DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
AUG 27 2012
The Honorable Blaine Luetkemeyer
U.S. House of Representatives
Washington, DC 20515
Dear Representative Luetkemeyer:
Thank you for your recent letter to Secretary Geithner regarding the tax reporting provisions commonly known as FATCA. Because your letter involves a matter of tax policy, it was referred to me for response.
Your letter expresses concerns about potential burdens under FATCA on financial institutions and U.S. citizens residing abroad, and urges Treasury to simplify the rules under FATCA and reduce burden. As you know, Congress enacted FATCA as part of the U.S. government’s multi-pronged effort to combat the use of offshore accounts and entities to evade U.S. income tax. The Treasury Department and the Internal Revenue Service (IRS) are committed to addressing this important issue, and we understand your concerns. We are committed to implementing the statute in a way that eases burdens on financial institutions in a manner that is consistent with the statute’s compliance objectives.
To this end, the Treasury Department and the IRS solicited and carefully considered comments from all stakeholders in developing the proposed regulations. In taking these comments into account, the proposed regulations reduce the potential burdens associated with complying with the statute in several important ways. For example, the proposed regulations reduce the administrative burdens associated with identifying U.S. accounts by calibrating due diligence requirements based on the value and risk profile of the account and by permitting foreign financial institutions in many cases to rely on information they already collect. The proposed regulations also expand the categories of foreign financial institutions that are deemed to comply with FATCA without the need to enter into an agreement with the IRS, in order to focus the application of FATCA on higher-risk financial institutions that provide services to the global investment community. Finally, the proposed regulations implement FATCA’s obligations in stages to minimize burdens and costs consistent with achieving the statute’s compliance objectives. The Treasury Department and the IRS continue to consider the comments that have been received on the proposed regulations, and will continue to engage interested stakeholders to ensure the effective and efficient implementation of FATCA as we work toward finalizing the proposed regulations.
In addition, on July 26, the Treasury Department released a model intergovernmental agreement that provides for FATCA implementation through reporting by financial institutions to their home governments, coupled with the automatic exchange of that information on a government-to-government basis with the United States. This model has been endorsed by the Organization for Economic Cooperation and Development and by many countries, including France, Germany, Italy, Spain, and the United Kingdom. The Treasury Department has also issued joint statements with Japan and Switzerland, respectively, announcing an additional alternative framework for intergovernmental cooperation to facilitate the implementation of FATCA. Under this approach, foreign financial institutions would report specified information directly to the IRS in a manner consistent with the FATCA rules, supplemented by government-to-government exchange of information on request where local law prevents financial institutions from providing information directly to the United States. Both of these intergovernmental approaches to implementing FATCA would address many of the concerns expressed in your letter.
These intergovernmental approaches have been widely praised, including by the banking associations quoted in your letter, as significantly reducing the burdens of FATCA implementation while still achieving its policy objectives. For example, the European Bankers Federation and the Institute of International Bankers began their joint comment letter of April 30, 2012, by “commend[ing] the Treasury and IRS for issuing a thoughtful and detailed set of proposed regulations, and for addressing many of the concerns that we and other interested parties have expressed regarding the implementation of FATCA.” They went on to “applaud the Treasury’s intention to enter into intergovernmental agreements with other countries to address conflicts between FATCA’s requirements and the laws of those countries and to simplify the implementation of FATCA more generally.” The Japanese Bankers Association expressed similar sentiments in its comment letter of April 27, 2012. Both letters provided detailed comments on the proposed regulations, which the IRS and the Treasury Department are carefully considering along with all of the other comments received.
Treasury and the IRS will continue to engage interested stakeholders, including foreign governments, to implement FATCA in a way that appropriately balances the compliance objectives of the statute with the burdens imposed. We appreciate your continued attention to these important matters.
Mark J. Mazur
Assistant Secretary (Tax Policy)
Identical letter sent to:
The Honorable John Campbell
The Honorable Donald A. Manzullo
The Honorable Francisco “Quico” Conseco