IRS Public Hearing on the Proposed FATCA Regulations
On 5/15/2012, representatives from WeiserMazars attended the IRS Public Hearing on the Proposed FATCA Regulations. The hearing had a record turn out from both domestic and international organizations. Twenty speakers were afforded the opportunity to address Senior Representatives from the IRS and Treasury with prepared statements.
Industry Associations presented their specific concerns, but there were numerous common themes:
- Extension of time for all aspects of FATCA implementation
- Uniformity of timing for participating foreign financial institutions ("PFFI") and U.S. financial institutions ("USFI")
- Administrative burdens relative to documentation requirements
- Conflicts of local legal jurisdictions and country product related concerns that ranged from general concern to criminal prosecution for looking at an account without client consent
- Limited FFIs should not taint an affiliated group if good faith efforts are being made
- Clarification of passthru payments
- Clearer definitions (e.g., financial institution)
- Japanese interests were represented by three distinct industry associations, Australia by two and our neighbor, Canada asked for even longer extensions than the other presenters
Highlights of the hearing included:
- Cost/benefit for "low risk" of tax evasion entities (e.g., Australian asset annuity funds, other welfare funds in Japan and Brazil) and need to expand deemed-compliant categories
- A multi-jurisdictional fund and asset manager was the strongest proponent of the common theme that the only solution for FATCA implementation would be inter-governmental agreements or a complete divestiture of U.S. assets, either would warrant more time than January 1, 2012
- Wasted implementation efforts and cost if an affiliated group becomes a non-participating FFI ("NPFFI") as a result of the limited FFI time frame expiring
- Continued use of existing AML/KYC due diligence rules, particularly adopting a 25% threshold in determining a substantial U.S. ownership
- Dual citizens may be subject to FATCA inadvertently merely due to place of birth