Same Country Exception. A letter writing campaign “exempting” one from FATCA reporting has now been kicked off. If one can show that one is tax compliant, one won’t be reported. In this case, one needs only to send a different piece of paper to the IRS that declares that one is same-country exempted. Sounds Good. Is it?
We’ll look at the details. But first, let’s look at something that came along, albeit at a much slower pace–the Social Security number. Since it’s not the prime point, I won’t claim to have researched its history fully, let’s just talk about it from my own memory. And, remember that the course of history need not be planned in advance. However, it can be expected to morph itself to a known end.
Social Security came about as a forced savings system for one’s retirement. The payments after retirement were well publicized, and the incoming payments were accepted by legislation in the houses. In order to keep track of the payments, identification was required for the first time in America. Lots of people complained, that identification was not part of the American ideal. It was a huge transition, for which we dismiss today as “conspiracy theories”. Many of us have a Social Security card which is overlayed with “not to be used for identification purposes”. This didn’t last very long. In fact, long before my first card was printed, the Social Security number was indeed used on tax forms and not just on Social Security.
During the early 80’s, judicial and legislation determined that no one could require you to supply your social security number to them (loans, credit cards, universities, whatever)–however, those institutions need not issue you their services if you don’t cough up your number. The Social Security number has morphed into most everything. In Europe, the government number is used everywhere. Anyone can require that you hand it over. In many countries, the birthdate is ingrained in the number. You have to cough it up for almost anything, including discount cards at the store.
Trying to keep it short, the Social Security number morphed from something with a real need into something used everywhere. Now, with FATCA, globally. Remember that something starts and with or without fore-planning, it morphs into mainstream.
Now, we are being offered Same Country Exemption. Safe Harbor (another Orwellian name which has a background in other areas). You have a safe harbor, if you prove to your bank (by attaching your 1040 IRS document) that you are US-tax compliant. (An individual residing in a foreign country could elect, but would not have to elect, to have an account treated as a “Same Country” Account by providing an election to the relevant FFI (such as, the individual’s bank) and attaching a copy to his or her regular Form 1040 or Form 1040NR. The FFI would then be relieved from the requirement to treat the account in question as a US account and to process and report information with respect to it.)When you do this, your bank will not FATCA report you. You will also then be allowed to not file your form 8938. It does not mention that you would still be required to file your FBAR.
Let’s begin with why this might be a benefit. If you’ve already crossed all your T’s and dotted your i’s, why would you care if you were being reported? If you are filing a paper with the statement that you are only same country, what is the difference between that and just sending in the firetrucking 8938?
Q: Does Same Country Exemption eliminate the FBAR? A: No. Q: Does it eliminate the penalties? A: No. So, now we’ve reached the point of “who cares” and Safe Harbor. But it gets worse.
If you want to take advantage of Same Country Exemption, you need to SEND YOUR PRIVATE AND PERSONAL TAX FORMS TO YOUR LOCAL BANK. Your bank will then make a determination of whether your IRS 1040 is good, bad, or needs to be whistleblown. This would be the first instance where a 1040 tax return might be reviewed by an external source. (Go back to the Social Security example).
Do you want this? But, Safe Harbor is voluntary. When you write to your Congressperson, you support that you can voluntarily submit your private and personal 1040 form to an institution. When your Congressperson reads your letter, he sees that you support voluntary submittal of your personal 1040 form to an institution. He reads thousands of letters of persons who support voluntary submittals of 1040 forms to their institutions.
What does your legislator learn from this? He learns that thousands of persons support the idea of submitting their private and personal 1040 forms to their institution. People will gladly show their private information to an institution. WELL, IF SO MANY THOUSANDS OF PERSONS WOULD VOLUNTARILY SUBMIT THEIR PRIVATE TAX FORMS TO A 3RD PARTY, THEN THOSE SAME PERSONS WOULD NEVER COMPLAIN THAT THEY WOULD BE FORCED TO SHOW THEIR PRIVATE TAX INFORMATION TO A THIRD PARTY. And if they don’t they wouldn’t mind being banned from using that institution.
Do you really want your bank to judge your 1040? Why not your grocer? Why not your gardener? Why not bring your 1040 to the singles bar and paste it to your forehead? Why not send a copy of your 1040 along with your passport application (oops, it looks like that already might be required according to the transportation bill).
So, hurry up and write a letter to your Congresscritter and tell them that you support Same Country Exemption. At the same time, ask them to inform all of the bank employees to close their eyes while they strip search you in the bank lobby.
Addition:
BE CAREFUL WHAT YOU ASK FOR. And be careful about what others are asking for– remember that a few hundred people will be supporting DA/ACA/AARO/FAWCO SCE as-is. That proposal could affect you.
By all means, write the letters. Be specific about what is needed. Be specific if something is not objectionable and what is definitely objectable. Make sure that you discuss your opinion about the specific issue of giving your bank your personal tax records, in both cases of mandatory or non mandatory.
Noted: (The “Same Country” Exemption, sometimes referred to as “Safe Harbor” Rule, is the product of collaborative work among several groups representing Americans abroad. A detailed description was prepared by ACA and draws upon ideas and work of the other groups – which ACA greatly acknowledges. ACA is solely responsible for its content. This paper (attached) was drafted by Charles M. Bruce, Legal Counsel, ACA….)
@badger,
Thanks for reigning me back in. I hear you.
And I know I am starting to sound like a broken record. Just afraid that we (Canadians living in Canada with US curse) are more and more being viewed as Americans living in Canada by our fellow Canadians – neighbours, politicians, and judges alike. The more talk that goes on here at IBS and other groups about all the injustices against ‘Americans Abroad’ (legitimate and justified, I know), the more nervous I get that Canadians seem to have disappeared into the woodwork to be replaced by ‘Americans Abroad’ for which no one has much sympathy.
I still remember being told ‘Yankee go home’ at the Ottawa protest before this lawsuit was even a thought. And now, as the summary trial looms ever closer, and the Canadian FATCA lawsuit becomes more ‘out there’ in terms of media attention, I think it is really important for us to stress that we are indeed CANADIANS fullstop with no qualifications.
Badger you said, “WE are NOT “AMERICANS ABROAD”. We are residents and we are citizens of a non-us country”
I am saying the same thing. No? That is my point – i.e. that we are Canadians living in Canada, not ‘Americans Abroad’
And when I say “a different fight”, I am (at least partly) referring to the Canadian lawsuit as opposed to the Bopp lawsuit or CBT lawsuit. They are different fights. But I agree with you in that I don’t see the “different fights” (my words) as being mutually exclusive with “complementary” or “aggregate” (your words).
Re: Dems Abroad: Nice one: https://twitter.com/stejacobi/status/625985324200652801
THANK YOU! I needed to be educated on Same Country Exemption. So do lot of other people. I too thought, like Victoria, that all your local bank would need would be one or two proofs of I.D. that proves residency, like a driver’s license. Then the local bank would cross your name off their FATCA list.
What you’re telling us is this that Same Country Exemption only subtracts one form from FATCA requirements. Therefore, its name is misleading. Why bother to have Congress enact it?
1. It still requires global banks to spend money on compliance and look to another way out of using US currency.
2. It still forces everyone with a US taint to pay compliance vulture fees every year to deal with FBARs and other forms.
3. It still forces people to file with FinCEN and get hit with exorbitant penalties.
In short, It’s sneakily designed to reel unsuspecting people in who think they’re getting off the hook, but instead, getting tagged and bagged for life. Whoever thought this up is a devious slime-ball. The name “Same Country Exemption” is a joke. IT DOESN’T DO WHAT IT SOUNDS LIKE IT WILL DO!
The rules of engagement need to be made simple for FFIs. For example, a resident Canadian citizen is not subject to FATCA reporting full stop. If you muddy the waters with ‘Same Country Exemptions,’ or ‘Safe Harbours,’ or any other non-sense, the banks will screw up and get it wrong.
The other problem is the banks don’t get penalised if they screw up as well. If they send your data in error to the IRS, it’s a case of tough luck. That needs to change as well.
Someone better than me can provide links…maybe Victoria…..
Many many moons ago……Same Country Exception did NOT involve showing US Tax Forms 1040.
Originally SCE was that if you were resident in Country X then FI in Country X did not need to be concerned about your place of birth or citizenship. The assumption was that you were paying tax in Country X and there would be no crumbs leftover for USA..USA..USA..
I can not recall in the evolution of SCE that showing Forms 1040 came into play.
Hey all…….can I interject some sanity to this debate? Maybe some in the know can pull the right strings with DA and even RO.
Our big problem is with 31 U.S.C. § 5314 which is FBAR and it dates back to President Nixon.
Here is the text;
_____
(a) Considering the need to avoid impeding or controlling the export or import of monetary instruments and the need to avoid burdening unreasonably a person making a transaction with a foreign financial agency, the Secretary of the Treasury shall require a resident or citizen of the United States or a person in, and doing business in, the United States, to keep records, file reports, or keep records and file reports, when the resident, citizen, or person makes a transaction or maintains a relation for any person with a foreign financial agency. The records and reports shall contain the following information in the way and to the extent the Secretary prescribes:
(1) the identity and address of participants in a transaction or relationship.
(2) the legal capacity in which a participant is acting.
(3) the identity of real parties in interest.
(4) a description of the transaction.
(b) The Secretary may prescribe—
(1) a reasonable classification of persons subject to or exempt from a requirement under this section or a regulation under this section;
(2) a foreign country to which a requirement or a regulation under this section applies if the Secretary decides applying the requirement or regulation to all foreign countries is unnecessary or undesirable;
(3) the magnitude of transactions subject to a requirement or a regulation under this section;
(4) the kind of transaction subject to or exempt from a requirement or a regulation under this section; and
(5) other matters the Secretary considers necessary to carry out this section or a regulation under this section.
(c) A person shall be required to disclose a record required to be kept under this section or under a regulation under this section only as required by law.
______
Notice the powers of the Secretary?
The Secretary on his own can exempt countries and accounts in said countries from FBAR reporting!!!!
The Secretary can determine what account size needs to be reported!!!
None of this needs to go through Congress.
The Secretary could exempt Canada……see section B-2
Link;
https://www.law.cornell.edu/uscode/text/31/5314
continued
Is it “desireable” for the US Treasury to get reports on Canadian Residents in Canada?
The law is the law and he can remove Canada toot sweet………
@George,
From the horse’s mouth: https://www.democratsabroad.org/sites/default/files/Democrats%20Abroad%20FATCA%20Position%20Paper.pdf
So it’s not the complete 1040, just this “Form 8939” that would be given to FFIs.
Don’t know if this is the latest version, though. Even the name of this proposal has changed since this position paper came out (Feb. 2015).
And they themselves admit this is just an idea, that the final rules would be decided by the IRS, so who knows what form it would actually take if implemented.
Thinking about it, I can’t imagine the IRS would implement DA’s proposal as written. What would prevent someone from filling out an 8939 and showing it to their bank, and then never filing anything with the IRS? From the IRS’s point of view, this would create a huge loophole that would effectively gut FATCA entirely.
This proposal seems either disingenuous or unrealistic. Even if implemented, what we would actually get would NOT be what DA is proposing.
Wow, looking at their April submission to the Senate Finance Committee, they provide even less detail about how this would work:
http://www.finance.senate.gov/legislation/download/?id=27fc8c6b-d1da-4437-a0d5-a01a2a8edf22
They say:
They don’t even explain what Form 8939 is supposed to be!
This level of sloppiness and vagueness hardly the hallmark of an organization that deeply cares about finding solutions for its constituents. It gives the impression that they just felt the need to throw something, anything out there that looks different from what RO are doing. All their passionate denunciations of RO’s strategy as being too slow to effect real change now fall flat when they haven’t even told us what they heck they are actually proposing.
Deja vu!
Time to Surgite! Comments Open! WSJ No less!
Fatca Relief Coming for U.S. Expats Via ‘Same Country Exception’? – Opinion
http://blogs.wsj.com/expat/2015/07/28/fatca-relief-coming-for-u-s-expats-via-same-country-exception-opinion/
It’s good that the WSJ article is accepting comments. Brockers please speak up.
Suggestion
It could still be YEARS to convince our leaders
In the interim if the US could with the stroke of a pen quickly implement their 2006 Tax Treaty model that may help many.
In Australia’s case our MANDATED pensions that are taxed on the way in and tax free upon withdrawal I believe would be ONLY taxed in Aussie thus NO tax to the US on withdrawals
They have not rectified this for TWENTY THREE years which I pointed out to him in a reply to his email ( talking to tax treaty people here I get the impression the USA is not keen on addressing)
Kim.Beazley@dfat.gov.au
Thanks for raising this issue with me.
As flagged in my earlier email, I have made some enquiries within the Australian Government and can confirm that we are aware of the problem you outline (which stems from a mismatch between the Australian and US taxation treatment of Australian individuals’ superannuation entitlements). You are also correct that a solution will require renegotiation of the Australia/US tax treaty to specifically address the problem (by inserting provisions similar to those in more recent tax treaties that the US has with some other countries).
In July last year the Australian Treasury invited public submissions on the countries with which Australia should seek to negotiate new or updated tax treaties, as well as the key outcomes Australia should seek in such negotiations. This issue was raised by a number of stakeholders. The Government has noted it and will seek to address it when the Australia/US tax treaty is next reviewed.
That said, tax treaties are generally not renegotiated on a single issue basis and often take considerable time to negotiate because of the need to work through all the issues of importance to both countries. In addition to the renegotiation process itself, changes to tax treaties require legislative change. This also adds time to the process and makes it subject to other legislative priorities.
Best Wishes
Kim
Newest from Democrats Abroad / 10,000 messages / at least messages getting through and getting attention / One can use this push to send their own suggested solutions
Dear Democrats Abroad Members,
We are pleased to report that after 2 days our FATCA grassroots campaign has yielded an excellent response! We asked you to message members of Congress asking them to sign the Congressional letter to the Treasury Secretary and IRS Commissioner in support of the Foreign Account Tax Compliance Act (FATCA) Same Country Safe Harbor reform.
More than 3,000 of you have participated! Nearly 10,000 messages have been sent to your Representatives and Senators asking them to sign the letter and throw their support behind this common sense reform to provide relief to Americans abroad from the burden of FATCA reporting.
Please help us send that number soaring towards 20,000 messages! We need your help URGENTLY!
The sponsors of the letter (Rep Maloney and Rep Mulvaney) anticipate “closing it off” to signatures at the end of this legislative session – that’s the end of this week! We need to demonstrate that there is growing momentum in Congressional support for this reform in order to keep the letter open to more signatures. The more signatures on the letter the louder the call coming from Congress for Treasury and the IRS to act.
If you have not yet participated, please send your message to your Senators and Representative RIGHT NOW, reminding them about the letter and asking them to sign it
That’s actually encouraging news, that they have gotten over 3,000 people to respond so far. We now know there are at least 3,000 people who may be willing to be activated for the next step.
It appears most commenters in these two places are NOT sailing unwittingly into the DA’s “Safe Harbor”. For all who are reading here and commented there — THANK YOU!
http://blogs.wsj.com/expat/2015/07/28/fatca-relief-coming-for-u-s-expats-via-same-country-exception-opinion/tab/comments/
https://www.facebook.com/DemsAbroad/posts/10155785168985005
DA asked– I am somehow still on their email list. I declined. My response to Carmelan at DA:
Dear Carmelan,
I am a Boston born medical doctor. I have lived in Canada since 1993 and am a practicing Emergency Physician in British Columbia. I became a Canadian citizen in 2001.
I do not support so-called “Safe Harbour” or “Same Country Exemption.”
I would, however, like to see the Democratic Party propose a repeal of Citizenship Based Taxation, a policy rooted in Civil War America which is toxic to Americans living abroad. I believe the U.S. should switch to the global norm of Residence Based Taxation.
As a result of FATCA combined with CBT, thousands of U.S. expats have been forced to renounce their U.S. citizenship. Several of these are my friends and colleagues here in the Interior of British Columbia.
I am hoping the Democratic Party will take the lead on this policy issue which is so detrimental to the 8+ million U.S. citizens living abroad and propose an immediate repeal to CBT.
Thank you.
BC Doc
Jonathan Lachowitz earns his income filing 1040’s for USPs in CH. It is in his interest to NOT abolish CBT. Otherwise he’d be out of a job. He’s proposing SCE merely to maintain the status quo for himself.
http://www.white-lighthouse.com/ch-people
From his submission
“Adopting a Residency based taxation system would help to level the playing field for Americans
overseas.”
And again
” RBT would help to level the playing field for overseas Americans and if well designed should be close to revenue neutral and reduce significantly the administrative costs of the IRS”
I have talked to him on the phone and he has volunteered to assist Shadow Raider in his meeting with the Senate Committee tax people. I for one feel we are lucky to have someone with his experience in my foxhole.
Also in conversation Shadow Raider says he is going alone. Is there anyone near Washington DC to assist . At the moment it will be three (professionals) to one true patriot
Thank you Jonathan Lachowitz and Shadow Raider, and Jak Dac for putting them together.
Noted: (The “Same Country” Exemption, sometimes referred to as “Safe Harbor” Rule, is the product of collaborative work among several groups representing Americans abroad. A detailed description was prepared by ACA and draws upon ideas and work of the other groups – which ACA greatly acknowledges. ACA is solely responsible for its content. This paper (attached) was drafted by Charles M. Bruce, Legal Counsel, ACA….)
https://www.americansabroad.org/issues/fatca/same-country-exemption-fatca-reporting/
This morning there was a comment on the WSJ site that said there was a post at IB, would just like to set the record straight…
· 3:38 am July 30, 2015
· Anonymous wrote:
From post on The Isaac Brock Society
Jonathan Lachowitz earns his income filing 1040′s for USPs in CH. It is in his interest to NOT abolish CBT. Otherwise he’d be out of a job. He’s proposing SCE merely to maintain the status quo for himself.
If you want to try and set the record straight. I am a small business owner; financial planner and investment advisor working with a lot of Americans overseas. Almost none of my income comes from tax work and certainly none from tax filing. I hired someone recently who worked mostly with low income people on tax filing; she is great…but migrating away from that business….I have probably put in 3-4000 hours in the past decade working for Overseas American issues…including being a key contributor to the Americans Abroad RBT proposal….When I have spoken in Washington on the subject I normally say that I am one of the few people who really understand the issues who don’t actually earn any money from it…In addition to ACA work I spend tons of time prop bono with people who are affected by these issues…mostly students, lower income etc…
With respect to SCE…this will be a minor step…but personally I have no plans to stop fighting for RBT and other improvements for Overseas Americans….My views and tactics on some things may differ with respect to various groups. ….but the goals are largely the same. SCE is a totally different issue to RBT…I am happy IB is there doing what they are; far too many people complain loudly and naively about the issues…far too few actually try to make changes…keep up the fight!
There are lots of uninformed comments out there…especially people who half understand what they are reading…not sure where this contributor came to such a conclusion about my work; maybe he or she should read my recent submission to the Senate and other writings….no vested interest for me personally, for my clients and friends overseas as the whole OA community in CBT….good riddance if possible…Also; I don’t get paid by the WSJ, I do this for fun…though it is a great platform to raise the profile of issues affecting overseas Americans…and it gets noticed in D.C.
Best Wishes,
Jonathan