October 13, 2010: Treasury Official Comments on Analysis of Accounts Under Notice 2010-60
Treasury Official Comments on Analysis of Accounts Under Notice 2010-60 Global Foreign Account Tax Compliance Act (FATCA) Development
On October 13, 2010, Michael Plowgian, an attorney-adviser in Treasury’s Office of International Tax Counsel, spoke to a group of bankers and their advisers in New York. Lee Sheppard, a reporter from Tax Analyst summarized Mr. Plowgian’s comments.
FATCA requires that an Foreign Financial Institution (FFI) assess the accounts it maintains to determine whether each account is a U.S. or foreign account. Notice 2010-60 specifies separate rules for financial accounts held by individuals and those held by entities. Further, the Notice contains separate rules for preexisting accounts and new accounts. Mr. Plowgian’s comments covered the analysis of both types of individual accounts.
For preexisting individual accounts, the Notice permits the FFI to identify those accounts (as either U.S. or foreign) using electronically searchable information in its files to ascertain whether any of the six indicia of U.S. ownership listed in the Notice are present in each account. According to Mr. Plowgian, if an individual account has none of the six indicia, and the FFI has sufficient documentary evidence of foreign status on file, and its database corresponds to foreign status, then an FFI can safely treat it as being other than a U.S. account. Mr. Plowgian also commented on the sufficiency of documentary evidence. He said that although the Notice does not contain a standard, the drafters will look to the standards of Chapter 3 (the 1441 rules) and chapter 61 (the General Information Reporting rules). Furthermore, he mentioned that the Treasury is considering allowing an FFI to rely on qualified intermediary attachments for particular countries. However, regardless of the documentary evidence, if the FFI has reason to know that the information in its database is inaccurate, it must act on that knowledge.
As compared with preexisting accounts, new accounts must be assessed based upon all the information collected by the FFI including information from Know Your Customer and Anti-Money Laundering procedures. One example Mr. Plowgian discussed was how to analyze various addresses for an account. He said that if a FFI’s records show a foreign street address for the account that will trump an account holder’s U.S. P.O. box as an indicator of foreign status. However, a foreign street address coupled with a US “hold mail” address requires further inquiry on the part of the FFI.
Mr. Plowgian also commented on the use of a W-8BEN to evidence foreign status. He said that the government will not require FFIs to use the form. In addition, he said the government will redesign the form, presumably in response to the comment that the form is inadequate for FATCA identification.
Mr. Plowgian also shared his personal view that it is unlikely that an FFI would be required to withhold on new accounts beginning on the 2013 effective date of the statute, even if the FFI agreement had become effective before that time and new account holders were uncooperative.
A summary of the comments, as originally published by Tax Analysts, is attached.