Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in Issues regarding US persons abroad 34 Comments

Provide for reciprocal reporting of information in connection with the implementation of the Foreign Account Tax Compliance Act (FATCA).—

In many cases, foreign law would prevent foreign financial institutions from complying with the FATCA provisions of the Hiring Incentives to Restore Employment Act of 2010 by reporting to the IRS information about U.S. accounts.

Such legal impediments can be addressed through intergovernmental agreements under which the foreign government agrees to provide the information required by FATCA to the IRS. Requiring U.S. financial institutions to report similar information to the IRS with respect to nonresident accounts would facilitate such intergovernmental cooperation by enabling the IRS to reciprocate in appropriate circumstances by exchanging similar information with cooperative foreign governments to support their efforts to address tax evasion by their residents. The proposal would provide the Secretary of the Treasury with authority to prescribe regulations that would require reporting of information with respect to nonresident alien individuals, entities that are not U.S. persons, and certain U.S. entities held in substantial part by non-U.S. owners, including information regarding account balances and payments made with respect to accounts held by such persons and entities.

This was found buried on page 202 of the Analytical perspectives of the President’s budget.

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/spec.pdf 

Additionally this request was NOT found in the Treasury Green Book where normally requests of this nature are made.

34 thoughts on “Here comes “DATCA” (FATCA reciprocity)”

  1. Good digging. I couldn’t find it in the Greenbook either, so now we know it is there as advertised!

  3. “… would require reporting of information with respect to nonresident alien individuals, entities that are not U.S. persons, and certain U.S. entities held in substantial part by non-U.S. owners, …”

    This is NOT reciprocal. Replace “US” by “Canada”/”Canadian”, and it is quite evident, that it isn’t what Canada is supposed to implement. It gives a free pass to USPs regardless of their other citizenships.

  5. We have been saying for sometime here on IBS, that for the IGA signer to have real expectation of reciprocity, there had to be legislation in America to impose it on US domestic financial Institutions (USFIs)

    FATCA truly is just the “tip of the spear” of the newest American WAR ON OFFSHORE TAX EVASION (WOOTE)

    There had to be a domestic DATCA if there is to really be a global GATCA, the end game of the FATCA effort.

    We have known that IRS bulletin 2012-20 was the beginning of the attempt, call it DATCA lite if you wish. http://1.usa.gov/11sGZsl

    However, that was hardly enough, so so now comes the full blown version as promised in Article 6 of the Model 1 of the FATCA IGA.

    Let’s see how Congress responds to page 202 of the Obama Budget, as this will be the clearest indication of whether or not America is serious about multilateral efforts to create a automatic Tax data exchanges, or if it is just the whim of the FATCAnatics. 🙂

    From Article Six.

    Mutual Commitment to Continue to Enhance the Effectiveness of Information Exchange and Transparency

    1. Reciprocity.The Government of the United States acknowledges the need to achieve equivalent levels of reciprocal automatic information exchange with [FATCA Partner]. The Government of the United States is committed to further improve transparency and enhance the exchange relationship with[FATCA Partner] by pursuing the adoption of regulations and advocating and supporting relevant legislation to achieve such equivalent levels of reciprocal automatic exchange.”

    I guess you could say that the Obama budget is “advocating and supporting relevant legislation to achieve such equivalent levels of reciprocal automatic exchange.”

    Even if you had no stake in this game, it should be fascinating “inside the beltway” fight to watch. I can almost guarantee that the MSM will not cover it as their focus will be on the social security Chained CPI measure controversy. That will dominate the budget discussion in the media.

  6. “The proposal would provide the Secretary of the Treasury with authority to prescribe regulations that would require reporting of information with respect to nonresident alien individuals, entities that are not U.S. persons, and certain U.S. entities held in substantial part by non-U.S. owners, including information regarding account balances and payments made with respect to accounts held by such persons and entities.”

    This is an interesting way to get a mandate break the existing US laws.

  7. “The proposal would provide the Secretary of the Treasury with authority to prescribe regulations that would require reporting of information with respect to nonresident alien individuals”

    Now, that’s reasonable. Why isn’t it what they require foreign countries to provide as well: account information on non residents. A lot less people would have a problem with FATCA.

  8. @Chris, You asked: “Now, that’s reasonable. Why isn’t it what they require foreign countries to provide as well: account information on non residents. A lot less people would have a problem with FATCA.”

    Because the USA, unlike the rest of the world, has citizenship-based taxation. It is using this uniqueness to penalize unknowing non-resident citizens who haven’t been filing FBARS, and to tax investment income and retirement plans of non-resident citizens who can’t take advantage of the foreign income exclusion amount to offset those investment incomes and retirement funds.

    In other words, FATCA is not about making FATCATS pay their fair share. Maybe that’s why they left out the ‘T’.

  9. This is yet again, the Obama Administration trying to pull the wool over the eyes of the world and the American people. How can the Administration expect other countries to ‘hunt out and disclose’ dual Canadian/US citizens and Green Card holders in Canada and every other country on this planet, but not require US banks to find and disclose the the details of US citizens/Green Card holders living in the US to the duals’ foreign governments. The US is not willing to throw dual US citizens living in the US with US banks under the bus (i.e. respect their rights) but expects Canada and other governments to throw its citizens under the bus. Not true reciprocity at all.

  10. @Steve Klaus, on this one, the US is right. They protect the rights of ‘US persons’ living in America. This is what every other country should do as well.
    I disagree with all foreign governments who don’t stand for their dual citizens. Given the magnitude of tax evasion, maybe FATCA is not such a bad idea. What is a horrible idea is the reporting of residents’ data. Canada and every government signing IGAs should draw a line in the sand and tell the US they only agree to report data on non-residents.

    On another note, with the offshore leak, the Cahuzac scandal in France, and the French finance minister saying that he wants a European FATCA, FATCA is all over the news in France, in many newspapers.

  11. Chris – I agree with you. Canada and other governments should not release information on their citizens (who are also US Persons) to the US government. My point was only that the US is trying to compel countries to release such information but refusing to do the same. At a minimum, countries should protect their citizens’ rights (whether dual or not).

  13. @Mark twain..

    Regulatory authority is the IRS wet dream. That way they can do what they want without pesky interference from Congress. They might have to put up with href=”http://waysandmeans.house.gov/uploadedfiles/boustany_5.11.12_letter_to_geithner.pdf” target=”_blank”>”huffing and puffing” letters like this which they can effectively ignore while they put into place IRS bulletin 2012-20 without any expression of the will of Congress by legislation. Very clever of them. These FATCAnatics are not dumb as they pursue their ideological FATCA/DATCA/GATCA war.

    The only real success I have seen recently in reigning in the IRS is in the landmark ‘Loving Case’ stopping their regulation of Tax Prepares. I have been watching that case with great interest.. It may be the model for how to oppose the IRS, but only if you can find a Libertarian attorney willing to take them on. Too many attorneys make their money from enabling IRS policies, so there are few willing to take these fights, but they can win.

    http://isaacbrocksociety.ca/2013/01/20/irs-should-not-be-able-to-license-tax-preparers/

  15. Since the tax reporting requirements of the U.S. is not aligned with that of other countries that makes FATCA reciprocity an oxymoron. U.S. financial institutions are only required to report the assets of foreigners who are not resident in the U.S. Whereas other countries must report the financial assets of U.S. persons who are resident within their territories. What hypocrisy is being practised by the U.S.

  19. I had no idea such bank reporting regulations were already in place. Looks like the damage to the US financial industry and the judicial blowback to the IRS and Dept. of Treasury has begun, as was forseeable. This could get really interesting.

  21. Further links:
    – A 4 page summary: http://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/Tax/Alerts/dttl_tax_alert_UnitedStates_230412.pdf

    – IRS Bulletin on the proposed REG-146097-09: http://www.irs.gov/irb/2011-08_IRB/ar13.html

    – IRS Bulletin on the finalized Rev. Proc. 2012-24: http://www.irs.gov/irb/2012-20_IRB/ar11.html
    This contains the list of 80 countries “with which the United States has in effect an income tax or other convention or bilateral agreement relating to the exchange of tax information within the meaning of section 6103(k)(4) pursuant to which the United States agrees to provide, as well as receive, information and under which the competent authority is the Secretary of the Treasury or his delegate”.

    Also notable here is this list: “The following list identifies the countries with which the automatic exchange of the information collected under §§1.6049-4(b)(5) and 1.6049-8 has been determined by the Treasury Department and the IRS to be appropriate”. It contains one entry: Canada.

    So it seems that although this isn’t directly tied to FATCA, it does provide the basis on which IGA reciprocity could be achieved. Of course, they’re just IRS/Treasury regulations, not US law (…yet).

  22. @notamused —

    Just a guess on my part, but I think Canada is the only country that the US has a comprehensive tax treaty with that already includes info exchange. I think that’s why Flaherty was so outraged by the whole concept of FATCA and its application to Canada. Who knows what he thinks now, but we can always hope that he hasn’t changed. And this lawsuit by the two bankers associations should provide a massive “heads-up” to any country that thinks it will get full reciprocity from the US.

  23. @notamused,….

    You can bring yourself up to date on this DATCA lite provision on this Post we did some time back…

    If you haven’t followed the history and development of DATCA over time, I recapped the entire DATCA story here…

  25. @Just Me
    Good stuff; I hadn’t seen that post before and wondered how that topic could have slipped through the cracks at IBS. Thanks.

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