Banks Ask IRS to Delay FATCA for Six Months

The Bank of New York Mellon, The Northern Trust Company and the State Street Bank and Trust Company ("banks") have asked IRS Commissioner John Koskinen to postpone the effective date of FATCA until January 1, 2015, in order to "enable a successful launch of FATCA."Koskinen announced on March 25 that FATCA would become effective on July 1, 2014, and that there would be no further delay of FATCA. In a joint letter to the IRS Commissioner, the banks asked him to reconsider that decision because, despite relentless efforts by the financial services industry, "it is simply not possible to implement FATCA in an effective manner by July 1, 2014."

According to the banks, implementing FATCA on July 1 would result in reputational risk to both the U.S. government and U.S. financial institutions, undue wrangling over how to complete and validate newly issued Forms W-8BEN-E (which still lack instructions), misclassified account holders, underwithholding, overwithholding, inaccurate reporting and a waste of human capital for the financial industry and their advisors and vendors struggling "to implement a regime which is not ready to be implemented." The banks acknowledge the Commissioner's assurance that the IRS will be lenient in dealing with initial errors that financial institutions may make in implementing FATCA, but believe that such relief is not enough to protect against the banks' exposure to legal claims and loss of clients from overwithholding and IRS penalties from underwithholding.

See: Banks' Letter to the IRS.Related news: SIFMA Submits Comments to U.S. Treasury and IRS Requesting FATCA Transitional Relief (April 17, 2014); FATCA Deadlines Near; IRS Still Promising More Guidance (with YouTube Selection) (March 26, 2014); Treasury Official Says Penalty Grace Period Unlikely for FATCA (March 5, 2014); Treasury Releases Last Substantial FATCA Rules Package (February 20, 2014); IRS Official Promises New FATCA Guidance "Soon," Denies Rumor of Further Delay to FATCA (January 28, 2014). See also: Cabinet FATCA Materials (for Cabinet subscribers only).For more information, please contact Daniel Mulcahy and Mark Howe.