By Prof. William H. Byrnes IV and Dr. Robert J. Munro *
...The Joint Statement between the U.S., France, Germany, Italy, Spain and the United Kingdom regarding an intergovernmental approach to improving international tax compliance and implementing FATCA laid the foundation for the U.S. commitment to share the same information requested from the other States. [U.S. Treasury Department - Joint Statement from the United States, France, Germany, Italy, Spain and the United Kingdom Regarding and Intergovernmental Approach to Improving International Tax Compliance and Implementing FATCA, February 8, 2012 (accessed November 15, 2013).]
While the reciprocal version of the Model Agreement includes a policy commitment to pursue equivalent levels of reciprocal automatic exchange in the future, no additional obligations will be imposed on U.S. financial institutions unless and until additional laws or regulations are adopted in the United States.A serious question has arisen as to the legality of any Intergovernmental Agreements (IGAs) and specifically any provision for reciprocity. ["The Big Picture: The Dubious Legal Pedigree of IGAs (and Why It Matters)," by Allison Christians, taxanalysts® Worldwide Tax Daily, February 11, 2013.] If IGAs are not valid then it is highly unlikely that any FFI would sign a FFI Agreement. [A lively and interesting discussion of FATCA IGAs is contained in Repeal FATCA.com, "FATCA Intergovernmental Agreement Exposed as Bad Deal for 'Partner' Countries"(accessed November 15, 2013). See also an interesting observation on why the U.S. is not engaged in information sharing with Latin American countries and why many nations avoid signing a tax treaty: "News Analysis: Will U.S. Hypocrisy on Information Sharing Continue?" by Lee A. Shepard, taxanalysts® Tax Notes Today, January 22, 2013.]
Algirdas Semeta, the EU Commissioner on Taxation and Customs Union, in turn, stated the EU Member States have signed an intergovernmental agreement model 1A precisely because of the reciprocity commitment:My point here is very clear: When countries negotiate a model 1 agreement, for exchange of information between governments [under FATCA], then the reciprocity is not only promised but also ensured by the United States.
Treasury Regulations §§1.6049-4(b)(5)(i) and 1.6049-8 have been challenged in court by Texas and Florida banks to block reciprocal implementation information gathering on foreigners holding deposits in U.S. banks. [See "U.S. Banks File Long-Shot Litigation to Block FATCA Reciprocal Requirements," Jack Townsend Federal Tax Crimes blog (accessed November 15, 2013).]
It is noted that this court challenge by Texas and Florida banks "threatens to undermine a broad U.S. government crackdown on offshore tax avoidance and jeopardize a web of carefully crafted international agreements ..."
The new regulations for nonresident interest reporting have certain and quite significant restrictions. [Guidance on Reporting Interest Paid to Nonresident Aliens, 77 Fed Reg 23, 391 (Apr. 19, 2012) to be codified at 2-6 C.F.B. pts. 1 and 31.]
* Prof. William H. Byrnes, IV is the Associate Dean of the Walter H. & Dorothy B. Diamond International Tax & Financial Services Graduate Program. He has achieved authoritative prominence with more than 38 book and compendium volumes, 93 book, treatise and supplement chapters, and 800 articles. Professionally, William Byrnes left Coopers and Lybrand as an Associate Director to full time academia wherein he pioneered online legal education in 1995, thereafter creating the first online LL.M. offered by an ABA accredited law school. He trains and supervises more than 200 professional and government LLM and JSD candidates annually for international tax and money laundering compliance.Dr. Robert J. Munro is Professor of Law at Thomas Jefferson School of Law in San Diego, CA. and a Senior Research Fellow and Director of Research for North America at CIDOEC at Jesus College, Cambridge University. He holds Masters degrees from the University of Iowa and Louisiana State University, a Juris Doctor from the University of Iowa and a Ph.D. from the University of Florida. He has done further graduate studies at Cambridge University, Oxford University and the Institute of Advanced Legal Studies at the University of London. He is the author of thirty-two published books, including the five-volume treatise, Money Laundering, Asset Forfeiture and International Financial Crimes, the three-volume Cybercrime and Security, and the three-volume Tax Havens of the World and Trade Briefs.
Information referenced herein is provided for educational purposes only. For legal advice applicable to the facts of your particular situation, you should obtain the services of a qualified attorney licensed to practice law in your state.
LEXIS users can view the complete commentary HERE. Additional fees may apply. (Approx. 7 pages)
Editor's Note: The above is an excerpt from Chapter 1 of the forthcoming 2014 edition of LexisNexis® Guide to FATCA Compliance by William Byrnes and Robert Munro, scheduled for publication in March 2014. Chapter 1 contributors: Prof. Denis Kleinfeld, Esq, Dr. Alberto Gil Soriano, Esq, and Prof. William H. Byrnes, Esq.
RELATED LINKS: For more information on FATCA, see:
"FATCA Proposed Regulations" by Pamela Revak (June 2012)
"IRS' FATCA Registration System" by Prof. William H. Byrnes IV (August 2013)