Removing Barriers Blog

CUNA Joins WOCCU in Opposing Expanded FATCA Reporting Requirements
Posted May 31, 2016 by CUNA Advocacy

Today, CUNA and the World Council of Credit Unions (WOCCU) sent a joint letter to congressional leaders in both chambers, in response to Treasury Secretary Jack Lew’s May 5th letter to House Speaker Paul Ryan requesting new legislation to increase the Foreign Account Tax Compliance Act (FATCA) reporting requirements on U.S.-based banks and credit unions.  

The letter urged congressional leaders to oppose any increase in FATCA reporting requirements on U.S.-based credit unions and banks, because it would increase regulatory burdens on American credit unions and banks without resulting in a single dollar of new tax revenue to the Treasury.  

FATCA already limits the ability of U.S. citizens to evade taxes through offshore banking by requiring foreign banks to report such accounts to the U.S. government, either directly or pursuant to a FATCA Intergovernmental Agreement.  U.S.-based banks and credit unions also already report interest income earned by non-resident aliens to the Internal Revenue Service (IRS).  This information is currently shared with many foreign governments pursuant to FATCA reciprocity.  

Secretary Lew has asked for new legislation to expand domestic application of FATCA further so that U.S.-based banks and credit unions are required to report non-resident aliens’ account balances to the IRS, even when the accounts do not earn interest or dividends.  The IRS would share this information with foreign governments, including foreign governments that are hostile to the United States, even though non-interest-bearing accounts do not generate taxable income.  

The compliance burdens on American banks and credit unions from domestic expansion of FATCA, however, would be significant because every bank and credit union in the United States would be expected to review their accounts on a regular basis and make reports to the IRS even if they do not hold any non-resident-alien accounts.  The result will be a diversion of resources at credit unions and banks that otherwise would have been used to provide loans and other financial services.