By Bernie Becker - 05/02/14 05:08 PM EDT
The Obama administration on Friday gave foreign banks more breathing room for complying with a new law that aims to crack down on offshore tax evasion.
Robert Stack, Treasury’s deputy assistant secretary for international tax affairs, said the decision was made after hearing from financial institutions concerned about their ability to get everything in order by July.
“In providing for a smooth start to FATCA, this notice will enhance our insight into accounts held overseas by U.S citizens, furthering the goal of narrowing the tax gap and cracking down on tax evasion,” Stack said in a statement.
The Treasury notice says that the department will consider good faith efforts to include making certain changes to account procedures and other policy tweaks. Banks that haven’t made those efforts will not get any of the transition period relief.
FATCA, enacted by Congress in 2010, forces foreign banks to disclose certain account information to U.S. authorities, or face a withholding tax. The Treasury Department has signed dozens of agreements with other countries to enforce FATCA.
The Securities Industry and Financial Markets Association, which last month asked Treasury for a FATCA transition period, praised the administration’s decision. SIFMA had argued that banks would not have enough time to comply with a batch of Treasury regulations issued this year without that sort of breathing room.
“By implementing this transition period and addressing other problems that we have brought to Treasury’s attention, financial institutions will be able to comply more effectively while minimizing unnecessary cost burdens and reducing potential harm to the U.S. economy in the long-run,” Ken Bentsen, SIFMA’s chief executive, said in a statement.