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.
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….)
My hat is off to you, and my head bowed in appreciation. The ACA RBT proposal is a very good one, and your SFC submission is a fantastic list of the problems facing Americans abroad. So many of the issues that drive me nuts are included there, and explained in a way that any attentive reader can actually understand.
One thing that we have discussed around here is whether RBT can be presented as truly revenue neutral or not. You seem to think so; would you be willing and able to expand upon that? How would it need to be constructed to make it so?
Thank you again for all your efforts.
Can we start a concentrated effort on
That is your reasoning, Orwell. It appears uninformed.
Here is the Senate Finance Committee submission from Jonathan Lachowitz: http://www.finance.senate.gov/legislation/download/?id=2df2d34f-24ec-4986-b4ee-4b3af065a305.
Add my thanks to Mr. Lachowitz for stepping up to raise his voice to the Senate Finance Committee. His column at WSJ has garnered what *Americans Abroad* who are paying attention already know in their rejection of the Same Country Exemption.
I am finding myself way out of the loop here….guess summer chores are cutting into BrockTIme! So please forgive my ignorance. Is this the ACA RBT proposal? If yes, there are a LOT of issues that are not sitting well with me.
DA is claiming 7500 letters have been sent so far but I wonder how many of those letters wandered off the DA provided script and actually did NOT express full support for the stop-gap SCE/Safe Harbor proposal but instead urged their representative to repeal FATCA and move away from the insular CBT towards the international norm of RBT. Here’s hoping there were plenty of letter writers who read the details of the DA proposal and found it fell way short of the mark.
The Americans Abroad Caucus has only 4 Republicans including rep Mulvaney co-chair. Solomon Yue has been in contact with him as follows: https://www.facebook.com/republicansoverseas/posts/408695515980916?comment_id=409468509236950&offset=0&total_comments=7&comment_tracking=%7B%22tn%22%3A%22R5%22%7D
@Jak Dac You have effective way at getting in contact with people: Jonathan Lachowitz . Lots of surprises for us.
We certainly owe Jonathan Lachowitz thanks for publishing that article and drawing attention to the issues.
While you might share the same fox hole with JL, and as you point out (and dug out) his SFC submission was on target, however, I find issues with some of what he said on that WSJ article that would indicate that perhaps he is a double agent:
“For instance, an American who is a bona fide resident of Brazil would no longer have to report her financial accounts in Brazil on the Form 8938 (and hopefully the Report of Foreign Bank and Financial Accounts or Fbar)”
That is suggesting within the context of the article that with the SCE advocated that FBAR is under consideration to be included. While I wish it were under consideration, it is definitely not the case of the letter – not even mentioned in the letter. FBAR is an Achilles Heel weakness in the DA attack on the RO lawsuit. They call it FATCA lawsuit. It is against FBAR unreasonable fines as well. All silence from DA about the FBAR claim. To “grind them on this” it is best to rebrand the lawsuit FATCA/FBAR lawsuit, even though only 1 of 8 claims is on FBAR – that is why it is not called the FBAR/FATCA lawsuit. So is the mention of FBAR in the article in this way spin to give impression that along with SCE is consideration for FBAR SCE?
Speaking of the lawsuit, if Jonathan Lachowitz was really on our side I would imagine that he would have mentioned the lawsuit somewhere in the article. Maybe also mention the ADCS lawsuit. Or even the rising numbers of renunciations.
“How FFIs react to it would not really be known until after implementation” As mentioned in the comments, this sounds like DA speak trying to pardon the fact that no, as it was called, “due diligence” was done on SCE with FFI via asking a few and maybe asking industry experts what they thought about SCE.
Another ‘give away’: Jonathan Lachowitz in his article and comment did not use the word constitution/constitutionality. DA folk avoid this word like the plague when speaking about US persons overseas – as if trying to belittle the claims of unconstitutionality in regards to FATCA and FBAR.
I rest my case.
For us the ADCS lawsuit is worth mentioning (or at least I hope so), but Jonathan Lachowitz isn’t Canadian. Even though I’m Canadian, if I were still also American then the ADCS lawsuit wouldn’t help me or my wife because we don’t live in Canada and some of our bank accounts aren’t Canadian (but I still hope the ADCS lawsuit will win and I made three meagre donations).
The Bopp suit is a loser. The US constitution has consistently lost in US circuit courts, has reached US Supreme Court more than 5 times, and has consistently been rejected for cert. The US constitution is as useless for Mr. Lachowitz as it is for the rest of us. It doesn’t matter that the constitutional arguments are true.
So these are not giveaways.
@Norman Diamond I am more hopeful that this suit and with this lawyer there is a good chance of it all succeeding. There has even been some recent Supreme Court action in contradiction to the law but perhaps to the benefit of the people – Obamacare and state exchanges. So once to the Supreme Court they might surprise us.
Nigel Green has waded into the “Safe Harbor” debate.
As JC says
Same Country Exemption does not extend to FBAR and FBAR penalties. One might image/hope “same country exception” would exempt retirement funds, house, etc. and high levels of income exemption. Nope.
Valuable article . I Appreciate the information ! Does someone know where my company might be able to access a template 2014 IRS 4506-T form to fill in ?
For me it was the first hit:
Google tailors results according to where you are and what searches your IP address has done in the past, so it might not be the first hit for you. So here it is:
I find out for the first time today that the Same Country Exception would require filing a tax return with one’s foreign financial institution. This is an unbelievably bad idea — foreign banks know about the reward that the IRS pay to people who expose tax cheats. So they’re eager to take any information they can get, and prepare an exposé to the IRS. The trouble is, they don’t know US tax law very well, so they identify issues that are often not there, creating lots of needless hassles for the bank customer. I’ve heard some real zingers lately. Why in the world was this made to be part of the package?