Tax Insights: IRS provides temporary US taxpayer identification number reporting relief for some foreign financial institutions

In brief

On December 30, 2022, the US Internal Revenue Service (IRS) issued Notice 2023-11¹ (the Notice), which provides temporary relief to certain foreign financial institutions (FFIs) that are required under the Foreign Account Tax Compliance Act (FATCA) to report US taxpayer identification numbers (TINs) for certain pre-existing accounts as defined in an eligible Model 1 intergovernmental agreement (IGA). An FFI in an eligible Model 1 IGA jurisdiction that complies with the procedures defined in the Notice will not be considered to be in significant non-compliance of its requirements under the IGA solely because of its failure to report US TINs for its pre‑existing accounts. 

In detail

Background

Reporting Model 1 FFIs are required to report the US TIN of each specified person that is an account holder and, in the case of a non-US entity with one or more specified US persons who are controlling persons, the US TIN of each controlling person. Before 2017, a reporting Model 1 FFI was not required to report a US TIN for a pre-existing account (i.e. an account maintained as of a specified date in the applicable Model 1 IGA) if the US TIN was not in the FFI’s records. 

Notice 2017-46 provided further temporary relief for calendar years 2017 to 2019 to allow reporting Model 1 FFIs additional time to implement procedures to obtain and report the required US TINs. Despite the temporary relief, the US Department of the Treasury (Treasury Department) and the IRS have determined that providing this additional time has not addressed the concerns that reporting Model 1 FFIs are facing to implement the required procedures to obtain and report US TINs for pre‑existing accounts. As a result, Notice 2023-11 introduces a requirement to use certain codes (which were previously optional) to explain why the reporting Model 1 FFI did not report a US TIN; this will help the IRS and Treasury Department to enhance compliance procedures and collect information that may guide potential permanent solutions. 

Temporary relief procedures for reporting US TINs by Model 1 FFIs

For calendar years 2022, 2023 and 2024 FATCA reporting, the US competent authority will not consider a reporting Model 1 FFI to be in significant non-compliance of its requirements under the IGA solely because of its failure to report US TINs for its pre-existing accounts, provided that the reporting Model 1 FFI:

• obtains and reports the date of birth of each reportable account holder (or controlling person) whose US TIN is not reported

• starting in calendar year 2023, annually
  • requests from each reportable account holder the missing US TIN
  • searches the electronic data maintained by the reporting Model 1 FFI for missing US TINs, and

• reports an accurate TIN code for each account that is missing a US TIN

While the relief from non-compliance applies only to reporting on pre-existing accounts as defined by the applicable Model 1 IGA, the requirements listed above must also be followed for any new accounts for which there is a missing US TIN. 

Annual request for missing US TINs

Notice 2023-11 provides specific criteria for the annual solicitation required as part of the temporary relief. To satisfy the requirement to make an annual request from each account holder for missing required US TINs, reporting Model 1 FFIs must use the communication method that is most likely to reach the account holder and that communication must include either:

• the web address of the State Department’s Joint Foreign Account Tax Compliance Act (FATCA) FAQ²

• a copy of the FAQs² and either: 
  • a copy of the relief procedures³ provided by the IRS for certain former citizens
  • the web address for the IRS relief procedures for certain former citizens³

An FFI must retain (i) records of the policies and procedures adopted to satisfy the requirements, and (ii) documentation that those policies and procedures were followed to establish its compliance with the requirements.

US TIN codes for reporting

Notice 2023-11 states that the US TIN code must be reported for each account that is missing a required US TIN.

The reporting Model 1 FFI must use, for reporting on:

• calendar year 2022, either: 
  • the TIN codes issued by the IRS in May 2021 (see Q6 under the “Reporting” section⁴ for more detail on the TIN codes)
  • the updated TIN codes to be issued by the IRS in early 2023 

• calendar years 2023 and 2024, the most recent TIN codes issued by the IRS 

Eligible Model 1 IGA jurisdictions 

For a reporting Model 1 FFI to be eligible for the relief, the applicable Model 1 IGA jurisdiction must make good faith efforts, by the date that is nine months after the end of the calendar year to which the information relates, to:

• encourage US citizens resident in the jurisdiction to provide US TINs to FFIs when requested 

• take measures to enforce compliance by reporting Model 1 FFIs identified by the US competent authority to the Model 1 IGA jurisdiction as potentially non‑compliant 

• encourage FFIs located in a Model 1 IGA jurisdiction to not discriminate against US citizens that do provide a US TIN, and 

• if notified by the US competent authority, take steps to conclude a competent authority arrangement with the US competent authority to amend Annex II to an existing IGA or exchange country-by-country information

Tax authorities in Model 1 IGA jurisdictions have already started to issue communications acknowledging Notice 2023-11, although it remains to be seen what specific actions tax authorities might take in response to the Notice.

The takeaway

The changes to the US TIN reporting requirements begin for calendar year 2022, however many FATCA reporting schemas may not include the required data fields, or may not specify that the fields are mandatory. It is expected that Model 1 IGA jurisdictions will issue local guidance on (i) eligibility for the new requirements, (ii) the intent to implement the procedures outlined in Notice 2023‑11, and (iii) possible extensions to reporting deadlines to allow time for tax authorities and FIs to update schemas and processes. In the meantime, reporting Model 1 IGA FFIs should start assessing the impact of the Notice and begin planning for the annual solicitations and reporting amendments. Further, FFIs should review their current policies and procedures and update them for the requirements of the Notice.

<sup>1. IRS Notice 2023-11 “Foreign Financial Institution Temporary U.S. Taxpayer Identification Number Relief” (December 30, 2022) at www.irs.gov.
2. US Department of State, “Joint Foreign Account Tax Compliance Act (FATCA) FAQ.”
3. IRS “Relief Procedures for Certain Former Citizens.”
4. IRS “FATCA - FAQs General” at www.irs.gov.</sup>