TEI submits comments on FATCA temporary & coordinating regulations.

• Position: Tax Executives Institute, Foreign Account Tax Compliance Act

On May 5, 2014, TEI submitted comments to the Internal Revenue Service regarding temporary and proposed regulations implementing Chapter 4 of the Code, better known as the Foreign Account Tax Compliance Act (FATCA), and coordinating withholding under FATCA with withholding under Chapters 3 and 61 and section 3406. TEI's comments focused on the need for clear guidance regarding required due diligence for payments excepted from FATCA, the application of the exceptions to the definition of financial institution for treasury centers and holding companies, and the consequences of changing FATCA status under the regulations, among other things. TEI's comments were prepared under the aegis of TEI's 1RS Administrative Affairs Committee, whose Chair is Ernest Gates of Wal-Mart. Benjamin R. Shreck, TEI Tax Counsel, coordinated preparation of TEI's comments.

Introduction

The Hiring Incentives to Restore Employment Act of 2010 added Chapter 4 to the Internal Revenue Code of 1986 (the Code), as sections 1471 through 1474. These provisions, better known as the Foreign Account Tax Compliance Act (FATCA), require information reporting with respect to certain recipients of certain U.S. source payments. If the information is not reported, Chapter 4 requires the withholding agent to withhold a 30 percent tax on such payments.

Since the enactment of Chapter 4, the 1RS and Treasury Department have issued several sets of administrative and regulatory guidance that provide additional details regarding how taxpayers may comply with their FATCA obligations. On February 20, 2014, Treasury and the 1RS released proposed and temporary regulations making certain modifications to the final regulations under Chapter 4. (1) Also on that date, the government released proposed and temporary regulations coordinating the Chapter 4 withholding regime with the preexisting regimes under Chapters 3 and 61, and section 3406. (2) On May 2, 2014, Treasury and the 1RS released Notice 2014-33 providing a "transition period" for FATCA enforcement and administration, as well as other relief to taxpayers. Comments were requested on the two sets of proposed and temporary regulations no later than May 5, 2014.

Background

Tax Executives Institute, Inc., (TEI) is the preeminent association of in-house tax professionals worldwide. Our nearly 7,000 members represent 3,000 of the leading corporations in the United States, Canada, Europe, and Asia. TEI represents a cross-section of the business community, and is dedicated to developing and effectively implementing sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike. As a professional association, TEI is firmly committed to maintaining a tax system that works--one that is administrable and with which taxpayers can comply in a cost-efficient manner.

TEI's members are responsible for managing the tax affairs of their companies and must contend daily with the provisions of the tax law relating to the operation of business enterprises, including compliance with FATCA, both in the United States and around the world. We believe that the diversity and professional training of our members enable us to bring a balanced and practical perspective to the issues raised by the proposed and temporary regulations issued under Chapter 4, the related coordinating regulations, and Notice 2014-33.

TEI Comments

1. Notice 2014-33

   Notice 2014-33 provides that "calendar years 2014 and 2015 will be regarded as a transition period for purposes of ... enforcement and administration with respect to the implementation of FATCA...." The transition period "is intended to facilitate an orderly transition for withholding agent and FFI...