Failed Challenge To Interest Reporting Regulations


In 2012, regulations were issued that require banks to report interest paid on deposits of nonresident alien individuals who reside in countries with an exchange of information agreement with the U.S. (even though such bank interest is usually not subject to U.S. income tax). The Florida Bankers Association and the Texas Bankers Association challenged the regulations. The D.C. District Court has dismissed their action.

One objection voiced by the bankers was that the information disclosed to the foreign governments could be disseminated and thus would injure the privacy interests of their customers. The court was unsympathetic, since the foreign governments would “pledge” to protect the privacy of the customer information.

Another objection was that there would be major capital flight as foreigners would close their accounts to keep this information out of the hands of their home country governments. The court was not convinced about this either.

Most real world practitioners will tell you that such accounts are being closed. In the policy debate between encouraging investment capital to enter and reside in the U.S. vs. tax enforcement concerns, and as evidenced by this provision and FATCA, the pendulum has clearly swung to the latter.

Florida Bankers Association, et al (DC Dist Col 01/13/2014) 113 AFTR 2d ¶ 2014-358

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Charles (Chuck) Rubin, Gutter Chaves Josepher Rubin Forman Fleisher P.A. | Attorney Advertising

Written by:


Gutter Chaves Josepher Rubin Forman Fleisher P.A. on:

Popular Topics
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.