From “JC”:
https://fatcalegalaction.com/ now live.
Attorney Bopp has issued a legal opinion on FATCA stating three constitutional claims, with strong legal merit, can be brought against the legal requirements imposed by the Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank Account Report (FBAR).
Yes FBAR!
According to James Bopp, Jr., “It is our preliminary opinion that the potentially meritorious claims are a violation of the treaty power, an 8th Amendment Excessive Fines Claim, and a 4th Amendment Search and Seizure Claim. . . . We believe that these 3 claims form the basis for a successful suit that would stop the damage that FATCA and FBAR have inflicted of U.S. citizens.”
The meat of the claim: Bopp FATCA Legal Opinion
At the start of the Legal Opinion, Mr. Bopp highlights Allison Christians’ arguments regarding the legal status of the FATCA IGAs signed by countries around the world.
The legal status of these IGAs is unclear and susceptible to challenge. They are not treaties under U.S. law because they have not be en submitted to the Senate for advice and consent pursuant to the Treaty Clause of the U.S. Constitution, Art. II, sec. 2, c l. 2. Nor ae they congressional-executive agreements because Congress has not authorized the Treasury Department to conclude the IGAs as part of the FATCA implementation effort. Instead, the Treasury Department appears to be treating the IGAs as treaty-based agreements, interpreting the information exchange provisions of existing tax treaties and tax information exchange agreements already in place with FATCA Partners. However, Allison Christians, a tax law expert and associate professor of tax law at McGill University in Montreal, argues that none of the IGAs are properly considered treaty-based agreements. Allison Christians, The Dubious Legal Pedigree of IGAs (And Why it Matters), Tax Notes International Vol. 69, No. 6 (Feb. 11, 2013).
…
Good stuff. I look forward to studying the web site.
I always like to find the minimum that needs to be achieved for success.
If the FBAR penalty structure was struck down, the problems facing expats would largely be gone. Why do I say this?
Most Canadians with clinging US nationality would never owe the US any tax. Canadian tax paid would largely serve as a credit against US tax. For most of the last 50 years, I believe cooler heads in Washington understood this.
What is the penalty for failure to file a tax return? The “penalty” is a percentage of the tax actually owed. If you owe no tax and do not file, there is no penalty!!!
The problem is Mr. FBAR. Sadly, FBAR would have NEVER become a problem had the Secretary used his authority from Congress to raise the reporting threshold with inflation, provide a same country exception and eliminate countries like Canada!! He has had this power for the last 40 years.
I am almost wondering if in prior years the blind eye to FBARs was because cooler heads figured the penalty structure was subject to challenge?
So I go back to if Bopp can get the Courts to strike down the FBAR penalty structure then FATCA becomes meaningless to large numbers of expats.
@calgary411 @JC
Good to see that fatcalegalaction.com is now live, apparently permanently now.
As I noted in an email to Stephen and Solomon when fatcalegalaction.com was previously live briefly (last weekend; Aug 24), I would like to offer my services as a volunteer. Indeed I would probably only donate financially to fatcalegalaction.com further if it were in conjunction with a significant opportunity to help in non-financial ways. Sometimes I feel better about giving money if there are other opportunities–for example through volunteering–to get to know the people involved. However I’ll continue to contribute monthly financially to ADCS either way.
As you’ve probably figured out by now, I’m an opinionated guy. I am volunteering for fatcalegalaction.com because I agree with you 95% of the time. But–precisely because I have strong opinions on things–I’m never going to agree with anyone 100% of the time. And I’m going to let people know the 5% of the time when I disagree. If Solomon and Stephen can work with someone like me, I invite them to contact me about being a volunteer for fatcalegalaction.com.
@George
I think that having a court strike down the FBAR penalties as excessive fines would be a huge win and I certainly hope at a minimum the US legal action is able to do that.
However, I don’t think it would solve the problem completely. With FATCA the risk of having one’s (and one’s spouse’) information turned over to the CRA/IRS, and/or being denied bank account privileges entirely, would still remain. It is true that without FBAR the US would probably enforce FATCA much less aggressively. But now that the banks have been spooked by FATCA, FATCA itself will need to be challenged to deal with that problem.
Thanks, Dash1729.
Thanks for your note and your offer to come forward to volunteer now that the new U.S. site is up. Hopefully, you will have that contact soon. Thanks for all you’ve contributed here — so glad you will continue your contributions, through commenting and needed donations, on this side of the border!!!
Bravo from me.
Carol
@ George
Sorry but striking down the FBAR penalties would not be much of win. It would only give an air of acceptability to FBARs and FBARs (FATCA reporting too obviously) are NOT acceptable. Not to me anyway. This is information which must remain private for a person’s own financial security. The very existence of FBARs is a big enough threat in itself. The penalties are just a pile-on to that threat. Man, if you only go for that minimum they’ll walk away thinking they are justified prying into the bank accounts of people, some of whom are merely adjuncts to those deemed to have “US personhood” (non-US family and business associates). FATCA reports, FBARs and CBT have to be called out for what they are — WRONG, WRONG and WRONG.
Anyway, I’m glad the FATCA Legal Action site is up and running and I wish GREAT success (not merely minimal success) to Jim Bopp.
I remain surprised that nobody has attacked FBAR at its root: the statute creating them left almost all of the details to Treasury via regulations to be passed. The stated intent – protecting the currency and detection/repression of money laundering and other nasty stuff – has nothing to do with “in country” accounts of bona fide non-resident citizens. They should have been excluded as their inclusion by Treasury was clearly not in furtherance of the statutory power delegated to them. Treasury was empowered to exclude them entirely and failed to do so. Yes, the fines are a constitutional breach: they certainly are not “remedial” (given anti-crime intent, anyone who is not sinking the US$ or laundering money at their local TD branch has nothing to remedy) and are thus purely punitive.
At any rate – let Mr. Bopp stir the pot from his end, we shall stir from ours.
Nobody has mentioned the fact that FBAR threshold has remained the same for over 40 long years. FORTY YEARS without adjustment.
What does that tell you?!
It tells me this FBAR rule was and is abused by our esteemed goveremt leaders to be used as an extortion tool as they deem fit. 10 grand was ALOT of money in 1970 but with each passing year it is easier for them to entrap innocents for a money grab.
That is all this 10 grand limit is there for.
An affront to all foreign based Americans.
This is an example of the sad truth of our, especially long term representatives.
striking down the penalties then makes a law with no enforcement. Makes the law pretty useless.
Until 5 yrs ago, they just left people alone. Now, they negate your exclusion if there is a typo on the 2555 form and take a year to fix it.
@Beth–correct. $10,000 in 1970 is about $60,000 today.
@Samuel Clemmens, “striking down the penalties then makes a law with no enforcement. Makes the law pretty useless.”
EXACTLY.
@Embee, “Sorry but striking down the FBAR penalties would not be much of win. It would only give an air of acceptability to FBARs and FBARs (FATCA reporting too obviously) are NOT acceptable. ”
FBAR with respect to expats only survives because of the penalty structure.
Penalty structure gone, FBAR defacto goes away.
That leaves the residue of FATCA, but the burden would then be on the US to audit so called US Persons and show that they in fact owe actual tax. No tax, no penalties, lots of wasted effort by the US.
Is that website also open to republicans within America? All those who want FATCA repealed?
@ George
Defacto is not good enough. Only defunct will do.
“No tax, no penalties, lots of wasted effort by the US.”
In the meantime, the stress of IRS entanglements and cost of condor involvements takes its toll on Canadian grannies’ health and wealth. Remember an IRS audit means the victim gets to run ragged finding the documentation for his/her innocence, while under the spectre of the IRS’s presumed guilt. Patricia Anderson d’Addario can speak to that (Ways and Means Committee report).
Polly,
The site is a U.S. site and open to anyone who wishes to access and donate to litigation in the U.S.
@Anne Frank
FBAR was never heard of until the UBS debacle. It was during that time that some aggressive and highly creative DOJ prosecutors wanting to make names for themselves started using FBAR for purposes far beyond its original intent.
Those DOJ lawyers are now in private practice reaping the benefits of the shit storm they helped create. Kathryn Kaneally will also soon be joining their ranks.
http://www.millerchevalier.com/OurPeople/KevinMDowning
http://www.jneimanlaw.com/Firm-Overview.shtml
FBAR needs to be put to the 8th amendment test and abolished altogether. Those DOJ zealots clearly demonstrated how easily FBAR can be abused.
I am very happy to see Jim Bopp working on fixing this mess. I wish him well and will certainly donate to his litigation fund.
@all
There is no mention a out citizen based taxation that only the USA uses in the world. While the rest of the world is on resident based taxation. Change that and then all this goes away. This new site is mum on this. Why?
I suspect the real skin in this game is the US banks fighting FATCA reciprocity. Expats with CBT problems are just pawns in all this.
Adding to the above, this is why renouncing or relinquishing US citizenship is the best course of action for expats provided the person is able to do so.
@northernstar
I don’t think Citizenship Based Taxation (CBT) is not unconstitutional. This litigation in intended to strike down FATCA in courts based on it being unconstitutional. I am sure they’re also opposed to the CBT but fighting against CBT is more of an activist role than a lawyer role. There isn’t much they can do if they launch a lawsuit against CBT. It would be a waste of time and money at least for now. – I think.
No where is there said about striking down FBAR penalties. There is an 8th Amendment Excessive Fines Clause that will be applied. Instead of striking down the penalty the case will be more about making the fines reasonable.
@George CBT and FATCA go way beyond FBAR. Some examples, tax on sale of home, death tax, disallowing Canadian tax break on sale of small business, tax on retirement accounts, penalising investment in Canadian mutual funds, penalising owners of nonUS businesses, penalising working for another nonUS business with signatory responsibility, discouraging promotion at work in nonUS business. Etc.
I believe I have found a significant unexploited angle in the legal argument. It talks about the difficulty of challenging the 30% withholding to FFI on US source payments as this may in some way be categorised as a ‘tax,’ However, the confiscatory 30% seizing of the account value of those ‘recalcitrant’ Americans tax resident overseas who refuse to identify themselves when asked by a FFI – a witholding based not on any tax but only a matter of compliance. Why wouldn’t that be unreasonable seizure? This surely must be attackable on grounds of violating the 8th Amendment. The more the laws are shown as outrageous the better the potential for educating others on the injustices of it all.
As I mentioned earlier, under comment on current articles, I find this website not quite as polished as the Republican resolution to rescind FATCA or the Republican resolution to end citizenship based taxation. Is this statement true: “most foreign banks are charging Americans exorbitant additional fees.” It is a point of credibility. Perhaps what was meant is that there are exorbitant additional fees for compliance for those tax resident aboard. The ADCS site appears a bit more polished.
“FATCA is a grave danger to every American living abroad” is this a hint about the US death tax? And that the legal action is out to do something about this? I hope so.
@Dash1729 Your contribution appears much more welcome at IBS. FATCA Legal Action does not have message boards. You could tick a box that says you wish to volunteer, but then what does this mean? Does that mean that you will contribute to their newsletter? Please keep us up to date. Certainly the volunteering will be education and spreading the word.
FATCA Legal Action could be strengthened if it had message boards, as could the ACA site. However, for ACA I get the impression that they want a lot of control of it all. They don’t even publish select letters that they have received. They must have quite a collection.
Ex
cessive F
ines Clause
@Canadian First. There may be argument made against CBT on excessive fines clause, unreasonable search and seizure, the taxpayer bill of rights #10 for a fair and just tax systems, then generally the inalienable rights of Americans to liberty and the pursuit of happiness not discriminated against by the US government based on where Americans live.
@x,
>Adding to the above, this is why renouncing or relinquishing US citizenship is the best course of action
> for expats provided the person is able to do so.
I gave $1k to the US lawsuit. I have and will continue to have to reside in the US. I will have to file all the crap for at least another 5 years on my UK pensions. I’ll have to continue to face the risk of having some informational form bite my ass. I am sick of it. I am sick of the fact that they took a bunch of my money.
CBT has never been a problem for me. The informational forms, PFIC and bad tax treaties are a problem for me. Too often here people claim that CBT is the only problem or that renouncing is the answer. Some of us couldn’t really renounce even if we were citizens and we don’t want to because we live in the US. We have to become citizens just to protect what we have.
@Neill
“CBT has never been a problem for me.” — It will be the moment you move outside the US.
Most people on this blog live outside the US so your situation is different.
@George
CBT and FBAR fines are SOME of the problems … the attack on privacy and the destruction of the ability of middle class people to store some value in a safe(r) place than where they live is the key shot for me. I have experienced capital and exchange controls and know just how wicked such shackles can be.