International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Wednesday, November 1, 2017

IRS' Information Reporting Program Advisory Committee Issues Annual Report Recommending FATCA delays

The Information Reporting Program Advisory Committee (IRPAC) today issued its annual report for 2017, including numerous recommendations to the Internal Revenue Service on new and continuing issues in tax administration.  The report includes a discussion on how to improve some processes, such as for penalties, abatement requests and levies as well as business master file entity addresses. The report also recommended enhancements to Form W-9 and the truncation of Social Security numbers on Form W2, IRC § 6050S and Form 1098-T reporting.  

During 2017, the committee continued its dialogue with IRS officials regarding reporting requirements under the Foreign Account Tax Compliance Act and the Affordable Care Act and made extensive recommendations regarding both programs.

Recommendation G.11 – FATCA Gross Proceeds Withholding

IRPAC requests a delay in the implementation of the Treas. Reg. §1.1473-1(a)(1)(ii) requirement to deduct and withhold tax on gross proceeds for two years following the issuance of guidance on FATCA gross proceeds withholding.

Treas. Reg. §1.1473-1(a)(1)(ii) provides that a withholdable payment includes “for any sales or other dispositions occurring after December 31, 2018, any gross proceeds from the sale or other disposition of any property of a type that can produce interest or dividends that are U.S. source FDAP income.” Industry standard generally holds that withholding systems require approximately two years to design, build, test, and implement. Given it is less than two years until this December 31, 2018 date, IRPAC requests the IRS delay the implementation of FATCA gross proceeds withholding for a minimum of two years following the issuance of applicable guidance.

Recommendation G.12 – FATCA Foreign Passthru Payment Withholding

IRPAC requests a delay in the Treas. Reg. §1.1471-4(b)(4) requirement to deduct and withhold tax on foreign passthru payments for a minimum of  two years following the issuance of guidance defining the term foreign passthru payment.

Treas. Reg. §1.1471-4(b)(4) provides that “A participating FFI is not required to deduct and withhold tax on a foreign pass-thru payment made by such participating FFI to an account held by a recalcitrant account holder or to a nonparticipating FFI before the later of January 1, 2019, or the date of publication in the Federal Register of final regulations defining the term foreign pass-thru payment.” Industry standard generally holds that withholding systems require approximately two years to design, build, test, and implement. Given it is less than two years until this January 1, 2019 date, IRPAC requests the IRS delay the implementation of foreign pass-thru payment withholding for a minimum of two years following the issuance of guidance further defining the term foreign pass-thru payment. 

IRPAC is a federal advisory committee that provides an organized public forum for discussion of information reporting issues. It is comprised of a diverse cross-section of individuals drawn from the tax professional community, financial institutions, small and large businesses, universities and colleges and securities and payroll firms.

The full 2017 IRPAC Public Report is available on IRS.gov.

http://lawprofessors.typepad.com/intfinlaw/2017/11/information-reporting-program-advisory-committee-issues-annual-report.html

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