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. 🙂
Quote from another source…
What we need is to get Castro and Chavez to ask the IRS to provide them with the list of names of their refugees in the USA and their banking details – that will cause the ire of Congress to rise up and flood the IRS!
Yet that is exactly what is involved here. Indeed, the issue of reciprocity is another one of those issues that should cause this to collapse – like the issue of identity theft/security in the data from overseas. I do not believe the IRS by themselves have either the power or right to actually offer this at all. There is nothing on our tax forms that identify the nationality of the taxpayer. So how would the IRS actually get that information?
Further, true reciprocity would require all US financial institutions – not just banks, but the Fidelity and Merrill Lynch and Charles Schwabs – to identify the nationality of their clients, too, and report all of the same details to the IRS for distribution back to the countries with whom they have signed IGAs.
This would turn the monster of FATCA into GODZILLA!
We should actually start pushing for this because that will make the IRS sweat like you wouldn’t believe. The very issue of reciprocity turns IGAs into a treaty discussion.
There is absolute NOTHING in the FATCA legislation that gives the IRS the right to promise let alone provide this information about foreign nationals in America; quite the contrary. The entire discussions on dual tax treaties in the past were left to administrative negotiations by State to the IRS because of the details involved, AND because the argument was that the IRS were only getting the counter-party to permit the IRS to tax AMERICAN citizens living abroad.
There was never any discussion of the issue of dual nationalities, and absolutely, positively NEVER an issue of the IRS reporting on foreign nationals in the USA back to their home governments. Indeed, we were the odd man out because we were the only ones who tax on a citizenship base.
We’re not talking about that at all here; these IGAs are promising reciprocity of “information” – that is NOT the purview of the IRS at all. And if it requires the same reciprocity – i.e., all US financial institutions changing their CRM programs to provide this “reciprocity”, this is WAY out of the IRS’ responsibility and highly illegal! The minute the American Bankers Association gets wind of this one, the proverbial will REALLY hit the fan!
More comments from another source…
More on impact of DATCA on non-banks.
As you can see, this goes far beyond banks to include US insurance companies, investment firms, etc.
Naturally, they’re all asleep at the switch. This from the IGA
US domestic reporting requirements under Art. 2(b) (“reciprocal” version of FATCA “partnership” agreement released 7/26/12)
Obligations to Obtain and Exchange Information with Respect to Reportable Accounts
1. Subject to the provisions of Article 3, each Party shall obtain the information specified in paragraph 2 of this Article with respect to all Reportable Accounts and shall annually exchange this information with the other Party on an automatic basis pursuant to the provisions of Article  of the [Convention/TIEA].
2. The information to be obtained and exchanged is:
[ . . . (a) is the foreign “partner’s” obligation]
b) In the case of the United States, with respect to each [FATCA Partner] Reportable Account of each Reporting U.S. Financial Institution:
(1) the name, address, and [FATCA Partner] TIN1 of any person that is a resident of [FATCA Partner] and is an Account Holder of the account;
(2) the account number (or the functional equivalent in the absence of an account number);
(3) the name and identifying number of the Reporting U.S. Financial Institution;
(4) the gross amount of interest paid on a Depository Account;
(5) the gross amount of U.S. source dividends paid or credited to the account; and
(6) the gross amount of other U.S. source income paid or credited to the account, to the extent subject to reporting under chapter 3 or 61 of subtitle A of the U.S. Internal Revenue Code.
NOTE: “Reporting US Financial Institution” in this context is not just banks: Art 1(g) – cross reference with 1(p), below: “The term ‘Financial Institution’ means a Custodial Institution, a Depository Institution, an Investment Entity, or a Specified Insurance Company.”
Each of the capitalized terms has its own definition, as follows:
h) The term “Custodial Institution” means any entity that holds, as a substantial portion of its business, financial assets for the account of others. An entity holds financial assets for the account of others as a substantial portion of its business if the entity’s gross income attributable to the holding of financial assets and related financial services equals or exceeds 20 percent of the entity’s gross income during the shorter of: (i) the three-year period that ends on the December 31 (or the final day of a non-calendar year accounting period) prior to the year in which the determination is being made; or (ii) the period during which the entity has been in existence.
i) The term “Depository Institution” means any entity that accepts deposits in the ordinary course of a banking or similar business.
j) The term “Investment Entity” means any entity that conducts as a business (or is managed by an entity that conducts as a business) one or more of the following activities or operations for or on behalf of a customer:
(1) trading in money market instruments (cheques, bills, certificates of deposit, derivatives, etc.); foreign exchange; exchange, interest rate and index instruments; transferable securities; or commodity futures
(2) individual and collective portfolio management; or
(3) otherwise investing, administering, or managing funds or money on behalf of other persons.
This subparagraph 1(j) shall be interpreted in a manner consistent with similar language set forth in the definition of “financial institution” in the Financial Action Task Force Recommendations.
k) The term “Specified Insurance Company” means any entity that is an insurance company (or the holding company of an insurance company) that issues, or is obligated to make payments with respect to, a Financial Account.
p) The term “Reporting U.S. Financial Institution” means (i) any Financial Institution that is resident in the United States, but excluding any branches of such Financial Institution that are located outside the United States, and (ii) any branch of a Financial Institution not resident in the United States, if such branch is located in the United States, provided that the Financial Institution or branch has control, receipt, or custody of income with respect to which information is required to be exchanged under subparagraph (2)(b) of Article 2 of this Agreement.
This is the section that defines whose (which aliens’) accounts would be reportable. Not sure how this meshes with non-resident alien interest concerns:
cc) The term “[FATCA Partner] Reportable Account” means a Financial Account maintained by a Reporting U.S. Financial Institution if: (i) in the case of a Depository Account, the account is held by an individual resident in [FATCA Partner] and more than $10 of interest is paid to such account in any given calendar year; or (ii) in the case of a Financial Account other than a Depository Account, the Account Holder is a resident of [FATCA Partner], including entities that certify that they are resident in [FATCA Partner] for tax purposes, with respect to which U.S. source income that is subject to reporting under chapter 3 or chapter 61 of subtitle A of the U.S. Internal Revenue Code is paid or credited.
Americans Surprised that FATCA Impacts Domestic Financial Account Holders
Welcome to DATCA America! Serves you bloody right. Good for the goose is good for the gander, as they say…
Time to recap the DATCA story…. (as much for me as for anyone who happens to bother reading this.) I may flesh it out a little more and make a full post of it later, but want to get it recorded tonight while still fresh in my mind.I have been trying to keep all articles relevant to the reciprocal information sharing subject posted here as I found them. I coined the word DATCA to reference it as the domestic version of FATCA.
Tim has also put up something on DATCA here,Lets review. (draft version:)somewhat arbitrary start date for a timeline.
February 22, 2011 – IRS Bulletin: 2011-8 REG-146097-09 was issued: It was a Notice of Proposed Rulemaking; Notice of Public Hearing; and Withdrawal of Previously Proposed Rule making Guidance on Reporting Interest Paid to Nonresident Aliens
March 11, 2011 – A bi partisan letter from the entire Florida delegation, comprised of Reps and Dems was written to Obama to complain about regulations that the IRS was unilaterally imposing on US banks as part of the FATCA rollout effort. However, they did not identify or maybe even understand that one was part of the other.
Another link for this letter.
September 22, 2011 – There was Ron Paul’s letter to Tim Geithner about FATCA I was not aware of it until posted by recalcitrantexpat on Feb 8, 2012.
September 27, 2011 – The first story that begin to register for me that there was opposition to actions that the IRS was taking. It was in an Accounting Today story six months later: Congressman Tells IRS to Back off on Bank Disclosure
This story also got a mention out of Rosa Eckstein Schechter of Florida here: Congressional Challenge to FATCA Brewing Out of Louisiana Congressman’s Letter to Treasury Secretary Geithner
October 27, 2011 – There was a Hearing held by the subcommittee of Financial Institutions of the Committee of Financial Services about “PROPOSED REGULATIONS TO REQUIRE REPORTING OF NONRESIDENT ALIEN DEPOSIT INTEREST INCOME”
Hat tip to Badger who dug this out here.
February 2, of 2012 – There was a US Treasury Department release of a JOINT STATEMENT FROM THE UNITED STATES, FRANCE, GERMANY, ITALY, SPAIN AND THE UNITED KINGDOM REGARDING AN INTERGOVERNMENTAL APPROACH (IGA)TO IMPROVING INTERNATIONAL TAX COMPLIANCE AND IMPLEMENTING FATCAGeneral Consideration 5 laid out a vision of reciprocity (A DATCA?) that said:
February 8th, 2012 This was my first use of the term DATCA related to the IR-2012-15: Treasury, IRS Issue Proposed Regulations for FATCA Implementation. It was here I begin to identify that some form of a DATCA was going to be a part of FATCA implementation.
April 17, 2012 – It was was reported in Accounting Today that IRS Issues FATCA Guidance on Reporting Interest Paid to Nonresident Aliens
May 11, 2012 – Another story surfaced on Accounting Today basically expressing dissatisfaction with what the IRS was doing, and asking again for information.Congress Probes IRS FATCA Interest Regulations
May 14, 2012 – The IRS went ahead with their final reg, IRS bulletin 2012-20 which was the first step in meeting the “Joint Statement” agreement of February 2, 2012 and ignoring Boustany’s letter above just days before. It officially created the reciprocal provisions (DATCA lite) in the Model Agreement 1 which was to follow.
26 July 2012 – The US Treasury Department issued the first FATCA model 1 Inter-government reciprocal agreement, (IGA) that contained article 6, promising to provide reciprocity (as in IRS bulletin 2012-20) to countries that signed the agreement. The Actual language said:
July 26th of 2012 – The Posey Legislation and amendment 3, which was passed by the House but went nowhere in the Senate. In this legislation they tried to reign the IRS in.
Obviously at this point it was clear that FATCAnatics were marching onward with their FATCA IGA reciprocal mission and a larger global GATCA in mind. 🙂 They seem determined to ignore Congress as they went! Their intention or interest mattered not!
Oct 17, 2012 – There was the letter by Congressman Reichart imploring Shulman to answer him about what they were up to. No response that I know of.
January 28, 2013 – The final FATCA fatwa regs are released effective January 28th, and countries are being pressured to sign FATCA IGAs with some measure of reciprocity rather than be subjected to the onerous FATCA Portal of Mordor as released in the 544 pages of regulations.
April 14, 2013 Obama’s budget released and calls for FATCA reciprocity This is the domestic full blown DATCA they have desired to be imposed on the USFIs. See page 202. It was posted on IBS with additional comments Here Comes DATCA.
April 19, 2013 Banker Groups Sue Treasury, IRS Over Account Reporting Rule Story from Bloomberg about the attempt to stop DATCA lite without a mention of FATCA. We blogged about what this all means here.
May 23, 2013 There was an
EU Parliament public hearing on FATCA that featured presentation and answers to questions by Treasuries Robert Stack. His answers on FATCA reciprocity were videoed and loaded on You tube here, and his transcript is loaded here. In his answers, he has explained that reciprocity (DATCA) is in the Obama budget, and what that would mean for Delaware Corporate beneficial ownership transparency.
Jun 06, 2013 Representative Bill Posey introduces legislation H.R. 2299: To prevent the Secretary of the Treasury from expanding United States bank reporting requirements with respect to interest on deposits paid to nonresident aliens
– So that is the brief history that I have watched develop and recorded it. It is interesting to look back and remind myself how long Treasury has been marching to their own drummer and have been ignoring Congress. No way was a domestic reciprocal FATCA (DATCA) ever part of the intention of Congress when this was passed it, assuming they even knew it was in the Hire Actin the first place.
There is nothing in the 2009 Press Release that heralded its coming. If reciprocity had been part of the intention, why wouldn’t they have just created the authority when they wrote FATCA in the first place?
They didn’t write it, because they were only focused offshore and in no way knew that the Treasury FATCAnatics were about to hijack the mission. I do speculate that a DATCA certainly must have been part of a secret goal of some of the sponsors, as America is the BIGGEST tax haven in the world and the resting place for trillions of dollars undeclared around the world. They wanted to stop that.
Switzerland is a piker by contrast.
This comment by @Badger on another thread is worth repeating:
So, therein will be the future battle lines be drawn as they progress towards a full FATCA implementation globally. Full Reciprocity is not there yet, but an IRS spokesman said recently, reciprocity is a work in progress. Make no mistake about it, that is where the ideologues of Treasury are heading. And frankly, if America is not going to be so hypocritical in its approach to financial transparency, it has to begin at home.
Will they get there? Will they actually pass a DATCA? It all depends if Congress has a spine! However, I think we under estimate how much our banking system has relied on illicit and ‘dark money’ for liquidity. Are we willing to give it up in an ideological pursuit of Global financial transparency? What will be the impacts on the US homeland for capital flight if we do? Will your loan not be approved because reserve levels of your local bank are too low, and the DATCA money is no longer resting in your bank? How pure do we want to be in our global efforts?
Just an aside: If you haven’t read that IRS bulletin 2012-20 that I have linked here, you really should.
It is as much a statement of mission of the FATCAnatics as much as the NeoCons issued with their Project for a New American Century years ago that laid out their vision prior to our war of preemption on Iraq.
Read this letter. Look at those signatures and compare it to the officials in the first administration of W, and then tell me why you were surprised at our Iraqi invasion!
To me, the FATCAnatics have laid out their mission just as forthrightly as the NeoCons did. There should be no surprises about where they are heading. Yet the media chooses not to read or report on it. I don’t know why they ignore it, but it is what it is I guess!
The Mission Marches on…Others are beginning to wake up to what is happening, but not in the Mainstream media yet…..and now you are up to date for the moment.
FULL RECIPROCITY UNDER FATCA IS A WORK IN PROGRESS, IRS OFFICIAL SAYS
As we have been saying…
Christophe just posted this, and it continues the story on DATCA and attention it is beginning to raise…
Exclusive: Foreigners’ accounts in U.S. banks eyed in tax crackdown
“The Obama administration may soon ask Congress for the power to require more disclosure by U.S. banks of information about foreign clients’ accounts to those clients’ home governments, as part of a crackdown on tax evasion, sources said on Monday.“
So Obama is going to ask congress to vote laws to allow reciprocity to happen. Let’s see how the banking lobby is going to work…
And that was interesting too:
“China has been publicly dismissive of FATCA, but it is talking with U.S. officials behind the scenes, sources said.”
“France and Germany “have been asking for something more like full reciprocity,” said Jonathan Jackel, a lawyer with the law firm of Burt Staples & Maner LLP in Washington, D.C.“
“The Texas Bankers Association is considering a lawsuit against the government to stop accountholder information sharing with Mexico, said Eric Sandberg, the group’s president“
And why just with Mexico?
And the article ends with
“The United States should be moving toward full reciprocity,” said Georgetown Law School Professor Itai Grinberg, a former Treasury official, adding it would be “deeply hypocritical” of the United States to ask for U.S. taxpayer information “without offering some kind of reciprocity.“
It’s getting interesting. Let’s count the points
Now the story is spreading to other places: http://www.chicagotribune.com/business/sns-rt-us-usa-tax-fatcabre91312w-20130204,0,2690343.story
The more the coverage and attendant scrutiny of this – the faux ‘reciprocity’ and domestic US opposition, the more attention to FATCA, the better.
Same story now posted online at the Canadian Globe and Mail: http://www.theglobeandmail.com/report-on-business/international-business/us-business/foreigners-accounts-in-us-banks-eyed-in-tax-crackdown/article8207084/
Open for comments!
Thnks… Let’s hope it keeps spreading as it might finally begin to dawn on some in the hallowed homeland, that this FATCA wind is blowing onshore. Keep watching for others.
@Just Me, have you seen this:
“IRS Delays Foreign Financial Asset Reporting
by Mike Godfrey, Tax-News.com, Washington 28 January 2013
The United States Internal Revenue Service (IRS) has disclosed that, in a Notice
to be published on February 19, 2013, it will provide guidance to certain taxpayers
concerning the first taxable year they must report specified foreign financial
assets to comply with the provisions of the Foreign Account Tax Compliance Act
It was originally proposed that, starting in tax year 2011, a Statement of
Specified Foreign Financial Assets would need to be filed by taxpayers with
specific types and amounts of foreign financial assets or foreign accounts.”……….”
However, the new IRS Notice has now informed taxpayers that the first taxable
year they will be required to report their interest in foreign financial assets
has been delayed.
The IRS and the Treasury Department intend that, when final regulations are
issued, those final regulations will modify the effective/applicability date
of the FATCA reporting provision so that it will not be required earlier than
taxable years beginning after December 31, 2012.”
Not sure what this means?
I had heard rumors that this was going to happen, but was waiting from something substantial to report, so this might be it… Very interesting… I have to assume that form 8938 won’t be required for this tax year then, even though it was last year? Hummmm
That’s what I thought it meant. Confusing – since presumably some people filed last year.
But, the “certain taxpayers” group could be made very small. Wonder what they are up to, and why. I guess we’ll see.
But to get around ‘DATCA’, US banks are helpfully creating non-interest bearing accounts, and ‘other alternatives’
….”In response to the new reporting requirements, many banks are now offering non-interest deposit accounts to Mexican nationals as well as considering certain other products that are similar to deposits, but may not involve the payment of interest required to be reported….”
That was soo predictable, eh? 🙂
non-interest bearing accounts—that is the object of it all, isn’t it? To force people into something that has no gain to the customer
Another addition to the DATCA story via Badger…
ARTICLE: The Effects the Bank Secrecy Act Has Had on the South Florida Banking Industry and Economy, and How the Newly Proposed IRS Regulation Would Compound Those Effects
Finally, this story comes out in the open and the Bankers associations have grown a pair…
Banker Groups Sue Treasury, IRS Over Account Reporting Rule or (DATCA)
Would love for this statement to turn out to be true…
Treasury Department’s Promises of U.S. FATCA IGA ‘Reciprocity’ Dead
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