(Adds details, background and lawyer comment, paragraphs 3,
By Patrick Temple-West
May 2 The U.S. Treasury Department said on
Friday that the Internal Revenue Service (IRS) this year and
next will take into account "good faith efforts" by foreign
banks to comply with a new U.S. anti-tax evasion law set to take
effect on July 1.
The Foreign Account Tax Compliance Act (FATCA), approved in
2010, will require foreign banks and other financial
institutions to hand over information to the Internal Revenue
Service about Americans' accounts worth more than $50,000.
Already delayed twice, the law will be implemented in a
"transition period" in 2014 and 2015, with IRS enforcement
taking into account good efforts to comply with it, according to
guidance published by the IRS.
"Today's notice outlines several measures to help
institutions comply with FATCA in a timely manner," said Deputy
Assistant Secretary for International Tax Affairs Robert Stack
in a statement.
FATCA was enacted after a scandal involving Americans hiding
money in Swiss bank accounts. The law's start date was delayed
as Treasury and IRS officials struggled to implement its rules
and as banks complained they needed more time to prepare.
Companies worrying about how to comply with FATCA will
welcome this latest round of relief, said Michael Hirschfeld,
chairman of the American Bar Association tax section and a
lawyer at Dechert LLP.
"This is excellent," Hirschfeld said. But he said there
could be could be confusion about what qualifies as a "good
faith effort," which was not clearly defined.
Foreign firms that do not comply with FATCA face a 30
percent withholding tax on their U.S. investment income and
could effectively be frozen out of U.S. capital markets.
The latest round of relief only applies to financial
institutions that must register directly with the IRS for FATCA.
These firms are in jurisdictions that have not negotiated
FATCA agreements with the United States.
Nearly 60 of these government-to-government FATCA pacts,
known as intergovernmental agreements (IGAs), have been reached.
But some key financial jurisdictions, including Singapore and
Hong Kong, have not agreed to IGAs.
Treasury said the new relief was needed in part because
multinational banks with branches in some unnamed jurisdictions
are prohibited from registering for FATCA by their local
(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh
and Chris Reese)