Model 1 FFI’s Obtain Extension of Relief

IRS issued Notice 2024-78 on 10/28/24 providing the extension of temporary relief for FATCA Model 1 Financial Institutions (FFI’s) regarding the reporting of U.S. Taxpayer Identification Numbers. This means that the temporary relief outlined in Notice 2023-11 is extended, in accordance with the procedures and requirements specified in this Notice 2024-78, for certain FFI’s that must report U.S. taxpayer identification numbers (U.S. TINs) for specific preexisting accounts. If an FFI located in an eligible Model 1 IGA jurisdiction adheres to the procedures detailed in this Notice 2024-78, the U.S. Competent Authority will not classify the reporting Model 1 FFI’s as significantly non-compliant with its obligations under the IGA solely due to its inability to report U.S. TINs for its preexisting accounts during the calendar years 2025, 2026, and 2027.

Extension of Relief

The extension of the temporary relief granted by Notice 2023-11 is intended to enable the IRS to continue to collect and analyze additional information for accounts without U.S. TINs. As with Notice 2023-11, to obtain the relief provided by this Notice 2024-78, reporting Model 1 FFI’s must use certain codes provided by the IRS that identify features of these accounts that may explain why reporting Model 1 FFI’s do not report a U.S. TIN and must comply with other requirements set forth in this Notice 2024-78. The Notice 2024-78 states that: “This relief is limited to reporting on preexisting accounts. It does not apply to U.S. reportable accounts opened after the determination date specified in the applicable Model 1 IGA, including new accounts held by account holders of preexisting accounts”. In addition, “nothing in this Notice 2024-78 or Notice 2023-11 prevents the U.S. Competent Authority from finding significant non-compliance due to a failure to satisfy an obligation under the applicable Model 1 IGA other than a failure to obtain and report each required U.S. TIN for preexisting accounts”.

Notice 2024-78 adds two new conditions from Notice 2023-11in order to obtain relief

Notice 2024-78 states that in order to obtain the relief for preexisting accounts described in 2025, 2026, and 2027 calendar years, for each U.S. reportable account (including new accounts) with a missing required U.S. TIN, the reporting Model 1 FFI must do the following (extracts below):

obtain and report the date of birth of each account holder that is an individual and controlling person whose U.S. TIN is not reported;
annually request from each account holder any missing required U.S. TIN, as described in further detail below;
annually search electronically searchable data maintained by the reporting Model 1 FFI for any missing required U.S. TINs;
report an accurate TIN Code for each account that is missing a required U.S. TIN;
if the FFI’s electronically searchable account information contains a foreign taxpayer identification number (or functional equivalent) assigned to a taxpayer by its country of residence (FTIN), report an FTIN for each specified U.S. person that is missing a required U.S. TIN; (NEW) and
using the AddressFix element, as described further below, report the city and country of residence for each specified U.S. person with a missing required U.S. TIN. (NEW).

AdressFix

The AddressFix element is designed for comprehensive address reporting. To maintain data reporting consistency and facilitate the IRS’s processing of reported information, Model 1 FFIs are encouraged to utilize AddressFix for all address details whenever feasible, with AddressFree available as an additional option. Nonetheless, to meet the stipulations of this section (number 6 above), it is essential that the city and country of residence for the specified U.S. person are included in AddressFix.

There is an annual request for missing required U.S. TINs

To satisfy the requirement to make an annual request from each account holder for missing required U.S. TINs, reporting Model 1 FFI’s must use the method of communication that is, in the FFI’s reasonable judgment, most likely to reach the account holder. The communication must include either of the following (extracts below):

The web address of the State Department’s Joint FATCA FAQs (as of the publication date of this notice, https://travel.state.gov/content/travel/en/international-travel/whileabroad/Joint-Foreign-Account-Tax-Compliance-FATCA-FAQ.html), or

a copy of the FAQs described in the preceding bullet and either
a copy of the relief procedures provided by the IRS for certain former citizens, or
the web address for such procedures (as of the publication date of this notice, https://www.irs.gov/individuals/internationaltaxpayers/relief-procedures-for-certain-former-citizens ).

Model 1 FFI’s must retain records

“FFIs seeking to obtain relief under this notice for the 2025, 2026, and 2027 calendar years must retain records of the policies and procedures adopted to satisfy this requirement and documentation that those policies and procedures were followed to establish its compliance with the requirements of this section until the end of calendar year 2031. To obtain the relief described in this notice, the FFI must also retain until 2031 any records or documentation adopted in previous years for the purpose of obtaining relief under Notice 2023-11 to the extent applicable”.

To qualify for the relief outlined in this section regarding reporting for a specific calendar year or relevant reporting period, a reporting Model 1 FFI must ensure that the corresponding Model 1 IGA jurisdiction makes diligent efforts by nine months following the end of the calendar year in question to achieve the following (extracts below):

Encourage U.S. citizens resident in the jurisdiction to provide U.S. TINs to FFIs when requested;
Take measures to enforce compliance by reporting Model 1 FFIs identified by the U.S. Competent Authority to the Model 1 IGA jurisdiction as potentially noncompliant;
Encourage FFIs located in a Model 1 IGA jurisdiction to not discriminate against U.S. citizens that do provide a U.S. TIN; and
If notified by the U.S. Competent Authority, take steps to conclude Competent Authority Arrangements with the U.S. Competent Authority, to implement an IGA, amend an Annex II to an IGA, or exchange country-by-country information.

Model 1 FFI’s ought to keep in mind that:

The IRS and the US Treasury Department plan to use the data to improve IRS compliance procedures and promote greater reporting compliance. All FFIs ought to make sure that they have adequate BSA/AML and Enhanced Due diligence processes in place in order to protect their legal, operational risks as further regulatory changes are possible.