The IRS on October 15 added a new reporting question (Q3) to its Foreign Account Tax Compliance Act (FATCA) frequently asked questions (FAQ) page. The FAQ addresses whether Model 1 foreign financial institutions (FFIs) must immediately close US reportable accounts lacking US taxpayer identification numbers (TINs) when existing transition relief expires at the end of 2019. The guidance provides that a reporting Model 1 FFI is not required to immediately close or withhold on US reportable accounts that do not contain a TIN beginning January 1, 2020.
Clarification of the IRS’s position on expiration of the transition period to obtain TINs from owners of pre-existing US reportable accounts is helpful information for FFIs in Model 1 jurisdictions. At the same time, FFIs and their responsible officers need to be aware that the United States and the applicable exchange partners may conduct an evaluation to determine whether the lack of account holder TINs resulted from significant non-compliance.
Impacted stakeholders should be prepared to substantiate that missing TINs on US reportable pre-existing accounts were not the result of willful neglect and that reasonable efforts have been made to obtain the TINs. At a minimum, the procedures outlined for obtaining US TINs in Notice 2017-46 still should be followed. Those procedures include (1) obtaining and reporting the date of birth from each account holder and controlling person whose US TIN is not reported and (2) requesting a US TIN annually from each relevant account holder with a missing US TIN. Furthermore, these procedures should be included in the FFI’s written policies and procedures and subject to adequate review and supervision.
Partner, PwC US