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Senator Rand Paul Introduces Bill to Repeal FATCA!

Posted on by Posted in Issues regarding US persons abroad 219 Comments

May 7, 2013

Washington, DC

by James Jatras

Treasury Department’s Promises of U.S. FATCA IGA ‘Reciprocity’ Dead

In a major game-changer, Senator Rand Paul (Republican of Kentucky) today introduced a bill  (S.887)  to repeal mandates of the “Foreign Account Tax Compliance Act” (FATCA) on financial institutions and individual American citizens as a “violation of sovereign nations’ laws and privacy matters.” In a letter to his Senate colleagues, Dr. Paul pulled no punches about the destructive effects of the FATCA law and the unsupportable claims that FATCA is a legitimate tool to combat tax evasion:

 “I intend to offer a bill to repeal certain provisions of the Foreign Account Tax Compliance Act, or FATCA (P.L. 111-147).  The intent of this law was to prevent tax evasion by increasing access to overseas bank accounts held by U.S. citizens.  However, any law enforcement benefits have been vastly outweighed by the deleterious effects of FATCA on economic growth and the financial privacy of Americans.

“FATCA requires the financial institutions of foreign countries to register directly with the IRS, and to provide financial information on the accounts of U.S. citizens – regardless of whether or not these U.S. citizens are suspected of tax evasion. A failure to comply with these requirements subjects that foreign financial institution (FFI) to a 30% withholding of U.S.-derived revenues. This has had the practical effect of forcing FFIs to relinquish any association with American customers, and to avoid direct investment in the United States. It goes without saying that overseas investment in the U.S. is an important engine of our economic growth and prosperity. FATCA endangers an estimated $25 trillion in foreign capital currently invested in the U.S.

“Perhaps even more troubling, the implementation of FATCA has allowed the Treasury Department to make independent decisions with respect to the sovereignty of foreign nations and the privacy of United States citizens. In order to implement this law, Treasury has initiated intergovernmental agreements (IGAs), citing the intent to engage in reciprocal information sharing with other nations. The Treasury Department, without the consent and authority of Congress, will force U.S. financial institutions to provide the bank account information of private customers to foreign nations.  Such a requirement not only diminishes U.S. privacy protections, but also imposes billions of dollars in compliance costs here at home, which will be passed onto customers and the American public.

“My bill is drafted with the intention of removing only FATCA provisions that undermine Americans’ constitutional privacy protections and add burdensome regulations with a negative economic impact on the United States.  Other provisions enacted at the same time, such as those pertaining to clarification of foreign trusts and treatment of dividends that do not have those negative impacts, have been left alone.  The intent of this bill is not to disrupt legitimate tax enforcement, only to repeal counterproductive and constitutionally suspect mandates.”

Senator Paul’s bold and principled action comes on the heels of a federal lawsuit against the U.S. Treasury Department and the Internal Revenue Service by the Texas Bankers Association and Florida Bankers Association.  In that suit, the bankers assert they will lose billions of dollars in business over improperly imposed regulations to report on foreign residents’ deposits to foreign governments.   Such reporting, a key feature in the so-called “reciprocal” version of FATCA “intergovernmental agreements” (IGAs) non-U.S. governments are being pressured to sign, is just the camel’s nose under the tent of far more invasive and expensive reporting, for which the Treasury Department recently requested additional authority from Congress.

It is anticipated that a companion version of Senator Paul’s bill will be introduced shortly in the House of Representatives.  In addition, measures to block the Treasury Department from carrying out the IGAs, which have not been authorized by Congress, are expected.

With the wind in Washington blowing against FATCA, foreign governments are on notice that Treasury’s promises of “reciprocity” are plain rubbish.   Congress will not provide the needed authority to rescue this fatally flawed law.   Instead of getting aboard the sinking FATCA ship, foreign governments should reject the constitutionally deficient IGAs Treasury has offered them, tell the U.S. they will not comply with FATCA or allow their domestic firms to comply with it, and signal their willingness to fight any illegal sanctions Treasury attempts to impose.

Activists in Washington are weighing in in support of Senator Paul:

 

“Senator Paul’s bold stand against FATCA has come at an opportune time. The world is fed up with U.S. fiscal imperialism, and the economy can ill afford another pointless and self-inflicted wound, as FATCA is the worst economic idea to come out of Congress since Smoot-Hawley. Rather than allow regulators to continue pursuing an unconstitutional ‘intergovernmental agreement’ strategy, it is time for lawmakers to accept defeat and abolish this fatally flawed law. Now would also be a good time for any foreign governments thinking about getting in bed with the US Treasury Department to think again. Their promises for reciprocation are simply worthless.” – Andrew Quinlan, Center for Freedom and Prosperity.

 

“The U.S. federal income tax system already imposes 6.7 billion hours of paperwork on individuals and businesses; FATCA would not only worsen this burden here at home, it would also impose onerous new liabilities abroad. The last thing America should be exporting is its complex tax laws. Senator Paul deserves a round of applause from taxpayers in our nation and around the world for recognizing the dangers FATCA poses to our economy and our civil liberties.” – Pete Sepp, National Taxpayers Union.

It is increasingly clear to everyone that FATCA has almost nothing to do with curbing actual “tax evasion” and everything to do with massive unintended consequences that will lose money for the federal treasury.

 

Finally, both American and non-U.S. firms that stand to lose millions of dollars each complying with FATCA need to help push the repeal bill through.  FATCA repeal needs to be part of any tax reform deal between Congress and the Obama Administration.

You can help – contact us at RepealFATCA.com and find out how!

Vote your Support for  S. 887 and email to your legislators all at the same time at PopVox

James George Jatras

www.RepealFATCA.com

RepealFATCA@gmail.com

@RepealFATCA

+1.202.375.1007

219 thoughts on “Senator Rand Paul Introduces Bill to Repeal FATCA!”

  1. The fear of reciprocity is going to slowly kill FATCA. Senator Paul’s bill is part of that process. You’ll see.

  3. @FromTheWilderness
    Life Underwriter Training Council Fellow, Registered Tax Return Preparer. I know one tax preparer I won’t be using the services of.

  4. @AbusedExpat,

    I sent this message to Mr. Paul:

    Dear Mr. Paul,

    Re: FATCA

    I am a Canadian citizen who has recently renounced US citizenship, compliant with US tax returns and reporting since 2005 when I realized it was not true what had been told to me when I became a Canadian citizen in 1975. I applaud you standing up for US Citizens Abroad who are collateral damage in looking for the real tax evaders — and being labelled tax evaders and traitors in the process. I thus want nothing further to do with the US unless it is to be with a US relative loved one in their time of medical need or at the end of their life.

    As stated in the Reuters piece, “Senator Paul offers bill to weaken U.S. anti-tax evasion law” (http://uk.reuters.com/article/2013/05/08/usa-tax-fatca-idUKL2N0DP00X20130508):

    In a letter to other senators, Paul said his bill would repeal only provisions that undermine U.S. privacy protections.

    “The intent of this bill is not to disrupt legitimate tax enforcement,” said Paul, who is popular among conservative Tea Party Republicans and libertarians.

    and your letter to colleagues:

    “My bill is drafted we the intent of removing only FATCA provisions that undermine American’s constitutional privacy privacy protections and add burdensome regulations with a negative economic impact on the United States. Other provisions enacted at the time, such as those pertaining to clarification of foreign trusts and treatments of dividends that do not have those negative impacts have been left alone. The intent of this bill is not to disrupt legitimate tax enforcement, only to repeal counterproductive and constitutionally suspect mandates.”

    It is not all black and white, as many will read it.

    Can you explain so we all know exactly what is proposed to be taken out and what exactly you propose to remain in FATCA.

    I would like more information on the meaning of your “clarification of foreign trusts and treatments of dividends that do not have negative impacts” — negative impacts to the US, not necessarily meaning negative impacts to US Persons abroad. In Canada, those foreign trusts include registered accounts: Tax Free Savings Account (TFSA), Registered Education Savings Plan (RESP), Registered Disability Savings Plan (RDSP) — and of course the Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) if IRS Form 8891 (U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans) is not correctly and timely filed each year.

  5. Press Release in the WSJ: “Senator Rand Paul Introduces Bill to Repeal FATCA”

    http://online.wsj.com/article/PR-CO-20130508-914454.html?mod=googlenews_wsj

    “Treasury has initiated intergovernmental agreements (IGAs), citing the intent to engage in reciprocal information sharing with other nations.”

    “The Treasury Department, without the consent and authority of Congress, will force U.S. financial institutions to provide the bank account information of private customers to foreign nations.”

    “Such a requirement not only diminishes U.S. privacy protections, but also imposes billions of dollars in compliance costs here at home, which will be passed onto customers and the American public.”

    “The last thing America should be exporting is its complex tax laws. Senator Paul deserves a round of applause from taxpayers in our nation and around the world for recognizing the dangers FATCA poses to our economy and our civil liberties.” Pete Sepp, National Taxpayers Union.

  6. Sigh. Glancing through the Reuters article comments, I’m a bit surprised that stateside Americans haven’t insulted me yet. Or, maybe they did and it got censured.

  8. A fresh comment in AccountingToday:

    In regard to ex-patriot double taxation…..with proper planning this can be generally avoided. People with this need generally have the funds to pay for the planning and realize it is a cost applied to THEIR decision to become an ex-patriot. Moreover, a 30% taxation rate for withholding may be less than the ex-patriot would have experienced as a U.S. domiciled resident subject, of course, upon the type of asset or income being taxed.

    http://www.accountingtoday.com/news/Rand-Paul-Introduces-Bill-Repeal-Parts-FATCA-66634-1.html

  9. Texas has 38 electoral votes, Florida has 29.

    The lawsuit from the Bankers Associations in these two states is not insignificant.

  10. @SwissPinoy

    The guy who wrote that comment in Accounting Today has the typical POV of most homelanders.

  11. More good awareness of the issue.

    Do Wall Street Journal articles usually come with this proviso:

    The Wall Street Journal news department was not involved in the creation of this content.

  12. My response to the typical POV of most homelanders:

    Dear Gregg E. Graening:

    I did not choose to become ex-patriot. Rather, the dot-com crisis forced me to seek work to pay debt interest. I found work, but it was not in America.

    I often didn’t have the funds to hire expensive accountants. Rather, I had to repay debts, pay taxes, pay costly living expenses and save to be able to get a mortgage to buy a house. During this time, free-filing was either not available for expats, heavily limited or frustrating with puzzling requirements such as address rejections due to location.

    I did not choose to be denied banking services as a US person. Rather, such was forced upon me thanks to FATCA. Thus, I did not renounce due to taxes, but because your FATCA caused national origin discrimination. National origin discrimination is a federal crime in the United States, for obviously logical reasons.

    Prior to renouncing US citizenship, I called my representation, I called HUD, I called the VA. Yet, all of them informed me they do not help Americans living outside of US jurisdiction. You want for Americans living abroad to be double-taxed, you want for them to pay high accounting fees even when they cannot afford such, and you want for them to be discriminated against and punished for being US persons. Yet, when Americans abroad to ask for help, America turns its back to them, informing them that they cannot be helped since they live outside of US jurisdiction.

    So, if you really must have national origin discrimination, FATCA, FBAR, double-taxation, costly accounting fees and form-filing nation, then fight for the right of Americans to be able to renounce free of charge and without exit penalties. While America may harm its citizens living abroad, but it should at least allow them to leave freely and without complications.

  13. @SwissPinoy
    Generally how long does it take to come out of moderation at Accounting Today? I posted one a couple of hours ago.
    This is what we’ve been honing our skills for, peeps!

  15. @bubblebustin, mine appeared instantly. I’ve already posted to several articles, so I must have passed the bot test. I wish that they had an edit button, though, so that I could remove the orphaned “but”.

  17. @Swisspinoy, if we’re outside their jurisdiction, then surely we’re not subject to tax. Unfortunately, that solution would be too easy (sigh).

  18. @Calgary411
    You’ve communicated on a few occasions with Kevin Shoom at Canada’s Dept of Finance, haven’t you? How would you feel about dropping him a line with this latest development?

  19. ACA is strangely quiet about Rand Paul’s bill. Could it be because they are too connected to the Dems?

  22. Thank you Calgary. I just sent notification to Maura Drew-Lytle, Director Media Relations and Communications at the Canadian Bankers Association, adding “Perhaps at this point the CBA’s efforts would be better spent in support of lobbying efforts to repeal FATCA than to press the Canadian government to enter into an IGA with the USG.”

    The last communication I had with her was last November when she wrote:

    “Thank you for your e-mail.  I encourage you to provide your views on the intergovernmental agreement to the federal government as part of their consultation with Canadians on this issue.  We are aware of Mr. Jatras’ views and have considered them as we move forward on this issue.  Please be assured that our primary concern in dealing with FATCA has always been, and continues to be, the impact that this extraterritorial legislation would have on Canadian bank customers.”

    Jim Jatras told us that talking to the CBA didn’t really go anywhere for him. Perhaps they’ll have a change of heart with these latest developments and their alleged frustration with the Canadian government? 

  23. As submitted to Kevin Shoom, with copies to Michelle Rempel (my MP), Finance Minister Flaherty and Prime Minister Stephen Harper.

    Dear Mr. Shoom,

    As you are undoubtedly now aware, Senator Rand Paul has introduced a bill to repeal portions of FATCA, http://www.repealfatca.com/index.asp?idmenu=4&title=News&idsubmenu=124

    May 7, 2013

    Washington, DC

    by James Jatras

    Treasury Department’s Promises of U.S. FATCA IGA ‘Reciprocity’ Dead

    In a major game-changer, Senator Rand Paul (Republican of Kentucky) today introduced a bill to repeal mandates of the “Foreign Account Tax Compliance Act” (FATCA) on financial institutions and individual American citizens as a “violation of sovereign nations’ laws and privacy matters.” In a letter to his Senate colleagues, Dr. Paul pulled no punches about the destructive effects of the FATCA law and the unsupportable claims that FATCA is a legitimate tool to combat tax evasion.

    This is a non-partisan issue and Mr. Paul’s showing the injustice of FATCA and the cost to the US (in reciprocity they didn’t plan for) will give a higher level of awareness to FATCA. Mr. Paul highlights the reasons other countries should stand up for their US dual citizens and US citizen residents, including the severely affected “Accidental Americans” who had no choice in the accident of place of birth and subjected to FATCA consequences.

    Again, Canada can be a leader in saying “no” before it is too late. Canada should have been the one to have done this in the first place rather than (hopefully not) negotiating away Canada’s privacy law for “US Persons” in Canada.

    Today, I sent this message to Senator Paul. This is bad law for US Persons Abroad who are not tax evaders. It is also bad law for the US itself. FATCA legislation certainly was not well thought-out, and Mr. Paul points out collateral damage consequences in the US and abroad, to say nothing of the lack of cost-benefit for FATCA law.

    Dear Mr. Paul,

    Re: FATCA

    I am a Canadian citizen who has recently renounced US citizenship, compliant with US tax returns and reporting since 2005 when I realized it was not true what had been told to me when I became a Canadian citizen in 1975. I applaud you standing up for US Citizens Abroad who are collateral damage in looking for the real tax evaders — and being labelled tax evaders and traitors in the process. I thus want nothing further to do with the US unless it is to be with a US relative loved one in their time of medical need or at the end of their life.

    As stated in the Reuters piece, “Senator Paul offers bill to weaken U.S. anti-tax evasion law” (http://uk.reuters.com/article/2013/05/08/usa-tax-fatca-idUKL2N0DP00X20130508):

    In a letter to other senators, Paul said his bill would repeal only provisions that undermine U.S. privacy protections.

    “The intent of this bill is not to disrupt legitimate tax enforcement,” said Paul, who is popular among conservative Tea Party Republicans and libertarians.

    and your letter to colleagues:

    “My bill is drafted we the intent of removing only FATCA provisions that undermine American’s constitutional privacy privacy protections and add burdensome regulations with a negative economic impact on the United States. Other provisions enacted at the time, such as those pertaining to clarification of foreign trusts and treatments of dividends that do not have those negative impacts have been left alone. The intent of this bill is not to disrupt legitimate tax enforcement, only to repeal counterproductive and constitutionally suspect mandates.”

    It is not all black and white, as many will read it.

    Can you explain so we all know exactly what is proposed to be taken out and what exactly you propose to remain in FATCA.

    I would like more information on the meaning of your “clarification of foreign trusts and treatments of dividends that do not have negative impacts” — negative impacts to the US, not necessarily meaning negative impacts to US Persons abroad. In Canada, those foreign trusts include registered accounts: Tax Free Savings Account (TFSA), Registered Education Savings Plan (RESP), Registered Disability Savings Plan (RDSP) — and of course the Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) if IRS Form 8891 (U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans) is not correctly and timely filed each year.

    Respectfully submitted,
    calgary411

  24. @bubblebustin

    I am just getting up and getting caught up, and saw that Accounting Today article. I just posted this at Accounting Today, and it got past the moderation hurdle. I still haven’t figured out what the criteria is, as sometimes shorter things don’t show up, and comments with link references may or may not show up. I just always save it, and try again in modified form if it doesn’t work the first time…

    This is now showing… (note.. I have had some fights with Michael Cohen on his copy paste of characterizations from Treasury in the past, so that is why I started the way I did.)

    Accurate Headline without characterization. Well done.

    This is a good development for a couple reasons. Not that I think it really has a chance of success, although from my perspective I wished it would pass.

    It is raises the issue out of the foggy bottom of technocrats making agreements and binding their governments without any visibility to the public at large or without any additional Congressional review as is currently happening with FATCA IGAs.

    This will (hopefully) stimulate vocal public debate, and I expect that Rand Paul will be vilified by left with the likes of Rachel Maddow accusing him of being for “Offshore Tax Cheats” without much understanding of the bigger economic issues and why FATCA is not necessary to stop offshore evasion.

    If you just read the recent GAO report on the IRSs OVDP, the most effective weapon for compliance was good ole DOJ work and John Doe Summons for encouraging those that were “really” hiding funds to come forward. You don’t need GREAT BIG EXPENSIVE BIG BROTHER BIG DATA coercive programs like FATCA/DATCA/GATCA to accomplish a compliance mission.

    There are other solutions.

    Of course, the amusing and confounding aspect of this is that the same politicians that have created the US tax code complexity using it as a campaign funding mechanism, and the follow on deficit mess with their spending habits and wars, have created FATCA as another GREAT Big Solution for a problem of their own making.

    It gets marketed as necessary and liberal groups clamor on board in the name of “fairness” or “Tax Justice without awareness of their alignment with the same people who have created the mess in the first place. And now, with a straight face they are proposing a 544 page solution plus XX number of FATCA IGAs? And, they are silly enough to believe it will work! Of course it won’t, but never mind. Has the War on Drugs worked?

    However, you can not have that argument about what FATCA is doing around the globe and why it won’t work, or why it is bad for the economy and America without it being on the radar of the U.S. media. This partial repeal effort helps it get there. Maybe! 🙂

    So, as a person who has not supported Rand Paul, I salute his effort.

    Now, those of us who rightfully have opposed FATCA from the start, will have to take our lumps in the public sphere which is preferable to letting the FATCAnatics, the left version of the NeoCons, continue their un-debated imperial preemptive subterfuge mission around the globe with all its unintended consequences and collateral damage.

    We may lose the war of public opinion, as many journalist get lined up on the side of “tax justice” without really understanding the issues, but with this partial repeal effort, at least it might now get the debate it should have in the first place when it was passed as a buried amendment in the 2010 HIRE ACT.

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