Relief applies to certain Model 1 FFIs that do not report US TINs to the IRS | Eversheds Sutherland LLP (USA)

Notice 2023-11issued in December 2023, provided limited relief to certain foreign financial institutions (FFIs) that were not fully compliant with the terms of their Model 1 FATCA Intergovernmental Agreement (IGA). Specifically, FFIs that did not collect or report U.S. Taxpayer Identification Numbers (TINs) ) to the IRS that relate to “pre-existing accounts” maintained by an FFI may find themselves in material non-compliance with the terms of their intergovernmental agreements. Notice 2023-11 provided FFIs located in Model 1 IGA jurisdictions the ability to comply with the terms of such IGA until 2024, even if such FFIs did not collect and report to the IRS TINs associated with pre-existing accounts. in FFI.

To qualify for the administrative benefits provided by Notice 2023-11, an FFI must:

1. collect the date of birth of an existing account holder and submit it to the IRS,
2. periodically request the US TIN of an existing account holder,
3. conduct an annual search of its electronic data to determine whether it has received a pre-existing U.S. account holder TIN, and
4. report the appropriate missing TIN code to the IRS.

The IRS indicated that this approach was justified to allow the IRS to evaluate how best to address the practical fact that not all Model 1 FFIs were able to report to the IRS the U.S. TIN of each of their pre-existing accounts held by certain U.S. persons. or significant US owners (or US controlling persons).

On October 28, 2024, the IRS released Notice 2024-78which further extends the benefits provided in Notice 2023-11 until 2027, subject to two additional conditions. In addition to the four conditions set forth in Notice 2023-11, to continue to avoid an IRS determination of material noncompliance with the terms of a qualifying Model 1 IGA, an FFI must also:

1. provide the IRS, to the extent possible, with the client’s non-U.S. TIN, and
2. Using the “addressfix” element in the FATCA reporting scheme, report the client’s city and country of residence to the IRS.

Both Notice 2023-11 and Notice 2024-78 impose additional conditions on a Model 1 FFI jurisdiction to allow an FFI in such jurisdiction to claim the benefits provided in those notices. These conditions remain unchanged in Notice 2024-78 and generally require that a Model 1 FFI jurisdiction encourage FFIs to obtain, and customers to provide, U.S. TINs.

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