The IRS and Treasury Updated Guidance

The Internal Revenue Service (IRS) and Treasury were extremely busy over the holiday season. The IRS decided to publish six key pieces of guidance just before the New Year concerning information reporting and withholding. Below, we summarize the updated guidance and link to more detail along with our thoughts on the impact to the industry.

• The Treasury and the IRS released an advanced copy of Rev. Proc. 2022-43 on December 13, 2022, providing the final qualified intermediary ("QI") agreement ("new QI agreement") for tax years beginning in 2023. The new QI agreement as described in Treas. Reg. §1.1441-1(e)(5) is effective as of January 1, 2023, and provides for a six-year term as of that effective date. For a summary of the Notice, click here (Notice 2022-43);
  
  
• Following the 2020 final regulations, the industry raised concerns that brokers would have major challenges in determining whether entities organized outside of the United States are classified as Publicly Traded Partnerships for U.S. tax purposes and thus subject to withholding. The IRS issued some further guidance on Publicly Traded Partnerships (Notice 2023-8);
  
  
• The IRS issued transitional guidance under sections 6045 and 6045A with respect to the reporting of information on digital assets by brokers (Notice 2023-2);
  
  
• One of the many requirements of the Foreign Account Tax Compliance Act (FATCA) is for Foreign Financial Institutions (FFIs) to report information on financial accounts held by U.S. taxpayers or by foreign entities in which a U.S. taxpayer holds a certain ownership interest. Model 1 FFIs were not required to report a preexisting account's US tax identification number (TIN) if it was not already in the Model 1 FFI's records. The IRS issued guidance that provides additional relief for the reporting of preexisting accounts for calendar years 2022, 2023, and 2024 (Notice 2023-11);
  
  
• The IRS released final regulations regarding the exception for interests held by Foreign Pension Funds under 897 (TD 9971); and
  
  
• The IRS issued guidance that provides transition relief on reporting thresholds for third-party settlement organizations. (Notice 2023-10)

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