Source: http://mopsicktaxlaw.blogspot.com/2015/04/
Timestamp: 2019-10-16 19:58:08
Document Index: 581741666

Matched Legal Cases: ['§1', '§1', '§1', '§1', '§1', '§1']

Steven J. Mopsick: April 2015
Five full years after the enactment of the Foreign Account Tax Compliance Act (FATCA), the Department of the Treasury has yet to address one of the major “unintended collateral consequences” of the Draconian law, which requires that almost every bank in the world directly register (or indirectly where an IGA has been adopted) with the IRS, as a withholding agent for the U.S. Government.
FATCA’s purpose was to stop Americans from using foreign banks to cheat on their taxes by hiding income in foreign banks. At first glance, the idea might appear to make sense; but for Americans living and working abroad, their corner bank through which they pay their mortgages and cash their paychecks is no more a “foreign bank” to the American abroad than a local Piggly Wiggly is an exotic foods emporium.
As Mr. Bruce points out in his article, some foreign banks have simply concluded that FATCA is simply too much of a compliance nuisance to bother with, it being much easier to simply “lockout” Americans from their customer base and announce that their business is simply not welcome. The result has been a severe inconvenience to those Americans abroad who desperately require normal banking services, not to mention the very real and offensive discrimination they feel as Americans abroad who are simply minding their own business just trying to make ends meet.
“Same Country” Exemption for Accounts of US Taxpayers Residing Abroad: Relaxation of FATCA Rules to Mitigate “Lock-Out” and Unnecessarily Burdensome Reporting Problems
* American Citizens Abroad is a tax-exempt, non-partisan organization promoting the interests of Americans residing outside the US. https://www.americansabroad.org/. The principal author of this paper is Charles M. Bruce. A number of individuals, including individuals associated with other organizations representing Americans abroad, contributed, and their contributions are gratefully acknowledged. Questions and comments are invited. These can be sent to cmb@ilf.ch. The term “Safe Harbor” is used by some other groups in lieu of “Same Country”.
[1] Reg. §1.1471-5(f)(1)(i)(A), Income Tax Regulations.
[2] Agreement Between Switzerland and the United States for Cooperation to Facilitate the Implementation of FATCA, Annex II, Para. II, A, 1 (Financial Institutions with Local Client Base).
[3] See Instructions for Form 8938 (Rev. Dec. 2014), p. 2/12 (Reporting Thresholds Applying to Specified
[4] The same type of requirement exists under the Local FFI (local bank) rules in various Intergovernmental Agreements.
[5] The section 911 definition of “resident” would apply by cross-reference, but the individual, in fact, would not
have to claim the Section 911 benefits. Therefore, for example, retired individuals, who have no earned income, could be covered by the “same country” exemption rules.
[6] "Depository account" means any account that is –
(1) A commercial, checking, savings, time, or thrift account, or an account that is evidenced by a certificate of deposit, thrift certificate, investment certificate, passbook, certificate of indebtedness, or any other instrument for placing money in the custody of an entity engaged in a banking or similar business for which such institution is obligated to give credit (regardless of whether such instrument is interest bearing or non-interest bearing), including, for example, a credit balance with respect to a credit card account issued by a credit card company that is engaged in a banking or similar business; ….
§1.1471-5(b)(3)(i)(A)(1).
[7] "Custodial account" means –
an arrangement for holding a financial instrument, contract, or investment (including, but not limited to, a share of stock in a corporation, a note, bond, debenture, or other evidence of indebtedness, a currency or commodity transaction, a credit default swap, a swap based upon a nonfinancial index, a notional principal contract as defined in §1.446-3(c), an insurance or annuity contract, and any option or other derivative instrument) for the benefit of another person.
§1.1471-5(b)(3)(ii).
[8] §1.1471-5(b)(3)(iii).
[9] As in the case of the small account exception, the bank could decide to report if for whatever reason this was less burdensome or is was already geared up to do so. Treas. Reg. §1.1471-5(a)(4)(ii), Income Tax Regulations.
The election would be in a form created by the IRS. The information provided thereon, such as, Taxpayer Identification Number, account information, status as resident of a foreign country, and name of foreign country, would be certified as correct. The taxpayer would be instructed to attach a copy to his or her tax return.
[10] Instructions for Form 8938 (Statement of Specified Foreign Financial Assets) (Rev. Dec. 2014), p. 7/12.
[11] Section 911.