Rep Bill Posey

Last September, due to the efforts of Suzanne Herman,
Representative Bill Posey (R-FL) sent an
excellent letter to Treasury Secretary Mnuchin,
asking him to deal with #FATCA.

 
 
This post included the text of the letter and some 60+ comments from Brockers. What Rep. Posey received is a stark contrast to the expectation expressed in this comment:

Bubblebustin says
October 16, 2017 at 2:12 pm

@plaxy

According to RO on its FB page:

“At Republicans Overseas’ request, RNC Co-Chairman Bob Paduchik personally delivered Rep. Mark Meadows’ and Sen. Rand Paul’s joint letter on the Foreign Account Tax Compliance Act to Treasury Secretary Steven Mnuchin’s office. Secretary Mnuchin is fully aware that 9 million overseas Americans have been suffering under FATCA tyranny.

As a result, FATCA is included in the 2nd Report to the President on Identifying and Reducing Tax Regulatory Burdens by the Treasury (https://www.treasury.gov/press-center/press-releases/Documents/2018-03004_Tax_EO_report.pdf).

In the report to the President recommending actions to eliminate or mitigate burdens imposed on taxpayers by eight specific tax regulations, the Treasury indicated that it is considering possible reforms of regulations issued pursuant to FATCA. Thank you Co-Chairman Bob-Paduchick.

This is the response Rep. Posey received from the Treasury Department:
 
 
clean letterhead  treasury
 
November 8, 2017

The Honorable Bill Posey
U.S. House of Representatives Washington, DC 20515

Dear Representative Posey:

Thank you for your letter regarding the Foreign Account Tax Compliance Act (FATCA). As you are aware, Congress passed FATCA legislation in 2010 to strengthen the integrity of the U.S. voluntary tax compliance system and to combat the use of foreign financial accounts and foreign entities to facilitate tax evasion. FATCA provides the IRS with information about U.S. taxpayers’ use of foreign financial accounts and certain higher-risk foreign entities, so that these foreign accounts and investments are subject to disclosure to the IRS, similar to the disclosures for accounts and investments held or made inside the United States that the IRS already receives.

Between 2010 and 2012, the Treasury Department and the IRS issued a series of notices and other published guidance setting forth proposed rules under the FATCA statutes and, after extensive engagement with stakeholders, issued final regulations in 2013 that phased in the implementation of the new information reporting regime. Additional FATCA guidance has subsequently been issued to respond to stakeholder comments and to coordinate the information reporting regime with preexisting information and withholding tax regimes under the Internal Revenue Code. Concurrent with the work on developing the FATCA regulations, the intergovernmental agreement (IGA) approach was developed in collaboration with other governments as an alternative way to implement the information reporting objectives of FATCA that would remove legal impediments under local law and reduce administrative burdens for foreign financial institutions where appropriate. Congress has authorized the exchange of tax information with foreign governments pursuant to bilateral executive agreements, and information regarding financial accounts is relevant to tax administration.

The Treasury Department has identified FATCA as a potential area for regulatory burden reduction pursuant to Executive Order 13777. The Treasury Department and the IRS are engaged with taxpayers and other constituents regarding ways to reduce unnecessary burdens from FATCA compliance. In this regard, we have recently provided relief to financial institutions by providing them additional time to collect taxpayer identification numbers to be included in reporting under FATCA and the IGAs.

The Treasury Department and the IRS will continue to work closely with all interested
stakeholders to implement FATCA in a manner that appropriately balances the compliance objectives of the statute with the burdens that it imposes.

We appreciate your continued attention to FATCA and look forward to working with you as these discussions continue. If you have additional questions, please contact Bradley Bailey, Office of Legislative Affairs, at (202) 622-1900.

Sincerely,

Drew Maloney
Assistant Secretary for Legislative Affairs
 
One would think a member of Congress would be important enough to receive a response from Secretary Mnuchin himself.

For your convenience in determining the value of Treasury’s letter, the original letter from Rep. Posey follows.
 
*****
 
letterhead image of Posey letter to Mnuchin

September 29, 2017
The Honorable Steven Mnuchin
Secretary of the U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW Washington, DC 20220

Dear Secretary Mnuchin,

I am writing to you regarding the Foreign Account Tax Compliance Act (FATCA) [26. U.S.C. § 1471-1474; 26 U.S.C. § 6038D]. As discussed below, FATCA is an invasive, costly failure that I strongly suggest must be repealed at the soonest possible opportunity, hopefully in the context of tax reform enacted this year. In addition, the means adopted during the tenures of your predecessors Jack Lew and Timothy Geithner to implement FATCA via a series of legally dubious and constitutionally infirm non-treaty agreements with other countries must not be allowed to stand. I ask your assistance in assuring that FATCA repeal is part of any relevant legislation, and that the Treasury Department takes prompt action to cease the implementation of FATCA via Intergovernmental Agreements (IGAs).
FATCA’s proponents claim that it is simply a “transparency” measure – similar to a domestic 1099 – to ensure greater tax compliance for assets held offshore. This characterization is misplaced. Domestic tax law requires reporting of taxable events, such as income (a W-2 Wage and Tax Statement) or bank interest (a 1 099-INT). U.S. law, based on a presumption of innocence, does not generally require inquiry into asset principle unless there is reason to suspect wrong-doing. By contrast, FATCA requires wholesale reporting of Americans’ assets and transaction history absent any such suspicion, solely because the asset is held outside the United States. This is despite the fact that the IRS’s own Taxpayer Advocate Service reports that “the vast majority” of Americans residing abroad “actually appear to be substantially more compliant than a comparable portion of the overall U.S. taxpayer population.”

Despite such an invasion of privacy, FATCA has failed in its stated purpose of recovering revenue lost to offshore tax evasion. Last year the Internal Revenue Service (IRS) credited FATCA for “collecting” $10 billion from “taxpayers coming back into compliance, ,2 but that figure conflates genuine tax revenues with penalties for filing deficiencies and recoveries from all offshore enforcement programs, not just FATCA. In the estimate of Professor William H. Byrnes of Texas A&M University School of Law, the real net tax recovery of FATCA alone is about $200 million annually and may be only half of that. Professor Byrnes projects that FATCA may “soon cost more money than it brings in.”‘ Indeed, his view may actually be overly optimistic in light of the IRS’s commendable enforcement standard of recovering seven dollars for every dollar spent.4

By contrast, because of the IRS’s need to try to discern indicators of evasion within a sea of indiscriminate personal information belonging to non-evaders, W. Gavin Ekins of the nonpartisan Tax Foundation suggests that, under FATCA, finding “a dollar of tax evasion may cost us $5 of actually sifting through the data and compliance costs.”5 FATCA’s unsatisfactory ratio of return must also be weighed against the impact on taxpayers saddled with burdensome reporting paperwork. The Tax Foundation estimated in 2016 that these requirements cost individuals nearly four and half million hours and more than $165 million,6 an amount comparable to FATCA’s likely proceeds. This does not even take into count the massive compliance costs imposed 011 financial institutions.
The above summarizes the good and sufficient reasons why FATCA must be repealed and enforcement dollars spent on more effective programs to detect and punish actual tax evasion. While your support for that effort will be appreciated, it is a task primarily of Congress. But I now turn to a matter almost entirely within your purview, on which I ask your prompt and decisive action. This relates to IGAs invented by the Department in consultation with five European governments for the purpose of enforcing FATCA.

While the IGAs read like treaties and have the effect of treaties in purporting to create mutual obligations between sovereign states they are not submitted to the United States Senate for that body’s advice and consent to their ratification, though the non-U.S. “partner” country is required to do so under its necessary internal procedures for entry into force. In July 2013, I wrote7 to Secretary Lew with a specific request for the statutory authority for the IGAs. The Department responded, after a delay of nearly a year, with the following statutory justification: 8

“The United States relies, among other things, on the following authorities to enter into and implement the IGAs: 22 USC Section 2656; Internal Revenue Code Sections 1471, 1474(f), 6011, and 6103(k)(4) and Subtitle F, Chapter 61, Subchapter A, Part III, Subpart B (Information Concerning Transactions with Other Persons).”

None of the sections cited above confers on the Treasury Department any authority for making agreements with foreign governments for the furnishing of private financial information. In particular, there is nothing in the cited sections that allows the Department to promise (under the so-called “Model 1″ IGA) on behalf of the United States FATCA-”equivalent” reporting to foreign tax services of private information obtained from domestic American financial institutions. Following through with this unauthorized promise would impose on American banks, credit unions, insurance companies, and other institutions crushing compliance costs of the magnitude already suffered by foreign institutions – costs that would inevitably be passed on to American consumers.

The IGAs represent a prime example of the kind of executive overreach that unfortunately typified the previous administration. I ask you to rein in this abuse by ceasing the negotiation of new IGAs and freezing the implementation of existing ones. This action should include a freeze on enforcement of FATCA regulations on taxpayers and financial institutions. Further, I ask that you notify IGA jurisdictions that these dubious pseudo-treaties are under legal review and that their nullification or abrogation from the U.S. side can be expected pending FATCA’s anticipated repeal.

Nothing in the foregoing should be construed in any way as being “soft” on tax evasion. Quite to the contrary, in addition to its other flaws FATCA is a distraction and a diversion of resources from effective tax enforcement based on standard investigatory techniques. As a member of the Financial Services Committee I look forward to working with the Department on measures to ensure effective tax enforcement that targets the guilty, without penalizing the innocent or
compromising our cherished American constitutional and legal norms. In the meantime, FATCA and the IGAs must go.

Thank you for your assistance on this critical matter.
posey signature

Service, 2016 Annual Report to Congress, Vol. 1; “FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA): The IRS’s Approach to International Tax Administration Unnecessarily Burdens Impacted Parties, Wastes Resources, and Fails to Protect Taxpayer Rights,” page 221; See:https://taxpayeradvocate.irs.gov/Media/Default/Documents/2016-ARC/ARC16 Volumel MSP 16 FATCA.pdf

2 IRS press release, “Offshore Voluntary Compliance Efforts Top $10 Billion; More Than 100,000 Taxpayers Come Back into Compliance,” Oct. 21, 2016; See: https://www.irs.gov/newsroom/offshore-voluntarv-comphance-efforts-top-10-billion-more-than-100000-taxpayers-come-back-into-compliance

3 “Background and Current Status of FATCA” Texas A&M University School of Law Legal Studies Research Paper No. 17-31, pages 1-34, 35; See: https://paers.ssrn.com/soI3/papers.cfm?abstract id=2926 119

4 IRS press release, “National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Tax Reform, IRS Funding and Identity Theft,” Jan. 9, 2013; See: https://www.irs.gov/newsroom/national-taxpayer-aclvocate-delivers-2012-annual-report-to-congress

5 “Why Americans are giving up citizenship in record numbers,” Washington Post, June 1; 2016: See:

6 Tax Foundation, “The Compliance Costs of IRS Regulations,” June 15, 2016; See: https://taxfoundation.org/compliance-costs-irs-regulations/

7 See: http://www.repealfatca.com/downloads/Posev letter to Sec. Lew July 1, 2013.pdf

8 See: http://federaltaxcrimes.blogspot.com/2014/07/irs-letter-to-congressman-defending-its.html
For a definitive section-by-section demolition of the Department’s response, see Professor Allison Christians, McGill University Faculty of Law, “IRS claims statutory authority for FATCA agreements where no such authority exists,” http://taxpol.blogspot.com.au/2014/07/irs-claims-statutory-authority-for.html

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