World Council Urges Key Changes to Proposed FATCA Rules
Proposed IRS Regulations Burdensome to Credit Unions
May 01, 2012
WASHINGTON, D.C. — World Council of Credit Unions this week came out in opposition to some aspects of the United States Internal Revenues Service's proposed implementation of the Foreign Account Tax Compliance Act (FATCA). The proposed regulations, which would 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.
"Credit unions are in most cases small, localized financial institutions that, like banks, provide members with retail banking services," wrote Michael Edwards, World Council's chief counsel and vice president for advocacy and public affairs. "Unlike banks, only people within the credit union's common bond can become members. Credit unions are unlikely to have accounts held by ‘U.S. persons' who are not residents of the credit union's home country."
World Council further urged the IRS to revise current definitions within FATCA rulings so that small local credit unions be exempt from compliance with the rule. Some credit unions' current inability to qualify as "nonregistering local banks" as defined by the proposed legislation puts an undue and inappropriate burden on the institutions, a concern of credit union leaders around the globe. Appropriately revising the proposed rule would help small credit unions avoid noncompliant activities, the letter said.
World Council also urged the IRS to make other changes to the rule, including the following:
- Raise the maximum asset threshold for credit unions meeting the "nonregistering local bank" definition to US$1 billion from the current US$175 million
- Strongly support the definition of "U.S. account" to exempt accounts less than US$50,000, even when a "U.S. person" holds such an account
- Allow non-U.S. credit unions meeting the "nonregistering local bank" and "local FFI" definitions to offer U.S. dollar-denominated financial products to members on their websites
- Amend the proposed definition of "local FFIs" in several other respects to reduce regulatory burdens on non-U.S. credit unions and prevent unintended consequences
- Modify the proposed rule to permit institutions to receive refunds withheld erroneously under FATCA, even when the institution is a "nonparticipating FFI"
- Exempt international workers' remittances from FATCA coverage to promote financial inclusion for underserved immigrant populations and their families in developing countries
- Support the Credit Union National Association's (CUNA) comment
letter on the proposed FATCA rules with respect to FATCA's impact on
U.S. credit unions
"We appreciate the opportunity to comment on the proposed FATCA
regulations," said Brian Branch, World Council president and CEO. "We
urge the IRS to review our recommendations and act in a way that removes
undue compliance burdens on small, locally owned credit unions, freeing
them to use their resources to serve their members."
The public comment period on the proposed FATCA regulations closed
April 30. World Council has petitioned the IRS to be allowed to
participate in a public hearing in Washington, D.C., on May 15 to
further support its recommendations. The final law, due to take effect
Jan. 1, 2013, will be released before year-end.
To view World Council's letter to the IRS in its entirety, 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 300+ technical assistance programs in 89 countries. Worldwide, 68,882 credit unions in 109 countries serve 231,000,000 people. Learn more about World Council's impact around the world at www.woccu.org.