Senator Rand Paul (R-KY) has introduced an amendment to the Tax Cuts and Jobs Act that repeals the Foreign Account Tax Compliance Act. ATR urges a YES vote on this amendment.
FATCA was signed into law in 2010 with the goal of stopping tax evaders that were using offshore bank accounts. However, it was designed as a blunt instrument that targets any American with a bank account overseas. Most who are forced to comply are expatriate Americans who have, little if any U.S. presence.
As a result, compliance costs far outstrip any effectiveness in curbing tax evasion. American citizens overseas have become locked out of financial institutions including banks, stockbrokers, hedge funds, and insurance. Often, it is easier for these businesses to deny US citizens service.
“FATCA is the Alternative Minimum Tax (AMT) for Americans overseas—an intrusive, complicated, painful and unfair tax regime designed to be massive overkill in hunting for coins between the cushions,” said Grover Norquist, President of Americans for Tax Reform. “We are finally abolishing the AMT—after 48 years—in the Tax Cuts and Jobs Act. We should put FATCA to sleep at the same time.”
Under FATCA, any overseas account held by U.S. citizens must be reported to the IRS. This means that millions of Americans must give up personal information and comply with burdensome IRS regulations and reporting requirements. The law requires financial institutions to collect and disclose this information. If they fail to do so, the IRS can impose a 30 percent withholding on an institution’s U.S. investments.
FATCA also requires American citizens to comply with tax filing forms if they have assets overseas meet or exceed $50,000. For overseas Americans, this means they must comply with the tax compliance laws in their country of residence in addition to IRS laws.
FATCA should be repealed as part of tax reform. Earlier this year, 23 conservative and free market groups urged Congress to repeal this burdensome law in a letter to Congressional leaders. ATR urges a YES vote.