US Supreme Court declines to hear FATCA case

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The US Supreme Court on Monday declined to hear a challenge to the Foreign Account Tax Compliance Act, which had been brought by a group of American expatriates and led by Kentucky Senator Rand Paul, who had argued that the 2010 legislation violated their constitutional rights.

The decision denying “certiorari” to the plaintiffs in the matter means that a Sixth Circuit decision handed down in August – which, as reported, found that they lacked the standing to sue, and that the harms they claimed to have suffered as a result of the law were not, in fact, directly caused by it – is final.

Although the decision won’t come as a surprise to many FATCA watchers, who have seen the difficulties the plaintiffs in the case have encountered over the years they’ve been battling the law that obliges non-US financial institutions to report to the US tax authorities on all offshore accounts held by American citizens, it will nevertheless be a crushing disappointment to expatriates who had been hoping they would at least get another day in court to argue their case.

Senator Paul is also certain to be disappointed by the ruling, as he has been campaigning against FATCA almost since it was signed into law in 2010 by President Obama.

In addition to Senator Paul, the seven plaintiffs included expat US citizens, some but not all of whom are members of the Republican party.

Solomon Yue, the vice chairman and chief executive for the Republicans Overseas and Republicans Overseas Action organisations, said Supreme Court’s decision not to hear the FATCA case was “disappointing”, but vowed that the fight would continue, and thanked the seven plantiffs in the suit for their role in “the good fight”.

“We regroup and fight again,” Yue, who also represents the state of Oregon on the Republican National Committee, told International Investment.

He pointed to a statement on the Republicans Overseas’ Facebook page in which the organisation issues a call for seven individuals – one each from the states of Arkansas, Iowa, Minnesota, Missouri, Maine, Nebraska, North Dakota and South Dakota – to volunteer to participate in the follow-up case.

“Please help us to get the word out,” the Republicans Overseas Facebook statement adds.

“We are committed to take down FATCA tyranny judicially, legislatively, and administratively.”

Elements in the Republican party have opposed FATCA almost since its inception, and in September 2016, a Republican member of the US House of Representatives, Mark Meadows of North Carolina, introduced a bill aimed at repealing it.

A group known as the Republicans Overseas Israel also mounted a Supreme Court challenge to the enforcement of FATCA in that country, which ultimately was also unsuccessful.

Post-financial crisis legislation

FATCA was signed into law in 2010 in the wake of the global financial crisis, as an attempt by the US to target the undeclared offshore accounts of Americans, many of whom had been found to be making use of bank accounts in places like Switzerland to avoid their US tax obligations.

Almost at once, however, American expatriates began to find that the financial institutions in the countries in which they lived began insisting they take their accounts elsewhere. This fuelled the opposition to FATCA that helped to fuel the lawsuit that, as of yesterday, failed to be heard by the Supreme Court.

The Supreme Court petition, Mark Crawford et al v United States Department of the Treasury, et al, may be viewed on the US Treasury’s website by clicking here. 

One of the seven plaintiffs in the lawsuit has vowed that the fight against FATCA will go on – in Canada, if nowhere else. To read Stephen Kish’s comments, click here.