On Friday, Republicans Overseas Action, Inc. filed a 78-page Plaintiffs’ Motion for Leave to Amended Complaint against the Foreign Account Tax Compliance Act (FATCA), the intergovernmental agreements (IGAs), and the Report of Foreign Bank and Financial Accounts (FBAR) in the U.S. District Court for the Southern District of Ohio, on behalf of Senator Rand Paul and nine other co-plaintiffs.
The then plaintiffs include “U.S. citizens, former U.S. citizens, Republicans, and/or non-Republicans” who are willing “to defend 8.7 million overseas Americans and 12.6 million stateside “green card” holders in their fight against FATCA tyranny.”
“The U.S. Treasury, IRS, and U.S. Financial Crimes Enforcement Network (FCEN) are still named as Defendants in this amended verified complaint for declaratory and injunctive relief with eight-count of constitutional violations:
Count 1 – The IGAs are Unconstitutional Sole Executive Agreements Because They Exceed the Scope of the President’s Independent Constitutional Powers
Count 2 – The IGAs are Unconstitutional Sole Executive Agreements Because They Override FATCA
Count 3 – The Heightened Reporting Requirements for Foreign Financial Accounts Deny U.S. Citizens Living Abroad the Equal Protection of the Laws
Count 4 – The FATCA FFI Penalty is Unconstitutional under the Excessive Fines Clause
Count 5 – The FATCA Pass-through Penalty is Unconstitutional under the Excessive Fines Clause
Count 6 – The FBAR Willfulness Penalty is Unconstitutional under the Excessive Fines Clause
Count 7 – FATCA’s Information Reporting Requirements are Unconstitutional under the Fourth Amendment
Count 8 – The IGAs’ Information Reporting Requirements are Unconstitutional under the Fourth Amendment”
Now, the relevance.
“In 2010, Congress passed FATCA, which was enacted as a means to find foreign accounts of US taxpayers (such as a Swiss bank account). Overseas banks must also report to the IRS any bank accounts held by Americans; this has led to the unintended consequence of many banks choosing not to service expats because of the additional headache for the particular financial institution.
The FBAR applies to any U.S. person who owns, has beneficial interest or signature authority over foreign financial accounts that exceed $10,000 in the aggregate in value at any time during the year. If you have any foreign bank accounts, this also has to be disclosed on Part III of Schedule B, whether the FBAR is required to be filed or not. FinCEN 114 must be e-filed and cannot be mailed, with the absolute filing deadline on June 30, with no extension possible.”
As a practitioner both representing taxpayers on FATCA issues and speaking with other practitioners, we listen to the IRS gloating about the $10 billion they have raised for the federal coffers from FBAR & FATCA violators. But they never say how much is evaded tax versus how much is just outrageous penalty. Most people I speak to would be surprised (as I would be) if more than 5% ($500 million) of the $10 billion was actual tax. The ratio of penalty to evaded tax is ludicrous if not unconstitutional.
Further, I have seen no evidence of a cost-benefit analysis that includes taxpayer compliance costs (including FFI costs) in determining if the whole FBAR/FATCA regime is worthwhile. And these compliance costs MUST include the burden of Americans being “fired” by their foreign banks and investment advisors, and money (taxes and GDP) lost by the US from individuals being induced to give up their citizenship.
FATCA and FBAR are burdensome to our citizens living abroad. The actions of the ROA are certainly a step in the right direction.