Congressional hearing on FATCA - video

The hearing was held 26 April. The video of the hearing is now available.

Reviewing the Unintended Consequences of the Foreign Account Tax Compliance Act

Subcommittee on Government Operations
Hearing Date: April 26, 2017 2:00 pm |2154 RHOB

https://oversight.house.gov/hearing/reviewing-unintended-consequences-foreign-account-tax-compliance-act/

On the timing bar (and not the clock displayed) the hearing starts at 14:45. There is a recess at 1:17:30 which lasts until 1:55:00.

Excellent post......looks like the general thinking in committee is that FATCA is a disaster.

Now available on youtube:

Thank you so much, OAP. This very same day my UK based tax accountant emailed to say the company are raising their prices, lol. Coincidence?

Luckily it's only FBAR for me at this point, in a few year I will probably have to start doing FATCA when I've drained down my retirement account and brought the money this way. So far I've had no issues with banks and my being American. But we need to move some money out of Lloyds and into something else just to find a little %....might just plop some money down in the Post Office bonds, 1.36% for a year when I checked yesterday. I need to leave well over £60K in my checking for the FLR coming up in a few months. I don't want to have to prove my pension income as well.

There always seem to be loopholes for some people. After Trumps new tax plan (without details of course) showed up I thought at first I would like it. 3 simple tax brackets....get rid of almost all deductions. Then I read an article that said that the people with big money will probably just route their earnings through corporations (I've no idea how they would do that) so that they would drop to the 15% bracket. I just assume there will always be loopholes built in for these people.

Excellent post.  I learned:
1. There is some traction within the United States for some change.
2. Swiss banks are discriminating against US citizens. This can be cured by Swiss domestic law; which the US can do through negotiating with Switzerland.
3. There are no similar problems in any other country because no-where else was featured.
4. FATCA can be improved, without returning to the Wild West of offshore tax evasion.
5. Congress hates tax criminals.
6. CBT was never discussed at all.
7. Consequently, renunciations will continue at a high rate because of the nuisance of annual tax return filing.

Excellent post.  I learned:
1. There is some traction within the United States for some change.

I found the (perhaps intentional?) wilful ignorance displayed by some members of the committee depressing. This may result from an obvious split along party lines. Specifically:
1. Not understanding the difference between CBT and RBT. The ranking member, Rep. Connolly, within the first 10 seconds of his opening remarks, made a grievous error.
2. Not understanding the difference between FATCA requirements and CRS requirements.
3. The intentional punishment for anyone with a foreign bank account as articulated by the witness, Ms Bean.

2. Swiss banks are discriminating against US citizens.

As a result of the intense US DoJ campaign against Swiss banks which saw some Swiss banks pay fines even though there was no evidence of US clients, or that US clients had evaded tax?

3. There are no similar problems in any other country because no-where else was featured.

You are being intentionally cheeky here, aren't you? 

Germany, France, the Netherlands,....for starters.

A recent post on BE highlighted the problem for a US citizen, resident in the US, who was denied a bank account because they were subject to FATCA 8938 reporting. The person had resided in Europe for 20 years, had pensions and investments, and therefore had to file 8938. Upon returning to live in the US, the bank (CapitalOne) refused to open an account on grounds of FATCA. A review of CapitalOne 360 terms and conditions verifies that the FATCA question is asked on application forms.
 

4. FATCA can be improved, without returning to the Wild West of offshore tax evasion.

Will a safe harbour/same country exemption alleviate the problem? Or, with FATCA penalties still in force, make the onus of verifying the US requirements by FFIs more difficult? (CRS is not a problem, but CRS is based on RBT.) One suggestion made during the hearing (by Rep. Norton?) was a US/IRS issued document to each expat to take to their bank. If there is a way to make the system even more complicated, some members of this committee will find it.

5. Congress hates tax criminals.

A new axiom, similar to Godwin's law, has been declared: "Edelweiss’ law" (I believe a past contributor to this site).
"Edelweiss’ law states that the longer any discussion of [FATCA] goes on the likelihood that terrorism, financing of terrorism, or child-sex trafficking will be used to justify [FATCA] approaches 1." (my edit)

6. CBT was never discussed at all.

Nor was FATCA reciprocity or the US refusing to sign on to the CRS. As a British citizen, I want info from the US on Brits using Delaware, Wyoming, and Nevada as tax havens. FATCA is a one-way benefit for the US only. The committee seemed unconcerned by this.

7. Consequently, renunciations will continue at a high rate because of the nuisance of annual tax return filing.

I agree.

Ms. Bean intimated that the high level of naturalisations in the US mean losing 6,000 people through renunciations due to FATCA/(CBT) is not a problem.

The majority argument centres on two issues: 1) constitutional irregularities, and 2) the financial inefficiency (return of investment) of FATCA.

Treasury has declared FATCA has resulted in $9.7Billion of revenues. It has avoided declaring that only 4,500 (which resulted in the bulk of the above $ figure) of the 55,000 who have been subject to tax, fines, and penalties are the result of the DoJ campaign in Switzerland. Most of the rest are from the voluntary disclosure through the OVDP programme which was started before FATCA became active. It has also not declared that of the $9.7Billion, 80% of the revenue came from FBAR fines and penalties, not tax evasion. In some cases, no tax was due.

The 'smart evading money' had left the building by 2011. There will be fewer significant 'evading accounts' to be found in future, only the minnows.

FYI I have written to my senators about this.

FYI I have written to my senators about this.

Well done, nun. Please let us know if you receive a more personal reply beyond the standard 'tax reform' letter.

During the hearing, Rep. Maloney (D-NY-12) stated she had placed before Congress, on the night of 25 April, a new Bill proposing the enactment of a "same country exemption" in relation to FATCA for those living abroad.

That Bill is now available for viewing:

https://www.congress.gov/115/bills/hr2136/BILLS-115hr2136ih.pdf

The Bill makes 2 references to:

https://www.law.cornell.edu/uscode/text/26/6038D
Section 6038D for individuals

https://www.law.cornell.edu/uscode/text/26/1471
Section 1471 for FFIs

During the hearing, Rep. Maloney (D-NY-12) stated she had placed before Congress, on the night of 25 April, a new Bill proposing the enactment of a "same country exemption" in relation to FATCA for those living abroad.

That Bill is now available for viewing:

https://www.congress.gov/115/bills/hr2136/BILLS-115hr2136ih.pdf

The Bill makes 2 references to:

https://www.law.cornell.edu/uscode/text/26/6038D
Section 6038D for individuals

https://www.law.cornell.edu/uscode/text/26/1471
Section 1471 for FFIs

It's early on a bank holiday, I've read everything twice, on the face of it, this seems like a good thing, but I'm not sure. What exactly is the Congressman proposing? I love writing a letter to my representatives, so if this is a good thing, I'll fire up the old inkjet!

What exactly is the Congressman proposing?

In theory, Rep. Maloney is proposing a "same country exemption". Using the UK as an example, if you live in the UK (according to Section 911(d)), any depository account you hold with a UK registered and regulated FFI (Foreign Financial Institution - such Lloyds, Barclays, etc.) will not be required to be reported to the IRS (via HMRC according to the US/UK IGA) by that FFI. Likewise, the individual taxpayer, provided they meet the above caveat for residence, is not required to file Form 8938 in relation to any specified foreign financial assets.

The reality:
1) FATCA will remain in existence, it would not be repealed. All other requirements and penalties contained in FATCA will still apply.
2) UK FFIs are bound by the terms of the US/UK IGA as passed into law by Cause 222 of the 2013 Finance Act. Until the IGA is amended, as noted in the Bill, this legislation will not alter reporting in the UK by the FFIs until the amendments are made. Renegotiating the IGA to include the amendments may be touchy for the US due to the proven lack of reciprocity. http://www.legislation.gov.uk/ukpga/2013/29/section/222/enacted
3) HR 2136 (Rep Maloney's Bill), for the FFIs, applies to deposit accounts only. But what about custodial accounts, trusts, etc.? 
4) HR 2136 allows the FFI the choice as to whether to apply this Bill to their consequent reporting decision of the accounts, or not. (report anyway, or don't report)
5) HR 2136 requires the individual to be resident (living in) the foreign country according to Section 911(d). Who will determine this? The FFI? HMRC? And what about the part year resident? (For FATCA, reporting is yearly without the benefits of the extended reporting allowed by the IRS for taxpayers.) If it's the FFIs, (as an extreme example) they may determine having to legally establish a client's 911(d) legitimacy is a step too far and start refusing to have USCs as clients due to the onerous (and possibly costly) requirements of the still legal and active FATCA legislation.
6) FBAR is still required as present, with no changes.

The passing of the FATCA legislation was as an enabler (raise funds to offset the cost) of the HIRE Act only. The true discussion centres around CBT.

EDITS in italics