As previously reported here:
and here:
http://www.repealfatca.com/index.asp?idmenu=4&title=News&idsubmenu=130
the Obama administration has been trying for some time, without success, to sneak some form of FATCA reciprocity past Congress to avoid any embarassing pants-on-fire confrontations with IGA signatories who were apparently promised the moon by American FATCA negotiators. Seems they’re at it again, with a duplicitous new twist, as the following links reveal:
http://www.jdsupra.com/legalnews/treasurys-fincen-proposes-rules-forcing-79017/
http://www.treasury.gov/press-center/press-releases/Pages/jl2595.aspx
http://www.fincen.gov/statutes_regs/files/CDD-NPRM-Final.pdf
In a nutshell, Treasury aims to glue just enough sequins onto its FinCEN (Financial Crimes Enforcement Network) CDD (Customer Due Diligence) requirements to convince IGA suckers that it is finally forcing domestic financial institutions to reveal the beneficial owners of accounts held by foreigners in the US. Since there is actually plenty of wiggle-room in the reporting thresholds, most such account holders will simply re-structure their ownership profiles and thus avoid reporting to their home countries, but no matter – the whole point of the exercise is merely to create a convincing-enough facsimile of reciprocity that the IRS will finally have the fig leaf it so desperately craves, not only for the FATCA club, but for its G8 G7 partners as well.
Now, in true FATCA IGA style, the proposed new legislation intends to simply bypass pesky Congressional authority altogether by being presented as a mere amendment to existing BSA (Bank Secrecy Act) regulations. Some bright light at Treasury finally made the right connection, thinking, hey, the ruse has worked fine for the IGA’s, so why not for DATCA?
Wonder how long it will take for Bill Posey to catch-on to this new effort?
I wonder how Odumber got it past Joe Biden? If those corps in Delaware (there’s more than there are people) find out about this, Joe will never be able to ride the train back home.
http://dailym.ai/1sptN3H
http://www.fincen.gov/statutes_regs/files/CDD-NPRM-Final.pdf
page 6 at bottom
Facilitating reporting and investigations in support of tax compliance, and advancing national commitments made to foreign counterparts in connection with the provisions commonly known as the Foreign Account Tax Compliance Act (FATCA);
Strengthening CDD is an important part of that effort, and it will
dovetail with other efforts to create greater transparency, such as the new tax reporting
p9
provisions under the Foreign Account Tax Compliance Act (FATCA). requires foreign financial institutions to identify U.S. account holders, including legal entities with substantial U.S. ownership, and to report certain information about those accounts to the Internal Revenue Service (IRS).
FATCA
The United States has collaborated with foreign governments to enter into intergovernmental agreements that facilitate the effective and efficient implementation of these requirements. These agreements and, to a lesser extent, the applicable FATCA regulations, allow foreign financial institutions to rely on existing AML practices in a number of circumstances, including, in the case of the agreements, for purposes of determining whether certain legal entity customers have substantial owners. Pursuant to many of these agreements, the United States has committed to pursuing reciprocity with respect to collecting and reporting to the authorities of the FATCA partner information on the U.S. accounts of residents of the
FATCA partner. A general requirement for U.S. financial institutions to obtain beneficial ownership information for AML purposes advances this commitment, and puts the United States in a better position to work with foreign governments to combat offshore evasion and other financial crimes.
I broke the new regs down in an understandable manner over the weekend, and posted on my academic blog – http://lawprofessors.typepad.com/intfinlaw/2014/08/fincen-issues-new-due-diligence-for-us-banks-to-support-fatca-.html
If somebody of this forum has Joe’s e-mail address, slip him a copy of this mail..
BTW, one very revealing metric in the proposal is the estimated annual cost to the American financial industry of processing these new regulations: only $54 million! If even one single foreign financial institution subject to FATCA regulations could get away with that minuscule amount then they would consider themselves lucky indeed.
$54M they must mean $54 Billion. If a law is so great then why not debate it in Congress. The Obama administration is worried the banking lobby will get FATCA reciprocity derailed.
Let’s hope this gives Jim Bopp another legal avenue against FATCA in the US.
One other thing I’ve noticed. There’s no reciprocity for US / dual citizens in this regulation. US citizens need only to give their SS number. While foreign citizens have to give their passport number and nationality of their passport.
So a dual national living in his country could in theory still hide his money in the US.
The risk would be the IRS gets a 1099 from the US bank and would have to cross check again 1044 filed. The exercise isn’t as clear cut as FATCA data and requires the IRS to search through the data. How about if someone ‘layers’ the money behind trusts and shell companies making the IRS’s task even harder.
So this is not reciprocity from an IGA signer’s point of view. It’s simply a way to bypass the US Congress. It’s half measure.
@Don
Here’s the formula Treasury used to come up with the bargain-basement cost estimate:
@Deckard, US Banks need to start asking every person that opens an account;
1.) Where were you born?
2.) List all Countries which you may be considered a Citizen of?
3.) Provide a copy of your passport showing Country of Birth?
4.) A statement where each parent was born?
Plus an electronic check for any sign of anything foreign to the USA.
@Deckard1138,
It seem unlikely they are only going to report new accounts as the calculation suggests. Don’t they really want to know about old accounts avoiding taxes for many years?
I think this is very problematic for the USA. When I perused the UK-US IGA all exempted accounts are on the UK side. The US side sort of assumed it would never report anything. So a problematic account like an ISA doesn’t get reported to the US. They may get the owners via reports on other accounts though. A problematic account like a 529 plan or HSA though isn’t protected from reporting to the UK by the US. Once again a US person living abroad gets screwed.
So haven’t they painted themselves into a really bad corner going this way? They do these carve outs to limit costs.
@Neil – Why would any agreement be problematic for the US, they’ll just change the rules without asking the UK Government?
The US can change the definitions at anytime for the following:
1. US Indicia (what makes you a ‘US Person’)
2. FFI (What an FFI is)
3. Reportable Account (Limits i.e $50,000)
4 FATCA Data Set (actual data required)
So the US later includes in US Indicia accessing your account with a US IP Address – Bingo!
– FFIs now include credit card companies, casinos, etc – Bingo!
– Reportable Accounts limit drops to $5000 – Bingo!
– FATCA Data Set is changed by the US to include transactional data (where name of shop is or name of employer that credited your salary, etc) – Bingo!
– The US not only demands the FATCA Data Set changes but wants it from 5 years back – Bingo!
By moving the goal posts on those for 4 levers, the US can increase the scope FATCA covers resulting in greater and greater amounts of data from virtually anyone whether a US citizen or not whose Bingo number comes out!
Once FATCA infrastructure is in place all this become very very easy.
FATCA today will not be FATCA tomorrow.
@Don,
I am talking about the IGA rules that say what account will be exchanged. The IGA with the UK says you don’t have to report many account types (pensions, ISA etc). The IGA doesn’t rule out any accounts on the US side. So the US has signed an agreement to hand over all account details. All the things you mention let the US get more people. I am talking about the UK being able to get more people. If the UK knows anyone has a 529 or HSA account then bingo more tax to HMRC using PFIC like rules.
@Don, I dread to think that they might even want to make it easier to re-include many former US citizens as ‘US tax persons’, perhaps by reducing the annual number of days allowed to spend in the US or heavily auditing recently filed 8854s (in efforts to deem more as ‘covered’ expatriates, etc.
In other words, I don’t honestly know that anyone can ever know for sure that they can completely get rid of US personhood, especially if rules are changed retroactively.
@Moaner – If nothing else gets done, resident citizens need a ‘carve out’ of FATCA by Canadian and EU courts and stick the US.
Here’s another joke about the US, they stick Africa with $ billions of FATCA compliance costs and then announce $14 billion in African investments. Africa is probably lucky to break even.
The only reason the Americans are investing in Africa is because of China’s growing influence on that continent. The Chinese are involved in heavy duty infrastructure projects like building railways and mining.
https://uk.finance.yahoo.com/news/us-announces-14-bn-investments-155331333.html
Having one or two sensible business ideas, if they start to generating real cash, it’ll become necessary to walk into the US embassy and either relinquish or renounce.
I’m certainly not going to get involved filling in the IRS’s silly forms while paying all my European taxes. In Europe the taxes are high, but at least the kids have decent schools, good roads, high standard of medical care, and good overall infrastructure.
In the US all you see is crappy infrastructure and rusting out old bridges built in the 1950/1960s when the US had vision and you were generally materially better off there then. Certainly Americans are generally no better of than other G7 countries. The US is a country that has rested on its laurels and needs to change. Change won’t come from within the US, it’ll be forced upon them externally with some financial crisis.
@Mona Lisa, “I dread to think that they might even want to make it easier to re-include many former US citizens as ‘US tax persons’, perhaps by reducing the annual number of days allowed to spend in the US or heavily auditing recently filed 8854s (in efforts to deem more as ‘covered’ expatriates, etc.”
Spot on……
All it will take is for Congress or the President w/Executive Order to redefine US Person as: “A former US Citizen who has resided in the USA for 30 days in a calendar year shall be deemed a US Person for that year and five subsequent years.”
I know folks who are using that reason to not come onto the radar.
@George, I decided to do five years full compliance with 8854 to hopefully avoid problems down the line. I did what made the most sense at the time. But I will continue to need to be able to visit family in the US, especially while my parents are still alive.
My biggest fear now is no longer the IRS as much as Congress trying to pass punitive legislation to make it harder for former citizens to visit. I wouldn’t put it past them in efforts to deter the soaring numbers of expatriations.
@Mona Lisa, I know where you are coming from and the tough spot you are in. My parents passed just as I had relinquished and there was no family left behind. I am not an Accidental American but I am the first generation who left. I have relatives over here not over there, so I am very fortunate in that regard.
I think we have seen a very ugly side of the power structure in America. They are punitive and like to change the rules.
I have no doubt that they will change entry requirements for expats. I also have no doubt that the definition of US Person will be expanded to bring back former citizens.
If you can classify a Canadian snowbird who winters in Florida a US Person, surely you can simply call any former US Citizen a US Person with no other reason.
I know some have called this a tax problem but its not, its a citizenship problem. US Citizenship can not trump other citizenship when you are resident in that other country!
@Don – you are correct re US dual citizens living in the US – the Obama proposed changes in his budget proposal did not include an obligation for the reporting of a dual US living in the US. Unlike FATCA the banks would not have to collect info from a US/UK citizen (for example) or report that info to the UK. This is EXACTLY the opposite of what FATCA requires.
@George, thanks. I am indeed still nervous about things even though I have filed all my final paperwork. I understand that it will be at least three and possibly up to six years before my statutes of limitations have finally closed (assuming they don’t change the rules to lengthen still-open SOLs ).
Another thing that concerns me is that any possible future US -sourced inheritance from my parents could be penalized in some way if they were to change the rules concerning former citizens.
I find it ironic that my financial planner has moved my investments in my ISA back into a managed portfolio geared up for UK citizens which holds 20 PFICs!! If my US personhood was re-instated against my will, I would be in a bind to be compliant because of all the family ties and need to have access to visiting the US…. but I would then be looking at double taxation plus annual accounting fees of probably $4000-$5000, especially if the IRS also argued that my ISA and pension fund were also deemed foreign trusts (requiring forms 3520/3520A).
I consequently still feel vulnerable, especially with the US government in such a vindictive mood. I love the UK but sometimes regret ever leaving the United States because my life will always be more complicated and fraught with uncertainty.
I don’t trust the UK government to offer potential US persons much protection either if the climate deteriorates further.
@Moaner: “If my US personhood was re-instated against my will, …”
Even though you renounced, you are still letting (fear of) the US control your life. This seems unhealthy to me. There is nothing ironic in holding a UK-geared portfolio now that you are a UK citizen only. What would be ironic would be to hold a PFIC-compliant one — all of the drawbacks of still being a US citizen but with no benefit.
I am a former long-term green card holder and think of myself as cautious to the point of (and perhaps beyond!) paranoia when it comes to the capricious and fickle nature of US tax policy towards non-citizens, having experienced it first-hand. My opinion of congress could honestly not be lower (although each new! proposed! US! tax! law! challenges that). And yet even I don’t believe that the US could successfully retroactively and unilaterally reinstate ‘US person for tax purposes’ on somebody.
If the US wants to turn itself into a giant open-range debtor’s prison then fine. But I’ll be damned if I will let their stupid actions affect my life outside the US. Living well is the best revenge.
@Mona Lisa. Sorry, I can not call you moaner, you will always be Mona Lisa…LOL.
“I don’t trust the UK government to offer potential US persons much protection either if the climate deteriorates further.”
Join the political party of the likely MP in your area for the next election. Then start writing as a party member. It does not matter if you support their other views as a party.
You want HM Government to solely recognize UK Citizens resident in the UK as solely UK Citizens.
@Watcher, I agree that I would be better off trying not to worry unduly about what the US might do regarding former citizens. I’m just pointing out that I wouldn’t put it past Congress to pass retributive legislation to punish former citizens and/or to deter further expatriations. However, I still believe I made the right decision for my situation in spite of my worrying; I wouldn’t have gone through with such a traumatic decision had I not been optimistic about my outcome… though I am concerned for those coming after me.
Sorry about double post! @George, I agree that it would be good for me to ideally get involved with a political party or at least try to keep writing to MP, in efforts to at least achieve a carve-out for UK citizens living in the UK.
Expatriation list is up in preview.
Looks like 576 people expatriated. Hope I cut and pasted correctly.