Hedge Funds Worried About FATCA Impact Under Affiliated Group Rules

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Hedge funds are watching implementation of the Foreign Account Tax Compliance Act with caution and have concerns about the treatment of some corporate investors that own 50 percent or more of a fund under rules for expanded affiliated groups, practitioners told Bloomberg BNA in February interviews.
Philippe Benedict, a partner with Schulte Roth & Zabel LLP, said in interviews there is a worry that these investors will fall under the aegis of the expanded affiliated group rules in the U.S. FATCA regulations, meaning possible layers of certification of FATCA compliance.
He said new proposed guidance on FATCA intergovernmental agreements from three crown dependencies—Guernsey, Jersey and the Isle of Man—may generally ease the expanded affiliated group rules. There is “some hope” that the Cayman Islands—home to many hedge funds—may take a similar approach, he said.

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