Administration Grants Transition Relief for Good-Faith Efforts Under FATCA

For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

The government said in new guidance that it would ease the transition into the Foreign Account Tax Compliance Act as a July 1 deadline approaches, with a two-year period of light enforcement for foreign financial institutions (FFIs) that are making a good-faith effort to comply.
Foreign banks that are working to get their systems ready to implement a law requiring them to report their U.S. account holders to the Internal Revenue Service won't face stiff enforcement and 30 percent withholding taxes until 2016. Those that aren't trying to comply could face consequences starting on July 1, IRS said May 2 in Notice 2014-33.
Among a range of other fixes, the IRS also said FFIs and withholding agents can treat accounts opened for entities on or after July 1 and before Jan. 1, 2015, as pre-existing. This change won praise from practitioners who said the IRS and the Treasury Department listened to the financial industry's biggest concern.
“I think this is very welcome news,” Laurie Hatten-Boyd, principal in the Washington National Tax practice of KPMG LLP, said in a May 2 interview. “The industry is going to receive this very well.”
In another change that garnered praise, the notice eased the requirements for limited branches and limited FFIs that are struggling to comply with the regulations.