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WASHINGTON-CUNA is asking its membership its position on an IRS proposal to discontinue providing Individual Taxpayer Identification Numbers for nonresident aliens (NRAs) to open an interest bearing deposit account. The IRS has come to the conclusion that ITINs for this use serve no “tax purpose,” according to CUNA’s comment call. The trade is asking that responses be made by Feb. 28. Comments are due to the Federal Reserve by March 15. “When a NRA opens an interest-bearing deposit account that is not effectively connected to a U.S. trade or business, he or she is tax exempt on any interest income under tax law,” CUNA’s message to the membership explained. “Additionally, financial institutions are not subject to reporting requirements or back-up withholding on NRAs. Therefore, the IRS believes there is no “tax purpose” for issuing an ITIN for this purpose.” The snag here is that the Patriot Act requires credit unions to obtain certain identifiers when opening an account, including an `identification number.’ According to the ITIN Program Office, CUNA said, the Customer Identification Program “does not preclude a financial institution from opening an account for nonresident aliens who do not have an ITIN and therefore is proposing to cease issuing ITIN numbers to those individuals whose income is not subject to taxation or reporting requirement.”

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