On October 27, 2009, Senator Max Baucus (D-Montana) and Representative Charles Rangel (D-New York), chairmen of the Congressional tax writing committees, introduced the Foreign Account Tax Compliance Act of 2009 (the "Bill") in the U.S. Congress. A statement released by the House Ways and Means Committee indicates that the Bill "is intended to clamp down on tax evasion and improve taxpayer compliance by giving the IRS new administrative tools to detect, deter and discourage offshore tax abuses." If enacted in its current form, the Bill would, among other things, impose a 30% tax on payments made to foreign financial institutions, unless they comply with disclosure and certification requirements relating to their U.S. account holders, and to foreign non-financial institutions in certain circumstances.1 Both President Barack Obama and Treasury Secretary Timothy Geithner issued statements giving their unqualified support for the Bill.Impact on Foreign Financial Institutions The Bill would introduce a 30% withholding tax on any "withholdable payment" made to a foreign "financial institution" (whether or not beneficially owned by such institution), unless the foreign financial institution agrees, pursuant to an agreement entered into with the U.S. Treasury, to provide information (including U.S. accountholder identification information and annual account activity information) with respect to each "financial account" held by "specified U.S. persons" and "U.S.-owned foreign entities." The new disclosure requirements would be in addition to requirements imposed by a "Qualified Intermediary" agreement. The term "financial institution" would include banks, brokers and investment funds, including private equity funds and hedge funds. A "withholdable payment" generally would include any payment of interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income from sources within the United States.2 It also includes gross proceeds from the sale of property that is of a type which can produce U.S.-source dividend or interest, such as stock or debt issued by domestic corporations. A "financial account" would include bank accounts, brokerage accounts and other custodial accounts. The term "specified U.S. person" would be any U.S. person other than certain categories of entities such as publicly-traded corporations and their affiliates, banks, mutual...
Foreign Account Tax Compliance Act Of 2009 - United States To Financial Institutions: Cooperate With Anti-Tax Evasion Efforts Or Else
|Author:||Mr Thomas Humphreys, Shamir Merali and Remmelt A. Reigersman|
|Profession:||Morrison & Foerster LLP|
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