WASHINGTON (7/11/13)--Rep. Bill Posey's (R-Fla.) H.R. 2299, which would repeal the Internal Revenue Service's recent expansion of United States credit union and bank reporting rules with respect to interest on deposits paid to nonresident aliens, "would be instrumental in eliminating an unnecessary and unduly burdensome rule for credit unions," the Credit Union National Association and the World Council of Credit Unions wrote in a joint letter.
Posey's bill was introduced last month and has three co-sponsors.
CUNA President/CEO Bill Cheney and World Council President/CEO Brian Branch in the letter said they strongly oppose the IRS regulations that require U.S. financial institutions to report interest paid to nonresident aliens. This requirement, which is codified at 26 C.F.R. Sections 1.6049-4(b)(5), 1.6049-8, places an extraordinary burden on credit unions, the letter noted.
"Credit unions believe that while some reporting requirements can be justified, the IRS has not shown that this non-resident alien interest income reporting rule is necessary to implement any such statutory requirements, nor has it provided a compelling reason why the expanded reporting requirements are necessary," the credit union leaders wrote.
Posey noted the burdens that credit unions and banks would face thanks to this IRS requirement in a recent letter to Treasury Secretary Jack Lew. (See July 10 News Now story: House Member Pens Concerns Re: FATCA Compliance Cost, More.)
The legislator in his letter called for The Foreign Account Tax Compliance Act (FATCA) to be "either substantially amended or repealed, and replaced with a cooperative scheme that penalizes actual tax evasion without harming the innocent."
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. Some provisions would apply to U.S. credit unions that make international payments. U.S. credit unions would also be required to identify and withhold on so-called "pass-thru payments" to FFIs involving transfers of U.S.-sourced investment or interest income an FFI that has not yet been subject to taxation.
Portions of FATCA that impact Form 1042-S filings are already in effect. Other provisions will be phased in between January 2014 and January 2017.
For the CUNA/World Council letter, use the resource link.