Treasury Department officials said offshore banking legislation pending in Congress may not require foreign banks to have every customer attest that their account does not benefit a U.S. taxpayer.
In some cases, officials told a Tuesday conference of representatives of foreign banks, the bank can rely on existing information gleaned from current anti-money-laundering safeguards to determine that an account is not tied to a U.S. taxpayer.
In that case, no additional reporting to the U.S. Internal Revenue Service would be necessary.
The Senate passed the offshore banking bill last week as part of broader legislation aimed at spurring job creation.
The bill is now pending before the House, where Democratic leaders say they hope to send the bill to President Obama for signature within the next couple of weeks.
The legislation aims to curb offshore tax evasion by requiring foreign financial institutions — including banks, hedge funds and other entities — to report the account information of U.S. customers to the IRS.
A 30% withholding tax would apply on all payments originating in the U.S. to any foreign financial entity that did not enter into a disclosure agreement with the IRS.
The new reporting requirements and penalties would take effect in 2013.
Tens of thousands or even hundreds of thousands of foreign banks and investment funds would be subject to the new rules.
That contrasts with the current IRS system of information exchange with foreign banks, which covers under 6,000 institutions.
Michael Plowgian, an attorney-adviser at the Treasury Department, said the number of institutions affected by the new rules would be "a couple of orders of magnitudes larger" than those in the current IRS program.
He spoke with other Treasury officials at the annual legislative conference of the Institute of International Bankers.
"There is a lot of room for flexibility to deal with different types of customers, and different institutions," Plowgian said. "In a lot of cases, it will be possible to rely on money laundering and know-your-customer rules."
He said, "It will depend on the jurisdiction and whether the information gives us the comfort we need to believe that the U.S. account-holders have been properly identified."
Steven Musher, associate chief counsel at the IRS, said at the same conference that the new law will be implemented in stages, and will be done so in close consultation with affected financial institutions.
"We are going to be looking to seek the minimum of cost and burden consistent with the transparency goals, and be sensitive every step of the way to how this will fit in with existing regimes" of other national regulatory and tax authorities, he said.
Musher and Plowgian said that in order to ease implementation of the law, banks might be held to a different standard with respect to reporting on existing accounts than they are held to when it comes to new accounts.
That does not mean existing accounts will be exempt from reporting requirements, Plowgian said.
The bill also tightens tax rules governing foreign trusts, and aims to close a loophole by which foreign investors have avoided dividend-withholding taxes on U.S. investments.
Congressional staff members have estimated that all the anti-tax evasion provisions taken together will result in an additional $8.7 billion being collected by the IRS over the next 10 years.
