Delay Announced for FATCA Compliance

The IRS has pushed back many of the Foreign Account Tax Compliance Act (FATCA) implementation deadlines. IRS Notice 2013-43, issued July 12, provides a six-month delay beginning June 30, 2014, for the effective dates of FATCA's reporting, due diligence and withholding requirements. View a PDF of the notice here.

FATCA Explained

Congress enacted FATCA in 2010 to target tax avoidance by U.S. taxpayers using foreign accounts. Under FATCA, withholding agents (including U.S. based community banks) must withhold tax at the rate of 30 percent on certain payments to foreign financial institutions (FFIs) that do not agree to report the required information to the IRS about their U.S. accounts or accounts of foreign entities with substantial U.S. ownership. This withholding requirement "encourages" FFIs to comply with the various reporting requirements. FFIs can agree to report information on their account holders by registering to be "FATCA compliant" through an IRS website. Once properly registered, withholding agents will be able to check the published FFI list to determine the need for withholding. According to Notice 2013-43, the IRS expects the registration website, the "FATCA portal," to open on Aug. 19, 2013.    

Implementation Concerns

U.S. banks and other withholding agents, as well as FFIs, raised concerns about the difficulties in meeting the previously scheduled FATCA implementation date of Jan. 1, 2014.

The U.S. Department of the Treasury said in a news release that extending implementation should provide more time for foreign jurisdictions to establish intergovernmental agreements with the United States and for FFIs to comply with the complex requirements of FATCA. However, many bankers worry that the six-month extension is still inadequate to get ready for implementation of FATCA. In fact, the American Bankers Association continues to express concern that banks will need more time to comply with FATCA.

Regulations forthcoming

The Department of Treasury and IRS intends to amend the regulations covering the FATCA implementation extension, but taxpayers may rely on IRS Notice 2013-43 as guidance until the amended regulations are issued.

For assistance in determining the application of the FATCA requirements to your bank or questions related to implementation dates, please contact a local Eide Bailly professional.