Full disclosure …

  • I have little patience or sympathy with tax evaders, be they individuals or corporations, who use offshore banking institutions to escape paying their fair share of taxes.
  • Likewise, I am dead set against politicians who offer-up taxpayers money in the form of subsidies or tax allowances to attract business that benefits their political aspirations.
  • I believe that our tax system is totally corrupt and the product of lobbyists and others who have used corrupt politicians to insert legislation to convey perks and privileges for special interests – and these are codified in near-impenetrable referential language and buried deep in the bowels of “must pass” legislation.
  • I do not believe in dual citizenship any more than I believe you can have allegiance to two or more sovereign states or serve multiple masters faithfully. Likewise, I abhor hyphenated-Americans. You are an American first and foremost or you are not.

With this said, I thought that FATCA (Foreign Account Tax Compliance Act ) was all about curbing tax cheats that were robbing us all – enjoying our perks and privileges of American citizenship while escaping the burdensome taxes we all pay to keep our government working and our defenses strong. I will not argue that the government has been corrupted, money has not been well spent, and that waste, fraud, and abuse continues to rise in spite of decades of political promises to reform the system.


Foreign Account Tax Compliance Act

The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.

FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts

FATCA focuses on reporting:

  • By U.S. taxpayers about certain foreign financial accounts and offshore assets
  • By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest

The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.

Source: IRS

But as I was reminded by several of my readers, the devil is in the details and when going beyond the cursory review of the government’s viewpoint, something radically different emerges …

It appears that FATCA has profound and dangerous implications for Americans living abroad and/or dual citizens who are impacted under the law.

Consider an American citizen married to a foreign national and having a joint bank account. The mere fact that one partner holds an American citizenship (full or dual) can automatically can result in bank reporting to tax authorities, a significant tax withholding sent to the United States, denial of account services to reduce bank bookkeeping and reporting, and possibly a demand for your mortgage or vehicle loan to be paid off – if for no other reason that one party is an American citizen. Even one that does not work in a foreign land and whose bank contains only funds from the foreign partner. Yes, it appears that it is that screwed up.

Here is Don writing from Switzerland  …

I was appalled, when I read your piece on FATCA. Do you even know what FATCA is? One would get the impression, from your writing, that you don't. The majority of people hunted and persecuted by FATCA are NOT wealthy Americans seeking to "hide" their wealth. Most of us are average, ordinary people, retiree's like myself.

Our accounts are not "foreign." While they may be in the country we live in, they are our "local" bank accounts, from which we pay our mortgages, electric bills, health insurance premiums, etc.

How would you like it if you had to report, every year, all of your bank accounts, your Social Security Number, bank IBAN / account and routing numbers, addresses, maximum value, on an particular day?

How would you like it if you had to report the bank accounts of any clubs or other organizations, of which you have signature authority, and all of your clubs' and organizations' information, on your personal filing?

And, all this reporting is via an UN-secure Internet connection, with penalties, for any mistakes, starting at $10K per account, per year.

My guess is that you wouldn't like it at all. I'd guess that you'd be screaming your head off about an unjust violation of your 4th Amendment Constitutional rights, just as Rand Paul is doing, for us little people.

It's been estimated that, on top of the persecution of US expatriates and "accidental Americans," it costs banks around $8,000 per "US person" per year, in compliance costs. It should be no wonder, to you, that this is a strong incentive to just shut their doors to Americans, or anyone with "US person indicators."

We ordinary Americans live in constant fear of the results of being persecuted by FATCA, for no reason.

How would you like to live in fear that your bank(s) would close your accounts or cancel your mortgage, and that you'd not be able to get any other accounts or mortgage, because maybe you have brown hair? This is the real FATCA, not the fictional FATCA of which you write.

In principle, if one subscribes to the US's unique Citizenship Based Taxation, which is out of step with the rest of the world, except Eritrea (a fine role model, for the US), of going after "tax cheats" might be an acceptable goal.

But, this may come as a surprise to you, "tax cheats" will always find a way to hide their money. Those who get hurt are the little people and the "accidental Americans."

Every day, ordinary people are having their "local" bank accounts closed, their mortgages cancelled, being denied jobs and promotions, etc., all because of FATCA.

My wife an I were caring for her mother, who died, last week, until because of FATCA, our bank threatened to close our accounts, from which we pay bills and the mortgage, and have never made an investment, and to cancel our mortgages, unless we returned, to make Switzerland, our legal domicile.

So, we had to pack up and leave, in Jan 2014, my 91 year old mother-in-law, on her own, so as not to lose our retirement, here. This is what FATCA really does. It doesn't catch "tax cheats."

My wife and I, along with most of the 8.7 million American expatriates and countless "accidental Americans" are the people who you belittle, with your completely uninformed writing.

Perhaps you might consider doing a little digging, to find out exactly what FATCA is, besides writing nonsense, based on what you hear on the NBC Nightly News or from the US regime.

You may not like Ron Paul or Rand Paul. That's your choice. But, to use their support of the Constitution and Constitutional rights as a justification, is indeed pretty darn low.

Don <I have redacted his name and exact location for safety reasons?

Don is not alone, here is Daniel’s story taken from the actual complaint which Daniel graciously forwarded to me …

Plaintiff Daniel Kuettel

51. Daniel Kuettel is a citizen of Switzerland and a former citizen of the United States of America. Daniel resides in Bremgarten, Switzerland.

52. Daniel’s childhood was divided between Colorado and Switzerland. His mother
was a citizen of the United States, and his father is a citizen of Switzerland and the United States. His parents met in the United States after his father emigrated to the United States after World War II. Daniel was born in Greeley, Colorado in a farmhouse in 1972. He lived in Greeley until he was ten years old, but, after his parents divorced in 1981, moved with his father to Switzerland. He spent the next five years in Switzerland and then returned to Greeley to live with his mother when he was fifteen years old. Two years later, Daniel moved back to Switzerland to live with his father again, and then returned to finish high school in the United States.

53. In 1992, after graduating from high school, Daniel enlisted in the United States
Army, serving as a crane operator in a rapid deployment unit for three years. He was stationed primarily at Fort Stewart, Georgia during his service. Upon completing his enlistment in 1995, he returned to Greeley, Colorado and joined the U.S. Army Reserve. He spent the next several years advancing his education and working in various capacities in the computer and information technology fields. During this time, he lived in Greeley, Colorado as well as California, moving first to Silicon Valley and later to San Diego. After the dot-com bubble burst in 2000, Daniel
eventually decided to move to Switzerland in search of employment in 2001.

54. Daniel met his wife, who is originally from the Philippines, in 2000. She is a
citizen of Switzerland and the Philippines. She is a nurse and is currently working as a stay-at-home mother to their two young children. His daughter, born in 2005, is a citizen of Switzerland, the Philippines, and the United States. His son, born in 2013, is a citizen of Switzerland and the Philippines.

55. Daniel relinquished his U.S. citizenship in 2012 because of difficulties caused by FATCA. He and his wife’s home is located in Switzerland, and many Swiss banks have been unwilling to accept American clients because of FATCA. Daniel made several inquiries at Swiss banks attempting to find one that would refinance his mortgage. His efforts, however, were mostly unsuccessful with all of them citing policies related to his U.S. citizenship.

He contacted both the U.S. Veterans Administration and the U.S. Department of Housing and Urban Development for assistance, but both agencies declined and stated that they do not provide assistance in obtaining mortgages to Americans living abroad. Left with few options, Daniel decided to renounce his citizenship so that he and his family could continue with the life they had built in Switzerland.

After renouncing his U.S. citizenship, Daniel was able to refinance his home with a Swiss bank shortly thereafter. Daniel will always consider himself an American but
felt that renunciation was the only real option for his family.

56. Daniel currently maintains a college savings account for his daughter in his own name at PostFinance bank in Switzerland but would like to transfer ownership of the account to her and place it in her name. Having the account in her name would offer several advantages such as better interest rates and discounts for local businesses. The account currently has a balance of approximately $8,400. If the account were in his daughter’s name, Daniel would transfer the full balance plus an additional $2,500 from his own, separate funds into the account. He would also make monthly deposits of $200 ($1,400 annually) to the account for the foreseeable future.

57. However, Daniel will refrain from transferring ownership of the college savings account to his daughter because he reasonably fears that he, his daughter, or the funds in the account will be subject to the unconstitutionally excessive fines of $100,000 or 50% of the balance of the account imposed by 31 U.S.C. § 5321 if the IRS determines that his daughter has “willfully” failed to file an FBAR for the account. According to the instructions for filing the FBAR, published by FinCEN, a child who is a U.S. citizen is required to file an FBAR for their foreign accounts. FinCEN, BSA Electronic Filing Requirements For Report of Foreign Bank and
Financial Accounts (FinCEN Form 114) 6 (2014), http://www.fincen.gov/forms/files/FBAR%20Line%20Item%20Filing%20Instructions.pdf. Where the child is incapable of filing, FinCEN requires the child’s parent to file the FBAR on their behalf.

If Daniel’s daughter is not capable of complying with this reporting requirement because she is only ten years old and too young to shoulder such an obligation. Daniel objects to filing an FBAR as required by FinCEN because he is not a U.S. citizen and would not do so for his daughter’s account. Daniel’s wife has told him that she too objects to filing an FBAR for his daughter’s account and would not do so. Daniel’s daughter cannot avoid the FBAR reporting requirement by renouncing her U.S. citizenship because she is too young. Daniel inquired about this possibility on June 2, 2015 and received a response from the U.S. Embassy in Bern, Switzerland advising him that his daughter cannot renounce her citizenship until at least the age of 16. (Ex. 1.)

58. Daniel has no adequate remedy at law and is suffering irreparable harm.

Mark Crawford, Senator Rand Paul, in his official capacity as a member of the United States Senate, Roger Johnson, Daniel Kuettel, Stephen J. Kish, Donna-Lane Nelson, and L. Marc Zell, Plaintiffs, v. United States Department of the Treasury, United States Internal Revenue Service, and United States Financial Crimes Enforcement Network, Defendants.


Donna-Lane (also a party to the lawsuit) had a few comments of her own …

The problem is that FATCA is making it impossible for Expats short or long term to have normal banking relationships and build for their future.
Many will never return to the US. Some plan to go back, now, ten years, retirement.
Some had the misfortune to be born in the US and left when young and never returned. They are being shut out of any financial services. Do you think that is right?

Some were born in other countries and are the child of an American, were never registered as a US citizen but the banks are so scared if they are discovered their banking future is impossible in a country where they lived all their life. This is new. At one point, a child of an American had to live two years in the states to retain American nationality. Now it is forced on them.

Even if you don't believe in dual citizenship many people are duals because of marriage or life choices or planned future life choices. I don't think one person has a right to make that decision for another person. I decided to be a dual because I wanted the right to vote on issues that affected my daily life in a country where I intend to spend the rest of my life and if you know Switzerland we vote on almost everything sometimes even down to whether the country buys airplanes for its air force.

I have no problem paying taxes in Switzerland where I live. I have no problem paying taxes in France where I have a second home. Why should I pay taxes to a country where I've not lived for a quarter of a century and get no benefits, and don't tell me the US will rescue me in case of war. They don't. Ask the Americans trapped in Yemen. And even if they did I would need to pay for the service.

Let me ask you...do you think the US has a right to demand another country change its laws or be punished?

do agree that taxes should be paid where you live and where you work. I believe money earned in another country should be taxed in that country.

I see Schumer (D.NY) wants to tax businesses ONLY on income they earn in the US. They are persons. Doesn't a two-legged person have the same rights as a corporation?

A study conducted by the Democrats Abroad and cited by Republican Overseas said those most affected were middle class, noting that 68% of checking accounts and 40.4% of savings accounts closed due to FATCA had balances of less than $10,000

One last question: Would you be satisfied to be shut out of banks and all financial services because you were born in a place different from where you lived? That is the issue.

And, let’s not overlook Jim in Brazil …

I am an expat (semi-retired) living in Brazil. Among other things FATCA has caused some of my non-US consulting clients to cancel their relationship with me because the don't want their financial data going to the US via FATCA.

In your research I think you may find that the so called Fatcat tax evaders are mostly "homelanders" who have sent their money abroad to hide from the TAX-MAN. Not expat like me who use our local (overseas to you) accounts with local [businesses].

Also, check out the profiles of the other 6 plaintiffs in the lawsuit (see attached).  And then multiply their situations by thousands.  I am confident that all 6 would be happy for Bernie Sanders or any other Senator to join in addressing this NON-PARTISAN problem.

While many of the comments came from Switzerland – the home of bank secrecy and U.S. tax evasion – many came from Canada, Mexico, and elsewhere in the world.

And there is every reason to believe that the large financial institutions, who are now trying to disadvantage individuals to make a point to the U.S. financial regulatory agencies, were totally complicit in tax evasion by high net-worth individuals.

Global banking giant HSBC for years catered to a motley crew of weapons dealers, tax evaders, tin-pot dictators and celebrities, using its private Swiss arm to shield accounts worth more than $100 billion.

Documents obtained and analyzed by the International Consortium of Investigative Journalists (ICIJ) reveal how HSBC (HSBC) used the secretive Swiss banking system to conceal the identities of accounts holders, and in many cases, help depositors avoid paying taxes.

ICIJ's findings are based on data turned over to French authorities by former HSBC employee Hervé Falciani in 2008. The files were later obtained by the newspaper Le Monde and shared among other media outlets.

ICIJ said the leaked documents show that HSBC "repeatedly reassured clients that it would not disclose details of accounts to national authorities" and even "discussed with clients a range of measures that would ultimately allow clients to avoid paying taxes in their home countries."

In a statement provided to ICIJ, HSBC said that its Swiss private bank has undergone a "radical transformation in recent years," including reforms that will make it more difficult for clients to evade taxes or launder money. <Source: CNN>

Bottom line …

My readers have convinced me that in its zeal to pursue tax cheats, those who crafted this legislation screwed the pooch. Reading more of the actual legislation, I have come to believe that this legislation is so bad that it should be repealed and replaced. It hasn’t changed my mind about dual citizenship and allegiance to one sovereign state, but it does appear that ex-pats are being totally screwed by this faulty piece of inartfully drafted legislation.

Like many of the bills coming out of Congress, this one appears to have been written by the special interests without regard for its impact on the “little guys” swept up in the net along with the big players. Anything to feed the ravenous beast of government.

I will continue to follow the issue and report accordingly. I would like to thank all of my readers, both foreign and domestic, who have sent me source materials and their comments. Keep them coming as I find this legislation symptomatic of the type of misguided Congressional fiats that are being imposed without due regard for our Constitution and/or existing laws.

-- steve

“Nullius in verba”-- take nobody's word for it!
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