Treasury Issues Proposed Regulations Requiring U.S. Banks to File Annual Information Statements With Respect to Payments of Interest Income to Non-resident Alien Individuals.
On January 6, 2011, the Treasury and the Internal Revenue Service proposed regulations (REG-146097-09) that would require U.S. banks to file annual reports of interest income paid to nonresident alien individuals. Current regulations, set forth in §6049, only require U.S. banks to report bank deposit interest paid to a U.S. person or to a non-resident alien who is a resident of Canada. The new proposed regulations resurface a prior proposed regulation project issued by the Clinton Administration that would have required U.S. banks to annually report to the IRS all U.S. bank deposit interest paid to any non-resident alien individual. This proposal was strongly opposed by various business groups and such strong renewed opposition should be anticipated.
The stated rationale of the Service for the reissuance of this reporting is that it will foster global information exchange with other countries. It "will further strengthen the United States exchange and information program, consistent with adequate provisions for reciprocity, usability, and confidentiality in respect of this information..”. Moreover, the proposal is aimed at improving voluntary compliance by U.S. persons who attempt to avoid U.S. information reporting by making false claims of foreign status.
The banking industry in light of the reporting requirements imposed under the recent FATCA reporting and withholding regimes, along with this new rule, should be expected to lobby the Congress to have such proposal and reforms substantially cut-back or repealed. Stay tuned.
