CUNA Regulatory Comment Call


February 7, 2006

IRS Proposes to Stop Issuing ITINs for Opening Accounts

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; or e-mail them to Assistant General Counsel Lilly Thomas at lthomas@cuna.com; or mail them to Lilly c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004.

BACKGROUND

The Individual Taxpayer Identification Number (ITIN) Program Office of the IRS has been looking into the issuance of ITINs for the last several years. ITINs are issued for individuals that file tax returns; however, the IRS has issued several ITINs that are not subsequently used in tax forms. In 2004, the IRS revised the ITIN application process to require applicants to submit proof that an ITIN will be used for tax administration purposes. This could be with a tax return, evidence that the applicant has opened an income bearing deposit account subject to withholding requirements, or other evidence with their requests for ITINs.

DISCUSSION

The ITIN Program Office of the IRS is now considering no longer issuing ITINs to anyone who is a nonresident alien (NRA) and whose only purpose for obtaining an ITIN is to open an interest bearing deposit account.

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. 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 Customer Identification Program (CIP) mandated by the U.S. PATRIOT Act requires that credit unions get identifying information from each person opening an account. The credit union must get an “identification number” from everyone who opens an account. For a U.S. person, the credit union must get a taxpayer identification number. For a non-U.S. person, the credit union must get one or more of the following: a taxpayer identification number, passport number and country of issuance, alien identification card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard. The ITIN Program Office is stating that the CIP 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.

QUESTIONS REGARDING THE PROPOSAL
  1. Does your new account policy require the use of a social security number or ITIN? Please explain.















  2. Do you believe no longer obtaining an ITIN for non-resident aliens (NRAs) will reduce the new accounts opened for NRAs? Please explain.















  3. What other identifying information (passport, other government issued documentation, etc.) do you use when opening an account? Please explain.















  4. What is the likelihood of your ability to verify identification of a NRA without an ITIN? Please explain.















  5. Will you find this guidance useful? How can it be improved?















  6. Please provide any other comments















Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Lilly Thomas • Assistant General Counsel • (202) 508-6733 • lthomas@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com