Foreign Account Tax Compliance Act (FATCA)
COMPLIANCE NOTE: WSIA is supportive of revisions proposed on December 13, 2018 by the IRS and Treasury with revised regulations intended to reduce unnecessary regulatory burdens associated with Foreign Account Tax Compliance Act (FATCA) compliance. After FATCA was passed in 2014, the P&C industry, including WSIA, asked for relief from FATCA reporting due to its unnecessary and burdensome application to our industry. Ultimately, FATCA is directed at foreign financial institutions and financial intermediaries to prevent tax evasion by U.S. citizens, U.S. residents and corporations through the use of offshore accounts; however, the application to the law cast a wide net, including P&C non-cash value premiums, that were not in a position to commit the type of tax evasion the law intended to curtail.
Revisions to the regulations are in line with what the industry has consistently requested as they eliminate withholding requirements for non-cash value insurance premiums under FATCA, thereby eliminating the concerning reporting requirement as well. Although the government has yet to issue a final, formal adoption of the revisions, the IRS’ release indicates that taxpayers can rely on the proposed regulation immediately for all open years until the final regulation is issued.
What is FATCA?
Surplus lines brokers and insurers’ compliance obligations related to the FATCA first took effect on July 1, 2014. WSIA has compiled a number of helpful resources and updates related to FATCA reporting requirements. Information and links outlined below were developed to help our members develop their own FATCA compliance procedures. To understand what FATCA is, we recommend reading with our Executive Summary and Legal Memorandum linked below.
Before the proposed revisions to the regulation were published, providing immediate reporting relief to the industry, we sought legislation to correct what we viewed as technical change for an unintended consequence. Legislation was twice introduced in the House to eliminate the P&C industry’s requirement to report non-cash-value premiums under FATCA in H.R. 871 (2017) and H.R. 6159 (2016). Although no action was taken on the legislation, work continued to educate Congress and the Treasury Department on the industry’s concerns in hopes of granting relief. While WSIA is pleased with the regulatory relief achieved in 2018,we continue to ask for the underlying law to also be revised to remove all confusion and ensure clarity in the future.
WSIA Issued Resources
WSIA FATCA contact: Keri Kish, Director of Government Relations, at [email protected].