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Response from Democrats Abroad Taxation Task Force to IRS Notice 2023-11: Temporary FATCA Reporting Relief for Non-U.S. Banks
On Friday, December 30, 2022, the IRS issued Notice 2023-11, which provides temporary relief from the FATCA reporting rules for non-U.S. banks (known as FFIs, “foreign financial institutions”) in about 90 countries (known as Model 1 Jurisdictions). The notice specifically provides relief for reporting of U.S. TINs (Social Security or ITIN numbers) for 2022, 2023, and 2024.
Democrats Abroad is encouraged by the recognition by Treasury and the IRS that modifications to the FATCA-reporting regime are necessary. Although temporary relief for non-U.S. banks is a positive step, the temporary relief is provided to FFIs rather than directly to Americans abroad. We would prefer permanent relief that resolves the core problem caused by FATCA: loss of access to non-U.S. bank accounts for Americans abroad.
In 2022 the Democrats Abroad Taxation Task Force met with IRS and Treasury officials to raise awareness of the ongoing tax and financial-access issues experienced by our constituency. We are pleased to see some of our views are recognized in this IRS notice. We look forward to an ongoing productive dialogue with these government agencies and Congress in order to resolve the tax and financial-access issues that severely impact the daily lives of Americans abroad.
Highlights from the notice that are relevant to Americans abroad include:
- Treasury and the IRS acknowledge that foreign countries, non-U.S. banks, and U.S. citizens (including for Americans living abroad) are concerned about account closures when a U.S. TIN has not been provided.
- Treasury and the IRS acknowledge notification that some non-U.S. banks are refusing to open or maintain accounts for Americans abroad, or are “otherwise providing access to accounts on less favorable terms than apply to other account holders, even if the U.S. citizen provides a U.S. TIN.”
- One of the requirements for FFIs to receive relief is for the relevant country to encourage its banks not to discriminate against Americans abroad who do provide a U.S. TIN.
- Even though Americans abroad and FFIs had up to 6 years to provide U.S. TINs for FATCA reporting, TINs were still not provided.
- Relief to FFIs is limited to reporting on accounts opened before a certain date and is conditional upon the bank providing U.S.-citizen customers with information on how to come into tax compliance and/or renounce citizenship.
- Relief also obliges banks to take steps to encourage tax compliance by U.S. citizens like providing links to the IRS and U.S. State Department’s websites.