International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Friday, December 1, 2017

Will FATCA Be Repealed Today? Senate to Vote This Evening.

On Friday, December 1, 2017, the Senate will vote on whether to repeal chapter 4 of the Internal Revenue Code (IRC), also known as FATCA, or whether to continue to it.  The vote will be broadcast live on C Span here.  All amendments are listed here with the respective vote.

Senator Rand Paul and Senator Wicker have submitted Senate Amendment 1623 to repeal FATCA as part of the Senate Tax Bill to be voted on as a package late Friday night.
The supporting documents for analysis and scoring cite to the academic research of Professor William Byrnes of Texas A&M University School of Law as published in several articles on SSRN.

Derivation

Summary of analysis IRS data by William Byrnes of Texas A&M University School of Law http://law.tamu.edu/faculty-staff/find-people/faculty-profiles/william-byrnes; williambyrnes@law.tamu.edu; O: (817) 212-3969; M: (786) 271-5202.

Revenues:

Through October 2016, 55,800 taxpayers have come into the OVDP (Overseas Voluntary Departure Program) to resolve their tax obligations, paying more than $9.9B in combined taxes, interest and primarily FBAR (Report of Foreign Bank and Financial Accounts) penalties since 2009. In addition, another 48,000 taxpayers have made use of separate streamlined procedures to correct prior non-willful omissions and meet their federal tax obligations, paying approximately $450M in combined taxes, interest and penalties. (See: “Offshore Voluntary Compliance Efforts Top $10 Billion; More Than 100,000 Taxpayers Come Back into Compliance”; IR-2016-137, Oct. 21, 2016;  https://www.irs.gov/newsroom/offshore-voluntary-compliance-efforts-top-10-billion-more-than-100000-taxpayers-come-back-into-compliance ) However, this is the yield for all payments (interest and penalties, not just taxes) and from all overseas recovery programs (not just FATCA). To isolate tax revenues recovered solely due to FATCA, Byrnes notes that streamlined procedures are only producing a revenue from three years of tax filings, interest and penalties of $9,375 per taxpayer. This indicates that the portion of the combined tax payments attributable solely to FATCA from income that would not otherwise have been reported from taxpayers who would not have been in compliance absent FATCA is a fraction of the OVDP, less than $300M and probably more realistically in the range of $100-200M and falling over time.

IRS Costs:

In its budget request for 2017, the IRS requested a half-billion dollar budget increase, of which more than 20 percent is for an increase of $126,739,000 to  fund 273 FTE (full time employee) positions solely for FATCA activities under the heading “Theme 2: Understand non-compliant taxpayer behavior and develop approaches to deter and change it.” https://www.irs.gov/pub/newsroom/IRS%20FY%202017%20BIB.pdf The increase (the equivalent of $460,000 per FTE requested) is targeted to “updates to the legacy electronic filing system to modify and process FATCA forms, add additional capabilities in the webbased registration system, and enhance functionality in the systems that facilitate the exchange and processing of FATCA data to and from withholding agents, Foreign Financial Institutions (FFIs) and Host Country Tax Authorities and the United States.” Translated into normal English, this means contending with a flood of data in foreign formats, the overwhelming bulk of which has no tax enforcement value.  The $127M increase is above existing spending on personnel and systems, which is not broken out specifically for FATCA. Given the size of the 2017 increase, a base of least $75M for FATCA activities is a conservative estimate of legacy annual FATCA spending, with the new projected total in the range of $200M, perhaps as high as $250M. This is only IRS costs and does not include damage to U.S. geopolitical interests through the forcing of FATCA and “intergovernmental agreements” upon foreign governments, with the industry costs associated therefrom more than $100 billion. 

SA 1623. Mr. PAUL (for himself and Mr. Wicker) submitted an amendment intended to be proposed to amendment SA 1618 proposed by Mr. Hatch (for himself and Ms. Murkowski) and intended to be proposed to the bill H.R. 1, to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018; which was ordered to lie on the table; as follows:

At the end of subtitle D of title I, add the following: PART IV--REPEAL OF FOREIGN ACCOUNT TAX COMPLIANCE ACT SEC. 14601. REPEAL OF WITHHOLDING AND REPORTING WITH RESPECT TO CERTAIN FOREIGN ACCOUNTS.

(a) In General.--Chapter 4 is repealed.

(b) Conforming Amendments for Rules for Electronically Filed Returns.--Section 6011(e)(4) is amended-- (1) by inserting ``, as in effect on January 1, 2017'' after ``(as defined in section 1471(d)(5)'', and (2) by striking ``or 1474(a)''. (c) Conforming Amendment Related to Substitute Dividends.-- Section 871(m) is amended by striking ``chapters 3 and 4'' both places it appears and inserting ``chapter 3''. (d) Other Conforming Amendments.-- (1) Section 6414 s amended by striking ``or 4''. (2) Paragraph (1) of section 6501(b) is amended by striking ``4,''. (3) Paragraph (2) of section 6501(b) is amended-- (A) by striking ``4,'', and (B) by striking ``and witholding taxes'' in the heading and inserting ``taxes and tax imposed by chapter 3''. (4) Paragraph (3) of section 6513(b) is amended-- (A) by striking ``or 4'', and (B) by striking ``or 1474(b)''. (5) Section 6513(c) is amended by striking ``4,''. (6) Section 6611(e)(4) is amended by striking ``or 4''. (7) Paragraph (1) of section 6724(d) is amended by striking ``under chapter 4 or''. (8) Paragraph (2) of section 6724(d) is amended by striking ``or 4''. (e) Effective Date.--The amendments made by this section shall apply to payments made after the date of the enactment of this Act.

SEC. 14602. REPEAL OF INFORMATION REPORTING WITH RESPECT TO FOREIGN FINANCIAL ASSETS. (a) In General.--Subpart A of part III of subchapter A of chapter 61 is amended by striking section 6038D. (b) Repeal of Modification of Statute of Limitations for Significant Omission of Income in Connection With Foreign Assets.-- (1) Paragraph (1) of section 6501(e) is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively. (2) Subparagraph (A) of section 6501(e), as redesignated by paragraph (1), is amended by striking all that precedes clause (i) and inserting the following: ``(A) General rule.--If the taxpayer omits from gross income an amount properly included therein which is in excess of 25 percent of the amount of gross income stated in the return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within 6 years after the return was filed. For purposes of this subparagraph--''. [[Page S7469]] (3) Paragraph (2) of section 6229(c) is amended by striking ``and such amount is described in clause (i) or (ii) of section 6501(e)(1)(A)'' and inserting ``which is in excess of 25 percent of the amount of gross income stated in its return''. (4) Paragraph (8) of section 6501(c) is amended-- (A) by striking ``pursuant to an election under section 1295(b) or'', (B) by striking ``1298(f)'', and (C) by striking ``6038D,''. (c) Clerical Amendment.--The table of sections for subpart A of part III of subchapter A of chapter 61 is amended by striking the item related to section 6038D. (d) Effective Date.-- (1) In general.--Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act. (2) Returns.--The amendments made by subsection (b) shall apply to returns filed after the date of the enactment of this Act.

SEC. 14603. REPEAL OF PENALTIES FOR UNDERPAYMENTS ATTRIBUTABLE TO UNDISCLOSED FOREIGN FINANCIAL ASSETS. (a) In General.--Section 6662 is amended-- (1) in subsection (b), by striking paragraph (7) and redesignating paragraph (8) as paragraph (7), and (2) by striking subsection (j) and redesignating subsection (k) as subsection (j). (b) Effective Date.--The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

SEC. 14604. REPEAL OF REPORTING OF ACTIVITIES WITH RESPECT TO PASSIVE FOREIGN INVESTMENT COMPANIES. (a) In General.--Section 1298 is amended by striking subsection (f) and by redesignating subsection (g) as subsection (f). (b) Conforming Amendment.--Section 1291(e) is amended by striking ``and (d)'' and inserting ``, (d), and (f)''. (c) Effective Date.--The amendments made by this section shall take effect on the date of the enactment of this Act.

SEC. 14605. REPEAL OF REPORTING REQUIREMENT FOR UNITED STATES OWNERS OF FOREIGN TRUSTS. (a) In General.--Paragraph (1) of section 6048(b) is amended by striking ``shall submit such information as the Secretary may prescribe with respect to such trust for such year and''. (b) Effective Date.--The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

SEC. 14606. REPEAL OF MINIMUM PENALTY WITH RESPECT TO FAILURE TO REPORT ON CERTAIN FOREIGN TRUSTS. (a) In General.--Section 6677(a) is amended-- (1) by striking ``the greater of $10,000 or'', and (2) by striking the last sentence and inserting the following: ``In no event shall the penalty under this subsection with respect to any failure exceed the gross reportable amount.''. (b) Effective Date.--The amendments made by this section shall apply to notices and returns required to be filed after the date of the enactment of this Act.

 

http://lawprofessors.typepad.com/intfinlaw/2017/12/will-fatca-be-repealed-today-senate-to-vote-this-afternoon.html

GATCA | Permalink

Comments

It's the day after. Is there any news? The amendment was introduced. Does this mean FATCA will be repealed?

Posted by: James | Dec 2, 2017 2:54:58 AM

Dear Mr. Byrnes,

Can you please comment on the passage of HR1. Rand Paul's Repeal Fatca amendment 1623 was included in the Manager's Amendment, and for 2 days no one has commented. Rather, people are saying on Twitter that his amendment wasn't included in the bill.

Posted by: James | Dec 3, 2017 8:03:23 AM

Post a comment