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28–503 PDF 2018

REVIEWING THE UNINTENDED CONSEQUENCES OF 

THE FOREIGN ACCOUNT TAX COMPLIANCE ACT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

GOVERNMENT OPERATIONS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

APRIL 26, 2017 

Serial No. 115–45 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://oversight.house.gov 


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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

Jason Chaffetz (UT), Chairman 

John J. Duncan, Jr. (TN) 

Darrell E. Issa (CA) 

Jim Jordan (OH) 

Mark Sanford (SC) 

Justin Amash (MI) 

Paul A. Gosar (AZ) 

Scott DesJarlais (TN) 

Trey Gowdy (SC) 

Blake Farenthold (TX) 

Virginia Foxx (NC) 

Thomas Massie (KY) 

Mark Meadows (NC) 

Ron DeSantis (FL) 

Dennis A. Ross (FL) 

Mark Walker (NC) 

Rod Blum (IA) 

Jody B. Hice (GA) 

Steve Russell (OK) 

Glenn Grothman (WI) 

Will Hurd (TX) 

Gary J. Palmer (AL) 

James Comer (KY) 

Paul Mitchell (MI) 

Elijah E. Cummings (MD), Ranking Minority 

Member 

Carolyn B. Maloney (NY) 

Eleanor Holmes Norton (DC) 

Wm. Lacy Clay (MO) 

Stephen F. Lynch (MA) 

Jim Cooper (TN) 

Gerald E. Connolly (VA) 

Robin L. Kelly (IL) 

Brenda L. Lawrence (Ml) 

Bonnie Watson Coleman (NJ) 

Stacey E. Plaskett (VI) 

Val Butler Demings (FL) 

Raja Krishnamoorthi (IL) 

Jamie Raskin (MD) 

Peter Welch (VT) 

Matt Cartwright (PA) 

Mark DeSaulnier (CA) 

John P. Sarbanes (MD) 

JONATHAN SKLADANY, Staff Director 

WILLIAM MCKENNA General Counsel 

JACK THORLIN, Senior Counsel 

SHARON CASEY, Deputy Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS

Mark Meadows, North Carolina, Chairman 

Jody B. Hice, Georgia, Vice Chair 

Jim Jordan, Ohio 

Mark Sanford, South Carolina 

Thomas Massie, Kentucky 

Ron DeSantis, Florida 

Dennis A. Ross, Florida 

Rod Blum, Iowa 

Gerald E. Connolly, Virginia, Ranking 

Minority Member 

Carolyn B. Maloney, New York 

Eleanor Holmes Norton, District of Columbia 

Wm. Lacy Clay, Missouri 

Brenda L. Lawrence, Michigan 

Bonnie Watson Coleman, New Jersey 


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C O N T E N T S 

Page 

Hearing held on April 26, 2017 .............................................................................. 1 

WITNESSES 

The Hon. Rand Paul, Senator from Kentucky 

Oral Statement ................................................................................................. 1 

Mr. James Bopp, Jr., Attorney, The Bopp Law Firm, PC 

Oral Statement ................................................................................................. 7 

Written Statement ............................................................................................ 10 

Mr. Mark Crawford, Director, AKSIONER International Security Brokerage 

Oral Statement ................................................................................................. 38 

Written Statement ............................................................................................ 40 

Mr. Daniel Kuettel, (Former U.S. Citizen Living in Switzerland who Renounced his U.S. Citizenship due to FATCA) 

Oral Statement ................................................................................................. 51 

Written Statement ............................................................................................ 53 

Ms. Elise Bean (Former Staff Director for Sen. Carl Levin (D–MI), Senate 

Permanent Subcommittee on Investigations) 

Oral Statement ................................................................................................. 57 

Written Statement ............................................................................................ 61 

APPENDIX 

Letter of April 25, 2017, from FACT Coalition submitted by Mr . Connolly ...... 86 

Letter of September 15, 2015, to the Treasury Department and IRS submitted 

by Ms. Maloney .................................................................................................... 91 

Taxpayer Advocate Service 2015 Report submitted by Ms. Maloney .................. 94 

Response from Mr. Bopp to Questions for the Record .......................................... 104 

Response from Mr. Crawford to Questions for the Record ................................... 125 

Response from Ms. Bean to Questions for the Record .......................................... 129 


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REVIEWING THE UNINTENDED 

CONSEQUENCES OF THE 

FOREIGN ACCOUNT TAX COMPLIANCE ACT 

Wednesday, April 26, 2017 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT OPERATIONS, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. 

The subcommittee met, pursuant to call, at 2:05 p.m., in Room 

2154, Rayburn House Office Building, Hon. Mark Meadows [chairman of the subcommittee] presiding. 

Present: Representatives Meadows, Hice, Jordan, Ross, Blum, 

Connolly, Maloney, Norton, and Watson-Coleman. 

Mr. MEADOWS. The Subcommittee on Government Operations 

will come to order, and without objection, the chair is authorized 

to declare a recess at any time. 

Today’s hearing is on the Foreign Account Tax Compliance Act, 

or FATCA. We will hear from our witnesses about FATCA’s effect 

overseas and on our Treasury. However, our first witness, Senator 

Rand Paul, a friend, a patriot, truly someone who is willing to not 

only put his money where his mouth is but someone who has defended liberty and freedom each and every day, and you’re certainly welcome. 

He has a briefing, as I understand it, at the White House coming 

up, so we’re happy to have you testify first, Senator, and then the 

Ranking Member Connolly and I will give our statement. 

So in recognition of that, I’d like to recognize the Honorable Senator Rand Paul. 

WITNESS STATEMENTS 

STATEMENT OF THE HON. RAND PAUL 

Senator PAUL. Thank you, Chairman Meadows, and thank you 

for inviting me to this hearing on the Unintended Consequences of 

the Foreign Account Tax Compliance Act. And also for allowing the 

American people an opportunity to hear how FATCA undermines 

their privacy through the bulk collection of their foreign financial 

records. 

I oppose FATCA for two reasons. First, it violates our privacy 

rights, and second, I think the compliance cost actually exceed the 

revenue that it brings in. 

Regarding privacy, the Fourth Amendment prevents the government from seizing or searching a person’s house or papers, including their financial records, unless the warrant shows individualized 


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suspicion and probable cause. This protection was included in the 

Bill of Rights in response to general warrants that have been 

issued by the British. 

FATCA, I think, undermines the very heart of this privacy right. 

It forces foreign financial institutions to hand over U.S. citizens’ 

personal financial records without a warrant, without a probable 

cause, and without naming them individually. 

FATCA also violates the Fourth Amendment by demanding all 

data on all Americans with overseas accounts. The demand is not 

individualized but collected rather in bulk without specifying a specific suspicion or cause. 

The government is using the heavy hand of the IRS to tell foreign financial institutions that they must hand over the records of 

all U.S. citizens, and if they dare to defy the government, they will 

be hit with a crippling tax penalty that no business could survive. 

This turns the Fourth Amendment on its head. It presumes that 

every American with money overseas is a criminal with no proof 

or even suspicion of criminal activity. You are guilty until proven 

innocent. These are not the principles on which our country was 

founded, and we should not stand for it. 

This is not just my concern. In January, the IRS’ own taxpayer 

advocate raised the same concern in her annual report saying that 

FATCA’s operative assumption appears to be that all such taxpayers should be suspected of fraudulent activity unless proven 

otherwise. Think about that. Guilty until proven innocent. 

No one should be deceived that the data being collected by the 

IRS is somehow harmless or benign. In addition to having to report 

the name, address, taxpayer identification number of each account 

holder, the government requires financial firms to report the account number, the account balance, the value at the end of the reporting period, and all the inflows and outflows of the account, basically everyone for whom you have had a financial transaction or 

written a check to. 

Comparable information is not required to be disclosed for those 

who have domestic accounts, so it’s a double standard. You have 

one standard for Americans living overseas and another standard 

for Americans here. 

The government has no business asking for or knowing this information about its citizens and certainly not without a reason to 

believe that the person is doing something wrong. 

FATCA essentially gives the IRS all your overseas financial data 

without going through any court to decide if the government has 

a right to see your documents. FATCA seems to be also a solution 

in search of a problem. 

The taxpayer advocate finds also that a lack of comprehensive 

statistical data establishing the existence of widespread noncompliance or fraud by taxpayers with foreign accounts. They don’t find 

evidence that there is excessive problems with people not paying 

their taxes. It’s about the same rate as people domestically, so why 

would we be giving the government special powers, lower standards to look at our information? 

My biggest concern about FATCA is that it treats all 9 million 

Americans living abroad as guilty until proven innocent. FATCA 

acts as if the Bill of Rights does not apply to citizens dealing with 


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their U.S. Government, depending on where they live. After 

FATCA was passed, some foreign banks even began to refuse to do 

business with Americans, even canceling their accounts to avoid 

the red tape and possible draconian penalties. 

Individual Americans are not the only ones bearing the burden 

either, estimates of initial cost of compliance reach into the tens of 

billions of dollars globally. Ongoing compliance just for U.S. companies cost more than $160 million a year. 

In addition, FATCA has led to foreign countries seeking information on citizens residing in the United States. Indeed, over 60 countries now have signed reciprocal intergovernmental agreements 

called IGAs. The IGAs allow bilateral exchange of financial data, 

meaning that the U.S. will now spy on foreigners who have accounts in our country as well, and we will aid and abet foreign 

countries in invading their citizens’ privacy as well 

Think about this. This may mean sending financial information 

to countries who are known as human rights abusers, such as 

Saudi Arabia, China, Tunisia. One can imagine the risk to a political dissident who comes to our country to escape tyranny, and 

then we find that we are going to be sending their information 

back to a tyrannical government, the tyrannical government they 

fled? 

These bilateral agreements, these IGAs, have not received any 

Senate certification, no vote, no vote in the House, no congressional 

authority at all. They are just done by the administration with no 

authority. Their constitutionality is currently being challenged in 

court, and I think you will hear from some of those involved in that 

challenge. 

My hope is that this hearing will shed some light on this abusive 

law and lead to a demand for action. 

Chairman Meadows, and I have sponsored a bill to correct this 

injustice and repeal FATCA. Congress should pass our bill this 

year and put an end to this madness. 

Thank you very much for letting me testify. 

Mr. MEADOWS. Thank you, Senator. And you’re very complimentary in terms of my involvement, but it’s basically been your leadership, Senator, that not only has highlighted this, but that continues to stand as a vigilant sentinel to protect our Fourth Amendment privacy, and I just want to say thank you. 

And it’s an honor to have you articulate this. You brought this 

issue to light when no one was paying attention, and yet I found 

that universally you’re being applauded for your protection of this 

constitutional right that our Founding Fathers so wisely enshrined. 

Senator PAUL. This is a big, big deal to the 9 million Americans 

who live overseas, and you know, we are getting ready to come up 

on tax reform. While this may be a small issue to many other 

Americans, it’s a big deal to them. 

My hope is that the bill we have worked on, maybe we could try 

to get it into the tax reform package because it’s an issue, I think, 

that should bring right and left together because, you know, sometimes the right is more concerned with financial affairs and the left 

more concerned with privacy and with civil liberties, but really, I 

think right and left can come together to say, you know what, we 

should protect everybody’s Fourth Amendment rights. 


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Thank you for letting me testify. 

Mr. MEADOWS. Well thank you. I know you’ve got to go to the 

White House, so you’re hereby dismissed. 

Thank you for your testimony. Your entire written testimony will 

be made part of the record. I thank the ranking member for allowing you to come in and testify early. 

The chair now recognizes himself for his opening statement. We 

are certainly pleased to hold this hearing to examine the Foreign 

Account Tax Compliance Act, also known as FATCA. 

FATCA requires foreign financial institutions to investigate their 

own accounts for suspected ties to the United States. Hear that 

again. Investigate their own accounts for suspected ties to the 

United States, and then report those accounts to the IRS for further investigation. 

Now, that doesn’t sound crazy in its face, but as it turns out, 

FATCA is a failure at a number of different levels. By its drafter’s 

own estimate, of whom we are going to hear expert testimony today 

and certainly the work that has been done in some of those investigative modes, is to be applauded. I’ve looked at the record, and 

so I look forward to seeing that. 

But even by those own estimates of the drafters, it was seeking 

to reduce tax evasion overseas and it only does that by less than 

1 percent. The Senator mentioned this. You know, so less than 1 

billion out of an estimated 100 billion in lost revenue overseas. 

Commissioner Koskinen who has testified before this committee 

a number of times has given sworn testimony regarding the high 

rate of return on investment for spending on the IRS with normal 

enforcement actives. In fact, his public statements indicate a return 

of up to $20 for every $1 that is invested on enforcement. So a $20 

return in revenue for $1 invested in enforcement. 

By contrast, FATCA brings in well under, by any estimations, 

half of that amount on a per-dollar basis that is invested. So the 

IRS gets asked for about 200 million to implement FATCA in fiscal 

year 2017 budget. So by the commissioner’s own estimates, not by 

mine, not by any think tank, but by the commissioner’s own estimates in enforcement returns, just shifting the money from FATCA 

to the general enforcement areas would increase our tax revenues 

by over a billion dollars. 

And so if we’re looking at proper allocation, and this is without 

spending one more penny on the overall budget for the IRS, it’s just 

shifting it, and so when we look at that, that’s a significant return. 

FATCA also unfairly and unilaterally burdens our biggest trading partners and strongest allies. I found out about this really by 

some of the people that we’ll hear from today when I was in Israel 

and with some of the issue that they started referring to this thing 

called FATCA that I had no idea what it was. And so, you know, 

as a good politician I was saying, well, I’ll get back to you on that. 

And so I went very quickly and googled it to figure out exactly 

what we were talking about, and so as I look at this, we are looking at unbelievable implications here. 

When we look at the compliance cost on foreign banks and on the 

international economy, we are looking at up to $200 million per 

bank to comply and potentially hundreds of billions of dollars overall. 


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Other countries are understandably upset that we are hurting 

their economies and are doubly upset that we have not yet offered 

them access to our own taxpayer data. So we basically said you 

have to comply, and there was this reciprocal agreement, and we 

said: Well, you have to comply, but we’re not going to comply. It 

was a double standard that we see, and so many of the foreign financial institutions have tried to avoid these FATCA compliance 

costs by refusing to take U.S. citizens. 

That’s what highlighted it for me, and I said: You’ve got to be 

kidding me. They’re saying, well, if you’re a U.S. citizen, they don’t 

want to touch you in some of these foreign financial institutions 

just because of the compliance cost. So expatriates have had to 

make the tragic choice between keeping their citizenship and preserving their financial stability. 

And to illustrate that point, I want to share a video that has 

been shared with the subcommittee to this committee, and so if 

we’d pause and maybe take a look at this video. It’s approximately 

3 minutes in length. 

[Video shown.] 

Mr. MEADOWS. Donna is not alone. FATCA has led to a number 

of U.S. expatriates renouncing their citizenship, and so hopefully 

today we’ll hear from some of our witnesses on how we can address 

this particular issue in a meaningful way and hopefully return the 

accountability that we’re all for to the proper balance of protecting 

our personal Fourth Amendment rights and yet still making sure 

that we hold our government accountable. 

And with that, I’d like to recognize the ranking member for his 

opening statement. 

Mr. CONNOLLY. Thank you, Mr. Chairman, and thank you for 

having a hearing. And maybe there’s a slightly different point of 

view about the issue while acknowledging there are problems with 

the act and with its implementation. 

The United States taxes the foreign income of its citizens, and 

we’re not alone. Most countries with income taxes do the same. 

Citizens pay taxes on all the income they earn regardless of where 

they earned it. 

There are benefits to this system. Americans are the most productive in the world, and this system ensures that the wealthiest 

among us cannot avoid paying taxes simply by moving money 

abroad. It’s quite simple. If you receive benefits by being an American, you should pay your fair share. And I say that, but no American ought to have to foreswear his or her citizenship in trying to 

comply with the law. 

We obviously are very sympathetic to the woman we just saw on 

that video. This tax system assumes everyone plays by the rules 

and pays their taxes according to the law. We know, unfortunately, 

in the past, not everyone did play the game fairly. While the law 

has, for decades, required us who are account holders to file reports 

with the Treasury Department, not everyone did. 

Extremely wealthy tax cheats, not the woman we just saw on 

that video, hired expensive lawyers who knew how to evade the 

system. Whistleblower leaks changed things. Congress learned of 

thousands of Americans who were willfully avoiding paying their 

taxes and overseas income without disclosing that information to 


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the IRS. These weren’t simply inadvertent mistakes. They were 

willful efforts to avoid taxes. 

Congress chose to take some action. That action came in the form 

of this act, FATCA, the Foreign Account Tax Compliance Act. 

Under that act, foreign financial institutions are required to disclose to the IRS the accounts of U.S. taxpayers. The Wall Street 

Journal reported that an IRS limited amnesty program, pursuant 

to this act, brought in $9.9 billion in taxes, interest, and penalties 

from 55,000 taxpayers who hadn’t paid their taxes and income 

earned abroad. 

FATCA is an incremental step in terms of tax collection. U.S. 

companies and financial institutions already provide taxpayer information to the U.S. Government through 1099 forms, and taxpayers with assets abroad file with the IRS the same information 

FATCA collects. Now, that information is also coming from foreign 

financial institutions since many taxpayers previously had not been 

filing. 

Despite the new law, banks are still lending, and it is possible 

for Americans to get accounts. Citigroup, for example, operates in 

more than 160 countries and will give Americans abroad bank accounts and mortgages. Because of this act, international tax collection has changed. Countries around the world are adopting the 

Common Reporting Standard, which is based on FATCA. 

Under the Common Reporting Standard, countries collect identifying information from account holders. They then share that information with a foreign account holder’s country of citizenship and 

receive information on the accounts of their own citizens. The information collected under the Common Reporting Standard is broader 

than that required by FATCA. Common Reporting Standard countries collect information on all account holders, not just U.S. citizens. With 100 such nations committing to implementing the 

standard by 2018, efforts to evade taxes are expected to diminish. 

I certainly don’t mean to suggest there haven’t been problems 

with FATCA. We just saw one. Although it’s important, the law 

does not require anyone to give up their citizenship. The advice 

came, as I understand it, from a Swiss bank, but nonetheless, we 

have a victim here. Nobody ever should feel they have to give their 

U.S. citizenship. 

So there are kinks, clearly, to work out, and I think that’s why 

this hearing can be very helpful, and we want to make sure that 

people like Ms. Nelson and Mr. Kuettel are protected. 

Repealing FATCA, however, entirely, would not restore their citizenship and could harm our government’s ability to collect the 

taxes owed. We’ve had hearings in this committee about the fact 

that hundreds of billions of dollars, not overseas, but hundreds of 

billions of dollars go—are left on the table uncollected because the 

IRS doesn’t have the staffing or resources or mechanisms, frankly, 

to collect taxes owed but not collected. 

And so, you know, as we wrestle with the fairness of this act and 

its implementation problems and certainly the injustice, individuals such as the one we just saw in that video have experienced, 

so we want to—we certainly want to address that, but we also 

want to make sure that the United States Government is being fair 

to all of its citizens by making sure everybody pays their fair share. 


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So I look forward to the hearing. I look forward to hearing testimony from our witnesses, and with that, I yield back, Mr. Chairman. 

Mr. MEADOWS. I thank the gentleman for his thoughtful opening 

statement. We’ll now go ahead and allow the witnesses, if you will 

make your way forward. I appreciate your flexibility with regards 

to allowing Senator Rand Paul to go first. 

And so we would love to welcome—and we’re going to keep these 

introductions brief. I understand we may have votes coming up 

here 2:45 to 2:50 range, and so we’re going to try to push a little 

bit quicker here, but I’ll hold the record open for five legislative 

days for any member who would like to submit a written statement. 

So in recognizing our panel of witnesses, I’m pleased to welcome 

Mr. James Bopp, Jr., welcome; Mr. Mark Crawford, welcome; Mr. 

Daniel Kuettel, welcome; and Ms. Elise Bean, welcome to you all. 

Pursuant to committee rules, witnesses will be sworn in before 

they testify, so if you will please rise and raise your right hand. 

Do you solemnly swear or affirm that the testimony you’re about 

to give will be the truth, the whole truth, and nothing but the 

truth? 

Thank you. You may be seated. 

Please let the record reflect that the witnesses all answered in 

the affirmative. 

In order to allow time for discussion, I’d ask that you limit your 

oral testimony to 5 minutes, but your entire written statement will 

be made part of the record. 

And so we’ll now recognize you, Mr. Bopp, for 5 minutes. You 

need to hit your little button right there. 

STATEMENT OF JAMES BOPP JR. 

Mr. BOPP. Thank you. Thank you, Chairman Meadows, and 

thank you for the opportunity to testify. In my oral presentation, 

I will summarize the key points of my written testimony. 

Republicans overseas, who which I serve as treasurer and general counsel, advocates for their rights and interests of overseas 

Americans. As this hearing will demonstrate, our overseas Americans are the victims of a draconian system of tax laws that disrupts their lives, deprives them of a living, and strips them of their 

basic Constitutional rights as U.S. citizens. 

At the heart of this is the fact that the United States is only one 

of two countries in the entire world that tax its citizens based upon 

their citizenship, not their residence. So the long arm of the IRS 

reaches out to the 9 million U.S. citizens overseas and taxes them. 

For the same reason that President Donald Trump has advocated 

for territorial taxation on corporations, U.S. citizens should also be 

taxed where they reside. The 2016 Republican national platform 

calls for this. 

But it is worse than this. The Bank Secrecy Act resulted in the 

U.S. citizens being required to file a FBAR report which applies to 

U.S. citizens and requires them to report to the IRS for any account which they have in a foreign bank or foreign asset, and if 

it’s—the value is greater than $10,000. Willful violation of this law 


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results in a 50 percent penalty on the highest value of that account. 

On top of this, in 2010, the Democratic Congress passed FATCA, 

which requires more reporting of personal and confidential financial information by individuals and by foreign financial institutions. 

Individuals are required to file a FATCA report annually if they have $50,000 in foreign accounts or foreign assets, whether they 

are in the United States, living in the United States, or living 

abroad. That report includes the name, account balance, maximum 

value of the account, and there’s a $10,000 penalty. 

In addition, foreign financial institutions have one of three 

choices. One is to report to the IRS on every single U.S. citizen account holder the account information, the value, and then the gross 

receipts and gross withdrawals of that account, or two, purge themselves of all U.S. account holders and certify that to the IRS, or 

three, suffer a penalty of 30 percent of all transfers of all funds for 

all purposes from the United States to that bank. 

In addition, the Obama administration has negotiated illegal 

intergovernmental agreements which provide, in most cases, that 

the banks, instead of reporting to the IRS, report to the foreign 

government—require the foreign banks to report to the foreign government of information about U.S. citizens which is then reported 

by the government to the IRS. 

These agreements have not been approved and are unconstitutional. Thus, FATCA is a sweeping financial surveillance program 

of unprecedented scope that allows the IRS to peer into the financial affairs of any U.S. citizen with a foreign bank account. 

In so doing, FATCA has imposed enormous costs on individual 

Americans abroad. As this hearing will demonstrate and as the 

Democrats abroad found out in a survey of Americans overseas, 

these surveys’ results show the intense impact FATCA is having on 

overseas Americans. Their financial accounts are being closed, their 

relationships with nonAmerican spouses are under strain, some 

Americans are being denied promotion or partnership in business 

because of FATCA reporting, and some are planning to—contemplating renunciation of their own U.S. citizenship. 

A decade ago, about 200 a year renounced. Now the number is 

up to 6,000 last year. These Americans are, in many ways, ordinary middle class Americans being affected in extraordinary ways. 

FATCA has also imposed an enormous financial cost on foreign 

financial institutions, and through the IGAs has converted foreign 

governments and foreign banks into IRS agents who are surveilling 

U.S. citizens and reporting to the IRS. 

FATCA has furthermore denied U.S. citizens basic constitutional 

rights, equal protection, due process, 14th Amendment protection 

against unlawful search and seizure, 8th Amendment protection 

against excessive fines. I am lead attorney in Crawford v. United 

States Department of Treasury that is making these claims. 

The bottom line about all of this is that the Americans abroad 

are U.S. citizens who should enjoy the individual right and freedom 

to reside overseas, if they choose, without penalty, and America 

benefits when they do. They are ambassadors for America who promote this country and its values and often are directly involved in 

promoting American business and products overseas. 


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However, the U.S. Government has placed a scarlet letter on the 

forehead of every American, and it is stamped U.S.A., and as a result, they are treated as pariahs by foreign banks and employers. 

This is wrong, and it needs to stop. 

[Prepared statement of Mr. Bopp follows:] 


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KING-6430 with DISTILLERInsert offset folio 1 here 28503.001

Testimony of James Bopp, Jr.1 

Before the Subcommittee on Government Operations 

of the House Committee on Ways and Means 

Regarding the Foreign Account Tax Compliance Act 

Thank you for the opportunity to testifY regarding the Foreign Account Tax Compliance 

Act ("FA TCA"). My testimony today will focus on FA TCA, the accompanying 

Intergovernmental Agreements ("!GAs"), and the Report of Foreign Bank and Financial 

Accounts ("FBAR"). I will discuss (1) the current state of these laws, (2) their negative effects, 

and (3) their unconstitutionality. 

I. Overview of the FATCA, the I GAs, and FBAR. 

A. FATCA 

FATCA was enacted on March 18, 2010 as a fiscal offset provision to the Hiring 

Incentives to Restore Employment Act of2010, Pub. L. No. 111-147, 124 Stat. 71 (2010). It was 

enacted for the ostensible purpose of reducing tax evasion by U.S. taxpayers who fail to report 

foreign assets located outside ofthe U.S.2 Yet in practice, FATCA has trapped innocent U.S. 

citizens in a shockingly draconian scheme, cutting them off from basic banking services in the 

country they call home and forcing them to disclose information that they would not otherwise 

disclose. Moreover, it forces foreign financial institutions-with the threat of a significant 

penalty if they do not comply-to search out and report any U.S. account holders. As discussed 

1 Principal, The Bopp Law Firm, PC, Terre Haute, IN. See Summary of Resume of James 

Bopp, Jr. attached. The author wishes to acknowledge Courtney Turner Milbank, J.D., of The 

Bopp Law Firm, PC, for her research and writing assistance. 

2 See generally Andrew Quinlan, The Foreign Account Tax Compliance Act Will Fail to 

Curb Tax Evasion, Mar. 16, 2014, https://www.forbes.com/sites/realspin/2014/03/16/theforeign-account-tax -compliance-act-will-fail-to-curb-tax-evasion/# 1 f8de I d768a8. 

-I-
11 


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more fully below, the costs associated with such institutions becoming compliant is staggering. 

FATCA is codified at 26 U.S.C. §§ 1471-74,60380 and other scattered sections of Title 

26, and has two primary components: (I) individual reporting and (2) foreign financial 

institution reporting. 

1. Individual Reporting 

The first F ATCA component requires individuals to report foreign financial assets when 

the aggregate value of all such assets exceeds $50,000. 26 U.S.C. § 6038D(a). While the statute 

permits the Secretary of the Treasury to prescribe a higher threshold amount, this provision 

offers no additional protection to U.S. citizens. Jd. This is because U.S. citizens are unable to 

rely on a threshold amount that is subjective and which the Secretary could revert at any time. 

Currently, the Secretary has prescribed two separate FA TCA reporting thresholds for 

individuals living within the U.S. and individuals living outside the U.S. For individuals living 

within the U.S., foreign financial assets become reportable if the aggregate value of one's assets 

is equal to or greater than $50,000 on the last day of the tax year or $75,000 at any time during 

the tax year. 3 These amounts double for married individuals filingjointly. 4 For individuals living 

outside of the U.S., foreign financial assets become reportable if the aggregate value of one's 

assets is equal to or greater than $200.000 on the last day of the tax year or $300,000 at any time 

3 See generally IRS, Comparison of Form 8938 and FBAR Requirements, 

https://www.irs.gov/Businesses/Comparison-of-Forrn-8938-and-FBAR- Requirements (last 

visited Apr. 19, 20 17). 

• Id. 

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during the tax year. 5 These amounts also double for married individuals filingjointly.6 

An individual's reportable financial assets must be reported to the IRS with the 

individual's annual tax return using Form 8938. 26 C.F.R. § 1.6038D-4(a)(l1). For each foreign 

account, the individual must report: 

i. the name and address of the financial institution at which the account is 

maintained; 

ii. the account number; 

iii. the maximum value of the account during the taxable year; 

iv. whether the account was opened or closed during the taxable year; 

v. the amount of any income, gain, loss, deduction, or credit recognized for 

the taxable year and the schedule, form, or return filed with the IRS on 

which such amount is reported; and 

vi. the foreign currency in which the account is maintained, the foreign 

currency exchange rate, and the source of the rate used to determine the 

asset's U.S. dollar value. 

26 U.S.C. § 6038D(c); 26 C.F.R. § l.6038D-4(a). Form 8938 additionally requires an individual 

to report the aggregate amount of interest, dividends, royalties, other income, gains, losses, 

deductions, and credits for all accounts.' 

Individuals who fail to report such assets are subject to penalties of$10,000 for each 

5 !d. 

6 !d. 

7 IRS, Form 8938, https://www.irs.gov/pub/irs-pdf/f8938.pdf (last visited Apr. 19, 2017). 

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failure to file a timely report and 40% of the amount of any underpaid tax related to the asset. !d. 

§§ 6038D(d), 66620)(3). 

2. Foreign Financial Institution Reporting 

The second F ATCA component operates on all foreign financial institutions worldwide. 

F ATCA requires such institutions to report detailed account information for any account held by 

a U.S. person to the U.S. government each year irrespective ofwhether the U.S. account-holder 

is suspected of tax evasion. !d.§ 147l(b). 

Foreign financial institutions must report U.S. accounts annually to the IRS on Form 

8966. The report must include: 

i. the name, address, and TIN of each account holder; 

ii. the account number; 

iii. the account balance or account value; 

iv. the gross receipts and gross withdrawals or payments. 

26 U.S.C. § 147l(c)(l); 26 C.F.R. § 1.1471-4(d)(3)(ii). Form 8966 additionally requires a 

foreign financial institution to report the aggregate gross amount of all income paid or credited to 

an account for the calendar year less any interest, dividends, and gross proceeds.8 

Foreign financial institutions that fail to comply with FATCA's reporting scheme are 

subject to a substantial penalty of 30% of the amount of any payment originating from sources 

within the U.S. !d.§ 147l(a). 

8 IRS, Instructions for Form 8966, 10, http://www.irs.gov/pub/irs-pdt/i8966.pdf(last 

visited Apr. 19, 2017). 

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B. IGAs 

The Treasury Department and IRS have chosen to implement FA TCA by adopting 

regulations9 and by entering into intergovernmental agreements ("!GAs") with foreign nations. 

The Treasury Department has entered into !GAs with 113 foreign countrics. 10 The !GAs 

were entered into force on August 31, 2015. 11 Yet, none of these !GAs have been submitted to 

the Senate for its advice and consent pursuant to Article II, section 2, clause 2 of the Constitution 

or approved by a majority vote in both houses of Congress. Nor are any of the !GAs authorized 

by an existing Article II treaty. 

The !GAs are styled as either Model 1 or Model 2 agreements. 

1. Modell IGAs 

Under Model I I GAs, the foreign government ("FA TCA Partner") agrees to collect the 

financial account information that FA TCA requires a foreign financial institution to report on 

9 FATCA regulations primarily elaborate on the requirements of the statutory provisions 

and clarifY the statutory requirements. See e.g., Regulations Relating to Information Reporting 

by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial 

Institutions and Other Foreign Entities, 78 Fed. Reg. 5874 (Jan. 28, 2013); Regulations Relating 

to Information Reporting by Foreign Financial Institutions and Withholding on Certain 

Payments to Foreign Financial Institutions and Other Foreign Entities, 79 Fed. Reg. 12812 (Mar. 

6, 2014); Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, 

Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and 

Portfolio Interest Treatment, 79 Fed. Reg. 12726 (Mar. 6, 2014); Reporting of Specified Foreign 

Financial Assets, 79 Fed. Reg. 738I 7 (Dec. 12, 2014). 

10 U.S. Dept. of the Treasury, Foreign Account Tax Compliance Act (FATCA) 

https://www.treasury.gov/resource-center/tax-policy/treaties/Pages/F ATCA.aspx (last visited 

Apr.19,2017). 

11 Tax Scan Team, Block all Accounts that do not provide Self Certification by Apri/30 

for FATCA: CBDT to Financial Institutions, Apr. 11, 2017, http://www.taxscan.in/blockaccounts-not-provide-self-certification-april-30-fatca-cbdt-financial-institutions/6644/. 

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behalf of the U.S. government and report that information to the IRS itself. 12 ln effect, a foreign 

financial institution identifies U.S. accounts then reports specified information about the U.S. 

accounts to its own government. 13 That foreign government then reports such information to the 

IRS. 14 

In Model 1 IGAs, the foreign government has agreed to collect information similar to, 

but not coextensive with, the information required to be reported by a foreign financial 

institution to the U.S. government under FATCAY 

The information required to be collected regarding depository accounts includes: 

i. the name, address, and U.S. TIN of each U.S. account holder; 

ii. the account number of each U.S. account holder; 

iii. the name and identifYing number of the foreign financial institution 

maintaining the account; 

iv. the calendar year-end balance or value of the account; and 

v. the total gross amount of interest paid or credited to the account during the 

calendar year or other appropriate reporting period. 

In Model 1 !GAs, the foreign government has agreed to transmit the above listed 

12 See, e.g., U.S. Dept. of Treasury Resource Center, Model lA IGA Reciprocal, 

Preexisting TIEA or DTC, art. 2, § I, (Nov. 30, 2014), http://www.treasury.gov/resource-center 

/tax-policy/treaties/Documents/FA TCA-Reciprocal-Model-1 A-Agreement-Preexisting-TIEA-orDTC-11-30-14.pdf. 

13 IRS, FATCA Information for Governments, https://www.irs.gov/businesses/ 

corporations/fatca-governments (last visited Apr. 19, 2017). 

14 !d. 

15 See, e.g., Model lA IGA Reciprocal, Preexisting TIEA or DTC, supra note 12, at art. 

2, § 2(a). 

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information directly to the U.S. government. 16 In return, the U.S. government has agreed to treat 

each ofthe foreign government's reporting foreign financial institution as complying with 

FATCA and as not subject to the 30% withholding under§ 147l(a).17 

2. Model 2 I GAs 

Under Model2 IGAs, the foreign government has agreed (I) to direct all covered foreign 

financial institutions to register with the IRS and comply with all obligations under FA TCA 18 

and (2) to exempt such foreign financial institutions from any of the foreign government's laws 

that would prohibit or otherwise criminalizc such conduct. 19 In return, the U.S. government has 

agreed to treat each of the foreign government's reporting foreign financial institutions that 

complies with the IGA as complying with F ATCA and not subject to the 30% withholding under 

§ 147l(a).20 

C. FBAR 

The Report of Foreign Bank and Financial Accounts ("FBAR")-while not technically 

part of FATCA or the !GAs-is part of the same scheme to curb tax evasion. FBAR must be 

filed annually with the IRS by persons who have a financial interest in, or signatory authority 

16 Model l A IGA Reciprocal, Preexisting TIEA or DTC, supra 12, at art. 2, § I. 

17 /d. at art. 4, § l. 

18 See e.g., U.S. Dept. ofTreasury FATCA Resource Center, Model2 IGA, Preexisting 

TIEA or DTC, art. 2, (Nov. 30, 2014), https://www.treasury.gov/resource-center/tax-policy/ 

treaties/Documents/FA TCA-Model-2-Agreement-Preexisting-TIEA-or-DTC-11-30-14.pdf. 

19 See e.g., Agreement between the United States of America and Switzerland for 

Cooperation to Facilitate the Implementation ofFATCA, Feb. 14, 2013, art. 4, available at 

http://www .treasury.gov /resource-center/tax-policy/treaties/Documents/FA TCA -Agreement-Swi 

tzerland-2-14-20 13.pdf. 

20 Model2 IGA, Preexisting TIEA or DTC, supra note 18, art. 3, § I. 

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over, a bank, securities, or other financial account in a foreign country with an aggregate value 

of more than $10,000.31 U.S.C. § 5314; 31 C.F.R. §§ 1010.306(c), 1010.350(a). Persons 

required to file include, not only citizens and residents of the U.S., but also other entities such as 

corporations, partnerships, trusts, etc. 31 C.F.R. § 10 I 0.350(b). The FBAR must be filed 

separately from an individual's regular federal income tax return by April 15th of each year. 21 

Under FBAR, reportable bank accounts include savings accounts, depository accounts, 

checking accounts, securities accounts, and "other financial accounts." 31 C.F .R. § 10 I 0.350( c). 

Persons can have a financial interest in a reportable account in several circumstances, including 

when a person owns or holds legal title to a reportable account, when they are the agent or 

attorney with respect to the account, or when they own more than 50% of the voting power, total 

value of equity, interest, or assets, or interest in profits. I d. § I 01 0.350( e). Persons have signature 

authority over a reportable account when they have "authority ... (alone or in conjunction with 

another) to control the disposition of money, funds or other assets held in a financial account by 

direct communication (whether in writing or otherwise) to the person with whom the financial 

account is maintained." !d.§ 1010.350(f)(l). 

Failure to file the FBAR can bring both civil and criminal penalties. 31 U.S.C. § 5321(d). 

Civil penalties vary depending on whether the failure to file was willful.Jd. § 532l(a)(5). For 

non-willful violations, the maximum penalty is $10,000 for each unfiled report. !d. 

§ 5321(a)(5)(B)(i). The penalty may not be imposed for non-willful violations if the violation 

was due to "reasonable cause" and the account balance was "properly reported." !d. 

21 FinCEN, BSA Electronic Filing Requirements For Report of Foreign Bank and 

Financial Accounts (FinCEN Form 114) 8 (2017), https://www.fincen.gov/sites/default/files/ 

shared/FBAR%20Line%20Item%20Filing%20Instructions.pdf 

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§ 532l(a)(5)(B)(ii). For willful violations, the maximum penalty is $100,000 or 50% of the 

balance of the account at the time of the violation. !d.§ 532l(a)(5)(C)(i). The "reasonable cause" 

defense is unavailable for willful violations. !d. § 532l(a)(5)(C)(ii). The maximum criminal 

penalty for FBAR violations is a $250,000 fine and five years imprisonment. !d. § 5322(a). 

II. These Laws Impose Unique and Discriminatory Burdens on U.S. Citizens Living 

and Working Abroad, and Foist Staggering Compliance Costs on Foreign Financial 

Institutions. 

A. FATCA and the IGAs 

FA TCA is a sweeping financial surveillance program of unprecedented scope that allows 

the Internal Revenue Service ("IRS") to peer into the financial affairs of any U.S. citizen with a 

foreign bank account. At its core, FA TCA is a bulk-data-collection program requiring foreign 

financial institutions to report to the IRS detailed information about the accounts of U.S. citizens 

living abroad, including their account balances and account transactions. 26 U.S.C. § 147l(c)(l). 

FA TCA eschews the privacy rights enshrined in the Bill of Rights in favor of efficiency and 

compliance by requiring institutions to report citizens' account information to the IRS even 

when the IRS has no reason to suspect that a particular taxpayer is violating the tax laws. 

Moreover, FA TCA imposes enormous economic costs on financial institutions. An 

estimated 250,000 foreign financial institutions are affected by FATCA.22 And many ofthosc 

foreign financial institutions have found that it costs more to become compliant than they 

originally anticipated. In a 2014 survey, more than a quarter (27%) of the surveyed financial 

institutions estimated their annual compliance cost for 2015 to be between $100,000 and $1 

22 William Byrnes & Robert J. Munro, Background and Current Status ofF ATCA, 

LexisNexis® Guide to FATCA & CRS Compliance 1-110 (5th ed., 2017) available at 

https://ssrn.com/abstract=2926119Background and Current Status ofFATCA. 

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million.23 And 55% of financial institutions surveyed said that they expected to exceed their 

original budget for FATCA compliance while only 35% said they expected to remain within 

budget. 

Another study estimates that the costs of some of the larger institutions may reach more 

than $200 million. 24 A representative for Banco Bilbao Vizcaya Argentaria, one of the largest 

banks in Spain, stated that "compliance costs could range from €8 million for a local entity to 

€800 million for a global entity."25 And the British government estimated the aggregate initial 

costs to U.K. financial institutions to be £900 million to £1,600 million, with a continuing cost of 

£50 million to £90 million each year.'6 The total cost of implementing FA TCA, has been 

estimated to be between $200 billion and $1 trillion.27 

What is most striking about these costs is that they are expected to exceed the amount of 

additional revenue that FA TCA is projected to raise. While the legislature did not perform a 

cost-benefit analysis before F ATCA was enacted,28 the Joint Committee on Taxation estimated 

23 Thomson Reuters, Thomson Reuters survey indicates FATCA compliance to cost more 

than anticipated, Nov. 12, 20!4, https://tax.thomsonreuters.cornlpress-room/press-releasc/ 

thomson-reuters-survey-indicates-fatca-compliance-cost-anticipated/. 

24 Bynes and Munro, supra note 22, at 1-110. 

25 !d. 

26 !d. 

27 Simon Black, Genius: FATCA Has Brought in Just $13.5 Billion in Revenue on a Cost 

of$1 Trillion, Feb. 11, 2016, https://www.sovereignman.cornltrends/genius-fatca-has-broughtin-just-13-5-billion-in-revenue-on-a-cost-of-l-trillion-18665/. 

28 Nigel Green, A Corporate-Welfare Bonanza for Tax-Compliance Firms, Apr. 2, 2017, 

https://www .wsj .com/articles/a-corporate-welfare-bonanza-for-tax-compliance-firms-149116393 

8. 

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that it would generate approximately $8.7 billion in additional tax revenue between 2010 and 

2020.29 The disjunction between FATCA's costs and benefits is perhaps best illustrated by the 

Australian experience where experts in 2014 estimated that F ATCA will extract an additional 

$20 million in revenue for the U.S. at an estimated implementation cost of around $1 billion.30 

This marked inefficiency has led many, including the U.S. Taxpayer Advocate, to question 

whether FATCA's costs and difficulties are worth the marginal increase in revenues.31 

FATCA's burdens, however, are not limited to financial institutions and fall most heavily 

on individual U.S. citizens. On the most fundamental level, FATCA deprives individuals of the 

right to the privacy of their financial affairs. FA TCA authorizes the IRS to collect information on 

the financial assets of U.S. citizens living abroad that it cannot collect on U.S. citizens 

domestically. On a practical level, FATCA is severely impinging on the ability of U.S. citizens 

to live and work abroad. It is affecting all facets of individuals' lives from day-to-day finances 

and employment to family relations and citizenship. 

F ATCA is causing many foreign financial institutions to curtail their business dealings 

with U.S. citizens living abroad because the costs associated with compliance are simply not 

worth the trouble. According to a study conducted by the group Democrats Abroad in 2014, 

almost one-quarter (22.5%) of Americans living abroad who attempted to open a savings or 

retirement account and I 0% of those who attempted to open a checking account were unable to 

29 Joint Committee on Taxation, JCX-6-10, Estimated Revenue Effects of HIRE Act, p.1 

(Mar. 4, 201 0), https://www.jct.gov/publications.html?func=startdown&id=3650. 

30 Australian Banker's Association Inc., Financial System Inquiry, (Mar. 2014), 107-108, 

http://fsi.gov .au/files/20 14/04/ ABA _!.pdf. 

31 William Hoffman, FATCA 'Tormenting' Taxpayers, Olson Says, Tax Analysts, Oct. 8, 

2 0 14, http://www. taxanalysts. org/contentlfatca-tormenting-taxpayers-o !son-says. 

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due so.32 The 2014 study also revealed that some Mexican financial institutions are even refusing 

to cash checks for Americans living in that country, many of whom are retirees. 33 

But banks are not only refusing to open new accounts or cash checks for U.S. citizens, 

they are also closing existing customer accounts. 34 In 2014, it was estimated that one million 

Americans living abroad (one-sixth of all such citizens) have had bank accounts closed because 

ofFATCA.35 Nearly two-thirds (60%) of those who reported having an account closed had lived 

abroad for twenty or more years, and most affected appear to be "overwhelmingly middle class 

Americans, not high income individuals."36 More than two-thirds (68%) of checking accounts 

and nearly half (40.4%) of savings accounts closed had balances of less than $10,000.37 And, 

over two-thirds (69.3%) of dedicated retirement accounts and more than half (58.9%) of other 

12 Democrats Abroad, F ATCA: Affecting Everyday Americans Every Day 6 (20 14), 

https ://d3 n8a8pro 7v hmx.c loudfront.net/ democratsabroad/pages/4 734/ attachments/ original/144 97 

77271/Democrats_Abroad_2014_FATCA_Research_Report.pdf?1449777271 (last visited Apr. 

19, 2017). 

33 Democrats Abroad, supra note 32, at 7. 

34 Martin Hughes, FATCA Fall Out Closes A Million US Bank Accounts, Money 

International, Oct. 7, 20 14, http://www .moneyinternational.com/tax/fatca-fall-closes-million-usbank-accounts/; Eyk Henning, Deutsche Bank Asks U.S. Clients in Belgium to Close Accounts, 

The Wall Street Journal, May 2, 2014, http://www.wsj.com/articles/SBIOOOI424052702303678 

404579537610638716116; Nat Rudarakanchana, Americans Abroad Can't Bank Smoothly As 

FATCA Tax Evasion Reform Comes Into Play, International Business Times, Dec. 20, 2013, 

http://www.ibtimes.com/ americans-abroad-cant-bank-smoothly-fatca-tax-evasion-reformcomes-play-1517032; Jeff Berwick, Breaking News: US Expats in Mexico Left Stranded in 

Latest FATCA Escalation, The Dollar Vigilante, June 4, 2014, http://dollarvigilante.com/blog/ 

20 14/6/4/breaking-news-us-expats-in-mexico-left-stranded-in-latest-fa.html. 

35 Hughes, supra note 34. 

36 Democrats Abroad, supra note 32, at 4, 6. 

37 Democrats Abroad, supra note 32, at 6. 

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investment or brokerage accounts closed had a balance of less than $50,000. 38 

In addition to causing Americans overseas to lose access to basic financial services 

abroad, FATCA is also having a detrimental impact on U.S. citizens living abroad at work and at 

home. Many have reported that they are being denied consideration for promotions at their jobs, 

particularly with respect to high-level positions,39 because of the concomitant compliance 

burdens foisted on employers by FATCA.'0 Indeed, in the study by Americans Abroad, 5.6% of 

respondents reported that they had been denied a position because ofFATCA.41 Others reported 

difficulty opening a business or partnering with others in joint ventures because of obstacles 

created by FATCA.42 Such trends will undoubtedly affect the ability of U.S. citizens to remain 

economically competitive in an increasingly globalized world. 

At home, FA TCA is forcing Americans abroad to rearrange not only their financial 

affairs but also reconsider their personal relationships.43 More than one-fifth (20.8%) of 

Americans abroad surveyed by Democrats Abroad have already or are considering separating 

38 Democrats Abroad, supra note 32, at 6. 

39 Democrats Abroad, 2014 FATCA Research Project Datapack 21 at Table Vll.3 (2014), 

https:// d3 n8a8pro 7vhmx.cloudfront.net/democratsabroad/pages/4 73 4/ attachments/ ori ginal/144 97 

77269/Democrats_Abroad_2014_FATCA_Research_Datapack.pdf'?1449777269 (last visited 

Apr.19,2017). 

40 Barbara Stcherbatcheff, Why Americans Abroad Are Giving Up Their Citizenship, June 

28,2014, 

http://www .newsweek.com/why-americans-abroad-are-giving-their-citizenship-25644 7 

?utm _source=taboola&utm _ medium=referral 

41 Democrats Abroad, supra note 32 at 9. 

42 Democrats Abroad, supra note 32 at 10. 

43 See generally Democrats Abroad, supra note 32, at 7-9 (noting several instances where 

FATCA was negatively affecting familial relationships). 

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their accounts from their non-American spouse.44 And 2.4% have or are considering separating 

or divorcing as a result ofFATCA's expansive reporting requirements,45 further destabilizing 

American families by adding to the already increasing divorce rate_46 This instability is likely 

having the harshest impact on Americans living abroad whose spouses are the primary 

breadwinners and themselves not American citizens. For these individuals, such as stay-at-home 

mothers, FA TCA is undermining their financial security and placing them in "highly vulnerable" 

positions because of the need to separate American spouses from a family's non-American 

earned financial assets.'7 It can leave them without property and without access to their families' 

bank accounts and credit.'8 

The issues discussed above have not only affected American expatriates, but also a group 

of people referred to as "accidental Americans." These accidental Americans may not have any 

personal or business ties to the U.S.49 but could have been granted citizenship by being born in 

the U.S. or to a U.S. citizen. Yet, despite their lack of personal or business ties, they are subject 

to the significant burdens stemming from F ATCA. 

44 Democrats Abroad, supra note 32 at 7. 

45 Democrats Abroad, supra note 32, at 7. 

46 Christophen Ingraham, Divorce is actually on the rise, and it's the baby boomers' 

fault, The Washington Post, March 27,2014, 

http://www. washingtonpost.com/blogs/wonkblog/wp/ 

20 14/0 3/2 71 divorce-is-actually -on-the-rise-and-its-the-baby-boomers-fault/. 

47 Democrats Abroad, supra note 32 at 8. 

48 Democrats Abroad, supra note 32, at 8 (reporting numerous situations where nonincome earning spouses were removed from the families financial affairs). 

49 Bynes and Munro, supra note 22, at 1-107. 

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For some Americans living abroad, FATCA's burdens have become so heavy that they 

are choosing to relinquish their US citizenship just so they can avoid the crushing weight of this 

unprecedented law. As one author put it, FATCA "threaten[s] your bank to get your bank to 

threaten you. The only way to get the IRS off your back is to ... get that expensive [Certificate 

of Loss ofNationality]."50 

Indeed, record numbers of Americans have relinquished their U.S. citizenship since 

FATCA's passage. 5

1 From 2010 to 2015, a record number of citizenship renunciations 

occurred-totaling more than I 0,000.52 And the trend shows no signs of slowing down. In 2016, 

there were 5,411 renunciations, a number well above the previous record in 2015 of 4,279. 53 

In some cases, non-American spouses are pressuring their American spouses to 

relinquish their U.S. citizenship to avoid entangling the non-American spouses financial affairs 

50 Daily Kos, How America holds its expats hostage on tax day, Apr. 16, 2017, http://m. 

dailykos.com/story/20 I 7/4/16/165 3 591/-How-America-holds-its-expats-hostage-on-tax-day. 

51 Catherine Bosley and Richard Rubin, A Record Number of Americans Are Renouncing 

Their Citizenship, Bloomberg Business, Feb. I 0, 2015, http://www.bloomberg.com/news/ 

articles/2 0 15-02-1 0/ americans-overseas-top-annual-record-for-turning-over-passports; Ali 

Weinberg, Record Number of Americans Renouncing Citizenship Because of Overseas Tax 

Burdens, ABC News, Oct. 28, 2014, http://abcnews.go.com/International/record-numberamericans-renounc ing-citizenship-overseas-tax -burdens/story?id=2 64 9615 4; Laura Saunders, 

More Americans Renounce Citizenship. With 2014 on Pace for a Record, The Wall Street 

Journal, Oct. 24, 2014, http://blogs.wsj.com/totalreturn/20 14/ I 0/24/more-americans-renouncecitizenship-with-2014-on-pace-for-a-record/; Robert W. Wood, Americans Renouncing 

Citizenship Up 221%, All Aboard The r"ATCA Express, Forbes, Feb. 6, 2014, http://www.forbes 

.com/ sites/ robcrtwood/20 14/02/06/ americans-renouncing-citizenship-up-221-all-aboard-the-fate 

a-express/. 

52 Bosley and Rubin, supra note 51. 

53 Ephraim Moss, FATCA Causing Record Amount of Citizenship Renunciations, Apr. 5, 

2 0 1 7, https ://www. taxconnections.com/taxb log/fatca-causing -record-amount-of-citizenshiprenunciations/#comments. 

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in FATCA.54 And, at the same time, as if to add insult to injury, the U.S. government has sought 

to make the price of citizenship for these persons even higher. For,just as FATCA's burdens are 

growing steadily more burdensome as the law moves toward full implementation, the U.S. 

government has simultaneously increased the cost of citizenship renunciation five-fold, from 

$450 to $2,350.55 The U.S. now has the highest cost of renunciation in the world. 56 

Finally, the extent of some negative effects remain to be seen. FATCA and the I GAs 

open the door for other countries to demand the same information from U.S. residents. The 

reciprocal version of the I GAs provide that the U.S. will exchange information from U.S. 

financial accounts held by residents of partner countries. 5

7 This is sure to subject U.S. financial 

institutions to the enormous financial burdens of implementation that foreign financial 

institutions are already experiencing. 

B. FBAR 

But F ATCA is not the only attack being leveled at Americans living abroad. The Bank 

Secrecy Act imposes an extra requirement on overseas Americans in the form of a special 

reporting requirement for foreign accounts. Under the FBAR, Americans living abroad must 

disclose detailed information about any foreign bank accounts with a balance in excess of 

$10,000. In practice, it is just a trap for the unprepared and the uninformed, pinching regular 

54 Democrats Abroad, supra note 32, at 9. 

55 Weinberg, supra note 51. 

56 Robert W. Wood, U.S. Has World's Highest Fee to Renounce Citizenship, Oct. 23, 

2015, https://www.forbes.com/sites/robertwood/20 15/1 0/23/u-s-has-worlds-highest-fee-torenounce-citizenship/#7b74c3e247de. 

57 Bynes and Munro, supra note 22, at 1-83. 

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middle-class Americans residing outside the U.S. 

The penalties for failing to file the report can be financially devastating and can wipe out 

a person's entire savings. The maximum penalty for failing to file an FBAR is $IOO,OOO or 50% 

of the value of the account, whichever is greater with each unfiled report begetting a separate 

penalty. 31 U.S.C. § 5321 (a)(S)(C). As a result, a single unreported account with a static balance 

can be penalized multiple times for the same course of conduct continued over multiple years. 

Because the FBAR civil penalties are cumulative, ultimately the fine for failing to file the FBAR 

can far exceed the actual value of the unreported financial asset. A person who fails to report an 

account for only two years could be subject to a penalty equal to the full balance of the account. 

Each unfiled FBAR could subject the person to a fine of 50% of the balance of the account, 

resulting in an aggregate fine after two years of 100% of the value of the account. One person 

who failed to file the FBAR for four years was subjected to a fine of 150% of the balance of his 

account. 5

8 

III. FATCA, the IGAs and FBAR Are Unconstitutional. 

On July 14, 20 I 5, a number of Plaintiffs, including Senator Rand Paul, filed suit in the 

United States District Court for the Southern District of Ohio, challenging FATCA, the I GAs, 

and FBAR. The case is styled Crawford v. U.S. Department of the Treasury, Case No. 3:15-cv00250. The merits of the case have not yet been reached and the Court has not ruled on the 

constitutionality ofF A TCA, the I GAs, and FBAR. This is because the Court dismissed the 

case--finding that none of the Plaintiffs had standing to challenge FATCA, the I GAs, or FBAR. 

58 David Voreacos and Susannah Nesmith, Florida Man Owes Record 150% IRS Penalty 

on Swiss Account, Bloomberg Business, May 29, 20I4, http://www.bloombcrg.com/news/ 

articles/20 14-05-28/florida-man-87 -owes-I 50-of-swiss-account-jury-says. 

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The Court reasoned that Plaintiff's harms were the result of third-party bank action, not the 

government. The Court's reasoning was flawed because it failed to take into account that banks 

would not have reported on U.S. accounts nor denied U.S. account holders were it not for 

F ATCA and the !GAs. The case is now pending in the United States Court of Appeals for the 

Sixth Circuit. See Crawford v. U.S. Department of the Treasury, Case No. 16-3539. 

For the reasons listed below and in Crmtford v. U.S. Department of the Treasury, 

FA TCA, the !GAs, and FBAR are unconstitutional. 

A. Tbe I GAs Are Unconstitutional Sole Executive Agreements. 

There are four recognized sources of authority for the Executive Branch to make 

international agreements: (1) the Treaty Clause, (2) an act of Congress, (3) an existing treaty, and 

(4) the President's independent constitutional powers. Restatement (Third) of Foreign Relations 

Law§ 303 (1987). These four sources give rise to four types of international agreements: (l) 

Article II treaties, (2) congressional-executive agreements, (3) treaty-based agreements, and (4) 

sole executive agreements. John E. Nowak & Ronald D. Rotunda, Treatise on Const. L. § 6.8(a). 

Each of the first three types of agreements require action by at least one chamber of 

Congress. Treaties must be ratified by two-thirds of the Senators present. U.S. Const. art. II,§ 2, 

cl. 2. Congressional-executive agreements must be authorized or approved by a majority vote in 

both Houses like ordinary legislation. Restatement (Third) of Foreign Relations Law§ 303. 

Treaty-based agreements must be made pursuant to authorization contained in an existing Article 

II treaty. Nowak & Rotunda, supra§ 6.8(a). 

Only the fourth type of agreement-sole executive agreements--can be brought into 

force, if at all, without congressional action. I d.; II FAM § 723.2-2(C). They are "reserved for 

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agreements made solely on the basis of the constitutional authority of the President." II FAM 

§ 723.2-2; accord United States v. Guy W Capps, Inc., 204 F.2d 655, 658-59 (4th Cir. 1953), 

a.ff'd, 348 U.S. 296 (1955). 

1. The IGAs Exceed the Scope of the President's Independent 

Constitutional Powers. 

The Executive Branch has identified possible sources of the President's independent 

power to make international agreements as including "(I) The President's authority as Chief 

Executive to represent the nation in foreign affairs; (2) The President's authority to receive 

ambassadors and other public ministers, and to recognize foreign governments; (3) The 

President's authority as 'Commander-in-Chief; and (4) The President's authority to "take care 

that the laws be faithfully executed." See II F AM § 723 .2-2(C). 

The President, however, lacks an independent power to impose taxes or specifY the 

manner of their collection or any other power which would grant him the power to enter the 

!GAs unilaterally. See generally U.S. Const. art. II (reserving taxing power exclusively to 

Congress). 

Yet, the I GAs are fundamentally international agreements concerning taxation and the 

collection of taxes. And none of them has received Senate or congressional approval or is 

pursuant to any authorization contained in any Article II treaty. The !GAs have not been 

submitted to the Senate for advice and consent. 59 

Furthermore, while FA TCA authorizes the Treasury Department to adopt regulations and 

"other guidance," it does not authorize the making of international agreements like the !GAs. See 

59 U.S. Dep't of State, Treaties Pending in the Senate (updated as of Dec. 30, 2016), 

http://www.state.gov/s/l/treaty/pending/index.htm (last visited Apr. 19, 2017). 

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26 U.S.C. § 1474(t). Finally, there is no valid treaty that otherwise authorizes the IGAs.60 

The President, therefore, lacks the power to conclude the !GAs as sole executive 

agreements because their subject matter lies outside his constitutional powers. 

2. The IGAs Override FATCA. 

Sole executive agreements may not be "inconsistent with legislation enacted by the 

Congress in the exercise of its constitutional authority." II FAM § 732.2-2(C); accord Guy W. 

Capps, 204 F.2d at 658-600; Swearingen v. United States, 565 F. Supp. 1019 (D. Colo. 1983). 

Yet, the I GAs establish a different regulatory scheme than the one mandated by FA TCA. 

The Model I !GAs, for example, exempt covered foreign financial institutions from the statutory 

requirement that they report account information directly to the Treasury Department, 26 U.S.C. 

§ 147l(b)(I)(C), and instead allow such foreign financial institutions to report the account 

information to their national governments. 61 

The Model 2 I GAs, for example, exempt covered foreign financial institutions from the 

obligation "to obtain a valid and effective waiver" of any foreign law that would prevent the 

reporting of information required by FATCA, 26 U.S.C. § 147l(b)(I)(F)(i), and instead obligates 

the foreign government to suspend such laws with respect to FA TCA reporting by covered 

foreign financial institutions.62 This deprives account holders of their right under the statute to 

refuse a waiver. 

60 Allison Christians, The Dubious Legal Pedigree of IGAs (and Why it Matters), 69 Tax 

Notes lnt'l565, 567 (2013) (The "I GAs are not treaty-based agreements."). 

61 See e.g., Modell A IGA Reciprocal, Preexisting TIEA or DTC, supra note 12, at art. 2, 

§I. 

62 Agreement between the United States of America and Switzerland for Cooperation to 

Facilitate the Implementation ofFATCA, supra note 19, at art. 4. 

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The President, therefore, lacks the power to conclude the !GAs as sole executive 

agreements because they override a duly enacted statute. 

B. The Heightened Reporting Requirements for Foreign Financial Accounts 

Deny U.S. Citizens Living Abroad the Equal Protection ofthe Laws. 

The Fifth Amendment provides that "No person shall ... be deprived of life, liberty, or 

property, without due process oflaw .... "U.S. Const. amend. V. The Due Process Clause of the 

Fifth Amendment includes a guarantee of equal protection equivalent to that expressly provided 

in the Equal Protection Clause of the Fourteenth Amendment. "An equal protection claim against 

the federal government is analyzed under the Due Process Clause of the Fifth Amendment." 

Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 217 (1995); United States v. Ovalle, 136 F .3d 

1092, 1095 (6th Cir. 1998). Thus, the federal government may not "deny to any person within its 

jurisdiction the equal protection of the laws," U.S. Const. amend. XIV,§ I. 

The only financial information reported to the IRS about domestic accounts is the amount 

of interest paid to the accounts during a calendar year, 26 U.S.C. §§ 6049(a), (b); 26 C.F.R. 

§§ 1.6049-4(a)(l), 1.6049-4T(b)(l). For a foreign account, the information reported to the IRS 

includes not only the interest paid to the account, 63 but also the amount of any income, gain, loss, 

deduction, or credit recognized on the account,64 whether the account was opened or closed 

during the year,"5 and the balance of the account.66 Comparable information is not required to be 

63 26 USC§ 147l(c)(l)(C); 26 C.F.R. §§ 1.147l-4(d)(3)(ii), -4(d)(4)(iv); Model !A IGA 

Reciprocal, Preexisting TIEA or DTC, supra note 12, at art. 2, §2. 

64 26 C.F.R. § 1.6038D-4(a)(8) 

65 Id. § 1.6038D-4(a)(6). 

66 26 USC§§ 147l(c)(I)(C), 6038D(c)(4); 26 CFR §§ 1.1471-4(d)(3)(ii), 1.6038D4(a)(5); Modell A IGA Reciprocal, Preexisting TIEA or DTC, supra note 12, at art. 2, §2; 

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disclosed regarding domestic accounts of U.S. citizens. The result is that U.S. citizens living in a 

foreign country are treated differently than U.S. citizens living in the United States. 

The federal government has no legitimate interest in knowing the amount of any income, 

gain, loss, deduction, or credit recognized on a foreign account, whether a foreign account was 

opened or closed during the year, or the balance of a foreign account. The fact that the local bank 

accounts of citizens living abroad are not held in the U.S. bears no rational relationship to any 

legitimate state interest the federal government might have in prying into the private affairs of 

citizens living abroad. 

C. The Penalties Imposed under FATCA and FBAR Are Unconstitutional 

Under the Excessive Fines Clause. 

The Eighth Amendment provides: "Excessive bail shall not be required, nor excessive 

fines imposed, nor cruel and unusual punishments inflicted." U.S. Const. amend. VIII. 

The Excessive Fines Clause is not limited only to fines that are criminal in nature but 

extends to civil fines as well. Austin v. United States, 509 U.S. 602,610 (1993). A fine is subject 

to the Excessive Fines Clause if one of the purposes of the fine is punishment. I d.; United States 

v. Bajakajian, 524 U.S. 321,328 (1998). Fines calibrated for retributive or deterrent purposes are 

considered to be for the purpose of punishment. Austin, 509 U.S. at 610. 

To withstand constitutionality, fines governed by the Excessive Fines Clause must not be 

"excessive." U.S. Const. amend. VIII. The "touchstone" of the excessiveness analysis is 

"principle of proportionality," requiring a comparison of the amount of the fine and the gravity 

of offense. Bajakajian, 524 U.S. at 334. A fine violates the Eighth Amendment when the fine is 

Model 2 IGA, Preexisting TIEA or DTC, supra note 18, at art. 2. 

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grossly disproportional to the gravity of the offense. !d.. 

The Supreme Court has identified three "general criteria" to guide the determination of 

whether a fine is grossly disproportionate: (1) "the degree the defendant's reprehensibility or 

culpability"; (2) "the relationship between the penalty and the harm to the victim caused by the 

defendant's actions"; and (3) "the sanctions imposed in other cases for comparable misconduct." 

Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S. 424, 434-35 (2001). 

1. The FATCA Foreign Financial Institution Penalty Is 

Unconstitutional. 

Under FATCA, payments from U.S. sources to foreign financial institutions not 

compliant with FATCA are subject to a 30% "tax" (hereinafter the FATCA "FFI Penalty"). 26 

U.S.C. § 147l(a); 26 C.F.R. § 1.1471-2T(a)(l). This penalty can be applied to any financial 

institution anywhere in the world if an institution fails to comply with F ATCA. 

Without the FFI Penalty, foreign financial institutions likely would not comply with 

FA TCA and Plaintiffs' private financial information would not be disclosed to the U.S. 

government. The penalty leaves foreign financial institutions no meaningful alternative but to 

implement costly compliance systems and comply with FATCA. In fact, former Senator, Carl 

Levin, stated that "FATCA was intended to 'force foreign financial institutions to disclose their 

U.S. account holders or pay a steep penalty for nondisclosure. "'67 

The FFI Penalty is intended as punishment and is therefore subject to the Excessive Fines 

Clause. Austin, 509 U.S. at 610. The penalty is used as a hammer to coerce compliance by 

foreign financial institutions everywhere in the world, whether or not they fall within the 

67 Byrnes and Munro, supra note 22, at 1-4 (citing HIRE Act, 156 Cong Rec § 1745, § 

1745 (daily ed Mar 18, 2010) (Statement of Senator Levin)). 

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regulatory jurisdiction of the U.S. Furthermore, the FFI Penalty is grossly disproportional to the 

gravity of the offense it seeks to punish and is therefore unconstitutional. Bajakajian, 524 U.S. at 

334. 

2. The FATCA Passthrough Penalty Is Unconstitutional. 

F ATCA and the I GAs require foreign financial institutions to "deduct and withhold a tax 

equal to 30 percent of' any payments made to recalcitrant account holders (hereinafter the 

FATCA "Passthrough Penalty").68 Recalcitrant account holders are persons who fail to provide 

(a) information sufficient to determine whether the account is a U.S. account to the foreign 

financial institution holding their account, (b) their name, address, or TIN to the foreign financial 

institution holding the account, or (c) who fails to provide waiver of a foreign law that would 

prevent the foreign financial institution from reporting the information to the IRS under F ATCA. 

26 u.s.c .. § 1471(d)(6). 

The Passthrough Penalty is designed to punish and is therefore subject to the Excessive 

Fines Clause. Austin, 509 U.S. at 610. Furthermore, the Passthrough Penalty is grossly 

disproportionate to the gravity of the offense and is therefore unconstitutional. Bajakajian, 524 

U.S. at 334. 

3. The FBAR Willfullness Penalty Is Unconstitutional. 

Section 5321 of the United States Code imposes a maximum penalty of $100,000 or 50% 

of the balance of the account at the time of the violation, whichever is greater, for failures to tile 

an FBAR as required by § 5314 (hereinafter the FBAR "Willfulness Penalty"). 31 U.S.C. 

68 26 U.S.C. § 1471(b)(I)(D); 26 C.F.R. §§ 1.1471-4(a)(l), 1.1471-4T(b)(J); Model lA 

!GA Reciprocal. Preexisting TIEA or DTC, supra note 12, art. 2, § I; Model2 IGA, Preexisting 

TIEA or DTC, supra note 18, art. 2. 

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§ 532l(b)(5)(C)(i). 

The Willfulness Penalty is designed to punish and is therefore subject to the Excessive 

Fines Clause. Austin, 509 U.S. at 610. The Willfulness Penalty is grossly disproportionate to the 

gravity of the offense and is therefore unconstitutional. Bqjakajian, 524 U.S. at 334. 

D. FATCA and the IGAs Information Reporting Requirements Are 

Unconstitutional Under the Fourth Amendment. 

The Fourth Amendment provides: 

The right of the people to be secure in their persons, houses, papers, and effects, 

against unreasonable searches and seizures, shall not be violated, and no Warrants 

shall issue, but upon probable cause, supported by Oath or affirmation, and 

particularly describing the place to be searched, and the persons or things to be 

seized. 

The Amendment is violated in where "the Government, through 'unreviewed executive 

discretion,' [is permitted to make] a wide-ranging inquiry that unnecessarily 'touch(es) upon 

intimate areas of an individual's personal affairs."' US. v. Miller, 425 U.S. 435,444 n.6 (1976) 

(quoting California Bankers Assn. v. Shultz, 416 U.S. 21, at 78-79 (1974) (Powell, J., 

concurring)). Such indiscriminate searches may only be conducted, at a minimum, after some 

"invocation of the judicial process" because "the potential for abuse is particularly acute." 

California Bankers Assn., 416 U.S. at 79 (Powell, J., concurring); see also, Miller 425 U.S. at 

444 n.6 (distinguishing situations where "the Government has exercised its powers through 

narrowly directed subpoenas duces tecum subject to the legal restraints attendant to such 

process"); Los Angeles v. Patel, 135 S. Ct. 2443,2452 (2015) (holding that, for administrative 

searches, "the subject of the search must be afforded an opportunity to obtain precompliance 

review before a neutral decisionmaker."). 

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1. FATCA's Information Reporting Requirements Are Unconstitutional. 

FA TCA requires foreign financial institutions to report a broad range of information 

about the accounts of U.S. account holders to the U.S. government, including: 

i. the name, address, and TIN of the account holder; 

ii. the account number; 

iii. the average calendar year or year-end balance or value of the account; 

iv. the aggregate gross amount of interest paid or credited to the account 

during the year; and 

v. the aggregate gross amount of all income paid or credited to an account 

for the calendar year less any interest, dividends, and gross proceeds. 

26 U.S.C. § 1471(c)(l); 26 C.F.R. § 1.147!-4(d)(3)(ii); IRS, Instructions for Form 8966 at 10, 

http://www.irs.gov/pub/irs-pdf/i8966.pdf. 

FA TCA makes no provision for judicial oversight of the searches of the private financial 

records of American citizens held by foreign financial institutions in violation of the Fourth 

Amendment. 

2. The I GAs' Information Reporting Requirements Are 

Unconstitutional. 

The I GAs require foreign financial institutions and their governments to report a broad 

range of information about the accounts of U.S. account holders to the U.S. government, 

including: 

i. the name, address, and U.S. TIN of each U.S. account holder; 

ii. the account number of each U.S. account holder; 

iii. the name and identifYing number ofthe foreign financial institution 

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maintaining the account; 

iv. the calendar year-end balance of the account; and 

v. the total gross amount of interest paid or credited to the account during the 

calendar year or other appropriate reporting period.69 

The I GAs make no provision for judicial oversight ofthe searches ofthc private financial 

records of American citizens held by foreign financial institutions in violation of the Fourth 

Amendment. 

Conclusion 

As discussed above, FA TCA is a sweeping financial surveillance program of 

unprecedented scope that allows the IRS to peer into the financial affairs of any U.S. citizen with 

a foreign bank account. And FBAR is a trap for the unprepared and the uninformed. The 

negative effects of these laws are significant and disturbing. 

Innocent Americans are being denied bank accounts, having their accounts closed, being 

forced to separate their jointly held assets, and missing out on career and investment 

opportunities as a result of these laws. They are also being forced to shoulder significant 

penalties. Moreover, the costs associated with foreign financial institution compliance far 

outweighs any revenues FATCA brings in-costs U.S. banks will surely have to bear when 

partner jurisdictions demand reciprocal information. 

Senator Rand Paul put it perfectly when he said, "FA TCA is a textbook example of a bad 

law that doesn't achieve its stated purpose but does manage to unleash a host of unanticipated 

69 Model lA IGA Reciprocal, Preexisting TIEA or DTC, supra note 12, art. 2, § 1; Model 

2 IGA, Preexisting TIEA or DTC, supra note 18, art. 2. 

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destructive consequences ... FA TCA should be repealed and Congress should find a less 

onerous means of enforcing tax laws."70 Repealing FATCA and FBAR will curb the significant 

harms being imposed on U.S. citizens living abroad and on foreign financial institutions. For 

these reasons and others discussed above, FA TCA and FBAR should be repealed. 

70 Byrnes and Munro, supra note 22, at 1-83 (citing Sen. Paul Introduces Bill to Repeal 

Anti-Privacy Provisions in FATCA. May 8, 2013). 

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38 

Mr. MEADOWS. Thank you, Mr. Bopp. 

Mr. Crawford, you are recognized for 5 minutes. 

STATEMENT OF MARK CRAWFORD 

Mr. CRAWFORD. Thank you very much for allowing me to be here 

today to share my firsthand experience regarding the consequences 

of FATCA from the perspective of an international businessman. 

My name is Mark Crawford. I’m an American citizen, and I do 

not hold any other citizenship, though at various times I’ve been 

a resident of the United Kingdom, Albania, Montenegro, and 

Greece. The politics that divide Americans at home don’t often divide those of us broad. Most of the 9 million Americans living overseas are ordinary citizens who are living their lives, raising families, studying, and working. We’re just Americans, and though 

we’re often far from home, America is still our home, and the U.S. 

Constitution is still our Constitution. 

In my written submission, I outline more detail about my personal background, having lived and worked across three continents 

over a 25-year period as a teacher in China, a missionary in Albania, a graduate student in England, a venture capitalist in the Balkans, a banker in Montenegro and Serbia, and now an entrepreneur involved in finance, natural resources, and film production. 

I’ve employed hundreds of people and increased economic activity 

between the United States and its friends around the world. 

Throughout my work abroad, I’ve remained active assisting U.S. interests whenever called upon, regardless of which party controlled 

the Congress or the White House, including having worked for appointees of the Clinton administration, supported USAID financial 

inclusion projects, voluntarily chairing American Chamber of Commerce affiliates, advising leaders of several American allied governments, and more recently, volunteering to assist the Treasury Department in Kosovo. 

Having worked in finance throughout the world, I returned to Albania in 2010 to pursue a business opportunity, and I ran into the 

consequences of FATCA. In smaller developing markets, there 

often isn’t enough volume to support standalone financial products, 

so it’s important for such markets to leverage off larger ones. Albania’s domestic capital market is still developing, and in order to 

connect Albania to international capital markets, I founded an Albanian introductory brokerage firm that would work with Saxo 

Bank in Denmark offering basic brokerage services to Albanian 

residents. 

When I sent the first 10 applications to Saxo Bank, they responded approving only nine. I reached out to Saxo Bank to see 

who was rejected, and they responded to say that I was rejected. 

I owned the company. I was told that though I was an Albanian 

resident at that time, I was rejected solely because I was an American citizen, because of fears because of the FATCA law. 

I realize that due to FATCA, I could not serve U.S. persons in 

my Albanian brokerage firm because of the carry-on impact of the 

Saxo decision. The introductory brokerage vision that I had was 

alive, but the idea of working with Americans and American persons was dead. 


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39 

I’m the pro bono chairman of the American Chamber of Commerce in Albania, and I work closely with our U.S. Embassy there 

in a private sector capacity trying to promote American business. 

A brokerage firm owned by myself that markets itself as an American led by the American Chamber chairman that does not accept 

American citizens is a logical anomaly to most in Albania, and understandably so. 

The introductory brokerage products became sidelined, and Saxo 

Bank eventually grew so unhappy with me that they dropped my 

firm altogether. The obstacle to my brokerage business created by 

FATCA was a deal breaker. 

Proposals to address the unintended consequences of FATCA had 

been considered by both parties and candidates on both sides of the 

aisle in the most recent presidential election. And recognizing the 

problems of FATCA, some have suggested implementing a safe harbor exception that would help Americans solely within the country 

of their residency. 

Such a safe harbor exception would not have solved the negative 

impact that FATCA had on my situation. I have never been a resident of Denmark, thus an exception would not have alleviated Saxo 

Bank’s relationship with me or other potential clients that I was 

bringing through my introductory brokerage firm from Albania. 

In conclusion, my experience is that the American entrepreneurial mentality sets our culture apart. Americans do not restrict 

their investments based on their personal residency; rather, they 

pursue opportunity according to the markets. Access to international financial services is critical for all such projects, and 

FATCA’s impact has already harmed some of my businesses, and 

if left unrepealed, will risk others. 

It is ironic that after spending much of my career helping advance U.S. interests by expanding financial inclusion through 

FATCA, the United States has inadvertently restricted inclusion 

for its own citizens. The fact that an increasing number of banks 

and financial institutions reject working with United States citizens, outright harms our interests. 

It is my belief that the best way to improve the current situation 

is not to make the situation more complex by creating carveouts or 

safe harbor exceptions or other partial fixes; therefore, I do support 

a full repeal of FATCA, and I look forward to your comments and 

questions in the future. 

[Prepared statement of Mr. Crawford follows:] 


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Testimony of Mark Christopher Crawford1 

Before the Subcommittee on Government Operations Regarding 

the Foreign Account Tax Compliance Act 

I would like to thank you, Chairman Meadows, and members of the Government Operations 

Subcommittee for allowing me to be here today to share my first-hand experience as an 

international businessman within the context of "Reviewing the Unintended Consequences of the 

Foreign Account Tax Compliance Act {'FATCA')". 

The politics that divide Americans at home don't often divide those abroad. Most of the 9 

million overseas Americans' are ordinary citizens who are living their lives, raising their families, 

studying, and working as teachers, doctors, businessmen, or relief volunteers. We are just Americans 

and though we are often far from home, America is still our home and the US Constitution is still our 

Constitution wherever we are. I've been pleased to join a bi-partisan group to raise this issue to all 

three branches of Government---the White House via the Republican platform, the Judiciary via 

challenging FATCA in Federal Court, and today before Congress. It is my hope and desire that my 

testimony today prompts Congress to re-addresses the negative impact that FATCA is having on 

Americans around the world and to repeal this legislation. 

During my testimony I will discuss (1) my own experience in international finance( always 

having worked in the private sector but often alongside US Government initiatives in collaboration 

with USAID and US Treasury), {2) the impact that FATCA has had on my entrepreneurial activity as an 

American living overseas, and (3) possible remedies to the unintended consequences of FATCA. I 

look forward to answering any questions that the Members may have as we seek to mitigate the 

consequences of FATCA. 

I. My experience in the foreign financial sector and the importance of fostering financial 

inclusion. 

My name is Mark Crawford. I am an American citizen and international entrepreneur, based 

in Dayton Ohio. I do not have any other citizenship, though at various times I have been a resident 

of the UK, Albania, Montenegro, Macedonia and Greece. I currently have investment activity in four 

1 Director, BlackburnSteele LLC, Dayton, Ohio; markcrawford.org; See Resume of Mark C. Crawford attached. 2 https://travel.state.gov/content/dam/travei/CA_By_the_Numbers.pdf 

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countries, including the United States. During my career, I have worked across three continents, 

reaching across party lines to promote American business and American values. I have started banks, 

micro-lending firms, NGOs, Chambers of Commerce, accounting and brokerage firms, and a film 

production company. I have led investments in natural resources and advised leaders of several 

American-allied governments regarding privatization, stabilization and economic growth. I have 

employed hundreds of people and increased economic activity between the United States and its 

friends around the world. 

By way of background, my parents are Texans and my father is a Texas A&M Electrical 

Engineering graduate and upon graduation was commissioned into the Air Force and assigned to 

build unmanned spacecraft at NASA's Jet Propulsion Laboratory at Caltech. I was born in Pasadena, 

California in 1971. 

Employment with NCR took our family to Wichita, Kansas for five years and then to Dayton, 

Ohio, which was NCR's headquarters at the time. I graduated from Dayton Christian High School and 

then attended Miami University in Ohio, studying liberal arts. I graduated from Miami in 1993, one 

year behind current House Speaker, Paul Ryan. Though my travels take me to a number of countries, 

I am still based in Dayton Ohio and one of my companies is headquartered there. 

Growing up I never travelled abroad. The closest experience I had to visiting a foreign culture 

was visiting my Grandparents in Texas. None of my extended family had spent much time living 

outside of the United States since the American Revolution. That changed in 1992 during my junior 

year at Miami of Ohio when I was invited by English Language Institute China (ELIC), which is based in 

Los Angeles, to spend the summer teaching spoken English to Chinese teachers at the Hunan 

Educational Institute in Changsha, China. My expenses were covered by friends and family up to the 

point of arriving in China, at which point the University covered our costs in conjunction with ELIC. 

The summer of 1992 was when the first US Olympic basketball "Dream Team" played in 

Barcelona, and in China I saw first-hand how closely US culture and sports are followed by many 

around the world. After this first-hand experience abroad I began to feel, and continue to feel today, 

that the more Americans are enabled to travel, study, teach, and serve abroad, there is intrinsic 

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value not only to those that we communicate our culture, language and values with, but for 

ourselves as well as we experience their languages, cultures and understand their values. 

While a student at Miami of Ohio, I was active with Campus Crusade for Christ. Though I did 

not intend to spend my career in missions and relief work, I had decided to take a gap year before 

applying to graduate school and was invited to spend one as a missionary in Albania working with 

Campus Crusade for Christ. During that year we worked with students and travelled through the 

villages of the country. In 1993, the banking sector in Albania at the time was hardly functional and 

my four hundred dollar monthly missionary stipend was flown in to Albania in cash by our regional 

director, who lived in Austria. I was so strapped for cash that I remember seeing a can of Coke being 

sold in Tirana for the first time, but I couldn't afford to buy one. Thankfully in Albania, wages have 

risen and many American products such as Coke, Pepsi, Microsoft, HP, Apple, Philip Morris and other 

American owned products are now very available in the market and affordable. 

After spending a year in Albania I was accepted a Masters Program at the University of 

london in the UK. In the fall of 1994, I used all my savings and flew from Corfu Greece to Manchester 

then took the bus down to london to start my studies. I then moved to london England were I did a 

Masters Degree at the School of Slavonic and Eastern European Studies (currently within UCl of the 

University of London). I spent most of my time studying macro-economic stabilization and central 

bank reform under Professor Jacek Rostowski, who later became the Minister of Finance in Poland. 

In order to pay for the balance of my tuition, I received a Federal Stafford loan and though my 

account balance was always small, Sa relays bank in london was kind enough to accept me as a client 

so that I could pay my expenses during my graduate school years. I remained fairly cash-strapped 

during those years and often would walk a few miles rather than take the underground. When I did 

buy a day pass to use the 'tube' I would often try and sell it for half price after I finished my morning 

classes. I stopped when someone told me that wasn't really something 'to be done' in the UK. In the 

end I made it through and graduated, paid for in thanks to a bit of savings, a Stafford loan, and a 

Barclays bank account. 

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I moved back to the United States at the end of 1995 and began to work for my family's 

financial planning firm, Life Plan Financial Group, which my father had started after his time with NCR. 

While working with lifePian I earned my Series 7 securities license. 

In 1996, I was recruited by appointees of President Clinton to join the Albanian-American 

Enterprise Fund (AAEF)3 which was authorized by the US Congress under the Support for Eastern 

Europe's Democracy Act of 1989 (SEED Act).4 I had learned functional Albanian and had experience 

in the country, along with a master's degree in economics and I quickly found myself moving up the 

corporate ladder, being assigned to the Albania office, making coffee, then answering phones, 

making copies, and eventually doing some basic accounting. 

Albania's transition toward a pro-Western free market system has been challenging. During 

the 1997, there was a financial collapse because of a nationwide pyramid scheme and due to the 

following civil unrest all Americans were evacuated for the first time from Albania. I wound up 

getting myself out of the country on my own but many of my American friends were a bit slower, and 

had to wait for the Marines to helicopter them out of a safe zone in the American Embassy housing 

compound to the USS Nassau in the Mediterranean (Operation Silver Wake).' I do remember that 

those American friends of mine had to repay the US Government for the cost of their evacuation, 

meaning that there would be no additional cost to the taxpayer for their extraction. 

One year later, Americans were evacuated a second time due to a specific threat against 

American interests in Albania from Egypt's Islamic Jihad, a group suspected to be related to Bin 

Laden and the bombings of the US Embassies in Kenya and Tanzania.• Again, I got myself out of the 

country and relocated along with many of the other Americans working in Albania to Ohrid 

Macedonia, where we ran each of our projects from just over the Albanian border. Even though the 

Americans with the AAEF had been evacuated, our work did not stop. During this evacuation the 

AAEF inaugurated what became its most successful investment, the American Bank of Albania, a 

3 AAEF.com 

4 https://www.congress.gov/bill/101st-congress/house-bill/3402 

5 http://www.navy.mil/navydata/policy/vision/vis04/vpp04-appxa.pdf 

5 http://www. nytimes.com/1998/08/ 17/world/ us-removes-its-diplomats-fram-e mbassy-in -a I ba nia .html 

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Greenfield investment, 100% owned and controlled by the Fund with the purpose of introducing 

conservative banking practice to the country. The bank was ultimately sold to lntesa San Paolo 

Bank.7 I continued to move up the corporate ladder as I lived in Macedonia, taking over an 

investment portfolio and running back-office operations as the deputy to the CEO of the AAEF for 

nine-months. Over the years several AAEF directors came and went, and by the time I was 29 years 

old I was running all of the Tirana based operations. In spite of its tumultuous path to capitalism, 

Albania has been strongly pro-American and the engagement of the Enterprise Fund fostered this 

relationship both while I was there and long after I left, investing in real estate, insurance, airports, 

shopping malls, biometric passports and trade. Though the Albanian-American Enterprise Fund was 

the smallest and the youngest of the Enterprise Fund's operating under the 1989 SEED ACT, our team 

generated the highest return on capital invested. Ultimately, at the end of the Fund's mandate, US 

Congress decided to return half of the original seed money to the Treasury Department and the 

remainder of the AAEF's capital was used to establish a US-based foundation with a mandate to use 

its funds to support Albanian education, entrepreneurship and infrastructure which continues to 

operate today.8 

As Eastern Europe emerged from Communism during the 1990's, one ofthe driving 

objectives of US international aid assistance was the increasing financial inclusion. Concurrent to my 

work with the AAEF, I volunteered to found and later Chair USAID's micro-lending initiative in 

Albania, named the Albanian Partner for Microcredit9 Though this project, in collaboration with 

Opportunity International, based in Chicago, we were able to bring needed financing to thousands of 

Albanian small businesses, bringing many of our clients up to the level of being bankable by the 

traditional banking sector, meaning that they were able to open a bank account, receive basic 

transaction services and apply for traditional bank loans. 

7

http://www.intesasanpaolobank.al/web/lntesa_Sanpaolo_Signs_Participation_in_the_American_Bank_of_Aib 

ania.php 

'https:/ /www.usaid.gov/news-information/press-releases/albanian-american-enterprise-fund-return-15-

million-american 

9 http:/ /pdf.usaid.gov/pdf_ docs/pdabu161.pdf 

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As a follow-up to these projects, I was recruited to move to Montenegro, then part of 'small 

Yugoslavia' in 2001. I become the CFO of a Greenfield investment in a private bank that had received 

some USAID financial support. The business strategy of the bank was to expand financial services 

throughout the country, with a heavy focus on supporting small businesses. It was quite challenging 

to start the bank in Montenegro in 2001 considering that NATO had recently bombed Montenegro 

along with Serbia during the Kosovo war. Nevertheless our mandate included aggressively marketing 

ourselves as American, with USAID assistance, and that is what we did. 

At the time, Montenegro remained part of a political union with Serbia and I moved to 

Podgorica just following the end of the Milosevic regime. In 2001 much of the US diplomatic 

presence for Montenegro was still working out of Dubrovik, Croatia. We, as private businessmen, 

engaged in promoting American interests in advance of the establishment of the US Consulate in 

Podgorica, and founded a commercial bank. 

Several years later I became the CEO of the bank. During my tenure as CFO and then CEO, 

the bank extended inclusion to over 15% of the citizens of the country, became the most profitable 

bank in the country and introduced MasterCard products and NCR ATMs into the country. 10 We 

were able to meaningfully improve US-Montenegro relations by engaging with citizens on the basic 

level of providing access to credit, receipt of international transfers, and savings accounts. 

When Montenegro voted for independence from its union with Serbia, the United States 

established its Embassy in Podgorica and I was approached by Ambassador Rod Moore regarding 

establishing the American Chamber of Commerce in Montenegro. With the break between 

Montenegro and Serbia, the existing American Chamber of Commerce remained in Belgrade, Serbia 

and a new Chamber needed to be formed for Montenegro. Normally, the American Chamber of 

Commerce in a given country is an affiliate of the US Chamber of Commerce in Washington DC and, 

depending upon the relationship of the AmCham President of the Board and the US Embassy, the 

Chamber can be close collaborators representing American business interests in the country. While 

10 https://seenews.com/news/montenegros-opportunity-bank-h1-net-profit-up-four-times-to-3091-mln-eurotable-217033 

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we received no financial support from the US Government, I was able to successfully organize 

American businesses in Montenegro and formed the American Chamber of Commerce in 

Montenegro, serving as its Pro-Bono Chairman for two years. Upon the sale of the bank where 1 was 

the CEO in Montenegro to an Austrian banking group, 11 I moved to Greece, but continued to come 

back to Chair the AmCham Pro-Bono, meeting regularly with the US Ambassador and Montenegrin 

Prime Minister or members of his cabinet." 

fl. The impact that FATCA has had on my entrepreneurial activity as an American living 

overseas 

My wife, is an American citizen, but comes from the ethnic Greek minority in Albania. Most 

of her family only speaks Albanian and Greek, while my own ancestors haven't really spent much 

time outside of the United States since the American Revolution, and my family is fairly monolingual, speaking only English. After living in Greece for a year, we decided to move back to Albania 

in order for our children to learn the different languages they would need in order to communicate 

with my in-laws. 

During my first stint in Albania the banking market had developed rapidly. Still Albania was 

grossly underdeveloped in terms of other traditional financial pillars. Albania had a stock market, but 

there had never been any listings. 13 The banks did not offer any access to international capital 

markets or placement options other than domestic treasury bills. 

Since I had lived in Albania in the 1990's the country has progressed, coming closer to 

European Union candidacy and joining NAT0.14 By 2010, many of my friends had steady jobs, owned 

their own homes, cars and kept some savings. However, the country offered no other financial 

products to give them investment alternatives, therefore they were forced to either buy real estate, 

hold domestic treasury bills, savings account balances or cash. In smaller developing markets such as 

Albania, there isn't enough volume to support offering sophisticated financial products. Of the 16 

11 https:/ I seenews.com/news/ croatia n-arm-of-austrias-erste-ta kes-over -us-micro-lenders-majority-stake-inmontenegros-opportunlty-bank-237677 

12 http:/ /photos.state.gov 1 galleries/ montenegro/ 61077 /2008theyea rin review /3. html 13 http:/ /www.tse.com.al/hlstory/ 14 http:/ /www.mod.gov.al/eng/index.php/security-policies/relations-with/nato/88-history-of-nato-albaniarelations 

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banks in the market, 14 have a majority foreign shareholder and all16 have significant foreign 

investors. For all of these banks, especially the 14 tied to foreign shareholders, decisions taken 

outside of Albania impact all of the clients of the daughter institution. Therefore, local banks piggyback on their mother banks, insurance companies piggy-back on their group and so on in order to 

offer a range of products to Albanians. 

While my children learned a few other languages, my vision in returning to Albania was to 

introduce access to international capital markets to the average Albanian citizen. Since the local 

stock market had no listings, I focused my efforts on developing an introductory brokerage business, 

where I would provide limited investment advice and know-your-customer due diligence services for 

a larger European investment bank that was willing to accept Albanian clients. Though my US 

securities license was no longer active, having earned my Series 7 years ago allowed me to qualify to 

apply for a brokerage license and introductory brokerage permission from the Albanian Financial 

Services Authority. During this process I began to hunt for an international investment firm that 

would work with me in Albania. Most firms viewed Albania as too small or underdeveloped to 

bother with, however, during my trip to Copenhagen, Saxo Bank indicated that they would be willing 

to work with me to develop my vision and we began to put in place the procedures and process maps 

in order to make that work. 

After almost one year from the start of my inquiry into the application process, in the April of 

20111 was awarded Albania's first brokerage license that provided for introductory brokerage 

activity with a foreign investment bank.15 A few weeks later I sent the first ten applications to 

Copenhagen in order to open brokerage accounts for these residents of Albania. Saxo was fairly 

quick to respond approving nine of the ten applicants. Naturally, I wanted to start well with my 

partners in Copenhagen, so I had carefully vetted all of the potential clients in order that everyone 

would be approved. I reached out to Saxo to see what we had missed with the client that was 

rejected and they simply said that the application that was rejected was my own. I, myself, was one 

of the ten applicants, at the time an Albanian resident. I was told that I was rejected solely because 

15 http://www.amf.gov.al/news.asp?id=506 

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of my American citizenship. Saxo said that due to FATCA they didn't want to work with Americans or 

Green Card holders. After what seemed to be a few weeks of confusion I realized that I could not 

serve Americans or Green Card holders in my brokerage firm in Albania because of the carry-on 

impact of the Saxo decision. The introductory brokerage firm vision was alive but the idea of working 

with Americans, Albanian-Americans, Green Card holders, etc. was dead. 

My experience in banking had seen a dramatic positive effect of branding a financial 

institution as American owned and operated. However, a brokerage firm that marketed itself as 

American, yet could accept no American clients was a logical anomaly to the Albanian market, and 

understandably so. Our hopes to develop an introducing brokerage product lining international 

capital markets with Albania began to die. Volumes were not sufficient and new clients were difficult 

to find. The introductory brokerage product became sidelined and Saxo grew unhappy and after a 

couple years dropped our firm altogether. During my time in emerging markets I have become used 

to fluid situations and dealing with the unexpected in order to create a positive outcome. This has 

been the case with my brokerage firm, including the summer of 2011 when one of my student 

interns from the University of New York, Tirana turned out to have been a former Guantanamo Bay 

detainee.16 However, the obstacle to my brokerage business created by FATCA was a deal-breaker in 

many ways. I was able to rework my business model, re-focusing on fee based investment advisory 

and bond agency work, and the business continues to develop but the financial harm was done and it 

was significant. 

FATCA has also impacted the manner in which I operate my own personal foreign bank 

accounts. I am currently an independent director of an American owned bank in Albania.17 Not 

every country in the world is as American friendly as Albania. By requiring US persons to provide 

their social security numbers to potentially foreign owned financial institutions the US Government 

has put its citizens at significant risk of fraud. Certainly banking secrecy and privacy is not always well 

guarded in emerging markets. Should a foreign financial institution, foreign government, or even 

16 https://www.ft.com/content/eba77a9c-6d71-llde-8b19-00144feabdc0 17 https:/ /invest-in-albania .org/the-newest -private-bank-in-albania-with-american-capita If 

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rouge individual working within one of the FATCA compliant institutions wish to do expat Americans 

harm then they would have easy access to their personal data in order to cause identity theft and 

harm, therefore I have restricted my banking activity as much as possible naturally causing more cost 

to do business bank to bank because of wire fees. 

In spite of the challenges that FATCA has caused my personal business, I have remained 

active assisting US interests whenever called upon. In 2012, I assisted the US Treasury Department's 

Office ofTechnical Assistance (OTA) representative in Kosovo as we explored the potential for 

developing capital markets access in that country.18 Additionally, I was again called upon by the US 

Embassy to put my name forward for Pro-Bono President of the Board of the American Chamber of 

Commerce, this time in Albania. I have just been unanimously elected by the members to my third 

two year mandate.19 

Ill. Possible remedies to the unintended consequences of FATCA. 

The bi-partisan group that is testifying before you today has been exploring remedies to the 

unintended consequences of FATCA for several years. Proposals to address the unintended 

consequences of FATCA have been considered by parties20 and candidates21 on both sides of the aisle 

during last year's Presidential race. In recognizing the problems of FATCA, some have suggested 

implementing safe harbor/same country exception that would help Americans solely within the 

country of residency. Such a safe harbor/same country exception would not have solved the 

negative impact that FACTA has had on my situation. I am not, nor have every been a resident of 

Denmark, thus such an exception would not alleviate Saxo Bank's relationship with me or other 

clients of my brokerage firm which would remain non-resident American client applicants. The best 

way to fully alleviate the consequences of FATCA is fully repeal this law or to mute the existence of 

FATCA by simplifying the tax code and moving away from citizenship based taxation (a system that 

18 http://ba nkassoc-kos.com/ en/the-confere nee-on -regiona 1-capita 1-ma rkets-ra ising-opportunities-for -kosovofirms 

19 http://www.amcham.com.al/general-assembly-meeting-2017/ 20 https://prod-static-ngop-pbl.s3.amazonaws.com/docs/RESOLUTION-TO-REPEAL-THE-FOREIGN-ACCOUNTTAX-COMPLIANCE-ACT-FATCA.pdf 

21 http://www.democratsabroad.org/our_candidates 

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the USA shares with few outlying countries such as Eritrea and North Korea), toward a territorial or 

residential based system. 

Today the Albanian brokerage firm is only one of several of my investments around the 

world, including banking, natural resources and film. Two weeks ago, I was in Albania and Bulgaria 

producing an action film, starring a number of American and European actors that are in the final 

days offilming on set right now. My experience is that the American entrepreneurial mentality sets 

our culture apart. American businesswomen and businessmen do not restrict their investment based 

on their personal residency. Their investment choices follow opportunity according the market. 

Access to international financial services is critical for all of such projects and FATCA's impact has 

already harmed some of my businesses and if left un-repealed will risk others as well. 

It is ironic that after spending much of my career helping advance US interests by expanding 

financial inclusion, through FATCA the United States has inadvertently restricted financial inclusion 

for its own citizens. The fact that an increasing number of banks and financial institutions either 

directly (as in the case of Saxo Bank) or via a carry-on effect (as in the case of my brokerage firm in 

Albania) reject working with American citizens outright harms US interests. It harms Americans that 

are living abroad as teachers, students, missionaries, and businesses from the taking risk that is so 

necessary for a successful free market to work. It is my belief that the best way to improve the 

current situation is not to make the situation more complex by creating carve-outs and exceptions, 

such as safe harbor or other partial fixes. Therefore, I support a full repeal of FATCA. 

11 
51 

Mr. MEADOWS. Thank you, Mr. Crawford. 

Mr. Kuettel, you are recognized for 5 minutes. 

STATEMENT OF DANIEL KUETTEL 

Mr. KUETTEL. Thank you, Mr. Chairman, for allowing me to 

speak on the negative consequences of FATCA. I’m here— my 

name is Daniel Kuettel. I live in Switzerland, and I’m here to tell 

you why FATCA forced me to renounce U.S. citizenship. 

As you see here, I brought my Army—U.S. Army jacket. I served 

in the Army. I served in the Army Reserves, and then I got married in the Philippines, asked my wife to come join me in America, 

but that was during the Dot-Com crisis. I lost my job, couldn’t find 

work, I sent my resume around the Nation but had no luck, so I 

took my chances in Europe. 

I did not leave the U.S. to evade taxes. I paid my taxes. I enjoyed 

paying taxes. I’m an economic refugee. I don’t have a lot of money. 

I’m not wealthy. In Switzerland, we saved up to be able to finance 

a small condo, and then in 2012, I needed to investigate refinancing that condo. In Switzerland, every few years, you have to 

refinance. But when I went to a bank to ask them if they would 

allow me to refinance my mortgage, when they heard that I was 

a U.S. citizen, they denied it. 

I went to another bank, I was denied again, and another. I called 

them. I was denied, rejected, rejected. It was horrible, terrible. I 

mean, if you’ve ever lived anything like this, this type of discrimination is unacceptable. 

I was worried that I would not be able to refinance my home, 

and so I called HUD, I called the VA, but they told me that they 

only support—they only help Americans reside in America. They 

don’t help expats. 

I called the Department of Justice to inquire why this law prohibiting national origin discrimination is not being applied, and 

they referred me to some statute that I could never find which was 

supposed to state that also the law only applies to U.S. residents. 

So I had to renounce, and it was a difficult decision to make. I 

went to a small village in Switzerland that I went to the first time 

that I came to Switzerland at the age of 10 where I was able to 

gather the strength to renounce. And afterwards, I was able to refinance my mortgage. 

But today I’m here because I’m having a problem again because 

of FATCA and that is with my children. My daughter is still a U.S. 

citizen. My son, on the other hand, he’s not a U.S. citizen. So my 

son, he can have a bank account with any bank in Switzerland. My 

daughter, about 310 out of 320 banks rejected her, and this is going 

to become a problem later on when she’s 16. 

In Switzerland, it’s a common practice to get an apprenticeship 

where she would go to work, earn money, she’ll need a bank account. But having a bank account means she’ll have to file FBAR, 

she’ll have to be subject to FATCA, and I mean, assuming that she 

even can get a bank account. 

And this is just a problem which rolls over. She’s going have to 

relive what I relived, go through what I went through. She’s going 


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52 

have to decide if she wants to have U.S. citizenship or she wants 

to have a normal life in Switzerland with a normal bank account. 

Thank you, Mr. Chairman. 

[Prepared statement of Mr. Kuettel follows:] 


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Testimony of Daniel Kuettel 

U.S. House of Representatives Subcommittee on Government Operations 

"Reviewing the Unintended Consequences of the Foreign Account Tax Compliance Act" 

Apri126, 2017,2:00 PM 

Chairmen Meadows and Members of the Subcommittee on Government Operations of the House 

Committee on Oversight and Government Reform 

Thank you for this opportunity to discuss the unintended consequences of the Foreign Account Tax 

Compliance Act (FATCA). This hearing is, in my view, one of the few instances in America's 241 

year history where Americans overseas are granted a glimpse of what it could possibly feel like to be 

politically represented. FA TCA gains access to sensitive information at a heavy cost. There are 

plenty of tools for efficiently combatting tax evasion without harming the very people such efforts are 

meant to protect. 

This is a story about me, an American veteran who holds on to his US Army jacket and a US passport 

with three holes punched into it. 

Criticism ofF A TCA is often wrongly painted as being just a Republican thing. 1 I grew up in a liberal, 

Democrat-leaning environment. At times, I was a vegan or a vegetarian, a feminist, a human rights 

activist, or an environmentalist. I protested to save the whales and to boycott McDonalds, I advocated 

for urban sustainability, fought against the car culture and enjoyed alternative healthcare and 

preventative medicine. I am not here today for Republicans, nor for myself. I'm here today for all 

Americans, even those who have not yet noticed, don't want to acknowledge2 or those who belittle the 

unintended consequences ofF ATCA. 

Sadly, many US residents often tell Americans overseas to renounce their US citizenship in response 

to problems caused by FA TCA, and many are doing so, like I did. I renounced and yet I've always 

been compliant and enjoy being compliant with taxation, if only filing wasn't so terribly complicated 

and costly! I don't have any issues with the IRS and always did what was requested of me. I'm lower 

middle class and have nothing to hide. !joined the Army and Army Reserves to serve my country, to 

earn money for college, to get out into the world, and to learn a trade. I was proud to be American. I 

never imagined that one day I would not be a US citizen. 

After getting married in the Philippines, I applied for my wife to join me in America, but lost my job 

during the dot-com crisis. I sent my resume around the country, but no full-time positions were 

available in the gutted job market at that time. My wife could not join me to support me while I 

searched for work since my check to pay for her INS application bounced due to a lack of funds. With 

no job, student loans, credit card debt, and mortgage debt, I could not afford to pay my bills, so I took 

to my chances and hopped on a cheap flight to Europe. At the time, California unemployment benefits 

were barely enough to cover my basic housing expenses. It was only later that they were increased 3 

times, after I had left. My father offered for me to stay with him, but I didn't want to be a financial 

burden on him. I'm an economic refugee, not a wealthy tax cheat. I did not leave America because of 

taxes. The IRS even owed me money when I left America. Why should I have to renounce citizenship 

of the country that I served due to a policy fueled with biases? 

Living overseas after 9/11, I wanted to try to understand why someone would do such a terrible thing 

to the country that I loved and served. This led me into middle-eastern politics where, for a decade, I 

'International Advisor. US Republicans want Fatca repeal despite $10bn tax haul. http://www.internationaladvise r. com/ news/ 103254 5/ us-republica ns-fatca-repea 1-d espite-usd 10bn-tax-hau I 2 Robert Stack's "Myth vs. FATCA" article failed to acknowledge the discrimination caused by FATCA 

"https://www.treasury.gov/connect/blog/Pages/Mvth-vs-FATCA.aspx 
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challenged bigotry against Americans. I was a free US ambassador overseas, defusing some negative 

consequences of US policy in ways that many US residents would never understand. Since the arrival 

ofF A TCA, I observed an increase in American hostility against Americans. 3 How can FA TCA be 

just when it teaches Americans, or even the world, to view US citizens as being hunted tax cheats? 

With F ATCA focusing on US indicia, why is it often coupled with the terrorism4 card, to gather 

support, while Americans overseas are far more likely to become victims of terrorist attacks? 

Around mid-2012, I was shocked when I inquired about refinancing my mortgage with a local bank 

and was told that they would not accept me as a client due to my US citizenship and F ATCA.5 I went 

to another bank, another, and then another, only to hear the same thing over and over again. I was 

being discriminated based on my American citizenship. It was unbelievable, like a nightmare. This 

nightmare is shared by many Americans living overseas, especially accidental Americans. My 

country that I had loyally served was causing me to be denied financial services. 

At the time, a lot of bigotry in America was being aimed at Switzerland. Instead of being respected 

for serving America, I was frequently accused of being a Nazi banker who stole money from Jews, or 

a wealthy tax cheat hiding in a tax haven. I was supposed to be hiding billions of dollars in a secret 

Swiss bank account. Yet, I paid my taxes, was compliant with US filing requirements, and had no 

money to hide. Some Americans even argued that Switzerland would be destroyed with FA TCA, and 

the US government was not shy in making excessive threats, like LEX USA,6 which threatened Swiss 

banks78 if the Swiss Parliament didn't approve a law whose details they were not allowed to know. 9 

Switzerland was treated as an international whipping boy. 1° FATCA was argued as being a "Golden 

Opportunity"" to squash financial secrecy. I was originally not against FATCA and yet I didn't 

understand why it was having an impact upon me or why its impact was being ignored and denied. 

didn't earn enough to be burdened with US double-taxation. I'm just a middle class American 

Veteran who is humbly happy to have food and shelter. 

Being concerned that my family would not have shelter, I wanted to know what my options were for 

refinancing, if the local discrimination against Americans persisted. So, I filed a complaint with the 

Office of Fair Housing and Equal Opportunity on Housing Discrimination. They didn't respond. 12 1 

then tried again, and they told me that they do "not have jurisdiction to handle complaints outside of 

the United States."" Similarly, the VA responded that their mortgage assistance only applies to 

Veterans who reside in America. 14 I called the Department of Justice to inquire on this national origin 

discrimination, but they referred me to some statute, which I never found, which was supposed state 

that US federal laws prohibiting national origin discrimination only protected US residents. How is it 

possible that the US government can force F ATCA upon residents of other nations by using lGA' s to 

override local laws, without providing its Veterans with any protections? 

3 <<it is no secret that FATCA teaches Americans to be racist against Americans.». 

http:ljisaacbrocksociety.ca/2013/11/03/stated-in-honor-of-fatca-you-americans-disgust-me/ 

4 «The background of this law is to detect foreign assets involving illegal savings, money laundering, combating 

terrorism and financing of terrorism». https://rubestax.com/en/guestions/fatca/ 5 https:ljexpatami.wordpress.com/2012/07 /30/us-bank-denying-americans-services-for-being-us-persons/ 6 http://www. bilan.ch/thierry-boitelle/guestions-fiscales/lex-usa -100-made-usa-cette-fois 7 https://insideparadeplatz.ch/2013/06/17/panikmache-der-lex-usa-lobbyisten/ 

8 https://www.fuw.ch/article/nationalrat-soll-nicht-auf-lex-usa-eintreten/ 

9 http://www.swissinfo.ch/ger/steuerstreit -lex-usa--nimmt-wichtige-huerde/36126994 10 https://www.theguardian.com/business/2009/mar/01/swiss-banks-anonymity-ubs 

11 "they fail to mention the golden opportunity they have this year to make concrete progress" 

http://eurodad.org/1545339/ 

12 https ://expatam i. word press. com/2012/07/23/filed-a-complaint -with-the-office-of -fa ir-housing-and-egua !-

opportunity-on-housing-discrimination/ 

13 https://expatami.wordpress.com/2012/09/02/resubmitted-complaint-on-housing-discrimination-to-hud 14 https:/1 expata mi. word press. com/2012/08/27/hud-complaint -on-housing-discri m ination-va nis hed/ 
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Like many Americans overseas, I wrote various US politicians, including Mitt Romney, 15 Bill 

Nelson, 16 and Joe Bid en, 17 but they either didn't respond or sent automated boilerplate responses. 

called politicians like Connie Mack and Keith Fitzgerald, but they responded that they didn't have any 

time for "expat issues" 18 or that their opposition would use it against them. I got the impression that 

many were afraid of standing up for expats in Switzerland due to the massive amount of propaganda 

being waged against the country. 

In Switzerland, the government stated in the press that the US conflict was not going to end anytime 

soon. I was often told that the only way to avoid the discrimination was to renounce US citizenship. 

Local banks didn't publish their policy on FATCA and it was frequently changing. Some were 

charging US citizens outrageous fees. FATCA advocates were aware of the discrimination, 19 but 

claimed that they would fix FATCA after implementing it, just like they are still claiming today, many 

years later.20 With US pressure growing, no support from America for its Veterans overseas and the 

problem lasting indefinitely, I found that it was safest to renounce my US citizenship to avoid the risk 

of being denied refinancing. 

To find the strength to renounce the from nation that I had served to defend, I returned to the village 

that I had lived in when I first came to live in Switzerland at the age of 10, and asked myself if I could 

this time make the departure permanent. The beauty and peacefulness of the area gave me the strength 

that I needed to detach myself from the ability of being able to live with my family in America. Are 

these the types of choices we want for our Veterans to be making, to not be with their family because 

it is American? 

After renouncing, the US government forced the US program on Switzerland, which was its method of 

violating the double-taxation treaty to do group fishing needed to enforce FA TCA. The US program 

fined Swiss banks for having US clients. It didn't matter if the US clients were innocent or guilty or 

where they resided. With its non-prosecution agreements, the US Department of Justice approved 

national origin discrimination against Americans. The impact was that, by the time that I needed to 

refinance, no bank in Switzerland was willing to have US clients as customers. US citizens had 

become a risk and a threat. Ifl had not renounced, then I would have lost my home. 21 

Because of the US Program, I had to prove my innocence, even though I was tax-compliant, simply 

because I used to be a US citizen. Under threat of being denied financial services, I was forced to 

hand over to my local bank many years of my US tax returns. After having proven my innocence, the 

bank then demanded, due to FA TCA, for me to waive my right to privacy where I live in Switzerland 

for the rest of my life and beyond. I replied that I was willing to waive my right to privacy for those 

years that I was a US citizen, but not afterwards, since such violated local privacy protection laws. The 

Joint Statement on FATCA states that the US government respects Swiss law. 22 

After renouncing, my son, the son of a US Veteran and a descendant of the Mayflower, was born 

without US citizenship. This means that he can take his savings to any local bank and they will accept 

him as new client, treating him as a respected local. Yet, my daughter was rejected by approximately 

310 out of 330 banks, simply because she is a tax-compliant US citizen,23 due to US policy. If she 

15 https:/!expatami.wordpress.com/categorvtrepresentative/mitt-romney/ 16 https://expatami.wordpress.com/2012/08/03/letter-to-senator-bill-nelson-on-h-r-6263/ 

17 https://expatami.wordpress.com/category/representative/joe-biden/ 18 https:// expata mi. wordpress.com/ category/representative/connie-mack/ 

19 https://www.gpo.gov/fdsys/pkg/CHRG-lllhhrg63014/pdf/CHRG-111hhrg63014.pdf 

20 https://www.facebook.com/DemsAbroad/posts/10158421674145005 

21 http:/(isaacbrocksociety.ca/2013/06/07/its-official-renouncing-us-citizenship-saved-our-home/ 

22 https:/!www.sif.admin.ch/sif/de/home/dokumentation/medienmitteilungen/medienmitteilungen.msg-id50049.html 

23 «19 Banken nehmen wieder US-BOrger als Kunden auf» 

http:/!www.tagesanzeiger.ch/wirtschaft/standard/19-Banken-nehmen-wieder-USBuerger-als-Kundenauf/story/26115487 
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could renounce US citizenship, then she would be treated the same as my son. Both of my children 

were born to the same parents in the same country, the same city, and the same hospital and have the 

right to be treated equally. US Federal Law prohibit national origin discrimination.Z4 The US 

government could enable innocent children to not be discriminated against, if it allowed them to be 

able to choose to become US citizens at the age of 18. Yet, instead, the US Department of State is 

charging children an outrageous fee of $2,35025 to avoid discrimination, assuming they are permitted 

to renounce. US citizens with disabilities are denied the right to renounce. They have no refuge from 

discrimination. 

I hope that this helps you to gain a better visualization of the world ofF A TCA beyond US borders. 

The bridge connecting America to its overseas population is crumbling under its weight, and I hope 

that this bridge can be renovated before it collapses. 

24 «Federal laws prohibit discrimination based on a person's national origin, race, color, religion, disability, sex, 

and familial status.». https://www.justice.gov/crt/federal-protections-against-national-origin-discrimination-1 

25 https:Uwww.forbes.com/sites/robertwood/2016/02/20/422-fee-increase-to-renounce-citizenship-yieldsmillions-with-exits-up-560/#7c0c3c2c2219 
57 

Mr. MEADOWS. Thank you for your testimony. 

Thank you for your service to our country. 

And you are in a minority. You’re the only witness, I think, that 

I’ve ever heard who says they enjoy paying taxes. 

So—but Ms. Bean, you’re recognized. 

And before I recognize you, I want to just say that this hearing, 

where it’s highlighting some of the difficulties with FATCA, I want 

to recognize, as I did in my opening statement, the great work that 

you did with UBS in the investigation, and so nothing in this is 

meant to be disparaging of the consequences of what I believe are 

unintended consequences of really your fine work, and so I recognize you for 5 minutes. 

Mr. CONNOLLY. Mr. Chairman. 

Mr. MEADOWS. Yes. 

Mr. CONNOLLY. Could I just ask a unanimous consent request before we hear from Ms. Bean. I meant to do this in my opening 

statement. I have a statement from the FACT Coalition opposing 

H.R. 2054, I’d ask be entered in the record. 

Mr. MEADOWS. Without objection. 

Mr. CONNOLLY. And I would also comment on the Chairman’s 

comment to Mr. Kuettel. Actually there are only two kinds of people who oppose taxes, men and women. 

Mr. MEADOWS. We’ll now recognize Ms. Bean for 5 minutes. 

STATEMENT OF ELISE BEAN 

Ms. BEAN. Well, thank you, Chairman Meadows, Ranking Member Connolly, and the members of the subcommittee for inviting me 

here today to present another view of FATCA. 

I was asked to testify because for many years I worked for Senator Carl Levin on the Senate Permanent Subcommittee on Investigations, and we held a number of hearings looking at how foreign 

banks were helping U.S. clients hide assets and evade U.S. taxes. 

To give you a couple of examples. We had a gentleman named 

John Mathewson who testified in front of us. He set up a bank in 

the Cayman Islands called, ‘‘Guardian Bank & Trust,’’ had about 

2,000 clients, $150 million in assets, and he said, in his opinion, 

virtually all of his clients were engaged in tax evasion. He said a 

standard practice to handle them was he would set up a shell company in the Cayman Islands, open up an account in the name of 

the shell company, the client would supply the money, and then he 

would give the client a credit card in the name of the shell company, and he would advise him to sign it illegibly on the back. That 

way they could use the credit card in the United States to withdraw funds from their Cayman account without anybody linking 

their name to their shell company. 

We looked at two banks in Switzerland, UBS, the largest bank 

in Switzerland and the second largest, Credit Suisse. UBS was 

shown that they had 52,000 undeclared accounts, meaning accounts opened by U.S. clients that had never been disclosed to the 

IRS with about $18 billion in assets. 

They were sending Swiss bankers to U.S. soil. It wasn’t a case 

of us going there, but sending their Swiss bankers here to yachting 

races, art shows, tennis tournaments, quietly handing around their 

business card and trying to convince people to put their money 


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abroad. They were very successful. They had tens of thousands of 

clients through those methods. They eventually pleaded guilty. 

They paid a fine of $780 million, and they eventually disclosed 

about 4,500 names to the U.S. but 4,500 is nowhere close to the 

52,000 undeclared clients. 

Credit Suisse had, at their peak, about 22,000 undeclared ac- counts with about $10 billion in assets. They too pleaded guilty. 

They paid a fine of about $2.6 billion. But guess what, they never 

disclosed any of those 22,000 accounts to the U.S. The U.S. had to 

find those people on their own, and they haven’t found very many 

of them. 

We did identify two clients. One told us about an occasion where 

his Credit Suisse banker met him at a luxury hotel here in the 

U.S. over breakfast, slipped him a Sports Illustrated magazine, and 

in between the pages was his bank statement so he could know 

what was going on in his Swiss account. That’s how they did business. 

Another gentleman told us about how he went to the bank’s 

headquarters in Zurich. He was ushered into an elevator with no 

buttons. It was remotely controlled. He was taken up to a floor and 

shown to a room with all white walls. The whole point being how 

the bank was so secret, and they actually told him they did not file 

the forms that required disclosure of his account to the IRS. 

In short, our investigations—and by the way, we also looked at 

a bank in Liechtenstein, and there we were able to get very detailed records on about 150 U.S. clients who had accounts there, 

and we gave examples at our hearing just to give you one, a Florida contractor in a construction business set up four Liechtenstein 

foundations, opened up accounts in the name of those foundations, 

and stashed about $49 million in those accounts that had not been 

disclosed to the U.S. until a whistleblower turned over the documents to the agency. 

In short, our investigation showed that opening up offshore bank 

accounts for U.S. clients was big business, billions of dollars, tens 

of thousands of clients. Additional evidence of the scope of the problem is the IRS Offshore Voluntary Disclosure Program. The latest 

statement from the IRS says that they have now had word from 

100,000 Americans, 100,000 Americans who admitted to having an 

undeclared offshore account. In order to get right with the government, they have now, as Mr. Connolly said earlier, paid a total of 

about $9.9 billion to satisfy the back taxes that they owed. 

That’s the backdrop for FATCA. That’s why FATCA was enacted 

on a bipartisan basis. The first thing to understand about FATCA 

is it does not impose a tax on anyone here or abroad. It does not 

impose a tax. It is simply a transparency measure, and it matches 

what every American citizen has been doing for decades. All of us 

get 1099s that are turned into the IRS about all domestic bank accounts. All of us do. It simply institutes the same program so that 

an American living here who opens up a U.S. bank account is 

treated the same way as an American living here or abroad opens 

up a foreign bank account. 

Recent research has shown that FATCA and other offshore account disclosure programs are working. Preliminary results from 

the 2017 study says that since 2009, the number of individuals reVerDate Nov 24 2008 11:28 May 14, 2018 Jkt 000000 PO 00000 Frm 00062 Fmt 6633 Sfmt 6633 H:\28503.TXT APRIL

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porting offshore accounts to the IRS has increased by 19 percent, 

and they have disclosed additional account assets of over $75 billion. It’s starting to work. We are starting to change and end these 

offshore abuses. 

Now, how has FATCA helped? Well, first of all, it leveled the 

playing field between Americans who open accounts here and 

Americans who open accounts abroad. It treats them the same way. 

It also leveled the playing field between U.S. banks and foreign 

banks. U.S. banks no longer see their wealthiest best clients leaving the U.S. bank and going to a foreign bank because they can 

open up a secret account. U.S. banks first. This restored a level 

playing field between U.S. banks and foreign banks. 

At the same time, everybody is correct that FATCA did not have 

a smooth implementation. It had a very rough beginning. There 

were a lot of banks that were furious at this U.S. attack on your 

secrecy and on their business model to open up these accounts, particularly in Switzerland. 

We went after UBS, Credit Suisse. We had a program to go after 

another 100 banks. Switzerland is very unhappy with the U.S., but 

you know what, those banks have adapted. Those banks have said 

that they will comply with FATCA. And in fact, today, 7 years 

later, there are over 274,000 foreign financial institutions have 

signed up to FATCA and agreed to comply with it. 

In addition, 100 countries have adopted a similar FATCA program under the leadership of the OECD to do the exact same thing 

that we’re doing. So disclosing foreign account information is becoming the global norm. So while it was a very rough beginning, 

people were very angry, particularly in Switzerland, that’s not the 

case 7 years later today. Now many banks are agreed to comply 

with FATCA. 

Now, we’ve heard today about how some American citizens are 

saying that FATCA is forcing them or leading them to give up their 

citizenship, but I have to also point out that that’s affecting a very 

small number of people. 

In 2015, about 4,300 people gave up their citizenship. That same 

year, we got new citizens of 730,000, people willing to pay U.S. 

taxes. And when you compare that 4,300 figure to the 9 million 

Americans living abroad, you’re talking about a rate of less than 

one-tenth of 1 percent. 

To conclude, I wanted to say that repealing FATCA today would 

be a mistake. It would hurt honest taxpayers who have to disclose 

their account information on a bulk basis every year to the IRS. 

That’s what honest taxpayers do. Whether you’re honest or not, 

that’s how banks treat your bank accounts here in the U.S. But it 

would hurt honest taxpayers here living in the United States to 

allow people who have the wherewithal to go abroad to not play by 

the same rules. 

It would encourage Americans to move more of their money offshore to get some of that secrecy. It would disadvantage U.S. banks 

who would again have to compete against foreign bank secrecy. It 

would also waste all of the investments made by those foreign 

banks to comply with FATCA. They have all done it. They are complying. 


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We began disclosures in 2015. All of that money would be wasted. And finally, it would return us to an era where it was much 

easier to have an offshore account hide your assets and evade your 

taxes. So that’s why I think repealing FATCA would be a tragic 

mistake. 

Thank you. 

[Prepared statement of Ms. Bean follows:] 


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STATEMENT OF ELISE J. BEAN 

FORMER STAFF DIRECTOR & CHIEF COUNSEL OF THE 

U.S. SENATE PERMANENT SUBCOMMITTEE ON INVESTIGATIONS 

BEFORE 

U.S. HOUSE SUBCOMMITTEE ON GOVERNMENT OPERATIONS 

ON 

REVIEWING THE UNINTENDED CONSEQUENCES OF THE 

FOREIGN ACCOUNT TAX COMPLIANCE ACT 

April 26, 2017 

Thank you, Chainnan Meadows, Ranking Member Connolly, and Members of the House 

Subcommittee on Government Operations for this invitation to testify about the Foreign Account 

Tax Compliance Act, also known as FA TCA. 

I was asked to testify today because, for more than a decade, I served as staff director and 

chief counsel for Senator Carl Levin on the U.S. Senate Pennanent Subcommittee on 

Investigations. During that time, Senator Levin and his Republican partners conducted a number 

of bipartisan investigations that exposed how U.S. taxpayers were using offshore bank accounts 

to hide assets and evade U.S. taxes. 

Using offshore bank accounts to evade taxes is a longstanding problem. In a 2001 

hearing, a U.S. citizen named John Mathewson testified before our Subcommittee about a bank 

he ran in the Cayman Islands called Guardian Bank & Trust.1 According to Mr. Mathewson, 

Guardian Bank held offshore bank accounts with about $150 million in assets for about 2,000 

clients, 95% of whom were U.S. clients. 

Mr. Mathewson testified at the hearing that, in his opinion, virtually all of the bank's U.S. 

clients were engaged in tax evasion, which was why they had opened offshore accounts. He also 

told us that, after opening the bank, he'd retnmed to the United States for a vacation and was 

arrested for cheating on his own taxes. To avoid imprisonment, he turned over his entire client 

list and their bank records to the U.S. government He then spent several years testifying against 

his former clients in various court proceedings seeking their payment of back taxes. 

At our hearing, he explained how Guardian Bank typically handled its U.S. clients. He 

said that, in most cases, the bank established a Cayman shell company for the client, opened an 

account in the name of that shell company, and then took care never to link the company's name 

1 "Role of U.S. Correspondent Banking in International Money Laundering," U.S. Senate 

Permanent Subcommittee on Investigations, S. Hrg. 107-84 (3/1/2001 ). 
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2 

to the client's name outside the walls of the bank. Mr. Mathewson said that his U.S. clients also 

typically paid him to issue a credit card in the name of their shell company, so they could use 

that credit card in the United States to withdraw funds from their Cayman accounts. He said he 

instructed them to sign their names illegibly on the back of credit card and on any charge slips, 

again to avoid linking their names directly to their shell companies. He said the credit cards 

made it easy for his clients to access their offshore funds. He noted that he had not dreamed up 

the credit card system, but had simply copied common practice among Cayman banks with 

offshore clients. He testified that his bank was just one of many Cayman banks providing 

similar services. 

A second example involves a whistleblower named Heinrich Kieber who, in 2007, 

walked into our Subcommittee offices and handed us records for about 150 U.S. clients with 

secret accounts at a financial institution in Liechtenstein called LGT Bank. He'd been hired by 

the bank to convert it into a paperless office and, as a result, had been given full access to its 

records. He told us that, when reviewing them, he'd been appalled at how the bank was helping 

wealthy and corrupt individuals hide assets and evade taxes. He made a copy of the bank records 

and took them to various tax authorities around the world, some of which paid him millions of 

dollars to gain access to the information. Mr. Kieber told us he'd given one set of the records to 

the IRS in hopes of earning a whistleblower reward; he gave us a second set free of charge with 

no strings attached. 

When we examined the records, we identified U.S. taxpayers who'd opened LGT 

accounts without disclosing them to the IRS and failed to pay taxes on the resulting income. One 

was a Florida construction contractor who, over a period of twenty years, formed four 

Liechtenstein foundations, opened accounts in their names at Liechtenstein banks, and compiled 

undeclared assets exceeding $49 million. 

Another was a New Yorker who opened LGT accounts in the name of two Liechtenstein 

foundations and stashed at least $4.5 million in the accounts. He even pretended to sell his New 

York home to one of the foundations, after which he paid "rent'' to that foundation as a way to 

move still more of his money offshore. 

Still another LGT account held $68 million in the name of a Liechtenstein foundation 

controlled by a wealthy family from Australia. That account caught our eye, because one of the 

family members was a California resident who had agreed to use a U.S. shell company to trigger 

transfer of the foundation funds to new accounts in Switzerland. 

A third tax haven bank offering U.S. clients secret offshore accounts was disclosed by a 

whistleblower named Bradley Birkenfeld who also walked through the Subcommittee doors in 

2007. Mr. Birkenfeld was a U.S. citizen, born and raised in Boston, who became a private 

banker in the wealth management field and worked at several non-U.S. banks, including UBS, 

the largest bank in Switzerland. After he lost his job at UBS, Mr. Birkenfeld decided to inform 

U.S. authorities about some of the bank's troubling practices, reaching out to the Department of 

Justice, the IRS, and our Subcommittee. 
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3 

His story was explosive. He told us that UBS regularly sent dozens of Swiss private 

bankers to the United States each year to recruit new clients and service existing ones with Swiss 

accounts never declared to the IRS. In other words, he wasn't describing a case of U.S. 

taxpayers traveling to Switzerland to open accounts; it was a case ofUBS sending Swiss bankers 

onto U.S. soil to convince U.S. clients to hide their money abroad. 

According to Mr. Birkenfeld, UBS paid all the necessary travel and event costs to enable 

its Swiss bankers to mingle with affluent U.S. guests at events like art shows, yachting races, and 

tennis tournaments, so that they could quietly hand out their business cards. A UBS document 

stated that, in 2004, the bank maintained 52,000 undeclared Swiss accounts for U.S. clients with 

an estimated $18 billion in assets. 

In 2008, Senator Levin and Senator Norm Coleman held a hearing and issued a bipartisan 

report exposing how LGT and UBS had been helping U.S. clients cheat on their taxes.2 During 

the hearing, a UBS representative surprised everyone present by openly admitting to the 

wrongdoing, apologizing for it, and announcing that UBS would no longer open accounts for 

U.S. clients without reporting them to the IRS. UBS later pled guilty to participating in a 

criminal conspiracy to help its U.S. clients evade U.S. taxes and paid a $780 million ftne. 

One last example involves the second largest bank in Switzerland, Credit Suisse. In 

2014, Senator Levin and Senator John McCain held a hearing and issued a joint report showing 

that, just like UBS, Credit Suisse had sent private bankers onto U.S. soil to recruit and service 

wealthy U.S. clients.3 The evidence indicated that, at its peak, Credit Suisse had over 22,000 

U.S. clients with undeclared Swiss accounts containing more than $10 billion. 

One Credit Suisse client interviewed by the Subcommittee told us about how, when he 

met his Swiss banker at a luxury U.S. hotel for breakfast, the banker gave him a Sports 

Illustrated magazine with his Swiss bank statement slipped in between the pages. Another client 

described how, when he visited the bank's main offices in Zurich, he was ushered into a 

remotely controlled elevator with no floor buttons, and escorted into a bare room with white 

walls, all dramatizing the bank's focus on secrecy. The client said he'd opened his account after 

being told that the bank did not require completion of the form used to report accounts to the 

IRS. He was also offered a credit card to draw money from his Swiss account while in the 

United States. 

Credit Suisse later pled guilty to helping U.S. clients cheat on their taxes and paid a 

criminal ftne totaling $2.6 billion. At the same time, the Swiss goverrnnent would not permit the 

bank to disclose to the United States the full list of22,000 Americans with undeclared accounts. 

2 "Tax Haven Banks and U.S. Tax Compliance," U.S. Senate Permanent Subcommittee on 

Investigations, S. Hrg. 110-614 (7/17/2008). See also "Tax Haven Banks and U.S. Tax 

Compliance: Obtaining the Names of U.S. Clients with Swiss Accounts," U.S. Senate 

Permanent Subcommittee on Investigations, S. Hrg. 111-30 (3/412009). 3 "Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore 

Accounts," U.S. Senate Permanent Subcommittee on Investigations, S. Hrg. 113-397 

(2/29120 14). 
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The hearings held by the Permanent Subconnnittee on Investigations provided detailed 

evidence of a foreign banking industry that was ready, willing, and adept at facilitating U.S. tax 

evasion. Additional evidence of the size of the offshore problem is the IRS' Offshore Voluntary 

Disclosure Program. Begun in 2009, the program offers reduced penalties to taxpayers who 

admit to the existence of an undeclared foreign account and agree to pay back taxes and interest 

owed on their undeclared assets. As of 2016, the program had been used by more than 100,000 

Americans to come into compliance with the law and pay back taxes exceeding $10 billion. 

That's 100,000 Americans and $10 billion- huge figures, but ones that likely reflect only a small 

percentage of the tax cheating going on. It is against that backdrop that F ATCA was enacted 

into law and should be evaluated today. 

FATCAToday 

F ATCA was authored and championed by Congressman Charlie Rangel and Senator Max 

Baucus. It became law as part of a broader bill known as the mRE Act A bipartisan majority 

of 68 Senators voted to enact the HIRE Act into law. 

That was in March 2010, seven years ago. Since then, Treasury has issued implementing 

regulations, and banks around the world have invested in the infrastructure needed to comply 

with the law. Exchanges of account information under FATCA began in earnest in 2015. 

It is important to note that F ATCA does not impose a tax on anyone, here or abroad. If 

F ATCA were repealed, no one anywhere in the world would get a tax break. Americans living 

abroad would owe the same amount of tax then as they do now. If some Americans living 

abroad think they shouldn't pay U.S. taxes, should pay less, or shouldn't have to pay an exit tax 

to give up their citizenship, their beef is with the tax code, not F ATCA. 

F ATCA' s sole aim is to increase the transparency of foreign accounts of U.S. taxpayers, 

so they can't be used for tax evasion. New research suggests FATCA is working. According to 

the preliminary results of a 2017 study by four university professors and an IRS research analyst, 

FATCA and earlier IRS offshore account initiatives have already "increased the number of 

individuals reporting foreign accounts to the IRS by at least 19 percent, and they increased total 

wealth disclosed by at least $75 billion.'"' 

How has F ATCA helped? Essentially, F ATCA leveled the playing field between U.S. 

taxpayers who open accounts here at home and those who open accounts abroad - subjecting 

both sets of accounts to equivalent disclosure obligations. 

4 See "Taxing Hidden Wealth: The Consequences of U.S. Enforcement Initiatives on Evasive 

Foreign Accounts," Niels Johannesen, University of Copenhagen, Patrick Langetieg, Internal 

Revenue Service, Daniel Reck, University of California at Berkeley, Max Risch, University of 

Michigan, and Joel Slemrod, University of Michigan (Working Draft as of 4/24/2017), at 1, 

http:/ lwww.law.nyu.edu/sites/default/files/upload _ documents/Slernrod%20W eek"/o2013.pdf. 
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FATCA has also leveled the playing field between U.S. banks and foreign banks. For 

decades, U.S. banks have been required to disclose information about accounts opened by U.S. 

clients, sending 1099 forms to the IRS and their accountholders. Until F ATCA, many foreign 

banks did not have the same disclosure obligation. Even foreign banks that signed agreements 

promising to disclose their U.S. client accounts often didn't follow through, because there was 

no meaningful penalty if they didn't. 

The result was that U.S. banks watched some of their best clients move funds offshore to 

foreign banks that didn't disclose accounts to the IRS. U.S. banks lost out to foreign banks 

selling secrecy. It was as simple as that. 

Then F ATCA changed the rules. It clamped down on the foreign bank secrecy that put 

U.S. banks at a competitive disadvantage. It did so by creating a meaningful penalty to ensure 

that foreign banks disclose their U.S. client accounts to U.S. authorities, just like U.S. banks do. 

The key provision states that any foreign bank that fails to disclose their U.S. client accounts to 

the IRS is subject to a 30% tax on any income earned by that bank in the United States. That 

30% tax, which is collected before the foreign bank's U.S. income leaves our borders, is a 

powerful enforcement mechanism. 

Because of it, many foreign banks, like U.S. banks, have now agreed to disclose their 

U.S. client accounts to the IRS by filing a form once per year. Over 274,000 financial 

institutions of all types, including tens of thousands of foreign banks, have now registered under 

FATCA. 

Not only that, but countries around the world followed the U.S. lead. Under the 

leadership of the OECD, more than 100 countries have signed international agreements enabling 

them to exchange information about foreign accounts. The first disclosures under the OECD 

system will take place this year, affecting financial accounts around the world. 

Nevertheless, some foreign banks are still angry about FATCA's compliance costs, and 

support eliminating the law. Repealing F ATCA would, in fact, lower their costs, but it would 

also give those foreign banks a permanent cost advantage over U.S. banks whose disclosure 

obligations will continue. It is unclear, by the way, just how much of a cost savings foreign 

banks would actually enjoy since, even without FA TCA, they would still have disclosure 

obligations under the OECD system. It is also unclear whether saving foreign banks money is a 

compelling reason to support repealing a transparency law like F ATCA that makes it harder for 

foreign banks to facilitate U.S. tax evasion. 

Some Americans living abroad also dislike F ATCA. They complain that F ATCA caused 

some foreign banks to refuse to provide banking services to Americans. It is tme that, early on, 

some foreign banks did close accounts held by U.S. clients or refused to open new ones, because 

they didn't want to have to comply with FATCA. But today, tens of thousands offoreign banks 

have crossed that bridge, are complying with F ATCA, and can open accounts for U.S. clients. 

Banks like UBS and Credit Suisse have made commitments to transparency, are already 

disclosing U.S. client accounts to the IRS, and don't plan on going back. And don't forget U.S. 

banks that welcome U.S. clients, like Citibank which operates in 160 countries. Online banking 
66 


KING-6430 with DISTILLERInsert offset folio 49 here 28503.049

6 

offers still another option. The reality today is that Americans living abroad can get banking 

services in virtually any country. 

Another claim by some Americans living abroad is that F ATCA is causing U.S. citizens · 

to give up their U.S. citizenship, rather than report their fmancial accounts to the IRS, even 

though their fellow U.S. residents have operated under the same disclosure requirements for 

years. The data shows, however, that only a relatively tiny number of U.S. citizens give up their 

citizenship. In 2015, for example, about 4,300 people gave up their U.S. citizenship, while that 

same year, we welcomed nearly 730,000 new citizens ready and willing to pay U.S. tax. 5 And 

when compared to the 9 million Americans living abroad,6 even if we made the outlandish 

assumption that, in 2015, every single person gave up their citizenship because ofFATCA, 

FATCA would still be responsible for only 0.05% of Americans living abroad who gave up their 

citizenship. That is not even one tenth of one percent. 

The bottom line is that, while F ATCA did cause some initial disruptions, it has since 

become widely accepted and even imitated around the world. Tens ofthousands ofbanks have 

made the investments needed to comply with it. A lawsuit seeking to invalidate the law was 

dismissed in court, because its plaintiffs were unable to establish that F ATCA had caused any 

one of them a specific rather than theoretical injury? 

F ATCA' s rough beginning is behind us. Instead, F ATCA has already begun 

discouraging offshore tax evasion, causing more U.S. taxpayers to disclose their offshore 

accounts, report their offshore income, and pay the taxes they owe. 

With U.S. tax reform at the top of the Congressional agenda, a multitude of policy 

options are clamoring for attention. Of all those policy options, repealing a law that stops 

dishonest taxpayers from hiding money abroad shouldn't make the list. Especially since every 

dollar lost to tax evasion is another dollar that must be made up for by honest taxpayers or by 

cuts to critical public programs. Repealing F ATCA would hurt honest taxpayers, incentivize 

wealthy Americans to move funds offshore, disadvantage U.S. banks, and help foreign banks aid 

and abet U.S. tax evasion. 

5 IRS Quarterly Publication oflndividuals, Who Have Chosen To Expatriate, as Required by 

Section 60390 (2/9/2017), https://www.federalregister.gov/documents/2017/02/09/2017-

02699/quarterly-publication-of-individuals-who-have-chosen-to-expatriate-as-required-bysection-6039g; Naturalization Fact Sheet, U.S. Citizenship and Immigration Services, 

https://www.uscis.gov/news/fact-sheets/naturalization-fact-sheet. 

: U.S. Department of State, https://travel.state.gov/content/damltravel/CA _By _the _Numbers. pdf. 

See Crawford v. United States Department of the Treasury, Case No. 3: 15-CV -00250 (USDC 

S.D. Ohio), Entry and Order Denying Plaintiffs' Motion for Leave to File an Amended Verified 

Complain (DOC. 32); Granting Defendants' Motion to Dismiss (DOC. 26) Plaintiffs' Complaint 

(DOC. 1); and Terminating Case (4125/2016), 

http://www.taxcontroversy360.corn!files/2016/04/Case.pdf. 
67 

Mr. MEADOWS. Thank you, Ms. Bean. 

The chair recognizes himself for a series of questions. 

So Ms. Bean, let me go—because you made some very profound 

statements there that I’m not sure you want to carry them out. Are 

you suggesting that the whole reason to do this is that U.S. banks 

want us to do it? 

Ms. BEAN. Well, it’s my understanding that when FATCA passed 

the first time around, the point—— 

Mr. MEADOWS. I’m just asking for your sworn testimony. Are you 

suggesting that U.S. banks are really supportive of this law? 

Ms. BEAN. Yes, I think banks do not want to compete against foreign banks that—— 

Mr. MEADOWS. So if I get the banking institutions to say that 

they don’t have a problem with us repealing that, you would 

change your opinion? 

Ms. BEAN. Well, many of those banking institutions have foreign 

banks as members. 

Mr. MEADOWS. No, I know that. 

Ms. BEAN. So that’s the opinion—— 

Mr. MEADOWS. That’s what I’m saying. So at this point, if they 

changed their position, would you change yours? 

Ms. BEAN. I think U.S. banks do not want to compete against foreign banks that can take their wealthiest clients—— 

Mr. MEADOWS. That’s not the question I asked. 

Ms. BEAN. —and separate accounts. 

Mr. MEADOWS. That not what I—I said if they changed it, would 

you change your opinion? 

Ms. BEAN. If they, you mean if U.S. banks? 

Mr. MEADOWS. Yes. 

Ms. BEAN. Not their trade associations, which have foreign banks 

in them. But if you could get U.S. banks alone to say we don’t want 

FATCA anymore, they’d still have to comply, by the way, with all 

of the other—— 

Mr. MEADOWS. Well, they’re about to have to comply. You see, we 

haven’t forced them to comply on this side, you know, and—— 

Ms. BEAN. They do comply—— 

Mr. MEADOWS. In a different way. We do not require them to 

comply with foreign entities at this particular point. So if 

France—— 

Ms. BEAN. Yes, we do. 

Mr. MEADOWS. We’re not forcing them to do that unless there’s 

a reciprocal agreement. I’ve looked at it, Ms. Bean, and so we can 

argue the point, so let me go to one other side of this. 

So you’re saying it’s the investment that we made, even if it’s 

bad policy, we shouldn’t go the other direction because we made a 

substantial investment and everybody is getting used to it. Is that 

your testimony? 

Ms. BEAN. It is. Foreign banks—— 

Mr. MEADOWS. All right. 

Ms. BEAN. By the way, these aren’t U.S. banks, but these are foreign banks—— 

Mr. MEADOWS. Okay. I’ve got 5 minutes, so yes or no answers are 

the best for me, but you can explain. That’s fine. 


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So GAO did a study in 2013, and they suggested that really it’s 

the voluntary disclosure that has most of this. It’s not the IRS coming in. It’s the voluntary disclosure that comes up with this. 

In fact, they said, in that study, 80 percent—now these are of the 

high income people. So the lower income people like Mr. Kuettel 

would not be actually in this study, but they said 80 percent of the 

high income individuals, the income that we recovered actually 

came from fees and—penalties and fees, not actually income tax. 

Does that strike you as surprising? 

So of the 800 million that we actually got last year, 80 percent 

of that were fees and penalties. It wasn’t really taxes. 

Ms. BEAN. When people don’t pay their taxes and they’re caught 

by the IRS, they do impose penalties. 

Mr. MEADOWS. Listen, this isn’t my first rodeo. I get that. What 

I’m saying is does that surprise you that 80 percent of the money 

we have coming in is actually fees and penalties? It’s not tax avoidance. It’s a penalty or a fee that goes with that. So the number 

we’re collecting, the vast majority of it is just a fee and a penalty 

for voluntary disclosure. Does that surprise you? 

Ms. BEAN. It did not surprise me, but it also includes interest, 

I believe, not just penalties but also interest. 

Mr. MEADOWS. Well, when we look at this, when we look at—— 

Ms. BEAN. I think it’s the biggest part of it. 

Mr. MEADOWS. It was 80 percent. I mean, I’ve got the study right 

here. I’ll be glad to share it with you. It’s 80 percent would basically come from penalties and fees, quote. 

And so when we look at that, you know, then what you’re doing 

is you’re taking this number down, and so we’re investing 200 million to try to go over, and we’re assuming that they’re not doing 

legal activity. I think most people actually agree with Mr. Kuettel. 

They may not be happy about their paying taxes, but they agree 

that it is their civic duty to do so. 

Ms. BEAN. I would agree with that. 

Mr. MEADOWS. And so when we see that, we’re making an assumption that activity is illegal, just like Senator Rand Paul was 

taking about. So what you’re saying is that it’s okay for us to go 

in and get details on their private accounts and making sure that 

we understand that in case there is illegal activity. Is that your 

premise today? 

Ms. BEAN. I don’t like getting a 1099 on my bank account. I’m 

an honest customer. 

Mr. MEADOWS. That’s not what I asked. Is it your sworn testimony—— 

Ms. BEAN. Like I would here with a 1099—— 

Mr. MEADOWS. —that it’s okay for us to go look at the private 

individual account with the suspicion that there may be illegal activity, and that’s okay? 

Ms. BEAN. I treat all Americans the same. 1099s or 1042s, I treat 

them all the same. 

Mr. MEADOWS. Ms. Bean, you’re—this isn’t your first rodeo either. You’re not answering my question. 

Is it your sworn testimony that it’s okay to go into the private 

individual accounts under the suspicion that there may be illegal 

activity and look at that as FATCA does? 


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69 

Ms. BEAN. As FATCA and American law does, yes, I think that 

is appropriate. 

Mr. MEADOWS. All right. So let’s look at it a little bit differently. 

So I am assuming you are a law abiding citizen. Would it be 

okay, under that same premise then, for me to go look at all your 

emails and all your private correspondence which some would 

argue is not as intimate as your financial details, would it be okay 

for me to go in there looking for suspicious activity? Would you 

think that that would be appropriate? 

Ms. BEAN. No. 

Mr. MEADOWS. Okay. I agree with you, and so what we’ve 

done—— 

Ms. BEAN. And the difference is that one is about paying 

taxes—— 

Mr. MEADOWS. What we’ve done—— 

Ms. BEAN. The other one is about private communications. 

There’s a difference there. All of us—— 

Mr. MEADOWS. Listen, my son is graduating from law school. His 

specialty is Fourth Amendment. So I mean, we’ve had these arguments at the dinner table, and so when we look at that, I understand the difference. But as we start to see this, Ms. Bean, here’s 

what I’m saying. 

We’re investing money, which forces a compliance nature that is 

making people where they can’t bank or where actually being a 

U.S. citizen is a detriment internationally for any financial, whether you’re in a single household or whether you’re a financial corporation. Do you think that that was the intended purpose of this 

bill? 

Ms. BEAN. The Supreme Court. 

Mr. MEADOWS. Was that the intended purpose of the bill, yes or 

no? 

Ms. BEAN. Was the intended purpose to denigrate Americans? 

Absolutely not. 

Mr. MEADOWS. All right. Thank you. 

I’ll recognize the ranking member. 

Mr. CONNOLLY. Thank you. I do want to, you know, want to caution about only looking at extremes. So we can ask about intrusion 

into Americans’ financial information as if all of it is extreme. 

So I’ll pose the opposite question to you, Ms. Bean, would it be 

okay if we completely repealed FATCA, and while we’re at it, say 

that anybody is free, as an American citizen, to have a secret bank 

account in Switzerland and should never have to report on it and 

should never have to pay taxes on it unless they feel like it? What’s 

wrong with that? 

Ms. BEAN. Well, what’s wrong with that is we have tens of thousands of people who are cheating on their taxes and—— 

Mr. CONNOLLY. Correct. Right. 

FATCA didn’t just come out of, you know, busybodies who love 

putting their nose in people’s private business and there was no 

problem to solve and it was just another perverse liberal thing to 

do in Congress, right? 

Ms. BEAN. Correct. 

Mr. CONNOLLY. I mean, there was actually a problem identified, 

which was rather substantial tax evasion in the billions of dollars. 


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Hard-working Americans pay their fair taxes, and none of us like 

to see anyone cheating, right? 

Ms. BEAN. Correct. 

Mr. CONNOLLY. Okay. Now, here’s my question. Having said all 

of that, the testimony we’ve heard from your three colleagues at 

the table would suggest that sometimes, though, we’ve gone too far, 

that maybe the intention was good, but it’s disrupting people’s 

lives. We’ve had testimony from two Americans that they had to renounce their citizenship because a bank in Switzerland told them 

they had to, if I got the testimony right. And surely you would 

agree that’s not an intended consequence of FATCA? 

Ms. BEAN. No, it’s not. 

Mr. CONNOLLY. You said something about the rollout, you admitted, was rocky. So is the implementation still rocky? Are there still 

unintended consequences that maybe Congress needs to address or 

someone implementing needs to address? 

Ms. BEAN. FATCA still is not—it’s far from a perfect law. There 

are things that could be improved. 

Mr. CONNOLLY. Nothing is a perfect law. I hate that expression. 

I mean, that implies something could be perfect. Nothing is perfect. 

I wish there were, but there is not. So we will put that aside. 

So it has problems in its implementation still? 

Ms. BEAN. Yes. 

Mr. CONNOLLY. Okay. 

And listening to the testimony of the three gentlemen to your 

left—left? Right? 

Ms. BEAN. My right. 

Mr. CONNOLLY. Right. Sorry. 

Do they have a point? I mean, do you recognize what you’re hearing here as a fair critique, maybe not a comprehensive critique? 

You and I would stipulate that the purpose of FATCA is a good 

one, and it has done some good, clearly, in promoting an international standard and in collecting taxes that otherwise would 

have been foregone. But, in doing that, either in the zeal or in the 

reach, it’s hurt people unintentionally. That’s really what we’re 

hearing here. And I’m concerned about that as a Member of Congress. 

I don’t want to see fellow citizens hurt. I want to see tax cheats 

brought in. I want to see everyone pay their fair taxes. And maybe 

not everybody up here shares that philosophy. I do. But I don’t 

want to be hurting people in the process who are innocent victims 

of a well-intentioned piece of legislation that’s overly broad or is 

badly implemented. And that’s what I’m asking you to comment on. 

Ms. BEAN. I really think their concern is misplaced. 

Mr. CONNOLLY. Whose? 

Ms. BEAN. The people to my right. 

Mr. CONNOLLY. Okay. 

Ms. BEAN. I think what they’re concerned about is, in some 

cases, it’s unfair to tax them because they don’t live in the United 

States. 

Mr. CONNOLLY. Can I just say—I’ve seen this—Mr. Chairman, if 

I can interrupt one second? 

I would ask everybody to forbear civility and acceptance. This is 

not a hearing where you’re shaking your head because you don’t 


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71 

like what somebody says. We’re going to hear everybody, and we’re 

going to try to be fair. But you’re not free to be commenting 

through body language on whether you approve or disprove of 

somebody’s right to express themselves. You know, if you’re at the 

table, you get to express yourself. If you’re not, please be forbearing 

and polite. 

Ms. Bean? 

Ms. BEAN. I was just going to point out that, even if FATCA were 

completely repealed, you’d still have all of the same problems about 

people saying ‘‘we’re getting taxed when we shouldn’t be’’ or ‘‘getting taxed too much’’ or ‘‘the process for renouncing citizenship is 

too complicated or too expensive.’’ All of those things would still be 

true because FATCA itself does not impose any tax, and it does 

not, of course, require anybody to renounce their citizenship. 

I think Switzerland was a particularly tough place to be, that the 

banks there were particularly upset because FATCA was aimed, in 

part, at Swiss bank secrecy. I think that a lot of those Swiss banks 

now have changed their practice. UBS and Credit Suisse now agree 

to open up accounts for American citizens and report them to the 

IRS, and a lot of other Swiss banks—— 

Mr. CONNOLLY. Thank you. Unfortunately, votes have been 

called. 

Mr. Chairman, I would like, if it’s all right, to have Mr. Bopp just 

comment on that, if he would like to. I’d like to hear the other 

point of view. 

Mr. MEADOWS. Yeah. Very quickly. 

Mr. CONNOLLY. Very quickly. 

Mr. MEADOWS. We’ve got a couple minutes left, and we’re going 

to need to recess and reconvene. So very quickly. 

Mr. BOPP. Thank you. I would just make a couple of points. First, 

this is not an unusual or rare problem that is affecting Americans 

overseas. The Democrats Abroad survey of Americans overseas 

found that 65 percent of married Americans overseas have lost 

bank accounts because of FATCA. 

Secondly, this does not level the playing field. U.S. banks have 

to file, you know, 1099s regarding interest income. Under FATCA, 

foreign banks have to not only identify income but also gains and 

losses, et cetera, also gross receipts, gross withdrawals, account information, value—no taxpayer in the United States reports that information to the IRS. 

And, finally, regarding the penalty point that you made, the $9.7 

billion that she’s talking about of taxes, interest, and penalties, 

most of those penalties we know anecdotally were not because 

these people needed to pay any taxes and failed to do it, but because they failed to file this form, this one lousy form that generates a 50-percent penalty of the highest value in the account. If 

you do it in the second year, fail to file your form, you’re now at 

a hundred percent. That’s the penalty. And, you know, that is 

something this committee should force the IRS to explain to the 

American people about how FATCA is working. 

Mr. MEADOWS. All right. We’re going to reconvene probably, for 

planning purposes, no sooner than 3:35. So you can go get coffee, 

do whatever you want. And so this committee stands in recess. 

[Recess.] 


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Mr. MEADOWS. The chair recognizes the gentleman from Georgia, 

Mr. Hice, for 5 minutes. 

Mr. HICE. Thank you, Mr. Chairman. 

Ms. Bean, I want to pick up with you, if we can continue here. 

Any idea how much revenue is lost to offshore tax evasion each 

year? 

Ms. BEAN. Estimates have been between $100- and $150 billion 

per year is lost to offshore tax evasion. 

Mr. HICE. All right. Between $100- and $150 billion. And you’re 

satisfied with that estimate? 

Ms. BEAN. Yes. 

Mr. HICE. Okay. 

And how much revenue is brought in because of FATCA? 

Ms. BEAN. I don’t know. It’s such a new law. They just started 

the reporting in 2015. I don’t know if they have any statistics yet. 

Mr. HICE. Okay. The Joint Committee on Taxation estimated 

$870 million. Are you familiar with that estimate? 

Ms. BEAN. That is being brought in per year? 

Mr. HICE. [Nonverbal response.] 

Ms. BEAN. I wasn’t familiar, but okay. 

Mr. HICE. Okay. Based on that, assuming that the Joint Committee on Taxation is accurate, at least in the ballpark, it is very 

poor math. We’ve got a loss of $100- to $150 billion. We’re only 

bringing in 870 million. And that’s just part of the problem. I 

mean, we’re spending—figures have been going out today—$200 

billion spent on this. The estimates on that range from a little less 

than that. The $200 billion is kind of a middle-of-the-road estimate. 

I’ve seen as high as a trillion, as low as $8 billion. But the middleof-the-road guess, $200 billion. And besides all that—I mean, I listen to these witnesses and read their testimonies and the harm 

that has been caused individuals around the world and the harm 

that has come about to some of our allies. You even mentioned 

yourself how—you know, you said that, in your opinion, things are 

changing. But many of our allies have been hurt because of this. 

Obviously, it’s not a very efficient use of IRS resources. 

And, quite frankly, I have questions as to just whether or not 

this thing is even constitutional or not. There are tremendous constitutional questions that come up with this. The fact that Americans living overseas are forced to provide financial information that 

would normally require a warrant is just amazing to me. There’s 

obviously an issue at least with the Fourth Amendment there. 

We have heightened reporting requirements to treat Americans 

living overseas more harshly than those living here. And that, obviously, is a Fifth Amendment concern. You just wonder even how 

constitutional this thing is at its very foundation. And then the fact 

that this was instituted without congressional authority—President 

Obama—the agreements were made. I mean, you’ve got a separation-of-powers issue. 

I guess my point is, over and over and over, there’s just questions 

on this thing as to even how effectively it’s working. If we’re bringing in $870 million but the cost is some $200 billion, it doesn’t take 

a whole lot of math to figure out this is not a very efficient thing. 

And you add to it the harm that’s being caused and the constitutional issues that are being raised, it appears to me that, although 


KING-6430 with DISTILLER
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this may have been implemented with good intentions, as has been 

mentioned here today, there’s enough information that’s come forth 

here about FATCA that, frankly, I find this thing not only to be 

disastrous as a law but dangerous, potentially, constitutionally. 

And it just seems to me in every way this ought to be repealed; 

if not, majorly modified. Just a quick yes/no, would y’all agree or 

disagree that this needs to be either repealed or modified? 

Mr. Bopp? 

Mr. BOPP. I definitely agree it needs to be repealed. We have 

thought about fixes, alleged fixes, being proposed by various people. 

The problem is it leaves all the essential elements of the FATCA 

regime in place. The burdens on most individuals, the burdens on 

financial institutions, don’t change in any of the proposals that we 

are aware of. And the constitutional issues remain. 

And we just should not be treating people that are U.S. citizens, 

because they’re residing abroad, stripping them of their rights as 

if they are second class citizens. 

Mr. HICE. Okay. 

My time has expired. 

Mr. Crawford, Mr. Kuettel, yes or no, repeal or modify? 

Mr. CRAWFORD. Yes. I support a repeal. 

Mr. KUETTEL. Yes. I support repeal. 

Ms. BEAN. No, I don’t. And just so you know, the courts that 

have looked at these types of issues have upheld—— 

Mr. HICE. Nor do you believe it should be modified? You like it 

just as it is? 

Ms. BEAN. I think there’s some modifications that would be appropriate. 

Mr. HICE. Okay. 

Thank you, Mr. Chairman. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the gentlewoman from New York, Mrs. 

Maloney, for 5 minutes. 

Mrs. MALONEY. Thank you, Mr. Chairman. 

I want to thank you very, very much for your focus on this issue. 

It’s an extremely important one as we move into more of a global 

world with many Americans living abroad. 

And, of course, I thank Ranking Member Connolly. 

And thank you to all of the witnesses who have come from all 

of the corners of the globe to testify about the future of this important law. 

I represent a district that has many Americans that live abroad 

that have expressed the concerns of Mrs. Nelson, although I have 

never had a first family who came over on the first ships testify 

to me. But many people have told me the excruciating experience 

of renouncing their American citizenship and their inability to open 

up bank accounts or being forced off the bank account of their 

spouse. 

But, likewise, I’m very sympathetic to the points that Ms. Bean 

has raised about the need to crack down on terrorism financing, 

drug financing, human trafficking financing, and just plain crooks. 

But I do think that we could reach some type of agreement in going 

forward. 


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I personally do not think FATCA should be abolished. But certainly the reporting procedures should not subject ordinary Americans, in my opinion, to the same scrutiny as criminal tax evaders, 

money launderers. And coming from New York, which is constantly 

a terrorist target, the extreme concern that law enforcement has in 

New York, and I’d say around the country, of terrorism financing. 

I’ve been particularly interested in this issue for some time now 

as co-chair and founder of the Americans Abroad Caucus. I have 

heard reports from constituents overseas detailing how FATCA’s 

expensive and risky reporting requirements have had a negative 

impact on access to banking services for Americans living abroad. 

FATCA was passed to fight overseas tax havens and make sure 

that American money could not be hidden from tax obligations, 

which is something I strongly support, and I’m sure most Members 

do as well. It does this by requiring foreign financial institutions 

to disclose certain information to IRS about American-held accounts or the institution will be subject to a 30-percent withholding 

tax on all of its income from U.S. sources. 

Unfortunately, in order to minimize their exposure to FATCA reporting requirements and avoid any withholding fees and potential 

penalties, some foreign financial institutions have decided to simply close accounts for U.S. citizens or refuse to open new ones for 

them or have asked them to get off the account of their spouse. As 

a result, many law-abiding American citizens living overseas have 

lost access to everyday financial tools, such as mortgages, bank accounts, insurance policies, and pension funds, all of which are critical services in a modern economy, regardless of your place of residence. 

Now, I believe it is essential that the Treasury Department has 

the tools it needs to fight overseas tax havens and make sure that 

any American money around the world remains compliant with the 

U.S. Tax Code, but the current FATCA reporting procedures subject ordinary Americans to the same scrutiny as criminal tax evaders. It’s gotten so bad that some Americans have resorted to renouncing their American citizenship in response, and that’s unacceptable. Whether it’s 1 or 2 or 2,000, we should not live in a world 

where people feel they have to renounce their citizenship in order 

to comply with, basically, transparency laws. 

Recognizing the consequences that the reporting requirements 

have had on Americans living abroad, the IRS Taxpayer Advocate 

Service 2015 annual midyear report to Congress recommended that 

the IRS exclude from FATCA reporting financial accounts maintained by a financial institution in the country in which the U.S. 

citizen is a bona fide resident. 

And I have here a letter that about 20 Members of Congress 

joined me in signing and sent to Treasury and IRS supporting this 

idea, this narrow, narrow exemption for American taxpayers. 

The report details how this proposal would mitigate concerns 

about unintended consequences raised by overseas Americans, reduce the reporting burden on FFIs, and allow the IRS to focus its 

enforcement efforts on identifying and addressing willful attempts 

at tax evasion or money laundering or money hiding through foreign accounts. The IRS would retain access to foreign financial account information as citizens would still be required to submit the 


KING-6430 with DISTILLER
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report of foreign bank and financial accounts. Additionally, the Financial Crimes Enforcement Network, or FinCEN, the query system ensures IRS employees direct access to FBAR data. 

The Treasury Department has not yet implemented this recommendation, and I wrote this letter on September 15th of 2015, 

which I’d like to submit to the record. 

Mr. Chairman? 

Mr. MEADOWS. Without objection. 

Mrs. MALONEY. —to the IRS and Treasury Departments, urging 

adoption of this reform, but still nothing has happened. 

So today I—as we hold this hearing, they haven’t taken any— 

been taken to institute a policy to alleviate the burden on overseas 

Americans as a result of FATCA. That is why, last night, I introduced the Overseas Americans Financial Access Act, which would 

implement the recommendation and exempt Americans from 

FATCA reporting if their accounts are held in the same country 

where they are bona fide residents. It is a narrowly tailored change 

that could drastically improve the financial conditions for Americans living abroad. 

I hope my colleagues will join me in this good-faith effort to 

make FATCA more effective in its intention and yet less burdensome on law-abiding Americans living and working abroad. 

And I request permission to place in this record, I think, an excellent document that was prepared by the Foreign Account Reporting on the issue and ways it could be improved, which included 

the recommendation that I legislated last night. And I have the bill 

here. And I’d also like to put that in the record. 

I feel that this narrowly tailored approach would relieve the burden on American residents, members of—Americans, yet keep the 

benefit of cracking down on terrorism financing, drug financing, 

human trafficking financing and just plain criminal behavior. 

My time is long over—expired. I thank the gracious chairman for 

allowing me this time to speak, and I look forward to a second 

round where I can participate in asking questions. 

Thank you. 

Mr. MEADOWS. I thank the gentlewoman. 

Her two unanimous consents, without objection, so ordered. 

Mr. MEADOWS. And the chair recognizes the gentlewoman from 

the District of Columbia, my good friend Eleanor Holmes Norton. 

Ms. NORTON. Let me thank you, Mr. Chairman, for this really interesting and important and revealing hearing. 

I was pleased to hear my good friend Mrs. Maloney take a stab 

at how we could, in fact, go at the probable unintended consequences of going after bad guys and getting good guys while at 

the same time not opening the gates altogether to the bad guy. 

Indeed, I was a little surprised to hear some of your responses 

to the question that was asked by my colleague on the other side 

whether repeal or modification was appropriate. Let me remind you 

what it takes in this Congress and what it took in the Congress 

that passed this to get legislation through to recoup taxes or to tax 

anyone. 

The evidence was overwhelming of human trafficking, of drug 

smuggling, of tax cheats, so overwhelming, that, in a Congress 

which is not known as passing a lot of bills and in a Congress 


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which has cut the IRS more than it has cut any other part of the 

government, this legislation, FATCA, was passed. So I have to ask 

you, when you say you would like repeal, do you really mean you 

want no law on the books that went after the bad guys so that we 

could make sure that the good guys weren’t, in fact, caught? I’m 

going to ask you to think about that, because this is the kind of 

modification that is going to take bipartisan support. And you just 

heard a Member offer at least one version of modification. 

But if you come to the Congress of the United States, who passed 

a law like this after being overwhelmed by evidence, and say, ‘‘The 

only thing we want is a wide open gate and ask you to throw all 

of that away,’’ then you’re not really helping us. So I’m asking you 

whether you would consider the notion of modifications that would 

in fact help us deal with what moved all of us during your testimony. 

Mr. Bopp? Let me hear all down the line on that. 

Mr. BOPP. Thank you. 

And, of course, we have considered the possibility of changes 

such as proposed and other proposals. And the problem is, is we 

do not find that they will be effective in relieving the burdens—— 

Ms. NORTON. All right. Mr. Bopp, my time is—— 

Mr. BOPP. And I can tell you why. 

Ms. NORTON. You know, you may not have seen any yet, but you 

see what you give us, an all-or-nothing kind of resolution. And 

that, of course, it tells us, who don’t do much in the first place, 

nothing. 

I just want to ask in the—I would—maybe the chairman would 

grant me some time as well, because I want to see whether any of 

you would be open to modification going back to where we were. 

The fact that you haven’t seen one—— 

Mr. MEADOWS. The chair will give—— 

Ms. NORTON. —doesn’t mean that there isn’t one in existence. 

And there haven’t been hearings like this; doesn’t mean that working with people couldn’t help us. 

But I do have to ask Ms. Bean about this—what looks like the 

rest of the country moving toward us with this common reporting 

standard. Does that, in fact, share much of what we’ve been talking 

about in FATCA, Ms. Bean, this common reporting standard, this 

OECD effort to collect and share information about foreign-held accounts? 

Ms. BEAN. It’s modeled on FATCA. It’s very similar to it. It’s not 

identical. But, yes, and over a hundred countries have now signed 

up to that system. 

Ms. NORTON. So, if anything, it looks like the rest of the world 

is moving toward FATCA because of hearings which opened this 

matter up, in fact, found. So could they work together to stop the 

kind of tax evasion we’ve been talking about, the common reporting 

standard and FATCA, Ms. Bean? 

Ms. BEAN. That’s the hope, that with most banks around the 

world starting to report account information to governments, that 

this whole problem of secret bank accounts that, as you said, are 

used not only by tax evaders but terrorists, criminals, sex traffickers, drug lords, that whole problem would be much more manageable because of the transparency. 


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Ms. NORTON. Would the information of U.S. account holders still 

be collected if Congress repeals FATCA but the common reporting 

standard continued in existence? 

Ms. BEAN. I don’t know the answer to that. I believe it would be. 

But I’d have to look at it in more detail. 

Ms. NORTON. I wish you would get that answer back to our chairman. 

I have to tell all of you sitting at the table: I was a tenured professor of law before I came to Congress. And, essentially, I taught 

one of the—in addition to the hard level of court courses I taught, 

one was negotiations. So I came kind of with the frame of mind is 

every—lawyers can be most helpful if they understand that we live 

in a world where each side can’t get what he wants but can, in fact, 

be satisfied. And it’s that kind of problem-solving approach I’ve 

tried to bring to the Congress as well. So I must tell you: When 

somebody tells me to take back a piece of legislation that could 

have passed only if we were deluged with information that made 

it irresistible, if you tell me that that is the only answer, I have 

to tell my friends at the table that you’re asking for the status quo. 

And I would ask you to work with Mrs. Maloney, with me, with the 

chairman, to find a way out of this dilemma so that, in trying to 

help the good guys—and you represent them—we do not go back 

to opening the gate to all the bad guys we were after in the first 

place. 

I thank the chairman for his indulgence. 

Mr. MEADOWS. I thank the gentlewoman. 

I would like to make note that the chair did give the additional 

2 minutes to the gentlewoman from D.C. 

Ms. NORTON. That’s why I love him so much. 

Mr. MEADOWS. We’re going to go ahead—since the gentlewoman 

from New York wanted a second round, we’re going to go ahead 

and do a brief second round. So I’m going to recognize myself for 

a series of questions. 

But let me clear up, I guess, some testimony. I’ve got sworn testimony that Ms. Bean says that we’re not asking financial institutions abroad to do anything that the United States banks do. 

And, Mr. Bopp, your sworn testimony seemed to be at odds with 

Ms. Bean. 

So help me clear up—Mr. Bopp, I think you said that more than 

just a 1099, they are required to have all kinds of other information. 

I want to give you a chance to correct the record if you’re not correct in your sworn testimony. 

Mr. BOPP. The 1099 that American banks are required to send 

in to the IRS and to the taxpayer, of course, reports the interest 

income on the account. It does not report gross receipts. It does not 

record gross withdrawals. It does not report the value of the account. These are things that FATCA requires foreign banks to provide to the IRS. So—— 

Mr. MEADOWS. All right. So you’re saying that foreign banks 

have to do that and U.S. banks don’t? 

Mr. BOPP. [Nonverbal response.] 


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Mr. MEADOWS. Okay. I think we’ll get a different opinion here, 

but, Ms. Bean, go ahead. Are you saying that his testimony is not 

correct? 

Ms. BEAN. Mr. Bopp is correct. There’s additional information 

under FATCA from foreign banks than there is in the U.S. banks. 

Mr. MEADOWS. Why is that? 

Ms. BEAN. I think that’s just the way the law was written. 

Mr. MEADOWS. Do you not see that as problematic? 

Ms. BEAN. Well, I think one reason is that U.S. banks are subject 

to subpoena from U.S. law enforcement in a way that foreign banks 

aren’t. So U.S. law enforcement, if they wanted to, could get the 

information—— 

Mr. MEADOWS. Oh. Whoa. Whoa. Whoa. So you’re saying 

FATCA—FATCA’s intent, from someone who should know— 

FATCA’s intent was to allow a way to access information without 

a subpoena? Is that what you just said? 

Ms. BEAN. Yes. Just like 1099s. There’s no subpoena for a 1099. 

Mr. MEADOWS. Right. But you’re saying that, because we did 

FATCA, we’re going to have our constitutional protections violated 

because of a law? Is that your sworn testimony here today? 

Ms. BEAN. The courts have said it is not unconstitutional. The 

Supreme Court—— 

Mr. MEADOWS. But you’re saying they’re getting around a subpoena, is you’re saying they’re subject to a subpoena, and somebody 

else is not subject to a subpoena. 

Ms. BEAN. I think you were asking me, why would FATCA require more information—— 

Mr. MEADOWS. No. I was asking you if it was different. Because 

your sworn testimony from my first round of questions is you said 

that we weren’t asking them to do anything that a U.S. bank was 

asked to do. That was your sworn testimony. And I can get them 

to read back the transcript. But I assume that you’re saying now 

you want to change that to say that, yes, we are asking foreign 

banks to do something that a U.S. bank doesn’t have to do. Is that 

correct? 

Ms. BEAN. What I meant in my testimony is that we’re requiring 

foreign banks to file a form on all accounts opened by U.S. clients. 

And we have U.S. banks that have to file a form on all accounts 

opened at U.S. banks. 

But Mr. Bopp is correct. There are a couple additional items of 

information primarily—— 

Mr. MEADOWS. So you would be okay with waiving those couple 

additional items and amending the law, because obviously that’s— 

we’re not treating people the same in the United States as we do 

abroad? 

Ms. BEAN. I would not because from a foreign bank, U.S. law enforcement cannot—— 

Mr. MEADOWS. Well, I’m going to go back to what the gentlewoman from the District of Columbia says. You can’t have it the 

other way either. I mean, they may not be able to get full repeal, 

but you can’t keep the full law and sit here and negotiate in good 

faith and assume that everything with FATCA is correct. 

Ms. BEAN. In fact, the rest of the world has noticed the same difference—— 


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Mr. MEADOWS. They’re being forced to notice the world because 

of what we’re doing—— 

Ms. BEAN. —press the U.S. to provide that additional information—— 

Mr. MEADOWS. Would you not agree with that? They’re being 

forced to do it because of what we’re doing from our law and forcing 

them to do it? 

Ms. BEAN. We are forcing them through the 30 percent—— 

Mr. MEADOWS. And do you not see that some of these sides effects that we’ve had expert testimony from Mr. Kuettel and Mr. 

Crawford, that those side effects of our forcing financial institutions to do it are having repercussions that were not intended in 

the original law? 

Ms. BEAN. My entire adult life I’ve had to file a 1099 on every 

bank account I’ve ever opened. 

Mr. MEADOWS. So you would be okay—— 

Ms. BEAN. I’m okay with that. 

Mr. MEADOWS. All right. So let’s go there. And maybe that’s a 

reasonable compromise. We repeal FATCA and that we require foreign institutions to have to file a 1099 to the IRS on interest income. Would you be okay with that? 

Ms. BEAN. I’d prefer the 1099 to be expanded to what FATCA requires. 

Mr. MEADOWS. Therein is a deeper problem. But we won’t go 

there. 

Ms. Bean, we’re not going to ever agree on that. 

Ms. BEAN. Okay. 

Mr. MEADOWS. So let’s go ahead with this. 

Are you okay, yes or no, with us just repealing back and saying 

that a foreign account has to do a 1099 on interest income as a 

U.S. Bank would do, as Mr. Bopp, and that’s all they have to do? 

Are you okay with that? 

Ms. BEAN. No. No, I’m not. 

Mr. MEADOWS. You know, I find it challenging that—because apparently—so what are the problems that you see with FATCA, Ms. 

Bean? 

Ms. BEAN. Well, one of the—there are a number of problems. One 

of the problems is—— 

Mr. MEADOWS. How many problems would you say there are 

with FATCA? 

Ms. BEAN. Well, I haven’t counted them up. But let me give you 

two of them. 

Mr. MEADOWS. Okay. 

Ms. BEAN. One is that, when the IRS started to penalize people 

for violating the law, their penalties—they had a range of penalties 

they could do—they were very unreasonable in the penalties they 

applied. 

Mr. MEADOWS. So what would a reasonable penalty be? 

Ms. BEAN. Well, one of the things that the IRS did at the insistence of the Taxpayer Advocate is they came up with a system that, 

if you had an inadvertent violation of the law—— 

Mr. MEADOWS. Inadvertent by who? Now, I will sometimes tell 

my wife that I forgot to take the trash out inadvertently. Is that— 

I mean, inadvertent by whose standard? 


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Ms. BEAN. I think they require a certificate from the taxpayer. 

And if the taxpayer will certify that they—it was inadvertent; they 

didn’t realize that they were violating the law—— 

Mr. MEADOWS. I would think that that would happen 100 percent 

of the time, wouldn’t you? 

Ms. BEAN. How about that. And then they’re qualified for much 

lower penalties. So that’s the system that’s been set up. 

Mr. MEADOWS. So what should the penalty be, Ms. Bean? 

Ms. BEAN. That’s a very complicated question. 

Mr. MEADOWS. But you’re an expert witness. You are here at the 

request of the minority as an expert witness. I would assume you 

have an opinion on that since you were involved in part of this. 

What would be an appropriate penalty? 

Ms. BEAN. Well, I’ll give you an example. There was a gentleman 

that they found a bank in Israel. He had hidden $21 million in 

those accounts, never been reported to the IRS. The IRS then 

ended up hitting him with a fine of $8.3 million for the many years 

that he hid those accounts, and he went through a lot of machinations to hide them from IRS agents. 

Mr. MEADOWS. But that’s criminal. That’s criminal. 

I mean—so here’s what we’re talking about, is when we are looking at that, if, indeed, he went through all kinds of issues—I mean, 

we’ve got laws that say we have to disclose those accounts. I know, 

every year, my accountant would ask that. But what you’re saying 

is, is that—so a big penalty, if he’s got a lot of money, is okay; but 

a big penalty, if they don’t have a lot of money, is not okay? Is that 

what you’re saying? I’m trying to figure out what—I’m trying to answer the question for you since you don’t seem like you want to answer the question. What’s an appropriate penalty? 

Ms. BEAN. Well, the penalties currently are gauged to how much 

money is in the account. So that’s one thing they do take into account. And another thing they take into account is whether it was 

inadvertent or not. 

Mr. MEADOWS. So are you going to answer the question or not? 

What’s the appropriate penalty? 

Ms. BEAN. Sometimes the appropriate penalty is zero. 

Mr. MEADOWS. All right. 

Ms. BEAN. If you didn’t know you were violating the law, the 

penalty could be zero. 

Mr. MEADOWS. All right. So you’re okay if we say you didn’t 

know that you were violating the law, that the penalty would be 

zero? 

Ms. BEAN. In some cases, yes. 

Mr. MEADOWS. Okay. We’re not getting much of anywhere. 

What would be the other example? So penalties being outrageous 

is one. What’s the other problem? You said there was two. 

Ms. BEAN. The other one I would mention is that we’ve had the 

FBAR for many years where people have to identify their foreign 

accounts. 

Mr. MEADOWS. Right. 

Ms. BEAN. But now, under FATCA, we created another form that 

seems to be very duplicative of the first form. 

Mr. MEADOWS. Right. 


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Ms. BEAN. And I’m not sure that we need that second form. And 

as people have said, there are a lot of trips and traps to complying 

with FATCA, and that seems to me to be one of them, to have that 

extra form. 

Mr. MEADOWS. All right. So let me understand. Your best recommendation on improving FATCA is we get rid of one form, and 

we may adjust the penalty. Those are your two best attempts at 

trying to fix FATCA? 

Ms. BEAN. Yes. Because, as I say, I’ve lived my life under that 

regime. 

Mr. MEADOWS. All right. So, if you’ve lived your life under that 

regime, knowing that there is a return, knowing that the IRS, that 

the gentlewoman from the District of Columbia talked about, knowing that there are financial resources, knowing that Commissioner 

Koskinen says that he can get a 20-percent return sometimes—or 

even let’s take conservative, under sworn testimony, he said an 8- 

to-1 return, wouldn’t we be better off taking the $71 million that 

we spent last year and using it for some other type of enforcement 

that provided a better return? Because aren’t we only getting 1 percent of what—your sworn testimony said there’s $100 billion out 

there. We’re only collecting 1 percent of those taxes. And, actually, 

it’s not even that. It’s taxes and fees and penalties and interest. So 

we’re spending all this money to address 1 percent of the problem. 

Ms. BEAN. Well, $150 billion includes all of the corporate tax 

avoidance. So that’s a whole different issue. But when you’re looking at individuals, the numbers that are usually used are $35- to 

$70 billion a year just for individuals. I’d been asked earlier about 

offshore tax avoidance and evasion altogether. But for individuals, 

it’s $35- to $70 billion. 

Mr. MEADOWS. All right. I’m way beyond my time. So here’s what 

I would ask you to do, each one of you to do, is come up with three 

recommendations. Your two that you gave me under sworn testimony don’t count. I need three recommendations on what you 

would do with FATCA. 

I need you to look at—in the spirit of trying to find—if we do not 

fully repeal, what are the three most onerous situations that affect 

gentlemen like Mr. Crawford and gentlemen like Mr. Kuettel? 

What are those areas? Are all of you willing to either give me your 

recommendations back to the committee to do that? 

Okay. Thank you. 

I recognize the gentlewoman from New York, Mrs. Maloney. 

Mrs. MALONEY. I thank the gentleman for his concern and trying 

to get an answer. But, to me, it’s not a monetary thing. It really 

is human life because terrorism financing has become a way of life 

in this world. 

Mr. MEADOWS. Well, will the gentlewoman yield for one point 

of—— 

Mrs. MALONEY. No. I have a phone call with Justice Ginsburg in 

about 5 minutes. So I can’t yield right now. Excuse me, Mr.—I just 

have to ask one question, and that’s it. 

Listen, so—I disrupted my train of thought. 

So, just recently, this month, Chairman Hensarling of the Financial Services Committee created a whole new committee on terrorism financing because it’s such a huge issue. 


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Bombs went off in my district several months ago. The police 

caught the guy. But the question is, where did he get his money 

from? So cracking down on terrorism financing is a real concern. 

And I would say, why are people hiding money? A lot of times 

it’s not just to save on taxes. It’s because they’re selling guns. 

They’re selling human bodies, or they’re involved in drugs or all 

kinds of things that basically hurt people. 

So I’m trying to—and I join you with your question—find a solution—and I look forward to working with you on it—that allows us 

in law enforcement to go after the bad guys but protects people like 

Mr. Kuettel. So my question is to Mr. Kuettel, would the exemption 

that was really put forward by the Taxpayer Advocate Service that 

basically recommended that the IRS exclude from FATCA reporting 

financial accounts maintained by a financial institution in the 

country in which the U.S. Citizen is a bona fide resident—that 

would have taken care of Mrs. Nelson’s situation, which she explained so clearly. But as a bona fide citizen of Switzerland, this 

particular change would have excluded you from this burden. Is 

that correct? Pardon me? 

Mr. KUETTEL. I fear not. 

Mrs. MALONEY. Why not? Because you’re a bona fide citizen in 

a country, you would no longer have to do the FATCA. That’s what 

this recommendation says. 

Mr. KUETTEL. From my experience, the damage of FATCA has 

already been done. The banks are already terrified of America. If 

you just exclude local residents from FATCA, they still have the reporting requirements for the taxation. When I take my daughter 

here to a bank, practically any bank, the first question is, ‘‘Are you 

taxed by America?’’ They don’t ask, ‘‘Are you reportable by America?’’ They ask, ‘‘Are you taxed,’’ meaning she’s a tax threat. 

Mrs. MALONEY. That’s the current law now. But if the law 

changed so that, if you’re a bona fide citizen, you could just say 

back to them, ‘‘I am a bona fide resident of this country, therefore’’—or you could get a form from our government that says, 

therefore, if you’re going to a financial institution in your country— 

I would like to get legal counsel to look at it, because I believe you 

would be exempt under these types of recommendations. 

In any event, something needs to be done on it. And I thank the 

chairman for his attention to it and his personal involvement in it 

and absolutely all of the panelists. 

But I do believe cracking down on terrorism financing, which is 

one of the major reasons of this, is a critically important concern, 

unfortunately, in the world now. 

So thank you, and I yield back. And I thank you. And I’m sorry 

I couldn’t yield, but—I’m in trouble right now. 

Mr. MEADOWS. That’s all right. I’ve got a very long memory. So 

that’s—we’ll go from there. I thank the gentlewoman for—I understand. A Supreme Court Justice or a Member of Congress from 

North Carolina: I would have made the same choice you did. 

So it’s—I thank the gentlewoman for her interest. 

So let me—in the interest of clarity, let’s talk about what this is 

and what it is not. This is really not about the terrorist organizations that go and deal with that. I have a little bit of expertise 

there. The Hezbollah sanctioning bill was a bill that I actually 


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started in the first Congress. I understand the aspects. It is now 

law. It is affecting behavior because we’re going after money for 

terrorists. But we use totally different vehicles than this particular 

vehicle. And so to suggest that they’re one and the same would not 

be accurate. 

I mean, and when you look at central bank activity and the moving of funds and all of that, it is a very different issue. It’s very 

complex, but it’s very different. I have real problems with us treating citizens of the United States who happen to live abroad differently than citizens of the United States that happen to live in 

the contiguous 48 or whether it’s Puerto Rico or anywhere else. 

When we start to look at this, it is critically important that we understand the constitutional foundations of who we are as a Nation. 

And in the interest of everything that we know, we can go after 

all kinds of things where we start violating the civil liberties of individuals in the interest of compliance. 

And that’s why we have—our Founding Fathers set it up. That’s 

why we have a Fourth Amendment. And we’ve got other areas 

where the Fourth Amendment is being challenged. 

And so, Ms. Bean, I would ask you to have an open mind and 

try to figure out those areas where the side effects and the testimonies that we’ve heard from these individuals and others, thousands of others, are being affected. So I’d ask you to keep an open 

mind and look at that. 

Mr. Bopp, I’d ask you to look at it from a different perspective. 

Assuming that we can’t get enough bipartisan support—which I believe we can—but if we can’t get enough bipartisan support to repeal this and actually replace it with something else—and I hate 

to use the words ‘‘repeal and replace’’ in the context of anything 

these days—but as I look at this, if we can look at repealing and 

replacing it with something, I would ask you to take the thoughtful 

suggestions here. 

Here is my closing remark. Senator Rand Paul recognized an 

issue that was brought to him not only from his concern for freedom-loving individuals and the Constitution, but it was something 

that was highlighted over and over again. And if you travel abroad, 

we have U.S. citizens who love the United States, who truly—some 

of them are more patriotic than some who live in my State of North 

Carolina. And yet they’re being forced with a decision of, do they 

renounce the country they love so that they can continue to transact even a normal bank account? And that’s a choice that we 

shouldn’t be forcing people to make. 

I think there are ways that we can figure this out and tailor this 

so that we truly go after those who have a problem with tax not 

only avoidance but criminal activity. We know that, indeed, it is 

our obligation to pay taxes, and to avoid that in an improper manner is certainly not anything that a Republican or a Democrat 

would condone. 

And so it is in that spirit that I would ask you to report back 

your three recommendations. Get as many—we won’t limit it to 

three, but if you don’t give me three, you’ll hear from us. How 

about that? Is that a deal? 

Mr. MEADOWS. I want to thank all of you for the discussion and, 

truly, for your testimony. It’s been very illuminating. 


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If there’s no further business before the committee, the committee stands adjourned. 

[Whereupon, at 4:27 p.m., the subcommittee was adjourned.] 


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APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD


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(I 

Member of Congress 

U.S. House of Representatives 

Washington, DC 20515 

RE: Oppose H.R. 2054/S. 869; Protect the Foreign Account Tax Compliance Act (FATCA) 

Dear Member of Congress, 

April25, 2017 

We write on behalf of the Financial Accountability and Corporate Transparency Coalition (FACT 

Coalition) to urge you to oppose H.R. 2054/S. 869. The purpose of this bill is to repeal the Foreign 

Account Tax Compliance Act (FATCA), an important tool to combat tax evasion by wealthy individuals 

who fail to report to the Internal Revenue Service (IRS) income related to foreign accounts, as has long 

been required by U.S. law. 

The FACT Coalition is a non-partisan alliance of more than 100 state, national, and international 

organizations working toward a fair tax system that addresses the challenges of a global economy and 

promoting policies to combat the harmful impacts of corrupt financial practices.' 

The 2010 law requires foreign banks and other foreign financial institutions holding U.S. client accounts 

to report certain information about those accounts to the IRS. This is information that those 

accountholders should already have been reporting but often were not, as shown by a series of offshore 

tax evasion cases over the years. For example, prior to passage, Switzerland's largest bank, UBS, paid a 

$780 million penalty and pled guilty to helping tens of thousands of U.S. clients (who did not disclose 

their accounts as required by U.S. law) evade U.S. taxes. UBS opened Swiss accounts for these clients 

without disclosing the accounts to the IRS, as was required under UBS's Qualified Intermediary 

agreement with the U.S2 To combat that type of misuse of foreign accounts, FATCA created 

transparency measures that parallel the transparency measures that have long applied to U.S. taxpayers 

with domestic accounts. 

Every year, your employer, your bank, the Social Security Administration, and anyone holding or 

investing your savings sends you and the IRS information about your accounts. This long-standing U.S. 

enforcement process combines patriotism and accountability to create a culture of tax compliance. This 

sensible approach has allowed us to pay for national priorities such as defense, education, and 

infrastructure. It is a necessary practice that ensures everyone is playing by the rules. 

1 For a full list of FACT members, see: https://thefactcoalition.org/about/coalition-members-and-supporters/ 2 "UBS Enters into Deferred Prosecution Agreement". U.S. Department of Justice. February 18, 2009 (accessible at 

https://www.justice.gov/opa/pr/ubs-enters-deferred-prosecution-agreement). 

1225 Eye St. NW, Suite 600 I Washington, DC 120005 I USA 

+1 (202) 827-6401 1 @FACTCoalition I www.thefactcoalition.org 
87 


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Page 2 of3 

According to the IRS, tax compliance in the U.S. is upwards of 80%.3 Many experts attribute that high 

rate, in part, to third party reporting requirements that ensure information is shared about taxpayer 

assets and income.• In contrast, the lack of tax compliance is often cited as one ofthe leading causes of 

financial woes in economically struggling nations. We are, as a country, engaged in a robust debate 

around tax rates, exemptions and structures, but few would argue that a goal of tax reform should be to 

make it easier to illegally evade taxes. And yet, repealing FATCA would do just that. 

FATCA does not impose any new tax on any individual, here or abroad. Put simply, with or without 

FATCA, U.S. taxpayers with money in foreign banks would still owe taxes- and many were required to 

disclose their accounts long before FATCA was adopted.' The only difference would be that, if FATCA 

were repealed, foreign accountholders would be at far less risk of being caught. 

FATCA disclosures apply only to wealthier individuals. Additional individual reporting requirements apply 

only to foreign accounts holding more than $50,000 for individuals and $100,000 for joint-filing U.S. 

residents holding offshore accounts. For those living abroad, the thresholds are more than $200,000 for 

individuals and $400,000 for couples.• For the foreign banks, the reporting requirements are for 

accounts with more than $50,000. 

FATCA also levels the playing field between U.S. and foreign financial institutions. For years, U.S. 

financial institutions complied with legal requirements to report account information for U.S. taxpayers 

to the IRS, while foreign financial institutions did not. law-abiding U.S. banks were forced to compete 

against foreign banks that allowed wealthy U.S. clients to open foreign accounts without disclosing them 

to the IRS. FATCA ended that unfair competition by imposing a meaningful penalty on foreign financial 

institutions that failed to disclose their U.S. client accounts. Repealing FATCA would reinstate not only 

the foreign bank secrecy that disadvantaged U.S. banks, but also the secrecy incentives that encouraged 

wealthy U.S. individuals to move their money and assets offshore. 

Opponents of FATCA have sometimes raised concerns regarding the costs of FATCA compliance. In fact, 

those costs are borne by foreign banks and put them on par with U.S. banks that already bear the same 

reporting responsibilities and costs. In a letter to Congressional leadership, groups opposed to FATCA 

wrote that "the global economy would come to a grinding halt" if FATCA-style reporting were adopted 

more widely.' However, FATCA-style standards are already being put in place by 100 other countries 

3 "The Tax Gap: Tax Gap Estimates for Tax Years 2008-2010" .Internal Revenue Service. April 4, 2017 (accessible at 

https://www.irs.gov/uac/the-tax-gap). 

4 Slemrod, Joel. "Tax Compliance and Enforcement: New Research and Its Policy Implications (Working Draft)''. 

University of Michigan. January 16, 2016 (accessible at 

http://webuser.bus.umich.edu/jslemrod/Tax_Compliance_New_Research_012016.pdf). 

'"Report of Foreign Bank and Financial Accounts (FBAR)". lnternol Revenue Service. February 27, 2017 (accessible 

at https:/ fwww.irs.gov/businessesjsmall-businesses-self-employed/report-of-foreign-bank-and-financialaccounts-fbar) . 

6 "Summary of FATCA Reporting for U.S. Taxpayers".lntemo/ Revenue Service. November 7, 2016 (accessible at 

https:/ /www .irs.gov /businesses/corporations/su mmary-of-fatca-reporting-for-u-s-taxpayers ). 

7 "Coalition of 23 Groups to Congress: Include FATCA Repeal in Tax Reform". Center for Freedom ond Prosperity. 

March 21, 2017 (accessible at http:Ufreedomandprosperity.org/files/2017-FATCA repeal coalition ltr.pdf). 

FACTCOALITION 

1225 Eye St. NW, Suite 600 I Washington, DC 1200051 USA 

+1 (202) 827-6401 1 @FACTCoalition 1 www.thefactcoalition.org 
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Page 3 of3 

that, just like the United States, seek to crack down on tax evasion through foreign bank accounts.• The 

new laws are kicking in this year with those countries unconcerned about any ill effect on the global 

economy. FATCA-style information exchange is quickly becoming the global norm. 

The initial costs to establish new systems to automate FATCA reporting requirements have already been 

spent and cannot be avoided since, even if FATCA were repealed, foreign banks would still have to 

comply with the information exchange laws in other countries. The cost savings argument was never 

about U.S. banks and, now, is less relevant for foreign banks. 

Tax evasion is a serious crime, and the victims are honest taxpayers. Economists estimate that offshore 

tax evasion by wealthy U.S. individuals robs the U.S. Treasury of between $3S billion• and $70 billion10 

each year. As we engage in a broader tax reform debate, we should be focused on closing loopholes and 

tightening anti-evasion measures, not loosening them. 

H.R. 20S4/S. 869 takes us in the wrong direction, and we strongly urge you to oppose the bill. We 

appreciate your consideration of our views. For additional information, please feel free to contact Clark 

Gascoigne at cgascoigne@thefactcoalition.org. 

Sincerely, 

Gary Kalman 

Executive Director 

The FACT Coalition 

(~ .~~-.~ . Clark Gascolgn: . ~ •. r 

Deputy Director 

The FACT Coalition 

8 "AEOI: STATUS OF COMMITMENTS (100 jurisdictions have committed)". Organisation far Economic Co-operation 

and Development. April10, 2017 (accessible at https:/ /www.oecd.org/tax/transparency/AEOI-commitments.pdf). 9 Zucman, Gabriel. "The Hidden Wealth of Nations: The Scourge of Tax Havens". Chicago, IL: University of Chicago 

Press, September 22, 2015 (accessible at 

http:/ /www.press.uchicago.edu/ucp/books/book/ch icago/H/bo20159822.html). 10 Guttentag, Joseph, and Reuven Avi-Yonah. "Closing the International Tax Gap." In Bridging the Tax Gap: 

Addressing the Crisis in Federal Tax Administration, edited by M. B. Sawicky, 99-110. Washington, D.C.: Economic 

Policy Institute, 2006. 

FACTCOALITION 

1225 Eye St. NW, Suite 600 I Washington, DC I 200051 USA 

+1 (202) 827-6401 1 @FACTCoalition 1 www.thefactcoalition.org 
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(I FACTCOALITION 

Coalition Members and Supporters 

Organizational Members 

National/International 

ActionAid USA 

Americans for Democratic Action 

American Federation of labor- Congress of Industrial 

Organizations (AFL~CIO) 

American Federation of State, County and Municipal Employees 

(AFSCME) 

American Sustainable Business Council 

Campaign for America's Future 

Center for Economic and Social Rights (CESR) 

Citizens for Responsibility and Ethics in Washington {CREW) 

Citizens for Tax Justice 

Earth Rights International 

EG Justice 

Enough Project 

Fair Share 

Fair Share Education Fund 

Financial Transparency Coalition 

Friends of the Earth U.S. 

Global Financial Integrity 

Global Witness 

Government Accountability Project 

Institute for Polley Studies- Program on Inequality and the 

Common Good 

Institute on Taxation and Economic Policy 

JPIC Ministry- Missionary Oblates 

Jubilee USA Network 

Leadership Conference of Women Religious 

The Main Street Alliance 

National Priorities Project 

New Rules for Global Finance 

OpenTheGovernment.org 

Oxfam America 

Pacific Environment 

Polaris 

Project On Government Oversight (POGO) 

Public Citizen 

Sargent Shriver National Center on Poverty Law 

Service Employees international Union (SEIU) 

Small Business Majority 

Tax Justice Network USA 

U.S. Public Interest Research Group (PIRG) 

U.S. Public Interest Research Group {P!RG) Education Fund 

U.S. UNCUT 

State/Local 

Arizona 

Arizona Fair Share 

Arizona Public Interest Research Group 

California 

California Falr Share 

California/Venezuela Region- Religious Sisters of Charity 

California Public Interest Research Group 

Jubilee Bay Area 

Main Street A!!iance of California 

Colorado 

Colorado Fair Share 

Colorado Main Street Alliance 

Colorado Public Interest Research Group 

Connecticut 

Connecticut Fair Share 

Connecticut Public Interest Research Group 

Delaware 

Delaware Americans for Democratic Action {Delaware ADA) 

Florida 

Florida Fair Share 

Florida Public Interest Research Group 

Main Street Alliance of Florida 

Georgia 

Georgia Fair Share 

Georgia Public Interest Research Group 

Idaho 

Idaho Main Street Alliance 

Illinois 

Citizen Action /Illinois Illinois Fair Share 

Illinois Public Interest Research Group 

Iowa 

Iowa Citizen Action Network 

Iowa Citizens for Community Improvement 

1225 Eye St. NW, Suite 600 I Washington, DC j20005j USA 

+1 (202) 827-6401 1 @FACTCoalition 1 www.thefactcoalition.org 
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Iowa Fair Share 

Iowa Farmers Union 

Iowa Main Street Alliance 

Move to Amend -Iowa Chapter 

Kentucky 

Kentucky Fair Share 

Minnesota 

Main Street Alliance of Minnesota 

Minnesota Fair Share 

Maine 

Maine Small Business Coalition 

Maryland 

Maryland Fair Share 

Maryland Public Interest Research Group 

Massachusetts 

Massachusetts Fair Share 

Massachusetts Public Interest Research Group 

Michigan 

Michigan Fair Share 

Michigan Public Interest Research Group 

Missouri 

Missouri Public Interest Research Group 

Montana 

Montana Fair Share 

Montana Small Business Alliance 

Nevada 

Nevada Fair Share 

New Hampshire 

New Hampshire Fair Share 

New Hampshire Public Interest Research Group 

New Jersey 

New Jersey Main Street Alliance 

New Jersey Public Interest Research Group 

New Mexico 

New Mexico Public Interest Research Group 

North Carolina 

Fair Share in North Carolina 

North Carolina Public Interest Research Group 

North Dakota 

North Dakota Fair Share 

Ohio 

Ohio Fair Share 

Ohio Public Interest Research Group 

Main Street Alliance of Ohio 

Oregon 

Jubilee Oregon 

Main Street Alliance of Oregon 

Oregon Fair Share 

Oregon State Public Interest Research Group 

Pennsylvania 

Pennsylvania Fair Share 

Pennsylvania Public Interest Research Group 

SEIU Local 668, Pittsburgh, PA 

UFCW Local 23, Western PA 

South Carolina 

South Carolina Small Business Chamber of Commerce 

Texas 

Texas Fair Share 

Texas Public Interest Research Group 

Vermont 

Main Street Alliance of Vermont 

Virginia 

Virginia Fair Share 

Main Street Alliance of Virginia 

Washington (State) 

Main Street Alliance of Washington 

Washington Public Interest Research Group 

Wisconsin 

Wisconsin Fair Share 

Wisconsin Public Interest Research Group 

Individual Supporters 

Eileen Appelbaum, Senior Economist, Center for Economic and 

Policy Research 

Dean Baker, Co*Director, Center for Economic and Policy 

Research 

Elise J. Bean, former Staff Director and Chief Counsel of the U.S. 

Senate Permanent Subcommittee on Investigations 

Wl!liam K. Black, Assoc. Professor, Economics & Law, University 

of Missouri- Kansas City 

Charles Davidson, Executive Director, Kleptocracy Initiative, 

Hudson Institute 

John Schmitt, Senior Economist, Center for Economic and Policy 

Research 

FACTCOALITION 

1225 Eye St. NW, Suite 600 I Washington, DC 1200051 USA +1 (202) 827-6401 1 @FACTCoalition I www.thefactcoalifion.org 
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Ql:nngn>1l6 nf tlfc Jtnitcb l)tatcs 

J:lluslJingtnn, flO! 20515 

September 15,2015 

The Honorable Jacob Lew 

Secretary of the Treasury 

U.S. Department of the Treasury 

1500 Pennsylvania Avenue, NW 

Washington, DC 20220 

Dear Secretary Lew and Commissioner Koskinen, 

The Honorable John Koskinen 

Commissioner 

Internal Revenue Service 

1111 Constitution Avenue, NW 

Washington, DC 20224 

On behalf of the roughly eight million American citizens whn live abroad, we write to 

express our concerns regarding several tax reporting requirements imposed on U.S. 

citizens living abroad that have created the unintended consequence of limiting overseas 

Americans' access to legitimate banking services. We respectfully request that the 

Treasury Department adopt a recent Taxpayer Advoeate Service recommendation that 

Foreign Account Tax Compliance Act (F ATCA) reporting exclude financial accounts 

maintained by a financial institution in the country of which the U.S. person is a bona 

fide resident. 

When FATCA was passed in 2010, the intent was to combat and prevent overseas tax 

havens. Unfortunately, in its implementation, FATCA has had detrimental consequences 

on law-abiding Americans living outside the U.S. 

As you know, FATCA requires Foreign Financial Institutions (FFis) to report accounts of 

U.S. citizens directly to the United States or to the govermncot of the country where the 

bank is located for further transmission to the U.S. through [ntergovermncotal 

Agreements ([GAs), or be subject to a 30"/o withholding on their U.S. investments. In 

many cases, these accounts are no different than savings or checking accounts in local 

bank branches across the U.S. People rely on their convenience and depend on these 

accounting services to simplity basic financial responsibilities such as paying living 

expenses, saving for higher education or planning for retirement. 

Some Foreign Financial Institutions have simply closed accounts or refused to open new 

ones for U.S. citizens in order to minimize their exposure to FA TCA reporting 

requiretnents, withholding fees and potential penalties. This practice leaves law-abiding 

American citizens without access to everyday fmancial tools such as mortgages, bank 

accounts, insurance policies and pension funds •• all of which are critical services 

regardless of place of residence. 

The IRS Taxpayer Advoeate Service (TAS) has recognized this issue and has expressed 

concerns about the redundancy ofF A TCA reporting requiretnents. In order to address 

this, the TAS issued a recommendation on April 13, 2015 that FATCA reporting exclude 
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financial accounts maintained by a financial institution in the country in which the U.S. 

citizen is a bona fide resident. We support this recommendation and urge its 

implementation. 

While we recognize that Treasury is tasked with the difficult job of making sure 

American money around the world remains compliant with the U.S. tax code, the current 

FA TCA reporting procedures subject ordinary Americans to the same scrutiny as 

criminal tax evaders and money launderers. Revision of these reporting policies is 

necessary to ensure that Americans remain competitive in international business and 

continue to contribute to economies here in the U.S. and around the world. Adopting the 

T AS's recommendation is an efficient way to avert a banking lockout while maintaining 

the integrity and intention ofFATCA. 

Thank you again for your attention to this request. 

Sincerely, 

Wa r . Jones 

Member f Congress 

~~ ~ 

~~ SamFarr{_Q 

Member of Congress 

, 

~~ Mtck Mulvaney 

Member of Congress 

~r:i~~t,,....., Member of Congress 
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g~~ David Price 

Member of Congress 

/ Karen Bass 

Member of Congress 

~ lf/t..k 

Eleanor Holmes Norton 

Member of Congress 

CC: Nina E. Olson, National Taxpayer Advocate 

Member of Congress 

Ted Lieu 

Member of Congress 

Member of Congress 
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Leg1sl.atwe 

Re:cumroendatv:n1s 

LR FOREIGN ACCOUNT REPORTING: Eliminate Duplicative Reporting 

#5 of Certain Foreign Financial Assets and Adopt a Same-Country 

Exception for Reporting Financial Assets Held In the Country In 

Which a U.S. Taxpayer Is a Bona Fide Resident 

1® The Right to Priliacy 

w The Right to a Fair tmd just Tttx ,~ystem 

and costs as a 

Financial Assets, the financial Crimes Enforcement Network (FinCEN) 

Form 114, Report ofForeign Bar~k and ftnancia!Accounts (FBAR), filing reqnirements.3 These burdens 

indude additional tax preparation fees and the unwillingness of some foreign financial in:;titutions (FFis) 

to do business with U.S. expatria(es because of significant costs and risks associated with 

preparing and maintaining a business for ongoing 

reponing of assers on the Form 8938 if the asset is reponed or reflected on certain other 

timely-filed international information returns, and provided an exception from reporting financial accounts held in U.S. territories for bona fide residents of such territories." However, it repeatedly declined 

to adopt the National Taxpayer Advocate's re..:ommendations' to forego duplicative FATCA reponing 

See, e.g .. IRC §§ 6038D(h)(1); 147l(d){1)(C)(li}. 

§ 

Taxpayer Advocate Service - 2015 Annuat Report to Congress - Volume One 
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Legisfatwe 

Recommen:tkltmns 

where assets have already been reported on an FBAR, 

financial accounts hdd in the country in which a U.S. taxpayer is a 

other stakeholders. 8 

Madeleine and Jacque 

cidental" U.S. citizen. 

has never worked in the United States. 

saved about 800,000 Euros for retirement that are invested in mutual funds and certificates of deposit. In 

United States again, Madeleine learned of the requirement to report worldwide 

reporting requirements associated with certain assets and 

accounts, and realized met the When she returned to 

France, Madeleine attempted to 

the potential FEAR and that could negatively affect her retirement savings. As a result, 

she had to pay for tax preparation, plus an additional fee to discuss any FBAR and fAfCA reponing 

questions with her advisor. w In addition, upon !earning that Madeleine is a dual U.S.-French citizen, the 

small local hank where the couple had held joint accounts fOr over a decade suggested that the Legrands 

either close the accounts or remove Madeleine from them, so that the bank can avoid costs and risks associated with reponing and withholding obligations under FAT(:A. 

To reduce the burdens ofFAfCA compliance, the National 'Taxpayer Advocate recommends that 

Congress: 

Amend !RC § 6038Do 

10 exclude from the specified foreign financial assets required to be rt>ported on the Form 8938 

financial accounts maintained by a financial institution organized under the laws of the country 

of which the U.S. person is a bonajide resident. 

the definition of financial 

10 TAS has been informed that this fee could be substant;al. particularly for persons overseas. fAS meeting with representatives 

of the Arnericon Citizet's Abroad (ACA) (Sept. 4, 2014). 

t.eglslatlve Recontnlflmdatlon$ - FOREIGN ACCOUNT REPORTING 
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Legislative 

RecommcndatHms 

returns and imposes severe civil penaJtics 

for failing to file, are not based on the amount of the underpayment of tax. !l Among the 

most publicized are the penahie:\ for failure to disclose foreign financial accounts (FBAR) 

financial assers (FATCA). The Currency and foreign Transaction Reporting Act of 1970 

known as The Bank Secrecy Act) requires U.S. citizens and residents to report tO reign accounts with an 

aggregate value of$10,000 or more at any time during the calendar year on the FBAR.ll FATCA requires 

U.S. citizt>ns, resident aliens, and certain non-resident aliens to file a Form 8938 with their individual 

returns reponing foreign assets exceeding specified thresholds. I.' 

A taxpayer may he subject to a civil $10,000 per violation for failing to file an 

FBAR even if the failure was not "willful. 1f the government establishes the failure was willful, the 

is the greater of$100,000 or 50 percent of the balance of the undisclosed account 

The taxpayer may also face criminal penalties of up to $500,000 and For 

taxable years beginning after March 18, 2010. pursuant to FATCA, an (and 

nf up to $'50,000 for continued failure after IRS notification) is impost._--d_ on U.S. taxpayers holding finan~ 

cial assets outside the United States who fail to report those assets on Form 8938. 17 Underpayments of 

tax attributahle to non-disclosed foreign financial assets are sub,Ject to an additional substantial understatement penalty of 40 percent. 18 Additionally, the statute of limitations is extended to six years if there is 

an omission of gross income in excess of $5,000 and the omitted gross income is attributable to a foreign 

financial asset. l? 

IRC § 1471 {d)(l) defines the term "United States account" and provides for the elimination of duplicative reporting tequirements.10 The term "United Stares account" excludes financial accounts 

in FFls if the holder of such account is otherwise subject to information reporting requirements 

under !RC §§ 6038, 6038A, 60388, 6038C, 6039F, 6046, 6046A. 

5321(a)(5). 

12 See 31 C.ER. § 1010.306(c}; Electronic Filing Requirements for Report of Foreign Bank and Financial Accounts, FinCEN Form 

114 (2014). 

§ 

IRC § 60380. 

18 See !RC § 6662(b)(7). 

19 IRC § 6501{e). 

20 IRC § 1471(d)(11(C). 

Taxpayer Advocate Service - 20:1.5 Annual Report to Congress - Volume One 355 
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Leg1slahve 

Recommendatmrts 

which the lRS determines would make the reporting with respect to these accounts dup!icadve. 21 

IRC § I47l(d)(l)(C)(ii) states: 

(C) Elimination of duplicative reporting requirements,--Such term shall not include any financial account in a foreign financial institution if-

(ii) the holder of such accoum is otherwise subject to information reporting requirements 

which the Secretary determines would make the reporting required by this section with 

respect to United States accounts duplicative (emphasis added). 

Treasury Regulation§ l.1471-5{b)(2) provides specific exceptions to the definition of financial accounts 

subject to reponing by FFis. Currently, the regulation docs nm provide an exception f-Or financial accounts maintained by a financial institution organized under the laws of the country of which the U.S. 

person is a bona fide resident. 

Similarly, IRC § 60380 specifically authorizes the IRS to issue regulations or other guidance to provide 

appropriate exceptions from FATCA reponing when such reponing would be duplicative of other disclosures. IRC § 6038D(h)(l) provides thar 

The Secretary shall prescribe such 

ate to carry out the purposes of this section, including regulations 

appropriate exceptions from the application of this sec6on in the case of-

(1) classes of assets identified by the Secretary, including any assets with respect to which 

the Secretary determines that disclosure under this section would be duplicative of other 

disclosures ... (emphasis added). 

Treasury Regulations under IRC § 6038D eliminate duplicative reporting of assets on the Form 8938 

if the asset is reponed or reflected on certain other timely-filed international information returns (e,g., 

Forms 3'520, 3520A, '5471, 862 L 8865, or 8891) provided the Form 8938 indicates the filing of the fOrm 

on which the asset is reported. 21 However, FinCEN Report 114 (FBAR) is not included on the list of 

those information returns. 

Similarly, Treasury Regulation§ 1.6038D~7(c)(1) provides that a bona fide resident of a U.S. possession 

who is required to file Form 8938 is not required to report financial accounts maintained by a financial 

instinnion organized under the laws of the U.S. possession of which the specified individual is 

rt'sidem. The regulation currently does not have a similar exception for US individuals who are 

residents of tOreign countries. 

21 IRC § 1471(d)(1)(C)(ii). 

22 See Trcas. Reg. § 1.6038D-7{a). 

356 Legislative Recommendations - FOREIGN ACCOUNT REPORTING 
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24 

25 

26 

28 

Lt;fg;~sfattve 

Rec:om:rn:ertd.ations 

For several years, the National Taxpayer Advocate and other stakeholders have expressed concerns ahout 

the overlap ofFBAR and the Form 8938, which must be fikll with annual federal income tax remrns. 23 

The FinCEN Report 114 and tht· Form 8938 are significantly duplicative, incn.'asing confusion and 

adding to the compliance burden for taxpayers. ~ Reponing and withholding obligations have resulted 

in aJditional cosrs and risks of subsramial penalties fOr and might have 

prompted some FFis to dose accounts of U.S, 

not fully 

to FATCA apparently 

is based on the unsubstantiated assumption that and that a widespread, 

is necessary. Such the case even though the vast majority of 

taxpayers have been, and be, fully compliant. In her 20 l3 reporr, the National 

Taxpayer Advocate observed that based on analysis of the data then available " ... to this point, the IRS is 

imposing additional reponing burdens and increased potential penalties 

ers that, 

demonstrate tax evaders are not feeling the 'veight of FATCA; instead. 

U.S. likely would be compliant regardless. U.S. taxpayers under the FATCA umbrella 

who Form 8938 arc generally as compbm as the overall U.S. taxpayer population as shown on 

Figure2.'5.l.c~ 

8938 and FBAR Requirements, avajjo.ble at 1"1ttp:j jwv.w.irs.govjBusinessesjComparison·of-Form· 

89313-ami~FBAR~Req"icc,ments~ 

Taxpayer Advocate Servlce - 2015 Annual Report to Congress - Votume One 357 
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29 

scoring'" 

U.egtslatlva 

RecommEmdatton:s 

Noncompliance Rates for Form 8938 Filers vs. General Population Taxpayers 

Form 8938 taxpayers Genera! population taxpayers 

19 of every 1,000 noncompliant 16 of every 1..000 noncompliant 

Payment noncompliance: IUr"""tHtttttt 

24 of every 1,000 noncompliant 

59 of every 1,000 noncompllant 

The National Taxpayer Advocate previously has observed taxpayers' willingness 

and filing obligarion.~ is driven more hy considerations of personal integrity and 

fairness than by economic deterrence and enforcement measures,30 

As of December 2015, apr•roximarcly 

while about 28::L000 bad filed fOrTY 2014:11 

matdy 38 percent also filed FBAR forms:'!!. 

the IRS from a foreign address based 

had filed Forms 8938 for tax year (TY) 2013, 

30 National Taxpayer Advocate 2012 Annual Report to Cnngress vol. 

31 TAS Research, COW, !RFT !RTF F1040 tables, data drawn Nov. 16, 2015. These numbers may change as more 

TY 2013 and 2014 with the IRS. 

32 TAS Research, COW, IRFT Entity and !RMFJ90_22 tables. data drawn Nov. 16. 

33 IRS LB&l Division, Planning. Analysis. lnventory, and Research (PAIR) analysis, COW, lMF~Entity table, data drawn Dec. 18, 

358 Legislative Recommendations - fOREIGN ACCOUNT REPORTING 
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FIGURE 2.5.234 

Taxpayers Filing Forms 8938 in Tax Year 2013 

Ill Form8938RetumsSutlmittWto 

IRSFromaForeignMdrllSS 

As noted above, the IRS has regulatory authority under FATCA to eliminate duplicative reporting on 

FATCA Form 8938 and FBAR. However, it repeatedly has declined to do so, citing the Joint Committee 

on Taxation QCT) Technical Explanation accompanying the HIRE Act.35 The Technical Explanation 

states that "[n]othing in this provision (section 511 of the HIRE Act enacting new section 6038D1 is 

intended as a substitute for compliance with the FBAR reponing requirements, which are unchanged 

by this provision."36 At the same time, as described above, the statutory language (as opposed to a JCT 

explanation) specifically authorizes elimination of duplicative reporting requirementsY 

While the IRS may fed constrained in its regulatory authority to change the FBAR filing requiremems, it 

is specifically granted the freedom to adjust FATCA filing requirements. The National Taxpayer Advocate 

is therefore baffied by the IRS's inexplicable unwillingness to address this unnecessary duplication of 

reporting requiremems. It appears that congressional action specifically requiring the IRS to eliminate duplicative reporting under FATCA and FBAR is necessary to alleviate significant burdens being experienced 

by affected taxpayers and to protect the taxpayers' rights to privacy and to a fair and just tax rystem. 

Same-Country Exception 

As stated above, U.S. taxpayers residing abroad are subject to overlapping reporting requirements under 

FBARand FATCA, which increase preparation expenses and the chance of error. 

Additionally, organizations representing U.S. taxpayers abroad have voiced concerns about unintended 

consequences of new FATCA rules for FFis that make it harder for U.S. taxpayers living abroad to open 

34 TAS Research, CDW, !RFT Entity and IRMF_F90_22 tables, data drawn Nov. 16,2015. IRS LB&! Division, PAIR analysis, COW, 

IMF _Entity table. data drawn Dec. 18, 2015. These numbers will change as more TY 2013 returns are filed with the IRS. 

35 Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310, the "Hiring Incentives To Restore 

Employment Act,~ Under Consideration by the Senate, Staff of the Joint Committee on Taxation, JCX·4·10 (Feb. 23, 2010). 

See also Reporting of Specified Foreign Financial Assets, Preamble to Final Regulations under IRC § 60380, Summary of 

Comments and Explanation of Revisions, sec. V (G), 79 FR 73817·01 (Dec. 12, 2014); Email from the Special Counsel to 

the Deputy Chief Counsel (Technical) to TAS Supervisory Attorney Advisor, Recommendations for Published Guidance under 

Sections 60380 and 1471 (Oct. 13, 2015): National Taxpayer Advocate 2015 Objectives Report to Congress 93-94, 99. 

36 Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310, the "Hiring Incentives To Restore 

Employment Act/ Under Consideration by the Senate, Staff of the Joint Committee on Taxation, JCX·4-10 (Feb. 23, 2010) at 60. 

37 IRC §§ 1471(d)(1)(C)(H) and 60380(h)(1). 

Taxpayer Advocate Servk;e - 2018 Annual Report to Congress - Volume One 359 
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Legjs:hihve 

ReCQmmendations 

and maintain legitimate bank accounts overseas, '

8 Some FFls, such <!.S DeutcsheBank, HSBC, and TNG, 

have reportedly closed out foreign accounts of US citiz-::ns iu response to FATCA to avoid significant 

risks associated with preparing for and ongoing FATCA compliDuring recent meetings with TAS. organ!?...:ations of U.S. citizens abroad reiterated their concerns about 

in thtir countrit•s of re~idency. 41 The Nacional Taxpayer Advocate 

multiple reports from taxpayers, taxpayer representatives, and tax professionals 

residing in a range of countries including Austria, Hungary, and Sweden and from some foreign tax of~ 

ficials 1hemsdves:'< Because i-'ATCA creares burdens for FFls, some foreign banks arc unwilling to open 

accounts for U.S. citizens abroad, especially tOr those individuals residing in small communities where the 

global banks do not have branches. 

Similarly, substantial day-to-day comp!iance burdens and costs ofirnplcmcnring FATCA arc placed on financial institution.:;. n For example, unless an FFI agrees information regarding 

accounts of US taxpayers, a broad range of U.S.-source payments to FFI are subject to a 30 percent 

withholding tax. 44 FATCA further charges withholding agents with the responsibility of determining 

whether they are obliged to undertake FATCA withholding and implementing that \Vithholding when 

is requircd. 4

'' 

As a recommendarion to help minimize the burden ofFATCA compliance for bmh individual US 

taxpayers residing abroad and FFis. Advocate proposed that the IRS 

hy U.S. citizens in a foreign 

for tax avoidance, These bona fide residents have a 

Thus, it is more logical and in 

39 See Natwnal Taxpayer Advocate 2013 Annual Report to Congress 

40 /d. 

41 representatives. of the Association of Americans and the Federation of American 

20:14 and Feb. TAS meetir.g with Democrats Abroad Task Force on (Mar. 

43 

44 

home country. 

45 fRC §§ 1471-1474; Notice 2013-43, 2013-311.R.B. 

360 

Recommendations for Published Guidance under !RC 

Natioflel Taxpayer Advocate Seeks End to Duplicative 

Club of Hungary, Budapest, Hungary, and 

requirements those accounts 

that an FF! can 

between the and the 

24. 2014). 

Legislative Reeommenda!kmo - FOREIGN ACCOUNT REPORTING 
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t;e:g,sfatrve 

{£ee~~hdatltl0$' 

ing with the spirit ofFATCA to require inform,nion reponing on financial assets and accounts opened in 

a country other than one's country of residence. 

Thl' IRS could have significantly alleviated reporting hurdens for U.S. pt'rmns who are hona fid-r residents 

in fOreign counuies by revising regulations under IRC §§ 6038D and 1471 to eHminate rhe requirement 

to rcporr specified fixeign financial ass,~ts on the Form 8938 if such pt>rsons h,w<: reponed the a~sets on 

rhc FBAR. The lRS could also facilitate these taxpayers' legitimate need for local banking services in their 

<:ountrics of residence hy ('Xduding financial accounts maintained by a finam::ial institution organized 

under the laws of the country ofwhi,_·h the U.S. persons are bonajitk residents from FATCA reporting.4' '10 this point. the IRS has not been ·willing ro pursue these recomm~ndations by the 

National Taxpayer Advocate anJ supported by otht·r s1akeholders.~8 ln response to National Taxpayer 

Advo(.ate's request that this proposal be indud-t·d in dw tJ.S. Department of rhc Tre,muy Office onax Policy and the IRS Priority Guidance Plan, the IRS Office of Chief Counsel maintained: 

Under longstanding US tax policy, U.S. citizens are taxed on their \Yorldwide income irrespective of v,rhere they Section 6038D was enacted to provide the IRS with 

hy all U.S. ta..'Xpayers owning Foreign financial assets, including 

States. Thns, it was decided that the 

section 1471 and 60380 should not providl' a broad carve out (from 

rules or the taxpayer :self·reporting t('Specrivdy-) for U.S. citizens 

proposed in [TAS Recommendations under Sections G038D and l 1i71]. 

However, please note that the :section 603SD regulations provide very substantial reporting relief 

for most U.S. who are borMjide residents of another country. The regulations do so hy 

financial asset reporting threshold~ for U.S. dtizens residing abroad 

those applicable to other US As 

a result, on!y those t,'.S. taxpayt.'rs r~:siding abroad who have wry substantial foreign 

,tsst:t holdings are reyuired file a h11·m R938."1 

For "accidental" Americans who have lived abroad For most of their lives, as described in the example 

.above, the thresholds may not achievt~ the intended result as their savings may exceed the 

higher threshoids."0 This is particularly true where the acwunts subjt'ct to 

savings. a result, these the COS( of tax prep-aration 

under FBAR and FATCA. from reporting under the higher thresholds wi!l 

Taxpayer Advocate Service - 2015 Annual Report to Congress Volume Omt 
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Leg1slat1ve 

Recommendations 

the risk ofiRS audits due to potentia[ FFI errors because FFis are still required to report their accounts to 

the IRS on Forms 8966, FATCA Report.' 1 

Both groups will face the increased risk of errors as rhe IRS has shut itself off from a two-way dialogue 

with taxpayers abroad by closing all IRS tax attache pom and eliminating the Electronic Tax Law 

Assistance Program, which was the only free method for taxpayers abroad to ask and receive answers to 

their specific tax law questions without paying roll phone or fax charges. 5

2 Similarly, both groups will 

continue experiencing diHiculties with opening or maintaining bank accounrs unless the definition of 

financial accounts subject to reporting by FFls under IRC § 1471(d) excludes accounts maintained by 

a financial institution organized under the laws of the country of which the U.S. person is a bona fide 

resident. 

Treasury Regulations under IRC § 6038D eliminate duplicative reporting of assets on the Form 8938 

if the asset is reported or reflected on certain other timely-filed international information returns (e.g., 

Forms 3S20, 3S20A, 5471, 8621, 8865, or 8891) provided the Form 8938 indicates the filing of the form 

on which the asset is reported. 5

3 The proposed legislation will achieve similar results by eliminating duplicative information reporting under FBAR. The proposed legislative change will not jeopardize the IRS's 

access to foreign financial account information reported on FBARs. The IRS has access to the FinCEN 

Query System, which allows IRS employees direct electronic access to FBAR data. 

This legislative proposal would also exclude from FATCA coverage foreign financial assets held in the 

country in which a U.S. taxpayer is a bona fide resident. It would mitigate concerns about rhe collateral 

consequences of FATCA raised by U.S. non-residents, reduce reponing burdens faced by FFJs, and allow 

the IRS to focus it.~ enforcement efforts on identifying and addressing willful attempts at tax evasion 

through foreign accounts. 5'

1 From a technical perspective this exception is substantially similar to the 

regulatory exception provided to bonafide residents of U.S. territories.s' 

Information reporting can be very useful and can influence taxpayer behavior and future compliance, 

provided it is narrowly tailored to accomplish a reasonable result. The proposed legislative recommendations enhance taxpayer rights to privacy and to a fair and just tax system without inhibiting the IRS's ability 

to obtain information about financial accounts maintained by FFis outside the US person's country of 

bona fide residency. 

51 Reaching the IRS to address inadvertent errors would be 

In FY 2013, the average walt time on the 

in FY 90 percent increase. Furthermore, the 

was only 55 percent See Most Serious Problem: 

52 /d. 

53 See Treas. Reg.§ 1.60380.7(a). 

54 A workable 

accountho!ders to the extent that this reliance 

55 See Treas. Reg. § 1.6038D-7(c). 

362 Legl:slatfve Recommendations - FOREIGN ACCOUNT REPORTING 
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)AMES BOPP. JR. 

jboppjr@.aol.com 

COURTNEY TURNER MILBANK 

cmilbank:g::bopplavY.com 

THE BOPP LAW FIRM, PC 

ATTORNEYS AT LAW 

THE NATIONAL BUILDING 

1 South Six1h Street 

TERRE HAUTE, INDIANA 47807-3510 

Telephone 812/232-2434 Facsimile 812/235-3685 

www.bopplaw.com 

May 15,2017 

Indianapolis Office: 

6470 Mayfield Lane 

Zionsville, IN 46077 

Telephone/Facsimile 

(317) 873-3061 

Chainnan Mark Meadows 

Subcommittee on Government Operations 

2157 Rayburn House Office Building 

Washington, DC 20515-6143 

Re: Three Recommendations on How to 

Improve the Legal Framework Set up by the 

Foreign Account Tax Compliance Act 

Dear Chairman Meadows, 

This letter provides three recommendations on how to improve the legal framework set 

up by the Foreign Account Tax Compliance Act ("F ATCA"). I First, we recommend that any 

taxation of overseas Americans comply with established United States constitutional principles 

and international legal nonns. Second. we recommend that the current laws be repealed in their 

entirety and certain proposals rejected. Third, we recommend that Congress enact a 1 099 

requirement on foreign banks, established by treaty, as long as this complies with established 

United States constitutional principles and international legal norms. 

I. Taxation of Overseas Americans Must Comply with Important Established United 

States Constitutional Principles and International Legal Norms. 

A. Overseas Americans Have a Right to Privacy. 

The Fourth Amendment of the United States Constitution provides: 

I The author wishes to ackno\vledge Courtney Turner Milbank, J.D., of The Bopp Law 

Firm, PC. for her research and writing assistance. Additionally, the author wishes to thank 

Anthony Parent, James Gosart. John Richardson, and Keith Redmond for their writing assistance. The author is solely responsible for these recommendations and this letter. 
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Chairman Meadows 

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Page2 

The right of the people to be secure in their persons, houses, papers, and effects, 

against unreasonable searches and seizures, shall not be violated, and no Warrants 

shall issue, but upon probable cause, supported by Oath or affirmation, and 

particularly describing the place to be searched, and the persons or things to be 

seized. 

U.S. CONST. amend. IV. Constitutional protections apply to all U.S. citizens regardless of their 

residence,2 and all the constitutional protections afforded U.S. citizens should be respected, 

whether residing abroad or in the U.S. The right of privacy, as well as other constitutional rights, 

are also encompassed in the IRS's Taxpayer Bill ofRights,3 which is also applicable to all U.S. 

taxpayers. 

Under the Fourth Amendment, financial records held by financial institutions contain 

personal information and must be protected. Los Angeles v. Patel, 135 S.Ct. 2443,2452 (2015). 

So such records may only be subject to search after prior judicial approval or where the targets 

of the search are afforded an opportunity to have the search request reviewed by a neutral 

2 See Reid v. Covert, 354 U.S. I, 5 (1955); see also Williams v. Blount, 314 F. Supp. 

1356, 1363-1364 (D.D.C. 1970). 

3 The Right to Privacy: 

"Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and 

will respect all due process rights, including search and seizure protections and will 

provide, where applicable, a collection due process hearing." 

The Right to Confidentiality: 

"Taxpayers have the right to expect that any infom1ation they provide to the IRS will 

not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the 

right to expect appropriate action will be taken against employees, return preparers, 

and others who wrongfully use or disclose taxpayer return information." 

INTERNAL REVENUE SERVICE, YOUR RIGHTS AS A TAXPAYER (20 14 ), available at 

https://www.irs.gov/pub/irs-pdf/p !.pdf (last visited May 15, 201 7). 
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Chaim1an Meadows 

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Page 3 

decisionmaker before complying. !d. Thus, where an overseas American is suspected of criminal 

activity, a warrant based on probable cause is required before the IRS can look into his or her 

affairs. 

Overseas Americans should be provided the same privacy rights afforded to Americans 

living in the United States. 

B. Equality of Treatment Is Guaranteed by The U.S. Constitution and 

Established International Legal Norms for Overseas Americans and Must Be 

Fully Protected. 

The Fifth Amendment also provides that "No person shall ... be deprived of life, liberty, 

or property, without due process of law .... " U.S. CONST. amend. V. The Due Process Clause of 

the Fifth Amendment includes a guarantee of equal protection equivalent to that expressly 

provided in the Equal Protection Clause of the Fourteenth Amendment. "An equal protection 

claim against the federal government is analyzed under the Due Process Clause of the Fifth 

Amendment." Adarand Constn;ctors, Inc. v. Pcna, 515 U.S. 200, 217 (1995); United States v. 

Ovalle, 136 F .3d 1092, I 095 (6th Cir. 1998). Thus, the federal government may not "deny to any 

person within its jurisdiction the equal protection of the laws," U.S. CONST. amend. XIV,§ 1. 

Overseas Americans must also be afforded these protections. Yet, the financial accounts 

of citizens living abroad are subject to more burdensome and extensive reporting, and by 

extension less privacy, than the local bank accounts of citizens living in the United States. 

Moreover, as a result, many are being denied "local" banks accounts in the country in which they 

reside. 

This cannot be permitted and overseas Americans must be provided due process and 

equal protection of the laws. This entails subjecting them to the same reporting requirements as 
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Chairman Meadows 

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Page4 

Americans living in the United States, thus providing them the same opportunities to open 

"local" bank accounts in the country in which they reside. 

Furthermore, established international legal norms also require equality of treatment 

between U.S. citizens and foreign citizens. Indeed, non-discrimination is a key concept in World 

Trade Organization law and policy. See generally General Agreement on TatTiffs and Trade 

1994. These non-discrimination and equality principles are a part of international economic law 

and legal norms and are applied to U.S. citizens living abroad. Id. So, a U.S. citizen living in 

Switzerland must be treated the same as a Swiss citizen living there. And any banking 

requirements must be applied equally to all, not to a selective few U.S. citizens. Moreover, banks 

should not be able to discriminate based on national origin. Bank accounts should be made 

available and should have the same reporting requirements for all residents in a particular 

jurisdiction. 

C. Overseas Americans Must Be Afforded Transparency in Statistical Data 

Collection and Freedom of Information. 

There have been many claims regarding the purpose and necessity ofFATCA, how much 

it has raised, and why it is still needed. However, reliable statistics about tax evasion by overseas 

Americans and stateside residents through the use of foreign accounts has not been provided to 

the public. 

On the other hand, there is a plethora of data showing the negative effects ofF A TCA, 

FBAR, and the !GAs on overseas Americans4 This includes data about overseas Americans 

4 Democrats Abroad, FATCA: Affecting Everyday Americans Every Day 6 (2014), 

https :/I d3 n 8a8pro 7 vhmx.c loudfront.nct/ democratsa broad/pages/ 4 7 3 4/ attachments/ original/ 144 97 

77271/Democrats_ Abroad_2014_FA TCA_Research_Report.pdf?l449777271 (last visited Apr. 
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Page 5 

being denied bank accounts and promotions, having their existing customer accounts closed, 

and/or being forced to separate their assets from a spouse, to divorce, or to renounce their 

citizenship.' 

So any proposed legislation should include a requirement that the IRS collect reliable 

data and statistics regarding tax evasion by overseas Americans and stateside residents through 

the use of foreign accounts. Moreover, that data should be made available to Congress and the 

public, subject to any constitutional and privacy concerns. 

This data will allow Congress and the public to do a cost-benefit analysis on any 

proposed legislation-ensuring that requirements are in place to curb tax evasion while not 

unnecessarily burdening overseas Americans. 

II. The Current Laws and Proposals Do Not Comply with the Aforementioned 

Principles and Norms and Are Unconstitutional. 

A. FATCA, FBAR and the I GAs Should Be Repealed in Their Entirety. 

The heightened reporting requirements on individuals and foreign banks for foreign bank 

accounts under FATCA, FBAR, and/or the I GAs violate U.S. constitutional protections to the 

extent that they require U.S. citizens living abroad and/or foreign banks to report more detailed 

information about their foreign bank accounts than required ofU.S. citizens with U.S. bank 

accounts and that they require confidential financial information without a warrant. Further, such 

laws violate international legal norms by imposing reporting requirements of US citizens in a 

foreign country that are not imposed on the citizens of that country. 

19, 2017). 
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While the local bank accounts of citizens in the United States are only subject to 

reporting of the amount of interest paid to the accounts via the l 099-INT,6 the local bank 

accounts of citizens living abroad are subject to reporting of a much broader and more intrusive 

set of information. US citizens holding local bank accounts in foreign countries must report, and 

their foreign bank may also report, not only the interest paid to the account,7 but also the amount 

of any income, gain, loss, deduction, or credit recognized on the account,8 whether the account 

was opened or closed during the year,9 the balance of the account, 10 the maximum value of the 

account, 11 and the infom1ation on any joint ownersY Comparable infom1ation is not required to 

be disclosed regarding domestic accounts of U.S. citizens. The result is that U.S. citizens living 

in a foreign country are treated differently than U.S. citizens living in the United States. 

6 While there are a series of other I 099 documents, including the I 099-MISC for 

independent contractor earnings, the I 099-DIV for dividends and other distributions, the I 099-G 

for state income tax refunds and unemployment compensation, the I 099-R for withdraws from 

traditional IRAs, and the I 099-C for debt cancellations; the relevant I 099 here is the l 099-INT. 

This I 099-INT reports interest income from banks where an individual has an account. 

7 26 USC§ 147l(c)(I)(C); 26 C.F.R. §§ l.l47l-4(d)(3)(ii), -4(d)(4)(iv); Modell A IGA 

Reciprocal, Preexisting TIEA or DTC, supra note 12, at art. 2, §2. 

8 26 C.F.R. § 1.6038D-4(a)(8) 

9 Id. § 1.6038D-4(a)(6). 

10 26 USC§§ 147l(c)(l)(C), 6038D(c)(4); 26 CFR §§ l.l471-4(d)(3)(ii), 1.6038D4(a)(5); Model lA IGA Reciprocal, Preexisting TIEA or DTC, supra note 12, at mt. 2, §2; 

Model2IGA, Preexisting TIEA or DTC, supra note 18, at art. 2. 

11 FinCEN, BSA E-Filing System, File the Report of Foreign Bank and Financial 

Accounts (FinCEN Form 114), http://bsaefiling.fincen.treas.gov/NoRegFilePDFindividual 

FBAR.html. 

12Jd. 
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But broader and more intrusive reporting is not the only issue associated with FA TCA, 

FBAR, and the !GAs. Instead, these onerous requirements are leading many banks to reject 

American citizens in their entirety. This leaves overseas Americans without "local" checking and 

savings accounts used for everyday, routine financial activity such as the payment of daily 

personal expenses (e.g., food, clothing, housing, fuel, utilities, etc.) and other recurring expenses 

necessary to support daily life in modern society. 

Thus, with respect to overseas Americans holding local bank accounts, the heightened 

reporting requirements imposed by FATCA, FBAR, and the IGAs violate the basic rights to 

privacy and to equal protection of the laws guaranteed by the Fifth Amendment. Therefore, they 

should be repealed. 

Furthermore, while we have not made a study of this issue, it is apparent that most 

foreign countries do not impose a similar regime of reporting by their own citizens to their 

government as is imposed by FA TCA, FBAR and applicable !GAs on US citizens living there. 

As a result, these laws violate established international legal norms. 

L FATCA 

In addition to the heightened reporting requirements, the penalties imposed by FA TCA 

are also unconstitutional and should be repealed. 

Fines are subject to the Excessive Fines Clause when they are intended to punish, as 

opposed to remediate, the offender. Austin v. United States, 509 U.S. 602, 609-10 (1993). And, 

when such fines are grossly disproportional to the gravity of the offense, they are 

unconstitutional. United States v. Bajakajian, 524 U.S. 321,334 (1998). 
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FATCA imposes a 30% "tax" on payments to foreign financial institutions from U.S. 

sources when these foreign institutions choose not to help the IRS pry into the bank accounts of 

their U.S. customers (the "FFI Penalty"). The 30% "tax" is not a tax at all but rather a penalty 

designed to accomplish indirectly through financial coercion what the U.S. government cannot 

mandate directly through regulation. It is imposed on noncompliant foreign financial institutions 

without regard to whether the institution even has American account holders suspected of tax 

evasion. As a penalty, the 30% "tax" lacks all proportion to the harm posed by an institution's 

noncompliance. The F ATCA FFI Penalty is therefore unconstitutional under the Excessive Fines 

Clause. 

Similarly, FATCA also imposes a 30% "tax" on account holders who exercise their rights 

under the statute not to identify themselves as American citizens to their banks and to refuse to 

waive privacy protections afforded their accounts by foreign law (the "Passthrough Penalty"). 

Like the ·'tax" on noncompliant foreign financial institutions, the "tax" on individual account 

holders is not a "tax" but a mechanism for deterring individuals from maintaining their privacy. 

The Passthrough Penalty ignores a citizen's actual tax liability altogether. It is imposed 

regardless of whether the American account holder owes any taxes or has otherwise evaded any 

U.S. tax obligations. An account holder can dutifully and truthfully file their taxes, identify their 

foreign accounts to the IRS, and file their FA TCA and FBAR reports each year and yet still be 

subjected to a 30% fine on all payments from their bank to their accounts. 13 

13 This is because the Passthrough Penalty is imposed on recalcitrant account holders. 

regardless of tax liability. A person becomes a recalcitrant account holder if they fail to provide 

(a) information sufficient to determine whether the account is a United States account to the 

foreign financial institution holding their account, (b) their name, address, or TIN to the foreign 
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The FFI Penalty and the Passthrough Penalty are unconstitutional under the Eighth 

Amendment and should be repealed. 

2. FBAR 

Not only does FBAR subject overseas Americans to additional reporting requirements 

beyond those of Americans living stateside--<:lenying overseas Americans the rights to privacy 

and equal protection of the laws-it also imposes a large penalty for willful violations. 

The original purpose behind the criminal and civil FBAR penalties of the Bank Secrecy 

Act of 1970 was to provide law enforcement with a tool to fight violent, international crimes (i.e. 

drug trafficking, human trafficking, and terrorism). Yet, we have not been able to find one 

instance of an FBAR penalty being imposed upon any one person accused of committing the 

underlying crimes. Rather, the FBAR's mission has creeped into something it was not intended 

to combat: tax compliance. It adds a parallel Title 31 reporting penalty scheme to the already 

existing penalty scheme in place by Title 26. 

The penalty for "willful" failure to file an FBAR for foreign accounts is the greater of 

$100,000 or 50% of the value of the unreported account. This penalty was intended to punish the 

worst criminal offenders but has been applied to average taxpayers. In fact. there are numerous 

instances of the IRS imposing or threatening to impose FBAR penalties when there was no tax 

due. That is, in cases of no tax compliance issue, the IRS still impose penalties of up to 50% of 

account value, because the Bank Secrecy Act authorizes this. This penalty is designed to punish 

financial institution holding the account, or (c) a waiver of a foreign law that would prevent the 

foreign financial institution from reporting the information to the IRS under FA TCA. !d. § 

l47l(d)(6). 
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and is grossly disproportionate to the conduct leading to the penalty, failure to file a form. 

Accordingly. the Willfulness Penalty is unconstitutional under the Excessive Fines Clause. 

FBAR should be repealed in its entirety-thus eliminating the extra reporting 

requirements and excessive penalties. 

3. IGAs 

The !GAs lack any constitutional basis. They have not been submitted to the Senate for 

its advice and consent under Article II, they have not been submitted to the Senate and the House 

for approval as congressional-executive agreements, and they have not been authorized by any 

treaty. They can stand, then, only as sole executive agreements and then only if they fall within 

the President's independent constitutional authority to make international agreements. But the 

power "To lay and collect Taxes'' is expressly and exclusively reserved to Congress under 

Article I of the Constitution. The President lacks any independent authority over such matters. 

For this reason alone, the !GAs are unconstitutional. 

But they are also unconstitutional for another related reason. Sole executive agreements 

cannot contravene legislative enactments. United States v. Guy W. Capps, Inc., 204 F.2d 655, 

659 (4th Cir. 1953), af{'d, 348 U.S. 296, 75 S. Ct. 326, 99 L. Ed. 329 (1955). Yet, the !GAs do 

just that. They override FA TCA by eliminating the requirement that foreign financial institutions 

register with the IRS directly under F ATCA and by nullifying the right of individuals to refuse to 

waive foreign privacy laws that would otherwise prohibit their banks from disclosing their 

account information to the IRS. This second ground thus provides another independent reason 

that the !GAs are unconstitutional. 

For these reasons, the !GAs should be eliminated. 
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B. Citizenship Based Taxation Should be Eliminated. 

The United States imposes taxation based on the "world income" on its residents and 

citizens-regardless of where they live. This is referred to as citizenship-based taxation. Under 

citizenship-based taxation. a "resident" or U.S. citizen is required to include as U.S. taxable 

income all forms of income, from any geographical sources. 

A "resident" is an individual who has a physical presence in the United States sufficient 

to trigger tax jurisdiction over the person. The rules for determining what constitutes "residence" 

for U.S. tax purposes are found in Internal Revenue Code 770l(b). 

A U.S. "citizen" includes "all persons born or naturalized in the United States, and 

subject to the jurisdiction thereof." U.S. CONST. amend. XIV. 14 Due to the fact that being born in 

the U.S. is the most common way to acquire U.S. citizenship, there are millions of citizens who 

do not have an actual residence in the United States or any connection to the United States, nor 

do they meet the requirements ofinternal Revenue Code 770l(b). A "citizen" can cease to be a 

citizen by relinquishing U.S. citizenship-with an associated cost of$2,350. 

One of the biggest issues with citizenship based taxation is that it subjects overseas 

Americans to double taxation-once in their country of residence and once in the country of 

their citizenship. In addition, overseas Americans have the added difficulty of being subject to 

two tax systems at the same time. 

FATCA, FBAR. and the !GAs are the enforcement mechanism for U.S. citizenship-based 

taxation. Americans abroad cannot sustain the immense pressures and requirements of both the 

14 The definition of who is a "citizen" is not found in the Internal Revenue Code but is 

found in the Immigration and Nationality Act and the 14th Amendment of the Constitution. 
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tax systems-the one where they reside and the U.S. tax system. Thus, FA TCA is forcing 

Americans abroad into a set of circumstances where they must renounce their U.S. citizenship to 

survive. 

For example, suppose you have a married couple living in Washington DC. One works as 

a lobbyist for an NGO and has a defined benefits pensions. The other is self employed in a lobby 

finn, working under an LLC. According to the IRS filing requirements, it would take about 15 

hours and $280 to complete their yearly filings. Should they under report income, any penalties 

would be a percentage of their unreported tax burden. The worst case is a 20% civil fraud 

penalty. 

Compare the same couple with one different fact. They moved to Australia because the 

NGO reassigned the wife to Sydney. The husband. likewise, moves his business overseas. They 

open a bank account, contribute to the mandatory Australian retirement fund, purchase a house 

with a mortgage and get a life insurance policy on both of them. 

These are now their new filing requirements: 

Form 8938 

Form 3520-A 

Form 3520 

Form 5471 (to be filed by the husbands new Australian corporation where he is self 

employed) 

Fonn 720 Excise Tax. 

FinCEN Form 114 

The burden that was 15 hours now goes up to 
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4.37 hours for Form 8938. 

57.2 hours for Form 720, 

54.20 hours for Form 3520, 

61.22 Hours for Form 3520-A. 

50 hours estimate for Form 5471 

For a total of226.99 hours (according to the IRS's own time estimates) not including time to file 

the FBAR. 

The penalties for innocent misfiling or non filings for the above foreign reporting forms 

for the couple are up to $50,000, per year. It is likely that the foreign income exclusion and 

foreign tax credit will negate any actual tax due to the IRS. So each year, there is a lurking 

$50.000 penalty for getting something technically wrong on a form, yet there would be no 

additional tax due to the US treasury. 

Eliminating these onerous reporting requirements or switching to a residence based 

taxation system would cure this disparate treatment of taxpayers. Furthermore, without 

citizenship based taxation, there would be no justification for FA TCA, FBAR or the I GAs. 

C. The Same Country Exemption Is Not Sufficient to Protect Americans 

Abroad. 

A commonly cited "fix" to FA TCA, known as Same Country Exemption ("SCE"), would 

exempt Americans abroad from FA TCA-related reporting and penalties for banking activity in 

their country of residence. SCE is the basis for legislation introduced by Rep. Carolyn Maloney 

on April25. There are multiple reasons why SCE would not be successful as a remedy to the 

multiple failings ofF A TCA. 
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SCE would not remove from foreign financial institutions ("FFI") the potentially 

catastrophic 30% penalty for failure to comply with F ATCA. Such penalties could potentially 

threaten the very solvency of the financial institution and is a risk that most financial institutions 

would seek to eliminate or minimize by continuing to limit or eliminate overseas Americans as 

account holders. Thus a main root cause for the record number of citizenship renunciations and 

discrimination against overseas Americans due to FA TCA would remain in place. 

Compliance costs for FFI's would not change and could possibly increase. Under 

FA TCA, banks need to clearly identify who among their account holders is and is not a U.S. 

citizen and are required to implement costly compliance processes to report extensive and 

intrusive details about the account activities of U.S. citizens. These costs have been estimated to 

be in the tens of billions of US dollars globally, vastly outstripping any estimate of potential 

recoveries by the IRS. Under SCE, these costly systems would remain and would become one 

step more complex in that FFI's would be required to identify who, among their U.S. citizen 

account holders, also has a valid exemption under SCE. 

In addition, there are incongruencies between the IRS and foreign countries' tax 

authorities regarding the criteria for bona-fide resident and fiscal resident. Foreign countries' 

laws do not necessarily match U.S. laws. This adds an exceptional burden on the FF!s to 

ascertain who is and who is not a bona-fide and/or fiscal resident of the country. Additionally, 

there will need to be a "control" done every year to ensure that the US citizens in question have 

not changed their status lest the 30% withholding penalty is applied. This adds an additional 

burden on the FF!s which they will not be willing to undertake. 
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Chairman Meadows 

May 10,2017 

Page 15 

SCE will also not help the circumstances for overseas Americans who must have banking 

facilities in more than one country, such as smaller countries like Liechtenstein, San Marino, 

Andorra, Vatican or Monaco. Even with SCE in place, a resident of Vatican would not be able to 

have an account located across the street in Rome. 

Additionally, SCE would not protect individuals who live in one country but work in 

another. For example, an individual may live in Germany, but work in Switzerland. By spending 

most of their life in Switzerland, they should be able to have a bank account there. Indeed, each 

of our witnesses in the hearings, Ms. Nelson, Mr. Kuettel and Mr. Crawford have found it 

necessary to have accounts in more than one European country. Yet, SCE would not help them. 

Most importantly, a FATCA modified by SCE will still leave in place multiple 

unconstitutional features, described elsewhere in this document, which can never be acceptable. 

For example, SCE would still require overseas Americans to report a level of personal banking 

infonnation that would require probable cause and a search warrant in order to obtain 

domestically. 

The SCE proposal does not include all financial accounts in the resident country but only 

deposit accounts. Therefore, it does not change being shut out of all the financial products 

available in the resident country. 

In sum, SCE would not improve the circumstances of the millions of overseas Americans 

being harmed by FA TCA and other laws. lt is woefully inadequate and should be rejected. 
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Chairman Meadows 

May 10,2017 

Page 16 

D. OECD Common Reporting Standard 

Proponents ofF A TCA often say that the OECD Common Reporting Standard ("'CRS") is 

an attempt to create a sort of Global F ATCA. Although the CRS may have been inspired by 

FA TCA there are some differences between the two. 

The Common Reporting Standard is an agreement among reportable jurisdictions to 

exchange information about reportable persons who are tax residents of a country. CRS is based 

on the principle of"Exchange Of Information". With CRS, countries may be required to change 

their domestic laws in order to allow for information exchange with a foreign government. 

A "reportable jurisdiction'' is a country that has agreed to implement the OECD Common 

Reporting Standard. A "reportable person" is a tax resident of a reportable jurisdiction. 

The rules for determining who is a tax resident are determined by the reportable jurisdiction. In 

cases where a person is a tax resident of more than one reportable jurisdiction, treaty tie-breaker 

rules can be used to determine tax residence. 

The United States is not a CRS reportable jurisdiction. As a result the United States is not 

entitled to receive information under the CRS. Furthermore, residents of the U.S. are NOT 

reportable persons under the CRS. 

The same issues that exist with FA TCA exist with CRS, as to harms of Americans 

abroad, but are then replicated in the U.S. If the United States agreed to the CRS, the U.S. would 

have to impose on its own banking system reporting requirements similar to FA TCA. where U.S. 

banks would have to report of foreign citizens in the U.S. to at least I 00 foreign countries. And 

the result is the imposition of enormous FATCA-Iike compliance costs on all U.S. banking 

facilities. This "alternative" should be rejected .. 
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Chairman Meadows 

May 10,2017 

Page 17 

III. Congress Should Enact a 1099 Requirement on Foreign Banks, Established by 

Treaty, as Long as this Complies with Established United States Constitutional 

Principles and International Legal Norms. 

As discussed above, any new requirements must conform with established principles and 

international legal norms. In accordance with those principles of privacy, due process, equality, 

and transparency, we suggest that Congress require foreign banks to report Form 1099 

infonnation on U.S. citizens to their government and for the foreign government to issue a 1099 

to U.S. citizens and to report that information to the IRS. 

A. 1099 Requirement. 

In the United States, the IRS uses the 1099 series offorms to track income that is outside 

the normal wages, salaries, and tips received from employment. Interest income is one such 

source of income and is reported on Form 1 099-INT. 

Form 1 099-INT summarizes the interest income, for the tax year, paid on savings 

accounts, interest-bearing checking accounts, and US Savings bonds. It is also used to report 

other tax items related to interest income, including early withdrawal penalties, foreign tax on 

interest, and federal tax withheld. 

A bank, financial institution or other entity that pays an individual at least $10.00 in 

interest during a year must prepare a 1 099-INT, send a copy by January 31 to the individual, and 

file it with the IRS. The IRS then uses that information to ensure an individual's income tax 

return reflects the correct amount of interest income. 
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Chairman Meadows 

May 10,2017 

Page 18 

B. Implementation of 1099-INT. 

Like banks in the United States, foreign banks should be required to collect this 

information and provide it to their government to provide to the IRS. In addition, the foreign 

government would provide a Form I 099-INT to any U.S. citizens paid at least $10.00 in interest. 

In order to accomplish this, treaties should be negotiated with foreign governments. 

These treaties should integrate the 1099-INT requirements within the foreign jurisdiction's 

existing system of banking regulations and local tax authority-rather than making it a 

requirement from the IRS. Furthermore, this requirement would be enforced by current penalties 

already used by foreign governments to enforce existing bank reporting. Finally, the authorizing 

legislation should provide that such treaties can only be negotiated with countries which collect 

such information regarding their own citizens. because of the need to adhere to the established 

international legal norm of equality of treatment. 

The only difference between these treaties and the current legal requirement of the 

issuance of a I 009 is that domestic banks are required to issue a I 099 directly to the account 

holder and foreign governments would be required to issue a I 099 to a U.S. citizen. One of the 

principal harms of the F ATCA requirement of foreign banks is that they are obligated to ferret 

out U.S. citizens from among their account holders. Many foreign banks have been unwilling to 

assume the liability for doing this. This proposal would shift that responsibility to foreign 

governments. under agreed procedures with the U.S. government under a treaty, thereby 

relieving foreign banks of that responsibilities and liability. 
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Chainnan Meadows 

May 10,2017 

Page 19 

C. Foreign Banking Institutions Should Participate in the Treaty Negotiations. 

In order to ensure that overseas Americans will be pennitted to open and maintain bank 

accounts in the foreign jurisdiction, foreign banks should be active participants in these treaty 

negotiations. This will further ensure that all persons are treated equally regardless of residency 

or citizenship. 

If, however, Congress determines that this 1 099-INT requirement would not provide 

sufficient benefit verses any hann created, it should not be pursued. 

Conclusion 

In conclusion, we recommend that any taxation of overseas Americans comply with the 

rights to privacy, due process, and equal protection of the laws, as well as other rights, 

guaranteed by the Constitution and by established international legal nonns. We recommend that 

the U.S. establish residency based taxation, eliminating the current citizenship based taxation. 

We further recommend that FATCA, FBAR, and the I GAs be eliminated in their entirety and 

that the Same County Exemption and Common Reporting Standards be rejected. Finally, we 

recommend Congress enact a modified 1099 requirement on foreign banks, established by treaty, 

as long as this complies with U.S. constitutional principles and international legal norms. 

Sincerely, 

The Bopp Law Finn, PC 

Is/ James Bopp, Jr. 

James Bopp, Jr. 

Courtney Turner Milbank 
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May 15 2017 RECOMMENDATIONS of Stephen John Kish to Subcommittee on 

Government Operations on how to improve the legal framework set up by FATCA15 

Chairman Meadows, Ranking Member Connolly, and Members of the Subcommittee on 

Government Operations, I appreciate having this opportunity to submit a second written 

statement regarding your April26, 2017 hearing on hann caused by the Foreign Account Tax 

Compliance Act (FA TCA), which is here appended to the statement of Mr. James Bopp. 

I am responding to your request seeking recommendations on possible modifications to 

FA TCA that might decrease the harm caused by this law. 

My name is Stephen John Kish. I was born in Seattle Washington on July II, 1948 and 

renounced my U.S. citizenship in 2016. As I mentioned in my written April 19 2017 submission 

to your subcommittee. I am a Plaintiff in Crawford v. U.S. Department of the Treasury, a lawsuit 

currently pending in United States Court of Appeals for the Sixth Circuit. 

My thoughts below on how to decrease the harm ofF ATCA are based on the principle 

that U.S. laws must not cause unreasonable harm to people impacted by the law or violate the 

U.S. Constitution: 

I) Repeal FATCA, FBAR, !GAs, and the FATCA/FBAR-enforced 

Citizenship-based taxation. Here I support enthusiastically James Bopp's 

recommendation that FA TCA, FBAR, and the !GAs, should be repealed in their entirety 

and citizenship-based taxation be eliminated (with the latter replaced with 

territorial/residence based taxation as is the worldwide standard). Because I personally 

fear that any even a "watered-down" FA TCA-Iike replacement law will negatively, 

15 Mr. Kish asked that he be permitted to file a written response to the committee, as a 

follow-up to his original submission. As such, his personal written response is appended here. 
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significantly, and specifically impact on Americans overseas and/or contradict our 

Constitution, I cannot recommend or support any FA TCA replacement legislation; and 

2) Modify citizenship laws to decrease FATCA harm. Should the FATCA law be 

repealed and not replaced, I recommend that former U.S. citizens who affirm to the 

Department of State that they renounced their citizenship because of FA TCA, will have 

their citizenship re-instated without cost or difficulty should they so wish. Conversely, 

should FA TCA not be repealed --- and consequently the harm continues --- I suggest that 

those persons who need to renounce their citizenship because ofF A TCA, be allowed a 

swift path to renunciation of their citizenship without any cost, administrative 

impediments, or penalties whatsoever. 

I hope that you will find these thoughts useful. 

Stephen John Kish 

May 15,2017 

Toronto, Ontario 

Canada 
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Mark Christopher Crawford 

400 Southbrook Drive 

Dayton, Ohio 45459 

Chairman Mark Meadows 

Subcommittee on Government Operations 

2157 Rayburn House Office Building 

Washington, DC 20515-6143 

Dear Chairman Meadows, 

May 12,2017 

Re: Response from Mark Christopher Crawford, 

How to Improve the Legal Framework Set up by 

the Foreign Account Tax Compliance Act 

I would like to thank you for allowing me to respond to the following question: "Please provide 

three recommendations on how to improve the legal framework set up by the Foreign Account Tax 

Compliance Act (FATCA)". My three responses will focus on (1) Addressing the current negative 

incentives that financial institutions face under FATCA which prompt them to purge themselves of 

American clients (2) Improving the Revenue offset framework that FATCA was intended to address 

within the HIRE Act of 2010 (3) Addressing any anti-money laundering aspect associated with the repeal 

of FATCA. 

I. Addressing the Current Negative Incentives that Global Financial Institutions Face under 

FATCA which Prompt Them to Purge Themselves of American Clients 

The cost of compliance with FATCA1 and the threat of a 30-percent withholding tax' in the case 

of non-compliance are prompting Foreign Financial Institutions (FFI) to comply with FATCA by purging 

US persons from their clientele. In some cases, in order to retain financial services abroad, Americans 

1 http://www.taxpayeradvocate.irs.gov/2013-Annuai-Report/downloads/REPORTING-REQUIREMENTS-TheForeign-Account-Tax-Compliance-Act-Has-the.pdf 

2 https:f/www.irs.gov/businesses/corporations/information-for-foreign-financial-institutions 
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have had to give up their US citizenship in order to avoid being purged from the international financial 

sector. 

One solution to addressing this issue is the complete repeal of FATCA thus removing the 

incentive for banks to treat US persons differently than other clients that they may have, removing the 

additional compliance cost and the threat of penalty for non-compliance. I support full repeal of FATCA. 

An alternate proposal is to create a Same Country Exception (SCE)3

• I appreciate that alternative 

solutions are being put forward insofar as their existence clearly recognizes that that the status quo of 

the FATCA legislation and its impact on Americans abroad is unacceptable. The weakness of the SCE 

proposal is that it assumes that Americans will move to a single country of residency and stay there for 

the rest of their lives. It assumes that financial institutions are willing to not only go through the 

compliance cost of determining whether their clients are US persons, but also increase their compliance 

procedures to determine year on year whether existing US person clients that might qualify under a SCE 

continue to do so. Should an SCE eligible US person in one country move away from that country, 

returning to the USA or moving elsewhere, then those persons' financial accounts may become noncomplaint. Foreign financial institutions would still be liable for the withholding penalty on previously 

SCE eligible accounts and the incentive to remove this contingent liability by purging US persons from 

their clientele would be unaltered. 

Americans living abroad are neither monolithic nor static. Many Americans move abroad for a 

brief period oftime and establish residency in one country for their studies, short-term teaching 

assignments, temporary duty assignments, etc then move to another country and establish a new 

residency and so on, or even return to the United States. In my career I have held residency in the 

United Kingdom during my graduate student year, in Albania at various times for business, in 

Montenegro for several years while running a bank and in Greece for a year. Additionally, I have lived 

3 https:/ /www. congress.gov /bi 11/115 th-congress/house-bi 11/2136 
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abroad for significant periods in Macedonia and China. I often returned to the United States in between 

residency in foreign countries, thereby re-establishing residency in America. I have done significant 

business in countries where I have not been a resident and have held ownership in companies based in 

countries where I have not been a resident. Based on my personal experience, I do not believe that a 

Same Country Exception would solve the unintended consequences of FATCA on American citizens or be 

helpful in reducing bank compliance costs and removing contingent liability from foreign financial 

institutions when accepting American clients. More specifically, a SCE would not help my own 

brokerage firm (mentioned in my verbal testimony on April26'hl in removing contingent liability under 

FATCA, thus I do not believe that SCE will have a meaningful impact on solving the unintended 

consequences of FATCA on my clientele. I continue to support full repeal as the best method of 

removing the potential penalties that foreign financial institutions face, currently prompting them to 

purge themselves of US clients. 

II. Improving the Revenue Offset Framework that FATCA was Intended to address within the 

HIRE Act of 2010 

The Foreign Account Tax Compliance Act (FATCA) was not passed as a stand-alone initiative. 

Rather it was included in the Hiring Incentives to Restore Employment (HIRE) Act of 2010 ostensibly a 

revenue offset to the payroll tax credit, etc as provided by the Act4

. The cost-benefit ratio of 

implementing FATCA has been consistently challenged'. IRS supporters complain that its mandate has 

been expanded to include FATCA, while its budget has been reduced6

• As we discussed in the hearing, 

4 https://www.irs.gov/uac/two-new-tax-benefits-aid-employers-who-hire-and-retain-unemployed-workers 

5 http://www.taxpayeradvocate.irs.gov/2013-Annuai-Report/downloads/REPORTING-REQUIREMENTS-TheForeign-Account-Tax-Compliance-Act-Has-the.pdf 

6 http://www.cbpp.org/research/federal-tax/irs-funding-cuts-compromise-taxpayer-service-and-weakenenforcement 
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FATCA is currently having dramatic unintended consequences on Americans living abroad'. A solution 

that helps provide a better revenue offset is to reduce the IRS mandate by repealing FATCA, move away 

from a citizenship-based taxation (CBT) system entirely (the USA is the only industrialized nation in the 

world that implements CBT"), and focus available IRS funding on a simplified more efficient IRS mandate 

that generates a better "ROI" or cost-benefit ratio as outlined by the Taxpayer Advocate9

• 

Ill. Addressing any Anti-Money Laundering (AML) Aspect Associated with the Repeal of FATCA 

During the verbal testimony on April26, Committee members stressed the importance of AntiMoney laundering (AMl) efforts, including the prevention of drug trafficking, human trafficking and 

other illicit activity. The panel of witnesses was asked to reflect on the impact that a full repeal of FATCA 

would have on these issues. It is important to note that the creation of FATCA was revenue driven, 

rather than as an Anti-Money laundering tool. Entities around the world are engaged in AMl activity 

independent of FATCA.10 The United States has a long history of activity in preventing money laundering 

independent of FATCA. 11 In my previous written testimony I referred to the multiple banks where I have 

had first-hand experience in the ownership, board or management in Albania, Montenegro and Serbia. 

All of these banks where I was affiliated had majority US shareholders and some had support from 

USAID. Each of these banks had rigorous anti-money laundering procedures and policy, independent of 

FATCA. In my personal experience, a continuation of efficient Anti-Money laundering efforts will be 

uninhibited by the repeal of FATCA. 

7 https:/ /oversight.house.gov/hearing/reviewing-unintended-consequences-foreign-account-tax-compliance-act/ 8 http://www.bbc.com/news/35383435 

9 https:/ /www. irs.gov I uac/n ewsroom/national-taxpayer-advocate-delivers-2012 -annual-report· to-congress 10 https://www.imf.org/external/np/leg/amlcft/eng/aml4.htm 11 https://www. fincen .gov /history-anti-money-laundering-laws 
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Response by Elise J. Bean to 

Question from Chairman Mark Meadows 

Subcommittee on Government Operations 

April26, 2017 Hearing: "Reviewing tbe Unintended Consequences 

of the Foreign Account Tax Compliance Act" 

1. Please provide three recommendations on how to improve the legal framework set up by 

the Foreign Account Tax Compliance Act (F ATCA). 

During the hearing, I mentioned the following two recommendations to improve 

FATCA's legal framework. 

(1) FATCA Penalties. One key concern related to FATCA involves the sometimes large 

penalties imposed on those who violate FATCA disclosure obligations or fail to pay !axes 

owed on income earned abroad. The IRS has partially addressed this problem by 

establishlng a program that eliminates penalties for persons who inadvertently violate the 

law. See IRS Streamlined Filing Compliance Procedures, 

https://www.irs.gov/individuals/international-taxpayers/streanllined-filing-complianceprocedures. Consideration could also be given to eliminating penalties on Americans 

living abroad who, when they file an overdue or incorrect tax return, are found to owe no 

federal lax. 

(2) Duplicative Forms. In implementing FATCA, the IRS chose to create a new tax return, 

Form 8938, for individuals to report foreign accounts and assets. The new fonn 

duplicates requests for information contained in the pre-existing Foreign Bank Account 

Report or FBAR. The two forms should be reviewed to minimize duplication, and if 

possible, the new IRS form should be eliminated in favor of retaining the FBAR. To 

facilitate this process, the FBAR form may need to be expanded and statutory language 

may be needed to remove any legal impediment to the IRS' making full use of the FBAR, 

which is not an IRS form, but a Treasury FinCEN Form 114 sponsored by the Financial 

Crimes Enforcement Netvvork. 

Chairman Meadows asked that I identify three additional recommendations in addition to the 

two discussed during the hearing. 

(3) Foreign Financial Institution Discrimination Against U.S. Citizens. Vlhen FATCA 

was first promulgated in 2010, some foreign fmancial institutions reacted by closing or 

refusing to open accounts for U.S. citizens, in an effort to avoid complying with 

FATCA's disclosure requirements. Today, seven years later, over 274,000 foreign 

financial institutions have agreed to comply with FATCA, including over 6,000 in 

Switzerland, and this problem has eased. Nevertheless, some Americans living abroad 

cite continuing problems '>'.ith opening accounts at foreign financial institutions. To curb 
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any ongoing discrimination against U.S. citizens, legislation could be enacted barring the 

sale ofU.S. Treasury bonds to any foreign financial institution that, because ofFATCA, 

has a policy or practice of refusing to open accounts for U.S. persons. Because U.S. 

Treasury bonds are an attractive investment for most foreign financial institutions, this 

prohibition might provide a useful tool to combat any ongoing foreign discrimination 

against U.S. citizens. 

(4) Accidental Americans. Some of the opposition to FATCA appears to be misplaced 

anger at U.S. tax and citizenship laws applicable to so-called "accidental Ameticans," 

meaning individuals with no ties to the United States, no intention of claiming U.S. 

citizenship, and a history ofliving as a national of another country, yet treated by the U.S 

government, over their protests, as U.S. citizens. Some claim that they have been 

unfairly forced by the State Department or IRS to acknowledge U.S. citizenship and 

accept significant tax liability, because they happened to have been born in the United 

States to foreign parents or born to a U.S. citizen who emigrated ·with them to another 

country. Consideration could be given to enacting legislation creating a special system to 

enable these individuals to establish, with documentary evidence, that they have been 

citizens of another country for a minimum period of years with no U.S. ties, are not U.S. 

citizens, and therefore have no tax liability. At a minimum, the legislation could set up a 

system allowing foreign parents to file a simple form electing to terminate the U.S. 

citizenship of their minor children and thereby free them from future U.S. tax liability. 

Filing the form with U.S. authorities could be deemed to eliminate any future F ATCA, 

FBAR, or U.S. tax liability for the affected minor. 

(5) Expatriation Fee. In 2014, the United States increased the fee to renounce U.S. 

citizenship from $450 to $2,350, reportedly the highest expatriation fee in the world . The 

State Department justified the fee increase, in part, by citing the need to counsel persons 

about the consequences of renunciation and verify their citizenship status. Some of those 

costs may be related to determining whether an applicant is free of any U.S. tax liability 

and has paid any tax exit fee. Americans living abroad have described the current fee as 

prohibitively expensive. Consideration could be given to enacting legislation that would 

lower the current expatriation fee. Additionally, the legislation could require a 

substantially lower fee for minors who have never worked and do not require the same 

level of investigation as adults to evaluate their tax status. 

I hope these recommendations are useful. 
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Response by Elise J. Bean to 

Questions from Ranking Member Gerald E. Connolly 

Subcommittee on Government Operations 

April26, 2017 Hearing: "Reviewing the Unintended Consequences 

of the Foreign Account Tax Compliance Act" 

1. During your testimony, you referred to court decisions which have upheld federal laws 

requiring information about bank accounts. Please provide citations to key court decisions. 

California Bankers Assn. v. Shultz, 416 U.S. 21 (1974)(holding that Bank Secrecy Act 

recordkeeping and reporting regulations, including requiring information on foreign bank 

accom1ts, to be reasonable, are analogous to IRS third party income and wage reporting 

requirements, and do not violate the Fourth Amendment prohibition against mlTeaSonable 

searches and seizures), https://supreme.justia.com/cases!federal/us/416/21!case.htrnl. 

United States v. Miller, 425 U.S. 435 (1976)(holding that accountholders have no privacy 

rights in bank records held by financial institutions, and a goverrunent subpoena to a bank 

to obtain those records does not violate the Fourth Amendment prohibition against 

mrreasonable searches and seizures), https://\vww.oyez.org/cases/1975/74-1179. 

In re Grand Jury Proceedings (Bank of Nova Scotia), 740 F.2d 817 (11th Cir. 1984), cert. 

denied, 469 U.S. 1106 (1985)(holding that the United States may compel a foreign bank 

to produce offshore account records without having to show that the requested records 

are relevant or necessary to a grand jury proceeding), http:/llaw.justia.com/cases/ 

federallappellate-courts/F2/740/817/233788/. See also In Re Grand Jury Proceedings 

(United States v. BankojNova Scotia), 691 F.2d 1384, (11th Cir. 1982), cert. denied, 462 

U.S. 1119 (1983), http://openjurist.org/691/f2dll384/grand-jury-proceedings-unitedstates-v-bank-of-nova-scotia. 

in re Grand Jury Subpoena, 696 F.3d 428 (5th Cir. 2012)Q1olding that accountholdcrs of 

offshore bank accounts may be compelled to produce offshore account records to the 

U.S. government, and a goverrunent subpoena to an accountholder to obtain those records 

does not violate the Fifth Amendment privilege against self-incrimination), 

http://www.caS.uscourts.gov/ opinions%5Cpub%5Cll/ll-20750-CVO.\vpd.pdf. See also 

In re Grand Jury Subpoena dated February 2, 2012, 741 F.3d 339 (2d Cir. 2013), 

http://caselaw.findlaw.com/us-2nd-circuitll652860.html. 

Linde v. Arab Bank, 706 F.3d 92 (2nd Cir. 2013)(holding that a district court may impose 

sanctions on a foreign bank for failure to produce offshore account records in response to 

a government subpoena, even if the bank's failure is due to foreign bank secrecy laws and 

foreign government orders not to produce), http://>V>vw.leagle.com/decisionl 

In%20FC0%2020130118068/LTNDE%20v.%20ARAB%20BANK, %20PLC. 
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2 

Florida Bankers Ass'n v. US. Dept. of Treasury, 799 F. 3d 1065 (D.C. Cir. 2015), cert. 

denied, 136 S. Ct. 2429 (2016)(dismissing as premature a lawsuit challenging U.S. 

regulations requiring U.S. banks to collect and report account information to the IRS for 

accounts opened by non-U.S. accountholders), https://~ww.cadc.uscourts.gov/intemetl 

opinions.nsf/D721EAOBE9SBBED585257EA10052EDE5/$file/14-5036-1567856.pdf. 

Crawfordv. US. Dept. ofTreasury, Case No. 3:15-CV-00250 (USDC S.D. Ohlo), Entry 

and Order Denying Plaintiffs' Motion for Leave to File an Amended Verified Complain 

(DOC. 32); Granting Defendants' Motion to Dismiss (DOC. 26) Plaintiffs' Complaint 

(DOC. 1 ); and Terminating Case ( 4/25/20 16)( dismissing lawsuit challenging F ATCA due 

to a lack of standing and a failure to state an injury; on appeal before the Sixth Circuit), 

http://www.taxcontroversy360.com/files/20 16/04/Case.pdf. 

2. During the hearing, you testified that more than 274,000 foreign financial institutions have 

now agreed to comply with FATCA. Please provide the source for that number. 

The IRS FATCA website includes a publicly available list of all foreign financial 

institutions that have signed agreements with the IRS and agreed to comply with F ATCA. It is 

updated monthly. Before the hearing, I dov.'llloaded the list and observed that it included over 

274,000 foreign fmancial institutions. See FATCA Foreign Financial Institution List Search and 

Dov.'l11oad Tool, https://apps.irs.gov/app/fatcaFfiList/fluJsf. 

3. During the hearing, you indicated that the United States now provides accotmt information 

from U.S. banks to foreign countries. Please identify those countries and the supporting 

regulations. 

In 2012, the United States finalized regulations requiring financial institutions with U.S. 

offices to disclose to the IRS account information on accounts opened for nonresident aliens. 

See Sections I .6049-4(b )(5) and 1.6049-8 of the Income Tax: Regulations; "Guidance on 

Reporting Interest Paid to Nonresident Aliens," 77 Fed.Reg. 76, at 23391 (4/19/2012). \\'hen 

finalizing the 2012 guidance implementing the new regulations, Treasury stated in part: "These 

regulations will facilitate intergovernmental cooperation on FATCA implementation by better 

enabling the IRS, in appropriate circumstances, to reciprocate by exchanging information with 

foreign governments for tax administration purposes." 

Since 2012, Treasury has issued several updated lists of the countries approved for 

account information exchange, with each new list longer than its predecessor. The latest, Rev. 

Proc. 2017-31, "Implementation ofNonresident Alien Deposit Interest Regulations," was issued 

in March 2017. It identifies 43 countries "with which the automatic exchange of the information 

collected under §§ 1.6049-4(b )(5) and 1.6049-8 has been detennined by the Treasury 

Department and the IRS to be appropriate." The 43 countries are: 
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Australia Iceland Mexico 

Azerbaijan India Netherlands 

Belgium Ireland New Zealand 

Brazil IsleofMan Nonvay 

Canada Israel Poland 

Colombia Italy Portugal 

Czech Republic Jamaica Saint Lucia 

Demnark Jersey Slovak Republic 

Estonia Korea, Republic of Slovenia 

Finland Latvia South Africa 

France Liechtenstein Spain 

Germany Lithuania Sweden 

Gibraltar Luxembourg United Kingdom 

Guernsey Malta 

Hungary Mauritius 

4. During the hearing, there was a discussion ofthe differences between the information 

required by 1099 forms for U.S. banks and FATCA-related forms for foreign banks. 

a. What information do the FATCA-rehited fonns require that does not appear on 1099 forms? 

Both the FACTA-related form 8966 and the U.S. 1099 forms, collectively, require 

affected financial institutions to disclose, for each covered account, the account number, the 

accountholder's name and tax identification number, and the interest, dividends, sale proceeds, 

and other miscellaneous income paid into the account. Additionally, the FA TCA -related fonn 

requires foreign fmancial institutions to disclose the account balance and whether the account 

was closed during the year. For certain accounts, such as those in which a recalcitrant 

accountholder refuses to provide any identifying information, the FACTA-related form also 

requires disclosure of the munber of such accounts, the gross amount of payments into those 

accounts, and the accounts' aggregate balance. It is important to note that, in some cases, U.S. 

regulations permit foreign financial institutions to elect to file 1099 forms instead of filing the 

FACTA-related form 8966. See Section 1.1471-4(d)(5)(i)(A) and (B). 

b. Why is this information necessary for tax enforcement? 

The added account information on the FATCA-related form 8966-the accOlmt balance 

and any account closme - is needed to help the IRS gauge whether it should invest resources to 

inquire into a U.S. taxpayer's foreign holdings. It also helps detennine whether a foreign 

account exceeds certain threshold levels and, so, must be reported, for exan1ple, on the Foreign 

Bank Account Report (FBAR), which applies only to accounts exceeding $10,000. 
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c. If this information is not provided on 1099 forms, how does the IRS obtain it from domestic 

financial institutions? 

U.S. law enforcement can subpoena account balance and other account information from 

domestic fmancial institutions, if needed. In contrast, U.S. subpoenas cannot easily compel 

infonnation from a foreign financial institution located outside of U.S. borders, which is one key 

reason why the FATCA-related form requires additional information. 

d. Other than from the FATCA-related forms, are there other methods the IRS may use to obtain 

this infom1ation from foreign financial institutions? 

U.S. law enforcement may use tax treaties, tax inf01mation exchange agreements, mutual 

legal assistance agreements, Qualified Intermediary Agreements, and, in some cases, subpoenas 

to request information from foreign financial institutions or their foreign governments about 

accounts opened or controlled by U.S. persons, but all of those methods are difficult, costly, and 

time-consuming to use, and none can be enforced using the 30% excise tax available to enforce 

compliance ""'ith FA TCA disclosure obligations. 

e. Does collecting this infornmtion imply that U.S. citizens with foreign accounts are violating 

the law? 

No. Opening a foreign account does not, per se, violate any U.S. law, and collecth1g 

account information- which is done for domestic as well as foreign accounts- does not imply 

any legal violation. The United States has one of the highest tax compliance rates in the world, 

estimated by the IRS to exceed 80%, which means U.S. tax authorities view the vast majority of 

U.S. taxpayers as law-abiding, including those with foreign accounts. See, e.g., 

https://www.irs.gov/uac/the-tax-gap. One reason for the high U.S. tax compliance rate is the 

IRS' use of a wide range of third party reporthlg requirements to gather information about the 

income and assets ofU.S. taxpayers. Research has long shO,VI1 that third party reporting 

discourages tax cheating, encourages greater tax compliance, and improves tax collection. See, 

e.g., http:/ /wvvw.budgetmodel.wharton. upenn.edu!issues/ 20 16/7/29/tax-compliance-andenforcement-an-overview-of-new-research-and-its-policy-implications. It also helps ensure tax 

fairness and protects honest taxpayers from being taken advantage of by dishonest taxpayers. 

5. During the hearing, there was a discu5sion of the differences between citizenship- and 

residency-based tax systems. 

a. Please explain the difference between the two systems. 

Citizenship-ba~ed taxation assesses taxes on the worldwide income of a country's citizens no 

matter where they live in the world. Residency-based taxation assesses taxes on "residents," a 

category defmed differently by different countries, but generally revolving around the concept of 

a person physically living for a minimum period of time in the country assessing the tax. 
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b. If the U.S. transitioned to a residency-based tax system, do you believe FATCA would still be 

necessary to prevent tax evasion? 

Yes. Residents may open accounts in otl1er countries and use them to hide assets and 

evade U.S. tax. That is why FA TCA applies to Americans living within the United States as 

'N-ell as to Americans Jiving abroad. 

6. If the United States were to repeal FATCA, would the information of U.S. citizens be 

collected by foreign financial institntions in countries subscribing to ilie Common Reporting 

Standard? 

I apologize, but I don't know enough about the Conunon Reporting Standards to respond.