Update from Credit Union Central of Canada on Budget and #FATCA

Everyone should read this. You need to scroll down several pages.



41 thoughts on “Update from Credit Union Central of Canada on Budget and #FATCA

  1. This was the most interesting and revealing part:

    The Canadian government is not yet convinced it needs to enter into an inter-governmental agreement with the U.S., similar to those between the U.S. and several European countries.

    That seems to imply the Canadian government thinks those 5 European countries signed deals that are very bad for them.

    Maybe the Canadian government’s position is the existing agreement between Canada and the US should be the model for all countries. The existing agreement only offers the US information on US citizens resident in the US.

  2. @omghesstillanamerican

    Canada is very attached to that agreement because it is totally reciprocal Canada reports to US and accounts held by any US Resident in Canada and the US reports back to Canada on any accounts held in the US by Canadian residents.

  3. I think they’re very smart to hold their ground. That agreement basically does an end run around citizenship based taxation and since it’s already signed why change it.

  4. @omghesstillanamerican

    A few more points:

    Canada is the only country that the US has such an agreement with and if the US is able to get information directly from Canadian banks instead of the CRA there is no incentive for them to hold their end of the existing bargain in terms of reporting to Canada information on accounts held in the US by Canadian residents.

  5. @Tim, so if a Canadian bank signs the FATCA agreement with the US, they should expect to get slapped around real good by the Canadian government. Because banking is so heavily regulated in Canada, no smart bank will sign on with FATCA.

  6. @omghesstillanamerican

    That is still an open question no one yet either in the banks or the government wants to talk about it. One possibility I have suspect is FATCA might apply to the investment subsidiaries of the major banks that already participate in the Qualified Intermediary Program but not apply to the main bank itself in terms providing traditional checking and savings accounts(at least for a period of time). I am pretty certain though we are going to get a pretty strongly worded comment letter from Flaherty at the end of April as he just did to Geithner on the Volcker Rule back in February

    I don’t know if you have seen this letter already but I am going to post a link along with another one from Mark Carney.



  7. @Tim

    Thanks so much for posting the link to Credit Union Central’s report on the Federal Budget.
    I found the following quote particularly significant for anyone who felt that Credit Unions would be exempt from FATCA : “This new US legislative requirement imposes onerous reporting requirements on foreign financial institutions, INCLUDING CANADIAN CREDIT UNIONS.”

    Re your comment above that FATCA might not apply to the banks providing chequing/savings accounts but would apply to the investment arms of the banks – Great for anyone who does not have investments but onerous for those people (especially seniors). Many seniors today, (myself included), use the income from our investments to pay our property tax bills, heat our homes, buy our groceries and yes, even pay our income taxes to Canada. (The only country we should have to pay taxes to!).
    I hope this does not prove to be how Canada gets around the “Charter Rights” of its citizens – ie make sure the banks provide normal day to day banking needs, but investing becomes the problem.

  8. @tiger

    The problem Tiger is many people have investment in “US Stocks and Bonds” if all your and others investments were in non US securities this would be less of a problem.

  9. @Tim

    I think I need to have a ‘sit-down’ with my investment advisor. Yes, I do have some of my investments in the U.S. Of course, I did that because it was explained to me that for diversification and growth, I should not have ‘all my eggs in one basket’, should be diversified over asset class and sector and also over different countries’ markets. And of course, this last year, my investment advisor has been proven correct – my U.S. ETF’s have done better than any equities I held in Canada. I have most definitely decided that once we get through April 30th and some final regulations, I will be moving investments out of the U.S., no matter how much better they might be doing.

    One thing I am still quite confused about re FATCA – if the FFI decides an individual is a ‘US person’, do they also have to report income earned on their Canadian investments. In other words, just like they now issue a T5 or T3 for income earned on non registered investments to the CRA, would they also issue forms such as 1099-DIV or 1099-INT to the IRS on those same investments?

  10. @tiger

    In a simple word YES. This is exactly what the US wants. I will also note on Credit Union side of things that Alterna which is one of the biggest in the country pretty equivocally said they weren’t complying with FATCA. If you are an Alterna member I believe I saw that there annual meeting is coming up in a few weeks.

  11. @Tim
    So if I understand correctly, they can report the income earned on Cdn. investments to the IRS, but won’t withold from that income. However, on investments held in the U.S., they can and will withhold tax?

  12. @tiger

    They can withhold on US investments if you refuse to provide a W-9 and supposedly they are supposed to close your account but it is unclear how the latter part will/would work

  13. @Tim…

    There is one thing that is not quite clear in my mind…

    The Tax treaty that Canada has with the US already provides for reciprocal tax data exchange.

    The 5 nation EU pact as an alternate structure to FFI direct reporting required by FATCA seems to be a similar tax data reciprocal exchange.

    What is the difference, at a fundamental level, between the two? Are you familiar enough to be able to explain, or would this get into the technical weeds and I would get lost understanding?

  14. @JustMe

    The existing tax data exchange applies only to “US Residents” whereas with FATCA the US wants data on US Citizens living in Canada.

  15. Every country should be fighting for the same deal Canada signed years ago. Offering information on US residents only.

    The 5 European countries that signed offering to exchange data on US citizens residing in Europe have betrayed not only those citizens but their own sovereignty.

  16. Tiger re
    So if I understand correctly, they can report the income earned on Cdn. investments to the IRS, but won’t withold from that income. However, on investments held in the U.S., they can and will withhold tax?”

    As far as I’m aware, this is incorrect. For US investments, the withholding is not done by the Canadian FFI It is done at source in the US.

    Under FATCA, Can. FFIs would report that a US Person has an account. That’s the only change. They don’t report income on Can investments to the IRS.

    Remember, accounts under 50k are exempt, under 1 million are subject to ‘electronic search’ of the bank’s info for ‘US indicia’ and RSPs may well be exempt.
    Fatca is far from a done deal as far as the banks are concerned.

  17. @Tim…

    Humor me a bit, as I am dense….

    When you say “US residents”, I want to be sure that I understand how you are using this terminology.

    Is this right?
    The US/Canada tax treaty provides that
    1. Canada will give the US information about those who are resident in America but hold accounts in Canada, and
    2. The US will provide information about those who are resident in Canada but hold accounts in America.

    Do I have that stated correctly? If not, could you spell it out more clearly for me as I want to have the distinction clear in my mind. Thanks for your help.

    Sorry to be so slow on the uptake here, but I don’t want to misread.

  18. @JustMe

    Yes, you have it exactly correct. What is notable is that for scenario number 2 Canada is the only country to date the US gives this type of information automatically to(This is “DATCA” non resident alien reporting that Reps Posey et all are up in arms about expanding).

  19. @JustMe

    Just out of curiosity I noticed you have relatives from Bellingham, WA. Are you familiar with Point Roberts, WA. I actually recently found out there is a small community bank based there and given the nature of the place I wonder how many of their clients are Canadian. There was an interesting article I linked to below that talked about the current status of Point Roberts


  20. @Tim. Yes, I am familiar with it. It is just south of the YVR ferry terminal. I have never driven out there, although I have sailed close by years ago. I saw that National Post story when it came out, but have no information to add about Sterling Bank… I bet the petro stations just north of the border don’t like the enclave. 🙂

  21. @Tim and Just Me

    My oldest son’s best friend was raised in Tsawwessen, literally a walk down the street to Point Roberts. Point Roberts really should belong to Canada.
    An interesting item was in our papers (Vancouver papers), sometime in the last year. They reported on a North Vancouver man who had owned a place at Point Roberts for more than a generation. He frequently went down to his place there. Border guards had been hassling him more and more frequently and he had even been denied entry to the US at one time. The hassles all had to do with tax issues, where was he actually resident etc etc. They had gotten so hostile toward him, he made the decision to sell his place at Point Roberts rather than put up with the border guards any longer.

  22. @usxcanada

    Thanks for posting the link to the story. I remember some of the details but not all of the details (have more and more senior moments these days!). Those border guards can sure be nasty!

  23. I put a call in today to CCU but was unable to reach the person I was directed to. However, I think I understand now, why credit unions will most definitely be included in FATCA.

    While most credit unions do not, on their own, offer investments in mutual funds and the like, many rely on Credential Financial-Credential Securities Inc. Credential Financial is owned by the Provincial Credit Union Centrals & CUMIS (owns 50% and represents insurance business via credit unions). The Provincial Credit Union Centrals are owned by credit unions in the corresponding province. So it would seem that the companies are tied, financially and legally and so Credential is the defining point as they deal in US funds, securities, etc.

    If this is the case, I cannot understand how Alterna would be able to refuse to comply with FATCA.

  24. Rest assured, credit units will change their structures to avoid all this and gather in millions of new customers from the chartered banks.

  25. I have spoken with the President and CEO of my credit union. He thinks the credit unions will have to comply with FATCA as they do have mutual funds and other US investments. He does not know how they will be able to do this without violating Canadian laws.

    He’s “hoping common sense will prevail.” Aren’t we all? Unfortunately, he probably doesn’t know the Americans like we do!

  26. up to $1,000,000 bazlance, “electronic search” I have no identifiers in my credit union files, electronic or paper.

  27. @nobledreamer;
    I spoke with my credit union too. No definitive information, but they are going to have someone that deals with ‘compliance’ issues call back. Same for contacting a large pension plan – to urge that they at least share with members what their current situation and lobbying efforts are, and to alert members to investigate whether they may need to consult with someone qualifed re their potential exposure and options re FATCA. Now, rather than afterwards.

    If any of you feel that you can speak with your credit unions and group pension plans, and underscore your concerns about privacy under Canada’s laws, the plan and CU fiduciary duties to members, and lobbying Flaherty to continue to hold out – that would be great. You can ask to speak to someone who deals with ‘compliance’ issues. An important point to make is that single citizenship Canadians are also affected – as per green card holders, snowbirds, etc. and as our joint account holders, and beneficiaries. If your joint account holder or adult beneficiaries is a single citizenship Canadian, they can call too. Making it clear that the effect goes beyond single individual account holders with US citizen designations. There is still more than a hint of the attitude in some quarters that this is of concern only to US citizens who happen to move up here – and so the thinking is that it is not of concern to substantial numbers of ‘Canadians’.

  28. @badger

    very good layout of all the points to make. Thanks!

    As to your last point, I believe a substantial number of “Canadians” will begin to be concerned when they realize why their bank fees, service charges and so on, will be raised so their institution can pay for the costs it incurs in order to be in line with FATCAT.

  29. @Everyone

    The whole issue with credit unions and FATCA is still very much up in the air. I would say Credential Funds and CUMIS are the ones with a real problem more than individual credit unions such as Alterna. Alterna’s is a multiple billion dollar operation and their auditors are Price Waterhouse Coopers. I don’t think the would come out and just say they aren’t participating without some actual legal analysis of their position. I also think it given the lack of management cooridination(i.e. I don’t think Credential can force Alterna as an independent legal entity to comply) it is an open question to what extent Alterna and Credential/CUMIS are affiliated entities. The other issue is the requirement for all affiliated entities to comply doesn’t come into effect until 2016.

    Here is an additional link below to some information on how credit unions along with Credential might be able to qualify for FATCA-lite status without having to provide information on “US Persons”.


  30. @Everyone

    Neither Alterna or Duca are “partner” credit unions of Credential. Wow. Alterna seems to really have their bases covered.

  31. @ Tim,

    My understanding of today was based upon reading that credit unions own the credit union centrals who own a portion of Credential. While Alterna may not be a “partner” credit union with Credential, there is still a legal financial tie via Credit Union 1.
    I believe an earlier post I made (perhaps on the old Forum, I can’t remember anymore) was based upon an earlier “Policy and Advocacy Report” of CCU from June 2011. This is the info that produced uncertainty:

    “It would appear at first glance that this new legislation would have little impact on most Canadian credit unions because, although they may have U.S. accountholders, credit unions do not ordinarily have U.S. source income to which the 30% withholding tax could be applied. However, discussions with Deloitte and others in the financial services industry suggest it is not that simple. There may be implications for the credit union system in at least a couple of areas:
    (i) connected party rules may join credit unions and their affiliates, such as Credential, Ethical Funds and CUMIS, causing withholding tax issues for the affiliates if credit unions are not compliant; and
    (ii) other FFIs may require credit unions to provide evidence of compliance with FATCA in order to transact business.”

    Even if Alterna somehow is not connected to Credential, it may be that they fall victim to (ii).

    Not trying to be argumentative, just seems that the issue of “connected party rules” needs more investigation. And even then, (ii) may seal their fate.

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