WASHINGTON (1/22/13)--When the U.S. Internal Revenue Service (IRS) released its final regulations last week to implement the Foreign Account Tax Compliance Act (FATCA), the final included key recommendations made by the World Credit Union Council and supported by the Credit Union National Association to reduce the burden on credit unions.
"The FATCA regulation will have a far-reaching impact on credit unions in many jurisdictions," said Brian Branch, World Council president and CEO. "In today's world, we continue to advocate for reducing regulatory burden so that credit unions can concentrate on serving their members' needs."
FATCA is designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions (FFIs) and other entities.
The rules target U.S. taxpayers using foreign accounts to avoid paying U.S. income taxes and they apply to non-U.S. credit unions in many jurisdictions. The FATCA final rule's "U.S. withholding agents" provisions will also apply to U.S. credit unions that make international payments.
FATCA will require most large or internationally active non-U.S. financial institutions to register with the IRS and monitor their accounts to detect U.S. taxpayers who may be hiding money overseas. The IRS's proposed regulation, however, would likely have also required smaller non-U.S. credit unions to register with the IRS because it only exempted small "banks" as defined by U.S. tax law.
WOCCU explained in a comment letter and in testimony to the IRS last year that the requirement would have placed unnecessary and inappropriate burdens on small foreign credit unions.
In the final FATCA regulation, the IRS incorporated World Council's key recommendations:
- That credit unions and similar credit cooperatives fall within the definition of FATCA-exempt "non-registering local banks," and;
- Non-U.S. credit unions are allowed to list U.S. dollar accounts on their websites without losing FATCA-exempt status.
Most non-U.S. credit unions with less than $175 million in assets will fall within the "non-registering local bank" exemption, and most larger non-U.S. credit unions will qualify as partially exempt "deemed compliant" foreign financial institutions.
Use the resource link to read more about the FATCA rule details.