{
  "id": "R44616",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R44616",
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  "source": "EveryCRSReport.com",
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      "source": "EveryCRSReport.com",
      "id": 587756,
      "date": "2016-09-07",
      "retrieved": "2019-05-03T15:30:34.981502",
      "title": "FATCA Reporting on U.S. Accounts: Recent Legal Developments",
      "summary": "Enacted in 2010, the Foreign Account Tax Compliance Act (FATCA) is intended to curb U.S. tax evasion occurring through the use of offshore accounts. Key among its provisions is the requirement that foreign financial institutions (FFIs), such as foreign banks and hedge funds, report information on their U.S. account holders to the Internal Revenue Service (IRS). FFIs that fail to comply will have tax withheld at a rate of 30% on many payments made to them from U.S. sources, including interest and dividends.\nSince FATCA\u2019s passage, there has been international criticism of the FFI provisions, generally focused on whether the United States was correct to take FATCA\u2019s unilateral approach. Questions have arisen about whether FATCA\u2019s requirements are inconsistent with existing U.S. treaty obligations; how to handle potential conflict of law issues arising when an FFI is faced with complying with FATCA or its home country\u2019s domestic (e.g., banking and privacy) laws; and whether the United States has intruded into other countries\u2019 sovereignty. \nRecognizing that these concerns could affect the success of FATCA, the United States has entered into bilateral intergovernmental agreements (IGAs) with numerous countries in order to implement the FFI requirements. Under some of these agreements, FFIs report information on their U.S. account holders to their home country, which then provides the information to the IRS. In general, for those FFIs that are not covered by such an agreement, FATCA requires that they report the information directly to the IRS. \nAs of August 1, 2016, there are 63 IGAs that are currently in force. Additionally, the United States treats certain countries as having an IGA in effect even though the country has not taken all the steps necessary to actually bring the agreement into force. In July 2016, the IRS made a significant announcement regarding these countries: they will stop being treated as having an IGA in effect in 2017 unless they comply with certain requirements by December 31, 2016. Among other things, the country must explain why the IGA is not yet in force and provide a step-by-step timeline for doing so. The Treasury Department and the IRS will then decide whether it is appropriate to continue to treat the country as having an IGA in effect.\nSome praise the FFI reporting requirements as an effective tool to combat tax evasion and argue that using the IGAs leads to positive outcomes, including reduced compliance costs for FFIs and avoidance of international conflict of law issues. Others, meanwhile, have expressed concerns about the privacy of information reported by FFIs and the appropriateness of the IGAs. These concerns are illustrated in an ongoing lawsuit, Crawford v. Department of the Treasury, in which the plaintiffs argue that the executive branch does not have the power to enter into IGAs and that the FFI reporting requirements violate the Fourth Amendment\u2019s protections against unreasonable search and seizures by requiring FFIs to report information about U.S. account holders without any judicial oversight. In April 2016, a U.S. district court in Ohio dismissed the case after determining that the plaintiffs lacked standing. The plaintiffs have appealed the decision to the U.S. Court of Appeals for the Sixth Circuit, which has not yet issued a decision. \nFinally, legislation has been introduced in the 114th Congress that would repeal much of FATCA (S. 663); modify FATCA with the intent of \u201cstrengthening\u201d it (Stop Tax Haven Abuse Act, H.R. 297 and S. 174); or require that its effects on U.S. citizens living overseas be studied (Commission on Americans Living Abroad Act, H.R. 3078).",
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      "typeId": "REPORTS",
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