IRS Extends Temporary Relief for FATCA Reporting of US Taxpayer Identification Numbers

The US Internal Revenue Service (IRS) released Notice 2024-78 (“Notice”) in October 2024, which provides an extension of and additional temporary relief procedures for certain foreign financial institutions (FFIs) resident in eligible Model 1 intergovernmental agreement (IGA) jurisdictions with respect to an FFI’s obligation to report US taxpayer identification numbers (TINs) (e.g., an individual’s US Social Security number) associated with preexisting accounts.¹ This Notice extends the relief that was originally provided in Notice 2023-11² to calendar years 2025, 2026, and 2027. By complying with the procedures outlined in the Notice, an eligible FFI will not be treated as being in “significant non-compliance” with its reporting obligations pursuant to the applicable Model 1 IGA solely as a result of the FFI’s failure to report US TINs associated with its preexisting accounts. Impacted Model 1 FFIs should ensure they are appropriately considering the required actions provided by the Notice, including updating policies and procedures as necessary.

Background

The Foreign Account Tax Compliance Act (FATCA) requires certain FFIs to report to the IRS information (including US TINs) about financial accounts held by US taxpayers or non-US entities in which US taxpayers hold certain ownership interests. In order to facilitate the exchange of information on financial accounts held by US taxpayers, the US Treasury Department (“Treasury”) collaborated with non-US governments to develop two alternative model IGAs (the Model 1 IGA and the Model 2 IGA) that are intended to provide an effective and efficient means for complying with FATCA while reducing the burden FATCA compliance imposes on financial institutions.

The Model 1 IGA provides that a reporting Model 1 FFI will report certain information on US reportable accounts maintained by the FFI to its local tax authority, which will then automatically report this information to the IRS. Part of the information required to be reported by a reporting Model 1 FFI includes the US TIN for each specified US person that is an account holder and for each US person treated as a controlling person for certain accounts held by a non-US entity. Failure to comply with an FFI’s obligations pursuant to its Model 1 IGA, which includes adequate reporting, may result in the FFI being treated as in “significant non-compliance.” This may then result, if unresolved, in the FFI being subject to a 30% withholding tax pursuant to FATCA on certain payments received by that FFI.

Prior Relief

FFIs and US citizens have expressed a number of concerns to Treasury and the IRS generally relating to the closure of bank accounts held by US citizens who have failed to provide US TINs.

Prior to Notice 2023-11, relief relating to Model 1 FFIs and US TINs was issued in 2017, 2019, and 2021 and offered limited relief and additional time for FFIs and taxpayers to comply with the requirement to obtain and report US TINs.³ For example, the IRS developed a series of codes that a reporting Model 1 FFI could use to populate the TIN field (in the absence of having a US TIN to report) (TIN Codes).⁴

As the problem persisted, the IRS implemented mechanisms to collect higher quality and more detailed information to better understand the issues surrounding obtaining and reporting US TINs. These mechanisms included the temporary relief procedures detailed in Notice 2023-11 for reporting for calendar years 2022, 2023, and 2024.

Extension of Relief

The Notice released by the IRS extends Notice 2023-11 past calendar year 2024 and adds new requirements. This will enable the IRS to continue to collect and analyze additional information for accounts without US TINs. To obtain the relief provided by the Notice, the reporting Model FFIs must continue to use certain codes provided by the IRS that identify features of these accounts that may explain why the reporting Model FFI does not report a US TIN. The IRS can then continue to use this data to enhance its compliance procedures and develop potential future options for reporting Model 1 FFIs who continue to be unable to obtain and report the US TINs for certain accounts.

Specifically, the Notice provides relief for reporting for calendar years 2025, 2026, and 2027. As in the previous notice, relief is limited to reporting on preexisting accounts. In other words, the relief provided does not apply to new accounts,⁵ including new accounts held by account holders of preexisting accounts. Reporting Model 1 FFIs who follow the specified procedures 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 US TIN with respect to a preexisting account.⁶

Requirements for Relief

In order to be eligible for the relief provided by the Notice—for each US reportable account (including new accounts) with a missing required US TIN—the reporting Model 1 FFI must: 

1. obtain and report the date of birth of each account holder who is an individual and controlling person whose US TIN is not reported;

2. annually request from each account holder any missing required US TIN by using the method of communication that is, in the FFI’s reasonable judgment, most likely to reach the account holder.
Moreover, the communication must include either:

a. the web address of the State Department’s Joint FATCA FAQs (https://travel.state.gov/content/travel/en/international-travel/while-abroad/Joint-Foreign-Account-Tax-Compliance-FATCA-FAQ.html); or

b. a copy of the FAQs described in the preceding bullet and either (i) a copy of the relief procedures provided by the IRS for certain former citizens or (ii) the web address for these procedures (https://www.irs.gov/individuals/international-taxpayers/relief-procedures-for-certain-former-citizens);

3. annually search electronically searchable data maintained by the reporting Model 1 FFI for any missing required US TINs;

4. report an accurate TIN Code for each account that is missing a required US TIN;

5. if the FFI’s electronically searchable account information contains a foreign taxpayer identification number (or functional equivalent) assigned to a taxpayer by its country of residence (FTIN), report an FTIN for each specified US person that is missing a required U.S. TIN; and

6. report the city and country of residence for each specified US person with a missing required US TIN using the AddressFix element.⁷

Items 1-4 above are identical to the previous relief granted in Notice 2023-11. Items 5 and 6 are new requirements in the Notice’s extension of relief.

With respect to item 2 above, the Notice explicitly provides that an FFI must retain records of the policies and procedures adopted to satisfy this annual request requirement and documentation that those policies and procedures were followed to establish its compliance with this solicitation requirement until the end of calendar year 2031. This means that any records or documentation adopted in previous years for the purpose of obtaining relief under Notice 2023-11 must also be retained until 2031, not the previously required calendar year of 2028.

Additional Good-Faith-Effort Requirements

In addition to the above, and similar to the requirement set forth in Notice 2023-11, for a reporting Model 1 FFI to be eligible for the relief provided by the Notice with respect to reporting for a particular calendar year or other appropriate reporting period, the applicable Model 1 IGA jurisdiction must make good faith efforts, by the date that is 9 months after the end of the calendar year to which the information relates, to: 

1. encourage US citizens resident in the jurisdiction to provide US TINs to FFIs when requested;

2. take measures to enforce compliance by reporting Model 1 FFIs identified by Treasury to the Model 1 IGA jurisdiction as potentially non-compliant;

3. encourage FFIs located in a Model 1 IGA jurisdiction to not discriminate against US citizens who do provide a US TIN; and

4. if notified by Treasury, take steps to conclude Competent Authority Arrangements with Treasury, to implement an IGA, amend an Annex II to an IGA, or exchange country-by-country information, as applicable. 

Looking Ahead

The IRS again noted that the relief described in the Notice is intended to enable it to collect and analyze additional information for accounts without US TINs. If permanent relief is granted in the future, the IRS anticipates that the scope of the accounts for which an FFI may obtain relief with respect to missing US TINs will be narrower than the scope of accounts for which relief is granted under the Notice.

¹ A “preexisting account” is an account maintained as of a determination date specified in the applicable Model 1 IGA.

² See our prior Legal Update addressing Notice 2023-11, “FATCA Relief Issued for Reporting of US Taxpayer Identification Numbers”.

³ In 2017, Treasury and the IRS released Notice 2017-46, which provided relief and guidance for reporting Model 1 FFIs who were unable to obtain and report required US TINs for preexisting accounts. The relief provided by Notice 2017-46 was limited to reporting for calendar years 2017, 2018, and 2019. In 2019, the IRS issued relief procedures for certain persons who have relinquished, or intend to relinquish, their US citizenship in order to ease the tax obligations that are part of the US expatriation process.

⁴ See FAQ 6 under “Reporting” on the IRS’s “FATCA – FAQs general” web page.

⁵ US reportable accounts opened after the determination date specified in the applicable Model 1 IGA.

⁶ Nothing in the Notice prevents the US competent authority from finding significant non-compliance by reporting Model 1 FFIs who do not report required US TINs for preexisting accounts and who do not comply with the relief requirements of this Notice or Notice 2023-11, as applicable. Further, nothing in this Notice or Notice 2023-11 prevents the U.S. Competent Authority from finding significant non-compliance due to a failure to satisfy an obligation under the applicable Model 1 IGA other than a failure to obtain and report each required US TIN for preexisting accounts.

⁷ For data reporting conformity and ease of processing by the IRS, reporting Model 1 FFIs should use AddressFix for all address information to the extent possible and may use AddressFree as a supplemental element.