WASHINGTON (1/2/14)--Congressional opposition to the Foreign Account Tax Compliance Act (FATCA) continues to grow in the U.S., and the Republican National Committee (RNC) this month is scheduled to vote on a draft resolution supporting FATCA repeal at its upcoming winter meetings.
Eight members of the RNC's Resolution Committee have agreed to be co-sponsors of the RNC "Resolution to Repeal FATCA." The draft resolution states that FATCA has "inadvertently ensnared every United States citizen living overseas due to its overzealous invasion of privacy and punitive taxation and enforcement."
The World Council of Credit Unions supports the adoption of the draft RNC resolution. "We share the concern that FATCA, if left in place, will impose billions of dollars of compliance costs on credit unions and other financial institutions annually," said World Council President/CEO Brian Branch.
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.
U.S. Internal Revenue Service regulations to implement FATCA also make it harder for U.S. taxpayers to avoid U.S. income taxation by placing funds in overseas accounts. "IRS finalized regulations in early 2013, but the regulations don't start to apply to U.S. credit unions until December 31, 2015 and the real operational impact doesn't start until Jan. 1, 2017, when some credit unions might act as FATCA 'withholding agents' if they provide international electronic payments services--they would be required to withhold 30% on certain transactions members make with foreign financial institutions without certain agreements with the U.S. and to use customer due diligence analyses," said Kathy Thompson, senior vice president for compliance at the Credit Union National Association.
If adopted by the Resolution Committee in January, repeal of FATCA would become part of the Republican Party's policy platform and would be poised to become a major issue for Republican congressional candidates in the 2014 election.