Congresswoman Carolyn Maloney (NY-12), founder and co-chair of the Congressional Americans Abroad Caucus, has filed an amendment to H.R. 7900 - National Defense Authorization Act for Fiscal Year 2023. The amendment is the same bill text as H.R. 5799 - Overseas Americans Financial Access Act. This is also known as the FATCA same-country exception.
What is H.R. 7900 National Defense Authorization Act for Fiscal Year 2023?
This bill authorizes FY2023 appropriations for military activities and programs of the Department of Defense (e.g., personnel; research, development, test, and evaluation; and procurement of items such as aircraft, missiles, and ammunition). It also prescribes military personnel strengths for FY2023.
What is H.R. 5799 the Overseas Americans Financial Access Act?
The aim of the bill is to relieve the unintended burden imposed by the Foreign Account Tax Compliance Act of 2010 (FATCA) on American citizens living overseas by directing the IRS to exclude from FATCA reporting financial accounts held by American citizens in countries where they are bona fide residents.
What the bill does:
- Amends FATCA reporting requirements to exempt Americans who are “qualified” under U.S. Code § 9119(d) (i.e. they’re bona fide residents of the foreign country where their tax home is) from having to report on their bank accounts.
- Reduces the compliance burdens on U.S. citizens, who currently must either file complex, additional forms themselves or pay higher tax return preparation fees.
- Reduces the compliance burdens on FFIs, some of which are declining to do business with U.S. citizens because of the significant costs and regulatory risks associated with ongoing FATCA compliance.
What the bill does not do:
This bill does not exempt qualified individuals’ foreign financial assets other than financial accounts maintained by foreign financial institutions from FATCA reporting requirements.
- The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 to crack down on tax evasion by requiring that foreign financial Institutions (FFIs) report on the foreign assets held by their U.S. account holders.
- This legislation was critical for closing loopholes in the U.S. tax system, but had unintended consequences on American citizens living and working overseas.
- Because of the burdensome reporting requirements and steep sanctions for violations, some FFIs have closed accounts or refused to open new ones for S. citizens in order to minimize exposure to FATCA reporting requirements, withholding fees, and potential penalties.
- This practice leaves law-abiding American citizens without access to everyday financial services such as mortgages, bank accounts, insurance policies and pension funds -- all of which are critical services regardless of place of residence.
Why is the introduction of this bill as an amendment significant?
Any kind of legislative movement indicates interest and appetite within Congress to advance and change law. The fact that this has been submitted as an amendment helps build momentum behind the policy and advance it through the many steps required to advance legislation and make it into law.
More information on this legislation:
- Click here to download a pdf of the amendment.
- Click here for H.R. 7900 National Defense Authorization Act for Fiscal Year 2023
- Click here for H.R. 5799 the Overseas Americans Financial Access Act
News coverage on this case:
- https://www.taxnotes.com/fatca-expert/fatca/defense-bill-amendment-would-offer-fatca-same-country-exception/2022/07/11/7dmvb (Behind paywall)
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