A congressional panel is planning to examine President Obama’s signature foreign asset reporting law that aims to target offshore tax evasion, Rep. Mark Meadows (R-N.C.) told The Hill Extra.
The Foreign Account Tax Compliance Act (FATCA) requires that foreign financial institutions and other related entities report to the IRS certain foreign accounts held by U.S. taxpayers. The penalty for foreign institutions that fail to comply is a withholding rate of 30 percent on payments received from U.S. sources, including dividends and interests. The U.S. government has entered into bilateral intergovernmental agreements (IGAs) with dozens of countries to implement the tax reporting law abroad.
FATCA, enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act, has faced a wide range of criticism involving U.S. treaty obligations, intrusion of other countries’ sovereignty and privacy rules.
“It was having a chilling effect not only on us being able to do business abroad but certainly from expats [who] are running into regulations. I don't believe they were the intent of the law originally,” said Meadows, who recently introduced a bill aiming to repeal FATCA.
The House Oversight and Government Reform Committee is currently planning to hold a FATCA-related hearing, but it is not yet on the schedule, according to Meadows’ spokesperson. The lawmaker is chairman of the committee's Government Operations Subcommittee. He said the hearing is likely to take place after Congress returns from the November elections.
Meadows didn't provide more details about the hearing, but his announcement follows the Sept. 7 release of his own bill that would repeal FATCA and other individual reporting requirements (H.R. 5935), that violate “Fourth Amendment privacy rights,” according to a press release.
The issue with privacy rights stem from the reporting requirements for foreign financial institutions. Currently, there are 63 active IGAs, but other countries with similar or pending bilateral agreements with the Treasury Department will have to now comply to a new set of IRS rules by the end of this year, according to a Congressional Research Service report dated the same day Meadows released his bill.
H.R. 5935 is “designed to hopefully give us still some accountability and transparency, but yet at the same time not make doing business with American citizens not the most difficult in the banking world,” Meadows said.
The bill is a result of the "far reaching implications of some of the regulations in the banking industry from a foreign perspective," he added.
The measure is similar to one offered last year by Sen. Rand PaulRandal (Rand) Howard PaulSenate rejects attempt to block Biden's Saudi arms sale Overnight Defense & National Security — Lawmakers clinch deal on defense bill White House 'strongly opposes' Senate resolution to stop Saudi arms sale MORE (R-Ky), who filed a suit against the Treasury Department in 2015 over IGAs. The U.S. District Court of Ohio, however, dismissed the case in April.
S. Michael Chittenden of Miller & Chevalier, however, said that these proposals "do not have the likelihood of passing" since similar efforts failed in the past. The Treasury Department has already poured a significant amount of resources to implement FATCA stateside and negotiate the IGAs with other countries, he added.
FATCA inspired a global trend of financial transparency, such as the common reporting standard launched by the Organization for Economic Cooperation and Development.
"FATCA is here to stay," Chittenden said.
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