On July 1, 2014, the Internal Revenue Service (IRS) regulations for the Foreign Account Tax Compliance Act (FATCA) will become effective. Parts of the regulations will impact the surplus lines industry. NAPSLO developed a Q&A Memo to assist NAPSLO members in better understanding potential new compliance obligations under the regulations. The Q&A Memo provides detailed information on FATCA, the impact to the surplus lines insurance industry and the new responsibilities for the U.S. broker.
FATCA was adopted by Congress in an effort to prevent tax evasion by U.S. citizens, U.S. residents and corporations through the use of offshore accounts and is directed at foreign financial institutions and financial intermediaries. FATCA does apply to U.S. source insurance premiums to the extent such premiums are classified as “withholdable payments” and therefore does have potential impact on the surplus lines industry.
The full memorandum on FATCA, as well as a summary overview of the key points regarding FATCA obligations, is available here.
NAPSLO strongly recommends that each NAPSLO member consider implementing FATCA compliance procedures. We believe this should be simple and not overly burdensome. While compliance can be very simple, the importance of compliance should not be underestimated; it is indeed critical that you comply with this new federal regulation. Your non-U.S. partners should be very willing to provide the necessary forms to demonstrate their FATCA status upon your request and hopefully will readily provide them. It would be prudent to simply add this new step into your general checklist of requirements when securing a policy with non-U.S. partners.
NAPSLO continues to monitor requests and discussions with the IRS to exempt the surplus lines/property & casualty industry from the FATCA compliance process. However, as noted in the Q&A Memo, at this time the IRS has declined to provide an exemption. In an effort to reduce the compliance burden on U.S. brokers, the Council of Insurance Agents and Brokers (CIAB) is considering hosting a clearinghouse or similar assistance for brokers to more readily access W-8BEN-E and W-8IMY forms shared by non-U.S. insurers and brokers. NAPSLO has arranged for NAPSLO members to have access to this solution, if developed. Also, as we mentioned above, the IRS may eventually provide access to the non-U.S. entities’ forms as well.