The U.S. Treasury and the Internal Revenue Service unveiled a nearly 400-page proposed regulation spelling out their plan for how to assure the United States can collect taxes due on U.S. funds held in overseas accounts, and they're signing on key European countries to participate and cooperate.

The proposed regulation relates to implementation of the Foreign Account Tax Compliance Act, meant to improve collection of tax on financial assets held in offshore accounts. The proposal reflects comments Treasury and the IRS received on earlier preliminary guidance as the agencies walk a fine line in imposing reporting requirements on foreign financial institutions to assure U.S. tax compliance.

“It's clear Treasury took a lot of the comments into consideration when drafting this regulation,” says Denise Hintzke, FATCA practice leader for Deloitte. “They've stated several times through this process they are trying to make things workable for the industry, and they've made a big stride in that direction. It's a pretty impressive package.”

In a joint statement, government agencies in the United States, France, Germany, Italy, Spain, and the United Kingdom said they are working on a plan to cooperate and share information that would bring about FATCA-like reporting across their respective borders. The proposed regulation from Treasury and the IRS says they envision developing an approach where financial institutions would report information on foreign account holders to regulators in their home countries, who would share information with one another.

To further ease the implementation burden, Treasury and the IRS have proposed extended time lines for the information reporting and eventually account and transaction reporting to get under way, says Hintzke. Financial institutions would begin some basic identity reporting on account holders in 2013, but would have until 2016 to begin reporting on income payments and until 2017 to begin reporting on specific transactions. “They have rolled in the reporting over a fairly long transition period,” she says.

The proposal also contains some relief for nonfinancial entities that were concerned about being swept into the regulation and required to provide information that's meant to be targeted at financial institutions, Hintzke says. “This set of proposed regulations has a fairly large carve out,” she says. The regulations would not be enforced on accounts that fall below $250,000, she says, and the definition of a financial institution is meant to assure the regulation wouldn't be imposed on operating companies.

The proposal is open for comment through April 30 with a public hearing set for May 15.