The U.S. Foreign Account Tax Compliance Act: American Legal Imperialism?

34 Pages Posted: 27 Feb 2015

See all articles by Bruce W. Bean

Bruce W. Bean

Michigan State University - College of Law

Abbey Farnsworth

Independent

Date Written: February 25, 2015

Abstract

The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 and came into effect on January 1, 2013.1 FATCA is by far the most extraordinary example of Congressional extraterritorial legislation in U.S. history. Eschewing the traditional practice in international law of limiting national legislation to the territory of the sovereign, the U.S. Congress explicitly crafted FATCA to impose egregious, continuing due diligence and reporting obligations on more than 100,000 financial institutions, each of which is organized and operates outside the territory of the United States. FATCA is designed to increase U.S. income tax compliance by American tax payers holding financial assets outside the United States.

This article briefly outlines the requirements of FATCA, describes the outcry by American expatriates to the unintended consequences of FATCA as well as the predicament of “accidental” and “incidental.” Americans who find themselves subject to years of unpaid obligations imposed by the unique approach to taxation contained in the Internal Revenue Code. The article concludes by describing a potentially monumental unintended consequence of FATCA, the end of the centuries old practice of sovereigns refusing to enforce revenue laws of other sovereigns as the developed world joins together to arrange mutual FATCA-like reporting to enhance tax collection efforts globally.

Keywords: Foreign Account Tax Compliance Act, FATCA, tax, legislation, foreign, extraterritorial

Suggested Citation

Bean, Bruce W. and Farnsworth, Abbey, The U.S. Foreign Account Tax Compliance Act: American Legal Imperialism? (February 25, 2015). ILSA Journal of International & Comparative Law, Vol. 21, No. 2, 2015. Available at SSRN: https://ssrn.com/abstract=2570015

Bruce W. Bean (Contact Author)

Michigan State University - College of Law ( email )

318 Law College Building
East Lansing, MI 48824-1300
United States
517/432-6920 (Phone)

Abbey Farnsworth

Independent ( email )

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