Thank you to all those who worked so hard to make this hearing a reality, and in particular to witnesses Daniel Kuettel and Mark Crawford for putting a human face on the FATCA disaster. Here’s a brief overview of what happens during each section of the hearing. Longer and more detailed notes after the jump. See also the official webpage for the hearing.
|14:36||Quick introduction by Rep. Mark Meadows (R-NC-11)
Meadows is the chairman of the Subcommittee on Government Operations
|15:32||Testimony by Sen. Rand Paul (R-KY)
Mentions that FATCA gathers far more information on foreign accounts than Form 1099 does on domestic accounts (I’ll call this “8966 vs. 1099” for short). States that he hopes to get FATCA repeal done as part of tax reform.
|23:07||Opening statement by Meadows
Mentions poor return-on-investment from money spent on enforcing FATCA.
|27:45||Video by Donna-Lane Nelson
Discusses her renunciation. Mentions that she’s a lifelong Democrat and not rich.
|30:45||Meadows continues opening statement|
|31:30||Opening statement by Rep. Gerald Connolly (D-VA-11)
Connolly is the ranking member of the subcommittee. Makes incorrect statement that most countries tax worldwide income of citizens. Notes FATCA implementation difficulties.
|37:00||Introduction and swearing-in of witnesses|
|38:30||Testimony by James Bopp
Lawyer for Republicans Overseas. Mentions Democrats Abroad survey showing FATCA’s effects, and that U.S. is one of only two countries which tax citizens abroad. See written submission.
|44:50||Testimony by Mark Crawford
American businessman in Europe. Mentions how Same-Country Exception (SCE) would not have solved his business banking issues. See written submission.
|50:10||Testimony by Daniel Kuettel
Ex-American who renounced to save his mortgage. Mentions that his daughter will eventually face the same choice he did, of having U.S. citizenship or having a normal life where she lives. See written submission.
|54:00||Interstitial remarks by Crawford and Connolly||Link|
|55:30||Testimony by Elise Bean
Former Carl Levin counsel. Says Forms 8966 and 1099 are equivalent, and that the number of citizens renouncing is not a concern because more immigrants are naturalising. See written submission.
|1:03:50||Meadows questions Bean
Asks about U.S. banks’ views of FATCA reciprocity, if revenue from OVDP was taxes or penalties, if suspicion of wrongdoing is sufficient justification for FATCA.
|1:10:30||Connolly questions Bean
Asks about FATCA implementation difficulties. Bean denies that FATCA is the problem, pointing instead to CBT and the lengthy renunciation process.
|1:15:50||Connolly asks Bopp for response to Bean
Bopp says that FATCA is causing problems for large numbers of people, not just renunciants; rebuts Bean’s earlier point about 8966 vs. 1099; notes that penalties are not tax penalties but FBAR penalties.
Microphones left on, pick up some chatter at 1:22:00 regarding the Democrats Abroad survey.
|1:55:25||Rep. Jody Hice (R-GA-10) questions Bean
Asks Bean how much revenue is lost to offshore tax evasion, how much FATCA recovers; Bean not familiar with JCT $870 million recovery estimate. Hice expresses concern at such poor results for potentially law which has both Fourth Amendment and separation-of-powers issues.
|1:59:45||Hice questions Bopp
Asks whether FATCA should be repealed or modified. Bopp responds proposed fixes (probably means SCE) don’t solve problems. Kuettel and Crawford also support repeal. Bean supports modification.
|2:00:59||Statement by Rep. Carolyn Maloney (D-NY-12)
Mentions membership in Americans Abroad Caucus, concerns about terrorism financing, disappointment at Treasury’s non-response to SCE (actually, Treasury said no). Notes she has introduced a bill to require SCE implementation.
|2:08:53||Rep. Eleanor Holmes Norton (D-DC) questions Bopp and Bean
Asks Bopp about SCE; Bopp says SCE will not relieve burdens. Asks Bean whether repealing FATCA and joining CRS would get same information; Bean unsure. Criticises Bopp, Crawford, and Kuettel’s call for repeal.
|2:16:00||Meadows questions Bopp and Bean
If nothing else, watch this. Meadows comes to the conclusion, based on Bean’s statements regarding 8966 vs. 1099, that FATCA was intended to circumvent the protections of the subpoena process.
|2:27:07||Maloney questions Kuettel about SCE
Kuettel responds that SCE would not have solved his problems because “the damage has already been done”, the banks are terrified of America, and that SCE still puts a burden on the banks themselves.
|2:31:10||Closing statement by Meadows
Rebuts remarks by Democratic members stating that FATCA addresses terrorism financing, noting that a Hezbollah sanctions bill he sponsored used different tools. Asks each witness to give him three suggestions for modifying FATCA if there is not bipartisan support for repeal.
15:32 — Testimony by Sen. Rand Paul (R-KY)
Paul’s testimony is scheduled to go first, before Meadows’ formal opening statement, because he has another appointment at the White House afterwards. Starts out by discussing violation of Fourth Amendment; mentions Taxpayer Advocate report criticising FATCA. Mentions “double standard” (18:07): Americans overseas have balances and transactions disclosed under FATCA (on Form 8966, though neither he nor any of the other speakers mention the form number), while Americans at home only have actual income reported on Form 1099 (all the speakers know what a Form 1099 is). “Guilty until proven innocent” (19:32). Goes on to compliance costs (19:45), and then IGAs (20:11). Reiterates unconstitutionality of IGAs (21:08). Questioning begins at 21:40. Meadows praises Paul for bringing the issues to light. Paul responds that he hopes to get FATCA repeal into tax reform (22:30).
23:07 — Opening statement by Meadows
Mentions poor ROI of FATCA (25:00), and that shifting enforcement dollars from FATCA to general enforcement would actually result in a $1 billion revenue gain. Mentions burdens on trading partners (25:35), IGA partners’ anger at non-reciprocity (26:15), mentions renunciations (27:15).
27:45 — Video by Donna-Lane Nelson
Mentions that she is a life-long Democrat forced to renounce by FATCA, and that she needed to pay for a specialized accountant to help her with all the reporting requirements despite her limited income.
31:29 — Opening statement by Rep. Gerald Connolly
Claims that most countries tax worldwide income of their citizens (31:51). But even he admits that no one should have to renounce due to the burden of complying with the law (32:25). Claims that decades of FBAR non-compliance is evidence that some taxpayers “are not paying by the rules” (32:45). Mentions OVDP (33:45), lumping together taxes & penalties. Claims that 1099 has same information as 8966. Mentions Citigroup still offering accounts to Americans abroad (34:30). Mentions countries adopting CRS; claims that it gets information on “citizens”. Wants to find a way to protect FATCA.
My comments: some of Connolly’s incorrect claims — that most countries have citizenship-based taxation and that 1099 collects the same information as 8966 — and his lumping together of taxes, tax penalties, and FBAR penalties, were rebutted by later witnesses. No one, not even the Democrats, explicitly brought up U.S. non-participation in CRS.
38:30 — Testimony of James Bopp
Introduces self, mentioning role with Republicans Overseas. Draconian system of tax laws (38:54). Corrects Connolly, mentions that U.S. is one of only two countries with CBT. Ties territorial taxation of corporations to territorial taxation of citizens (39:30). Mentions FBAR (39:55). Illegality of IGAs (41:40). Mentions Democrats Abroad survey which found account closures, strain with non-American spouses (42:30). Mentions that people renouncing are ordinary middle-class Americans (43:00). Mentions Crawford v. Treasury (43:45). Closes by describing Americans overseas as ambassadors who promote American values and American products, but who are stamped with scarlet letter by U.S. laws.
44:50 — Testimony of Mark Crawford
Introduces self as businessman residing overseas with no other citizenship besides American. Mentions background with Clinton administration (46:00). Discusses effect of FATCA on small markets (46:30). Saxobank rejection of American citizens abroad, including Crawford himself, leading to Saxobank dropping Crawford’s business as well. Notes that Same Country Exemption (SCE) would not have solved his problems (48:30).
50:10 — Testimony of Daniel Kuettel
Introduces self as former American residing in Switzerland who was forced to renounce citizenship by FATCA. Mentions U.S. Army service, marriage with wife in Philippines, job loss in dot-com crash, move to Switzerland as “economic refugee”. Says he did not renounce to avoid taxes but that he enjoys paying taxes. Mentions failed efforts to refinance his condo (51:19), and that HUD, Veterans Affairs, and the Department of Justice did not help him (51:52). Mentions ongoing issues for his daughter who remains a U.S. citizen but not his son (52:45), and that she will eventually face the same choice he did of having U.S. citizenship or having a normal life in Switzerland (53:40).
In barely three-and-a-half minutes, he demolishes every one of the myths that Homelanders spread among why people move to other countries and why they renounce citizenship.
54:00 — Interstitial remarks
Crawford thanks Kuettel for his testimony and his service, jokes that Kuettel is the only witness who’s ever said he enjoys paying taxes. Moves on to Bean; opens with conciliatory tone, praising her for her work on the UBS scandal and describing negative effects of FATCA as unintended consequences. Connolly asks for statement from FACT Coalition opposing FATCA repeal to be entered into the record, jokes that only two types of people oppose taxes: men and women.
55:30 — Testimony of Elise Bean
Introduces self as presenting “another view of FATCA”, from her experience under Carl Levin. Discusses Cayman Islands credit cards, UBS and Credit Suisse undisclosed accounts and private bankers trying to get business in US. Mentions that both firms did not disclose many accounts. Mentions success at getting information from a bank in Liechtenstein which had opened accounts for a Florida businessman, who was caught by a whistleblower disclosure. Mentions OVDI, claims that 100,000 Americans have gone into OVDI and calls $9.9 billion “back taxes” without even mentioning the word “penalty” as Connolly did. Notes that FATCA does not impose taxes. Repeats claim about 1099s having the same information as 8966 and that Americans abroad are being treated the same as Americans at home.
Claims that FATCA’s rough early implementation was due to foreign banks being furious about their “secrecy” being attacked. Claims that CRS is doing the same thing as FATCA. Claims that Americans forced to renounce their citizenship are “a very small number of people” by comparing them to the number of people gaining citizenship (1:02:20). Closes by stating honest taxpayers at home have to give the same information to the IRS, and objects that “Americans who have the wherewithal to go abroad” should not have to do the same.
My comments: Bean repeats the usual FATCA-natic fallacy that large numbers of immigrants excuse harms done to emigrants. She takes it even further by trying to claim that the naturalisations demonstrate that the burden of U.S. tax compliance is fair. Well of course FATCA isn’t causing problems for most new citizens — their local bank accounts aren’t the ones being FATCA’ed. And even Bean’s fellow Democrat Carolyn Maloney later rejects the argument that a high ratio of naturalisations to renunciations means that there are no problems. No need for my comments on the rest, Meadows deconstructs it all very ably
1:03:50 — Meadows questions Bean
“Are you suggesting that the whole reason we’re doing this is because U.S. banks want us to do it?” (1:04:05). Lots of back and forth about whether Bean would change her position if U.S. banks did. Bean tries to draw distinction between the banks themselves and the banking industry associations which include foreign members. Meadows notes that the U.S. banks aren’t yet being subject to requirement for reciprocal disclosure, and that if and when they are they might start opposing FATCA. Meadows mentions that the money from the voluntary disclosure programs was 80% from penalties not taxes. Bean keeps trying to mention 1099s on domestic bank accounts. Meadows makes her answer whether she thinks that mere suspicion of wrongdoing should be enough to investigate a foreign account (1:09:00). Bean eventually says yes, says no to Meadows’ subsequent question about whether he should be able to read her emails on mere suspicion of wrongdoing.
1:10:30 — Connolly questions Bean
Implies that Meadows is only looking at extremes, goes to “opposite extreme” and asks whether an American should be able to open a bank account in Switzerland and never pay taxes on it. Admits nevertheless that FATCA has disrupted Americans’ lives, pointing to Crawford and Kuettel’s testimony. Attributes that to “the implementation was rocky”, asks Bean whether the implementation is still “rocky”. Bean responds that problems still exist. Connolly asks whether Bean admits that the other three witnesses have a point. Bean responds that their concern is misplaced because their real problem is CBT or the renunciation process (1:14:00) and that “FATCA does not require anyone to renounce their citizenship (1:15:00).
1:15:50 — Connolly asks Bopp for response
Bopp says problems caused by FATCA are not rare, pointing to the survey by Democrats Abroad. Rebuts Bean’s point about 1099s, noting difference between income reporting and balance reporting. Closes by noting penalties were not even tax penalties but FBAR penalties.
Followed by recess.
1:55:25 — Rep. Jody Hice (R-GA-10) questions Bean
Asks how much revenue is lost to offshore tax evasion. Bean responds $100 to $150 billion. Ask how much revenue is brought in annually because of FATCA. Bean responds that it’s too new since reporting only began in 2015. Hice responds with the Joint Committee on Taxation estimate $870 million, Bean says she wasn’t familiar with that estimate. Hice accepts JCT estimate, notes that FATCA recovers only a small proportion of the problem, and compares that to FATCA implementation costs and harms mentioned by other three witnesses and harms to U.S. allies. Notes issues whether FATCA is even constitutional or not, mentioning 4th and 5th amendment concerns due to FATCA demanding information which would normally require a warrant to obtain, as well as the separation-of-powers issues with IGAs, which aren’t authorised in the statute itself and never been submitted for Senate advice and consent. Calls it “not only disastrous as a law, but dangerous” despite any good intentions behind it.
My comment: even the JCT $870 million annual revenue estimate is probably still too high, and the IRS lowered its own estimates of FATCA revenue to not even one-tenth of the JCT figure before they gave up on making any estimates at all.
1:59:45 — Hice questions Bopp
Hice asks Bopp whether he agrees that FATCA needs to be repealed or majorly modified. Bopp states that fixes being proposed by “various individuals” (probably referring to SCE) don’t fix constitutional issues or implementation costs, because the banks still have to report.
Hice asks Kuettel, Crawford, and Bean for yes or no answers on repeal or modification. Kuettel and Crawford say repeal. Bean says no to repeal, tries to say something about courts, Hice cuts her off and asks whether she supports modification, Bean says yes.
2:00:59 — Statement by Carolyn Maloney (D-NY-12)
“I represent a district that has many Americans who love abroad”. Mentions that she has heard from many constituents who have had to renounce citizenship or who have been taken off of a spouse’s bank account. However states that she is sympathetic with Bean’s point about terror financing, drug trafficking, human trafficking. Does not support repeal but states that ordinary Americans should not be subject to same scrutiny as criminal tax evaders and money launderers. Mentions that she is co-founder of Americans Abroad Caucus and that due to that position she’s heard about negative effects of FATCA, including refusal to serve American customers. Says that it’s unacceptable that even one or two or two thousand people renounce their citizenship because of FATCA.
Mentions Taxpayer Advocate’s recommendation of Same Country Exemption. Mentions (in a way that suggests she thinks it’s good) that even with SCE, Americans abroad would still be required to file FBAR reports, so that the IRS would not lose access to their account information. Submits letter from members of Congress to Treasury recommending SCE in September 2015 and criticises lack of response. Mentions that she has introduced the Overseas American Financial Access Act to require SCE (see press release).
My comment: Maloney deserves credit for her early attention to banking issues caused by FATCA and her vote against repealing the Foreign Earned Income Exclusion, as well as her implicit rebuttal of Bean’s claim that the number of renunciations is not worthy of attention. However, Maloney is incorrect that Treasury has never responded to calls for SCE. They have responded — in the negative.
2:08:53 — Rep. Eleanor Holmes Norton (D-DC) questions Bopp and Bean
Mentions support for Maloney’s idea. Calls the problems “probable unintended consequences”. Expresses concern about Bopp, Kuettel, and Crawford’s responses to Hice on repeal, stating that the “evidence was overwhelming”. Asks “Do you really want no law on the book that goes after the bad guys” and accuses them of not helping. Bopp notes that SCE will not relieve burdens.
Norton goes on to ask Bean about the Common Reporting Standard and whether it shares the same information. Bean responds that CRS is based on FATCA but not identical. Norton states that it looks like the rest of the world is moving towards FATCA. Asks whether information of US accountholders would still be collected if Congress repeals FATCA but CRS went on. Bean doesn’t know. Norton criticises other witness for alleged unwillingness to negotiate.
2:16:00 — Meadows questions Bopp and Bean
Notes contradiction between Bopp and Bean’s testimony, with Bean stating that FATCA 8966 is the same as what US banks have to do with 1099s while Bopp disagreed. Bopp stands behind his position on 1099s, noting that 1099s only report interest, not gross receipts and withdrawals nor account value. Bean admits that Bopp is correct. Meadows asks why. Bean says “that was the way the law was written” and that subpoenas can obtain the same information from U.S. banks.
Meadows asks whether FATCA was intended to let the U.S. government get around subpoenas (2:18:23) and whether Bean wants to change her earlier testimony. Bean says that foreign banks have to file a form and US banks have to file a form. Meadows asks whether Bean would accept modifying the law to require foreign banks to only report 1099-equivalent information; Bean says no. Meadows criticises Bean for unwillingness to negotiate. Bean admits that “we are forcing [banks] through the 30% excise” (probably means threat of 30% withholding (2:20:19).
Meadows again asks whether Bean would accept foreign banks filing 1099s. Bean responds that the 1099 should be expanded to require FATCA-equivalent information from domestic acountholders (2:21:01). Meadows notes that he and Bean would never agree on that.
Meadows asks what Bean thinks the problems are with FATCA. Bean mentions two. States that penalties were unreasonable. Meadows asks for appropriate penalties. Bean brings up example of person hiding $21 million in Israel who was fined $8.3 million. Bean notes that penalties are scaled and sometimes the appropriate penalty is zero in some cases if you don’t know you’re violating the law. Bean mentions second problem is FBAR and FATCA duplication.
Meadows criticises Bean’s position as eliminating one form and waiving a few penalties. Asks why FATCA is only addressing a small amount of estimated offshore tax evasion. Bean responds that $150 billion includes corporate avoidance and evasion, while $30-70 billion is individual. Meadows asks Bopp, Crawford, and Kuettel to submit three recommendations for modifying rather than repealing FATCA.
2:27:07 — Maloney questions Kuettel about SCE
Maloney goes back to points about terrorism financing. Asks Kuettel whether SCE would have been sufficient to help him. Kuettel responds that it would not have, because “the damage has already been done” and the banks are still terrified of America, and that SCE still places burdens on the banks.
My comment: the full text of Maloney’s SCE bill is not yet available, but existing proposals for SCE either do not modify the bank’s reporting obligations at all (i.e. the individual is relieved of the requirement to file Form 8938, but the bank still has to file Form 8966), or require the customer to submit U.S. tax returns to the bank and for the bank to decide whether that means the customer is compliant (what Mark Twain likened to being strip-searched in the bank lobby).
2:31:10 — Closing statement by Meadows
Closing statement by Meadows. Says that this is not about terrorism financing. Compares his Hezbollah sanctions bill (H.R. 4411 to FATCA, stating that very different tools were used. Says that he does not like treating Americans abroad differently than Americans in the contiguous 48 states or Puerto Rico. Asks Bean to keep an open mind, and asks Bopp to think about replacement. Thanks Paul for attention to issue brought to his attention by citizens abroad who love the United States.
I can’t say it any better than badger said in a comment:
Tell us oh FATCAnatics and US CBT apologists how you and your tax laws and FATCA and FBAR benefited those outside the US who you slandered today? How did you support the children ‘abroad’? How did you support those with disabilities ‘abroad’? What healthcare or education did you provide us with? How about the roads we drive on? Post-secondary grants? Clean water to drink? Food or shelter?
Oh, you say we can’t qualify for anything – unless we live inside the US? Funny, in view of the claim that the US government benefits us wherever in the world we reside.
And you have the nerve to pretend that FATCA and FBAR and US extraterritorial CBT has not caused us harm and caused ordinary people and families to renounce? Or that even if that is the case, it is justified because you “meant well” and disingenously claim it was ‘unintended’?
Hmmm, what is ethical about lies, obfuscation and sins of omission coming from those sworn to serve?
Is it ethical to dismiss the harm to so many ordinary people in order to pursue your crusades and obsessions?
The FATCAnatics were all about pretending that their ends justified whatever harm their means have caused, and finding ways to make light of it – and apparently they’ve got no qualms whatsoever in playing fast and loose with the facts and abusing their control over the proceedings to upbraid those who don’t agree with them.
When Connolly gave his exaggerated example of the ‘extremes’ of egregious tax evaders in his attempt to dismiss the harms experienced by the witnesses, he basically said that it doesn’t matter what happens to the many ordinary people as long as they can pursue the few. And it is absurd and improbable that there are masses of US taxable millionaire and billionaires running loose outside the US, hiding among us ordinary folk, just waiting to be FATCAed.
It’s because US citizens have easy access to the US financial system.
Wow Gerald Connolly is a total moron.
He didn’t even do basic research before showing up
Too bad they didn’t force Connolly, Bean and the other FATCAnatics and FATCApologists like Norton to hear from William Byrnes first and rebut the points he makes in this article ‘Is FATCA ‘Much Ado About Nothing’? Is FATCA’s Tax Revenue Going to Offset Its IRS and Industry Costs?’ ; http://kluwertaxblog.com/2017/04/18/15527/
I would enjoy hearing them attempt to respond to the logic with which Byrnes skewers the imaginary numbers the FATCAnatics ab/use to justify their persecution of everyone around the world – floating the feeble FATCA pretext that the mere fact of a US birthplace and/or parent/s plus committing legal local banking in their non-US home country of residence = de facto tax evasion and money laundering, + a growing list of other heinous crimes like human/sex trafficking, drug smuggling and terrorism.
Ex. Byrnes said;
“…to generate this illusionary $150 billion lost tax dollars, U.S. tax evaders would need to have hidden 20 percent of all global wealth. While it is already shown unlikely that most U.S. taxpayers with foreign assets are tax evaders based on the 2013 IRS tax statistics that 470,000 taxpayer returns claimed the foreign-income exclusion and another 7.5 million claimed a foreign tax credit totaling just over $20 billion, it is even more unlikely that 20 percent of global wealth belongs to U.S. tax evaders.
‘Is FATCA ‘Much Ado About Nothing’? Is FATCA’s Tax Revenue Going to Offset Its IRS and Industry Costs?’ William Byrnes (Texas A&M University Law)/April 18, 2017
As we see in this instance, the FATCApologists take the FATCAfather Richard ‘Dick’ Harvey’s advice to broaden FATCA’s palatability/saleability by spinning out its fantastical starting point about tax evasion even further ( https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2122491 ) and pretending that FATCA functions not only to save the world from those with a US birthplace and/or parents who not only live, but bank legally and locally outside the US (what a shocker – that we don’t all live and bank in Kansas Dorothy!) – but also saves the US from all of us living outside the US who are also deemed guilty (before the fact) of being even more monstrous – we’ve now morphed into presumed “…… terrorists and criminals, sex traffickers, drug lords……” .
26 CFR 601.101:
“The Director, Foreign Operations District, administers the internal revenue laws applicable to taxpayers residing or doing business abroad, foreign taxpayers deriving income from sources within the United States, and taxpayers who are required to withhold tax on certain payments to nonresident aliens and foreign corporations, provided the books and records of those taxpayers are located outside the United States.”
Now that a registered letter to the last known address of the Director, Foregin Operations District is being returned to sender, I’m trying again. Here is my latest guess about the address:
Director, Foreign Operations District
Assistant Commissioner (International)
Director, Philadelphia Service Center
Drop Point 8731,
P.O. Box 21086
Philadelphia, PA, 19114–0586,
And here’s an address which I’m not trying yet:
Director, Foreign Operations District
Assistant Commissioner (International)
Commissioner, Small Business/Self Employed Division (SB/SE)
S C3–413 NCFB
500 Ellin Road
Lanham, MD, 20706
The source for the above two guesses dates from 2002:
26 CFR 101.106:
“Unless they otherwise specify, taxpayers living outside the United States use the facilities of the Washington, DC, Appeals Office of the Mid-Atlantic Region.”
The IRS gave me the following address for the Washington, DC, Appeals Office of the Mid-Atlantic Region, and my registered letters were signed for (and ignored of course):
IRS Advisory Group
7850 SW 6th Court, MS 5780
Plantation, FL, 33324