The Internal Revenue Service has posted an updated Foreign Financial Institution Agreement on its Web site for implementing the Foreign Account Tax Compliance Act, or FATCA.

FATCA, which was included as part of the HIRE Act of 2010, requires foreign banks and other overseas financial institutions such as hedge funds to report on the holdings of U.S. citizens to the IRS, or else face stiff penalties. The law has provoked controversy abroad, but nonetheless, thousands of foreign banks have registered with the IRS and the Treasury Department through a recently established FATCA online portal to meet deadlines that began this year.

The IRS said Tuesday that the updated FFI Agreement has been released and posted to the FATCA Website. The IRS also released Revenue Procedure 2014-38, which updates and supersedes the FFI Agreement originally released as Revenue Procedure 2014-13.

Revenue Procedure 2014-38 updates the Model FFI Agreement applicable to foreign financial institutions wishing to enter into an FFI Agreement with the IRS to be treated as a participating FFI under section 1471(b) of the Code. 

Rev. Proc. 2014-38 also provides guidance to FFIs and branches of FFIs treated as reporting financial institutions under an Model 2 intergovernmental agreement, or IGA, on complying with the terms of the FFI Agreement, as modified by the Model 2 IGA.  The intergovernmental agreements have been negotiated by the Treasury Department with tax authorities in other countries to ease implementation of FATCA in accordance with their existing tax treaties and the nation’s own banking secrecy laws. They generally operate under two models. In a Model 1 IGA, the foreign financial institution reports the customer’s information to its government tax authority, which passes it along to the IRS. In a Model 2 IGA, the bank reports it directly to the IRS.

Rev. Proc. 2014-38 updates the Model FFI Agreement to reflect temporary regulations released on Feb. 20, 2014, under chapters 3, 4, and 61 of the Tax Code, and section 3406.