Transcript of the one and only Congressional hearing ever held on FATCA

I wanted to finally provide the transcript of the one and only Congressional hearing ever held on FATCA before it passed into law.


Even in 2009 there was significant opposition to the law

Congress really didn’t know what the hell they were voting on there were almost no witnesses invited other than from Treasury. ACA for example wasn’t invited to attend. Almost none of the committee members asked any relevant questions.

The public service of the US Treasury Department badly wanted this legislation however, by not informing Congress that much about it I suspect it will be public servants who will walk the plank when the you know what hits the fan.


27 thoughts on “Transcript of the one and only Congressional hearing ever held on FATCA

  1. The guy from Treasury who testified at the hearing has now left and teaches at Harvard Law School.

  2. In the testimony the IRS – per Wilkins” makes it clear that it cannot collect FBAR penalties under Title 26.

    “On the FBAR topic, under current law the penalties applicable to persons who fail to file an FBAR, a foreign bank account report, are not imposed through the Internal Revenue Code. They are, instead, imposed through the Bank Secrecy Act, which is in title 31 of the U.S. Code.

    If an individual fails to report income held in a foreign financial account, on the one hand, the IRS could use traditional tools such as assessments, liens, and garnishments to collect the taxes and the tax penalties. However, the traditional IRS enforcement tools may not be used to collect the title 31 FBAR penalties that apply if the foreign account is not reported. The FBAR penalty must instead be referred to the Justice Department for separate prosecution and collection.

    H.R. 3933 amends the Internal Revenue Code to create an FBAR-like reporting obligation as part of the filing of a tax return, and a separate penalty regime for failure to report the foreign financial account. This would allow the IRS to enforce the new Internal Revenue Code penalty by applying traditional IRS enforcement tools.”

    On the purpose of FATCA:

    “Mr. Tiberi. Thank you. To further go on, with respect to international tax, would you agree that there is a distinction between individuals and corporations who are deliberately avoiding taxation, deliberately hiding assets, not following the Internal Revenue Code, and a distinction between American, U.S.-worldwide companies who are doing business internationally, who are working every day with the Internal Revenue Service on issues of deferral, and check the box, and other legal measures within the Internal Revenue Code?

    Mr. Wilkins. Yes. I definitely agree with that statement. What we are dealing with in this bill is deliberate and illegal hiding of income and assets, and non-compliance with what the law is today.”

    Mr. Doggett:

    “My interest today in this, as you know, stems from my having filed with Senator Carl Levin — and I appreciate your reference to it — the Stop Tax Haven Abuse Act. I appreciate the fact that Secretary Geithner, when he was before the full committee in March, indicated that the administration fully supports that legislation.

    And while the primary focus of the hearing today, and the sole focus of the recent legislation that’s been introduced is tax evasion by individuals, I believe that much more costly tax evasion is occurring from corporate individuals, and that that must also be considered.

    As I noted when this subcommittee convened on March the 31st considering these matters, the use of international tax games by corporations in these offshore tax havens is widespread, and it drains billions of dollars from the treasury.

    I don’t believe that there is any justification for having one standard for individual taxpayers and another, more permissive approach, to corporate individual taxpayers. One rule for Wall Street corporations and one rule for individuals? I think that’s indefensible.

    And after years, if not decades of delay in this committee, there is also no justification for failing to address international tax abuse, or insisting that this has to be done in a two-step approach, one for individuals now, and another for corporations some day. We need a comprehensive approach, not just a vague promise that corporate evasion will eventually be addressed.

    In fact, while some may try to draw a distinction, as has occurred here today, between illegal tax evasion and tax avoidance, the real difference primarily is — between individuals illegally hiding their cash overseas and corporations manipulating the tax does — the main difference is that the corporations have better lobbyists to obtain the — legitimacy for some of these questionable transactions than do some of the individuals.”

  3. FATCA will only work as long as the US dollar keeps its reserve currency status. China is now taking small steps to compete with the US dollar, and once Europe sorts itself out, it another viable reserve currency appears on the scene in the next several years, FATCA is over.

    If you have a viable competitve currency to trade in without a 30% withholding tax who in there right mind wouldn’t bill in it. The US is putting its reserve currency status at risk with FATCA.

    FATCA is good in the sense it will hasten the acceptance of an alternative reserve currency to compete with the US dollar.

    FATCA may give the US a short term bump but in the long term it’s bad news for the US dollar. Congress has made bad decisions before and this will be no execption.

  4. @renounceuscitizenship

    I just got off the phone with my friend to down in Boston also named Tim by the way. He is growing to try to get some meetings setup in person with some people involved in the legislation to explain what exactly is going on including possibly the guy from Treasury now at Harvard that testified at the hearing. Harvard Profs there are pretty Ivory Tower so I wouldn’t hold much in that case. I do suspect he will be sucessful in obtaining a meeting with someone from US PIRG which is based in Boston and was one of organization that supported the legislation.

  5. @Tim – the Harvard campus is not as foreboding as people may think. You can walk into many of the buildings as you wish and do a tour yourself. If you find someone who has access to the campus telephone directory you’ll be able to contact who you wish fairly quickly. The phone number will be 617.495.XXXX or something like that. If you know the room number at the Hall or House you could walk right in and ask for them or leave a message.

    Your Treasury guy I would imagine teaches across the river at the Business School, or down the square perhaps at the Kennedy School of Government or possibly at FAS Department of Economics.

  6. Tim, it would be very interesting to see if these same people addressed the “international” complications with this. Like if someone lives in one country and already pays taxes, and potential conflicts with other countries’ laws. I wonder if that was even addressed though…

  7. Its Stephen E Shays
    in Hauser Hall as part of the School of Law

    Like like its right off of Massachusetts Ave

  8. @Tim – If you look at the Harvard map Pound and Langdell Hall you can walk straight into to – I would imagine Hauser would be the same. However with Harvard it would be best to make contact by email or fax first before knocking on their door. There’s definitely a culture about the place. Remember many of the professors are busy doing other things than teaching, often writing books, doing documentries, guest speaking, consulting, anything that promotes their own personal brand.

    For example, Elizabeth Warren (a Harvard Law professor) is currently busy running for Massachusetts US Senate to take back the seat Scott Brown (Republican) won 2 years ago. Now Mass being basically a very blue state can’t stomach having a republican senator forever.

  9. Here in relevant part is what Shay said:

    “Mr. Chairman, we applaud the leadership role taken by you and Chairman Rangel in the House, and by Chairman Baucus and Senator Kerry in the Senate, in introducing this legislation. And, additionally, the work of Senator Levin and Congressman Doggett, in supporting a strong international tax enforcement agenda.

    Mr. Chairman, Ranking Member Tiberi, and members of the subcommittee, the Foreign Tax Compliance Act fits well into the administration’s multi-pronged strategy of improving our domestic tax laws, while increasing global cooperation on tax information exchange to help narrow the tax gap, and create the fairer tax system we need.

    We look forward to working with you and members of this subcommittee on this important subject. I would be pleased to answer questions when the time is appropriate. Thank you.”

    Not very encouraging is it. But remember that all of this is in the context of reducing tax evasion.

    There is nothing in any of this that suggests that U.S. citizens living abroad were (at least at the time) the intended targets of any of this.

  10. Never try to predict Massachusetts politics – Brown won more because Martha Coakley was a poor candidate not because he was outstanding. In my opinion Warren doesn’t have much more appeal than Martha did, however, Brown is by no means the working guy in the pick up truck campaigning hard for your vote (as his TV ads portrayed). He owns six houses and while not Bill Gates rich, he’s definitely the working well off.

    I think it’s going to come down to their debates in the end. Brown doesn’t strike me as a guy who can think on his feet with facts and figures (he needs his notes next to him), while Warren seems to have her facts. It’ll be interesting.

    Brown’s achilles heel will be health care. He boasted he would be the deciding vote for Obamacare, but at that time the Massachusetts reforms were just starting to be felt. Now in 2012 you have a lot more voters been “saved” by the Commonwealth with state subsidised health insurance because of unemployment, bad employers etc. Those voters are unlikely to listen to Sen Brown. Massachusetts virtually has universal health now with over 98% of residents covered.

    Most people in Massachusetts like the health care reforms and it’s going to be hard for Brown to campaign on repeal of Obamacare without putting Massachusetts’ reforms into question if the Federal government doesn’t continue to fund it.

    His wife is comes from ordinary means and was a TV news reporter for WCVB Boston.

  11. Brown serves on the Senate Subcommittee on Investigations(aka the Carl Levin Committee). My friend down there will be keeping that in mind.

  12. These were the statements put out by Obama and Geithner shortly after the introduction of the Act.


    “I commend Chairmen Baucus and Rangel, and Senator Kerry and Congressman Neal, for moving forward on the important task of giving the government the tools it needs to crack down on Americans hiding their assets in overseas tax havens. A small number of individuals and businesses hide their assets overseas solely in order to shirk their responsibilities, even as the vast majority of hard-working Americans honor the obligations of citizenship and fulfill their responsibilities.

    “Shortly after taking office, I laid out a set of proposals to crack down on illegal overseas tax evasion. The legislation introduced today would fulfill that promise, putting a stop to billions of dollars worth of abuses. I look forward to working with Congress to turn these proposals into law so that honest Americans no longer shoulder the burden of the few individuals and businesses that put profit before responsibility.”


    WASHINGTON – The U.S. Department of the Treasury today released the following statement from Secretary Tim Geithner on the introduction of the Foreign Account Tax Compliance Act of 2009:

    “The legislation introduced today by Chairman Rangel and Chairman Baucus follows through on the Administration’s commitment to combating offshore tax evasion and ensuring a level playing field. For too long, individuals have taken advantage of the system by hiding money in accounts overseas, while millions of families and small businesses here at home pay the price. This legislation will reduce the amount of taxes lost through the illegal use of hidden accounts and is the next step in making sure that everyone pays their fair share.

    “This legislation fits well into the Administration’s dual-track strategy of improving our domestic tax laws while increasing global cooperation on tax information exchange to help narrow the tax gap and create the fairer tax system we need. We have had great success recently in working with countries around the world to increase tax information exchange as part of the global effort to end offshore tax evasion.

    “In addition to the leadership of Chairman Rangel and Chairman Baucus, I want to acknowledge the work of Senators Kerry and Levin and Representatives Neal and Doggett in support of a strong international tax enforcement agenda.”

  13. Watch out for Levin, he’s another ex-Harvard know it all. Brown graduated from Tufts and BC so he may have that in his favour not being assoicated with Harvard.

  14. thank you for those very telling excerpts re Wilkins, Doggett etc. @ renounceuscitizenship.

  15. Its been a rather interesting evening for me. I just found out I am spending the next two months in Boston of all places for my work(I have had to travel there frequently in the past). Wow. I might be meeting Professor Shays myself if I can pull it off.

    One thing I want to consider is seeing if I could possibly setup a meeting or videoconference between Stephen Shays and perhaps some MPs such as Peter Julian or John Weston to discuss this issue. I think that would be rather interesting. Any suggestions as to how to get in touch with their staff members dealing with FATCA issues. Can discuss in private forum if need be.

  16. For those interested in tracing FATCAT back to its roots, may I suggest that you read an article by Prof. J. Richard (Dick) Harvey that appeared in the Villanova University Law Review in December 2011.

    Professor Harvey admits to being one of the “architects” of FATCAT and his ruminations on how and why it exists may be instructive.

    The article may be downloaded free of charge at:

    For those with limited attention span, here is the Abstract:

    Abstract ‐ Since its signing by President Obama on March 18, 2010, the Foreign Account Tax
    Compliance Act (FATCA) has been criticized by many in the financial community. As one of the
    architects of FATCA, the purpose of this article is to: (i) describe my perception of the origins of
    FATCA, (ii) discuss selected issues, and finally (iii) make recommendations that may ultimately be
    helpful to insuring FATCA’s success in both the short and long‐run.
    The article is written for several audiences. The entire article should be of interest to students and
    academics. For tax professionals and my former colleagues in government, the recommendations in
    Section 4 should be of most interest.
    Since 2007 the US has made significant progress in addressing offshore accounts through a
    combination of tools, including the threat of FATCA. FATCA was a bold, unilateral action by the US
    intended to ultimately provide transparency surrounding offshore accounts of US taxpayers.
    However, FATCA will take time to successfully implement and there will be growing pains.
    The long‐term success of FATCA may depend upon whether the US can convince other countries to
    adopt a similar system, or better yet, join with the US in developing a multilateral FATCA system.
    Thus, as the IRS and Treasury implement FATCA they need to focus on the long‐term goal. In the
    short‐run various compromises will need to be made to ease the initial implementation of FATCA.
    Some of those potential compromises are discussed in this article. In addition, a multilateral FATCA
    system and the related benefits are discussed.
    Finally, financial institutions worldwide should seriously consider attempting to help forge an
    international consensus. Although financial institutions will clearly incur substantial costs from
    FATCA, those costs may pale in comparison to the future costs that could be incurred over the next
    5 to 20 years as other countries implement their own specific systems. It would be substantially
    cheaper for financial institutions if there is one global standard, rather than ultimately building
    separate FATCA type systems for each country.

  17. The US wants to set the standard…
    One World banking…
    Currency controls…

    I have said it from the very beginning: the US wants to have control of the banking system. This is the only “reasonable explanation” behind it all. Assuming that the majority of us are just law-abiding citizens/residents where we live, the gain from the US is quite small, if ANY. But who has first “dibs” on any tax owed is where we actually live because we are physically present and they can throw us in jail if we don’t pay.

  18. The thing that struck me most about Prof. Harvey’s discussion was its extraordinary naiveté.

    – There was in his account literally no mention whatsoever of the possibility that FATCAT might cause a diminution in investment flows into the US.

    – The possibility that US taxpayers might not live in the US at all was not even hinted at and apparently was something that none of the FATCAT drafters even considered during their deliberations. The words “foreign account” and “tax cheats” appear to have been inseparable in the minds of Treasury officials and Congressional staffers.

    – The amazingly offhand and superficial treatment given to the possibility that foreign laws might prohibit FFI participation or that there might be cultural and/or policy considerations in foreign lands that might take precedence over a nation’s need to collect taxes (e.g. privacy, etc.).

    – Nor is there the slightest mention of a possible nationalistic backlash to what he cheerfully describes as the US “unilateral” effort to impose its system and the costs of maintaining it on a world that was not so much as briefed in advance.

    Truly extraordinary!

  19. @todundsteuer

    The primary purpose and intention of FATCA was to impose a report or withhold system for foreign passive entitites bootstrapped on top of the existing qualified intermediary system. The terminology is very much centered around passive enitities. I don’t believe they ever intended that it would effect the provision of basic banking services outside the US and the extroadinary backlash that would ensue when that happened.

  20. @todundsteuer

    You’ve motivated me to dig up a comment I made on taxprofblog in Dec last year, when this paper was announced. Here’s what I wrote:

    “The author is visibly defensive about the damage his legislation is causing, yet remains unapologetic, and appears either unwilling or unable to grasp the full horror of what he has created. I count eleven occurrences of some form of the word “hope” in this paper. That pitches it somewhere around wishful thinking, and certainly far from than anything rigorously thought out. Like FATCA itself, this paper is worthless trash from beginning to end.”

    Did I undersell it? 🙂

  21. @Tim…going on internet silence for a while, (traveling) but entering a comment, so I get email notice of new comments and remember to come back here and read this thoroughly. You keep digging out great stuff that I learn so much from. You have been an invaluable resource for Isaac Brock, and I for one, really appreciate what you do.

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