Prologue – April 26, 2017 – The Meadows FATCA Hearing
Democratic policy makers have been supporting automatic bank reporting of domestic bank information to the IRS since at least as early as 2017! See Elise Bean testifying at the Meadows FATCA hearing: https://t.co/Z7YPic8VRS
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 17, 2021
2021 – The Democrats attempt to legislate domestic bank reporting to the IRS
President Reagan said "We are a nation that has a government — not the other way around." He could not have foreseen @TheDemocrats proposal of domestic #FATCA that bank information of resident Americans would be automatically be reported to the IRS. https://t.co/yigPUU3JNq
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 16, 2021
The Democratic Party is working hard to turn America’s domestic banks into agents/accessories of the Internal Revenue Service. Specifically the Biden administration, Senate Democrats and the House Democrats are ALL in support of the proposal (which as informally described) is to require banks to automatically report aggregate inflows and outflows to the IRS. The Biden administration and Senate Democrats support a threshold of $600. The House Democrats appear to favour a reporting threshold of $10,000. As reported here Nancy Pelosi supports this reporting initiative.
Regardless of the reporting threshold (which is irrelevant to the principle), from the perspective of the Democrats:
Domestic banks should be required to automatically report the bank account information of US residents to the IRS.
Here is what the Biden administration Green Book (see page 88) says about this:
“Proposal This proposal would create a comprehensive financial account information reporting regime. Financial institutions would report data on financial accounts in an information return. The annual return will report gross inflows and outflows with a breakdown for physical cash, transactions with a foreign account, and transfers to and from another account with the same owner. This requirement would apply to all business and personal accounts from financial institutions, including bank, loan, and investment accounts,2 with the exception of accounts below a low de minimis gross flow threshold of $600 or fair market value of $600.”
This applies to far more than basic bank accounts: Note that this proposal would apply to all kinds of financial accounts (including basic bank accounts, investment accounts, loan, etc.)
The proposed reporting is far more than just inflows and outflows: Notice the various categories of reporting including the specific focus on “foreign accounts” and transfers from one account to another. (Furthermore, the suggested justification that this is related to a lack of information reporting for partnerships is not – with a $600 reporting threshold – credible.)
An editorial in the Boston Herald noted that:
Buy a beater car for $2,000, and you’ve just triggered an IRS alarm.
Opposition growing in the United States
Significantly there is evidence of mounting opposition from the banks of America.
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 12, 2021
Furthermore, a recent article at Tax Notes suggests that the proposal does not meet its objectives. Yet the Democrats continue to move forward!
Opposition growing outside the United States
For Americans abroad this is “Bringing FATCA To The Homeland!” Since 2014 the bank/financial accounts of Americans abroad have (courtesy of FATCA) been reported to the IRS.
Mounting opposition is described by expat journalist Helen Burggraf writing for the American Expat Financial News Journal. Her article discusses both (1) domestic opposition (with no evident awareness of FATCA) (2) and observations from Americans abroad (with the experience of FATCA).
(1) Opposition that is oblivious to the FATCA experience
As written by Ms. Burggraf:
‘Targeted’ plan ‘isn’t remotely
targeted – it’s Orwellian’
Among the media critics of the proposed information-reporting regime was a New York-based columnist who writes for the Toronto-based Globe & Mail, one of Canada’s most-read publications.
Because many Canadians are also U.S. citizens and /or have business or personal interests in the U.S., they tend to be disproportionately affected by U.S. regulations, although opinion writer Gus Carlson’s article, which essentially rounds up the criticisms of other commentators, focuses on the proposed regulation’s invasion of U.S. citizens’ privacy, and its “apparent lack of respect for a basic tenent of the rule of law in a free society: that a person is innocent until proven guilty.”
In a piece headlined “The Biden administration’s ‘targeted’ plan to catch rich tax evaders isn’t remotely targeted – it’s Orwellian”, Carlson quotes Wyoming Republican Senator Cynthia Lummis as suggesting “that the plan is rooted in a lack of trust in the American worker.”
He quotes the Wyoming senator as having asked U.S. Treasur Secretary Janet Yellen, during a recent Senate hearing, whether she “distrust[ed] the American people so much that you need to know when they bought a couch? Or a cow?”
Carlson went on to note that a small-business owner in New York had told him that if the plan were implemented as described, “she would move more of her business to cash-only transactions,” and that she went on to add that “nobody in their right mind would want to have a bank account” if the law were to be adopted.
(2) Opposition with an awareness of the FATCA experience
Democrats Abroad has never opposed FATCA but has argued that a FATCA reporting requirements should not apply to Americans abroad.
Ms. Burggraf continues with:
Republican Overseas: ‘resist
this latest assault on our privacy’
The Republicans Overseas has been among the biggest critics of the Biden Administration’s plan – perhaps not surprisingly, politics being what they are.
In a statement released last month, and posted on the RO website here, the overseas arm of the Republican party said it “decrie[d]” the Democrats’ plans to “spy on domestic Americans’ bank accounts” and called on Republican members of the House and Senate “to stop this governmental overreach.”
The RO statement added: “Overseas Americans know all too well the horrors of having the U.S. government pry into our personal financial affairs.
In 2010, Democrats passed the HIRE Act. To pay for this legislation, Democrats implemented the Foreign Accounts Tax Compliance Act, or ‘FATCA’. They estimated that conniving Americans were hiding assets overseas, and that assessing overdue taxes and imposing hefty fees on these assets would generate nearly US$100 billion in income.
Commentary on the pushback from Republicans Overseas is reflected in the following tweet:
Excellent and needed initiative. I applaud @GOP pushback & invite RO to continue their efforts & make #RBT a reality for 9M #expats. @DemsAbroad @GOPOverseasFr #FBAR #FinCen #GDPR https://t.co/y98MYPrcCb
— ccoste (@ccoste2) October 14, 2021
Is privacy even an issue?
As a matter of law the Supreme Court of the United States in United States v. Miller has ruled that there is no expectation of privacy in bank records.
Hopefully laws should be firmly grounded in concepts of morality. In 1890 Samuel Warren and Louis Brandeis published their classic article “The Right To Privacy“. (Interesting commentary on this article discusses it in the modern world of FATCA and CRS is found in this post at the Isaac Brock Society.)
At a bare minimum it’s clear that there is a link between privacy and freedom and certainly a link between the erosion of privacy and the erosion of freedom. As Ranking Member Senator Mike Crapo is reported to have said on October 14, 2021:
“I think this is the biggest violation of personal privacy that has ever even been proposed, let alone enacted, by the United States government, and it’s something that every American ought to be incredibly worried about.”
Closing with some wisdom from the past …
The reality as Ronald Reagan said is that "Freedom is never more than one generation away from extinction". The problem is the support of the @TheDemocrats IRS domestic bank reporting provision means that most Americans simply don't care. https://t.co/ePmqQMICns via @YouTube
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 16, 2021
Part 2 of this post will explore the following additional reasons why this proposal is misguided. Furthermore, I will explore the relationship between FATCA and this new domestic reporting requirement.
All resident Americans need to know in order to understand their future is to learn how the United States government treats Americans abroad.
Many individuals rationalize this on the basis that they have nothing to hide. They may have nothing to hide, but they have everything to lose!
Americans need to wake up! If they don’t, it will clear that the United States is NOT a nation of people that has a government. It will be the other way around!
Have a question? Contact John Richardson, Citizenship Solutions.
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