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FATCA W-9 Issue

Our HCUA Compliance team has heard from multiple credit unions who have received a request from Progressive Insurance to complete a Form W-9 to comply with the Foreign Account Tax Compliance Act (FATCA). Credit unions across the country are receiving the same. 

As background, on January 1, 2019, additional provisions pertaining to FATCA go into effect. Payments of U.S. source income from U.S. entities to non-U.S. persons will be affected.   For additional information, please see IRS Notice 2015-66

Colleen Kelly, CUNA’s Senior Federal Compliance Counsel, contacted Progressive on behalf of our industry. Progressive confirmed they are collecting a W-9 form from every entity that may receive funds, including lienholders of insured collateral.  The Form W-9 will identify and certify that a payee is a U.S. entity and thus not subject to FATCA withholding. If Progressive does not obtain a Form W-9, Progressive may be required to withhold 30% of each payment and remit such funds to the U.S. Government. This is not unlike how a credit union may presume that any member that does not provide a W-9 is a non-resident alien and subject to back-up withholding.

This regulation continues to evolve and although Progressive may be casting a wide net to ensure compliance, CUNA is recommending credit unions complete the Form W-9 or risk back-up withholding

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