Foreign banks on Friday won yet another delay in a sweeping Treasury
Department law intended to end tax evasion by Americans and will now
have until next July to begin complying with the requirements, the
IRS said [Notice 2013-43].
The unusually broad law, the Foreign Account Tax Compliance Act, or
FATCA, requires foreign financial institutions, including banks and
mutual funds, to either collect and disclose data on American clients
with accounts holding at least $50,000, or to withhold 30% of the
dividend, interest and other payments due those clients and to send
that money to the IRS.
The latest unexpected rollback of the deadline, an extension of six
months to July 1, 2014, underscores a struggle by the Treasury
Department to enforce the new rules. The law was approved in 2010 amid
heightened scrutiny of offshore private banking services sold to wealthy
Americans, and it was originally scheduled to go into effect last
January. But in late 2012, facing heavy criticism, the government
delayed its rollout until January 2014.
Foreign banks have argued that the regulation will cost too much to
carry out and is too broad, particularly regarding cross-border payments
on swaps and other derivatives. Many European financial trade groups
have derided it as an imperialistic push by the United States to impose
its own tax laws on the rest of the world. The United States taxes its
citizens and residents on their worldwide income, regardless of where
Kenneth Kies, a lobbyist in Washington, D.C., said that the extension
“underscores what has been obvious — that this is an enormously complex
and burdensome regime to deal with,” adding, “People just aren’t
James Hines, a corporate taxation professor at the University of
Michigan, said some foreign governments were refusing to cooperate with
the new rules. “It puts the Treasury in a tough position,” he said.
“It’s not clear how many delays they can have before FATCA starts to get