updated 2:27 PM CET, Feb 8, 2023

March 18, 2022: FATCA turns 12

Twelve years after President Obama signed the Foreign Account Tax Compliance Act into law – buried inside a domestic jobs bill known as the HIRE Act  – legal and political challenges targeting certain of its key provisions are continuing to progress, albeit slowly, in various "hot spots" around the world.

And yet, one more year on, and Washington lawmakers have still done nothing to mitigate the difficulties that U.S. expats struggle with, as a result of FATCA, in spite of these expats' increasingly-exasperated calls, as well as yet more calls for change on the part of the U.S. from growing numbers of foreign government officials, especially in Europe.   

"Plus ça change, plus c'est la même chose," said one U.S./French dual citizen, dully, when asked to comment on the situation.

As we've noted in our news coverage over the past year, the global pushback against FATCA has taken various forms, and continues to. In Europe, for example, FATCA's alleged data-provision over-reach has seen the European Court of Justice rule against it more than once, such as in 2020, when, significantly, it struck down the so-called "Data Protection Shield", until that time the main mechanism used by the EU to protect the personal data of EU citizens when it's transferred to the U.S.

As recently as earlier this month, Mishcon de Reya partner Filippo Noseda, who has been one of the most visible anti-FATCA campaigners globally, fired of the latest in a series of letters he's sent over the last few years to European Data Protection Board chair Andrea Jelinek, this time enquiring about "an update on the discussions of the EDPB, following [an] expert subgroups' request dated 7 July 2021," and seeking information as to what the Data Protection Board was, in fact, doing with respect to certain FATCA-related [data-protection] issues that have been raised but thus far, seemingly not acted on. (Noseda's letter begins, "Dear Dr Jelinek, FATCA: State of Play (?)")

Meanwhile, as we've also been reporting, there've been calls over the past 12 months, as during the previous several years, by certain lawmakers in the European Parliament as well as the legislatures of certain EU countries, notably including France, the Netherlands and even, recently, Italy, for the U.S. to address the banking difficulties FATCA is causing so-called "accidental Americans" living in Europe.

Last month, as we reported, France's finance minister, Bruno Le Maire, assured the founder and head of the Paris-based Association of Accidental Americans that he remained "fully aware of the practical difficulties faced" by France's accidental American citizens, and that in fact, had himself "recently contacted Ms. Janet Yellen, Secretary of the American Treasury, in order to recall and defend the interests of France" with respect to the FATCA-related problems that he acknowledged are continuing to make life difficult for accidental Americans in France and elswhere.

And earlier this month, the Dutch State Secretary for Tax Affairs and Tax Administration, Marnix van Rij, called for his country's fellow lawmakers to ensure that the U.S. took action as needed, so that Dutch accidental Americans who lack the "tax identification numbers" that the U.S. insists all non-American citizens provide to their banks will not face the closure of their bank accounts after Sept. 1, the latest deadline that the U.S. has set for this obligation to be met.

But 12 years on, the U.S. has yet to make any major changes to the FATCA regime, and Congress in particular has stayed well away. One of the only concessions to emerge, in 2019, was an IRS package of "Relief Procedures for Certain Foreign Citizens" that was introduced, offcials said, to enable a sub-group of "accidental Americans" who had renounced their citizenship, or who were considering doing so – to avoid certain taxes normally associated with renouncing, if they met certain qualifications. 

It wasn't specifically aimed at FATCA, but at a group of dual U.S./foreign nationals who have been drawn into the U.S. tax compliance net in large numbers as a result of the legislation, and whom the so-called Relief Procedures have done little to help. 

Significantly, one of the few actual victories against FATCA was scored at the end of last year, not by any foreign government, but by an individual "accidental" named Ronald Ariës, who crowd-funded his challenge against his local (Dutch) bank (de Volksbank), arguing that he should be allowed to keep his accounts with the bank, even if he didn't provide it with a U.S. Tax Identification Number. 

Ariës, a retired KLM pilot, has been resisting U.S. pressure on him to obtain a U.S. TIN because he feels it is unreasonable to require him to enter the U.S. tax system at all, since he left the U.S., after being born there, more than 60 years ago, and grew up in the Netherlands – where his parents were from – as a citizen and taxpayer. 

In a ruling that has left many "accidental Americans" (as well as ordinary American expats) cheering, a Dutch court ruled on Dec. 29 of last year that a Dutch citizen born in the U.S., but with no other connection to that country, was entitled to keep his accounts with his local bank, even if he doesn't provide it with a U.S. Tax Identification Number (TIN), as long as his total holdings in these accounts didn't exceed US$50,000.

In addition to prohibiting de Volksbank from terminating Ariës's bank accounts, as long as his balance remains under US$50,000, the court ordered the company to pay his court costs, which it said are estimated "to date" at €1,896.83 (US$2,148).

Thus far, the decision has not been overturned, with the result that not just de Volksbank but other banks in the Netherlands as well, potentially, elsewhere in Europe, in theory are caught in the middle between certain FATCA-related requirements (that are enforced locally by intergovernmental agreements between the U.S. and the governments of the countries in which they operate) and local banking laws. 

As most Americans active in the anti-FATCA movement admit, FATCA itself isn't the problem for expats – the U.S.'s citizenship-based tax (CBT) regime is.

For reasons dating back to the American Civil War (1861 - 1865), which the U.S. government of the time was struggling to pay for, the U.S. is currently the only country outside of Eritrea that taxes on the basis of citizenship rather than residency. But it wasn't until FATCA came along and began providing it with the data it needed to pursue expat Americans – and the acquiescence of the world's banks to provide it with this data as well as enforcing the law, by refusing to have as clients those expats who refused to provide Tax Identification Numbers, such as Social Security Numbers – that the U.S. government could begin to actually enforce its CBT regulations abroad. 

In actual fact, though, the dirty work is being carried out mainly by the world's banks. What's more, because of the way FATCA's been set up, they're typically the ones tasked with informing many of the 6 million to 9 million U.S. expats, who hadn't been aware of their tax obligations to the U.S. from abroad, or even in some cases that they were considered to be American citizens, of their obligations.

Date set for long-awaited 'Gwen and
Kazia' FATCA appeal hearing

Thus it is that, 12 years on, the pushback continues. One of the longest-running challenges has been taking place over the past six years in Canada, where a group of dual Canadian/U.S. citizens has sought to challenge the constitutionality of the Intergovernmental Agreement (IGA) that Canada uses to implement FATCA there.

As reported, a long-awaited appellate court hearing in this battle, informally known as the "Gwen and Kazia" FATCA case, is currently set to take place on March 30, in a Vancouver, British Columbia courtroom. Formally known as the "Gwendolyn Louise Deegan et al. v. Attorney General of Canada et al.", the matter is set to get underway at 9:30am local time, according to documents posted on Canada's Federal Court of Appeal's website.  

In their last court outing, in 2019, the Gwen and Kazia et al. plaintiffs saw their case dismissed by a Federal Court in Ottawa, but within less than three months, they were back with their appeal, which the hearing in Vancouver later this month is set to address.  

French 'accidentals' challenging
State Department over renunciation regime

For its part, the Paris-based Association of Accidental Americans chose to go to Washington to file its legal actions over the "astronomical" US$2,350 fee that the U.S. currently charges those wishing to renounce their American citizenships.

The AAA, along with around 20 "accidental Americans" of 13 different nationalities with which it is bringing its action, first filed their initial complaint in U.S. District Court in Washington against the U.S. State Department in December, 2020, arguing that the right of an individual to renounce their U.S. citizenship was a "fundamental, constitutional, natural and inherent right under the U.S. Constitution." 

The AAA and its fellow plaintiffs are being represented by L. Marc Zell and Noam Schreiber of Zell & Associates International Advocates, LLC.

Asked for his thoughts on FATCA, 12 years on, Zell began by saying that its enactment in 2010 had been "a disaster for Americans living overseas."

"Suddenly, expatriate Americans became outcasts and pariahs in their countries of residence," Zell, an American-Israeli lawyer, added.

"Many had their bank accounts closed, and their access to financial institutions and services curtailed or blocked completely. They could not obtain mortgages and car loans. They could not finance their small businesses. Even where they were able to continue their banking relationships, they suddenly found themselves separated from their fellow customers and marked 'U.S. Persons' when they tried to open accounts or conduct other financial transactions.

"FATCA also meant the end to financial privacy for almost all Americans abroad."

And no group was hit harder than the "accidental Americans", Zell concluded, referring to that group of non-U.S. citizens who often "had no idea that they even had American citizenship until FATCA poisoned their lives," by their being flagged up by their banks to the IRS as Americans because they had been born there.

"The time has come to put an end to FATCA, and restore the privacy and financial freedom of millions of Americans, accidental and otherwise, living overseas."

Long-running challenge by
'Jenny' over mis-use of her data

One of the most visible FATCA challengers over the last few years, certainly in Europe, is a U.S.-born, UK resident woman now known (thanks to a recent Financial Times article) to be named Jenny Webster, a 43-year-old "self-employed editor and a researcher at the University of Central Lancashire. (Mishcon de Reya, mentioned above, is handling her case, which is being crowd-funded, and which has been making its way through the UK courts since 2018.) 

Webster argues in her court filings that the way the UK has allowed her personal financial data to be shared with the U.S. authorities, under FATCA has been illegal for various reasons, including the fact that it has caused her "personal damage and distress."

She has also claimed that her personal data has been illegally breached by the UK authorities, in the course of its being handled as a consequence of FATCA.

Mishcon de Reya has argued that because the alleged breaches of Webster's data took place before the UK left the EU at the end of 2020, her claim "engages the [EU's] GDPR as well as the previous EU Data Protection Directive, which was at the heart of the 2020 'Schrems II' judgment on the transfer of personal data to the U.S."

In that case, as reported, the Court of Justice of the European Union held that U.S. data protection rules are not essentially equivalent to those required under EU law.

No appetite back
home for a U.S. 'FATCA'

To those FATCA critics who remember how the act was signed into law in 2010 – buried, all-but-un-noticed, inside a domestic U.S. jobs bill known as the HIRE Act ( Hiring Incentives to Restore Employment Act of 2010), with media reports focusing on how the legislation would help, as the New York Times put it at the time, to "spur employment by providing businesses incentives to hire new workers" rather than on where the funding for it was to come from – last year's efforts by certain Democrats to introduce a Stateside version were revealing.

That's because last year, the prospect of requiring U.S. banks to provide data to the U.S. authorities on accounts held by their wealthiest clients, in order to crack down on "tax cheats," was met with a wall of uncomprising resistence from Republicans, who said it would represent an unacceptable invasion of (Stateside) American taxpayers' privacy, as well as overreach on the part of the government.

"Whether [the minimum threshold amount is] US$600 or US$10,000, under this proposal, the intimate financial details of everyone in this room  – at a minimum, of every American who has a job  – will be turned over on a daily basis to the IRS,” the New York Times quoted Senator John Kennedy, Republican of Louisiana, as having told reporters, in a story published last October.

Although Democratic Sen. Ron Wyden of Oregon, one of the sponsors of the bank reporting proposal, and other Democrats argued that their Republican counterparts were misrepresenting the facts and even lying to "protect affluent tax cheats," they had no choice but to replace their "Stateside FATCA" with an alternative money-raiser.

Not just the Foreign
Account Tax Compliance Act...

Meanwhile, apart from its other "achievements" over the past twelve years (whatever people might think of them), it seems that the Foreign Account Tax Compliance Act has established itself firmly as the undisputed, No. 1 reason people use the FATCA acronym, according to AcronymFinder.com.

FATCA is far less-frequently used, the acronym-finding website reports, to refer to the "Federación Argentina de Trabajadores Cerveceros y Afines" (Argentina Brewers and Allied Workers Federation); the "Federal Air Traffic Control Authority"; or to the "Finnish Air Traffic Controllers Association".