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  • New York

    • 919 Third Avenue
    • New York, NY 10022
    • United States of America
      • +1 212.756.2000 Phone
      • +1 212.593.5955 Fax
  • Washington, DC

    • 901 Fifteenth Street, NW, Suite 800
    • Washington, DC 20005
    • United States of America
      • +1 202.729.7470 Phone
      • +1 202.730.4520 Fax
  • London

    • One Eagle Place
    • London SW1Y 6AF
    • United Kingdom
      • +44 (0) 20 7081 8000 Phone
      • +44 (0) 20 7081 8010 Fax

Existing Treasury Regulations

In a previous Alert dated April 8, 2014, we described certain registration and compliance requirements for hedge funds under the U.S. Foreign Account Tax Compliance Act (“FATCA”).

U.S. Treasury Regulations issued under FATCA provide that a disregarded entity (“DRE”) generally does not need to register with the IRS. However, if a DRE and its sole owner are located in different jurisdictions, such as a Cayman Islands “master fund” owning a Luxembourg SPV that is a DRE, the master fund would list the SPV on its own registration as its branch and thereby obtain a GIIN[1] for itself and a GIIN for the SPV.

New IRS Position

On May 1, 2014, the IRS published in an FAQ that a DRE located in a Model 1 IGA[2] jurisdiction whose laws disregard U.S. tax classification elections (“check-the-box elections”) should instead register with the IRS and not be listed as a branch of its sole owner. According to the FAQ, if, for example, the forthcoming Luxembourg FATCA-related rules disregard check-the-box elections, then the Luxembourg SPV described above would register on its own and not be listed as a branch of the Cayman Islands master fund.

Steps to Take Where the DRE is Located in a Different Jurisdiction from Its Parent

  • If you have not yet registered such DRE: It may be prudent to wait for the issuance of relevant guidance and, therefore, until such time: (i) not register the DRE; and (ii) not have the parent register the DRE as a branch.
  • If you have already registered such DRE: You do not need to take any remedial action at this time but should review relevant local guidance when issued.
  • If you intend to register such DRE prior to the issuance of local rules: We believe that registering such DRE on its own and not as a branch of its sole owner is the approach more likely to hold up, given the FAQ and the likelihood that most jurisdictions will disregard check-the-box elections.[3] However, future guidance from the relevant Model 1 IGA jurisdictions might require amending such registrations if the applicable local FATCA rules respect check-the-box elections.


The FAQ can be found on the IRS website.

Authored by Philippe Benedict , Shlomo C. Twerski , David S. GriffelJesse R. Rubin and David S. Wermuth .

If you have any questions concerning this Alert, please contact your attorney at Schulte Roth & Zabel or one of the authors.

[1] Global Intermediary Identification Number.

[2] Intergovernmental Agreement.

[3] To date, the U.K. regulations ignore check-the-box elections, as does the proposed guidance issued by the Crown Dependencies. Most other Model 1 IGA jurisdictions have not yet issued guidance.

This information has been prepared by Schulte Roth & Zabel LLP (“SRZ”) for general informational purposes only. It does not constitute legal advice, and is presented without any representation or warranty as to its accuracy, completeness or timeliness. Transmission or receipt of this information does not create an attorney-client relationship with SRZ. Electronic mail or other communications with SRZ cannot be guaranteed to be confidential and will not (without SRZ agreement) create an attorney-client relationship with SRZ. Parties seeking advice should consult with legal counsel familiar with their particular circumstances. The contents of these materials may constitute attorney advertising under the regulations of various jurisdictions.