Introduction
On April 26, 2024 I submitted a comment to the OMB arguing that the time had come for Treasury to exempt Americans abroad from the FBAR filing requirement. I published the comment in the form of a post at my citizenship solutions site.
All of the comments may be read here. The government’s “supporting statement” includes:
Most of the comments were submitted by or on behalf of U.S. persons living abroad. A few comments were received from financial and legal associations. The consistent theme in these comments was that the FBAR requirement for U.S. persons living abroad is unnecessary and burdensome. Some of these comments also suggested certain revisions to, or exemptions from, the regulations. The comments are summarized in the following five categories.
• Unnecessary for U.S. Persons Living Abroad:
• The FBAR requirements are duplicative of the FATCA requirements.
• Almost all U.S. persons living abroad, even those with modest incomes, must file the FBAR because the $10,000 threshold is too low.
• U.S. persons living abroad need financial accounts in their country of residence for practical purposes. Maintaining these accounts is not suspicious.• Burdensome for U.S. Persons Living Abroad:
• There is confusion regarding the filing requirements for the FBAR, because the FBAR and FATCA requirements are different as they relate to the thresholds and types of accounts to be reported. This can lead to misinterpretation and filer errors.
• The FBAR penalty for filing errors is excessive.
• Foreign spouses are required to report their financial information along with the U.S. spouse living abroad.
• U.S. persons living abroad are not afforded certain professional and charitable opportunities because of FBAR requirements. For example, a company or a non-profit may not want to hire a U.S. person living abroad for certain financial roles, particularly those that involve granting the U.S. person signature or similar authority, because the U.S. person would be obligated to report on the company or non-profit’s financial accounts.
• It can be challenging to determine the highest account value for certain accounts, because the statements do not always provide that information.
• It is costly to hire a tax professional to assist with FBAR and FATCA filing requirements.• Recommendations for Modification to FBAR Regulations:
• Remove FBAR requirements, and permit U.S. Government sharing of FATCA information.
• Adjust the FBAR dollar threshold for inflation. The initial threshold of $10,000 has not been changed in over 40 years.
• Exempt employees from reporting signature authority over, but no financial interest in, their employers’ foreign financial accounts.
• Maintain special rules for reporting limited account information on 25 or more foreign financial accounts for entities that are highly regulated.
• Eliminate duplicative reporting of foreign accounts held by global custodians.
• Revise the FBAR instructions to account for the ruling in Bittner vs. United States.
• Change the maximum account value to the account balance as of December 31 of the calendar year to eliminate burden.
• Articulate how FBAR reporting is highly useful to the U.S. government.• Exemptions for U.S. Persons Living Abroad:
• Exempt U.S. persons living abroad from reporting the financial accounts in their country of residence.
• Exempt U.S. persons that have lived abroad for a long period of time.• Estimate of Time to Complete the FBAR for U.S. Persons Living Abroad:
• Determining the maximum value of an account can be time consuming because the information is not always readily available on account statements.
• U.S. persons living abroad may have 15 to 20 accounts for practical reasons. For example, many U.S. persons living abroad have a checking account, a savings account, lines of credit, investment accounts, retirement accounts, and business accounts. With this many accounts, it may take such a filer well over an hour to complete the FBAR.
And concluding with:
These comments will be considered as part of FinCEN’s review of regulations and guidance required by section 6216 of the AML Act. As part of this review, FinCEN will evaluate ways to clarify FBAR reporting requirements and minimize burden to the public, while retaining reports or records that are highly useful in countering financial crime. FinCEN also intends to conduct, pursuant to the Paperwork Reduction Act of 1995 (PRA), additional assessments of the burden associated with BSA requirements, including FBAR requirements.
Note that there is no consideration of these comments in the March report on the status of the implementation of the AML Act. https://www.congress.gov/crs-product/R47255
Seeking your help!!
I am in the process of preparing a presentation called “The Life And Times Of Mr. FBAR” for a professional conference at the end of June. As part of the process of organizing my presentation I have been looking at things I have previously written. I found my comment/argument and created an AI generated podcast and slide show out of it. The podcast is linked to in the tweet below.
A slide summary of the podcast and article is here.
What follows is the April 26, 2024 submission …
Any thoughts/comments would be appreciated.
Why Treasury Should Exempt U.S. Citizens Resident Outside The United States From FBAR Filing
My now exwife, Japanese, cited FBAR/FATCA and CBT among her reasons for our recent divirce.
Very well thought out and presented, I think. It totally makes sense to those of us affected by the scheme. But I’m wondering about the US-centric view. We are trying to persuade people with a different viewpoint and understanding. There have been many attempts to get them listen to our reason, even at the time this was being set up and our MLAs were running to Washington to get instructions for the “intergovernmental agreements” that formed the bases of FBAR..
If we consider the US-centric view, the major concern is cost-banefit, I think. Demonstrating how costly this is for them, and how little it returns, would be more persuasive, I believe, than trying to show that it is illogical like we have been doing. A presentation like the one above, but showing cost-benefit, would be a powerful addition to the arsenal of reasons to abandon this scheme.
For your argument to be credible IMO (when presenting it to the US government) I’d make sure there is no factually incorrect information; an example in your post on the other site is how you said there was no such thing as an “Accidental American” in 1970. At least since the US has had birthright citizenship there have been accidentals, although probably not as many given the lower frequency of international travel in the past as you attested to (and both the de jure and de facto consequences of being such were not as severe as they are now).
@Kelly – thanks for your comment. Could you tell me exactly where you see the inconsistency? The reality is that from a pure legalistic immigration perspective there is no such thing as an “accidental American” – which is of course part of the problem.
@WasUSnowCan appreciate your thoughts. How would you frame this cost-benefit issue (in a paragraph or two)?
@Todd – you are not the first to find yourself in an @FBARMarriage which led to the @FBARDivorce. I am sorry to hear aboutthis.
Thoughts from a note received today …
“There is clearly no justification to continue this ridiculous farce other than it would take some effort to get rid of it. Any reasonably intelligent politician (oxymoron?) should be able to discern this. It has nothing to do with accomplishing anything worthwhile. It was conceived under the false notion that billions of dollars worth of tax revenue was languishing unharvested; all due to the illegal machinations of expatriate vermin who had the sheer impertinence to exit the U. S. The guy who came up with the figures to “justify” this atrocity actually admitted that several years later. He just made up the numbers. It’s all about saving face at this point, and maybe saving their asses a bit, too. Why repeal a perfectly useless piece of legislation? Who wants that?”
Of course you’re literally right as the term “Accidental American” is not used officially, but there were definitely people even back then who were US citizens just because their parents were temporarily there when the child was born, or were born abroad and never lived in the US but had a parent who qualified to pass their citizenship to the child, which are the definition of “Accidental Americans”.
If you’re wondering where that statement is, look at “Part V – FBAR and U.S. Citizens: The World of Mr. FBAR in 1970 is NOT The World Of Mr. FBAR 2024” and the paragraph under “(i) The world has changed – The 21st Century is not like the 20th century” at the link below:
https://citizenshipsolutions.ca/2024/04/28/why-treasury-should-exempt-u-s-citizens-living-in-other-countries-from-fbar-filing/
Thank you for suggesting, John, that I expand my ideas.
We want the US to change its behaviour towards us. Our approach has been attempts to awaken their sympathy for the hardships caused. Many very well written and researched presentations have been made. So far, the effort has not been effective.
I’m suggesting trying a business approach. The objective would be to stimulate them to change their behaviour by showing that FATCA has been costing more than than it generates and that it has not been meeting its other objectives.
There would have been objectives, expected revenue generated and estimated cost presented by the sponsors of the bill. This information convinced the legislators to approve the bill and would be written in the legislation and available.
A main objective was apparently apparently to tax wealthy people in the US who were using residence in other countries to avoid taxes. I wonder how well this objective has been met.
I doubt that it was an objective to cause hardship to ordinary (not wealthy) people who have chosen to live in countries other than the US. This is therefore a costly, unintended consequence of this legislation.
There would have been projections of generated revenue. I wonder what the actual revenue has been.
Costs were largely offloaded to financial institutions and other country’s governments, but still the US must receive and process the data. I wonder whether these costs are appreciably less than the revenue that has been generated.
Gathering information and writing a document could clarify all of this, I think. It might prove to be a strong business case for discontinuing. It also might show gaps in available information. Identifying the gaps could be useful to our case. We might learn that revenue greatly exceeds costs and that it is good business, which would nullify our argument.
The costs of implementing and carrying on FATCA has been borne largely by the financial institutions. For them, there are costs which are probably largely hidden. It adds to staff work and increases paperwork. But perhaps its biggest cost is to goodwill. Knowing that their financial information will be reported to bureaucrats in the US would turn many people away from becoming customers, I think. With all the available information laid out in a paper, perhaps the financial institutions would be interested in helping to end FATCA in its present form.
I do not have the ability to obtain the information needed and to present it in a cogent case. I suspect there are people who do. If there is merit to my ideas, perhaps some capable person will take up the task.
Haven’t we been saying this for the better part of two decades. And yet, FBAR requirement is actually not even part of the United States law code (31 USC 5314) but part of a regulation that is designed by the Treasury department, does not require an act of congress or signing by the president, but a mere whim of the treasury department to exempt US persons living abroad. FBAR was the main reason I had to relinquish my US citizenship.
In other words, the IRS and Treasury department have been punishing benign actors with intention. That’s why I characterized DC as Mordor. But they have power with FATCA that they eye of Sauron only dreamed of.
The power to collect FBAR penalties does not cross the US border. So there’s that.