Last September, due to the efforts of Suzanne Herman,
Representative Bill Posey (R-FL) sent an
excellent letter to Treasury Secretary Mnuchin,
asking him to deal with #FATCA.
This post included the text of the letter and some 60+ comments from Brockers. What Rep. Posey received is a stark contrast to the expectation expressed in this comment:
Bubblebustin says
October 16, 2017 at 2:12 pm@plaxy
According to RO on its FB page:
“At Republicans Overseas’ request, RNC Co-Chairman Bob Paduchik personally delivered Rep. Mark Meadows’ and Sen. Rand Paul’s joint letter on the Foreign Account Tax Compliance Act to Treasury Secretary Steven Mnuchin’s office. Secretary Mnuchin is fully aware that 9 million overseas Americans have been suffering under FATCA tyranny.
As a result, FATCA is included in the 2nd Report to the President on Identifying and Reducing Tax Regulatory Burdens by the Treasury (https://www.treasury.gov/press-center/press-releases/Documents/2018-03004_Tax_EO_report.pdf).
In the report to the President recommending actions to eliminate or mitigate burdens imposed on taxpayers by eight specific tax regulations, the Treasury indicated that it is considering possible reforms of regulations issued pursuant to FATCA. Thank you Co-Chairman Bob-Paduchick.”
This is the response Rep. Posey received from the Treasury Department:
November 8, 2017
The Honorable Bill Posey
U.S. House of Representatives Washington, DC 20515
Dear Representative Posey:
Thank you for your letter regarding the Foreign Account Tax Compliance Act (FATCA). As you are aware, Congress passed FATCA legislation in 2010 to strengthen the integrity of the U.S. voluntary tax compliance system and to combat the use of foreign financial accounts and foreign entities to facilitate tax evasion. FATCA provides the IRS with information about U.S. taxpayers’ use of foreign financial accounts and certain higher-risk foreign entities, so that these foreign accounts and investments are subject to disclosure to the IRS, similar to the disclosures for accounts and investments held or made inside the United States that the IRS already receives.
Between 2010 and 2012, the Treasury Department and the IRS issued a series of notices and other published guidance setting forth proposed rules under the FATCA statutes and, after extensive engagement with stakeholders, issued final regulations in 2013 that phased in the implementation of the new information reporting regime. Additional FATCA guidance has subsequently been issued to respond to stakeholder comments and to coordinate the information reporting regime with preexisting information and withholding tax regimes under the Internal Revenue Code. Concurrent with the work on developing the FATCA regulations, the intergovernmental agreement (IGA) approach was developed in collaboration with other governments as an alternative way to implement the information reporting objectives of FATCA that would remove legal impediments under local law and reduce administrative burdens for foreign financial institutions where appropriate. Congress has authorized the exchange of tax information with foreign governments pursuant to bilateral executive agreements, and information regarding financial accounts is relevant to tax administration.
The Treasury Department has identified FATCA as a potential area for regulatory burden reduction pursuant to Executive Order 13777. The Treasury Department and the IRS are engaged with taxpayers and other constituents regarding ways to reduce unnecessary burdens from FATCA compliance. In this regard, we have recently provided relief to financial institutions by providing them additional time to collect taxpayer identification numbers to be included in reporting under FATCA and the IGAs.
The Treasury Department and the IRS will continue to work closely with all interested
stakeholders to implement FATCA in a manner that appropriately balances the compliance objectives of the statute with the burdens that it imposes.
We appreciate your continued attention to FATCA and look forward to working with you as these discussions continue. If you have additional questions, please contact Bradley Bailey, Office of Legislative Affairs, at (202) 622-1900.
Sincerely,
Drew Maloney
Assistant Secretary for Legislative Affairs
One would think a member of Congress would be important enough to receive a response from Secretary Mnuchin himself.
For your convenience in determining the value of Treasury’s letter, the original letter from Rep. Posey follows.
*****
September 29, 2017
The Honorable Steven Mnuchin
Secretary of the U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW Washington, DC 20220
Dear Secretary Mnuchin,
I am writing to you regarding the Foreign Account Tax Compliance Act (FATCA) [26. U.S.C. § 1471-1474; 26 U.S.C. § 6038D]. As discussed below, FATCA is an invasive, costly failure that I strongly suggest must be repealed at the soonest possible opportunity, hopefully in the context of tax reform enacted this year. In addition, the means adopted during the tenures of your predecessors Jack Lew and Timothy Geithner to implement FATCA via a series of legally dubious and constitutionally infirm non-treaty agreements with other countries must not be allowed to stand. I ask your assistance in assuring that FATCA repeal is part of any relevant legislation, and that the Treasury Department takes prompt action to cease the implementation of FATCA via Intergovernmental Agreements (IGAs).
FATCA’s proponents claim that it is simply a “transparency” measure – similar to a domestic 1099 – to ensure greater tax compliance for assets held offshore. This characterization is misplaced. Domestic tax law requires reporting of taxable events, such as income (a W-2 Wage and Tax Statement) or bank interest (a 1 099-INT). U.S. law, based on a presumption of innocence, does not generally require inquiry into asset principle unless there is reason to suspect wrong-doing. By contrast, FATCA requires wholesale reporting of Americans’ assets and transaction history absent any such suspicion, solely because the asset is held outside the United States. This is despite the fact that the IRS’s own Taxpayer Advocate Service reports that “the vast majority” of Americans residing abroad “actually appear to be substantially more compliant than a comparable portion of the overall U.S. taxpayer population.”
Despite such an invasion of privacy, FATCA has failed in its stated purpose of recovering revenue lost to offshore tax evasion. Last year the Internal Revenue Service (IRS) credited FATCA for “collecting” $10 billion from “taxpayers coming back into compliance, ,2 but that figure conflates genuine tax revenues with penalties for filing deficiencies and recoveries from all offshore enforcement programs, not just FATCA. In the estimate of Professor William H. Byrnes of Texas A&M University School of Law, the real net tax recovery of FATCA alone is about $200 million annually and may be only half of that. Professor Byrnes projects that FATCA may “soon cost more money than it brings in.”‘ Indeed, his view may actually be overly optimistic in light of the IRS’s commendable enforcement standard of recovering seven dollars for every dollar spent.4
By contrast, because of the IRS’s need to try to discern indicators of evasion within a sea of indiscriminate personal information belonging to non-evaders, W. Gavin Ekins of the nonpartisan Tax Foundation suggests that, under FATCA, finding “a dollar of tax evasion may cost us $5 of actually sifting through the data and compliance costs.”5 FATCA’s unsatisfactory ratio of return must also be weighed against the impact on taxpayers saddled with burdensome reporting paperwork. The Tax Foundation estimated in 2016 that these requirements cost individuals nearly four and half million hours and more than $165 million,6 an amount comparable to FATCA’s likely proceeds. This does not even take into count the massive compliance costs imposed 011 financial institutions.
The above summarizes the good and sufficient reasons why FATCA must be repealed and enforcement dollars spent on more effective programs to detect and punish actual tax evasion. While your support for that effort will be appreciated, it is a task primarily of Congress. But I now turn to a matter almost entirely within your purview, on which I ask your prompt and decisive action. This relates to IGAs invented by the Department in consultation with five European governments for the purpose of enforcing FATCA.
While the IGAs read like treaties and have the effect of treaties in purporting to create mutual obligations between sovereign states they are not submitted to the United States Senate for that body’s advice and consent to their ratification, though the non-U.S. “partner” country is required to do so under its necessary internal procedures for entry into force. In July 2013, I wrote7 to Secretary Lew with a specific request for the statutory authority for the IGAs. The Department responded, after a delay of nearly a year, with the following statutory justification: 8
“The United States relies, among other things, on the following authorities to enter into and implement the IGAs: 22 USC Section 2656; Internal Revenue Code Sections 1471, 1474(f), 6011, and 6103(k)(4) and Subtitle F, Chapter 61, Subchapter A, Part III, Subpart B (Information Concerning Transactions with Other Persons).”
None of the sections cited above confers on the Treasury Department any authority for making agreements with foreign governments for the furnishing of private financial information. In particular, there is nothing in the cited sections that allows the Department to promise (under the so-called “Model 1″ IGA) on behalf of the United States FATCA-”equivalent” reporting to foreign tax services of private information obtained from domestic American financial institutions. Following through with this unauthorized promise would impose on American banks, credit unions, insurance companies, and other institutions crushing compliance costs of the magnitude already suffered by foreign institutions – costs that would inevitably be passed on to American consumers.
The IGAs represent a prime example of the kind of executive overreach that unfortunately typified the previous administration. I ask you to rein in this abuse by ceasing the negotiation of new IGAs and freezing the implementation of existing ones. This action should include a freeze on enforcement of FATCA regulations on taxpayers and financial institutions. Further, I ask that you notify IGA jurisdictions that these dubious pseudo-treaties are under legal review and that their nullification or abrogation from the U.S. side can be expected pending FATCA’s anticipated repeal.
Nothing in the foregoing should be construed in any way as being “soft” on tax evasion. Quite to the contrary, in addition to its other flaws FATCA is a distraction and a diversion of resources from effective tax enforcement based on standard investigatory techniques. As a member of the Financial Services Committee I look forward to working with the Department on measures to ensure effective tax enforcement that targets the guilty, without penalizing the innocent or
compromising our cherished American constitutional and legal norms. In the meantime, FATCA and the IGAs must go.
Thank you for your assistance on this critical matter.
Service, 2016 Annual Report to Congress, Vol. 1; “FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA): The IRS’s Approach to International Tax Administration Unnecessarily Burdens Impacted Parties, Wastes Resources, and Fails to Protect Taxpayer Rights,” page 221; See:https://taxpayeradvocate.irs.gov/Media/Default/Documents/2016-ARC/ARC16 Volumel MSP 16 FATCA.pdf
2 IRS press release, “Offshore Voluntary Compliance Efforts Top $10 Billion; More Than 100,000 Taxpayers Come Back into Compliance,” Oct. 21, 2016; See: https://www.irs.gov/newsroom/offshore-voluntarv-comphance-efforts-top-10-billion-more-than-100000-taxpayers-come-back-into-compliance
3 “Background and Current Status of FATCA” Texas A&M University School of Law Legal Studies Research Paper No. 17-31, pages 1-34, 35; See: https://paers.ssrn.com/soI3/papers.cfm?abstract id=2926 119
4 IRS press release, “National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Tax Reform, IRS Funding and Identity Theft,” Jan. 9, 2013; See: https://www.irs.gov/newsroom/national-taxpayer-aclvocate-delivers-2012-annual-report-to-congress
5 “Why Americans are giving up citizenship in record numbers,” Washington Post, June 1; 2016: See:
6 Tax Foundation, “The Compliance Costs of IRS Regulations,” June 15, 2016; See: https://taxfoundation.org/compliance-costs-irs-regulations/
7 See: http://www.repealfatca.com/downloads/Posev letter to Sec. Lew July 1, 2013.pdf
8 See: http://federaltaxcrimes.blogspot.com/2014/07/irs-letter-to-congressman-defending-its.html
For a definitive section-by-section demolition of the Department’s response, see Professor Allison Christians, McGill University Faculty of Law, “IRS claims statutory authority for FATCA agreements where no such authority exists,” http://taxpol.blogspot.com.au/2014/07/irs-claims-statutory-authority-for.html
@ Harrison,
Re:
At the time we started Brock, December 2011, some embassies/consulates were requiring 2 meetings, some requiring 1. (Our earliest renunciation data at Brock is from 2009, 1 meeting at Bern (all our Bern reports are 1 meeting).)
By 2013, many embassies/consulates which required 2 had switched to requiring only 1. I presumed this was because they were getting such an increase in volume of renunciations.
Although I follow developments re DoS procedure pretty closely, and although some embassies/consulates continue to require 2, I cannot think of any embassy/consulate switching from 1 to 2. Doesn’t mean no one has, but if so it can’t be common.
Re:
You are most definitely incorrect that the embassy/consulates in Canada require 2 meetings. I check with them regularly regarding procedure, and as of this week, they continue to require only 1 meeting.
(BTW, for those interested, they also report that wait times currently range from 2-3 months (Montréal and Ottawa) to 5-6 months (Québec City), with the other four locations falling in between.)
The UK as well continues to require only 1 meeting, though they continue to clearly state that you may opt for a pre-meeting phone conversation if you wish.
I don’t have any information about “all Asian countries,” except I’ve been aware of a few requiring 1 and a few requiring 2 — that region doesn’t come up here much and “all Asian countries” includes several dozen embassies and consulates. But, as Heidi stated, “If you are serious, don’t bother with Google, they are not accurate, email the Embassies.” And one thing I’ve learned in six years of tracking renunciation procedure is if you get a reply concerning procedure from one embassy/consulate, do not assume their instructions apply to any others — although some procedural matters are common to all, others vary quite a bit from place to place.
Re:
The US Embassy’s website in the UAE, which should have come up in a google search,lists the documents you must send in in advance, followed by “All of the above documents and forms (typed or clear-readable handwritten) must be scanned and sent to AbudhabiACS@state.gov for scheduling an appointment with the consular officer at the Embassy to take the oath of renunciation.”
Doesn’t mention anything about scheduling an appointment to occur before the appointment to take the oath of renunciation.
And rather than requiring an appointment prior to the renunciation appointment, it says, “Please note that if you do not understand any aspect of the loss of nationality requirements or process described above or you are unsure about whether you would like to continue with the expatriation process, you may speak telephonically or in-person with a consular mission member or consular officer at the embassy.”
I think I saw two appointments in HK and two in UAE, Kuwait and Saudi Arabia. Yes they require sending of documents prior to renunciation but they do require two interviews. Anyways my concern was HK requiring two as I found out. Taiwan sounds definitely interesting.
Canada was requiring two previously when I checked it last time on this blog. Now it is maybe one. I am not sure as I don’t live in Canada. I just looked at the previous experiences here on this blog. It changes from time to time maybe as a lot of renunciations were going on previously. As HK too was hammered earlier with a lot of renunciations from 2010-2011. Its kinda difficult choice too to let go although I have not been to US for the past 7 years now.
@ Harrison,
Re:
Yes, some locations in Canada, though not all, required two meetings prior to November 2013.
A policy was issued by the embassy here at that time that all posts in Canada use only one meeting for routine renunciations, unless requested otherwise by the renunciant, and to my knowledge all locations in Canada have done so since that time.
We make a point to have the sentence “Please note procedures can vary by location and can change over time” at the bottom of every page of the Consulate Report Directory because the last thing we want is to do is provide people with inapplicable information that would further complicate their expatriation.
But when it comes to older comments in the comment stream on this topic (and presumably many topics on many blogs), they can give an impression that is no longer accurate if people are not aware of how much change has occurred or is likely to occur regarding the topic (and it’s quite understandable that a person wouldn’t be aware). Ditto for differences in location as well as time.
It’s because of this variety in procedure over time and location that I strongly agree with Heidi’s point about the importance of e-mailing a consulate/embassy for information.
@pacifica thx points noted from you and the consulate directory link. It seems to depend on each country with Paraguay being really late like 19 months. The process depends on each individual and the country of renunciation. Unfortunately to get a CLN finally in your hands is not possible in any non resident country with the time it takes to process the CLN these days. It’s not like I can fly to Luxembourg and get it and come back with a CLN in my hands. Ahh to be free of this toxic passport which at one time was the best in the world. Thanks US govt for making our lives miserable by all your requirements for expats living overseas. Making banking, brokerages, holding partnerships and some jobs impossible too. Why can’t you join the rest of the world in adopting RBT? We pay taxes here and would like to pay taxes to enjoy the services where we live not be bound by you everywhere ! Trust me it’s not about taxes it’s all about control
@ Harrison
Right, you can’t come back with a CLN in your hand. Everybody waits for it to be mailed to them.
Stephen Kish went to Iceland from Canada and his CLN arrived by mail within 2 months (2016).
http://catseyesap.com/crd/Consulate%20Report%20Directory%202018.01.pdf
And you are double right that “it’s all about control”.
Amidst the talk of where to renounce, more and more embassies and consulates are giving top priority to bonfide residents of that place. Hence, to renounce in Singapore, you have to be a bonafide resident of Singapore, not just fly in and show up. Same with Hong Kong and Taiwan. You can check this by finding the renunciation page on each consulate’s website, where this is clearly stated. I don’t know how to prove you’re a bonafide resident. Nevertheless, the feeling I get from this is that the renunciation rate in such places is far higher than is reported on State Department figures (and they’re likely devoting fewer resources to renunciations, just out of spite), so they can’t handle the renunciation tourists.
“Renunciation tourists”. I believe that’s a first, Barbara!
Renunciation Tourism. Yes, it occurred to me that I coined a phrase. Perhaps some localities like Halifax or some African countries have a marketing opportunity, if their local US consulates don’t have a “local residents only” renunciation policy. “Tired of waiting months in drizzly gray Vancouver to renounce your US citizenship? Visit safe and sunny Sierra Leone and emanicpate in just days, and try our lovely beaches too!”
@Harrison
“It’s not like I can fly to Luxembourg and get it and come back with a CLN in my hands. ”
No, but you will have a receipt for the renunciation fee in your hands to show the banks and you will be effectively free of that predator government the moment you take the oath of renunciation.
I believe just having a receipt and proof that you did the renunciation is already, theoretically, enough to satisfy banks that one is no longer a US citizen. Has anybody actually done this, in the EU. Is there a point in going through the whole procedure (is it even possible) except payment of the fee and “purchase” of CLN? Analogous to Plaxy’s theory of not filing 8854.
@Fred
Not sure I understand your question.
Banks in Switzerland certainly accepted renunciation receipts to permit accounts to be kept open and the Swiss banks had the most to lose (non prosecution agreement).
@Fred(B) The 8854 would have to be filed only if one needs to remove the covered expat status. It is better to file it so your beneficiaries in USA can get your wealth tax free after your death. If beneficiaries not in USA then no need to file. It is not even proof that they are not going to be taxed. They can do whatever they can damn well please. Wish now I had known about this CBT and moved to Canada decades ago when I had the chance and the right age . Better country better people and choices. Lots of my friends, relatives living in Canada and enjoying their lives. Best country in the world to move to and live.
Fred(B) – good question.
I haven’t heard of anyone trying to open a new account in an EU bank while in limbo. I didn’t try it, myself. I wish now that I had.
I suspect the receipt would not be accepted in lieu of CLN, either for opening a new account or to prevent the reporting of a pre-existing account. But that’s just my guess.
The receipt proves entitlement to the CLN, should the shabby photocopy fail to materialise. Proof of purchase.
It’s not really comparable to the decision to file 8854 or not to file 8854. Producing the receipt is the NRA’s effort to prove s/he is not subject to US tax law, whereas by filing the 8854 the NRA agrees to be bound by US tax law.
@Harrison and FredB
Despite threats, there is still no procedure or question on the estate and gift tax form 3520 (which needs to be filed by the US beneficiary of the estate) asking if the estate comes from a covered expatriate.
Heidi – “Banks in Switzerland certainly accepted renunciation receipts to permit accounts to be kept open and the Swiss banks had the most to lose (non prosecution agreement).”
The Swiss banks, being in a much more precarious position, might have been wary of legal action by customers? The IGA 1 lets banks report, or refuse accounts, just as they please, with no consequences for the bank for wrongly reporting.
Fred – “Is there a point in going through the whole procedure (is it even possible) except payment of the fee and “purchase” of CLN? ”
You pay up front. No payment, no renunciation.
@plaxy
I would think that Pre existing US accounts would come under FATCA juristriction and would be reported for that year up until the new year the cln kicked in.
Trying to open a new account with a CLN receipt should be OK, but it depends on the bank’s discretion.
Heidi – “Trying to open a new account with a CLN receipt should be OK, but it depends on the bank’s discretion.”
Yes – that’s why I think the answer would be no. No skin off their back.
@plaxy
Swiss banks were catagory 2
https://www.justice.gov/opa/pr/justice-department-announces-final-swiss-bank-program-category-2-resolution-hszh-verwaltungs
Heidi – “Swiss banks were category 2”
Yes – threatening the banks, but also the bank’s USC customers. If the bank wrongly reported data of NRA customers to the IRS, mightn’t the NRAs have had grounds to sue?
Sue the banks? Expensive and have to prove damage done. Look at our Canadian lawsuit.
@Heidi. I don’t know if there is a question or not about covered expat gift tax now but maybe in a few years there would be you never know as it took years for FATCA to hit the banks that hard as previously bank officers were joking that these guys are crazy. Nothing is going to happen but now they are running around trying to comply. Individual banks all over the world had to comply on their own 6 years ago and get a number from IRS or risk facing withholding tax. After this the central banks all over the world kicked in as per Model 1 to make sure all banks are complying. I will be filing my 8854 so my children at least have some protection as I am not covered but still they can determine anything on their own as they wish it to be as I found out by emailing my attorney friend again. It’s not for us to determine its for them to determine our status and this is what is really irks me. My attorney friend did advise me that there would be a gift tax or not as determined by IRS. There is a 15,000 usd per year exclusion from gift tax as of now to beneficiaries. The rate is 35 percent over 15,000 usd.
@plaxy sue the banks? Good luck on that. The banks can give any data to a govt due to any nationality nowadays as Swiss are doing as per CRS rules too. No one can sue a bank based on OECD/FATCA rules.
Heidi – “Sue the banks? Expensive and have to prove damage done. Look at our Canadian lawsuit.”
That’s under the IGA 1, and the suit is against the CDN government, not a bank.
The IGA 1 protects the banks; the Swiss Bank Program didn’t. The bank would need to be very careful about not mis-identifying NRAs as US citizens.
IGA 1 banks don’t need to worry on that score, so they don’t need to accept a receipt instead of a CLN. They don’t even need to take notice of the CLN. It’s only going to the local tax agency, as far as the bank is concerned.