SIFMA seeks delay for tax evasion law

A key financial services advocate is trying one last time to delay a law cracking down on offshore tax evasion scheduled to go into effect this year.

{mosads}The Securities Industry and Financial Markets Association asked the Treasury Department and the Internal Revenue Service to give banks and other businesses six months of what it called “transitional relief” from the Foreign Account Tax Compliance Act, or FATCA.

FATCA, passed in 2010, seeks to battle tax evasion by forcing banks to disclose information about certain accounts held by Americans or face a withholding tax. The law, already delayed a couple of times, is set to go into effect on July 1.

But SIFMA said Wednesday that time frame would not give banks and other businesses enough time to get ready, especially after Treasury dropped a new set of rules fewer than two months ago.

“It is simply not feasible in less than three full months for all of the impacted domestic and foreign financial institutions to complete detailed implementation plans, prepare written procedures, train personnel, educate clients, and develop and test the systems changes required for compliance with the voluminous changes issued this late in the process,” SIFMA’s Payson Peabody wrote to Treasury and IRS officials.

“If banks and securities firms are not afforded sufficient time for an effective implementation of FATCA, SIFMA believes that adverse consequences could include severe disruptions to global and U.S. financial markets.”

SIFMA’s proposed six-month delay would only be for businesses, and the law would continue to go live for individuals on July 1.

The securities advocate said preparing for the law would be more complicated for businesses than individuals. Banks would not be the majority of businesses that would benefit from the delay either, SIFMA says, with trusts, estates, private foundations and tax-exempt groups also among the entities that would get relief.

The Treasury Department did not immediately respond to SIFMA’s request, but Treasury officials made clear in February they didn’t see any reason to think the law wouldn’t be fully implemented on July 1.

“We don’t see any likely event that will cause us to change that,” one official said.