Reviewing the Unintended Consequences of the Foreign Account Tax Compliance Act Hearing
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REVIEWING THE UNINTENDED CONSEQUENCES OF THE FOREIGN ACCOUNT TAX COMPLIANCE ACT HEARING BEFORE THE SUBCOMMITTEE ON GOVERNMENT OPERATIONS OF THE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM HOUSE OF REPRESENTATIVES ONE HUNDRED FIFTEENTH CONGRESS FIRST SESSION APRIL 26, 2017 Serial No. 115–45 Printed for the use of the Committee on Oversight and Government Reform ( Available via the World Wide Web: http://www.fdsys.gov http://oversight.house.gov U.S. GOVERNMENT PUBLISHING OFFICE 28–503 PDF WASHINGTON : 2018 For sale by the Superintendent of Documents, U.S. Government Publishing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 11:28 May 14, 2018 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 H:\28503.TXT APRIL KING-6430 with DISTILLER COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM Jason Chaffetz (UT), Chairman John J. Duncan, Jr. (TN) Elijah E. Cummings (MD), Ranking Minority Darrell E. Issa (CA) Member Jim Jordan (OH) Carolyn B. Maloney (NY) Mark Sanford (SC) Eleanor Holmes Norton (DC) Justin Amash (MI) Wm. Lacy Clay (MO) Paul A. Gosar (AZ) Stephen F. Lynch (MA) Scott DesJarlais (TN) Jim Cooper (TN) Trey Gowdy (SC) Gerald E. Connolly (VA) Blake Farenthold (TX) Robin L. Kelly (IL) Virginia Foxx (NC) Brenda L. Lawrence (Ml) Thomas Massie (KY) Bonnie Watson Coleman (NJ) Mark Meadows (NC) Stacey E. Plaskett (VI) Ron DeSantis (FL) Val Butler Demings (FL) Dennis A. Ross (FL) Raja Krishnamoorthi (IL) Mark Walker (NC) Jamie Raskin (MD) Rod Blum (IA) Peter Welch (VT) Jody B. Hice (GA) Matt Cartwright (PA) Steve Russell (OK) Mark DeSaulnier (CA) Glenn Grothman (WI) John P. Sarbanes (MD) Will Hurd (TX) Gary J. Palmer (AL) James Comer (KY) Paul Mitchell (MI) JONATHAN SKLADANY, Staff Director WILLIAM MCKENNA General Counsel JACK THORLIN, Senior Counsel SHARON CASEY, Deputy Chief Clerk DAVID RAPALLO, Minority Staff Director SUBCOMMITTEE ON GOVERNMENT OPERATIONS Mark Meadows, North Carolina, Chairman Jody B. Hice, Georgia, Vice Chair Gerald E. Connolly, Virginia, Ranking Jim Jordan, Ohio Minority Member Mark Sanford, South Carolina Carolyn B. Maloney, New York Thomas Massie, Kentucky Eleanor Holmes Norton, District of Columbia Ron DeSantis, Florida Wm. Lacy Clay, Missouri Dennis A. Ross, Florida Brenda L. Lawrence, Michigan Rod Blum, Iowa Bonnie Watson Coleman, New Jersey (II) VerDate Nov 24 2008 11:28 May 14, 2018 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 H:\28503.TXT APRIL KING-6430 with DISTILLER C O N T E N T S Page Hearing held on April 26, 2017 .............................................................................. 1 WITNESSES The Hon. Rand Paul, Senator from Kentucky Oral Statement ................................................................................................. 1 Mr. James Bopp, Jr., Attorney, The Bopp Law Firm, PC Oral Statement ................................................................................................. 7 Written Statement ............................................................................................ 10 Mr. Mark Crawford, Director, AKSIONER International Security Brokerage Oral Statement ................................................................................................. 38 Written Statement ............................................................................................ 40 Mr. Daniel Kuettel, (Former U.S. Citizen Living in Switzerland who Re- nounced his U.S. Citizenship due to FATCA) Oral Statement ................................................................................................. 51 Written Statement ............................................................................................ 53 Ms. Elise Bean (Former Staff Director for Sen. Carl Levin (D–MI), Senate Permanent Subcommittee on Investigations) Oral Statement ................................................................................................. 57 Written Statement ............................................................................................ 61 APPENDIX Letter of April 25, 2017, from FACT Coalition submitted by Mr . Connolly ...... 86 Letter of September 15, 2015, to the Treasury Department and IRS submitted by Ms. Maloney .................................................................................................... 91 Taxpayer Advocate Service 2015 Report submitted by Ms. Maloney .................. 94 Response from Mr. Bopp to Questions for the Record .......................................... 104 Response from Mr. Crawford to Questions for the Record ................................... 125 Response from Ms. Bean to Questions for the Record .......................................... 129 (III) VerDate Nov 24 2008 11:28 May 14, 2018 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 H:\28503.TXT APRIL KING-6430 with DISTILLER VerDate Nov 24 2008 11:28 May 14, 2018 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 H:\28503.TXT APRIL KING-6430 with DISTILLER REVIEWING THE UNINTENDED CONSEQUENCES OF THE FOREIGN ACCOUNT TAX COMPLIANCE ACT Wednesday, April 26, 2017 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT OPERATIONS, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. The subcommittee met, pursuant to call, at 2:05 p.m., in Room 2154, Rayburn House Office Building, Hon. Mark Meadows [chair- man of the subcommittee] presiding. Present: Representatives Meadows, Hice, Jordan, Ross, Blum, Connolly, Maloney, Norton, and Watson-Coleman. Mr. MEADOWS. The Subcommittee on Government Operations will come to order, and without objection, the chair is authorized to declare a recess at any time. Today’s hearing is on the Foreign Account Tax Compliance Act, or FATCA. We will hear from our witnesses about FATCA’s effect overseas and on our Treasury. However, our first witness, Senator Rand Paul, a friend, a patriot, truly someone who is willing to not only put his money where his mouth is but someone who has de- fended liberty and freedom each and every day, and you’re cer- tainly welcome. He has a briefing, as I understand it, at the White House coming up, so we’re happy to have you testify first, Senator, and then the Ranking Member Connolly and I will give our statement. So in recognition of that, I’d like to recognize the Honorable Sen- ator Rand Paul. WITNESS STATEMENTS STATEMENT OF THE HON. RAND PAUL Senator PAUL. Thank you, Chairman Meadows, and thank you for inviting me to this hearing on the Unintended Consequences of the Foreign Account Tax Compliance Act. And also for allowing the American people an opportunity to hear how FATCA undermines their privacy through the bulk collection of their foreign financial records. I oppose FATCA for two reasons. First, it violates our privacy rights, and second, I think the compliance cost actually exceed the revenue that it brings in. Regarding privacy, the Fourth Amendment prevents the govern- ment from seizing or searching a person’s house or papers, includ- ing their financial records, unless the warrant shows individualized (1) VerDate Nov 24 2008 11:28 May 14, 2018 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 H:\28503.TXT APRIL KING-6430 with DISTILLER 2 suspicion and probable cause. This protection was included in the Bill of Rights in response to general warrants that have been issued by the British. FATCA, I think, undermines the very heart of this privacy right. It forces foreign financial institutions to hand over U.S. citizens’ personal financial records without a warrant, without a probable cause, and without naming them individually. FATCA also violates the Fourth Amendment by demanding all data on all Americans with overseas accounts. The demand is not individualized but collected rather in bulk without specifying a spe- cific suspicion or cause. The government is using the heavy hand of the IRS to tell for- eign financial institutions that they must hand over the records of all U.S. citizens, and if they dare to defy the government, they will be hit with a crippling tax penalty that no business could survive. This turns the Fourth Amendment on its head. It presumes that every American with money overseas is a criminal with no proof or even suspicion of criminal activity. You are guilty until proven innocent. These are not the principles on which our country was founded, and we should not stand for it. This is not just my concern. In January, the IRS’ own taxpayer advocate raised the same concern in her annual report saying that FATCA’s operative assumption appears to be that all such tax- payers should be suspected of fraudulent activity unless proven otherwise. Think about that. Guilty until proven innocent. No one should be deceived that the data being collected by the IRS is somehow harmless or benign. In addition to having to report the name, address, taxpayer identification number of each account holder, the government requires financial firms to report the ac- count number, the account balance, the value at the end of the re- porting period, and all the inflows and outflows of the account, ba- sically everyone for whom you have had a financial transaction or written a check to. Comparable information is not required to be disclosed for those who have domestic accounts, so it’s a double standard. You have one standard for Americans living overseas and another standard for Americans here. The government has no business asking for or knowing this in- formation about its citizens and certainly not without a reason to believe that the person