IRS offers temporary FATCA relief to foreign financial institutions required to report US TINs

Many Model 1 intergovernmental agreement (IGA) jurisdictions, FFIs and US citizens have expressed concern that FFIs are closing, or may close, bank accounts of US citizens who have failed to provide their US TINs. FFIs have indicated that these closures are based on their concerns about being treated as significantly non-compliant with their Model 1 IGA obligations. To address these stakeholder concerns, the Notice provides interim guidance to impacted FFIs while also providing the IRS with additional information to enhance compliance procedures.

The IRS notice provides that if a Model 1 FFI complies with certain procedures, the US competent authority will not determine that there is significant non-compliance with the reporting Model 1 FFI’s obligations under the IGA for reporting on calendar years 2022, 2023 and 2024 solely as a result of the FFI’s failure to report US TINs associated with its pre-existing accounts

Requirements for reporting Model 1 FFIs

A reporting Model 1 FFI is eligible for the relief provided by the Notice if, for each US reportable account with a missing required US TIN, the FFI: 

1. obtains and reports the date of birth of each account holder that is an individual and controlling person whose US TIN is not reported;
2. starting in calendar year 2023, annually requests from each account holder any missing required US TIN;
3. starting in calendar year 2023; annually searches electronically searchable data maintained by the FFI for any missing required US TINs; and
4. reports an accurate TIN code for each account that is missing a required US 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 recently issued by the IRS. 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 (on 27 January 2023, see IRS Reporting FAQ 6).

The mandatory use of defined numerical codes which identify features of these pre-existing accounts may explain why the reporting Model 1 FFI failed to report a US TIN and the IRS and the US Treasury Department intend to use this data to enhance compliance procedures and to inform potential future options for Model 1 FFIs that continue to be unable to obtain and report a US TIN for certain accounts. The Notice states that if relief is granted in the future, the scope of the accounts for which FFIs may obtain relief likely will be narrower than the scope of accounts for which relief is provided for under this Notice.

Solicitation for missing required US TINs

To satisfy the requirement to contact each account holder for missing required US TINs, FFIs must use the method of communication that it determines is most likely to reach the account holder. In addition, the communication must include either:

• the web address of the State Department’s Joint FATCA frequently asked questions (FAQs); or
• a copy of the FAQs and either (a) a copy of the relief procedures provided by the IRS for certain former citizens or (b) the web address for such procedures.

An FFI must retain records of the policies and procedures adopted to satisfy this requirement. It must also retain documentation that those policies and procedures were followed to establish its compliance with the requirements until the end of calendar year 2028.

For a reporting Model 1 FFI to be eligible for the relief set out in this Notice, the relevant Model 1 IGA jurisdiction must, among other things, make “good faith efforts” to encourage its US citizens to provide US TINs to FFIs when requested, and to take measures to enforce compliance by reporting Model 1 FFIs.

Irish Revenue has confirmed that it will update the Tax and Duty Manuals shortly to reflect the revised Notice from the IRS in relation to missing US TINs. HMRC’s guidance has already been updated to reflect the IRS Notice and updated TIN code FAQ and notes that reporting to HMRC in respect of calendar year 2022, due by 31 May 2023, is considered to be a transitional year whereby it is still possible to report an account without a TIN to HMRC by entering the nine zeros in the TIN field. However, FFIs are encouraged to use either the TIN codes issued in 2021 or the updated, recently issued TIN codes.

Three key actions FFIs cannot afford to ignore

1. Review the relief provisions, many of which require actions this year, and create processes to maintain compliance.
2. Work with relevant stakeholders to incorporate additional language in annual solicitations.
3. Diligently document the steps taken to comply and attempt to reduce missing TINs.