The referrer is clearly not receiving interest. You should keep track of incentive payments to referrers and report under the 1099-MISC rules if a user receives $600 or more in such payments (combined with other 1099-MISC payments) in a year.
As to the FDIC's definition of interest, it only makes a difference with regard to whether a demand deposit account will be disqualified for the unlimited deposit insurance coverage provision in §330.16, and that provision is currently scheduled to sunset on 12/31/12. If you are paying the $50 to a new customer only if there are the required direct deposits or debit card transactions, I think you've satisfied the exception contained in §330.101(e), and you won't be considered to be paying interest by the FDIC.
The IRS ruling is another matter. The FDIC's interest definition may be modeled on the IRS rule, or vice versa, but the FDIC doesn't reach over into IRS territory to tell them how to interpret the Internal Revenue Code.
The IRS has not drawn a sharp line in its definition of interest, and I won't offer you tax advice. I will say that you probably have a strong argument that the $50 payments are not for the use of money (since you would not pay them if the customer didn't make the required transactions, regardless of the balance or duration of that balance). But if the $50 doesn't get reported on a 1099-INT, it would fall under the 1099-MISC rules, assuming the threshold amount for reporting is reached. And technically, the customer should report it as income, regardless of whether you report it on any sort of 1099 form.
Last edited by John Burnett; 01/31/12 07:19 PM.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
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