WASHINGTON (7/30/12)--The Credit Union National Association (CUNA) supports recent congressional efforts to delay implementation of the Foreign Account Tax Compliance Act (FATCA), and will continue to work to raise awareness of the burden that will be imposed on credit unions if this regulation is allowed to be implemented, CUNA Senior Vice President of Legislative Affairs Ryan Donovan said last week.
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 Internal Revenue Service's (IRS) proposed regulations to implement FATCA would require FFIs, including credit unions, to register with the IRS and detect taxable account activity by U.S. citizens in foreign countries.
The IRS has said that its FATCA rules would also require U.S.-based credit unions and financial institutions to file Forms 1042-S for payments of deposit interest or dividends in amounts of $10 or more that are made to nonresident alien members and customers. These financial institutions must also conduct due diligence regarding whether credit union members' payments to overseas FFIs are to an FFI that is not FATCA compliant.
FATCA would also require U.S. credit unions to withhold 30% of any funds that are transferred to non-FATCA compliant FFIs.
The rule would apply to payments made on and after Jan. 1.
CUNA has urged Congress to pass legislation to prevent FATCA from going into effect on Jan. 1, noting that the compliance burdens and overhead costs credit unions would face as a result of these proposed changes would far exceed any benefit to the IRS.
Rep. Bill Posey (R-Fla.) last week introduced legislation that would stop FATCA from being implemented. Posey's bill was added as an amendment to the Regulatory Freeze for Jobs Act (H.R. 4078), which passed the U.S. House by a 245 to 172 vote. H.R. 4078 has moved on to the Senate, but may not pass that body due to its partisan nature.
Sens. Jim DeMint (R-S.C.), Rand Paul (R-Ky.), Saxby Chambliss (R-Ga.) and Mike Lee (R-Utah) have also criticized FATCA in a letter sent to U.S. Treasury Secretary Tim Geithner last week. The senators asked for more information on the potential costs of FATCA changes, and whether FATCA-related agreements that the Treasury is entering into with foreign governments would violate consumer privacy.
The World Council of Credit Unions (WOCCU) has also been advocating for repeal or significant modification of FATCA, including by testifying at an IRS Public Hearing on FATCA in May.
"We are glad that members of Congress are concerned about FATCA's undue compliance burdens on small, locally owned credit unions. Repealing FATCA will help free credit unions around the world to use their resources to serve their members," WOCCU President/CEO Brian Branch said.
For more on the issue, use the resource links.