Democrats Abroad has just released a new report from its FBAR/FATCA Taskforce. Overall, it looks like most of its policy ideas have been cribbed from ACA without any attribution. Most unfortunately, the report’s authors can’t resist turning a disaster which cuts across party lines for all U.S. Persons abroad into just another excuse to take cheap partisan pot-shots as it concludes:
Republicans Abroad has been conspicuous by their absence in lobbying for reforms to FATCA. Political operatives at the RNC have woken up to the issue and have formed a new entity called Republicans Overseas to make political capital out of a FATCA repeal effort. They hope the movement will stir sentiment and drive overseas votes to Republican candidates and raise money. Their plan is at best quixotic and at worst a blatant political ploy – in either case it is likely to fail given the commitment that regulators have demonstrated to implementing the law and the recognition in the US and globally that tax dodging must be stopped.
Here, then, is the text of this new missive:
Democrats Abroad marks the start of tax season (woo hoo) with a new report, copied below, from the Democrats Abroad FBAR/FATCA Taskforce. This Task Force examines financial reporting requirements affecting Americans with accounts in foreign financial institutions and works to lessen their unintended adverse impacts on overseas Americans. We hope this report is helpful. Democrats Abroad supports government efforts to block and catch Americans avoiding tax through illegal means. We also urge the government to recognize that most overseas Americans are honest citizens, not tax cheats or money launderers.
Important: Please be reminded that we do not provide personal advice on US tax issues and obligations.
Please also go to the Task Force webpage on www.democratsabroad.org for more information on the Task Force and an archive of past communications about their work. This is the link: https://www.democratsabroad.org/group/da-international/fbarfatca-task-force-page-updated.
If you log in to www.democratsabroad.org you can join the FBAR/FATCA Task Force Group (See Email Notification Settings in the right hand column and click on “Notify me of postings of this group”) to post comments. We welcome your comments on the website.
Katie Solon
International Chair
Democrats Abroad
2014 REPORT TO MEMBERS BY THE FBAR/FATCA TASKFORCE
In 2011, the Democrats Abroad international Executive Committee appointed the FBAR/FATCA Task Force to examine the reporting mandates imposed on overseas Americans by the Foreign Bank Account Report (“FBAR” also known as Form TD-F 90-22.1) and the Foreign Accounts Tax Compliance Act (“FATCA”). Although the FBAR has been a reporting requirement to Treasury for many Americans(1) with bank accounts in foreign banks since 1972, it is only since 2004 that enforcement has escalated. FATCA was enacted by Congress in 2010 for the purpose of providing information to the IRS that it will use to identify and apprehend Americans making use of illicit schemes, structures, accounts and facilities to move untaxed earnings out of the US(2).
This report contains four things:
- A summary of the key provisions of FATCA
- Democrats Abroad’s position on FATCA
- The impact of FATCA on Americans living outside of the US
- Democrats Abroad’s Recommended Reforms
The Two Principal Provisions of FATCA FATCA is a complicated piece of legislation and the way some of its provisions are interpreted is in constant flux. What follows is a summary of its two basic components.
- Reporting Requirement for Foreign Financial Institutions (FFIs)
Most Foreign Financial Institutions—such as banks and brokerage houses—are required to enter into an agreement with the IRS to identify their US account holders, disclosing their names, addresses and account details. Any US financial institution making a payment to a non-compliant FFI must withhold 30% of the gross payment.
- Reporting requirement for individual US citizens and their families
A US citizen living outside the US must file the FATCA Form 8938 if he or she holds or has signatory control over funds in FFIs totaling $200,000 in aggregate at the end of the year or $300,000 in aggregate at any time during the year. The thresholds for couples filing jointly are $400,000 and $600,000, respectively. There are severe penalties for under-reporting income in any FFI. The thresholds for US-based citizens are much lower and US residents with signature power over jointly held overseas accounts may have to report even though the overseas citizen may not have to.(3)
Democrats Abroad Position on FATCA Although Democrats Abroad supports strong policies to improve tax compliance and limit tax evasion, we Americans living abroad now find our financial lives exposed to a degree of scrutiny – under threat of severe penalties, fines and even imprisonment – to which Americans living stateside are not subjected. Implicit in this stringent reporting regulation is the unfair and unjustified suspicion that Americans living abroad are tax cheats and/or money launderers, which clearly the vast majority are not. The Task Force has been working for more than three years to outline to legislators and regulators the nefarious implications of FATCA compliance and to promote reforms that both preserve the law’s intent and provide relief to law-abiding overseas Americans excessively burdened by it.
FATCA’s Impact Using evidence gained in a survey of our global membership – which generated thousands of responses – and a website to collect tax stories from overseas Americans, in addition to numerous inquiries, accounts and complaints from members around the world, Democrats Abroad has identified and documented FATCA’s unintended adverse impact on overseas Americans. These are examples, in brief, of some of the issues raised by overseas Americans in addressing the challenge of meeting FBAR and FATCA compliance:
Impacts on employment opportunity:
- Discriminatory impact on US senior managers in foreign companies where an American signature on corporate accounts triggers a reporting obligation to the IRS;
- Loss of job opportunities at all levels for Americans in multi-national corporations due to the cost of compensating for US tax reporting;
- Weakening of entrepreneurial opportunities for overseas Americans due to onerous reporting obligations.
Impacts on personal affairs and privacy:
- Escalation in tax filing complexity and cost;
- Inability to open new financial accounts or forced closure of existing accounts;
- Assets and accounts held jointly with non-nationals subject to IRS scrutiny;
- Exorbitant and confiscatory penalties for non-compliance;
Democrats Abroad’s Recommended Reforms
From our analysis of the data on the impact and our discussions with regulators, legislators and tax advisors, the Task Force established the following proposed reforms:
- Define a foreign or offshore account that must be reported as an account in a country other than one’s country of residence, thereby recognizing our legitimate need for local banking services. This would also relieve the IRS of the burden and distraction of scrutinizing filings that detail legitimate overseas accounts;
- Raise the FATCA reporting threshold for overseas Americans to $1 million, therefore putting the focus on taxpayers with wealth that is sizeable enough to justify the costly and complex investment structures normally used to conceal assessable earnings;(4)
- Index the reporting threshold to inflation so that it goes up every year just as the Section 911 income exclusion does;
- Add a provision that excuses anyone who does not owe taxes (because of the Section 911 Foreign Earned Income Exclusion or any other exemption or a tax treaty) from the obligation to file FATCA form 8983, regardless of the reporting threshold;
- Merge the FBAR reporting requirement with the developing FATCA legislation to eliminate duplication in filings;
- Offer true amnesty to overseas Americans who are delinquent taxpayers, inviting them to pay what they may owe and restore their status as tax-compliant citizens.
Urgent, achievable action is Democrats Abroad’s priority
In the best of all possible worlds, the US would have a policy of residency-based taxation rather than citizen-based taxation, and so foreign financial account reporting requirements established to catch tax cheats would focus exclusively on Americans who reside in the US and shift untaxed earnings abroad. US federal debt levels and funding needs suggest that it is not realistic to expect the US Congress to give serious consideration to residency-based taxation in the near term nor for the IRS to ease up on its implementation of the law.(5)
Urgency in providing relief to overseas Americans is our highest priority.
Our efforts, and those of some non-partisan organizations of overseas Americans, over more than three years to lessen the adverse impacts of the law have yielded significant results. The FATCA threshold for all individuals was originally $50,000 —regardless of where they lived. Democrats Abroad and others lobbied successfully to get the threshold raised for overseas Americans to the $200,000/$400,000 thresholds noted in the first section.(6) Our on-going advocacy plan will continue to focus on reforming the regulations established by the IRS and Treasury because we are confident that our reforms are achievable in the short run and will be effective.
Democrats Abroad will continue to provide full-throated support to strong, good faith efforts to block and catch Americans using illegal means to avoid paying taxes; we will also continue to urge the government to recognize that most overseas Americans are honest citizens, not tax cheats or money launderers. The burden of FBAR and FATCA compliance will be profiled during our March 2014 Congressional door knock, as it has been during Congressional door knock events over the past five years. The Task Force will also continue to engage with regulators (at the Treasury and IRS – including the Taxpayer Advocate) and legislators (especially on the Senate Finance Committee, House Ways & Means Committee and Americans Abroad Caucus) in the promotion of our recommended reforms.
We are very pleased to provide this update on our work. Please be reminded that we do not provide advice on US tax issues and obligations. Many Americans living abroad may find it necessary to seek professional tax advice.(7)
Respectfully submitted,
Democrats Abroad FBAR/FATCA Task Force
Joe Green (Canada)
Stanley Grossman (UK)
Maureen Harwood (Canada)
Carmelan Polce (Singapore) – Chair
Joe Smallhoover (France)
Endnotes
1. Where Americans or US Citizens are noted herein the terms also include Legal Permanent Residents/green card holders.
2. This is how Wikipedia defines FATCA. “The Foreign Account Tax Compliance Act (FATCA) is a portion of the 2010 Hiring Incentives to Restore Employment (HIRE) Act. The FATCA requires individuals to report their financial accounts held outside of the United States, and requires foreign financial institutions to report to the Internal Revenue Service (IRS) about their American clients. FATCA was designed primarily to combat offshore tax evasion and to recoup federal tax revenues.”
3. Here is a link to the official IRS publication on FATCA. http://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-(FATCA). More details and copious references can be found in the Wikipedia article on FATCA: http://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act#cite_ref-17
4. We note that while Section 1010.350 (a) of the Code of Federal Regulations prescribes a reporting requirement to the Commissioner of Internal Revenue, and Section 5314 of the Code of Federal Regulations designates the prescribed form as the Report of Foreign bank and Financial Accounts (TD-F 90-22.1), the dollar amount that falls under said reporting requirement is nowhere designated.
5. See Bloomberg reporting this on 6 January 2014. “Newly confirmed Internal Revenue Service Commissioner John Koskinen said some of the top priorities for his office include improving compliance, ensuring the IRS has enough money as part of the budget process, building employee morale and working to restore the public’s trust in the wake of controversy.
Speaking to reporters during a 45-minute meeting Jan. 6, Koskinen said implementing both the Affordable Care Act and the Foreign Account Tax Compliance Act are key goals, with FATCA expected to provide a significant amount of information to help the IRS fight offshore tax evasion. It symbolizes ‘the increasing capacity of the IRS and the U.S. to be able to track down offshore accounts and those who have been avoiding income taxes,’ Koskinen said. FATCA is expected to be a big step forward in tax compliance, he said.”
6. Republicans Abroad has been conspicuous by their absence in lobbying for reforms to FATCA. Political operatives at the RNC have woken up to the issue and have formed a new entity called Republicans Overseas to make political capital out of a FATCA repeal effort. They hope the movement will stir sentiment and drive overseas votes to Republican candidates and raise money. Their plan is at best quixotic and at worst a blatant political ploy – in either case it is likely to fail given the commitment that regulators have demonstrated to implementing the law and the recognition in the US and globally that tax dodging must be stopped.
7. Many US Consulates and Embassies include a listing in the American Citizen Services section of their website of local accountants who provide US tax advice.
This message is paid for by the Democratic Party Committee Abroad
Democrats Abroad
PO Box 15130Washington, DC 20003United StatesTelephone: +1-202-621-6085
Well, it’s something. It should go further though. FBARS should be totally eliminated if you have zero U.S. holdings and do not live there at all. In fact RBT for long term expats is the only really workable solution still allowing them to catch actual off shoring tax cheats. It won’t harm long term expats either and avoids the Sophie’s Choice element altogether. Sadly, it’s not included here.
Further there’s no mention of apology or reconcile. Sad. Not surprising but, I won’t beat it up too badly. It’s something. I had the same thought as you. Sounds like the ACA proposal without the RBT. Wish they’d just go with ACA and leave out all this political positioning. Such a sham and a shame to go down that road.
It should be stating switch to RBT…That would solve all the problems.
Well, it’s pretty obvious to me that the Dems aren’t really going to bat for us. They seem to still justify CBT, which is the root of the problem. Sorry, no sale!
It’s clear that you can’t advocate for the repeal of FATCA, support a change to residency based taxation or disagree with the current administration’s policies in any significant way while remaining a Democrat. What you can do is try to undermine the opposition’s efforts by portraying them as disingenuous – which in turn will hurt all of us.
Despicable.
The RNC may very well make FATCA repeal a central plank of their revised platform – so much for doing nothing. If DA really wanted to put their money where their mouth is then it would be lobbying for the same thing with the DNC, but that won’t happen, will it?
@Deckard1138
The Dems Abroad put a horrible taste in my mouth when I went to their meeting in 2012 in Toronto to explain FATCA…THey had tax accountants ready to sign us all up. They put the fear in all of us. I am
glad I found Brock and Maple Sandbox.
Dems Abroad are concerned with Voters…not those who don’t vote. Once you say relinquish or renounce they can’t be bothered.
The latest bulletin from Democrats Abroad does not appear to differ from the July 2012 bulletin.
http://isaacbrocksociety.ca/2012/07/07/the-best-thing-joe-green-and-democrats-abroad-could-do-is-encourage-all-democrats-to-vote-for-romney/
Looks like those Democrats Abroad are still committed to the prison of citizenship-based taxation.
This is disgraceful. It amounts to putting their party loyalty (and even worse, loyalty to the “commitment” of “the regulators,” ie, Treasury/IRS) first.
I hate to make this partisan, but DemsAbroad are answering – the wrong way – the question I posed in my last RepealFATCA.com mailing (http://www.repealfatca.com/index.asp?idmenu=4&title=News&idsubmenu=145):
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It seems their answer at this point is to circle the wagons. Which means some flaming arrows are in order.
@Deckard1138
FACTA could break either way in the minds of homelanders. DA seems firmly planted on the fence, ready to support either the anti-tax dodger camp (in an act of self-annihilation), or USC’s abroad (themselves).
@Jim Jatras
No, Democrats Abroad are like “The Stepford Wives”. They aren’t capable of thinking anyway. Better to feel sorry for them.
http://isaacbrocksociety.ca/2012/12/19/democrats-abroad-are-like-the-stepford-wives/
But, feeling sorry for them doesn’t preclude sending arrows.
Here is a Democrat, Robert Scheer, who is very critical of Obama and has a platform that is followed on the Ron Wyden wing of the party….
He is a good candidate for turning on to FATCA opposition, although he doesn’t get it yet….
No Place to Hide: We’re All Suspects in Barack Obama’s America
I just posted this comment at TruthDig. I took this as an opening for quick FATCA education….
Robert,
With due respect, when are you going to understand that Americans living abroad under the offshore jihad that is called FATCA. which the U.S. Media have ignored for 4 years since it was passed in 2010, is JUST like NSA spying?
I hate to tell you, but Rich Lowry was correct last week on Left Right and Center about the IRS information gathering. However you seem to have no idea what is happening globally with the round up of very extensive financial information of ALL “U.S. Persons” living everywhere on the globe under the so called good intention of combating Homeland American tax evasion.
This is creating a global GATCA of auto tax information exchanges which is an open door for NSA spying as the authors intended it to be. Under this program all are under scrutiny and guilty until they prove their innocence!
This is NOT a partisan issue. If you are against NSA spying, then you should be willing to examine what is happening with FATCA. Even the Democrats Abroad understand the many NEGATIVE impacts,
This from the Democratic Underground. http://bit.ly/1mAOVAB
or this from the National Taxpayer Advocate recent report to Congress. http://1.usa.gov/1eoQzlb
Although sadly because the Republicans Overseas are now calling for FATCA repeal, the Dems abroad are circling the wagons in a partisan manner. However, if Ron Wyden and Rand Paul can join together, we all should be able to see FATCA for what it is, global spying.
If you love the NSA, you will love FATCA.
Just Me, I agree that FATCA has little to do with tax evasion and the authors and the current admin know this perfectly well, as do, I suspect, most of the govts that are being arm-twisted on the IGAs. Problem is – how do you call bs on the most militarily aggressive nation on the planet without incurring their wrath?
DA is a mindless group of sheep who seem to buy in to the notion that no American overseas intends to stay away from the homeland forever, so therefore, what’s the big deal?
Here’s what I know. Despite the crowing from the CBA and the compliance industry pimps, Canada hasn’t signed and IGA and January is almost over. Canadian financial institutions have to sign up with the IRS by April and they won’t with the govt providing them legal cover. When an IGA happens (or if) I will worry about what comes next and until then I will lobby the only people who can actually help and that is Canadian MP’s and media. The US in any form doesn’t give a rat’s ass about us. In my opinion, we are wasting our time with them.
Dems Abroad are showing their real global socialist faces. They will promote only superficial reform and will embrace CBT as long as they can.
IMO, the only way to get the Dems interested in RBT is if (or when) the numbers of Americans abroad renouncing US citizenship get to the point of becoming a political embarrassment. Anything less than that will not move them a single inch from their global agenda of wealth redistribution through taxation — ie. spreading the wealth around as Obama likes to say.
As a libertarian, I’m not a fan of either party, but at least the Republicans seem to be ready to step up to the plate for expats — at least at this moment anyway.
WARNING Anyone planning to renounce must NOT vote in US elections. I never have voted in 40 years of being here in Canada because I’m smart enough to understand that the two party system is a one party system. Voting in a US election shows you believe in the system. If you do, fine, but if you don’t then don’t get suckered in because one of the questions on the DS4079 asks if you voted.
ChearsBigEars, excellent point that bears repeating.
How the Democrat Stepford Wives still manage to rationalize around this after years of evidence about the serious cost and consequences for the entire world, the harm, and the total teetering mess of the design of FATCA is beyond belief. They are by definition living ABROAD. How can they justify still supporting a US government and ruling party who is preying not only on them and their fellow ‘US taxable persons’ OUTSIDE the US, but ALL the other TAXPAYERS and citizens of the NON-US country they are actually living in?
The whole world is slated to pay to implement FATCA – for the sole (and dubious) benefit of the US. ALL TAXPAYERS wherever they live will pay their domestic taxes to create and support structures and processes to implement FATCA and report to the US IRS and US Treasury FOREVER.
Seriously. Talk about divided loyalties. I bet these DA types are mostly people who don’t see themselves as loyal or owing anything to the country where they are living. Otherwise, they couldn’t continue to rationalize support for Obama and a party and country that is hellbent on leaching off the one they’re actually living in and enjoying the fruits and services of right now. Basically at this point, if they can excuse FATCA at all, then they are traitors to the country they are living in, enjoying the services of, and possibly a citizen of. Their fellow taxpayers in their non-US country are going to ALL foot the BILL for a FATCA IGA in order for the DA types to keep a toehold in and loyalties the political structure of the US. I think dual citizenship is possible without inherent conflicts most of the time. But NOT in this case a loyalty both to the Democrats and the President of the US AND to Canada and all the other countries in the world.
FATCA is NOT good for us. FATCA isn’t even good for the US. Anyone who can continue to rationalize that is willfully blind or criminally opportunistic.
I think FATCA is the final tipping point. You either are for the best interests of your fellow taxpayers and citizens in the NON-US country where you live and enjoy benefits and the rest of the world, OR you can be a Democrat Abroad still excusing the current Democratic Party and President Obama. Not both.
And I am not saying that in support of the Republican Party because I’ve never been a Republican or ever voted for them.
Just reading this from DA makes me nauseous:
“….in either case it is likely to fail given the commitment that regulators have demonstrated to implementing the law and the recognition in the US and globally that tax dodging must be stopped…”
In other words, the Democratic Party and President Obama are adamantly stuck on stupid, arrogant and hypocritical. And the DA is not going to work for repeal of FATCA cause it is family. And family stick together right? Even if they beat you?
The US is demanding a free lunch at the expense of every single other country in the world. That’s a BS sandwich.
@Badger
You are right.
I have come to really dislike politicians.
We Americans Abroad are collateral damage as in their political war. Neither side cares an iota about us.
I don’t care if the GOP microwaves kittens, I’ll vote for them if they repeal FATCA.
“Many Americans living abroad may find it necessary to seek professional tax advice.”
Which the DA knows they can’t afford.
No mention of the continued (and non-mythical) and rising renunciations and relinquishment numbers. No mention of the resistance to FATCA in Canada.
If even the Taxpayer Advocate can note those, the DAs still feel that they shouldn’t/can’t acknowledge the truth? Surely they know of people who’ve expatriated over FATCA and CBT and who are resisting FATCA IGAs where they live.
Specially glaring omission of the growing elephant in the room for DA Canada.
@badger
The elephant being the symbol for the GOP?
Pingback: Only @Demsbroad take these Stepford Wives seriously | U.S. Persons Abroad - Members of a Unique Tax, Form and Penalty Club
@bubblebustin,
Luckily, I don’t have to ponder that choice since I can’t vote in the US anymore anyway.
@badger
And luckily I will never be faced with having to decide whether to vote for a party whose platform is microwaving kittens, thank goodness.
Democrats Abroad must realize that the issues facing US citizens living abroad are important enough to our survival that many would be willing to hold their nose and vote for a party they wouldn’t vote for otherwise, if that party is willing to take significant steps to stop FATCA and put an end to CBT.
That said, DA may be genuine in its belief that there’s no chance in either happening and assume that RO realizes the same and therefore they are quick to condemn RO for grandstanding to Americans abroad in the false hope that they might actually be able to affect change. Maybe it’s not so much that they don’t support repeal but feel the chances of repeal are so slim that it’s not worth the risk of sticking their necks out in rebellion against their own party. By the same token, RO has little to lose and everything to gain in taking its current course of action.
A lifetime of voting Democrat was, for me, dashed on the shores of FBARs and FATCA.
@ChearsBigEars
I haven’t submitted an FPCA since the farce that was the Obama / Romney election. I remember voting for hope and change and all I got was a continuation of Dubya’s police state with the addition of even less freedom.
And yes, I’ll definitely agree that the two party system there is really a one party system, though it took me until after 2008 to figure it out for myself.