NEW YORK, Feb 5 (Reuters) - Texas and Florida bankers’ groups are appealing the dismissal of a lawsuit they brought last year challenging rules meant to help the government implement the Foreign Account Tax Compliance Act (FATCA), a law aimed at combating offshore tax evasion.
Enacted in 2010 and set to go into effect in July, FATCA will require foreign banks to disclose to the U.S. government information about Americans’ accounts worth $50,000 or more.
In a reciprocal information-sharing effort, the Internal Revenue Service also wrote rules requiring U.S. banks to disclose information about U.S. accounts held by many foreigners that earn at least $10 of interest per year.
In a lawsuit filed in April 2013, the Florida Bankers Association and Texas Bankers Association challenged those rules aimed at U.S. banks as burdensome and an obstacle to foreign investment in the United States.
The information provided by the U.S. banks to the IRS would be made available to about 70 foreign governments as part of a global regime of information-sharing meant to combat the hiding of assets from tax authorities.
FATCA’s success depends in part on reciprocal information sharing by U.S. banks. Legal experts have said that the bankers’ associations’ lawsuit, if successful, could undermine the government’s ability to negotiate FATCA implementation agreements with other countries.
In a win for the U.S. government, Judge James Boasberg of the U.S. District Court for the District Columbia last month dismissed the banking groups’ lawsuit, finding that the rules would impose “minimal burden” on the banks and their customers.
In a court filing on Tuesday, the bankers’ associations said they were appealing to the District of Columbia Court of Appeals.
Lawyers for the associations, the Treasury Department and IRS could not immediately be reached for comment.
In a statement, the bankers’ groups said the rules are a “sweeping change” in the way the government treats individuals wanting to invest in the United States.
The rules have already resulted in the outflow of $500 million from the Texas banking system, Eric Sandberg, president of the Texas Bankers Association, said in the statement.
FATCA has come under heavy attack from libertarians and congressional Republicans, who have criticized it as government overreach and an invasion of financial privacy.
The Republican National Committee last month called for its repeal, saying it would create a costly layer of bureaucracy, cause capital flight and hurt the U.S. economy.