Prologue – Today as reported by Elizabeth Thompson at CBC
— Elizabeth Thompson (@LizT1) March 3, 2020
Introduction – About the background to this
1. Article 2 of the Canada U.S. FATCA IGA includes an obligation to report the U.S. Social Security Number of the U.S. Person. Here is what Article 2 of the IGA says:
Obligations to Obtain and Exchange Information with Respect to Reportable Accounts
1. Subject to the provisions of Article 3 of this Agreement, each Party shall obtain the information specified in paragraph 2 of this Article with respect to all Reportable Accounts and shall annually exchange this information with the other Party on an automatic basis pursuant to the provisions of Article XXVII of the Convention.
2. The information to be obtained and exchanged is:
a) In the case of Canada with respect to each U.S. Reportable Account of each Reporting Canadian Financial Institution:
(1) the name, address, and U.S. TIN of each Specified U.S. Person that is an Account Holder of such account and, in the case of a Non-U.S. Entity that, after application of the due diligence procedures set forth in Annex I, is identified as having one or more Controlling Persons that is a Specified U.S. Person, the name, address, and U.S. TIN (if any) of such Entity and each such Specified U.S. Person; …
2. Early on the implementation of the IGAs it became clear that many people deemed by the United States to be it’s taxable property (AKA tax residents of other countries who were born in the United States) didn’t have a U.S. TIN (Social Security number). Why would they? They didn’t consider themselves to be American and were tax paying citizen/residents of other countries. But, why let a does of reality interfere with the FATCA myth?
3. The banks were scared of FATCA noncompliance and realized that they now would be in breach of their FATCA obligations by not providing a U.S. Social Security number to the CRA (and therefore the IRS).
4. U.S. Treasury in an act of unprecedented kindness, wisdom and understanding gave non-U.S. banks until December 31, 2019 to provide U.S. Social Security numbers.
5. Oh My God! Time flies. It is now 2020. The Treasury grace period and is over. U.S. Social Security numbers must be provided or the banks will be “non-compliant”. This is a worldwide problem with most of the publicity coming out of the Netherlands where (as reported) banks are closing the accounts of Dutch residents with a tint of “U.S.Ness”.
6. As some commenters have noted, an non-compliant (bad, bad, bad) bank actually has 18 months to cure the non-compliance from the date of notification of non-compliance by U.S. Treasury. Interestingly, in October of 2019 the IRS made clear that the failure to supply the Social Security Number after December 31, 2019 would NOT necessarily trigger a notice of non-compliance from the IRS. But, the problem is that nobody really trusts U.S. Treasury and the IRS. (An excellent post summarizing the problem from Dr. Karen Alpert is here.)
7. As a result, there is heightened pressure, coming from non-U.S. financial institutions to force those pesky people (who chose to be “Born In The USA”) with a Social Security number (even though they don’t have one).
8. It appears that consciousness of this new problem (like the recent virus coming from China) is beginning to spread around the world. The most recent spread of consciousness appears to be in Canada itself.
In any event, a very important question in the life of an individual is now:
“Are you or have you ever been an American citizen?”
Those in the business of compiling passport indexes, really should “come clean” and state that:
A U.S. CLN is now the Number One Passport in the world today!
For those who want to read up on the IGA, here it is …
And now on to the today’s news …
The problem that appeared to get the most publicity in the Netherlands, …
The primary obligation of US citizens is reporting to the U.S. Government and to the non-US banks that act as IRS agents – starting with Social Security Number: "U.S. Treasury remains silent as bank accounts of EU 'accidental Americans' still being frozen" https://t.co/oB2Gdmb88B
— U.S. Citizen Abroad (@USCitizenAbroad) March 3, 2020
Described by Helen Burggraf as …
The U.S. Treasury is continuing to maintain its silence with respect to the issues European banks have been struggling with for months over their perceived need to report to the U.S. – under the tax evasion law known as FATCA – government tax information details on certain of their American account-holders that they don’t have, European banking sources, expat groups and others report…
This is in spite of the fact that so-called “accidental Americans” in Europe are continuing to have their non-U.S. bank accounts frozen in cases where their banks say they have failed to provide “Tax Information Numbers” (TINs, typically Social Security numbers) as the banks say FATCA requires them to have as of the end of last year, according to sources in the accidental American community.
More from Helen Burggraf here.
May (as reported by Elizabeth Thompson) be poised to come to Canada.
Those who HAVE BEEN or WILL BE identified as "U.S. Persons" under the #FATCA IGA and do NOT provide a Social Security Number, "The Canada Revenue Agency, not the U.S. Internal Revenue Service, will be enforcing the requirement and levying any fines." Problem of USNess continues. https://t.co/Ph6HfCQ676
— U.S. Citizen Abroad (@USCitizenAbroad) March 3, 2020
Ms. Thompson’s article includes:
CRA has authority to fine
If the social security or taxpayer identification number is missing or invalid, the IRS would flag it to the CRA and the CRA would notify the financial institution, which would have 120 days to get the information. The CRA has the authority to levy fines for non-compliance, although it can also exercise discretion. Officials said that there would be an 18-month delay before the CRA issued a notice of non-compliance to a financial institution.
Canada Revenue Agency officials held a meeting Jan. 29 with more than 200 representatives of financial institutions to discuss a proposed guidance document on how they should proceed. Some industry insiders said they expect that guidance, which should be out by the end of March, to say financial institutions can close accounts if they can’t get the information after making reasonable efforts.
Those inclined could go over to the CBC article referenced in the above tweet and comment directly.
A closing thought …
At a bare minimum, the well researched article by Elizabeth Thompson, shows that it is a mistake to assume that tomorrow will always be like today (the Transition Tax problem comes to mind). FATCA and the IGAs are not problems that should be ignored. The FATCA IGA has resulted in the Canada allowing the U.S. to essentially plant an IRS flag on Canadian soil. The provides the mechanism for a serve escalation of U.S. taxation in Canada and a continuing erosion of Canada’s sovereignty.
In conclusion …
The ADSC-ADSC.ca lawsuit still needs funding. FATCA is a live issue. The IGAS are a live issue. Jenny’s FATCA lawsuit in the U.K. needs funding. And speaking of Jenny, here are her thoughts on today’s bulletin from Elizabeth Thompson.