Banker associations sue U.S. over account reporting rule

NEW YORK Thu Apr 18, 2013 10:34pm EDT

A man walks out of an Internal Revenue Services office after filing his taxes on Tax Day in New York, April 15, 2009. REUTERS/Lucas Jackson (UNITED STATES BUSINESS CONFLICT) - RTXE12W

A man walks out of an Internal Revenue Services office after filing his taxes on Tax Day in New York, April 15, 2009.


NEW YORK (Reuters) - Two state banker associations sued the U.S. on Thursday over new rules requiring banks to report account information for non-resident aliens to their home governments as part of an effort to combat tax evasion.

In a lawsuit filed in the federal court in Washington, D.C., the Florida Bankers Association and the Texas Bankers Association said the rules which went into effect on January 1 unfairly burdened banks while discouraging investments.

The information, collected by the Internal Revenue Service, can be shared with 72 foreign governments, as the United States seeks to work with other countries that provide similar information to the United States to reduce tax evasion.

The lawsuit, which names the IRS and the Treasury Department as defendants, claimed that privacy concerns about exchanging such information with foreign countries is prompting non-resident aliens to withdraw millions of dollars from U.S. banks.

One member bank reported losing $50 million in deposits, according to the complaint.

A spokeswoman for the IRS declined to comment on pending litigation, while a spokeswoman for the U.S. Treasury Department said the lawsuit is being reviewed.

The new rules require financial institutions to provide the IRS with details about any non-resident alien whose account earns at least $10 a year in interest.

The bankers associations said in the lawsuit that the government failed to take account of the rules' economic impact, in violation of federal administrative procedures.

The case is Florida Bankers Association v. U.S. Department of Treasury, U.S. District Court for the District of Columbia, No. 13-529.

(Additional reporting by Sakthi Prasad; Editing by Michael Perry)

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Comments (1)
I think you might be missing the bigger story if there is no mention of FATCA in the text.

This is ALL about compliance complexity and cost of FATCA blowing back on US shores… The

Here, let me point the way…

First of all read the IRS bulletin, 2012-20 that is what these Banks are rightfully complaining about….

I quote…

“Congress supplemented the established network of information exchange agreements by enacting, as part of the Hiring Incentives to Restore Employment Act of 2010 (Public Law 111 -147), provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) that require overseas financial institutions to identify U.S. accounts and report information (including interest payments) about those accounts to the IRS. In many cases, however, the implementation of FATCA will require the cooperation of foreign governments in order to overcome legal impediments to reporting by their resident financial institutions. Like the United States, those foreign governments are keenly interested in addressing offshore tax evasion by their own residents and need tax information from other jurisdictions, including the United States, to support their efforts. 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.”

You can call that a domestic FATCA lite, or DATCA. They are using regulations to get what they can, but that is not enough if they are going to impose a full blown DATCA reciprocity on U.S. Financial Institutions, like they are requiring around the globe with these FATCA inter-government agreements, or FATCA IGAs

Secondly, unreported in the media, is Treasury’s addition of full FATCA reciprocity (DATCA) in the Obama’s 2014 budget Analytical Perspectives: See page 202

“Provide for reciprocal reporting of information in connection with the implementation of the Foreign Account Tax Compliance Act (FATCA).—In many cases, foreign law would prevent foreign financial institutions from complying with the FATCA provisions of the Hiring Incentives to restore Employment Act of 2010 by reporting to the IRS information about U.S. accounts.

Such legal impediments can be addressed through intergovernmental agreements under which the foreign government agrees to provide the information required by FATCA to the IRS requiring U.S. financial institutions to report similar information to the IRS with respect to nonresident accounts would facilitate such intergovernmental cooperation by enabling the IRS to reciprocate in appropriate circumstances by exchanging similar information with cooperative foreign governments to support their efforts to address tax evasion by their residents.

The proposal would provide the Secretary of the Treasury with authority to prescribe regulations that would require reporting of information with respect to nonresident alien individuals, entities that are not U.S. persons, and certain U.S. entities held in substantial part by non-U.S. owners, including information regarding account balances and payments made with respect to accounts held by such persons and entities.”

Now, the question is, will Congress go along with the desire of Treasury to have more regulatory authority to impose full FATCA reciprocity (DATCA) on the U.S. financial industry?

FATCA begets DATCA begets a global GATCA.

That is the real story here, and this suit is just the opening salvo of the financial industry pushing back, and you are missing it…

Apr 19, 2013 11:14pm EDT  --  Report as abuse
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