U.S. Sen. Rand Paul Introduces New Bill to Repeal FATCA

Volume 2, Number 3
May 9, 2013

U.S. Sen. Rand Paul Introduces New Bill to Repeal FATCA

On May 7, Sen. Rand Paul introduced in the U.S. Senate a bill (S. 887) to repeal most provisions of the Foreign Account Tax Compliance Act (FATCA) and provide regulatory relief to credit unions around the world. World Council strongly supports Sen. Paul's FATCA repeal legislation and the Credit Union National Association (CUNA), World Council's U.S. member organization, has come out strongly in support of the FATCA repeal bill in a letter from CUNA President and CEO Bill Cheney to Sen. Paul.

S. 887 would repeal "Chapter 4" of the U.S. Internal Revenue Code, which is the core of the FATCA statute and sets forth FATCA's "foreign financial institution" reporting requirements applicable to non-U.S. credit unions as well as its "withholding agent" provisions applicable to U.S. credit unions.

Procedurally, S. 887 has now been read twice and referred to the Senate Committee on Finance. We expect for Sen. Paul's FATCA repeal bill to gain co-sponsors in the Senate and also for a similar "companion" FATCA-repeal bill to be introduced in the U.S. House of Representatives in the near future.

We also expect the introduction of S. 887 to slow down the FATCA intergovernmental agreement (IGA) negotiations taking place between the United States and other governments and possibly help derail FATCA implementation even if S. 887 does not become law. The U.S. government does not have the capacity to implement FATCA effectively without cooperation from other countries and therefore needs foreign governments to agree to the FATCA IGAs for FATCA to work.

Introduction of S. 887 — which would repeal FATCA for most intents and purposes — as well as Congress's likely inaction on a related Obama administration budget request for additional legal authority to impose FATCA reporting requirements on U.S. credit unions and banks calls many of the assumptions underlying IGA negotiations into question. Jurisdictions may slow or cease negotiating IGAs with the United States in light of these developments, and FACTA implementation could fall apart without IGAs that enlist foreign governments to help the United States enforce FATCA.

In addition, Sen. Paul has placed procedural holds on Senate approval of tax treaties with Switzerland, Hungary and Luxembourg. FATCA IGAs with these jurisdictions cannot be implemented unless Sen. Paul's procedural holds are removed and the Senate ratifies these tax treaties by a two-thirds majority. Senate ratification is not required, however, with respect to other jurisdictions' FATCA IGAs because they fall within the scope of existing tax treaties with the United States.

We will continue to monitor these developments and will provide you with updates regarding S. 887 and related FATCA repeal efforts as more information becomes available.

IRS Releases Draft FATCA Registration Form

The U.S. Internal Revenue Service (IRS) has issued a draft of Form 8957, the form that many non-U.S. credit unions and banks would use to register with the IRS for FATCA compliance purposes. The IRS has not yet announced the deadline for non-U.S. credit unions to file Form 8957; presumably the agency will announce this registration deadline in the coming months.

Not all non-U.S. credit unions would be required to file Form 8957 with the IRS. Small non-U.S. credit unions (those with less than US$175 million in assets) in jurisdictions without a FATCA IGA would not use Form 8957 because they are exempt from IRS's FATCA registration requirements. Similarly, non-U.S. credit unions of any asset size in jurisdictions that agree to FATCA IGAs would not use Form 8957 because they would be subject to locally developed FATCA compliance requirements that would involve reporting similar information but would not involve Form 8957 per se.

Please do not hesitate to contact me if you have any questions. Thank you very much and have a nice day.

Michael S. Edwards
Chief Counsel and VP for Advocacy & Government Affairs
World Council of Credit Unions
601 Pennsylvania Ave., NW, Washington, DC 20004-2601 USA
Office: +1-202-508-6755 | Mobile: +1-215-668-5240 | Fax: +1-202-638-3410 |

Previous Editions