Sunday, March 30, 2014

Tenth Circuit Opinion on Mens Rea for Tax Obstruction - What Does Unlawful Mean? (7212(a)) (3/30/14)

In United States v. Williamson,  746 F.3d 987 (10th Cir. 2014), here, the Tenth Circuit rejected the taxpayer's argument that the jury should have been instructed on the meaning of "unlawful" meant in a standard form of tax obstruction definition of the "corruptly" element of the crime. See Section 7212(a), here.  The defendant wanted an instruction that was or very close to the standard Cheek instruction -- intentional violation of a known legal duty -- for the willfulness element of most tax crimes, but not an express element of the crime of tax obstruction.  I have argued that the tax obstruction crimes (principally Section 7212(a) and the defraud conspiracy, 18 USC Section 371, here) should be interpreted to have an element functionally equivalent to willfulness and hence that something like intentional violation of a known legal duty should apply.  John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255 (2009), here and in an online appendix with examples, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough? Online Appendix, 9 Hous. Bus. & Tax L.J. A-1 (2009), here.

Let's see what happened in the case.

The defendant undertook more or less standard tax protester actions, making monetary claims against IRS personnel and filing a lien against the agents' real and personal property.  He was indicted for tax obstruction and another crime, 18 USC § 1521, here, for filing a false lien.

At trial, the court gave a standard tax obstruction instructio, first listing the elements of the crime as follows:
First: The defendant in any way corruptly; 
Second: Endeavored to; 
Third: Obstruct or impede the due administration of the Internal Revenue Laws.
After listing the elements, the trial court defined some of the terms in the elements (emphasis supplied):
"Endeavor" means to knowingly and intentionally make any effort which has a reasonable tendency to bring about the desired result. It is not necessary for the Government to prove that the "endeavor" was successful. 
To act "corruptly" is to act with the intent to gain an unlawful advantage or benefit either for oneself or for another. 
To "obstruct or impede" is to hinder or prevent from progress; to slow or stop progress; or to make accomplishment difficult or slow. 
The phrase "due administration of the Internal Revenue laws" means the Internal Revenue Service of the Department of the Treasury carrying out its lawful functions to calculate and collect income taxes.
The trial court did not define "unlawful" which is a term used in the definition of "corruptly."  The defendant wanted it defined.  The sets the stage, so now I include excerpts (in these excerpts except for the footnote number the excerpts are my to draw the readers' attention):
At trial, defense counsel did not challenge the accuracy of these instructions but argued that the court should add a definition of unlawful (which appears in the definition of corruptly). He stated that "the definition of unlawful in the Tenth Circuit is, 'with the specific intention to do something the law forbids'" and that "an alternative definition of unlawfully would be violation of a known legal right." Id., Vol. 3 pt. 3 at 359. Also, quoting United States v. Winchell, 129 F.3d 1093 (10th Cir. 1997), he said that he would accept as the definition: "'[a] voluntary, intentional violation of a known legal right.'" Id. at 360. When the government pointed out that Winchell was defining willful, not unlawful, defense counsel asserted that "unlawful and willfulness converge in this instance," but offered that he would be "happy to defer to any other definition of unlawfulness, which the Tenth Circuit set out in Winchell." Id. at 361. The court ended the discussion by saying, "I don't think we need a definition of unlawful." Id. On appeal Defendant argues that unlawful should have been defined and that he could be guilty of violating § 7212(a) only if his acts were an "intentional violation of a known legal duty." Aplt. Br. at 39 (italics omitted). 
Insofar as Defendant is arguing that the word unlawful in the instructions should have been defined, we disagree. The meaning of unlawful is common knowledge and ordinarily does not need to be defined. See Atchison, Topeka & Santa Fe Ry. Co. v. Preston, 257 F.2d 933, 937 (10th Cir. 1958) ("[A] court is not required to define words and phrases which are familiar to one of ordinary intelligence."). We note that the Tenth Circuit Criminal Pattern Jury Instructions repeatedly use the word unlawful but never define it, and the Tenth Circuit case adopting the instruction used at Defendant's trial saw no need to define it. See Winchell, 129 F.3d at 1098. Defendant cites no authority requiring it to be defined or defining it as he proposes. 
Perhaps Defendant is trying to argue something a bit different from the failure to define unlawful and is simply asserting that the instructions did not impose the proper mens rea requirement. This alternative argument is suggested by his reliance on Cheek v. United States, 498 U.S. 192 (1991). In Cheek the issue was the meaning of willfully as used in 26 U.S.C. § 7201 and 26 U.S.C. § 7203. Id. at 194. The Supreme Court concluded, using the language Defendant would have liked in his jury instruction, "that the standard for the statutory willfulness requirement is the voluntary, intentional violation of a known legal duty," id. at 201 (emphasis added) (internal quotation marks omitted), and that a defendant can overcome this requirement by showing that he acted in the good-faith belief that he was complying with the law, even if the belief was not objectively reasonable, see id. at 203-04. 
The problem for Defendant is that § 7212(a) does not use the word willfully. Cheek was not a constitutional decision requiring a particular state of mind before one could be convicted of a tax offense. It was interpreting statutory language—language not present in § 7212(a). No decision of the Supreme Court, or of this court, has held that Defendant's suggested mens rea requirement is the mens rea required for violation of § 7212(a). Nor is there any compelling reason to believe that Congress wanted the Cheek standard to apply to § 7212(a). Rather than using the word willfully, it used corruptly to define the mens rea for § 7212(a). And the federal appellate courts have agreed (although with some insignificant variations in language) on the definition of corruptly that appears in the district court's instruction: "To act 'corruptly' is to act with the intent to gain an unlawful advantage or benefit either for oneself or for another." R., Vol. 1 at 222. See United States v. Floyd, 740 F.3d 22, 31 (1st Cir. 2014) (collecting cases); United States v. Crim, 451 F. App'x 196, 201 (3d Cir. 2011). 
Moreover, the definition of willfully in Cheek and the definition of corruptly in the instructions in Defendant's trial have much in common. Indeed, the Second Circuit has suggested that an instruction like the one here "was as comprehensive and accurate as if the word 'willfully' was incorporated in the statute." United States v. Kelly, 147 F.3d 172, 177 (2d Cir. 1998). If there is something missing or ambiguous in the "corruptly" instructions that could be cured only by using the language taken from the definition of willfully, Defendant needed to point that out to the district court. On appeal, Defendant argues (at least indirectly) that what is missing from the instructions at his trial (and is conveyed in the language "intentionally violated a known legal duty," Aplt. Br. at 42) is that the jury, although instructed that he must have acted "with the intent to gain an unlawful advantage or benefit," was not told that it must find that he knew that the advantage or benefit was unlawful. Id. at 38.  But that is not the argument made by Defendant at trial. Defense counsel's brief argument to the district court consistently framed his concern in terms of the need to define unlawful, ending with the statement, "So I'm happy to defer to any other definition of unlawfulness, which the Tenth Circuit set out in Winchell." R., Vol. 3 pt. 3 at 361. (The reference to Winchell is puzzling because that opinion defined corruptly in essentially the same language as the instructions at Defendant's trial and did not define unlawful. See 129 F.3d at 1098-99.) We can hardly expect a trial judge to infer that defense counsel is making a mens rea argument when counsel insists that he just wants the word unlawful to be defined in the instructions. The patient, experienced, and highly intelligent trial judge in this case certainly did not understand the argument as Defendant presents it on appeal, concluding the discussion with the ruling, "I don't think we need a definition of unlawful." R., Vol. 3 pt. 3 at 301. 
Because Defendant's argument at trial did not alert the district court to the argument raised on appeal, we review the appellate argument under the plain-error standard. See United States v. Bedford, 536 F.3d 1148, 1153 (10th Cir. 2008). To establish plain error, Defendant must show "(1) there was error, (2) that is plain, (3) that affects substantial rights, and (4) that seriously affects the fairness, integrity or public reputation of judicial proceedings." Id. (internal quotation marks omitted). We need not resolve whether the "corruptly" instruction was flawed. We leave to another day whether a conviction under § 7212(a) requires that the defendant knew that the advantage or benefit he sought was unlawful and, if so, whether the instruction here would adequately inform a jury of that requirement. On this appeal it is enough that the second requirement of plain-error review (that the error be plain) is not satisfied. Although, as previously noted, the instructions used by the district court are in common use, Defendant has not cited any decision, much less a decision by this court or the United States Supreme Court, holding that they are improper in a § 7212(a) prosecution. See United States v. Fishman, 645 F.3d 1175, 1193 (10th Cir. 2011) ("In general, for an error to be contrary to well-settled law, either the Supreme Court or this court must have addressed the issue." (internal quotation marks omitted)). 
Defendant argues that he has at least shown that the elements of § 7212(a) are doubtful and that therefore the rule of lenity requires that we interpret the statute in his favor. But that rule cannot overcome the requirements of plain-error review. The doubt required for the rule of lenity must be doubt raised by an adequately preserved argument. Otherwise, the second prong of plain-error review (that the appellant show that the alleged error was plain) would be eviscerated. See United States v. Ruiz-Gea, 340 F.3d 1181, 1188 (10th Cir. 2003) ("When the choice between two possible meanings of a statute is so open to debate that the rule of lenity comes into play, one can hardly say that either interpretation is plainly wrong."). 
Finally, Defendant raises snippets of what may be arguments supporting his proposed instruction. But the arguments were not raised in district court and are not properly presented in his opening brief on appeal. We therefore reject them. See Bronson v. Swensen, 500 F.3d 1099, 1104 (10th Cir. 2007) ("[W]e routinely have declined to consider arguments that are not raised, or are inadequately presented, in an appellant's opening brief."); McDonald v. Kinder-Morgan, Inc., 287 F.3d 992, 999 (10th Cir. 2002) ("It is clear in this circuit that absent extraordinary circumstances, we will not consider arguments raised for the first time on appeal."). n1
   n1 Defendant's counsel at oral argument said that he was also challenging the rejection of his proposed good-faith instruction on § 7212(a). But Defendant did not make that argument in his opening brief. On the contrary, he summed up his § 7212(a) argument by saying, "For the same reasons the evidence supported the giving of a good faith jury instruction with respect to the § 1521 charge, as discussed above, the evidence supported the district court instructing the jury that to convict Mr. Williamson of violating § 7212(a) it had to find he intentionally violated a known legal duty." Aplt. Br. at 42 (citation omitted). We do not address arguments that "are not raised, or are inadequately presented, in an appellant's opening brief." Bronson, 500 F.3d at 1104.
So, if I read the opinion correctly, the Court articulated the argument very well, but apparently rejected it because the error was not "plain."  The defendant had not properly articulated the argument to the trial court.  Perhaps, we trial lawyers can learn from the case and get a different -- better -- result in the next case where the opportunity arises.


  1. The sorry state of U.S. tax dodging multinationals...........
    Two major reports are worth highlighting here. First, and most recently, from the U.S. Permanent Subcommittee on Investigations (via Senator Carl Levin), a report on tax avoidance by U.S. multinational Caterpillar:

    “Caterpillar Inc., an American manufacturing icon, used a wholly owned Swiss affiliate to shift $8 billion in profits from the United States to Switzerland to take advantage of a special 4 to 6
    percent corporate tax rate it negotiated with the Swiss government and defer or avoid paying $2.4 billion in U.S. taxes to date, a new report from Sen. Carl Levin, the chairman of the U.S. Senate Permanent Subcommittee on Investigations shows.”

    As usual, the market-corrupting activities of accountancy firms were in full evidence:

    “Caterpillar paid over $55 million to PricewaterhouseCoopers (PWC), one of the largest accounting firms in the world and Caterpillar’s longtime auditor, to develop and implement the
    Swiss tax strategy, which was designed explicitly to reduce the company’s taxes.”

    That is the deliberate corruption of markets by accountancy firms (and other enablers): it isn’t bribery or other forms of corruption, but I view the facilitation of tax abuses as corruption.

    Second, and more broadly, a major report in February by Citizens for Tax Justice into corporate tax avoidance and tax evasion, entitled The Sorry State of Corporate Taxes: What Fortune 500 Firms Pay (or Don’t Pay) in the USA And What they Pay Abroad — 2008 to 2012. It’s another humdinger, if that’s the right word for it.

    Among other things, it shows that the highly financialised U.S. multinational General Electric paid an effective tax rate of MINUS 45 %, on average, during the three (out of five) years where it had no net tax bill. Over the full five years, its average tax bill was minus 11 percent.

    The point I like to make repeatedly is that under the pressure of Tax Wars (traditionally
    known as tax competition), effective corporate tax rates do not stop once they reach zero: they keep on going downwards. The subsidy hogs get greedier and greedier.

    The sad thing is: from the point of view of individual countries trying to engage in tax wars, it’s absolutely pointless. And that’s not to mention the even more pernicious global systemic effects.

  2. Yes you are right ! Notwithstanding a critical Treasury watchdog report questioning the
    readiness of the IRS, Commissioner Koskinen promised that his agency
    would be ready. Now 9 days later and we are beginning to question just how

    Recently the IRS issued the FATCA form for banks, Form 8966. Unfortunately, the form has no instructions. With less than 90 days before the new law kicks in, banks are getting restless. Banks must spend millions to upgrade their computer systems to handle the new FATCA data requirements. With less than 3 months to go, the IRS still hasn’t fully explained what information is needed and how it must be reported.

    The FATCA Form 8966 isn’t the only banking form still not finalized. The W8-BEN-E form, which is the Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting, still doesn’t have instructions. The IRS website says they will be available “soon.” (lol...)

    The W8-BEN-E form is quite complex and is 10 pages long. Banks are angry that by the time the IRS finally issues instructions there simply won’t be enough time to reprogram their computers and design effective compliance procedures.

    To summ it up : no instructions, no guidance and very little time to comply with the law but a lot of frustration and uncertainty.

  3. On a personal level this is what FATCA has wrought.

    All my foreign accounts have been declared. I want to keep them because of family in Europe (including Switzerland.) I a a US citizen and resident.

    After two dozen emails, a dozen phone calls, and four meetings at banks in Switzerland plus two othe EU countries I have found one bank that will take me ... for how long I don't know. Again the money is declared and account information will be reported through FATCA.

    No Swiss bank I know of wants me. CS and UBS have told me they have a $1 million minimum, fees of over 1.5% (that's $15,000 per year) and I am limited in how much of my mney I can put into stocks or similar investments -- not too much since Uncle Sam doesn't want me to take too many risks with my money.

    The first two things I say to any bank I cannis that I am a US citizen resident in the US.

    Following is my experience in banks in two EU countries, after many many calls:

    Bank 1 said that was ok, but when I showed up to the appointment they said the info they gave me was wrong.

    Bank 2 told me that I could only open a Euro account and would find out whether I could hold stocks or mutual funds. A day later they said no, that even a Euro account was out of the question since they wrre considering closing all US citizen accounts.

    Bank 3 wanted a ton of proof about source of funds, tax returns, etc. I would have had to go back to the US, gather the info, mail it to them, then if they decided to open the account I would have had to fly back to Europe to do so.

    Bank 4 at first told me I could open an account. When I called back to schedule an appointment they said no, I had to be resident of that country.

    I traveled several hours by train to Bank 5. They opened the account. However they are so scared of the US that they refuse to have any communication (mail, phone, fax, internet) with me to or from the US. Even though they will report info to the IRS through FATCA they will not send me that information to the US! I will have to travel to the bank every year to collect the information.

    This bank is several hours away by train from Switzerland but hey beggars can't be choosers.

  4. Interesting precedent out of the Netherlands where the Dutch Board for the Protection of Human Rights ruled AGAINST FATCAs nationality discrimination.

    The American X has lived in the Netherlands since 1970 and also has US
    citizenship in addition to Dutch. He had an investment account with
    BinckBank (“Alex”). On December 1, 2013 BinckBank ended the relationship
    because X had not shown that he is not liable for taxes in the United
    States. X approached the Netherlands Institute for Human Rights to claim
    that BinckBank engaged in unlawful discrimination due to citizenship.
    BinckBank argued that it had terminated all 150 US customers who met the
    definition of “US Person”, used by the US Internal Revenue Service
    (IRS), because it refused to comply with requirements resulting from the
    planned Dutch legislation in response to the US Foreign Account Tax
    Compliance Act (FATCA) to provide all transactions and historical
    transaction data by US Persons to the Dutch Tax Authorities. According
    to BinckBank the discrimination was based on a generally binding
    regulation, because the agreement on December 18, 2013 between the
    Netherlands and the US Intergovernmental Agreement (IGA) for the
    implementation of FATCA forced it to do so . The Institute left open the
    question whether the IGA was a generally binding regulation because the
    IGA did not require BinckBank to close its customer accounts because of
    their US citizenship The Board also rejected the appeal by BinckBank
    for reasonableness and fairness, as the broad obligations required by
    FATCA brought disproportionately heavy costs. The law, in the General
    Equal Treatment Act (Equal Treatment Act), explicitly states that direct
    discrimination on grounds of citizenship was not only prohibited,
    except for exceptions included in the Equal Treatment Act itself.
    Honoring the appeal made by BinckBank on reasonableness and fairness
    would be contrary to the closed system of the Act. The Board concluded
    that BinckBank had engaged in unlawful discrimination in the provision
    of services on grounds of citizenship.”

    More on the ruling is available here:

    This story is obviously good news for people in the Netherlands. It is interesting to note that the account in question is described as an investment account that “engages in online buying and selling orders for investors,” since U.S. persons have been shut out of such accounts even in countries where savings, mortgage and checking account closures seem
    to be less common..
    The detailed arguments make clear that there are some exemptions in Dutch law for discrimination on the basis of national origin and that the bank was arguing its case on this basis:

    Google translates the material as follows:.
    Direct discrimination is prohibited, unless one of the exemptions listed in Article 2, paragraph Equal Treatment Act applies. This subsection provides that the prohibition of discrimination on grounds of nationality shall not apply if the discrimination is based on generally
    binding regulations or on written or unwritten rules of international law. The prohibition of discrimination on grounds of nationality shall also not in cases where nationality is decisive.”
    I suspect that the last sentence actually is something more along the lines of “Nor does the prohibition against discrimination based on nationality apply in cases in which nationality is determinative”

  5. US Securities Industry complains that the July 1st FATCA deadline can’t be reasonably met. Will the US industry get what the US refuses to extend to those ‘foreign’ bodies?

    ‘SIFMA seeking relief from FATCA deadline; Looming July 1 implementation deadline raises concerns’

    By James Langton | April 21, 2014 15:40
    “The U.S. securities industry is requesting relief from the forthcoming FATCA deadline, citing the operational challenges facing the industry, and warning this could disrupt financial markets.
    The Securities Industry and Financial Markets Association (SIFMA) said Monday that it has submitted a letter to officials at the U.S. Department of Treasury and the Internal Revenue Service (IRS) requesting targeted relief from the July 1 implementation deadline for the Foreign Account Tax Compliance Act (FATCA).”………….
    April 17, 2014
    ‘SIFMA Submits Comments to the US Treasury and the IRS Requesting FATCA Transitional Relief’

  6. With regards to the title of this blog post I find it kind of scary that so far this so called "new international standard" has only the support of 24% of the world.
    Besides the three large economies of Russia, China and India, the FATCA
    compliant list comprises only 49 of the 198 officially recognised states
    in the world.

  7. A blog site I hadn’t seen before (from Hong Kong):

    Great visuals and links to lots of articles/sites; not certain how up to date it is but sure is eye-catching.

  8. Latest from Carl Levin on Russia and FATCA

  9. FATCA causes foreign banks to discriminate against Americans. That has nothing to do with the tax system. Just for info... I spoke with someone last weekend about her situation.
    She is a US Person and fully compliant. Not rich, not poor – just an average person. She got a note from her bank (Declaration to Certify Compliance with Tax Obligations) which I have copies of. They FROZE her accounts until she could provide a few year’s worth of FBARs and they were asking for proof that they had been submitted and received. To my knowledge it’s only in the past year that we got any proof of filing. What a mess. I could not believe it.

    Moving to France, I’m hearing from duals (Franco-Americans). Lot of duals are sitting tight and not doing anything (not filing, not bringing any attention to themselves). One fellow I spoke to said, “I’m French and I’m only French in France” so he wasn’t worried at all. Others are concerned but have a lot of faith in the French Republic – France is known for protecting its citizens. A letter I was sent from one of my reader from his/her bank seems to indicate that some banks are indeed taking that path. The person asked the bank directly if he/she fell under FATCA and the bank answered, “This is only for Americans and French living in the US” and therefore none of this applies to you. This person is French/American.

    I’m watching this very closely. The signs (the tea leaves I’m reading) seem to point toward dual nationality having a protective effect in some places. That would make sense. So does that mean that the best First Step for any American living abroad right now is to apply for citizenship ASAP in the host country? And then sit back and watch what happens. Is this already the strategy of choice for those who aren’t quite ready to renounce? Looks like it.

  10. Many "experts" see FATCA solely as the battering ram that opened up the bank secrecy
    jurisdictions, something the OECD had been trying to do for years. Like a lot of people, they hear FATCA and think FATCAT.
    They are decent people, but I don’t think in their wildest dreams they could imagine how badly FATCA has been implemented. In the U.K., there is a crackdown on offshore accounts and the government has put out loads of ads raising public awareness that they need to come clean IAs for FATCA, I can’t ever remember seeing anything even in the international arrival halls from the IRS. My parents has never seen any ads in the Wall Street Journal.
    If the equality experts understood that the U.S. tax law affects far more than the 1% and can take money from foreign benefits, scholarships,and savings plans for disabled people, they would be shocked. If they understood that middle class people without access to workplace pensions had lost their gains because of the treatment of PFICs, they would be appalled. Avoiding the ISA while working in London would be painful. Cutting one of your ways to save tax efficiently off.
    They just don’t know FATCA’s full effects yet as well as we know FATCA. FATCA is a badly written law. It hasn’t really hit Britain yet (still running into people who don’t know what’s coming 1 July). I give it a year tops before attitudes change,…

  11. So FATCA is exposed in that letter as what it is – extortion and a
    weapon of economic destruction. Levin refers to FATCA’s “SANCTIONS”.
    This is not a voluntary multilateral or bilateral mutual exchange of tax
    related information as the US deliberately pretends. FATCA = SANCTIONS.
    FATCA = an economic weapon. For Levin to deliberately and frankly mix
    US extraterritorial tax policy with foreign affairs demonstrates that.
    If it weren’t for the ‘quaint’ ‘peculiar’ institution of US CBT, FATCA
    wouldn’t work at all, and they’d have to rig some other kind of

    How the rest of the globe doesn’t raise the issues of FATCA as a
    deliberate way to tip the scales to giving US FIs and nonFI’s an
    advantage while burdening everyone else, plus making all the worlds’
    taxpayers pay the implementation and maintenance costs, and holding us
    all for ransom is becoming increasingly absurd.

  12. This is speculative, and “considering” can mean anything, but I am noting it here for the record :

    ‘IRS Has Received Many Requests to Delay FATCA; Prepares Technical Corrections to Regulations’

    “The IRS is “considering” many requests to delay the July 1, 2014, effective
    date of the Foreign Account Tax Compliance Act (FATCA) (P.L. 111-147), a
    mid-level Service official said on April 30 during a webcast sponsored
    by the American Bar Association, Section of Taxation..”………….

  13. House Finance Committee Q&A today on FATCA

  14. As expected : IRS Announces That Tax Rules for Overseas Banks Will See Light Enforcement In the Next 2 Years!

    IRS Notice 2014-33 announces that calendar years 2014 and 2015 will be regarded as a transition period for purposes of IRS enforcement and administration with respect to the implementation of FATCA by withholding agents, foreign financial institutions (FFIs), and other entities with chapter 4 responsibilities, and with respect to certain related due diligence and withholding provisions under chapters 3 and 61, and section 3406.

    This notice also announces certain intended amendments to the regulations under sections 1441, 1442, 1471, and 1472, including amendments providing that a withholding agent or FFI may treat an obligation (which includes an account) held by an entity that is opened, executed, or issued on or after July 1, 2014, and before January 1, 2015, as a preexisting obligation for purposes of sections 1471 and 1472, subject to certain modifications set out in the notice.

    Taxpayers may rely on Notice 2014-33 regarding these proposed amendments to the regulations prior to their issuance.

    Notice 2014-33 will be published in Internal Revenue Bulletin 2014-21 on May 19, 2014.

  15. In todays WSJ .... see below excerpts from “Banks Get Break on New Tax-Evasion Enforcement”.

    1) “A former IRS adviser who helped write the Fatca legislation, J.
    Richard Harvey, said the delayed enforcement ultimately could help the
    regulatory effort, by helping to avoid a failed launch.

    “If the first several months are a disaster, it could lead to calls
    for its repeal,” said Mr. Harvey, now a Villanova University law
    professor. “By signaling they will ease enforcement, they are hopefully
    taking some of the pressure off the initial implementation.” ”

    2) “Already, the law’s requirements have led some global banks to
    drop U.S. customers. In a letter reviewed by The Wall Street Journal,
    Deutsche Bank is asking U.S. clients of its operations in Belgium to
    close their accounts with the German bank and transfer them to rivals in
    a move to comply with the U.S. rules. The bank said it regrets having
    to terminate client relationships in what it called a consequence of
    Fatca implementation.

    The bank said in its letter that because “it is no longer allowed to
    use Internet, email, phone or fax to serve retail clients” who are U.S.
    taxpayers with accounts in European branches, a business relationship is
    untenable in countries where it has only a limited number of branches.
    Deutsche Bank is organized in Belgium in a way that compels clients to
    use online banking and call centers for their daily banking needs since
    it has only 34 branches in the country, said a bank spokesman.

    Treasury officials said Deutsche Bank is misinterpreting the rules,
    adding that the law doesn’t prohibit banks from providing online banking
    or phone services to customers.”

  16. After Canada ,now Republicans Overseas Will Be Launching Legal Challenge to FATCA.....
    The irony is that the greatest non-partisan effort being made by any group of Americans will be from abroad.
    “Michael George DeSombre was elected Chairman of Republicans Abroad Hong Kong in December 2012 after serving on the board as vice-Chairman since 2008. Mr. DeSombre is a partner of Sullivan & Cromwell, a global law firm headquartered in New York, and has been resident in Hong Kong since 1997.”


    As much as I dislike FATCA, I don’t think it can be successfully challenged in court. The enforcement of IGAs by countries on their own residents might be unconstitutional in those countries, because it would be a recognition of US sovereignty over them and discrimination based on nationality, but I don’t think it’s unconstitutional from the US point of view. If it’s a violation of privacy, then so are the myriad of other reporting requirements. I don’t think a court would rule that FATCA is against the 4th amendment.

    The FBAR penalties are another story. These are obviously unconstitutional under the 8th amendment, and there is already a clear judicial precedence (United States v. Bajakajian). The problem is that only someone who was actually charged the draconian penalties can
    challenge them in court.
    CBT is also different. I did some research and wrote my opinion that it is unconstitutional, and why it does not conflict with Cook v. Tait.
    I praise Republicans Overseas for their initiative, but I think they are focusing on the wrong spot. I even wonder if they are just making a scene to get votes and donations from Americans abroad. Challenging FATCA in court won’t get anywhere, and even if it’s successful, it won’t really solve the problem. If they want to use the courts, I suggest they challenge CBT instead.

  17. ‘Superlawyer Jim Bopp takes on McCain-backed tax act that targets Americans overseas’

    …..”…Mr. Bopp, as general counsel to Republicans Overseas, presented to its
    board two other constitutional objections: violation of the Eighth
    Amendment’s prohibition against unusual punishment in the form of
    gargantuan monetary penalties and violation of the 14th Amendment’s ban
    on unreasonable search and seizure of the financial assets of Americans

    Lots of interesting details (consitutional issues and FATCA, expatriations, etc.) in this story;

  18. I keep reading that there are 50 IGAs in place..... that is not correct !
    30 are deemed and VERY FEW have actually been approved by Parliaments

    Here is the link to the Original BIG STORY as they characterize it.

  19. The tweet that was sent out by Michael DeSombre (“Republicans Overseas will be launching legal challenge to FATCA”) did not mention that funds need to be raised for the U.S. legal challenge. I expect that the Republicans will be successful in raising the monies. My understanding is that there will be a separate organization related to Republicans Overseas raising these funds – similar to the Canadian “ADCS/ADSC”.

    Irrespective of whether you like Republicans, or worry about their motives, the world will better off if either Republicans Overseas or ADCS/ADSC is successful in killing the bad FATCA law.
    Jim Bopp, the mean bulldog lawyer who would lead the charge mentions here some (but not necessarily all) of the U.S. laws that might be contradicted by FATCA:
    Mr. Bopp told The Times that he plans to attack the act on three legal grounds: that it violates the Senate’s sole possession of foreign treaty power, the Eighth Amendment’s ban on cruel or unusual punishment and the 14th Amendment’s personal privacy guarantee.
    Some research convinced Mr. Bopp that the act violates the treaty powers that the Constitution grants members of the U.S. Senate. The U.S.government has forged agreements with foreign governments to have their banks reveal all financial matters about their American customers or face huge penalties.

    These country-to-country agreements are in effect treaties but ones that no U.S. department or agency bothered to seek the U.S. Senate’s advice on or approval for, he plans to argue.

    Finding senators to serve as plaintiffs in a drive to get the Supreme Court to acknowledge the act’s unconstitutionality is task No. 1 for Mr. Bopp and the board of Republicans Overseas.
    Republicans Overseas now wants a litigation vs. legislative approach:
    “Seeking legal rather than legislative remedy on behalf of Americans living abroad before the scheduled July 1 full implementation of the law is the only available course for now,” said Solomon Yue, the Republicans Overseas chief operating officer and an Oregon RNC member.

    The Republican Overseas position differs from that of Republican Senator McCain and Democrat Levin:

    Mr. McCain and Mr. Levin see it differently. They not only want to sustain the law, but they also want to strengthen it.

    In a joint report by their Senate permanent subcommittee on
    investigations, the two lawmakers signed on to a call for “the U.S.
    Treasury and the IRS [to] close gaping loopholes in FATCA that have no statutory basis.”

  20. FATCA or how do you destroy a banking system.
    Think about it like this: imagine that the King of Saudi Arabia decreed that NO grocery store chain in the United States was allowed to sell pork products to citizens of Saudi Arabia.
    Crazy, right? Arrogant? Of course.
    But that’s essentially what the US government has done.
    The US government seems to be going OUT OF ITS WAY to destroy the advantages of the current system.
    Uncle Sam is practically begging the rest of the world to create an alternative banking system that doesn’t depend on Wall Street or the US government.
    And this alternative system is already forming. More and more nations are starting to engage in currency swap arrangements, and banks around the world are setting up their own network of interbank accounts.
    If the US banking system loses its prominence, suddenly the dollar becomes less relevant. As the dollar becomes less relevant, then US Treasuries less relevant.
    And if foreigners lose interest in US Treasuries, who will buy that slice of the US government’s debt ? Jack, keep watching my Avatar and the $/CHF

    Another door closing for US persons… pretty soon… only place will be UBM… Under Bed Mattress.

  21. UStax,

    As is often the case, you make some good points but you shroud them in rhetoric about what you perceive as the injustice of the US initiatives. The basic shape of those initiatives is here to stay, however much you and others wish otherwise and proclaim otherwise loudly and regularly.

    That is not a statement that I endorse these initiatives. That is simply a statement that they have traction.

    At this point, I think the best those who do not like the initiatives is to try to offer comments that the policy makers who read the comments can fine-tune the initiatives. But the permanence of the initiatives, subject to fine-tuning, is a given. They are not going away.

    Jack Townsend

  22. Jack, I think you make a good point and one that many individuals involved in the "offshore tax" debate would be well advised to consider. The reality is, as bad a law as FATCA may be, for most people, its repeal would have little effect, because it doesn't address the inherent biases in US tax law against anything offshore and the unwillingness of the IRS/policy makers to come up with a reasonable/non-punitive approach to bringing people into compliance.

  23. ....."you make some good points but you shroud them in rhetoric about what you perceive as the injustice of the US initiatives"......
    Jack you are free to express your opinion about my posts and comments but unfortunately that is all that it is or ever will be - just YOUR opinion.

  24. I wanted to call your attention to the proliferation of adherence to what I would call FATCA “lite”. A large proportion of FFIs, I believe, are seeking to become FATCA compliant by implementing the client onboarding procedures (which is comparatively inexpensive) but not implementing the reporting procedures (which is vastly more expensive). Of course, to pursue this strategy, they can’t have any US person customers.

    I’ve been keeping score in the UK in relation to the availability of online investment account. Having read through the account terms and conditions of 30 some providers, 15 have outright bans on US person customers (including for accounts that are “exempt” under the UK/US IGA and therefore have no reporting like Individual Savings Accounts and Self Invested Pension Plans), 14 haven’t updated their terms and conditions to refer to things like US personhood or W-9s and precisely 1accepts US citizens.

    One further provider has told me they will accept US persons but haven’t reflected it in their terms and conditions or account opening application. So, nearly 90% (15/17) of those that have clarified whether they will implement FATCA “lite” or FATCA (including reporting) have opted for FATCA “lite” and implemented US person bans.
    Any US person discovered at those online investment account providers that have implemented US person bans will have their account frozen and possibly subject to forced liquidation.

  25. The data revolution


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