WASHINGTON-At the urging of CUNA and other financial services trade groups, the Internal Revenue Service (IRS) withdrew a proposal requiring financial institutions to report on deposit interest paid to nonresident aliens from a large list of countries. In a new proposal, the reporting would only be required if the account holder was from one of 16 specified countries. Currently, reporting is only required for nonresident aliens of Canada. "This is not something we necessarily felt the IRS had the statutory authority to do," CUNA Associate General Counsel Mary Dunn said of the original proposal. She added that CUNA is not sure what statutory requirements the IRS is fulfilling with its proposal and that CUNA has not been the only group to point this out. Additionally, Dunn pointed out that the administration has also raised concerns over the proposal. In testimony before the IRS last year, Dunn explained that nonresident aliens' interest income is not taxable in the U.S. anyway and, therefore, the compliance costs outweigh any benefit to the IRS. "Even though credit unions are not taxed, we're still subject to a whole range of regulations from the IRS," according to Dunn. The attorney pointed out that while credit unions are tax-exempt entities, they still have to comply with 17 different IRS-implemented regulations. Dunn said the new proposal-which includes reporting for nonresident aliens from Australia, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, and the United Kingdom-is less onerous than the original. The IRS has not explained very well exactly why these nations were chosen, she said. Another change suggested by CUNA was to eliminate a requirement to complete reporting on all nonresident alien joint accountholders' even if they all lived within one country and file multiples of the same report. The new proposal only requires reporting on just one of the joint accountholders if they all live in the same country and it is on the list. The deadline to comment on the new proposal is November 14. [email protected]

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