On 12/30/22, the IRS issued Notice 2023-11 with the purpose of providing FATCA reporting relief to Model 1 FFIs who have been unable to obtain US TINs for their pre-existing accounts that are US reportable accounts. In turn, the Model 1 FFIs will provide information that the IRS can analyze to determine why these TINs are missing. The Notice states that if an FFI in an eligible Model 1 IGA jurisdiction complies with the procedures described in this notice, then the U.S. Competent Authority will not determine there is significant non-compliance with the reporting Model 1 FFI’s obligations under the IGA solely as a result of its failure to report U.S. TINs associated with its preexisting accounts. Model 1 IGAs define preexisting accounts as financial accounts maintained by a reporting financial institution as of June 30, 2014.
Why is the US Treasury and the IRS extending this relief?
Under the Model 1 IGA, reporting Model 1 FFIs are required to obtain the required U.S. TINs from account holders. However, the IRS has continued to receive FATCA reports from FFIs that do not include U.S. TINs for preexisting accounts. On 5/13/21, the IRS added a FAQ under FATCA Reporting (Question Number 6). In this FAQ, the IRS presents voluntary TIN codes that FFI’s may use to identify the reason as to why the FFI could not provide a U.S. TIN when the FFI reported 2020 data. In sum, this was the IRS’ effort to better understand the issues that FFIs face in obtaining a U.S. TIN. Despite this effort, the lack of TIN problem persists for the FFIs.
Relief for reporting on certain preexisting accounts that are U.S. reportable accounts
For reporting on calendar years 2022 (due by September 30, 2023), 2023 (due by September 30, 2024), and 2024 (due by September 30, 2025), the U.S. Competent Authority will NOT determine that there is significant non-compliance with the obligations of a reporting Model 1 FFI under an applicable Model 1 IGA with respect to reporting required U.S. TINs for preexisting accounts solely because of a failure to obtain and report each required U.S. TIN for such accounts, provided that the reporting Model 1 FFI complies with the conditions set forth in Notice 2023-11 and is in a Model 1 IGA jurisdiction that satisfies the requirements of this notice. In addition:
- 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 (new accounts), including new accounts held by account holders of preexisting accounts.
- Nothing in this notice prevents the U.S. Competent Authority from finding significant non-compliance for a failure to satisfy any obligation under the applicable Model 1 IGA other than a failure to obtain and report each required U.S. TIN for preexisting accounts.
Reporting Model 1 FFIs are eligible for relief with respect to certain preexisting accounts if the FFIs:
- obtains and reports the date of birth of each account holder that is an individual and controlling person whose U.S. TIN is not reported;
- starting in calendar year 2023, annually requests from each account holder any missing required U.S. TIN, as described in further detail below;
- starting in calendar year 2023, annually searches electronically searchable data maintained by the reporting Model 1 FFI for any missing required U.S. TINs; and
- reports an accurate TIN Code for each account that is missing a required U.S. TIN. For reporting on calendar year 2022, the fourth condition may be satisfied by a reporting Model 1 FFI by using either the TIN Codes issued by the IRS in May 2021 or updated TIN Codes issued by the IRS in early 2023. For reporting on calendar years 2023 and 2024, the fourth condition must be satisfied by a reporting Model 1 FFI by using the most recent TIN Codes issued by the IRS.
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 FFIs must use the method of communication that is, in the FFI’s reasonable judgment, most likely to reach the account holder. In addition, the communication must include either of the following:
- The web address of the State Department’s Joint FATCA FAQs:
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:
Retain Records
An FFI 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 until the end of calendar year 2028.
Model 1 FFIs 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 for preexisting accounts.
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.
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