Here is the Memorandum of Argument of our Plaintiffs (Gwen and Kazia) for our FATCA IGA legislation lawsuit that was submitted on October 3, 2018 to Canada’s Federal Court. [Note that text is limited to 30 pages.]
The Memorandum can be found HERE.
The gist of our argument (page 12) is that the FATCA IGA legislation is inapplicable to Provincially regulated institutions and violates Sections 7, 8, and 15 of Canada’s Charter of Rights.
Some Excerpts:
— “The Impugned Provisions trench upon the core of the provincial power over property and civil rights because they constitute the regulation of a particular industry – the financial industry – and the regulation of this particular industry is an exercise of the provinces’ core powers over property and civil rights.40″
—“…although some US Persons in Canada have obligations under US law to report their Accountholder Information to the IRS, they generally do not have an obligation to report this information to Canada.”
…“Canada admits that it does not know how many account records have been shared with the IRS which are associated with individuals who are not US Persons.49…”
—“That the Impugned Provisions authorize warrantless searches without any notice or means of judicial review of any kind is undisputed and fatal to their reasonableness.”
—“But Canada has admitted that it does not oversee – meaningfully or at all – the conduct of Canadian FIs in determining whose Accountholder Information will be reported to both Canada and the United States.”
—“…it is impossible for Canada to establish that its own use for domestic tax compliance purposes of Accountholder Information obtained pursuant to the Impugned Provisions (to which it admits63) is reasonable because Canada’s use of that information is unrelated to the objective underlying the Impugned Provisions.”
— “The plaintiffs and other reasonable hypothetical individuals have a reasonable expectation of privacy in their Accountholder Information. Canadian courts have observed that personal financial information prima facie attracts a reasonable expectation of privacy, and that individuals can reasonably expect their financial institutions to keep their information confidential.
—“Canada cannot justify the s. 8 infringement under s. 1 of the Charter because it cannot demonstrate that the Impugned Provisions minimally impair s. 8.”
—“Most importantly, the Impugned Provisions undermine the Group’s access to a basic aspect of full membership in Canadian society by denying them the protection of Canadian sovereignty by exposing them to the extraterritorial enforcement of another state’s taxation and tax compliance regime.”
NEXT STEPS:
— Canada responds to our Memorandum of Argument by November 21, 2018.
— We reply to Canada by December 7, 2018.
— Trial is held in Vancouver beginning January 28, 2019
@ Nononymous
I don’t feel that renunciation is currently necessary. I am off the IRS radar, fully non-compliant; I’m not subject to FATCA reporting because I do not disclose US citizenship when asked by banks; as a Canadian citizen living in Canada, I am protected from any US attempts to penalize me.
i like you nononymous am living by the above words……i really wonder just how many others there really are out there just like us that have gotten over their OMG moments and gotten on with their lives and how many others there are out there that have never even reached their OMG moments and have gotten on with their lives with out any additional stress because of the bully to the south?
late january can not come soon enough to head to down town vancouver with a box of popcorn to watch the spectical unfold in real time.
Minor point of clarification. When I say US birthplace is “not an issue” in Canada, I mean that in a pragmatic sense: under current conditions banks don’t check, only ask, so it’s easy to avoid FATCA. I think it is an issue insofar as banks could be far stricter if they wanted to be – I’d rather they had no legal basis for asking about US citizenship.
Re: Sam – Just for the record Canadian banks do ask. Everyone knows my story – I an Canada, Hear Me Roar Mr. President. Exactly one month after I renounced, my employer received the first letter regarding his trust accounts. “Are you, any of your associates or person(s) with the ability to direct money US citizens for tax purposes?” Two more letters followed from other banks. You may feel fine flying under the radar, but one can hardly ask an employer to lie for them. John Richardson has done an article recently about an individual contacted through an email address obtained by the consulate when reapplying for a passport reminding them of a tax obligation. That’s why I said it would be prudent to speak with or attend a seminar by John Richardson as each situation is different.
Re: Sam …in case anyone wonders which banks were asking about the accounts – TD, RBC & CIBC.
@Ann#1
The employment situation is definitely trickier. It might not be prudent to conceal US citizenship from an employer if you have signing authority over their accounts. As a private citizen, however, feel free to lie.
Canadian banks do ask the question, that I’ve never denied. But for ordinary consumers they make no attempt to verify that the answer given is correct.
The employer’s OMG moment – finding out his company just became a US Person.
It was the entity account that was being FATCA’ed – with pernicious side effects on the employee.
That’s presumably why the other two banks enquired around the same time, if it happened during the year in which Canada’s implementation of FATCA required due diligence screening of Pre-Existing Entity accounts to begin.
From what I recall, there was proactive screening of business accounts and investment or bank accounts over a certain size. In Canada, to the best of my knowledge, there has never been proactive screening of regular bank accounts of modest size (< $1 million I'm guessing).
From personal experience, I've never been contacted by a bank asking the FATCA question. It has only come up on new accounts with new banks, and on new products with RBC, where I've been a customer for years.
To repeat a tale I've told before, circa 2014 an investment advisor did proactively ask me about US citizenship, whether I had an SSN, and said I needed to sign a W8 or W9. This was not due to my having large amounts of money, but rather having inherited the family broker, with a different level of service than one of my modest means would typically be subject to. After some back and forth I lied and said no I was not a US citizen, and refused to sign a W8 on principle (because among other things RRSPs are not FATCA-reportable anyway) and they were fine with that, and I've heard nothing further since. (I don't actually know if they screened all their customers or if I was singled out. I first thought that they knew or suspected, since my parents had discussed my US citizenship with them in the context of estate planning, but now I figure they just turned up US indicia, since they must have had on file our American address dating back to grad school days.)
@Ann #1
I realised I could never be compliant (even if I’d wanted to be) when my bishop told me, quite rightly, that just because I had signing authority on the diocesan main bank account, he wasn’t going to let me report all of the diocese’s accounts etc to the IRS.
There are times when compliance isn’t even possible.
“I’ve never been contacted by a bank asking the FATCA question.”
Neither was I. The bank where I had long-standing account simply did their pre-existing-account screening by directing all customers logging in to their accounts to AEOI questions – which didn’t let a person who gave a US place of birth continue to log in. I’d been renounced for 2 years by then.
@plaxy
That might not be “contacted”, strictly speaking, but it’s certainly pro-active if they throw up a barrier to online banking login.
What would happen if you gave a non-US place of birth, or otherwise answered with less than the truth, I wonder?
Yes, it was pro-active due diligence screening. If I’m not mistaken, that’s what leads to FATCA letters being sent out.
“What would happen if you gave a non-US place of birth, or otherwise answered with less than the truth, I wonder?”
I wouldn’t have even considered lying about where I was born.
The flaw with the automated questionnaire was the fact that once the birthplace question was answered, it was unable to cope with a “No” response to the subsequent question “Are you a US citizen?”
In my professional capacity, “born in US but not US citizen” is what we would call an edge case so rare it’s not worth designing a solution for – just kick them out of flow and make them deal with it over the phone. It’s also possible that it never occurred to anyone at the bank that such a thing exists, since the only people who meet that criteria are those who’ve relinquished or renounced, and the children of diplomats.
“In my professional capacity, “born in US but not US citizen” is what we would call an edge case so rare it’s not worth designing a solution for –”
It can’t be that rare among bank customers, given that quite a few of the US-born have been forced by banks to renounce as a condition of being allowed to hold a bank account.
It was sloppy systems design. An aporia.
Good therapy for me. I went to the bank and raised loud and holy hell in front of the waiting customers.
@plaxy
I find this interesting, as someone else who lives/banks in the UK. Was this for a normal current account, or a mutual fund/investment/savings account?
Although my ISA company asked the US person question (and I’ve now sent them a copy of my CLN), the bank in which I hold my current and regular savings account have never asked that at my on-line log in.
Yes, bad design of the online experience. But I’ve noticed in my dealings with Canadian banks, both as a customer and as a designer of such things, that they can be quite ill-informed about the finer points of this situation. It doesn’t surprise me at all that “US birthplace = US citizen” is coded into the logic of an online account update.
BirdPerson – it was an ordinary current account with one of the big four, i.e. one of the bunch you and I bailed out a few years back.
The bank (think black horses) had no information about my birthplace. When I opened the account, many years ago, it wasn’t the kind of information a bank had any reason to be curious about. I don’t know if they’re still using the questionnaire I ran into; they removed it from my account and have handled me warily ever since meltdown day. 🙂 🙂
“It doesn’t surprise me at all that “US birthplace = US citizen” is coded into the logic of an online account update.”
Indeed. Incompetence is commonplace here and I daresay the same is true in Canada.
Nononymous:
“…they can be quite ill-informed about the finer points of this situation.”
The difference between citizenship and non-citizenship hardly qualifies as a “finer point” in a FATCA context. IMO
@ BirdPerson…The work around for getting compliant (FBARS) was they were given my employer’s CRA number (business #) NOT his S.I.N., how many accounts I had signing authority for (7), the banks that held the $ and nothing else. No highest balance, no account numbers, no addresses, nada. If they had questions, then they would have to come back to the CRA & deal with the CRA who would tell them that he was a Canadian citizen.
@plaxy
No of course that’s a rather important point. But the distinction between US citizen and US person is completely lost on most banks here. That’s more what I mean by finer points.
@ Ann#1
How interesting. Well, I’ve renounced and I’m not filing anything, so it’s not really an issue now.
@plaxy
My bankers are also of the big four, an English one which was taken over by a smaller Scottish one. I’ve banked on line for years, and even have an instant access cash ISA which I can access online. I find it interesting that this question has never come up. Anyway, I opened my account with them back in 1986, which is probably why I’ve never had anything in the post from them either. I don’t think place of birth was that important decades ago.
BirdPerson – no, they’d have had no reason for asking for birthplace. None of the banks where I have longstanding accounts have had information on my place of birth or citizenship. I’ve made a point of informing them all now.
“If someone wants to sue the government for citizenship based taxation, where does one start? I know there was a case hundred years ago, but circumstances in that case were very different. Is it realistic to sue the government for cbtax? Has anyone recently tried in any of the courts?”
In one of my present cases the US Department of Justice argued that the infamous definition #39 doesn’t apply and that non-residents (including non-resident citizens) of the US are not eligible for jury trials. I suggested that the court consider very carefully before throwing another matchstick on the funeral pyre of Cook v. Tait. But judges are talented people and they’ll surely find some other way to deny due process.
“Yes, bad design of the online experience. But I’ve noticed in my dealings with Canadian banks, both as a customer and as a designer of such things, that they can be quite ill-informed about the finer points of this situation.”
And any programmer who dares to try to inform the project manager gets fired for their efforts.
@ND
No actually, they would simply be ignored.