WASHINGTON (5/9/13)--The Foreign Account Tax Compliance Act (FATCA), if left in place, "will impose billions of dollars of compliance costs on U.S. credit unions and banks annually," Credit Union National Association President/CEO Bill Cheney wrote in a Wednesday letter to Sen. Rand Paul (R-Ky.). The CUNA letter follows Paul's Tuesday introduction of a bill (S. 887) that would repeal FATCA.
The CUNA letter said Congress did not appear to have U.S. credit unions nor banks in mind when it developed the FATCA provisions in 2010. "Yet U.S. financial institutions will be required to bear a large proportion of FATCA's compliance burdens," Cheney said.
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.
To cope with the FATCA changes, credit unions would need to establish procedures and practices, including staff training, for ongoing identification of covered entities and transactions, and take additional steps to ensure they met their reporting and withholding compliance responsibilities when facing transactions that come under IRS regulations.
The CUNA letter also addressed the European Union's consideration of a "European FATCA" that would regulate U.S. credit unions and banks in the same manner that the U.S.'s FATCA purports to regulate credit unions and banks in the European Union. "Unless Congress repeals FATCA, we think that it is only a matter of time before the extraterritorial diktats of a European FATCA and other FATCA-inspired foreign laws become additional compliance burdens on U.S. financial institutions," Cheney said.
"FATCA and FATCA-related intergovernmental agreements with foreign nations undermine the constitutional privacy rights of U.S. credit union members and bank customers," the CUNA letter added.
For the full letter, use the resource link.