31 thoughts on “FATCA Final Regulations Are Out

  1. I’ve done a bit of speed reading and I don’t like what I read on page 334:
    (i) Designation of account holder as a U.S. citizen or resident. If the information required to be reviewed with respect to the account contains a designation of an account holder as a U.S. citizen or resident, the participating
    FFI must retain a record of a withholding certificate and documentary evidence described in §1.1471-3(c)(5)(i)(B) evidencing citizenship in a country other than
    the United States in order to establish the account holder’s status as a foreign person.
    (ii) Unambiguous indication of a U.S. place of birth. If information required to be reviewed with respect to the account unambiguously indicates a U.S. place
    of birth for an account holder, the participating FFI must retain a record of a form of documentary evidence described in §1.1471-3(c)(5)(i)(B) evidencing citizenship in a country other than the United States and a copy of the individual’s
    Certificate of Loss of Nationality of the United States, or, alternatively, a withholding certificate, a form of documentary evidence described in §1.1471- 3(c)(5)(i)(B) evidencing citizenship in a country other than the United States, and
    a reasonable written explanation of the account holder’s renunciation of U.S. citizenship or the reason the account holder did not obtain U.S. citizenship at
    birth in order to establish the account holder’s status as a foreign person.
    This still leaves the huge question about how Canadian banks will be able to ask for place of birth. I think many of us can make a “reasonable written explanation of renunciation of US citizenship,” but I worry about what “reasonable” would entail and who determines this. Does the bank submit it to US to make the determination or does the bank adjudicate US citizenship?
    I am still determined not to go anywhere near a US Consulate and I’m just as determined not to tell my bank where I was born or give any explanation about renunciation of US citizenship for someone else to decide.
    We need Canadian government to get off their duff and get this straightened out. Now!
    Does Canadian law and the Charter apply to Canadian citizens, residents and banks in Canada or will they simply be overridden by US law?

  2. I think this section (page 397) exempts pensions and retirement plans (i.e. RRSPs) Maybe somone with more legalese than I have could clarify if my interpretation is correct.
    (2) Exceptions. A financial account does not include an account
    described in this paragraph (b)(2).
    (i) Certain savings accounts–(A) Retirement and pension accounts. A retirement or pension account that satisfies the following conditions under the laws of the jurisdiction where the account is maintained:
    (1) The account is subject to regulation as a personal retirement account or is part of a registered or regulated retirement or pension plan for the provision
    of retirement or pension benefits (including disability or death benefits);
    (2) The account is tax-favored (as described in paragraph (b)(2)(i)(E) of this section);
    (3) Annual information reporting is required to the relevant tax authorities with respect to the account;
    (4) Withdrawals are conditioned on reaching a specified retirement age, disability, or death, or penalties apply to withdrawals made before such specified
    events; and
    (5) Either—
    (i) Annual contributions are limited to $50,000 or less, or
    (ii) There is a maximum lifetime contribution limit to the account of $1,000,000 or less.

  3. Again, I ask someone with more legalese than I have to clarify if the following (page 398) means saving plans like RESPs and RDSPs would be exempt from FATCA. I don’t think TFSAs would be exempt because criteria number 3 is not met, i.e. withdrawal “conditioned on meeting specific criteria.”
    (B) Non-retirement savings accounts. An account (other than an insurance or annuity contract) that satisfies the following conditions under the laws of the jurisdiction where the account is maintained:
    (1) The account is subject to regulation as a savings vehicle for purposes other than for retirement;
    (2) The account is tax-favored (as described in paragraph (b)(2)(i)(E) of this section);
    (3) Withdrawals are conditioned on meeting specific criteria related to the purpose of the savings account (for example, the provision of educational or medical benefits), or penalties apply to withdrawals made before such criteria are
    met; and
    (4) Annual contributions are limited to $50,000 or less;

  4. @Outraged and Blaze, This is really a travesty, I just can’t imagine that Canada would not protect us.. What the Hell??
    We have to do something!!!

  5. @Saddened: We are doing something. We are sticking together. We are lobbying the government. We are refusing to tell our banks where we were born. We are talking to CCLA. We are ready to “lawyer up” when we need to if the Canadian government refuses to protect Canadian citizens and residents.
    If there is anything positive in this, it is that I did not find anything in my speed reading that indicated that FATCA will apply to children born outside of US to parents born in US. Has anyone else seen anything about that?
    This has zonked me. I’m out of here for now.

  6. Good grief, more than 500 pages of turgid stuff, with cross references that are hard to follow. Par for the US course. Also par for the course is the breath-taking unspoken assumption that foreign banks and foreign governments will either disobey or change their own privacy and banking laws to go along with this. If homelander Americans are still wondering why the rest of the planet hates their guts, they only have to read and ponder this for a moment — if they’re capable of putting themselves in anothers’ shoes, or of imagining another country dumping something like this on the US.
    Quick search for the text string “certificate of loss” confirms that presentation to a “withholding agent” (FFI agent in Canada) of a copy of a CLN normally constitutes evidence that the agent “may” consider the person to be a foreign person in spite of a US birthplace, absent some other indicia which I can’t figure out where they are … Seems to me that wording should be “must” rather than “may,” however that’s for a judge to decide when (as is inevitable) this ends up in some court somewhere.
    For now, by off-the-cuff reading is that a CLN is a get-out-of-jail-free card for this stuff, unless one has done something monumentally stupid or unusual after the expatriation, likely involving moving money offshore from US sources or something like that, but who knows?
    Will be interesting now to see whether Flaherty and company wimp/crap/traitor out and proceed with an IGA, now the regs are out. Though they aren’t official until they’re posted at Federal Register on the 28th.
    Interesting point that Blaze raises about persons born outside the US of US parents not being mentioned anywhere she’s spotted (I didn’t see anything either, but I don’t pretend to have gone through it in depth). In reality, it would be utterly impractical IMO (not to mention a massive Charter violation and politically explosive as hell) for banks to ask every account holder where their parents were born and what citizenship their parents had at the time of the account holders’ birth (I don’t think that information appears on any Canadian birth certificates I’ve ever seen, and I know it doesn’t appear on my passport). So I don’t think it’s an oversight, I think it’s probably a tacit and silent concession to reality. But it’s good news, as long as the account holder hasn’t done something dumb like let slip in a conversation with an FFI employee that their parents were US. Things can happen if you aren’t on your guard in a conversation and have a tendency to run off at the mouth to fill empty space while someone is filling out forms or whatever … Sadly, one more reason to be very circumspect when having public conversations with “officials” on any subject any more.
    Even more sadly, people born of foreign parents on US soil who have absolutely no other US connection since their infancy or since reaching age of majority, seem to be well and truly buggered in these regs. Unless I missed something.
    If you want a CLN and haven’t applied for one yet, join the queue NOW because it will become massive once awareness of these regs spreads, I think.
    My two cents’ worth.

  7. @Schubert, thanks for your comment, worth much more than two cents! I’m debating whether to hold on to see what our govt actually does, or to start the CLN process… I’m still a bit worried I’ll have problems with that, but that’s eased a bit with two people letting me know on the my ‘other’ blog that they successfully got theirs. yesterday, someone posted, and said it took almost a year to receive the backdated CLN, so perhaps the backlog has started!

  8. To Schubert’s point about the Federal Register. There are still a few hurdles on the US side as I understand it to get them formally published on the 28th although I don’t want to put any type of odds on whether the January 28th day will be delayed.

  9. In case you are curious what is the delay between today and the 28th. Well the IRS and Treasury need to do a “cost benefit” analysis of the regulations over the next two weeks after they have already been published.

  10. Nothing has changed. Your bank won’t ask where you were born. They will ask your citizenship. How you answer is up to you. RRSPs, RESPs and RDSPs will be exempt.

    1. @ Cornwalliscal and Anyone Else who would like to weigh in:
      Regarding possible exception of the Canadian Registered Disability Savings Plan (RDSP) — will it be exempt or will it not?
      (2) Exceptions. A financial account does not include an account described in this paragraph (b)(2).
      (i) Certain savings accounts–(A) Retirement and pension accounts. A retirement or pension account that satisfies the following conditions under the laws of the jurisdiction where the account is maintained:
      (1) The account is subject to regulation as a personal retirement account or is part of a registered or regulated retirement or pension plan for the provision of retirement or pension benefits (including disability or death benefits); (PER FINANCE MINISTER FLAHERTY’S REPLY TO ME, THE RDSP IS NOT CONSIDERED A RETIREMENT ACCOUNT (AND IS NOT ADDRESSED IN THE CANADA/US TAX TREATY – AS IT CAN BE USED FOR OTHER REASONS FOR A DISABLED PERSON — SO IS THE RDSP GOING TO BE EXEMPT OR IS IT NOT GOING TO MEET THE DEFINITION? I’D SAY, PROBABLY NOT.)
      (2) The account is tax-favored (as described in paragraph (b)(2)(i)(E) of this section); (MEETS THIS DEFINITION)
      (3) Annual information reporting is required to the relevant tax authorities with respect to the account; (MEETS THIS DEFINITION)
      (4) Withdrawals are conditioned on reaching a specified retirement age, disability, or death, or penalties apply to withdrawals made before such specified events; (MEETS THIS DEFINITION)
      and
      (5) Either—
      (i) Annual contributions are limited to $50,000 or less, (MEETS THIS DEFINITION)
      or
      (ii) There is a maximum lifetime contribution limit to the account of $1,000,000 or less. (MEETS THIS DEFINITION)

    2. @Calgary: When I initially read the regs, I interpreted them just as you have. I believe this should exempt RDSPs and RESPs. I also interpreted this to mean TFSAs are not exempt.
      However, like you, I do not have the necessary legal or accounting expertise to know if my interpretation is correct.
      It would be great if someone with such knowledge could share some information with us. I would also like to know if exempt plans are included in an FFI determination of aggregate amount of $50,000. For example, if someone has $175,000 in RRSPs, but only $30,000 in non-exempt accounts, are they required to report to IRS?
      But, in actual fact, those points are secondary. What we really want is for FATCA not to apply to anyone living outside US.

    3. OK, I get it now. It is here and the RDSP meets MOST of the definition (although proceeds are not limited to use for medical benefits; it can be used for housing for the disabled person):
      (B) Non-retirement savings accounts. An account (other than an insurance or annuity contract) that satisfies the following conditions under the laws of the jurisdiction where the account is maintained:
      (1) The account is subject to regulation as a savings vehicle for purposes other than for retirement;
      (2) The account is tax-favored (as described in paragraph (b)(2)(i)(E) of this section);
      (3) Withdrawals are conditioned on meeting specific criteria related to the purpose of the savings account (for example, the provision of educational or medical benefits), or penalties apply to withdrawals made before such criteria are met; and
      (4) Annual contributions are limited to $50,000 or less;

    1. @cornwalliscal,
      Forgive my delayed comment to yours. I hope it takes after all of Outraged’s fine work on solving why my previous ones did not.
      I would like to see for myself specifically what accounts are exempt. If ALL Canadian Registered accounts will be exempted, I thank the Canadian government, especially Finance Minister Flaherty, for any help they may have provided for this to happen.
      However, it is absolutely NOT REASON for the Canadian government to sign a FATCA IGA with the US.

  11. Actually, under current Canadian law, your bank cannot ask for your citizenship. However, a Canadian citizenship certificate is one of the pieces of ID that a person can choose to use to open a Canadian bank account.
    A bank cannot ask where you were born. In fact, you cannot even use a foreign birth certificate as ID to open a bank account in Canada. Only a Canadian birth certificate can be used for that purpose.
    http://www.cba.ca/en/consumer-information/40-banking-basics/83-opening-a-bank-account
    So, the huge question remains. How will Canadian banks know where we were born? We need to keep the pressure on the government to not change the laws–or to be prepared for a Charter challenge if they do.

  12. The following may be of particular interest to those of you (I know of several) who don’t have a CLN, haven’t applied for one, and did renounce your USC on becoming a Canadian several decades ago, and have (thanks to Access to Information) a copy of the renunciation oath that you swore during your Canadian naturalization ceremony. (Canada stopped asking for that oath in 1973, more or less, depending on the citizenship court and how up to date they were when you went in.)
    “A withholding agent may also treat the individual as a foreign person, notwithstanding the U.S. place of birth and any other U.S. indicia described in paragraph (e)(4)(ii) of this section, if the withholding agent obtains a non-U.S. passport or other government-issued identification that is evidence of citizenship in a country other than the United States and either a copy of the individual’s Certificate of Loss of Nationality of the United States, or a reasonable written explanation of the account holder’s renunciation of U.S. citizenship or the reason the account holder did not obtain U.S. citizenship at birth.”
    Interesting to speculate on that last bit, “a reasonable written explanation of the account holder’s renunciation…” What is “reasonable” and who determines that? How about a copy of the oath you signed, renouncing your previous nationality on the day you became a Canadian, for example?
    I don’t have the patience to slog through 500 pages of turgidity in a document that doesn’t apply to me or my wife (yea CLNs!!!), but I didn’t see anything in my skimming that says the FFI withholding agent has to file any of this documentation to the IRS. My reading (I may be wrong though) is the FFI has to keep the documentation on file locally and have it available to show an IRS auditor if there is ever an audit of the FFI’s compliance with FATCA. If this is true, let’s further contemplate the odds that the IRS is going audit a) every FFI on the planet, b) a random sample of every FFI on the planet, or c) a random sample of Canadian or Swiss or name-your-target FFIs, given staff and budget constraints and a semi-sane benefit-cost analysis on doing an audit. (I used to work with some federal auditors in Canada; no auditor launches an audit without a reasonable expectation that the cost of the audit will be justified by a likely benefit or a probable risk from not auditing, and keeps his/her job very long.) So if your local withholding agent buys your “reasonable written explanation” why you aren’t a US person and files it without checking with the IRS, what are the odds this is going to be a problem for you?
    Maybe I missed something in the regs; if so, someone please correct me on this.
    Just think about it …
    There still remains the issue of crossing the US border on a foreign passport showing US birthplace, without a CLN, but that’s another subject covered on another thread and, so far, a problem that only arises sporadically and AFAIK hasn’t resulted in anyone being turned back or arrested, at least not anyone who posts on this website or at Brock. Pulled over and questioned, seems to be the limit so far. I have seen a couple of reports recently of people who were “warned” about the passport issue, had an entry typed into the border patrol computers, and were asked the next time they crossed why they didn’t have their US passport yet. So they may be tightening up on this, but this is a third-hand report from me so don’t take it as gospel or common practice unless/until we start getting multiple personal reports of that experience on the other thread.

  13. @Schubert: I felt exactly the same way when I read that section. I don’t know how any Canadian bank could refuse to accept the copy of my signed oath of renunciation which is also witnessed by a Canadian Citizenship Court official.
    My citizenship ceremony was held April 27, 1973. My understanding is the renunciation requirement changed as of April 1, 1973. Either the Vancouver Citizenship Court didn’t know about it or they were still using old forms. In any case, I am so grateful someone may have screwed up (including the official who witnessed my signature on that oath of renunciation! I’m also grateful to you for telling me I could get that information from my citizenship file.
    The copy is safely tucked away in my safety deposit box, but I also have copies at home. As far as I am concerned, it is my restraining order to keep the IRS away from me without the need to go to a Consulate.
    That, however, does not address the fact that Canadian banks have no legal right or authority to demand information about place of birth. I continue to believe they will not do that (I hope that’s more than just wishful thinking!)
    I still want the Canadian government to assure all Canadian citizens and residents that Canadian banks most adhere to Canadian law and Canadian law will not be changed to accommodate a foreign government. I have sent one more e-mail about that to Flaherty, Mulcair, Rae, May, Don Davies, Hoang Mai and my MP. I don’t expect any more response than to the others I have sent, but I will keep pushing.

  14. @Cornwallis: I hope we are correct RESP & RDSP are exempt, along with RRSP. Is your understanding same as mine–TFSAs are not exempt?
    Also, do you think the exempt accounts are included in the aggregate amount held with one bank or are they not included in that calculation?
    Do the regulations give any insight as to whether credit unions are exempt from FATCA?

  15. Here is my feeling on the current status of the IGA. If I could travel forward in time to lets say July 1st 2013 and did so I would NOT be shocked to find out on that date that we were STILL speculating on whether on IGA would be signed. I am not necessarily saying one won’t be signed at some point but I would not necessarily wait by the telephone all day long expecting that phone call.

  16. Perhaps this is wishful thinking on my part, and I don’t know what Tim’s connections or contacts are on this one, but my instinct tells me the same as what Tim says about a Canada-US IGA. I don’t think our government is exactly itching to conclude an agreement, any agreement, at any cost or on US terms only. First, it wouldn’t be consistent with the firm stance Flaherty and the government have taken on some other financial matters in the past year or so unrelated to FATCA. Second, under no stretch of the imagination could one describe the current Conservative government as soul-mates of any wing of the Democratic Party, even a pretty-centrist (to put it rather mildly, in spite of Fox News and other media rants) one like the Obama Administration. Third, if they were just itching to roll over and let the US walk all over us on this one, they’d likely have done it before now. I don’t see it, and I’m no fan at all of the Harperites on hardly any issues other than this one so far.

  17. Thanks Badger. I will be on the phone to the CEO of my credit union next week. In my last conversation with him, he said “We’re hoping common sense will prevail.” He has more confidence in US than I do.
    I just checked my credit union’s annual report and discovered they have just passed the $2 billion in assets mark, which takes them well out of the standard of $175 million to be considered small.
    However, I think all of their offices are in their “home jurisdiction.” I also suspect 98% of their customers (which they consider owners) are citizens or residents of Canada. Those two points would put them in the “deemed compliant partial exemption category” if I’m reading this correctly,
    I will let you know what I learn.
    Others may want to check with their own or other credit unions.

  18. This article asks if FATCA will turn banks into tax advisors.
    http://rfpconnect.com/news/2013/1/28/will-fatca-turn-banks-into-tax-advisors
    I don’t think it will. I think it will turn them into IRS spies on honest, law-abiding people living, working and paying taxes outside US.
    Of course, the only banks which will become spies will be those that have not already been judge and jury and sentenced citizens of other countries to a life without banking or other financial services just because they had the misfortune to be born in United States of Arrogance.

  19. To Shubert’s earlier point. I recently saw an interview with Flaherty while completely unrelated to FATCA where he did seem to be very critically of the Obama Adminstrations. My ears perked becasue while I have heard other Conservatives especially backbenchers be critically of Obama I have never heard it from a Conservative as high level as Flaherty.
    http://www.reuters.com/article/2013/01/25/davos-canada-pipeline-idUSL6N0AUC1620130125
    DAVOS, Switzerland, Jan 25 (Reuters) – U.S. President Barack Obama’s emphasis in his inaugural address on fighting climate change may not bode well for the contentious project to build the Keystone XL oil pipeline, Canada’s finance minister said on Friday.
    The Canadian government has been an enthusiastic supporter of TransCanada Corp’s plan to build the $5.3 billion pipeline, which would open up a huge new market on the U.S. Gulf Coast for crude derived from oil sands in Alberta.
    Washington faces a decision in the next few months on whether to approve the project, a possible cure for deeply discounted Canadian crude prices.
    “I had reason for optimism before the election that the president would approve it, were he re-elected, but his speech the other day was not encouraging,” Finance Minister Jim Flaherty told Reuters at the World Economic Forum in Davos.
    Now you can disagree or agree on the merits of the Keystone pipeline but what is noticable is this very public criticism from Flaherty.

  20. The government that was REALLY itching and eager to roll to the US on this was the UK. Everyone else even countries such as France and Germany that everyone THOUGHT were itching and eager to roll over have not yet.

  21. @Tim: According to this article, Obama seems to be closing the books on US expansionism.
    http://www.thestar.com/news/world/article/1320124–burman-obama-seems-to-be-closing-book-on-u-s-expansionist-policies
    This says in his inaugural address, Obama appeared to be closing the book on the expansionist policies of the U.S. government in recent years. He spoke of a “decade of war. . . now ending,” stressing the limits of western power and intervention:
    “We will show the courage to try and resolve our differences with other nations peacefully.”
    Somehow, FATCA doesn’t seem so peaceful to me. Admittedly, US is not dropping any nuclear bombs on allies. Instead, they are using financial terrorism to force banks and governments around the world to stalk people who simply had the misfortune to be born in US.
    I think that’s how US defines working “peacefully” with friends.

  22. All along we’ve been told that the original purpose of FATCA was to target Americans living in US, but hiding assets and income “offshore.”
    We have been led to believe those of us who are citizens and residents of other countries were simply collateral damage.
    Now someone is saying we were the targets all along.
    http://www.morpheus-group.com/blog/industry-insight/fatca-time-for-change/?goback=.gde_3731046_member_208976450
    This says: FATCA was designed, say its proponents, to target the undeclared assets of American taxpayers who live abroad.
    I suspect this is incorrect, but the author (Lisa Smith) usually has her facts right. The rest of the article is pretty accurate, especially the section on FATCA debate.
    I don’t really care what the reason is. IRS and US: Get out of our lives!

  23. @Tim, Badger, Others: I spoke with the Vice-President of my credit union (Libro) this morning. He said FATCA negotiations between Canada and US are close to being finalized. He fully expects an IGA to be signed for financial institutions to submit information to CRA instead of directly to IRS. (I don’t know if he has inside information or if that is his information from Flaherty’s general statements.)
    I think he was very surprised that does not alleviate our concerns in any way.
    He said “We are with you 100% in spirit.” Yet, he does expect Libro to comply. He said if they do not , they would have to “close our doors” because of the high cost.
    I advised him if my credit union or bank demands to know where I was born or threatens to close my account, I will pursue legal action along with others.
    I told him of the legal advice I have received from one of Canada’s most prominent constitutional lawyers. I also advised him of the position of CCLA. I think he was somewhat taken aback that some of us are that far along in planning resistance to FATCA and the strength of our determination.
    I also pointed out to him how bitterly disappointed I am that Libro is not doing more to protect its customers (which they call owners). He stressed they have a responsibility to all of their owners and complying with FATCA allows them to protect the holdings of all of their owners.
    He also told me of the “burden” FATCA is placing on financial institutions to comply. I replied I really was not interested. Instead, I told him of the “burden” FATCA places on honest, law-abiding Canadian citizens and residents whose savings and assets were entirely earned, saved, invested and taxed in Canada.
    He did not have any answer to how Libro would determine who was born in US without violating Canadian law. He did say anything they do to comply with FATCA will be in accordance with Canadian laws.
    I told him the most frustrating thing about this is Libro was originally established as St. Willibrod Credit Union because Dutch immigrants had difficulty getting banking services over 60 years ago. Yet, now immigrants from another country who have been here for decades are in jeopardy of having their rights to confidential financial services violated by that very same credit union. He didn’t have an answer for that.

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