http://www.thecanadianpress.com/contact_us.aspx?ekfrm=1897

TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Planned Improvements Have Not Been Made to Manage and Track Correspondence
With International Taxpayers

September 8, 2015

Reference Number:  2015-30-072

This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.

Redaction Legend:

1 = Tax Return/Return Information

Phone Number  /  202-622-6500

E-mail Address /  TIGTACommunications@tigta.treas.gov

Website           /  http://www.treasury.gov/tigta

HIGHLIGHTS

PLANNED IMPROVEMENTS HAVE NOT BEEN MADE TO MANAGE AND TRACK CORRESPONDENCE
WITH INTERNATIONAL TAXPAYERS

Highlights

Final Report issued on September 8, 2015

Highlights of Reference Number:  2015-30-072 to the Internal Revenue Service Commissioner for the Wage and Investment Division.

IMPACT ON TAXPAYERS

As of May 2014, the U.S. State Department estimated that approximately 7.6 million U.S. citizens live in a foreign country.  The rules for filing income, estate, and gift tax returns, as well as paying income taxes, are generally the same for international taxpayers as for those taxpayers living in the United States.  The IRS heavily relies upon its many notices and letters as its primary means of communication with taxpayers.

WHY TIGTA DID THE AUDIT

As globalization trends continue, so too do the challenges to the IRS’s ability to provide services to and enhance the tax compliance of U.S. taxpayers living in other countries.  This audit was initiated to evaluate the process for sending tax correspondence (notices and letters) to business and individual taxpayers who reside outside the United States, analyze how the taxpayers responded, and determine whether the correspondence resulted in improved compliance.

WHAT TIGTA FOUND

Even though the IRS sent approximately 855,000 notices and letters to U.S. taxpayers living in other countries during Calendar Year 2014, it cannot determine taxpayer response rates.  The lack of data on response rates for international taxpayers is problematic because this information is needed to determine the effectiveness of international correspondence on increasing taxpayer compliance and to make program improvements.

IRS data systems are not designed to accommodate the different styles of international addresses, which can cause notices to be undeliverable.  Other factors complicate the delivery of international mail, making its delivery less certain than domestic correspondence.

In addition, the IRS generally does not know if international taxpayers receive the tax correspondence sent to them.  Without specific controls to monitor and metrics to measure international tax correspondence, the IRS cannot determine the impact of its international tax correspondence on taxpayer compliance.

WHAT TIGTA RECOMMENDED

TIGTA recommended that the IRS:  1) develop a systemic process that identifies undelivered international mail volumes, as well as tracks international tax correspondence and receipt trends;2) develop specific performance measures to monitor the compliance impact of sending international tax correspondence to taxpayers residing outside the United States; 3) use the Postal Service Form 2865, Return Receipt for International Mail, for the countries that currently support return receipts for registered foreign mail; 4) expand the International Submission Processing Individual Master File Foreign Address Job Aid to include abbreviated address formats for all foreign countries as needed; and 5) coordinate with the other business operating divisions to make the job aid available to all IRS employees who are responsible for the input of addresses into IRS computer systems.

The IRS disagreed with four of the five recommendations.  While the IRS generally agreed that TIGTA’s recommendations could provide additional insight into the factors contributing to undeliverable international mail, it does not believe this information would permit the IRS to overcome budgetary, statutory, and operational constraints as needed to achieve appreciable improvement in its current processes.  TIGTA does not believe that the IRS’s response is adequate because current IRS processes for addressing international mail issues are ineffective or nonexistent.

September 8, 2015

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

You can read the full report at https://www.treasury.gov/tigta/auditreports/2015reports/201530072fr.html

Thanks to bubblebustin for providing the content for this post.

I just sent this to all NDP sitting members.

Please ask the geniuses running the NDP campaign…

Why they are unwilling to solicit the 1,000,000+ votes of Canadian citizens with the misfortune of being born in the USA who are having their bank records turned over to the IRS by the Stephen Harper government?

https://isaacbrocksociety.ca/

 
“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

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