Liberty and justice for all United States persons abroad

The Isaac Brock Society

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From Accounting Today, Michael Cohn reports that the IRS Issues FATCA Guidance on Reporting Interest Paid to non resident Aliens

The Internal Revenue Service has issued final regulations and guidance on reporting interest paid to nonresident aliens, along with a revenue procedure listing the countries with which the U.S. has a bilateral exchange of information agreement.

So, the speculation that DATCA would not survive might be pre-mature.

The last brick in the foundation of the global Fatca (GATCA) is being cemented in place.

FATCA begets DATCA begets GATCA

I have posted this response.  You all are welcome to join in..

Well Michael, I see that DATCA is still not dead. Will be interested to see what the Congressman like Rubio,Boustany,Ron Paul,and the entire Florida delegation that were opposed to this will do. Do I hear “nothing”?

Obviously their letters of protest have had no effect on the IRS or the administration.

As we know, the IRS needs this to make the FATCA reciprocal Tax exchange regime work! In their statements now they are no longer hiding the objective as they were last year. They make it clear that it key to their strategy to overcome FATCA opposition around the world. A global FATCA is being created, and you are one of first and few to know. 🙂

149 thoughts on “DATCA is not Dead! It lives on…”

  1. @ Just Me
    Oh thanks — that kind of rattled me. Sorry I read it wrong but I’m still a bit confused because the US banks have been reporting interest to the IRS all along for people living in Canada and I always presumed that with our tax treaty the information was given to the CRA too. We keep a small chequing account in the USA (my husband draws on it when he travels down there) and we always received 1099s on it, even though we were living in Canada, although eventually we requested to have no interest paid on that account because it was such a small amount and a nuisance to have to report it both on our 1040s and our Canadian tax forms. Does this mean the US banks will be required to go beyond reporting the interest and actually report bank balances and activity too? Glad my name is no longer on that account at least.

  2. Em..

    Well, Canada and the U.S. have that tax treaty, so that is why they already do. But the US wants U.S. Banks to report on everyone else too. Great trading chits.

    Right now it is only seems to be interest paid that they are interested in. Probably something similar to the US equivalent of a 1099 report. No talk of bank balances, that I have seen, but you never know what great idea they will think up next.

  4. But this is only a fair reciprocation to encourage FATCA compliance. In fact the DATCA side of this is the fairest of all for Non-Resident-Aliens (also known as the rest of the world). All NRA non-high-net-worth people are concerned that people with money can manipulate their tax liability by having offshore accounts whilst living in a non-US jurisdiction. The US is, as has been pointed out, the best tax haven in the world.
    It is only fair that once the US attack the rest of the world with their greedy demands for money from people who don’t even live in their country that they should lose the advantage of attracting foreign tax evading dollars to prop up parts of the economy.

  5. p33t…

    Yes, you could say it is sort of fair, but fair will have consequences. Also, fair is a subjective term. It is a faux reciprocity, so not totally fair, and it will make foreigners question whether they want to leave money in the US, or take it elsewhere, and that is where fairness might create unintended consequences with results that are never fair. But never mind. In the name of fairness, we are creating a Global tax data exchange, and what will that global “Fairness” bring? If everyone one practiced territorial taxation, maybe it would bring uniformity of taxation, and leave capital with no place to hide, but that has a cost too. If it is a negative cost, is that fair on smaller customers whose banking cost go up to pay for the complex compliance demands? Fair is an endless argument in search of a debating point.

  6. @p33t and @JustMe,
    there was some very fuzzy wording in terms of what that ‘reciprocity’ and ‘exchange’ might be. I can’t find the quote now (it’s somewhere on the IBS Datca threads), but it established that whatever is shared won’t be an equivalent to what is being required from the rest of the world.

  7. I’ve commented on this before. But the DATCA may or may not have a REAL effect. The smart money (rich businesspeople and politicans) can just move to a different bank, like the Cayman Islands or Channel Islands. Assuming that what they are doing is NOT illegal, they can still keep a dollar-based account “technically outside of the US” MINUS the DATCA risk. The custodial bank may still be in the US, but the actual bank is elsewhere. If the DATCA DOES in fact affect custodial bank, then this is whole other ball of wax.

    I am very sure in all of my analysis that the US wants the FATCA so they can go after anybody they choose, and not for just catching tax cheats, and being so kind to “help” other countries do the same. Part of me thinks that’s not a bad, especially for catching REAL criminals. But that kind of power is extremely dangerous, almost Stalinistic. Stalin used his power and his “stooges” to terminate his opposition. Then he turned on his generals and executing them. See the parallels with other countries (generals) helping the US. I don’t see how they can really benefit with the FATCA or DATCA.

    As I always say, the safest thing is not touch the US with a 10 foot pole, even if everything you are doing is legit. They are not to be trusted.

  8. @badger… You are right. There will be no equivalency. So, again, to the fair question, how fair is that? Not!

  9. Sorry guys – I did not mean that any of it was actually fair – I was just commenting on the comparative fairness of the two sides of the ‘reciprocal’ agreement. I believe that it is fair to tax on residency and use of services etc and it is not fair to insist on tax returns and payment from citizens who do not get the benefits by living and working in a different country. It is especially unfair to fine people for not returning tax documents where they have not avoided, evaded or even owed any tax. Finally it is definitely not fair to get the rest of the world to effectively spend their own money to help you terrorise your own citizens. It is also a tax on the world to keep a few US politicians in power by rushing to pander to popular parochial opinion.

  10. @JustMe, and @all;

    Here is a very good explanation of the interrelationship of ‘DATCA’ and FATCA regarding the use of information for (horse)’trading’ purposes;
    from:

    ‘Final regulations implementing nonresident alien deposit interest reporting’

    Alston & Bird LLP
    Tola Ozim and Edward Tanenbaum
    USA May 15 2012

    “Finally, and quite significantly, the revised information reporting rules are seen as critical in the context of the enactment of the Foreign Account Tax Compliance Act (FATCA)……… In light of the FATCA ………..that, in part, will require foreign governments to cooperate to overcome legal restraints on their resident financial institutions to identify U.S. accounts and report information to the IRS, the final regulations are important in that the new rules enable the United States to have information to trade with foreign governments that are also interested in detecting offshore tax evasion by their own residents.”……….

  11. @Badger…

    Thanks for posting that link here. These authors make the connection was an obvious one to me when I first heard about the IRS regulations. However, it is one of those things hidden in plain sight, only recognized by those that follow these issues closely, or on specialized blogs. I have yet to see one MSM journalist really write intelligently on FATCA let alone make the connection to DATCA. Even the Congressman that oppose DATCA don’t publicly admit that this is the blow back of their own FATCA legislation. They could kill DATCA by just repealing FATCA, but that would require admitting this is a problem of their own making.

    The simple story truly is:

    FATCA begets DATCA begets GATCA.

  13. Just an update to the battle against DATCA.

    On May 24th, there was an Op-ed in the Miami Herald by the President of the Florida Banking Association called  New IRS rule scares foreign depositors  I missed it initially as I was traveling and finally got around to posting a comment which then took several days to come out of moderation. You can read my comment there, where I tried to draw the broader narrative that Florida Banks are experiencing FATCA FALL OUT (FFO) or FATCA BLOW BACK (FBB) your choice of acronyms.

    Last night, I thought I would write Mr Sanchez and see if I could engage him a bit. Realistically, I am doubtful I will ever get a response, as your chances of hearing anything back from unsolicited email is slim. 

    Here is what I wrote.  

    Dear Mr Sanchez,I read with interest your Op-ed piece on the coming IRS regulations that was posted on the Miami Herald on Thursday, May 24th titled New IRS rule scares foreign depositors

    As President of the Florida Bankers Association, I sympathize with your predicament, however, I do note that you have really only told half a story about what is going on. However, that is probably out of necessity, as a full story would be hard for your audience to digest.

     I am writing just to say, that I support your effort to stop this misguided regulation.  I don’t know what your opposition strategy is, or how extensive your lobbying efforts, but I wonder if you have ever considered reaching out to organizations like American Citizens Abroad, DemocratsAbroad, Republicans Abroad, or Association of American Residents Overseas? I think there are some good synergies that might be possible in opposition to these misguided regulations.  I do not represent them any of them, (however, I am an ACA member) but do think you have some common ground that could be exploited.

    Americans Abroad, generally speaking are being just as severely impacted by Congressional/IRS policy actions related to bank reporting, as you are in Florida. Maybe even more so, as they are on the receiving end of a IRS jihad against Homeland offshore tax cheats. This is having the unintended consequence of denying them banking services in the countries where they live. With FATCA implementation close at hand, they are becoming pariahs that banks don’t want to touch anymore. You, on the other hand, will be impacted severely, but differently, and will at least have the outlet of passing on the costs of capital flight and IRS reporting administration to your U.S. homeland customers.

    I have been aware of this IRS regulatory effort since last year, but it really came to the fore front when the “he said / she said” opposing Op-eds between Senator Rubio and Treasury’s Emily McMahon was written back in March. I have been following it closely since then, and posted a blog called Dualing Editorials at Isaac Brock Society. 

    I followed up in April, with another post called. DATCA is not Dead.  This was a follow on, when the IRS rolled out the final regulations you write about. I guess you don’t get any public hearings to discuss, oppose or create press attention, like the  Foreign Financial Institutions (FFIs) just did on FATCA.   (By the way, DATCA is my short hand term for the IRS regulations that you are now facing.)

    I noticed in your article, there was no mention of FATCA, but surely you know that DATCA has arisen as the faux reciprocity tool the IRS needs to force FATCA down the throats of the FFIs and governments around the world which hate FATCA as much as you dis-like DATCA.  I assume you are working in joint lobbying efforts with some of the foreign Banking Associations, like Canada or Australia, maybe?  You really have the same problems, governments gone wild in search of new revenues they assume are hidden in your vaults. 

    You, of course, are getting the FATCA fall out (FFO) of Congresses misguided and extra-territorial over reach when it passed  FATCA buried in the Hire Act in 2010.  Did you miss the press releases from back then when they were dreaming up this beauty, or not realize it was headed your way?

    I am of the opinion, that it will be very hard to stop DATCA, (unless you have some legal tricks or Congressional amendments your sleeve) but I salute your effort. I will help with my meager blogging when and where I can, although my focus is broader than your narrow homeland concern. Still, on a stand alone basis, it is bad policy and terrible for capital investments in America.  This is definitely sending the wrong message to investors and financial markets, and heaven knows we don’t need to add any more stress to the system right now!

    Obviously, the most direct route to killing the DATCA demon is to attack its FATCA head. But attempts to appeal FATCA are difficult, as this freight train has gained speed for 2 years now. There are those that are using it, as their stepping stone to create a Global Tax Data exchange. (GATCA)  You are just one of the victims of that effort. I fear we may be watching the creation of a new systemic shock to the financial system if this proceeds on, as those Utopian dreamers plan.

    I did notice, with a certain irony the letter the entire Florida Delegation sent to President Obama appealing for redress.  In it, were a lot of signatures of those in Congress who voted for FATCA in the first place. In fairness, since they don’t read the bills they vote for, maybe they did not know it was there! Now you are living with the FBB (Fatca blow back) results.  You might want to ask them if they would like to reconsider their vote for FATCA, as you are on the receiving end of the unintended consequences just like American’s abroad are.  

    Btw, your fellow international bankers just had an opportunity to express their opinion of draft regulations on May 15th, at the FATCA public hearings.  (The opportunity you did not have.)  No, I did not notice any stories about it in the Miami Herald either.  Here is a link to the testimony that I posted in a blog called: So where were the journalists at the May 15th FATCA public hearing?  There were no journalist from the Miami Herald there.  Maybe there should have been one?!  They would have heard laments similar to yours, but they get even less attention or sympathy in the media than you do.  

    Good luck with your fight. I am rooting for you. I would encourage you contact any or all of the groups I have mentioned  to see if there are any contacts or angles of attack that might be mutually beneficial. Expats and US banks are being gored by the same Ox.  Surely there is something that can be done jointly to stop this before it is too late. 

    All the best,   

  16. @JustMe, that’s a pretty astonishing article by Nessmann. I have been raising the question here already on a point related to this comment of his; …….”The NRA lives in a country with a U.S. tax treaty, so he should be able to use it to reduce or eliminate withholding taxes. But, the IRS refuses to let the NRA apply the tax treaty. This is despite the fact that the IRS international help desk tells the NRA’s advisers that no tax should be withheld.

    The NRA may be forced to sue the IRS to get back the tax that should never have been withheld. Did the collections division make a calculated decision to withhold the tax because it thought the NRA would back down due to the cost of litigation? Or is the withholding some sort of trial run for FATCA?”…

    My question for the banks and financial institutions: if you make an error, and identify a client incorrectly as a US ‘person’, and the 30% is withheld, what recourse is there for the client? Presumably, as both the IRS and the banks have dedicated legal departments, the individual account holder will never be able to get their money back – even if it has been withheld in error, simply because they don’t have the dedicated legal and financial experts to fight back. In all the articles about FATCA, I have not seen mention of any dispute resolution or appeal mechanism for redress. Surely with the sheer number of accounts involved, and the complexity of the systems to scan records and flag those with US information, there will be errors.

    I pose that scenario to our respective non-US governments as well. Should your residents and citizens (whether dual by birth or naturalization, or green card, ) be subjected to this hugely unequal contest, where the individual has no rights, the 30% withholding is the default, and the whole scheme is so complex that specialized and expensive legal and tax professionals would be needed to assist in sorting it out – but possibly costing far more than the account holds?

    What kind of ‘fair share’ of tax is that? And the scenario above is what happens even in the absence of any actual tax owing, or any actual wrongdoing.

  17. @badger

    I have heard the issue of accidental withholding of 30% and the complications of getting it back discussed before, but I haven’t heard that this was already happening in relation to DATCA.  

    I am somewhat skeptical of what I read, but it certainly does bring up real questions of what is the process to undo even inadvertent errors.  If the default, is withhold, I think it would only happen once, as that would be the last time that person ever put money in a US bank again.  Then what is the word of mouth multiplier effect.  US outward capital flows are bound to happen.

  19. Just keeping an eye on the reciprocity agreements and what might or might not happen…

    The U.S. Road to Reciprocity under FATCA

    The U.S. has committed to reciprocity in collecting and automatically exchanging information on accounts held in U.S. financial institutions by residents of the G5 (France, Germany, Italy, Spain, and the U.K.) under the Intergovernmental Approach (IGA) announced in February. (Model I) The exchange of information is likely to be on a bilateral basis only with the U.S. – meaning, the G5 will not exchange information with one another. Notably, neither the Japanese nor Swiss Frameworks include an automatic exchange of information provision with the U.S. (Model II) Thus, it is likely that only agreements based upon the G5 IGA model I, now expected in July (rather than June), will include reciprocity provisions.

    Will be interesting to watch what happens here, and the opposition to the DATCA provisions by US Banks as shown in the above link to Tim’s post. 

  21. Christophe just brought this story to my attention, and in my opinion, it is good news indeed.

    House votes to postpone IRS rule on foreign deposits in US banks

    WASHINGTON – A new IRS rule designed to find tax cheats got a thumbs-down Thursday from the U.S. House, which moved to delay its implementation over fears it would hurt the economy.

    By a 251-165 vote, the U.S. House backed a measure sponsored by U.S. Rep. Bill Posey, R-Fla., that would postpone the IRS regulation – which will shine more light on foreign deposits in U.S. banks – until the nationwide unemployment rate improves to 6 percent; it now sits at 8.2 percent.

    “My hope is that at the end of the day people will say this is not a good time to do this,” Posey said.

  22. *Just Me

    Here is roll call. Mostly party line but some notably exception such as Debbie Wasserman Schultz(FL) and Jim Himes(CT). I don’t know what the odds are in the Senate. Rubio has over twenty co-sponsors but other than Florida Senator Bill Nelson they are all Republican.

  25. *One way around this though is for a non resident alien depositor to simply move all of their fund into a non interest bearing checking account.

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