Insurance Brokerage Seeks Certainty on FATCA Withholding Provision

February 12, 2019

Mr. David Kautter
Assistant Secretary for Tax Policy
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Mr. Charles P. Rettig
Commissioner
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, D.C. 20224

Mr. L.G. "Chip" Harter
Deputy Assistant Secretary
International Tax Affairs
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Mr. William M. Paul
Acting Chief Counsel and Deputy Chief
Counsel (Technical)
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, D.C. 20224

Re: Request for Comments on the Proposed Regulations Reducing Burden under FATCA and Chapter 3 (REG-132881-17)

Dear Sirs:

We are writing in response to the request for comments issued by the United States Department of the Treasury (the "Treasury') with respect to the Proposed Regulations under Chapter 4 (sections 1471-1474) commonly referred to as the Foreign Account Tax Compliance Act (FATCA”).¹

Firstly, we would like to thank the Treasury for proposing the modification of certain provisions under FATCA to reduce unnecessary burdens pursuant to Executive Order 13777, Enforcing the Regulatory Reform Agenda (82 FR 9339), and Executive Order 13789, Identifting and Reducing Tax Regulatory Burdens (82 FR 19317). In particular, we agree with the proposed amendment to treat premiums for insurance² contracts that don't have a cash value (as defined in Treasury Regulation section 1.1471-5(b)(3)(vii)(B)) as excluded nonfinancial payments and therefore not withholdable payments under FATCA.

As Aon has identified in prior submissions to the Treasury on September 27, 2013 and June 25, 2014, and during discussions with the Treasury on September 10, 2015 and April 6, 2016, including premium payments made with respect to non-cash value insurance contracts (i.e., property and casualty (-P&C') insurance premiums) in the definition of withholdable payment is unnecessary, ineffective and imposes substantial financial and administrative burdens on the global P&C insurance industry without providing any significant benefit or advancing the policy objectives of FATCA. The financial and administrative burdens imposed upon the global P&C insurance brokerage by FATCA have included high costs to modify broking systems and severe documentation requirements that have not appreciated the volume and complexity of global insurance placements. We further agree that amendment of Internal Revenue Code section 1297(b)(2)(B) by the Tax Cuts and Jobs Act, Pub. L. No. 115-97 (2017) to provide a more limited exception to status as a Passive Foreigi Investment Company ("PFIC') for companies engaged in an insurance business more appropriately addresses the need for reporting on the U.S. owners of these companies.

To enable certainty that the global P&C insurance industry may in practice rely on this amendment to treat premiums with respect to non-cash value insurance contracts as nonfinancial payments under FATCA, we encourage the Treasury to finalize this Proposed Regulation as soon as possible. As a leading global P&C insurance broker with operations in more than 120 countries that are conducted by more than 50,000 employees, Aon's recent experience is that the P&C global industry is continuing to treat insurance premiums as in-scope for FATCA in an abundance of caution. As a result, a reduction in the operational and administrative burdens have yet to be realized by the global P&C insurance industry.

Thank you for this opportunity to submit comments in respect of this Proposed Regulation. We greatly appreciate the Treasury's thoughtfulness and willingness to reduce the burdens imposed on the global P&C insurance industry with the proposed amendment to Treasury Regulation section 1.1473-1(a)(4)(iii). If you have any questions, please contact Joshua Odintz at Baker & McKenzie LLP at 202-835-6164.

Yours sincerely,

Andy Jenn
Chief Operating Officer, Aon Broking

Cc:
Mr. Douglas Poms, International Tax Counsel