The Foreign Accounts Tax Compliance Act of 2009 is a bill intended to provide Treasury with tools to identify U.S. persons that use foreign accounts to avoid U.S. Tax.

This legislative update from KPMG LLP's Washington National Tax discusses the bill, focusing on its most important aspect: the far-reaching scope of a new withholding regime for payments to certain foreign financial and non-financial institutions.

By defining a financial institution to include any entity that is in the business of holding, investing, reinvesting, or trading investment type assets, the bill reaches well beyond traditional "banking" institutions. For these entities, the bill potentially imposes a significant burden with respect to identifying U.S. account holders and U.S. ownership of foreign entities.