cross-posted from citizenshipsolutions
The FBAR Chronicles continue …
First, A Public Service Announcement – Mr. FBAR Get’s A New Filing Due Date
Latest #FBAR filing date is now Oct. 15. Applies even if the 1040 is filed after October 15. https://t.co/3eq1jIICvm
— Citizenship Lawyer (@ExpatriationLaw) March 16, 2017
This is one more of my posts about Mr. FBAR. Mr. FBAR is a mean, nasty vicious thug who has no place in any civilized society.
Thomas Jefferson once said:
Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.
My thoughts are that:
Were it left to me to decide whether we should have FBAR without outlaws, or outlaws without FBAR, I should not hesitate a moment to prefer the latter.
Unfortunately, Mr. FBAR has become the new symbol of American citizenship. Furthermore, Mr. FBAR disproportionately affects the local bank accounts of Americans abroad – becoming (in effect) a form of “domestic terrorism” against U.S. citizens living outside the United States.
Mr. FBAR As Applied To The Canada U.S. Dual Citizen …
As reported by CBC news, Global News in Canada, The Isaac Brock Society and various Facebook groups. a U.S. Canada dual citizen (Jeffrey P. Pomerantz – the Defendant) has been sued in Washington State, by the U.S. Department Justice, to collect FBAR penalties for the years 2007, 2008, and 2009. It appears that at the present time, the Defendant lives in Vancouver, Canada.
The actual “Complaint” filed in the Court which summarizes and explains the Government’s allegations is found here. (If you have read this far, you should pause and read the Complaint.)
The facts are horrendous. Basically the Defendant was assessed significant FBAR penalties which increased through interest charges to the point where they had grown to approximately $800,000 U.S. dollars (approximately 1,100,000 million Canadian dollars) by the time the law suit was commenced in 2016. FBAR penalties are frightening, draconian and are really a form of Civll Forfeiture. One comment, as reported on the Isaac Brock Society put it:
On a practical note, there is one commenter in particular, Kathy “Powell”, who could use upticks on the CBC article for her efforts to set things straight … if anyone here has CBC commenting privileges. (I gave mine up when “real names” were required.)
As for Jeffrey Pomerantz who is truly living “a friggin’ nightmare”, there’s just too little information to create a clear picture of his situation. I won’t judge him as others at CBC are doing. I’m just shaking my head at how those without a clue keep tossing in misinfoturds to muddy the waters even more. What is crystal clear to me is that the villain in this scene is the IRS/DOJ and even if Jeffrey Pomerantz is guilty of something he doesn’t deserve to be completely impoverished for it.
The complaint filed by the Department of Justice is here and should be read by all bloggers and other commenters. At first blush one gets the impression that this case is primarily about the IRS assessing an FBAR penalty on a Canadian citizen resident in Canada and that the penalty was based on unreported Canadian bank accounts. This interpretation reinforces the fear (real and legitimate) that the IRS might attempt to attempt to confiscate the wealth of Canadian citizens resident in Canada through civil forfeiture FBAR penalties. I do NOT believe that this is a fair reading of the Department of Justice Compliant. (The situation is bad enough without expanding it’s reach. There is no need to accelerate the “fear mongering”.)
This case is more like a Homelander with unreported bank accounts in Switzerland …
Here is why.
Please note that this story is based on FBAR violations for the tax years of 2007, 2008 and 2009. Based on the Department of Justice complaint, we see the exploration of the following factual allegations.
Factual allegations:
A. Was The Defendant a U.S. Resident Or A Canadian Resident During The Years In Question?
Although it is unclear, it appears likely that the Defendant was a both a U.S. citizen and a U.S. resident during all or some of the years of 2007, 2008 and 2009. The CBC article includes:
While the Justice Department’s complaint says Pomerantz lived in the United States during all three years, documents prepared by Pomerantz’s side found in the court file say he and his wife, a Canadian-Norwegian dual citizen, only lived in California for part of 2008 and 2009 before moving back to Canada.
Assuming that he was a U.S. citizen residing in the United States, his case (presumably) would have been viewed as that of a Homelander with offshore accounts.
B. Where Were The Offshore Accounts That Were The Basis For The FBAR Penalties?
RBC (Royal Bank Of Canada Accounts):
The Department of Justice complaint (paragraphs 12 and 13) describes the existence of RBC accounts which were opened “prior to or during 2007”. A reading of the brief suggests that the RBC accounts were NOT counted towards the FBAR penalties. The RBC accounts were in the name of a Vancouver, Canada based company. Although not conclusive, this suggests the the Department of Justice did NOT target those specific RBC accounts located in Canada.
Swiss Bank Accounts In The Name Of A Turks And Caicos Corporation
The Department of Justice pleading (paragraphs 8 to 10) allege the Defendant opened:
- five swiss bank accounts in the name of a Turks and Caicos Island Corporation;
- that the Turks and Caicos Corporation performed no active business but was opened for the sole purpose of holding the Defendant’s investments (paragraph 7); and
- that the income from the accounts was NOT reported on the 2007 – 2009 tax returns (paragraphs 22, 36 and 44).
In other words, the FBAR penalties should be seen as penalties imposed on Swiss bank accounts (sounds horrible) which were located outside the Defendant’s country of residence (in a tax haven).
The Two CIBC “PERSONAL CHECKING” Accounts Opened Prior To 2001
Paragraph 5 of the Government’s Complaint describes two CIBC accounts that:
- were opened prior to 2001
- remained open during the years of 2007, 2008 and 2009
- were not reported on an FBAR.
(Because they were “checking accounts” it is unlikely that they generated taxable income.)
Although we can (I think) assume that these accounts were located in Canada, the compliant does not specifically state this.
Nevertheless, my impression is that:
- although the CIBC accounts were included in the group of accounts that were part of the FBAR penalty base (see paragraphs 17, 31 and 41);
- the FBAR penalties were motivated by the Swiss bank accounts opened for the benefit of the Turks and Caicos Corporation.
To summarize …
Nobody deserves the treatment that this defendant was subjected to. It is however, wrong to interpret this case as the IRS attempting to impose FBAR penalties on the Canadian bank accounts of Canadian residents. There is enough FBAR hysteria already! This case should be seen as the IRS attempting to impose an FBAR penalty based on the unreported offshore Swiss accounts that were for the use of an offshore (Turks and Caicos) corporation used to hold personal investment assets.
Although FBAR penalties are (in general) unconscionable, unfair, draconian and a form of civil forfeiture):
this case should NOT be interpreted that the IRS attempting to impose FBAR penalties on the Canadian bank accounts of Canadian residents.
This post has been based largely on the Department of Justice complaint as filed in the Court.
Pomerantz tells Global that he moved the money from account to account. The FBAR fines were for the following years:
2007=400K
2008=$225k
2009=$150k
We are probably looking at money that was moved at least once in 2007, as Pomerantz suggested in the Global article to Patrick Cain:
The total of 500K in the accounts makes sense with the 50% maximum willful fine per year. The fine is likely much larger than the money that he’s ever had.
This guy is a minnow. That is what I said in the last post. He has probably spent the money already. And he is not only victim of FBAR injustice, he has also been a victim of FBAR aggregate accounting fraud perpetrated by the USA government against him.
Thank you @ Patricia Moon for posting John Richardson’s very measured and reasonable interpretation of Jeffrey Pomerantz’s IRS/DOJ problem. It’s the best assessment possible, I believe, of a situation of which we simply do not have all the details … and you know what? I don’t want to know all the details. This man’s financial privacy has been breached and broadcast quite too much already. John is so right to equate FBAR penalties with civil forfeiture, both are indicative of how seedy the whole system has become.
Yes, and the point of my previous post is that the Canadian government is not providing equal protection to the people whose account information has been given to the IRS. Even though the accounts may not be in Canada and even though the US government did not glean the information from FATCA disclosures, Pomerantz’s case remains proof positive of the jeopardy that Canadian citizens will face, once the US Justice Department correlates the data of 300,000 accounts with unfiled FBARs.
As I’ve posted elsewhere (http://fixthetaxtreaty.org/2017/02/24/foi-take-2/), we are having difficulty getting the Australian Tax Office to recognise that accountholders should be notified when their data is sent to the IRS. Against that backdrop, I was encouraged last week to hear this short interview with The Australian Inspector-General of Taxation in which he acknowledges that taxpayers should have a right to this information. (https://www.facebook.com/TaxAnalysts.org/videos/1305062082893135/). Clearly, we still have a way to go before notification is automatic, but I am hopeful that we will get there eventually.
The Media was meant to be a check on power and to favor no one over another–Just the facts without slanting the news one way or another. Our U.S. Media has become an advocate for a point of view. We are by survey a center right country, but the Media is a far left organization. If they remain so slanted I expect an alternative on the right will arise and that is as bad as having a left leaning Media…God help us….
…”an alternative on the right will arise and that is as bad as having a left leaning Media”…
Oh please sir, with respect, you are being far too dramatic. I welcome a so-called right wing alternative. Isn’t truth the only antidote for lies and government tyranny in various forms?
At least so in the US, it was ubiquitous progressive left wing press that got Obama – a first rate, far-left seditious quack – elected. It was the media that propped him up for eight horrid years of mendacity, high crimes and misdemeanors. It was the left wing media that yawned when he signed FATCA and all it’s diabolical bureaucratic derivatives (FBAR etc.)
It has been the mainstream left-wing press worldwide that has refused to even toy with the idea that perhaps it is time to expose the scandalous bullying of the US Treasury department; or IGA coercion.
At least in Switzerland, not one drop of ink was spilled in bringing FATCA to light.
And just which right wing alternative do you fear? Whether you realize it or not, this very website is one that many here see as “right wing” if that term is associated with exposing everything wrong with an abusive government tax policy.
Frankly sir, if you see one side as no damn better than the other in this case then I feel sorry for you. You’ve lost all ability to see who’s newspaper/website is on your side.
I write this without intention of giving offense.
Is there any judge in the world who sees that such fines for moving an account is obscene?
It would appear Mr. Pomerantz does have tax issues though they are not involved in the case mentioned in yesterday’s news articles. I was reading the Title 31 sections mentioned in the court document and interestingly enough, Title 31 does not provide for the collection options available in Title 26. Not at computer but if memory serves, for an unpaid debt to Treasury for longer than 180 days, bringing suit is standard. Another section discussed late filing penalties and interest so the remarks that the $1.1 million applied to FBAR only, appear to be correct. Will get sections etc tomorrow. Time to sleep.
United States v. Jeffrey P. Pomerantz (W.D. Wash.) – On May 13, 2016, we (DOJ) filed a complaint against Jeffrey P. Pomerantz seeking to reduce to judgment penalties for willful failure to file Reports of Foreign Bank and Financial Accounts (FBARs) for 2007, 2008 and 2009. The penalties amount to over $800,000. Pomerantz is a U.S. citizen residing in Vancouver, British Columbia. In 2003, Pomerantz formed a shell entity in the Turks and Caicos to manage his investments. The Turks and Caicos entity opened several Swiss bank accounts with Sal Oppenheim Bank, over which Pomerantz retained signatory authority. However, at the time the IRS initiated an exam of his tax returns in January 2010, he had not filed any FBARs for 2007, 2008 or 2009. During the course of the exam, he filed FBARs. Pomerantz has a pending case in the U.S. Tax Court contesting tax deficiencies and fraud penalties asserted for 2007, 2008, and 2009. The deficiencies and fraud penalties asserted by the IRS against Pomerantz and his wife arise in part from income deposited into, and income generated by, the late-reported and unreported foreign accounts – See more at: http://www.patellawoffices.com/blog/protecting-your-assets/2016-us-dept-of-justice-doj-tax-division-fbar-penalty-collection-cases/#sthash.KWou7iZ8.dpuf
@Patricia Moon, Clearly Mr. Pomerantz has been skewered by his own petard: his own admission of having accounts. I had something like this in 2010: (1) I could not go into the OVDP because I was not going to give the USA government 25% of my wealth–that seemed crazy and draconian; (2) I couldn’t file an FBAR and give them the information they needed to skewer me, because if the IRS was fining people in the OVDP 25% how much more would they throw the whole 50% at me.
Well it appears that Pomerantz could have possibly benefited from Petros Principles (What the IRS can’t know unless you tell them can’t hurt you). But unfortunately for his sake, back in 2010, they didn’t yet exist.
@Petros
one small thing re:
2007=400K
2008=$225k
2009=$250k
That should be $150,000 not $250,000
Not at all on the side of the IRS, DOJ etc. But it is important to be as accurate as possible-the best way to show how awful they really are
Petros, I now feel SO lucky that my awareness fell inbetween OVDI (2011 & 2012) There was no way in hell I was going to pay 25% of our assets to the IRS. I was lucky I could renounce and that we had done some “stupid” things-not putting my name on the business, not having purchased mutual funds, not having a spousal RRSP….plus the utter irony, the only money that was mine, was my inheritance from my parents which was transferred up because I could not open an account in the US. Money coming directly from the US (part of which had been taxed) that was not taxable to me! GGGGGRRRRRR
Just received some interesting links that we might should look into-I am NOT saying they amount to anything one way or the other. We need to research this.
https://docs.google.com/file/d/0B0SLTNWD-Z3YdFR2M183TVBlak0/edit
Assessment and Collections of the FBAR Penalty April 2013
written by the “leading expert” at that time, Caroline D. Cirallo, now the Acting Assistant AG and name included on top of complaint
from the outline appear to be US oriented-don’t initially see anything suggesting applicable outside US
http://federaltaxcrimes.blogspot.ca/2013/04/fbar-penalty-collection-beyond.html
commentary involving the above link-a bit easier to read (only on excerpts)
A repeat reminder to all;
Please go to the Internet Archive -Wayback Machine and start saving ALL webpages where valuable material is found. Many of our original sources are no longer available readily online.
https://archive.org/web/
Paste the URL into;
‘Save Page Now’ box
“Capture a web page as it appears now for use as a trusted citation in the future.
Only available for sites that allow crawlers.”
Also might be something useful here;
The Continuing Evolution
of FBAR Enforcement
By Steven Toscher and Michel R. Stein
http://www.taxlitigator.com/wp-content/uploads/2016/06/Evolution.pdf
Other interesting stuff by same author/s or at same site;
http://www.taxlitigator.com/publications/
or ex.
http://ogdenpage.com/pdf/1Fbar_Enforcement.pdf
Maybe more to glean from SKL’s report here:
US Government sues Canadian resident US citizen for 860K in penalties
http://www.skltax.com/us-government-sues-canadian-resident-us-citizen-for-860k-in-penalties/
You’re in Canada, Max – it’s spelled “chequing”.
@Bubblebustin — a lot of scaremongering in that article. It fails to mention that Pomerantz lived in the US for at least part of the time the penalties relate to – and that the accounts were not only in Canada. I don’t think this case means that normal Canadians (or Australians) with normal (local) bank accounts are at risk.
As noted, it does appear that these FBAR penalties are related to unreported Swiss & CIBC accounts at the time of his 2007-09 (intermittent or continuous) residence in the US.
What I find curious is the wording “…resided within the United States, OR WAS OTHERWISE SUBJECT TO THE JURISDICTION OF THE UNITED STATES WITHIN THE MEANING OF 31 C.F.R. 103.24”
31 C.F.R. 103.24 appears to refer to “Reports of Foreign Financial Accounts” but what exactly do they mean by “or was otherwise subject to the jurisdiction of the US” – that he may have resided out of the country for part of the year but that the US still claimed jurisdiction? due to being a US citizen?
and/or due to being a US resident for at least part of the year?
Is someone able to interpret this?
@Badger – thanks for the link to the papers by Toscher & Stein – they are very useful.
Posted on Facebook, on American Expatriates
Sora Fon IRS collection of tax debts from foreign locations is uncommon but certainly possible in many cases. Look first at the IRM itself https://www.irs.gov/irm/part5/irm_05-021-003.html If the IRS knows of the location of funds abroad (in a FFI) it may be able to levy against US assets in a US branch of subsidiary or in a correspondent bank. I can’t comment specifically on QI issues as they don’t relate to anything we do.
Internal Revenue Manual – 5.21.3 Collection Tools for International Cases
(4) IRM 5.21.3.2(5) and (6) updated to include additional guidance on required approvals on levy of a domestic branch of financial institution.
irs.gov
On levying the domestic branch of foreign bank consider: http://uniset.ca/other/cs6/68OR2d379.html
This is the one court case that we know of where the IRS tried to use the method of levying the US branch of Canadian bank to collect a tax debt. The court ruled against the bank and told TD to return the client’s money.
The Canadian court sympathized with the bank but said this is a part of sovereign risk of doing business in other countries. It was not the job of the Canadian court to protect the bank from risks associated with doing business in the USA.
“One must sympathize with the position of the bank but that position is the result of its election to carry on business in more than one country and that cannot influence the application of Canadian law.”
We have no examples of the US Feds trying to use QI to collect a debt, it is normally an agreement to streamline the US withholdings from stock dividends and the like.
@Karen,
Perhaps you might also be interested in these, FWIW;
CANADIAN TAX jOURNAL / REVUE FISCALE CANADIENNE (2012) 60:2, 305 – 54
305
F’ATCA and FBAR Reporting by Individuals:
Enforcement Considerations from a
Canadian Perspective’
Andrew Bonham
https://www.ctf.ca/ctfweb/Custom/CMDownload.aspx?ContentKey=7ae51268-fbf4-4abf-a07a-41c7be3af7f6&ContentItemKey=c3e8c6ab-f4f9-45b3-8d34-c8dde8c018a2
2006 HOUSTON BUSINESS AND TAX JOURNAL
‘EVOLUTION OF THE FBAR: WHERE WE WERE, WHERE WE ARE, AND WHY IT MATTERS’
By Hale E. Sheppard
http://www.hbtlj.org/v07p1/v07p1_sheppard.pdf
You can also check out others by the same author;
https://www.chamberlainlaw.com/attorneys-96.html
To all, the usual caveat;
As always, my posting of articles and links to authors like those above does not constitute an endorsement of their position or their professional services. I have no special knowledge of this area. Just a now enduring interest in the US extraterritorial alternative creative revenue streams cunningly conjured out of thin air via US extraterritorially imposed confiscatory penalties for ‘form-crime’ (such as those created despite no US tax owed and no direct US tax connection – by the FBAR, the 3520/A, etc.) – as imposed on those entirely outside the US – claimed as lifelong citizen-serfs in eternal extraterritorial-indentured servitude by the US – regardless of wheresoever in the big world outside the US they actually reside and generate and hold their legal local earnings and savings – and pay taxes to the non-US country in which they ACTUALLY have an economic connection (and receive ACTUAL BENEFITS).
The entire docket and all documents filed through today, 19 March 2017 can be read and downloaded at http://uniset.ca/pomerantz/pomerantz_docket.html
Or from RECAP, the PACER court record clone created by the late Adam Swartz, a brilliant computer scientist hounded to suicide by federal prosecutors despite MIT and JSTOR, the supposed “victims” of his “piracy” (rather, creativity), having forsworn prosecution: https://en.wikipedia.org/wiki/Aaron_Swartz
I mention this because it’s just another element of Federal Government vindictiveness of which FATCA is just a small part.
@andy05
Who would doubt Adam Swartz was hounded to suicide yet when the story of Jonathan Prince comes up, so many (expats included) are so quick to avoid the reality of that and claim it must have been due to mental instability etc………The American govt could use someone like Adam right now..
In both cases, I was so horrified to see that such brilliant lights were shut out by our “exceptionalist” government, always on the side of what’s right and good……….
Inspiring………