SIFMA Calls For Targeted Relief On FATCA

SIFMA has submitted a letter to officials at the U.S. Department of Treasury and the Internal Revenue Service (IRS) requesting targeted relief from the July 1, 2014 Foreign Account Tax Compliance Act (FATCA) implementation deadline.

"Our members strongly support the goal of detecting and deterring offshore tax evasion by U.S. persons and they are proud to play a part in bringing offshore tax evaders to justice. Increasingly, however, our members are raising concerns with us about the short time frame between the availability of final rules and the 'go-live' date for FATCA, less than 10 weeks from today," said Payson Peabody, managing director and tax counsel, SIFMA. "In a previous comment letter, we urged Treasury to provide at least 16 months from the date FATCA regulations and forms are finalized. Compressing the compliance time frame for executives speaking multiple languages in thousands of financial institutions around the world will increase the costs and risks of FATCA and has the potential to harm the U.S. economy in the long run."

Based on a recent internal survey[i], SIFMA members are spending over $1 billion in an effort to comply with FATCA during 2013 and 2014, but that is only a small fraction of the global cost of FATCA. IRS officials have said that when they designed their FATCA database, it assumed there could be as many as 600,000 FFIs. The majority of these foreign entities are not SIFMA members, and their costs are not included in the $1 billion figure.

It is important to recognize that several significant economies have not signed an International Governmental Agreement (IGA). Although Treasury has used its discretion wisely in this area in the past several weeks, growing the list of Model 1 IGA countries substantially, there is still a risk of excessive FATCA withholding that could have adverse consequences for capital markets and, indirectly, for the United States economy. According to a SIFMA review of gross domestic product figures published by the United Nations, more than 40% of global GDP outside the Unites States is generated in countries without a Model I or II IGA agreement in place.

SIFMA's letter offers a proposal for transitional relief targeted to accounts held by and payments made to foreign entities. SIFMA has written to Treasury previously to request that the deadline for FATCA withholding be moved to January 1, 2015.

The text of the letter can be found here: http://www.sifma.org/issues/item.aspx?id=8589948630.