The Foreign Account Tax Compliance Act (FATCA) will begin to impact the offshore investment fund industry in 2013, requiring a “foreign financial institution” (FFI) to enter into an agreement with the Internal Revenue Service (IRS) and disclose certain information regarding its U.S. account holders on an annual basis.  FFIs are broadly defined to include offshore hedge funds or other offshore private investment funds, and compliance with FATCA may be difficult for many of these funds.  The principal goal of FATCA is to prevent U.S. taxpayers from using foreign accounts and investments to hide income from the IRS and evade payment of U.S. tax.  As the penalties for failure to comply with FATCA are harsh – including the imposition of a 30 percent withholding tax on certain U.S. source payments – managers of offshore hedge funds should begin to prepare for FATCA and its due diligence reporting requirements.  On January 17, 2013, the IRS issued long-awaited final regulations under FATCA, clarifying many of the items left open by the proposed regulations released in February of 2012 and previously issued IRS guidance.  In a guest article, Michele Gibbs Itri, a partner at Tannenbaum Helpern Syracuse & Hirschtritt, LLP, discusses the impact that current FATCA rules will have on offshore investment funds and describes the steps that fund managers can take now to comply with these rules to avoid any FATCA tax on the funds’ U.S. investments.