Treasury aims to make FATCA more user-friendly
That’s the word from a U.S. Treasury Department official on soon-to-be released regulations affecting thousands of banks and brokers worldwide subject to the Foreign Account Tax Compliance Act (FATCA), signed into law in 2010.
FATCA has drawn sharp complaints from foreign banks because of its reach and costs of compliance. The Treasury Department is now “keenly aware” of the challenges of compliance, and the proposed regulations will answer many concerns, said Emily McMahon, acting assistant secretary for tax policy.
“We believe that these proposals will substantially address the many comments we’ve already received regarding administrative burden,” McMahon said at a New York State Bar Association meeting in New York.
The act, expected to take effect in 2013, requires new disclosures to the Internal Revenue Service by foreign banks and other institutions where accounts are held by U.S. clients with more than $50,000 in assets.
McMahon said the Treasury Department realizes banks need lead time to configure reporting systems, and said the proposed regulations will phase in reporting requirements over an extended transition period.
Moreover, the proposed regulations will try to align FATCA compliance with procedures already in place to comply with anti-money laundering and other customer rules, she said.
Treasury’s international team also has been talking with several U.S. trading partners about how to overcome legal obstacles to compliance, McMahon added.
One problem with compliance is that privacy laws in many countries may prohibit financial institutions from reporting directly to the IRS, McMahon said.
One option being explored is having financial institutions report to their home countries’ government, which could transmit information to the IRS, she said.
The proposed regulations are in the final stages of clearance by the Treasury and IRS and will be released soon, she said.