What IRS FATCA Notice 2023-11 Actually Means (Nothing Good)

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Host Anthony Parent interviews Attorney John Richardson over one of his most recent articles - involving IRS FATCA Notice 2023-11. While some are declaring this a victory for individuals, John sees it differently and see it as the IRS laying the groundwork for more destruction. Joining Anthony and John is Keith Redmond, Global Advocate for the American Overseas who offers his own insight as to how people around the world are actually responding to this.

Through a combination of FATCA (“Foreign Account Tax Compliance Act”) found Chapter 4 of the Internal Revenue Code and the FATCA IGAs (the mechanism for countries to comply with FATCA) the United States has created conditions where US citizen customers are a burden and risk to non-US banks.

These provisions have created conditions that threaten punitive financial sanctions on non-US banks who cannot notify the IRS of a US citizen’s Social Security Number. Generally this is because the US citizen has lived abroad for many years and does NOT have a SSN. This situation has created worry for the banks and for their US citizen customers.

The fact that the US citizen does NOT have a SSN is NOT relevant to the reporting obligation imposed on the bank. To be clear: The FATCA IGAs mean that non-US banks can easily be in “significant non-compliance” for the failure to comply with something that is impossible to comply with.

How Notice 2023-11 frames the issue

The Treasury Department and the IRS have received communications from Model 1 IGA jurisdictions, FFIs, and U.S. citizens expressing concern that FFIs are closing or may close bank accounts of U.S. citizens who have failed to provide a required U.S. TIN, including accounts of U.S. citizens resident outside the United States. FFIs have indicated that these closures are based on concerns about being treated as in significant non-compliance with their obligations under a Model 1 IGA. Model 1 IGA jurisdictions have also indicated that FFIs are unable to close certain accounts, which may increase the risk that the FFI is found to be in significant noncompliance with its obligations.

It bears repeating that:

1. The non-US banks are required to supply the IRS with the US citizen’s SSN, even though;

2. The US citizen either does not have or will not disclose a SSN to the bank.

Treasury’s response to the problem of looming “significant non-compliance”

On December 30, 2022 US Treasury issued Notice 2023-11. The primary purpose of the Notice was to prescribe temporary conditions pursuant to which (1) the bank could avoid being deemed to be in “significant non-compliance” under the FATCA IGAs while (2) retaining certain US citizens who are unable or unwilling to provide US SSNs. This relief is an interim measure and will last for three years. In addition, the relief is contingent upon both the banks and the government of the Model 1 jurisdiction taking additional steps to “encourage” FATCA compliance from US citizens. Separately, the relief requires that the government of the IGA Model 1 jurisdiction to take additional steps to “enforce” FATCA compliance on its banks. It is obvious that the words “encourage” and “enforce” have very different meanings.

To be clear Notice 2023-11 does NOT simply provide an extension. The extension is conditional on taking additional steps designed to strengthen FATCA compliance generally. Interestingly, early commentary has ignored this troubling escalation of FATCA enforcement.


https://citizenshipsolutions.ca/2023/...

Anthony PARENT
www.irsmedic.com
[email protected]

John RICHARDSON
www.citizenshipsolutions.ca
[email protected]

Keith REDMOND
  / americanexpatriates  
[email protected]