WASHINGTON (Reuters) - Four bank lobbying groups have asked the Obama administration for a six-month delay in the start of an anti-tax evasion law set to begin on July 1, 2014, saying that banks and other financial institutions need more time to prepare.
The effective date of the Foreign Account Tax Compliance Act (FATCA) has already been postponed twice, pushing it back 18 months. The law was approved in 2010. It is still not in full effect.
But the Obama administration has yet to provide all the rules needed by banks and financial firms to comply, the lobbying groups said in a November 18 letter to tax officials.
FATCA requires foreign banks, insurers and investment funds to send the Internal Revenue Service information about Americans’ offshore accounts worth more than $50,000.
Foreign businesses that do not comply can be effectively frozen out of U.S. capital markets because of a 30 percent withholding tax on their income from the United States.
Less than eight months remain before penalties start.
“This is insufficient time to achieve the effective, full implementation of FATCA,” said the letter, signed by the American Bankers Association, The Clearing House Association LLC, the Institute of International Bankers and the Securities Industry and Financial Markets Association.
A Treasury Department spokeswoman did not have an immediate comment on Wednesday.
In 2009, Swiss financial services company UBS, the world’s largest wealth manager by assets, paid a fine of $780 million to the United States to avoid criminal charges over Americans’ use of secret Swiss bank accounts to avoid taxes.
Months later, Congress drafted FATCA, which was signed into law by President Barack Obama. Banks immediately blasted it and said compliance would cost more than $100 million.
Enforcement of FATCA penalties was delayed initially until January 1, 2014, and then again by another six months.
Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Jan Paschal