A new law requires foreign insurers receiving U.S.-sourcepremiums to submit a form to the IRS.

The new law is the Foreign Account Tax Compliance Act (FATCA).It went into effect July 1. The Treasury Department implemented itdespite a strong lobbying effort by the property and casualtyinsurance industry earlier this year to delay its implementationand reduce its impact through clarifications of the ruleimplementing it.

The law generally requires that foreign insurers receivingU.S.-source premiums provide W-8BEN-E forms to their U.S. insurancebrokers to demonstrate that they are either FATCA-compliant orFATCA-exempt in order to avoid otherwise mandatory 30%withholding.

Because the issue is of particular importance to agents andbrokers, the Council of Insurance Agents and Brokers (CIAB) hascreated a web portal, W8BENE, which allows global carriers toupload their W-8 forms to a database which U.S. brokers can thensearch and download.

CIAB's justification for the decision to create the web portal:“Our members are going to bear the brunt of this,” according toScott Sinder, CIAB's legal counsel and a partner at Steptoe &Johnson in Washington, D.C.

FATCA targets tax non-compliance by U.S. taxpayers with foreignaccounts. Its objective is the reporting of foreign financialassets by U.S. taxpayers and the withhold “stick” is the cost ofnot reporting, according to the Internal Revenue Service.

“There will be no withholding,” Sinder said. “If a foreigncarrier does not submit the IRS form documenting that it either isFATCA compliant or exempt from such compliance, then the U..Sbroker will not be able to purchase any coverage from them,” Sindersaid.

CIAB officials said the portal is an easy-to-use solution forbrokers and insurers to obtain the W-8BEN-E forms they need to meetthe new IRS reporting requirements.

“We've worked hard over the past few months to develop thisportal in a way that would make this massive change in businessprocess as easy and seamless as possible,” said Ken A. Crerar, CIABpresident/CEO. “Insurers and brokers who sign up for the websitewill be able to exchange forms quickly with minimal impact to theirnormal business process.”

There will be nominal cost associated with the portal, but theCIAB is allowing users a free trial period until Jan. 1, 2015,Crerar said. There is a $10 processing fee, but usage for theduration of 2014 is free of charge. After that, the cost willbe between $200 and $500 annually, depending on the brokers'affiliation with the CIAB. The U.S. Congress passed FATCA in2010.

According to Sinder, the industry believes FATCA is burdensomebecause, among other reasons, the reporting mandate includespremiums on property and casualty policies even though suchpolicies have no cash value and provide no financial investmentincome, and even though the foreign carriers that provide suchcoverage almost never offer cash value policies that would besubject to the FATCA reporting requirements.

“We believe that FATCA was not intended to cover such payments,and unnecessarily burdens insurance brokers and their clients withcostly compliance obligations.”

However, as FATCA went into effect, Sen. Carl Levin, D-Mich., akey sponsor of the measure issued a statement indicating that it isa breakthrough.

“Today marks a new era for tax fairness. Starting today,American tax dodgers will find it harder to cheat Uncle Sam byopening secret bank accounts in offshore tax havens. While thebattle to tighten FATCA and close its disclosure loopholes willcontinue, today marks a big win for hard-working, honest Americanswho are sick and tired of picking up the tab for tax dodgers hidingmoney offshore.”

Correction: An earlier headline identifiedthe act as “FACTA” rather than “FATCA.”