Notice 2023-11

Notice 2023-11

Foreign Financial Institution Temporary US Taxpayer Identification Number Relief

One of the many requirements of the Foreign Account Tax Compliance Act (FATCA) is for Foreign Financial Institutions (FFI) to report information on financial accounts held by US taxpayers or by foreign entities in which a US taxpayer holds a certain ownership interest. Under a Model 1 IGA the FFI reports to its local tax authority and then automatically exchanges that information with the IRS.

To remain compliant with the terms of the IGA, a Model 1 FFI must report the tax identification number (TIN) of its US account holders. Withholding agents are generally required to withhold a 30 percent punitive tax on US source payments to an FFI that does not agree to report this information to the IRS.

To avoid the imposition of this punitive withholding tax and encourage voluntary compliance with these requirements, there was an initial 3-year transition period (2014-2016) where a Model 1 FFI was not required to report the US TIN of a preexisting account if it was not already in the Model 1 FFI's records. In lieu of a US TIN, a date of birth was required, but only if it was contained in the FFI's current records.

In 2017, additional transition relief was granted under notice 2017-46, where an FFI could remain compliant under the IGA without reporting a US TIN if they obtained and reported the date of birth, annually requested the missing US TIN, and searched all electronic data for missing TINs. This relief applied to calendar years 2017, 2018, and 2019.

Despite the six years of relief granted, the IRS continues to receive reporting from Model 1 IGA jurisdictions with missing US TINs. To develop a deeper understanding of the root issues here, the IRS created a series of No TIN Reason Codes to better understand the specific scenarios under which a US TIN could not be obtained and reported. Using these codes, which the IRS shared directly with their Model 1 IGA partners, was voluntary.

Considering the feedback the IRS has received from all concerned stakeholders (Model 1 IGA jurisdictions, FFIs, and US citizens) around the fear of being found in significant noncompliance or a US account holder being placed on an uneven or even discriminatory footing, the IRS has determined that providing more time to obtain these missing TINs will not solve the issue.

Notice 2023-11 provides additional relief for reporting preexisting accounts for calendar years 2022, 2023, and 2024. There will not be a determination of a significant noncompliance event solely based on a failure to obtain and report a US TIN provided that: (1) ALL accounts of individuals and controlling persons with a missing TIN include a date of birth. (2) The FFI annually requests the missing TIN from each account holder. (3) The FFI annually searches its electronically searchable data for missing TINs. (4) Reports an accurate No Tin Reason Code ( based on the most recently published list) for each account missing a required US TIN. The notice does indicate the IRS plans to update this list of codes prior to the 2023/2024 reporting cycle but the current list is sufficient for 2022/2023 reporting.

Model 1 jurisdictions can apply their own proprietary set of rules to receive what they consider clean reportable data. Those rules may conflict with this notice. If you have questions about a specific tax jurisdiction, please don't hesitate to contact us, we are happy to help.

The complete text of Notice 2023-11 can be found here.

_________________________________________________________________________________________________

Copyright © 2019 by S&P Global Market Intelligence, a division of S&P Global Inc.

These materials have been prepared solely for information purposes based upon information generally available to the public and from sources believed to be reliable. S&P Global Market Intelligence, its affiliates, and third party providers (together, "S&P Global") do not guarantee the accuracy, completeness or timeliness of any content provided, including model, software or application, and are not responsible for errors or omissions, or for results obtained in connection with use of content. S&P Global disclaims all express or implied warranties, including (but not limited to) any warranties of merchantability or fitness for a particular purpose or use.

S&P Global Market Intelligence's opinions, quotes and credit-related and other analyses are statements of opinion as of the date they are expressed and not statements of fact or recommendation to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security.

S&P Global keeps certain activities of its divisions separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain divisions of S&P Global may have information that is not available to other S&P Global divisions.

S&P Global Ratings does not contribute to or participate in the creation of credit scores generated by S&P Global Market Intelligence. Lowercase nomenclature is used to differentiate S&P Global Market Intelligence PD credit model scores from the credit ratings issued by S&P Global Ratings.

S&P Global provides a wide range of services to, or relating to, many organizations. It may receive fees or other economic benefits from organizations whose securities or services it may recommend, analyze, rate, include in model portfolios, evaluate, price or otherwise address.

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.