Americans Helping Americans Abroad

This title might seem more appropriate for the Greenpeace newsletter, but I hope it caught your attention!

It was such a pleasure to meet many of you at the recent Annual General Meeting, a great opportunity for the AARO community to exchange ideas. Your ideas there and the feedback from the member survey have energized us for the work ahead.

In a discussion after the meeting about the difficult tax situation for Americans abroad, one member aptly likened us to dolphins being caught in tuna nets. While the mission of combatting global tax evasion and criminal money laundering is a laudable one, the measures taken to achieve that purpose should not be unduly burdensome to an entire class of law-abiding citizens. AARO has made important progress in bringing the situation of us “dolphins” to the attention of Washington and the National Taxpayer Advocate (Nina Olson), as Lucy Laederich and Tim Ramier reminded us. Yet, as John Fredenberger mentioned, as global tax evasion scandals inevitably take the limelight in the international press, it is a tough environment in which to be heard!

On May 5, 2016, in response to the international press attention surrounding the release of the “Panama Papers”, the Obama administration announced a number of initiatives directed at enhancing financial transparency in the United States. In a letter to Paul Ryan, Secretary of the Treasury Jacob J. Lew highlighted the measures the Treasury have recently taken: (1) finalizing customer due diligence regulations for financial institutions and (2) issuing proposed regulations increasing information reporting requirements for certain wholly-owned U.S. entities. These entities, often organized in Delaware, may be used to shield foreign owners of non-U.S. assets or non-U.S. bank accounts. The IRS has hitched these new regulations to the existing rules for reporting non-U.S. entities with U.S. owners, which affect many AARO members. As we discussed at the recent Tax 202 meeting, these requirements are complex and subject to significant penalties for non-compliance.

Secretary Lew also called for Congress to act to take further measures, including passing legislation to require U.S. financial institutions to provide the same information that foreign financial institutions must provide the IRS under FATCA. As John Fredenberger mentioned at the AGM, lack of full reciprocity under FATCA is a topic that is currently being studied by the French government as a basis for principled objection to FATCA and its impact on the significant number of “accidental Americans” in France.

In an unfortunate turn of phrase, the Secretary’s letter states that “FATCA allows us to gain insight into the accounts of U.S. citizens abroad, limiting the ability of tax evaders to hide assets in overseas accounts.” In fact, FACTA is not directed at the accounts of U.S. citizens abroad but accounts themselves located outside the United States. This statement is illustrative of how Washington continues to confuse us dolphins for tunas, and highlights the importance of the advocacy work by AARO and its members to lobby for changes to alleviate the undue burdens of FATCA on Americans abroad, such as the “same country exception” to FATCA reporting.

The tax committee welcomes your participation and input as we work to coordinate global efforts, raise awareness and achieve solutions for the benefit of all Americans abroad.

Nora Newton Muller
Member of the AARO Tax Committee