The following is an excerpt from JOHN D. MCKINNON And ERIC MORATH | February 8, 2012 | WSJ.com |
WASHINGTON—The Treasury Department on Wednesday outlined a new global regulatory system to prevent Americans from dodging taxes through foreign accounts, including an unprecedented plan to obtain U.S. taxpayer information through foreign governments.
The law, known as the Foreign Account Tax Compliance Act, requires foreign financial institutions to start reporting detailed information about U.S. account holders to the Internal Revenue Service in coming years. If the firms don’t comply, they could face U.S. tax penalties.
Financial institutions, which have worried for months about the potential burden of the new rules, reacted with a mixture of optimism and concern. They noted that U.S. officials appeared to accept a number of their suggestions for reducing potentially heavy impact on them.
But some warned that the new system—which implements a 2010 law passed by Congress—still could prove onerous for them and lead some foreign banks to reduce their investments in the U.S., to minimize their exposure to the U.S. tax penalties.
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