WASHINGTON, D.C. — World Council of Credit Unions testified today in a hearing convened by the U.S. Internal Revenue Service (IRS) to urge the agency to consider changes to its proposed Foreign Account Tax Compliance Act (FATCA) regulations that would reduce undue regulatory burdens on credit unions in other countries. Expanding the definition of "non-registering local banks" to include credit unions would help relieve the strain of unnecessary IRS reporting for non-U.S.-based credit unions already unable to serve members like those the IRS is seeking to tax due to membership restrictions.
"Credit unions are in most cases small, localized financial institutions that, like banks, provide their members with access to retail banking services such as lending and deposit products," said Michael Edwards, World Council chief counsel and vice president for advocacy and government affairs, to the assembled panel of IRS representatives. "We therefore urge the IRS to amend the definition of ‘non-registering local bank' in the final FATCA regulation to add the phrase ‘or as a credit union or similar cooperative credit organization.'"
Representatives from 21 global financial organizations spoke at the hearing, including bank trade associations from Australia, Japan and Switzerland. World Council was only organization speaking on behalf of credit unions and financial cooperatives.
The proposed FATCA regulations, which currently require many foreign financial institutions (FFIs) - including credit unions - to register with the IRS for the purpose of detecting taxable account activity by U.S. citizens in foreign countries, would place unnecessary and inappropriate burdens on small non-U.S. credit unions, World Council said in an April 30 letter to the IRS. The agency last week invited World Council representatives to testify in today's hearing to make its case for revisions to proposed FATCA provisions.
World Council also urged the IRS to make other changes to the rule, including the following:
"In many countries credit unions already are challenged in providing critical financial services to their members," said Brian Branch, World Council president and CEO. "The easing of unnecessary and inappropriate regulations on these small institutions will allow them to commit more capital to better serve those members."
The final FATCA regulations, due to take effect Jan. 1, 2013, will be released before year-end.
To view World Council's April 30 letter to the IRS, go to: www.woccu.org/positionpapers.
World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.
World Council has implemented more than 290 technical assistance programs in 71 countries. Worldwide, 51,000 credit unions in 100 countries serve 196 million people. Learn more about World Council's impact around the world at www.woccu.org.