Last week the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) again extended the deadline for…
FATCA Deadlines Extended
Many of our tax-noncompliant clients are fearful of being involuntary discovered through the impending FATCA disclosures of their foreign accounts by their foreign banks. The Internal Revenue Service has issued a notice extending the time under which certain transitional rules for the Foreign Account Tax Compliance Act will apply.
FATCA was included as part of the HIRE Act of 2010 and requires foreign financial institutions to report on the assets of U.S. taxpayers to the IRS, or else face penalties of up to 30 percent on their income from U.S. sources. The law has provoked controversy abroad, and as the US Treasury Department has delayed a number of the requirements to give banks time to adjust while also negotiating a series of intergovernmental agreements with tax authorities in foreign countries, most of which allow them to act as intermediaries before the information is given to the IRS.
IRS Notice 2015-66, issued Friday, announces that the Treasury and the IRS intend to amend regulations under Sections 1471-1474 of the Tax Code to extend the time that certain FATCA transitional rules will apply. The notice also provides information on the exchange of information by Model 1 IGA jurisdictions with respect to 2014. Under the Model 1 intergovernmental agreement, which is the more typical kind, foreign financial institutions report the account information to their own countries’ tax authorities, which then pass the information to the IRS. Under the Model 2 IGA, the foreign banks report the information directly to the IRS.
In new Notice 2015-66 the IRS said it plans to amend FATCA regulations to reduce certain collateral restrictions on grandfathered obligations and extend the following transition rules:
(1) the date for when withholding on gross proceeds and foreign passthrough payments will begin;
(2) the use of limited branches and limited foreign financial institutions (limited FFIs); and
(3) the deadline for a sponsoring entity to register its sponsored entities and redocument such entities with withholding agents.
Separately, IRS Notice 2014-33 states that calendar years 2014 and 2015 are regarded as a transition period for purposes of IRS enforcement and administration of the due diligence, reporting, and withholding provisions of FATCA. Consistent with treating 2014 and 2015 as a transition period, the US Treasury and the IRS will treat foreign banks covered by an IGA as complying with, and not subject to withholding under, FATCA even if the relevant partner jurisdiction has not exchanged 2014 information by September 30, 2015, as long as the partner jurisdiction notifies the U.S. competent authority before September 30, 2015, of the delay and provides assurance that the jurisdiction is making good faith efforts to exchange the information as soon as possible. This notice does not affect the timing of when FFIs should report information to a partner jurisdiction, which remains governed by local law.
This means that as long as the foreign government notifies the US Treasury of the delay then there will be no adverse effects under FACTA.
It is good to see that some of the impending transition dates have been pushed back.
FATCA is not the only new way foreign account information is being shared among different countries’ tax authorities. The Organization for Economic Cooperation and Development has been pushing for a Common Reporting Standard to address the issue of offshore tax evasion by creating a globally coordinated, consistent approach to the disclosure of financial accounts held by non-residents and the automatic exchange of that information by governments. The OECD standard builds upon FATCA, which obligates foreign financial institutions to provide the U.S. government with information about accounts held by U.S. taxpayers. In total, almost 100 jurisdictions have committed to implement the CRS by January 1, 2017.
Patel Law Offices offers a free strategy session to discuss how to resolve your legal problem. Conveniently schedule online today...
For foreign asset problems complete our questionnaire and online scheduler.
For other tax problems complete our questionnaire and online scheduler.
For estate planning complete our questionnaire and online scheduler.
For probate/estate administration complete our questionnaire and online scheduler.For other legal problems visit our website and online scheduler.