Persistence pays off!
Suzanne Herman, a long-time Brocker, never gives up & look at the result!
We need more of this kind of thing!
BRAVO!!!
See the original here
September 29, 2017
The Honorable Steven Mnuchin
Secretary of the U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW Washington, DC 20220
Dear Secretary Mnuchin,
I am writing to you regarding the Foreign Account Tax Compliance Act (FATCA) [26. U.S.C. § 1471-1474; 26 U.S.C. § 6038D]. As discussed below, FATCA is an invasive, costly failure that I strongly suggest must be repealed at the soonest possible opportunity, hopefully in the context of tax reform enacted this year. In addition, the means adopted during the tenures of your predecessors Jack Lew and Timothy Geithner to implement FATCA via a series of legally dubious and constitutionally infirm non-treaty agreements with other countries must not be allowed to stand. I ask your assistance in assuring that FATCA repeal is part of any relevant legislation, and that the Treasury Department takes prompt action to cease the implementation of FATCA via Intergovernmental Agreements (IGAs).
FATCA’s proponents claim that it is simply a “transparency” measure – similar to a domestic 1099 – to ensure greater tax compliance for assets held offshore. This characterization is misplaced. Domestic tax law requires reporting of taxable events, such as income (a W-2 Wage and Tax Statement) or bank interest (a 1 099-INT). U.S. law, based on a presumption of innocence, does not generally require inquiry into asset principle unless there is reason to suspect wrong-doing. By contrast, FATCA requires wholesale reporting of Americans’ assets and transaction history absent any such suspicion, solely because the asset is held outside the United States. This is despite the fact that the IRS’s own Taxpayer Advocate Service reports that “the vast majority” of Americans residing abroad “actually appear to be substantially more compliant than a comparable portion of the overall U.S. taxpayer population.”
Despite such an invasion of privacy, FATCA has failed in its stated purpose of recovering revenue lost to offshore tax evasion. Last year the Internal Revenue Service (IRS) credited FATCA for “collecting” $10 billion from “taxpayers coming back into compliance, ,2 but that figure conflates genuine tax revenues with penalties for filing deficiencies and recoveries from all offshore enforcement programs, not just FATCA. In the estimate of Professor William H. Byrnes of Texas A&M University School of Law, the real net tax recovery of FATCA alone is about $200 million annually and may be only half of that. Professor Byrnes projects that FATCA may “soon cost more money than it brings in.”‘ Indeed, his view may actually be overly optimistic in light of the IRS’s commendable enforcement standard of recovering seven dollars for every dollar spent.4
By contrast, because of the IRS’s need to try to discern indicators of evasion within a sea of indiscriminate personal information belonging to non-evaders, W. Gavin Ekins of the nonpartisan Tax Foundation suggests that, under FATCA, finding “a dollar of tax evasion may cost us $5 of actually sifting through the data and compliance costs.”5 FATCA’s unsatisfactory ratio of return must also be weighed against the impact on taxpayers saddled with burdensome reporting paperwork. The Tax Foundation estimated in 2016 that these requirements cost individuals nearly four and half million hours and more than $165 million,6 an amount comparable to FATCA’s likely proceeds. This does not even take into count the massive compliance costs imposed 011 financial institutions.
The above summarizes the good and sufficient reasons why FATCA must be repealed and enforcement dollars spent on more effective programs to detect and punish actual tax evasion. While your support for that effort will be appreciated, it is a task primarily of Congress. But I now turn to a matter almost entirely within your purview, on which I ask your prompt and decisive action. This relates to IGAs invented by the Department in consultation with five European governments for the purpose of enforcing FATCA.
While the IGAs read like treaties and have the effect of treaties in purporting to create mutual obligations between sovereign states they are not submitted to the United States Senate for that body’s advice and consent to their ratification, though the non-U.S. “partner” country is required to do so under its necessary internal procedures for entry into force. In July 2013, I wrote7 to Secretary Lew with a specific request for the statutory authority for the IGAs. The Department responded, after a delay of nearly a year, with the following statutory justification: 8
“The United States relies, among other things, on the following authorities to enter into and implement the IGAs: 22 USC Section 2656; Internal Revenue Code Sections 1471, 1474(f), 6011, and 6103(k)(4) and Subtitle F, Chapter 61, Subchapter A, Part III, Subpart B (Information Concerning Transactions with Other Persons).”
None of the sections cited above confers on the Treasury Department any authority for making agreements with foreign governments for the furnishing of private financial information. In particular, there is nothing in the cited sections that allows the Department to promise (under the so-called “Model 1” IGA) on behalf of the United States FATCA-“equivalent” reporting to foreign tax services of private information obtained from domestic American financial institutions. Following through with this unauthorized promise would impose on American banks, credit unions, insurance companies, and other institutions crushing compliance costs of the magnitude already suffered by foreign institutions – costs that would inevitably be passed on to American consumers.
The IGAs represent a prime example of the kind of executive overreach that unfortunately typified the previous administration. I ask you to rein in this abuse by ceasing the negotiation of new IGAs and freezing the implementation of existing ones. This action should include a freeze on enforcement of FATCA regulations on taxpayers and financial institutions. Further, I ask that you notify IGA jurisdictions that these dubious pseudo-treaties are under legal review and that their nullification or abrogation from the U.S. side can be expected pending FATCA’s anticipated repeal.
Nothing in the foregoing should be construed in any way as being “soft” on tax evasion. Quite to the contrary, in addition to its other flaws FATCA is a distraction and a diversion of resources from effective tax enforcement based on standard investigatory techniques. As a member of the Financial Services Committee I look forward to working with the Department on measures to ensure effective tax enforcement that targets the guilty, without penalizing the innocent or
compromising our cherished American constitutional and legal norms. In the meantime, FATCA and the IGAs must go.
Thank you for your assistance on this critical matter.
1 Taxpayer Advocate Service, 2016 Annual Report to Congress, Vol. 1; “FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA): The IRS’s Approach to International Tax Administration Unnecessarily Burdens Impacted Parties, Wastes Resources, and Fails to Protect Taxpayer Rights,” page 221; See:https://taxpayeradvocate.irs.gov/Media/Default/Documents/2016-ARC/ARC16 Volumel MSP 16 FATCA.pdf
2 IRS press release, “Offshore Voluntary Compliance Efforts Top $10 Billion; More Than 100,000 Taxpayers Come Back into Compliance,” Oct. 21, 2016; See: https://www.irs.gov/newsroom/offshore-voluntarv-comphance-efforts-top-10-billion-more-than-100000-taxpayers-come-back-into-compliance
3 “Background and Current Status of FATCA” Texas A&M University School of Law Legal Studies Research Paper No. 17-31, pages 1-34, 35; See: https://paers.ssrn.com/soI3/papers.cfm?abstract id=2926 119
4 IRS press release, “National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Tax Reform, IRS Funding and Identity Theft,” Jan. 9, 2013; See: https://www.irs.gov/newsroom/national-taxpayer-aclvocate-delivers-2012-annual-report-to-congress
5 “Why Americans are giving up citizenship in record numbers,” Washington Post, June 1; 2016: See:
6 Tax Foundation, “The Compliance Costs of IRS Regulations,” June 15, 2016; See: https://taxfoundation.org/compliance-costs-irs-regulations/
7 See: http://www.repealfatca.com/downloads/Posev letter to Sec. Lew July 1, 2013.pdf
8 See: http://federaltaxcrimes.blogspot.com/2014/07/irs-letter-to-congressman-defending-its.html
For a definitive section-by-section demolition of the Department’s response, see Professor Allison Christians, McGill University Faculty of Law, “IRS claims statutory authority for FATCA agreements where no such authority exists,” http://taxpol.blogspot.com.au/2014/07/irs-claims-statutory-authority-for.html
Especially like Mr. Posey’s highlighting that…
FATCA is a distraction and a diversion of resources from effective tax enforcement based on standard investigatory techniques.
This is good. This is really, really good. Thank you, Bubblebustin, for your perseverence.
Chapeau!
H
What might work is the clear statement here that FATCA costs more than it brings in. That is the only piece of information that homeland’s might be interested in. IMHO No mention of injustice which really doesn’t interest them when so in debt.
The letter does not mention anything about CBT being repealed and not mentioned in any individual tax reform package submitted to Congress. While FATCA might be repealed or not, Congress is working now to repeal foreign earned income exclusion which affects most of us in ‘foreign lands’. We might be living on an island surrounded by ‘Big water. Yes sir/madam big water’ but we are not immune to escaping the clutches of our beloved govt who want to punish us for living away from our homeland. No banks or brokerages on island want us for simply too many threats on them by our govt. Maybe for dual Canadians/US citizens it might still be possible but for the rest of us poor folks living in other lands it is not.
“What might work is the clear statement here that FATCA costs more than it brings in. That is the only piece of information that homeland’s might be interested in. IMHO No mention of injustice which really doesn’t interest them when so in debt.”
The ONLY thing that will make a difference here is when US residents realise that this whole FATCA/CBT mess is not only costing them, it’s costing them dearly. To be honest, most would probably think a modest cost is worth it if the ingrates in other lands get punished.
This point should get the attention of this Treasury Secretary, given his past connections with Goldman Sachs.
Texas and Florida bankers were the first to sue, and lose, over FATCA. Was Posey in the Senate at that time? Could there be a different result, if the banks were to sue again under a Republican administration?
@Mike
True that. And many people in America are so ANGRY and frustrated. What better scapegoats than the expats who “jumped ship” in their eyes.
My God. Thank you Congressman Posey ! Thank you.
@plaxy
Mr. Posey is in the House of Representatives and was when the Florida/Texas banker suit took place. The issue stated by the court was misconstruing what constituted a tax. I don’t think a change in Administration would have much effect on that.
I join Calgary, EmBee, Hieronymous and Nervousinvestor in profound thanks to Congressman Posey for his letter. In this 11th hour must there be criticism of the honest efforts being made to bring our situation to the attention of those with the power to DO something? Isn’t it nice to know SOMEBODY’s listening?
Kudos to Suzanne for inspiring Congressman Posey to write!
And, of course, thanks to Patricia for posting this here and introducing the letter so enthusiastically!!!! 🙂
Patricia Moon – point taken, thanks.
Thanks to Patricia and bubblebustin’ for their long and continuing fight on our behalves.
I would like to see a copy of this letter go to every one of our vassal countries who so readily signed the IGAs with the USA, making extra-territorial US FATCA law our own.
@Bubbles…………OK everyone here has seen bits of my personality and as we all seem like neighbours living in the Old Neighbourhood……..the first four words out of my mouth when I saw this were;
Bubbles…I love ya!
Thanks everyone, and love you too George 🙂
This was done through my congressman’s legislative director, who also at my request has sent a letter to the IRS enquiring as to what the IRS is doing with the information it has received through the IGA’s. We should have a response within a few weeks.
I’ve asked, but have not received a response from him on his position on CBT.
Let’s hope Secy Mnuchin pays attention to this. I was not aware that the Treasury Dept responded to his last letter, albeit a year later.
My Liberal MP in Canada, in spite of numerous return calls and meetings has essentially done nothing more than connect me with other people with the same issues. I will be sending this letter to her, with the suggestion that rather than fight us in court, she and our government do whatever they can to encourage FATCA repeal efforts south of the border.
“Let’s hope Secy Mnuchin pays attention to this. I was not aware that the Treasury Dept responded to his last letter, albeit a year later.”
Maybe it would be worth sending a copy to the Federal Tax Crimes blogger?
“I will be sending this letter to her [Liberal MP], with the suggestion that rather than fight us in court, she and our government do whatever they can to encourage FATCA repeal efforts south of the border.” Great idea! We should all do the same in our respective jurisdictions. Thanks again, Bubblebustin!
@Bubblebustin
Thank you for these fine efforts. I have been wondering for the last two years what the IRS is doing/will do with the FATCA account data that they have received. I would also like to know the current status of the Rand Paul/Mark Meadows effort to repeal FATCA. You could encourage Mr. Posey to try to do all that he can to support them (if not done already).
Bill Posey is my Congressperson. I have written him an email of thanks and added some notes about the perversity of the interplay between US nationality law and US and foreign tax law. (I added a note — to illustrate that perversity and irony — that if my foreign-born non-Amcit special-needs grandson had been born after the Morales-Santana decision of June 12, he would have been born an American citizen and setting up a special needs trust abroad would have been virtually impossible.)
“the interplay between US nationality law and US and foreign tax law”
US citizenship is a problem and former permament residence for too long a period is a problem, but nationality is not a problem. US non-citizen nationals who go to other countries don’t ordinarily have to file US tax returns. If they have to file due to a difference between withholding from US sourced income and the amount of US tax due, they file Form 1040-NR not 1040.
@Norman: America did not know the Christian and Civil-Law concept of “nationality” at all at the beginning: only English-law “allegiance”. There are now several kinds of “nationality” — more accurately attachment — in US law, some created by statute, some by the Supreme Court, sometimes (not so much now other than the Rio Grande Treaty with Mexico) by treaty. Puerto Rican-born or -naturalized US citizens being an interesting (because potentually estate-tax-exempt) case. Noncitizen nationals (over the years in various ways, often as “protégés”): slaves, Native Americans, Filipinos, Pacific Islanders, are curiosities and anomalies.
If only the Supreme Court could ever have envisaged, postwar, US citizenship as anything but a divine gift, not potentially a burden.
What a very clearly stated and powerful letter. Thank you so very much @Bubblebustin for your sustained hard work and determination which inspired it.
Thank you, badger.
Can someone tell me why I no longer get sign up notifications when I comment on a new post?
@andy05
Thank you for writing to congressman Posey.
I’m composing another letter to Canada’s Revenue Minister which is to include the Posey letter. It’s a work in progress, but includes the following statement:
“The letter is very powerful and speaks of the very reasons why Canada should not support FATCA.”