Challenges are growing over the U.S. Foreign Account Tax Compliance Act, which is known as FATCA.
This is the law being enforced by the Internal Revenue Service. The law requires foreign financial institutions to report on the bank accounts held by U.S. citizens.
The Republicans Overseas organization is planning to challenge the constitutionality of the law in court.
The Republican National Committee has passed a resolution to repeal the law. Democrats Abroad has moved to support freeing from the law expats who do banking in the same country in which they live
The U.S. House has passed an appropriations bill that contains $1 million to study the impact of foreign bank account reporting, basically a cost-benefit analyses.
The Credit Union National Association, Inc., and the World Council of Credit Unions, Inc., said they support the Republican National committee resolution.
In a letter to the Republicans, the organizations said that “These FATCA requirements have caused banks, both U.S. and foreign, to deny access to banking and other financial services to the 7.6 million Americans overseas, which effectively excludes them from employment opportunities and forces them to choose between U.S. citizenship and their livelihood. An increasing number of expatriate Americans—including music legend Tina Turner — have renounced their U.S. citizenship because of FATCA.
“The IRS’s FATCA regulation requires U.S.-based financial institutions, including U.S. credit unions, to conduct due diligence and tax withholding on international funds transfers even though the FATCA statute passed by Congress made no mention of U.S.-based credit unions or banks. Although U.S. credit unions continue to serve their natural person member-owners who live overseas, FATCA’s requirements impose regulatory burdens on U.S. credit unions that make it more difficult and expensive for credit unions to serve their members living abroad as well as to serve their members who live in the United States and send cross-border wire transfers.”
Republicans Overseas said that a lawyer, Jim Bopp, would challenge the legislation on three grounds: That Treasury Department’s unilateral intergovernmental agreements violate the Senate’s treaty power, that FATCA’s excessive penalties violate the 8th Amendment, and that its privacy invasions violate the 4th Amendment.
Republicans Overseas said the organization was moved to challenge the law after a California school teacher faced penalties for failing to file foreign asset disclosure forms on the foreign pension of her late Swiss husband of 30 years. The organization said she had to pay a law firm $124,000 to work with the IRS and expects to pay penalties of up to $800,000.