Advocacy efforts confirm TEI's global reach.

Position::Tax Executives Institute

TEI meets with CRA and Finance Canada; Comments on FATCA, Canadian Loss Transfer System, and EU Cross-Border Interest & Royalties; Obtains Favorable EU Action on Infringement Complaints

Tax Executives Institute's Fail 2010 advocacy initiatives underscore the global reach--and effectiveness--of the Institute's technical activities. Spanning diverse areas--from the U.S. proposed regulations on the Foreign Account Tax Compliance Act (FATCA) to Canadian government liaison activities and potential legislation on a group loss transfer system to European Union direct and indirect tax policy issues--TEI's global efforts to improve tax policy and administration pay substantial dividends for members and their companies.

Sometimes the rewards of the Institute's advocacy efforts are relatively immediate--such as the Internal Revenue Service's September announcement narrowing the scope of required disclosures for uncertain tax positions. (TEI's comments on the IRS's proposed initiative were reprinted in the September-October issue of The Tax Executive.)

Other times a longer view is needed. In the case of TEI's 2007 infringement complaint against certain EU Member States' invoicing requirements, the European Commission staff's investigation continues, but two recent successes against Greece and Hungary vindicate the Institute's engagement.

And sometimes seemingly perpetual patience and diligence are necessary. The prospects for implementing a corporate group loss-transfer system in Canada--an initiative begun by TEI in 1985--are bright today. Most recently, on October 6, TEI wrote Canada's Minister of Finance to renew its call for relief.

"TEI's individual projects are successful only because of the high regard that government agencies have for the views of the Institute and its members," TEI President Paul O'Connor stated. "And our continuing success hinges on years of liaison activities between the Institute and governments--at all levels and in myriad jurisdictions." He cited the agendas for the December 2010 liaison meetings with Canada Revenue Agency and the Department of Finance as an example.

TEI Offers FATCA Comments

On October 19, the Institute filed comments with the IRS on Notice 2010-60, relating to the Foreign Account Tax Compliance Act, which was enacted in March 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010. FATCA adds four new sections to the Internal Revenue Code:

* Section 1471, Withholdable payments to foreign financial institutions;

* Section 1472, Withholdable payments to other foreign entities;

* Section 1473, Definitions; and

* Section 1474, Special rules.

The new law establishes rules for payments to foreign financial institutions and other foreign entities, and imposes a 30-percent withholding tax on the gross amount of a "withholdable payment" made to a (i) "foreign financial institution" (FFI) if the institution does not meet certain requirements (section 1471(a)); or (ii) "non-financial foreign entity" (NFFE) if the beneficial owner of such payment is an NFFE that does not meet certain requirements (section 1472(a)).

Noting that the statutory definitions are very broad and may require tens of thousands of entities to enter into FFI agreements with the IRS, the Institute commended the government for recognizing that certain classes of entities should be excluded from the definition of "financial institution" under FATCA to limit the burdens imposed on compliant taxpayers. In the notice, the government announced its intent to issue guidance exempting certain holding...

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