U.S. judge tosses bankers' suit over rules to fight tax-dodging

WASHINGTON Mon Jan 13, 2014 8:42pm EST

WASHINGTON Jan 13 (Reuters) - In a win for the Obama administration's fight against offshore tax evasion, a U.S. federal judge on Monday dismissed a lawsuit challenging new rules forcing U.S. banks to tell the Internal Revenue Service about certain accounts held by foreigners.

Set to take effect in March, the rules are part of a fast-emerging global web of bank information-sharing agreements between the United States and many other countries meant to combat the hiding of assets abroad to avoid paying taxes.

Bank industry lobbying groups in Texas and Florida in April challenged the U.S. rules in a lawsuit against the Treasury Department and the IRS, saying the rules were burdensome and would discourage U.S. foreign investment.

Judge James Boasberg of the U.S. District Court for the District of Columbia, in a 23-page opinion, dismissed the lawsuit, finding that the new rules "would cause minimal burden to banks and their customers."

Written in 2012, the rule would require disclosure by U.S. banks of information about accounts held by non-resident aliens that earn at least $10 of interest per year.

"The court's opinion today represents an important step in our commitment to work with our treaty partners to eliminate cross-border tax evasion," said Assistant Attorney General Kathryn Keneally, head of Justice's tax division, in a statement.

A lawyer representing the banking associations could not immediately be reached late on Monday.

The new reporting requirements help the United States implement the Foreign Account Tax Compliance Act (FACTA), the Justice Department said.

Approved by Congress in 2010, FATCA is driving the rapid worldwide expansion of a network of bilateral tax information-sharing agreements, negotiated by the U.S. Treasury and its overseas counterparts amid heightened global concern about tax dodging. FATCA is set to take effect in July 2014.

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

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Comments (3)
SteveKlaus wrote:
What a ‘win’ – while the judge may be legally correct, Congress is to blame for allowing the Obama administration to take actions that will clearly harm the economy in terms of foreign owned money being deposited in US banks. FATCA, GATCA and citizenship based taxation (verus the world standard being residence based taxation) will do more to harm both the economy and the lives of innocent US citizens abroad and Congress is just standing by and letting it happen and be driven by Obama’s progressive policies.

Jan 13, 2014 10:20pm EST  --  Report as abuse
SteveKlaus wrote:
What a ‘win’ – while the judge may be legally correct, Congress is to blame for allowing the Obama administration to take actions that will clearly harm the economy in terms of foreign owned money being deposited in US banks. FATCA, GATCA and citizenship based taxation (verus the world standard being residence based taxation) will do more to harm both the economy and the lives of innocent US citizens abroad and Congress is just standing by and letting it happen and be driven by Obama’s progressive policies.

Jan 13, 2014 10:20pm EST  --  Report as abuse
CitizenAbroad wrote:
Kathryn Keneally is a former partner at Fulbright & Jaworski, a Washington law firm. According to new reports, she previously defended tax evaders including the family of Philippine dictator, Ferdinand Marcos. She was not Obama’s first choice for this job and was questioned by Congress for her past behavior. It is a poor reflection on the Obama Administration and Congress that she became Assistant Attorney General.

Jan 14, 2014 4:32am EST  --  Report as abuse
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