March 27, 2013
James George Jatras for RepealFATCA.com
In an important development in Washington, today Michael S. Edwards, Vice President and Chief Counsel, World Council of Credit Unions, called for repeal of the Foreign Account Tax Compliance Act (FATCA). Among the points cited by Edwards, the boomeranging costs of FATCA from foreign institutions to domestic U.S. entities like credit unions:
FATCA compliance for U.S. credit unions is also not likely to be easy or inexpensive though the IRS delayed most compliance requirements for U.S. institutions to Jan. 1, 2017, from its originally proposed Jan. 1, 2014, compliance date. U.S. credit unions are included in the IRS rule’s definition of “withholding agent” and therefore will be required beginning in 2017 to perform due diligence and 30% tax withholding on overseas payments of not-yet-taxed U.S.-sourced “passive” interest and investment income that is being routed to financial institutions overseas that are not FATCA compliant. “Passive income” includes interest and dividends paid on credit union share accounts and banks accounts, as well as the taxable proceeds from sales of real property or other U.S.-based investments.
He also cites FATCA’s meager support in Congress and the need for more action to build opposition:
Last year a group of U.S. senators including Rand Paul (R-KY), Mike Lee (R-UT), and Saxby Chambliss (R-GA) wrote then Treasury Secretary Timothy Geithner to express disapproval of how the administration was implementing FATCA. Their letter also requested detailed information on how FATCA would impact U.S. banks and credit unions, including its estimated compliance costs, as well as information on whether FATCA would compromise the financial privacy of U.S. citizens. Larger scale opposition to FATCA in Congress, however, has not yet materialized.
FATCA does not seem to have very many supporters in Congress, but it is already the law of the land and will affect U.S. credit unions eventually unless Congress acts. World Council of Credit Unions and the Credit Union National Association are working to gain traction in Congress for such repeal, but at this juncture, repeal is far from guaranteed in a divided Congress that is concerned about deficit spending. While we will continue to advocate repealing FATCA and its unnecessary compliance burdens, we will also be pursuing regulatory relief with the Treasury and other policymakers.
Edwards’ call comes as FATCA is experiencing significant hurdles with getting foreign governments to sign so-called “intergovernmental agreements” (IGAs) to implement this law. Among the countries either refusing to sign or dragging their feet are China and Russia, and even in Switzerland a “nonreciprocal” IGA is running into parliamentary obstacles to approval.
RepealFATCA.com applauds WCCU’s position and calls on other impacted industry to engage directly in effecting FATCA’s repeal before the worst aspects of this misguided law go into effect. The time to get behind the repeal push is now!
James George Jatras