Senator Rand Paul and Congressman Mark Meadows sent a letter this week to US Treasury Secretary Mnuchin and Director of White House Management and Budget Office Mulvaney.
Co-Leader of the Campaign to Repeal FATCA, Nigel Green, comments that:
“Mark Meadows and Rand Paul Letter to White House and Treasury Urging Executive Action to Nullify FATCA Is a ‘Landmark Moment’ and that “The Foreign Account Tax Compliance Act “has only rolled on because of legally unauthorized ‘intergovernmental agreements,’” so cancelling them would “doom this terrible, toxic law.”
The full text of Mr. Green’s commentary are at PressWire and at ValueWalk.
@Harrison
Are you confusing *withholding* with seizure?
FIs seem to have different ways of enforcing compliance. Some simply ask verbally and take no steps to validate the answer, which leaves one free to lie. Some want you to sign a W8 or W9 even though that is not the purpose of these forms – they concern withholding, not US personhood for FATCA reporting. (I would therefore refuse to sign either.) Some banks may have their own forms. In Canada we might soon have a universal tax-residence form for CRS, which I think will make FATCA-avoidance easier for those who wish to deny their US personhood and remain non-compliant.
If you have examples of language stating that non-US banks will drain customers accounts at IRS request, please post a scan somewhere and link, or type it up verbatim.
@Harrison
Your complaints about denial of banking services are of course valid. A broker asking you to use a non-US passport and deny US citizenship is at least leaving the decision to the customer, which I respect.
But your lawyer friend’s assertion that the US government has any ability to seize non-US assets is, I’m afraid, pure horseshit.
while Model 1 FFIs generally will not be required to withhold under FATCA on payments they make, Model 2 FFIs may have a residual withholding obligation. Under the FFI agreement, there are generally two situations in which Model 2 FFIs may have FATCA withholding obligations: (1) when the Model 2 FFI makes payments under an obligation that are determined by reference to dividends paid on U.S. equities (that is, dividend equivalent payments under section 871(m)) and, more importantly, (2) when the Model 2 FFI acts as an intermediary, and an underlying payer of a U.S. source “withholdable payment” fails to withhold in accordance with FATCA. The FFI agreement provides that a
“WBEN is given to all foreigners or entities by local banks in the country I live at these days to be signed.”
Some banks here try to get renunciants to sign the W8-BEN. I said no and asked for a non-US form.
“W9 is for existing US citizens who were clients before FATCA began, however they don’t like opening up accounts for US citizens or residents citing compliance problems. Most brokers would deny accounts to anyone with a US taint no matter even if they are dual or tri nationals. They would simply ask you to use your second or third passport (I want clean legal history for possible expatriation in case FATCA is not repealed and CBT is not erased forever) to open up an account and click No for US citizen tick box. This is something I could not agree on.”
No, me neither. Sounds risky.
Regarding the question of whether IGAs allow banks to take money from a customer’s account, the following might cast some light:
http://www.allenovery.com/publications/en-gb/Pages/FATCA-Withholding-in-A-Model-2-Jurisdiction.aspx
Oops. My quote from Allen&Overy accidentally got posted twice. Pity these comments can’t be edited.
got pasted twice. grrr
@badger – comment on the IRS “structuring” misbehaviour from a tax advisor person, written in 2014 after the NY story was published.
https://www.nestmann.com/will-the-irs-keep-its-latest-promise
Re: Harrison’s apparent confusion.
It seems to me Harrison is conflating withholding with something more sinister.
Harrison- possibly, if you had US source income or assets, and if you were offside with respect to reporting your accounts or with signing the required forms with your bank, then and only then the US could withhold 30% of any US sourced payments.
Otherwise, withholding of a percentage of any US dividend payment or payment from sale of US assets is perfectly normal. It happens every day. For example, say I have stock in Apple. They pay a dividend every 3 months. Either 15% or 30% is withheld depending on whether I filled in a W9 or a W8-Ben at my bank. Or if I sold a property in Florida, a portion of the proceeds would be awithheld until the lawyer was satisfied I had paid taxes due.
This is normal. It is a far cry from seizure of assets from my bank account. Seizure from my account by the IRS cannot legally be done even though my bank has branches in the US and Canada is at the top of your list.
The information you quote is simply wrong and meant to frighten you. Your friend is also incorrect.
@Nononymous
No I am not confusing ‘withholding’ with seizure. It says the account can be put on hold or seized by IRS if you are US citizen and found not to comply with any US tax laws. Simple as that. By the way, guys I did post a link earlier in my post simply about branch of any bank outside US where you have an existing account with having a US branch such as HSBC etc can be levied or seized by IRS as per many tax lawyers and even Mr Nestmann. The advice here is to always put in a branch which does not have a US branch simple as that. http://premieroffshore.com/dealing-with-the-irs/
I am putting here the link again for you all to see. This is basically the same advice given by my friend and Mr. Nestmann. I asked a Singapore bank manager of OCBC and he told me yes that it is possible to get a levy on our branch in USA to levy your account in Singapore.
Anyways, I have complied with all their BS ever since I first got my SS number decades ago. Moving overseas they have different set of rules and its a minefield. Unfortunately the best option I have been provided is to renounce to be able to open up brokerage accounts etc as in my country of residence they do not open up brokerage accounts at all to US citizens or permanent residents due to US laws. Some banks like citi bank here are the only option I have been given as compliances are hitting hard every bank here.
“It says the account can be put on seized by IRS if you are US citizen and found not to comply with any US tax laws.”
This is from a FATCA letter? Can you quote the exact wording?
“By the way, guys I did post a link earlier in my post simply about branch of any bank outside US where you have an existing account with having a US branch such as HSBC etc can be levied or seized by IRS as per many tax lawyers and even Mr Nestmann.”
Where does Nestmann claim that a non-US-resident USC’s HSBC bank account can be seized by IRS? Please post a link.
Nononymous.
Nononymous says
April 8, 2017 at 1:12 pm
@Harrison
Your complaints about denial of banking services are of course valid. A broker asking you to use a non-US passport and deny US citizenship is at least leaving the decision to the customer, which I respect.
The broker was simply trying to cover their backs not my back. This form had penalty of perjury written on it too that I was like are you serious? I am never going to sign a form like that. The problems are created by US govt not the brokers. They have to make their money and US govt is interfering in their business which is not under US jurisdiction. It’s illegal extra judicial laws applied on the whole world that is the number one problem and my tax attorney friend agreed on that part too. It’s illegal but a bonanza for him and lawyers like him and CPAs. If someone is living overseas for more than five years why he has to be bound by US laws and regulations?
Iota,
I don’t remember the exact wording as of this moment. But I do remember that account can held or seized at the request of IRS if not complying with US tax laws.
@Harrison
Your link is to a law firm web site, and it states only the firm’s advice or opinion. These sorts of folks are pretty notorious for exaggerating risks.
If you have a document stating that an account can be held or seized, please reproduce it here. Name and source of document plus quotation of the relevant text.
Otherwise I’m not the only one here who is very confident that what you claim is false. The Pomerantz case provides an instructive example of how little power the IRS has beyond US borders.
Once you take US assets and income out of the mix, all compliance is voluntary. Money flows into the US because non-residents are either afraid of (non-existent) consequences – thanks to both IRS propaganda and the compliance-industrial complex – or have some misguided belief in the value of “honesty” with respect to US tax compliance, or they are willing to pay to make a clean break.
@Harrison –
“I don’t remember the exact wording as of this moment. But I do remember that account can held or seized at the request of IRS if not complying with US tax laws.”
Fortunately, you thinking that that’s what you remember is not the same as it being fact.
It’s important not to post scary things about the IRS being able to confiscate people’s money. They can’t, outside the US. Remember, other people may read what you say and get unnecessarily frightened.
@Harrison
Though I admire their chutzpah, I’m surprised that a broker would advise denying US citizenship, given that under the rules (either FATCA or IGA or both, I don’t recall) they are obliged to follow up if they have reason to believe that an account-holder is a US person. It’s not advice I’d want give in writing!
@Harrison
What we do know to be a problem is denial of banking services to US persons abroad. Some FIs simply won’t touch *any* USC customers. Some will want USCs to sign a W9 even if this particular piece of paper has nothing to do with FATCA reporting. And some will demand that USC customers be “tax compliant” – which on the face of it is absurd because a foreign FI is in no position to judge whether someone has met their US tax obligations fully and filed their forms correctly. It’s an attempt at ass-covering, nothing to do with the law.
All of the above is bad. But it’s not seizure of offshore assets, as you describe.
@iota
I have an excellent memory and I do remember the wordings very well. It was a hold ( not withholding taxes on dividends) and seizure of accounts if not complying with US tax laws. I don’t live in Canada. Every country’s IGA would be different than it would be for a tax haven country Not trying to scare anyone, I have a beef with those condors too who try to scare you into complying and making money. Sorry if you all think that am trying to scare you but i posted it just like I saw it and discussed with my CPA too at that time. This was very scary letter. It was much better to close the account than keep the money there. But later all banks in my jurisdiction are sending these type of letters to everyone as they are bending over backwards for US.
Sorry not my intention to scare anyone. I posted it just like I received it sometime ago and closed the account. It’s better to keep the money in a safe deposit box at home than to keep in banks like that. The mattress idea sounded better too. No reporting required ever,
@Harrison – it’s not those of us who are replying to you that might get frightened, it’s lurkers. Many USCs when they first hear of CBT/FATCA turn to reading in forums to try to understand their situation. So they need to not be told a bunch of codswallop about the IRS having the power to confiscate their cash.
I am working on a paper which involves this aspect.
https://www.law.cornell.edu/uscode/text/18/981
(k) Interbank Accounts.—
(1) In general.—
(A)In general.—
For the purpose of a forfeiture under this section or under the Controlled Substances Act (21 U.S.C. 801 et seq.), if funds are deposited into an account at a foreign financial institution (as defined in section 984(c)(2)(A) of this title), and that foreign financial institution (as defined in section 984(c)(2)(A) of this title) has an interbank account in the United States with a covered financial institution(as defined in section 5318(j)(1) of title 31), the funds shall be deemed to have been deposited into the interbank account in the United States, and any restraining order, seizure warrant, or arrest warrant in rem regarding the funds may be served on the covered financial institution, and funds in the interbank account, up to the value of the funds deposited into the account at the foreign financial institution (as defined in section 984(c)(2)(A) of this title), may be restrained, seized, or arrested.
(B)Authority to suspend.—
The Attorney General, in consultation with the Secretary of the Treasury, may suspend or terminate a forfeiture under this section if the Attorney General determines that a conflict of law exists between the laws of the jurisdiction in which the foreign financial institution (as defined in section 984(c)(2)(A) of this title) is located and the laws of the United States with respect to liabilities arising from the restraint, seizure, or arrest of such funds, and that such suspension or termination would be in the interest of justice and would not harm the national interests of the United States.
(2)No requirement for government to trace funds.—
If a forfeiture action is brought against funds that are restrained, seized, or arrested under paragraph (1), it shall not be necessary for the Government to establish that the funds are directly traceable to the funds that were deposited into the foreign financial institution (as defined in section 984(c)(2)(A) of this title), nor shall it be necessary for the Government to rely on the application of section 984.
(3)Claims brought by owner of the funds.—
If a forfeiture action is instituted against funds restrained, seized, or arrested under paragraph (1), the owner of the funds deposited into the account at the foreign financial institution (as defined in section 984(c)(2)(A) of this title) may contest the forfeiture by filing a claim under section 983.
(4)Definitions.—For purposes of this subsection, the following definitions shall apply:
(A)Interbank account.—
The term “interbank account” has the same meaning as in section 984(c)(2)(B).
(B) Owner.—
(i)In general.—Except as provided in clause (ii), the term “owner”—
(I) means the person who was the owner, as that term is defined in section 983(d)(6), of the funds that were deposited into the foreign financial institution (as defined in section 984(c)(2)(A) of this title) at the time such funds were deposited; and
(II) does not include either the foreign financial institution (as defined in section 984(c)(2)(A) of this title) or any financial institution acting as an intermediary in the transfer of the funds into the interbank account.
9.7.10.4.1.2.2 (07-28-2003)
Forfeiture of Correspondent Bank Accounts
1. Title 18 USC §981(k) was amended by Section 319(a) of the USA PATRIOT Act to permit the forfeiture of funds that are being held in a correspondent account in the United States on behalf of a foreign bank. Funds on deposit in a bank account in the United States can now be substituted for the funds in a targeted foreign account. In other words, if the government can show that forfeitable property was deposited into an account at the foreign bank, a civil forfeiture action can now be filed against an equivalent amount of money that is in a foreign bank’s correspondent account located in the United States. This is now possible because the law redefined the ” owner” of the funds to be the account holder at the foreign bank and not the bank itself. Due to the controversial nature of this change and the consequences it could have with the affected foreign government, it will not be pursued as a first resort in every case.
@Harrison
It would be useful to see the text of such a letter, and the specific provision is your country’s IGA.
When you say “not complying with US tax laws” this makes me think it’s a case of overzealous compliance policies by the bank – which is not a good thing – rather than provisions for asset seizure under FATCA.
How, pray tell, would the bank determine that you were compliant with US tax law? Ask to see your returns? It’s not really something they can prove one way or the other. They can ask you to sign a piece of paper stating that you are, but to what end? This is not required by FATCA or any IGA that I’m aware of.
Not sure I have read all the comments but if Harrison is referring to the IRS being able to take funds from a foreign bank’s correspondent bank in the US- it is not in FATCA or IGA etc. It’s Title 18 Criminal Code of US.
I am NOT commenting on the ability/inability of US to collect; merely, this is where they think they get the authority to do so………
There have also been several posts on this before……here is one
http://isaacbrocksociety.ca/2016/11/04/us-intention-to-to-pursue-enforcement-in-spite-of-foreign-law/
There was also one where Allison Christians referenced this same information but I haven’t found it yet..
It was hold or seizure of bank account at the request of IRS if not complying with US tax laws. Trust me I felt like it was an attempt to cover their backs. Same thing with broker who was trying to sign a form which in fine print had penalty of perjury on it. Sorry guys no can do. Want to exit US clearly in case the Republicans don’t deliver on FATCA repeal. As per my attorney friend it would never get repealed as too much time has passed by already and their lobby is very strong. He told me to renounce if you want to. Things will get much harder as they will try to stop more people from exiting as he knows too 9 m Canadian Americans and 1.5m East Asians are trying to renounce soon.
@Patricia – does this apply for collection of taxes? With no court proceeding needed to determine whether an offence has been committed?
@Iota
As I understand it. It is the outcome of having received a set number of notices followed by a levy/lien;
It goes from CI and onto Dept of Justice. So far, I do not see anything that says a separate court proceeding is required, but I am researching and this is difficult to read, understand and process. I have to finish this paper this weekend so hopefully it will shed some light.
If I recall correctly, the Florida UBS summons was never acted on – the accountholder gave in and waived his right to privacy.