CLOs appear to have escaped the worst of the Foreign Account Tax Compliance Act, or FATCA, which requires foreign financial institutions, including foreign banks, offshore funds and CLOs domiciled offshore, to report to the Internal Revenue Service any applicable information about their U.S. accounts.

The law was designed to combat offshore tax evasion. CLOs domiciled offshore fall under its umbrella, but, because FATCA was not contemplated when many older CLOs were issued, their legal structures leave them unable to comply with the requirements. Thus, they could have been subject to a 30% tax withholding on loan interest, principal payments or sale proceeds.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.