Key takeaways:

• The IRS has issued proposed regulations on FATCA, providing guidance on a wide range of issues of importance to foreign and U.S. private investment funds.
• Both U.S. and foreign funds will need to contend with the FATCA withholding rules.
• For a foreign fund to avoid U.S. 30% withholding tax under FATCA, the fund will need to participate in the FATCA program by entering into an FFI agreement with the IRS.
• 30% U.S. withholding under FATCA will be phased in beginning on January 1, 2014, commencing with payments of U.S. source income (including interest and dividends). Withholding on gross proceeds from the sale or disposition of property that produces U.S. source interest and dividends will commence on January 1, 2015.
• Certain investors in private funds, including certain foreign sovereign investors and foreign retirement and pension plans, will be eligible for exemptions from FATCA withholding.