IRS Extends Relief for Foreign Financial Institutions to Report U.S. Taxpayer Identification Numbers

Foreign financial institutions (FFIs) get a few more years of relief, subject to certain requirements, with respect to obtaining and reporting U.S. taxpayer identification numbers (TINs) for certain preexisting accounts under the Foreign Account Tax Compliance Act (FATCA). Notice 2024-78 extends through 2027 the relief program that the IRS previously set out for 2022–2024 in Notice 2023-11. 

FATCA and TIN Reporting Requirement

Under FATCA, certain FFIs must report to the IRS information about financial accounts held by U.S. taxpayers and foreign entities in which U.S. taxpayers hold certain ownership interests. In the case of non-compliance, FATCA generally requires withholding agents to withhold a 30% tax on certain U.S. source payments to FFIs that do not report the required information. 

To facilitate the exchange of information, the Treasury Department has developed two model intergovernmental agreements (IGAs) in collaboration with foreign governments, “Model 1” and “Model 2” IGAs. Under the Model 1 IGA, Model 1 FFIs report certain information on U.S. reportable accounts to the relevant jurisdiction’s tax authority, which then automatically exchanges the information with the U.S. Competent Authority. Each Model 1 IGA provides that a reporting Model 1 FFI will not be subject to withholding tax under Section 1471 if the Model 1 IGA jurisdiction and the FFI comply with their obligations under the IGA.

Among other information, Model 1 FFIs must report the U.S. TIN of each specified U.S. person that is a holder of a U.S. reportable account and, for a non-U.S. entity with one or more specified U.S. persons who are controlling persons, the U.S. TIN of each controlling person for the U.S. reportable accounts of the entity. 

Previous Temporary Relief

The Treasury Department and the IRS previously provided temporary relief for Model 1 FFIs that were unable to obtain and report U.S. TINs for preexisting accounts in Notice 2017-46. That relief was limited to reporting for calendar years 2017–2019 and was intended to give Model 1 FFIs more time to implement practices and procedures to obtain required TINs. 

In 2023, despite the previous relief provided for prior years, the IRS determined that issues continued with respect to reporting from Model 1 IGA jurisdictions failing to include the required U.S. TINs for all preexisting accounts. Accordingly, the IRS issued new temporary relief in Notice 2023-11. See BDO’s Tax Alert, “Foreign Financial Institutions Get Relief on Reporting U.S. Taxpayer Identification Numbers.”

Under Notice 2023-11, the U.S. Competent Authority will not deem a Model 1 FFI to be in significant noncompliance with its reporting obligations solely due to a failure to report U.S. TINs on preexisting accounts for calendar years 2022–2024 if the FFI meets certain requirements. 

New Relief for 2025–2027

Citing the need for additional time to study issues related to obtaining and reporting U.S. TINs and to evaluate the development of future compliance options, the IRS has decided to extend the relief provided in Notice 2023-11 for three additional years. 

For 2025–2027, Reporting Model 1 FFIs that comply with the requirements set out in Notice 2024-78 will not be treated as in significant non-compliance with their obligations under an applicable Model 1 IGA solely because of the failure to report a required U.S. TIN with respect to a preexisting account. However, the notice limits this relief to reporting Model 1 FFIs that are in an eligible jurisdiction that makes good faith efforts to increase the likelihood that U.S. citizens residing in that jurisdiction will report their U.S. TINs to the FFIs and that takes other specified steps.

To qualify for the relief, the FFI must do each of the following:

1. Obtain and report the date of birth of each account holder that is an individual and controlling person whose U.S. TIN is not reported, 
2. Annually request from each account holder any missing required U.S. TIN, using “the method of communication that is, in the FFI’s reasonable judgment, most likely to reach the account holder,” and including certain specified information in such requests,
3. Annually search electronically searchable data maintained by the reporting Model 1 FFI for any missing required U.S. TINs,
4. Report an accurate TIN Code for each account that is missing a required U.S. TIN,
5. If the FFI’s electronically searchable account information contains a foreign TIN (or functional equivalent) assigned to a taxpayer by its country of residence, report the foreign TIN for each specified U.S. person that is missing a required U.S. TIN, and 
6. Using the “AddressFix element,” report the city and country of residence for each specified U.S. person with a missing required U.S. TIN.
   
   

The notice states that the AddressFix element is to be used generally for all address reporting to ensure conformity of data reporting for IRS processing. While reporting Model 1 FFIs should use AddressFix for all address information to the extent possible, the IRS adds that they may use AddressFree as a supplemental element. However, to qualify for the relief in the notice, FFIs must report the city and country of residence of the specified U.S. person in AddressFix.