The chief of the U.S. Internal Revenue Service said on Friday that a new law meant to fight offshore tax dodging by Americans will not be delayed again beyond its July 1 effective date, despite a clamor among banks asking for more time and guidance.
"We're not going to have any delays," IRS Commissioner John Koskinen told reporters on a conference call.
His remarks came five months before the United States must start enforcing the Foreign Account Tax Compliance Act (FATCA). It will require foreign banks, insurers and investment funds to send the IRS information about Americans' offshore accounts worth more than $50,000.
Foreign businesses that do not comply with the law can be effectively frozen out of U.S. capital markets because of a 30-percent withholding tax on U.S. source income.
The IRS is expected soon to publish forms and guidance that financial institutions are keenly awaiting so they can figure out how to avoid FATCA penalties.
"We expect to issue the final package of rules shortly," a Treasury spokeswoman said on Friday.
"We are working diligently to finalize all related guidance to ensure that financial institutions have time to effectively prepare and comply, and there is no consideration for a delay of FATCA implementation," the spokeswoman said.
Jonathan Jackel, a lawyer with Burt, Staples & Maner LLP, said the more time Treasury takes to publish the final guidance, the likelier it is that the law could be delayed again.
"They can't possibly expect people to comply with rules that have not been published yet," he said.
"If there is going to be a delay, it will be more of an internal issue within the government – whether they can crank out the infrastructure that they need," he said.
The lack of FATCA guidance from the government prompted four bank lobbying groups in November to ask the Obama administration for another six-month delay in a law that has already been delayed twice.
Signed into law by President Barack Obama in 2010, the law was originally supposed to take effect on January 1, 2013.
In 2011, the start-date was postponed to January 1, 2014. Then in the middle of last year, the start-date was pushed back again to July 1, 2014.
There is room within the law to spare financial institutions the FATCA withholding after July 1, former Treasury Department officials said.
"They can certainty provide relief. There has always been flexibility on certain aspects of this," said John Harrington, a former Treasury official who is now with law firm Dentons LLP.
But given strong assurances from the Obama administration that the law will not be delayed again, "it would take something extraordinary" for the administration to waiver, he said.
A source familiar with the Obama administration's position on FATCA said the White House will not allow another delay.
