Category Archives: Issues regarding US persons abroad

 
“Logline” from the extensive press kit for this new documentary film:

The investigative documentary Faliciani‘s Tax Bomb follows the tracks of the obscure whistleblower Hervé Falciani who — being responsible for the so-called Swiss Leaks — caused the biggest bank data theft in the history of HSBC Bank. His delicate information hit the international finance sector like a bomb and uncovered massive tax fraud strategies exceeding billions of Euros, finally triggering off a heated debate between financial experts and political leaders about the legitimacy of tax havens. Hervé Falciani is said to be the Edward Snowden of the banking system. He is currently on the run from being arrested by the Swiss authorities.

Source image courtesy of Sally Edelstein and her web site Envisioning The American Dream.

http://drtp.ca/canada-fatca-court-challenge-fizzling-maybe/

“[77] For all these reasons, the declaratory and injunctive relief requested by the plaintiffs in their motion for summary judgment shall be denied by the Court, without prejudice to the plaintiffs’ right to pursue their claim that the impugned provisions are ultra vires or inoperative because they are unconstitutional or otherwise unjustifiably infringe Charterrights. There shall be no costs. This is a case where, in view of the nature of the issues and the public interest involved in clarifying the scope of novel provisions affecting hundreds of thousands of Canadian citizens, no costs should be ordered against the losing parties.”

This last sentence leads us to believe that the case may be heard in the Supreme Court of Canada at a later date.
Hillis v. Canada (Attorney General) 2015 FC 1082

[PRIVATE BANKING DATA ON 155,000 CANADIAN ACCOUNTS WERE (PRESUMABLY) TURNED OVER ON SEPTEMBER 30 BY YOUR OWN CANADIAN GOVERNMENT TO THE UNITED STATES.

Plaintiffs Ginny and Gwen, ADCS, and our legal team are now planning the next steps for round two of our fight.

Professor Allison Christians, an expert witness in our Canadian lawsuit, comments:

“In my view it was political malfunction in both the US and Canada that brought forth FATCA and then the FATCA IGA, and that FATCA as applied can be summed up in terms of administration as a case of continuous indifference to individuals who are wrongdoers in no real sense yet bear the brunt of severe punishments meant for others. If the judiciary is also not to blame and not to fix, then it seems there is no avenue to right the wrongs of FATCA anywhere. I hope that is not the case.”]

Cross posted at ADCSovereignty

Here is the actual Order for denying the injunction:

ORDER

Here are the reasons provided by the Court for denying the injunction request:

REASONS FOR ORDER

RENNIE J.A.
[1] On September 15, 2015 the Federal Court dismissed, in part, the appellants’ action for declaratory and injunctive relief with respect to intention of the Minister to disclose certain financial information to the Internal Revenue Service of the United States of America. The summary trial decision of Justice Martineau addressed only that part of the action dealing with what might be characterized as the statutory interpretation and statutory authority of the Minister to make the disclosure. Charter challenges to the proposed action were, on consent, not addressed and await trial. Thus, the summary judgment dealt exclusively with the allegation that the disclosure was contrary to the Canada–United States Tax Convention Act, 1984 (S.C. 1984, c. 20), the Canada-US Tax Treaty and Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)), collectively described as the authorizing legislation.

[2] The appellants move on an urgent basis for an interlocutory injunction, effectively staying the disclosure of their financial information by the Canada Revenue Agency (CRA) to the Internal Revenue Service (IRS) under the authority of this legislation. The Minister has made clear that she intends to disclose this information at the close of business today, hours from now.

[3] By way of background, and at the highest level of generality, the legislation mandates the disclosure of information about “US persons” held by Canadian banks to the CRA, and provides for the CRA to automatically disclose that information to the IRS on an annual basis. The IRS may or may not use that information to pursue enforcement actions against US persons resident in Canada.

[4] The appellants are “US persons” by virtue of birth, but have spent their working lives in Canada and are Canadian citizens. They do not hold US passports. They claim to be “accidental Americans”, US citizens only by reason of birth. Their information would be disclosed under the regime, which could lead to the IRS enforcement action. The judgment below is candid that the application of the law could cause the appellants serious difficulties.

[5] The appellants argue, amongst several other grounds, that the disclosure of this information constitutes assistance to the United States in its enforcement and collection of its taxes, which is prohibited under Article XXVI A of the Canada-US Tax Treaty. The Federal Court found that this prohibition only applies once tax liability has been determined and is enforceable, and is thus not triggered, and that in any event, any such claim was premature.

[6] The appellants further argued that information sharing was only permissible when that information “may be relevant” to enforcing the treaty or domestic laws of a contracting state (Article XXVII), and as such the information must be assessed for relevance on a case-by-case basis rather than handed over in bulk. The judge below found that, even when the information is still in bulk form and has not been shown to have any further utility, it already meets the “may be relevant” test. The appellants argue, in support of the interlocutory injunction, that the learned judge’s reasons fail to respond to this argument; the judge erred in focussing on the fact that Canada cannot challenge US tax policy choices, but failed to explain how that establishes or meets the statutory requirement of relevance.

[7] The appellants also argue that the regime violates the non-discrimination provision of Article XXV, wherein a US National resident in Canada cannot be subject to a burden that is not also imposed on Canadians in Canada. The appellants argue that the privacy intrusion, and the burden of complying with the filing requirements, are thus unequally imposed on them as US Nationals resident in Canada. The judge rejected this argument. While he did not directly address the privacy interest, he said that the filing costs are borne by the banks rather than the individuals and thus cannot ground unequal treatment.

I. The test for an interlocutory injunction

[8] I am not satisfied that each of the three criteria governing the grant of an injunction or stay pending appeal set forth in RJR — MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, 1994 have been met.

[9] The appellants assert four serious questions to be addressed on appeal. At this stage the Court only needs to examine the questions and be satisfied that they “may” form the foundation of a meritorious appeal. In addition to the grounds reviewed above, the appellants argue that the automatic disclosure of taxpayer information of Canadian residents who are also US citizens, is not authorized by the Canada –US Tax Treaty. While Martineau J rejected this argument, and the subsidiary arguments which underlie it, the question at this stage is only whether the appellants might have a credible case to make an appeal. I am satisfied that they do.

[10] I am not, however, satisfied that the criteria of irreparable harm has been met. The Minister concedes, on two occasions in her memoranda, that “there is no taxpayer information concerning the Appellants in the batch of ‘slips’ that have been collected by the Minister from financial institutions pursuant to Par XVIII of the Income Tax Act and which the Minister must disclose to the United States, pursuant to the IGA, on or before September 30, 2015.”

[11] On this understanding, the appellants do not meet the second criteria of the RJR — MacDonald test. As no financial information concerning the appellants will be sent to the IRS, there can be no irreparable harm.

[12] Turning the third criteria, the balance of convenience, the Minister concedes that the appeal will not be moot as of this transfer of information this afternoon. The Minister concedes the existence of a continuing live controversy. While mootness is always an question for the panel of this Court hearing the appeal, at this stage, the Minister’s position that the appeal will not be moot tips the balance of convenience in favour of the Minister.

“Donald J. Rennie”
J.A.

cross-posted from the ADCSovereignty WordPress Blog

What follows is the announcement from the Republicans Overseas Facebook page and comments. What follows is Judge Rose’s decision which I will comment on in more detail when I have had time to read and consider it. You will find Judge Rose’s decision here.

That said, I would like to make some initial comments about why Judge Rose approached the “equal protection” claim. You will see that on pages 25 – 38 of the lawsuit. I strongly encourage you to read these pages in particular.

You may recall the wisdom from 17th Century France (I wasn’t there) …

“The law in its majesty equality prohibits both the rich and the poor from sleeping on the park bench.”

Which Judge Rose carried forward into 21st Century America (I am here) …

FATCA in its majestic equality requires both Homelanders and Americans abroad to report their “foreign” bank accounts.

In the same way that the practical impact of the “park bench” law is to apply only to the poor, the FATCA reporting requirements apply only to Americans abroad.

In other words, Judge Rose is NOT looking to the effect of the law to consider a denial of equal protection.
Continue reading →

The Yucatan Times:

WASHINGTON, D.C. — United States authorities have begun the exchange of information with Mexico on all Mexicans with bank accounts or investments in the U.S. who have obtained more than $10 USD in annual interest…

Mexico will provide the IRS the name, address and tax number of Americans with accounts whose balance is greater than $50,000 USD, the account number, the monthly balance and the amount of interest paid.

http://www.theyucatantimes.com/2015/09/u-s-irs-and-mexican-sat-begin-sharing-info-on-bank-accounts/

“DOING NOTHING” WAS NEVER AN OPTION. TODAY THIS POEM OF DRYDEN COMES TO MIND:

“Fight on, my men,” says Sir Andrew Barton,
“I am hurt, but I am not slain;
I’ll lay me down and bleed a while,
And then I’ll rise and fight again…”

“Fight on my men,” says Sir Andrew Barton,
“These [English dogs] they bite so low;
Fight on for Scotland and Saint Andrew
Till you hear my whistle blow!”

[Republican Overseas motion for preliminary FATCA injunction denied (September 29) by Thomas Rose, U.S. District Court Judge in Ohio. Here is the link to the decision.

— Win or lose our Canadian injunction, we will do as George says: “…get straight on to the Charter challenge.”]

This is the affidavit of Sue Murray, which is part of the submission of Government of Canada in response to our request for a delay in the banking information turnover. Go to this link which contains this and other affidavits.

Canada claims that a delay is not possible given the specifics of the IRS regulation.

Also, it appears that about 155,000 bits of private banking information are waiting to be turned over to a foreign country.

Here is her affidavit:

I, Sue Murray, of the City of Ottawa, in the Province of Ontario, SWEAR THAT:

1. I am the Director, Competent Authority Services Division, International and Large Business Directorate, Compliance Programs Brancl1 (“CPB”), Canada Revenue Agency (“CRA”), and as such have personal knowledge of the matters deposed to in this affidavit, except where they are stated to be based on information and belief, in which case I believe them to be true.

Discussions with the IRS

2. Subsequent to the hearing of the summary trial (which took place August 4-5, 2015), on August 27, 2015 there was a call between representatives of the CRA (myself, Richard Montroy, Assistant Commissioner, CPB, and Ted Gallivan, Deputy 000059 2- Assistant Commissioner, CPB) and Douglas O’Donnell, Commissioner-Large Business and International Division, of the US Internal Revenue Service (“JRS”).

During that call the issue of a possible injunction application in this case was raised with Mr. 0′ Donnell. There was general discussion ·of the impacts of such an injunction. Although no definitive answer was provided, it appeared that it would be very unlikely that the IRS would be willing to grant Canada an extension of time to provide information to the IRS in order to avoid an injunction application.

3. On the afternoon of September 18, 2015, the IRS issued a notice, attached as 1::-;hibit ‘ A’ (the «Notice”), in which they indicated on pages 18 and 19 that they would consider granting extensions of time to certain jurisdictions to comply with reporting requirements under an intergovernmental agreement (IGA) related the US FATCA provisions. Specifically, the portion of the Notice that could be applicable to Canada is that pertaining to B. Model 1 IGAs for which the Obligation to Exchange is
in Effect.

4. Mr. Montroy again requested a call with Mr. O’Donnell. When the call occurred, on September 21, 2015, after the appellants had withdrawn their request for an injunction hearing, Mr. Montroy was not available, but a number of CRA representatives, including me and Lisa Anawati, Director General, International and Large Business Directorate (ILBD), CPB participated in the call. The CRA representatives informed Mr. O’Donnell of the outcome of the summary trial application in this case, and that an appeal would be filed, and sought clarification from Mr. O’Donnell on the application oftbe Notice to Canada. Mr. O’Donnell made clear that the Notice did not pertain to Canada’s circumstances and that the U.S. continued to expect that Canada would comply with its obligation to provide its information by September 30,2015.

5. On September 23, 20J 5, after the appellants indicated that they would once again be moving forward with an injunction application, [sought clarification from the IRS 000060 – 3 – regarding whether they would grant an extension of time to provide the information if the appellants were successful in obtaining an injunction.

6. On September 24, 2015, there was a call between representatives of the CRA (myself, Mr. Montroy and Ms. Anawati) and Mr. O’Donnell. During that call it was confirmed that the US was not prepared to grant an extension because the Canadian situation is not covered by the Notice criteria, as the legislation and systems are in place to be able to effect exchange. Given that the Notice does not contemplate such an exception, this was the US position even if Canada is subject to a Court ordered injunction. In addition, Mr. O’Donnell confirmed that the exchange is anticipated to be reciprocal [!] and should Canada be prohibited from delivering its information, the US would not provide theirs.

Change in transmission date 7.

Under the IGA there is an obligation to exchange information by September 30, 2015. Leading up to the summary trial hearing we were asked to advise when the transmission would actually take place and we estimated that it would occur sometime within the September 15 – 30, 2015 time period, in order to allow for technical difficulties that may arise once transmissions began. When, after the hearing of the summary trial, we were asked to advise the court exactly when transmission would start, we determined that September 23, 2015 would be the probable date. However, just prior to September 23, 2015 we realized that we would need more time to make the appropriate arrangements for transmission. In recognition of the need to again provide a date before the September 30, 2015 deadline, and to avoid having to change the date again, we decided that transmission will not take place before September 29, 20:15 and will instead take place either the 29th or 30th of September. 00061
-4 –
Information to be sent to the IRS

8. I have reviewed tbe information which has been provided by Canadian financial institutions and is to be sent to the IRS. The package consists of approximately 155,000 information slips. Each slip represents one account and one account holder.An account holder can be either an individual or a corporate entity. There are instances where a single individual or entity holds multiple accounts. Allbaugh unable to provide a precise number, I can say that the number of individuals represented by the 155,000 information slips is less than 155,000.

lJ. Based on my review of the information slips I can confirm that there are no information slips in relation to either of the appellants in this proceeding. I have reviewed the appellants’ notice of application and note that the injunction they seek in paragraph 1 applies to any information to be sent under the Canada-United States 1:·11/wnced Tax !Hformation Exchange Agreement Implementation ct, being s.99 and Schedule 3 of the Economic Action Plan 2014 Act~ S.C. 2014, c.20. However they also state in their notice of application that they are only seeking an injunction in relation to a “subclass” of information. I have reviewed the remedy sought by the appellants’ in their summary trial application, on the assumption that this is the relief being sought in paragraph 68 of their notice of application, and note that the CRA is not generally in possession of information which would permit it to sort the information slips provided by financial institutions to narrow them to a subclass of information.

Impacts of an Injunction
W. If the CRA is unable, due to an injunction, to transmit the required information to the IRS, and no extension of time is granted by the IRS, Canadian financial institutions will risk losing the benefit of the deemed FATCA compliance that they would otherwise obtain through the IGA. ln particular, as of October 1, 2015, if the 000062 – 5 – ·000063 information has not been received by the IRS and no extension of lime has bct.:n granted, it is possible that the Canadian Financial Institutions could be considered noncompliant.

II . The lGA not only requires the CRA to provide information to the IRS , but for the JRS to provide information to the CRA If an injunction is granted and the CRA is not able to meet its commitments under the lOA, the IRS will not provide CRA with the information it has committed to provide. This would have a detrimental impact on CRA ‘s tax compliance work. The information to be provided by the IRS is helpful to tax compliance work in Canada because it would quickly and easily permit the CRA to match financial holdings in the US to specific taxpayers in Canada to, in a timely way, assess their compliance and if necessary commence audit action. As with other information obtained by the CRA, it is compared to that reported on tax returns and where inconsistencies are identified. compliance actions are undertaken and reassessments made.

12. Canada has a long-standing history of exchange of information with many countries, particularly the United Stales and non-compliance with the lGA would have a detrimental effect on our international reputation in this regard.

SWORN before me at the City of Ottawa,
in the Province of Ontario, this 25th clay of
September, 2() IS .
Commissioner

Continue reading →

— SEPTEMBER 30 MORNING BUT NO DECISION YET FROM COURT ON OUR REQUEST FOR A STAY.

— Remember, win or lose the stay, we move on to the Constitutional-Charter trial.

Here is a link to part of our request for a stay and here is part of Government response.

— I also enclose below a September 28 response of the Arvay team to some key points raised by Government.

— Starting first with part of our request for a stay in the turnover:

Appropriateness of Injunctive Relief

58. The Appellants acknowledge that the three part test In RJR-MacDonald Inc. v. Canada (A.C), [1994] 1 S.C.R. 311 applies to this application.

59. With respect to whether the Appellants have raised a “serious question” on the appeal, that branch of the test will be satisfied if on a limited review of the issues the Court concludes that the Appellants -14- “may” have a meritorious appeal: Coca-Cola Ltd v. Pardhan,
(1999),85 C.P.R. (3d) 501 (F.C.A.).

60. In this case, that threshold is easily satisfied. For example, in his reasons for judgment, Martineau J.:

a. entirely fails to address the meaning and import to be accorded the Technical Interpretation, which unambiguously states that Article XXVII prohibits bulk exchange of financial institution
account information;

b. engages in an unduly formalistic and narrow construction of Article XXVIA;

c. entirely fails to address the Article XXV admission which unanswerably shows that the Impugned Provisions violate the Canada-US Tax Treaty; and

d. reaches the conclusion that for the purposes of Canadian law, the Intergovernmental Agreement is a treaty or listed agreement for the purposes of s. 241 (4) of the ITA when that was not pled by the Respondents, where the Intergovernmental Agreement explicitly purports to be subordinate to the Canada-US Tax Treaty, and where the Appellants sought to tender evidence showing that from the point of view of the other party to the agreement it certainly is not a treaty.

61. With respect to whether the Appellants would suffer irreparable harm, there is a real risk that the appeal would be rendered moot insofar as the existing Account information of U.S. Persons is concerned if an injunction were not granted.
-15-
62. Under Article 4 of the Intergovernmental Agreement, Canada is required to begin providing the Accountholder Information to the United States by September 30,2015.

63. Canada previously advised that it intended to begin disclosing the Accountholder Information to the United States on September 23, 2015. On September 18, 2015 the Appellants informed the
Respondents of their intent to seek a stay and requested the Respondents’ confirmation that any exchange of information pursuant to the Impugned Provisions would be delayed as a result of it. On September 22,2015, the Respondents informed the Appellants that no information would be exchanged until September 29,2015.

64. Once Canada has disclosed the Accountholder Information, the information will be irretrievable. The impact on the individuals whose Accountholder Information is disclosed will be permanent and irremediable.

65. This is particularly so given that this first disclosure will identify the Appellants and others in their position to the IRS as US Persons where previously the IRS would not have had that information.

66. Thus, once the information is disclosed, the primary purpose of the appeal for such persons and for such information, to prevent such disclosure, will have been rendered moot.

67. With respect to the balance of convenience, the Appellants acknowledge that there is a strong presumption in favour of legislation enacted by Parliament being in the public interest, which presumption is rebuttable if it can be shown that injunctive relief would serve a public interest greater than that served by maintaining the challenged legislation in immediate force: Allard v. Canada, 2014 FC 280.
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68. Further, it should be noted that the present motion does not seek a complete suspension of the IGA, but rather only an exemption in respect of a subclass of persons to whom it applies and then only insofar as it seeks to enjoin the disclosure of Accountholder Information and not the collection. Courts have drawn a distinction between injunctions which seek to suspend legislation, and those which seek exemptions from the application of legislation. Those seeking only exemptions are subjected to a less stringent test:Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd.,
[1987] 1 S.C.R. 110.

69 . Moreover, in the present case, there are, on their face, competing public interests embodied in section 241 of the ITA, the Tax Treaty Act, and the Impugned Provisions.

70. Privacy over taxpayer information has been recognized by this Court and the Supreme Court of Canada as an important public interest under s. 241 of the ITA because it is a key tool to promote compliance in self-assessment tax systems: Slattery (Trustee oj) v. Slattery, [1993] 3 S.C.R. 430; Gernhart v. Canada, [2000] 2 F.C.R. 292 (F.C.A.).

71. ‘The Technical Interpretation evinces that pnvacy of taxpayer financial account information specifically is a public interest that animates the Canada-US Tax Treaty and, accordingly, therefore the Tax Treaty Act.

72. There can be no doubt that unless an injunction is granted to prevent imminent disclosure under the Intergovernmental Agreement, the public interest in privacy of taxpayer information will have been compromised. The question as to whether such compromise is lawful is the very question under appeal. In that sense, the status quo very much favours the granting of an injunction.
-17-
73. Furthermore, there is reason to believe that the specific public interest the Impugned Provisions purport to advance, enhanced taxpayer compliance, will not actually be achieved. Indeed, Martineau J.
explicitly recognized in paragraph 76 of his Reasons that in many quarters, the regime the FATCA regime is regarded as ineffective, as well as costly and unjust. The record before him amply supports the conclusion that such may well be the case.

74. It is to be recalled that both the Tax Treaty Act and the Impugned Provisions contain paramountcy clauses. If in fact the provisions of the two pieces of legislation cannot be reconciled in the manner that either the Appellants or Respondents advocate, and if the paramountcy clause in the Tax Treaty Act were to be found primary over the paramountcy clause in the Impugned Provisions, then failure to issue an injunction will have resulted in the will of Parliament to protect the public interest in privacy over taxpayer confidentiality as expressed in s.241 of the ITA, the Tax Treaty Act having been subverted.

75. On the other hand, if an injunction is granted, there will only be a delay while the appeal proceeds, and the Appellants submit that in that case the appeal should be expedited to minimize the delay. Further, it is apparent from the Notice that the IRS is aware that a number of jurisdictions may not be ready to exchange information by the original deadlines pursuant to their IGAs, and is for that reason treating 2014 and 2015 as “transition years” and granting certain countries extensions for the exchange of information. It is submitted that common sense would prevail, and the United States would refrain from taking any steps while its ally and treaty partner adheres to the rule of law.

—- Part of the Government’s response to our request for a stay:

OVERVIEW
1. The Appellants seek an injunction against the Crown in a non-constitutional case. This is something this Court has no jurisdiction to grant.

Continue reading →

 
Virginia La Torre Jeker J.D., has weighed in on how the IRS Notice 15-66
will affect Model 1 IGA countries.
 
TIMING OF EXCHANGE OF 2014 INFORMATION UNDER A MODEL 1 IGA

Treasury and the IRS will treat foreign financial institutions (FFIs) covered by an IGA as complying with, and not subject to withholding under FATCA even if the relevant partner jurisdiction has not exchanged 2014 information by September 30, 2015, as long as the partner jurisdiction notifies the U.S. competent authority before September 30, 2015, of the delay and provides assurance that the jurisdiction is making good faith efforts to exchange the information as soon as possible.

The point to be made here, is that notification is what is required not permission.

 
Entire article can be found Here.

More on Virginia La Torre Jeker J.D., can be found Here.
 

The *never-give-up actions* of a Brocker who is a constituent of Conservative MP, John Weston, received positive news today (see the link to the pdf of the letter in this email) …

From: <john.weston.c1d@parl.gc.ca>
Date: September 24, 2015 at 12:12:21 PM PDT
Subject: Letter from John Weston.
Suzanne,

Thank you for contacting our office with the information from tax controversy watch. I wanted to provide to you the letter that was sent to Minister Findlay’s office regarding the delaying the information exchange.

We will continue to keep you up to date.

Kindest regards,

Sue McQueen
Chief Member’s Assistant

John Weston, MP
PO Box 1505
Sechelt, BC V0N 3A0
604-885-2939

Says our fellow-Brocker,

This is the FIRST Conservative MP to write to the Revenue Minister about the delay that I know of. Maybe it would be good to post on Brock for other people who have Con MP’s too. If we can get enough Con MP’s to write – who knows??? Never say never!
…
And guess what, just as I was ready to send this to you, I heard back from my Lib candidate who I just sent John’s letter to and was told that she’s working on it and to “stand by”!

**************

Message to the rest of us:

Stay tuned —

AND contact YOUR Conservative (or any other Party) MP and ask them to responsibly and urgently act on behalf of *US Persons in Canada*.