Much about the Washington bureaucracy frustrates and maddens us, and the Foreign Account Tax Compliance Act (FATCA) tops our list right now.
How is it, exactly, that international commercial insurance placements, with no cash value, can be viewed as a source of suspicion for tax avoidance?
There is no good rationale.
FATCA, which took effect worldwide on July 1, aims to close offshore tax evasion by using private industry as “the stick” and requiring complicated reporting requirements designed to pressure foreign financial institutions to forego any alliances with U.S. tax evaders.
When the FATCA statute was passed by Congress in 2010, non-cash-value commercial insurance transactions were not intended to be wrapped into the new law’s reporting requirements. But the IRS wrote implanted regulations that continue to include non-cash value insurance. We’ve been working with the IRS and Treasury for two years on the issue, and 17 members of Congress—all of them serving on the tax-writing House Ways and Means Committee—agree with our position and chimed in with Treasury officials. We have their attention and know they are listening, but the law is still inadvertently including non-cash value premiums.
It’s a classic case of Washington bureaucracy and IRS intrusiveness.
We’re convinced of the goodwill of Treasury in wanting to work with us, thanks to the strong intervention of Rep. Ander Crenshaw, R-Fla., (who chairs the House subcommittee that funds the IRS) and Federal Insurance Office Director Mike McRaith. Treasury officials now have a better understanding and greater appreciation of what the agent/broker burdens of this law are, and we’re hoping they will be open to identifying and exempting some (if not all) of those reporting burdens for established insurers who already conform to all kinds of legitimate regulatory requirements.
In the meantime, we’re working tirelessly to help agents and brokers around the world who do international placements with offshore commercial insurers comply with all the foreign reporting rules.
Our Internet portal, W8-BEN-E (www.w8bene.com) is open to all insurers, as well as Council members and non-members, to upload and download the required W8-BEN-E forms they need to prove FATCA-compliant or FATCA-exempt status. This being our technology issue, here are a few highlights: The portal provides a searchable catalogue of participating foreign insurers and reinsurers’ W-8 forms, complete contact information for (re)insurers’ W-8 administrators, immediate and safe document access and secure W-8 uploading, and the ability for foreign insurance carriers to make rolling changes to their forms as needed.
There has been talk of an enforcement delay, but don’t let anything you’ve read dissuade your firm from doing everything it can to be in full compliance with this act. By 2017, FATCA is expected to become more intrusive, as additional requirements for foreign pass-through payments will come into effect.
Yes, we have seen some progress in our attempts to get regulatory relief, but there is no guarantee of success. Our best advice is to sign up for the portal, stay the course and stay tuned for the latest.