WASHINGTON—CUNA and the World Council of Credit Unions have written a joint letter supporting the Internal Revenue Service’s proposed rule reducing regulatory
burdens related to the Foreign Account Tax Compliance Act (FATCA).
The adoption of FATCA added new and significant compliance costs to U.S. credit unions, particularly those engaged in remittances and have non-U.S. citizens as members, noted CUNA, which said it has advocated for its repeal in the past.
Under FATCA, U.S. credit unions are classified as “withholding agents” and are required to perform due diligence and withhold a 30% tax on some cross-border payments, as well as maintain compliance with a network of intergovernmental agreements
“We strongly support many aspects of this rule that will reduce unnecessary regulatory burden for credit unions including the elimination of withholding on payments of gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the United States,” reads the letter, signed by CUNA President/CEO Jim Nussle and World Council President/CEO Brian Branch, who urged the IRS to finalize the proposal.
CUNA and the World Council said they support specific aspects of the proposal, including:
- A section that would eliminate withholding on gross proceeds by removing gross proceeds from the definition of the term “withholdable payment”
- Deferral of withholding on any passthrough payments made to recalcitrant account holders
- Elimination of withholding on Non-Cash Value Insurance Premiums under Chapter 4 of FATCA as the burden on insurance brokers is significant and not necessary to further the purposes of chapter 4
- A provision modifying due diligence requirements of withholding agents, including difficulties in obtaining new treaty statements for preexisting accounts
- Amendments that address the case in which a nonqualified intermediary receives a payment for which a withholding agent has withheld at the 30% rate under Chapter 4 and reported the payment on Form 1042-S as made to an unknown recipient that the organizations believe should assist account holders to claim foreign tax credits in their jurisdictions of residence
- Provisions allowing reliance on the rules until such time as the rule is finalized, which the organizations believe will provide immediate regulatory relief for our credit unions