Prologue and introduction:
October 24, 204 – @VP @KamalaHarris promises to take the tax, banking and financial services concerns of "Overseas Americans" seriously.
October 28, 2024 – The @JoeBiden Kamala Harris administration issues IRS Notice 2024-78 which effectively incentivizes BOTH FFIs and the #IGA…
— John Richardson – Counsellor for US persons abroad (@ExpatriationLaw) November 3, 2024
October 24, 2024 -Letter to Americans abroad from Kamala Harris
In a letter addressed to Americans abroad Vice President Harris said that she takes the concerns of US citizens overseas seriously, “whether it’s improving access to consular services, addressing the complex challenges you face with banking, taxation, and financial services, or ensuring equal treatment in immigration and citizenship processes.”
The full text of the letter may be found here.
https://www.democratsabroad.org/vp_harris_letter_to_americans_abroad
October 28, 2024 – Biden Treasury Letter To Americans Abroad – Notice 2024-78 – Either Comply With FATCA and U.S. Citizenship Taxation or Renounce U.S. Citizenship
As described in a short announcement from KPMG:
The IRS today released Notice 2024-78, extending the temporary relief provided in Notice 2023-11, subject to the procedures and requirements of Notice 2024-78, for certain foreign financial institutions required to report U.S. taxpayer identification numbers (U.S. TINs) for certain preexisting accounts as defined in an applicable Model 1 intergovernmental agreement (IGA).
If a foreign financial institution in an eligible Model 1 IGA jurisdiction complies with the procedures described in the notice, then the U.S. Competent Authority will not determine there is significant non-compliance with the reporting Model 1 FFI’s obligations under the IGA solely as a result of its failure to report U.S. TINs associated with its preexisting accounts for the 2025, 2026, and 2027 calendar years.
The text of Notice 2024-78 is here:
Notice 2024-78 is the first indication of how seriously (NOT) the Biden/Harris administration takes the concerns of Americans abroad. In brief, the message from the Biden Administration to (an update to Treasury Notice 2023-11) Americans abroad is:
Either comply with FATCA and U.S. citizenship taxation or renounce your U.S. citizenship!
Notice 2024-78 provides for a continuation of Notice 2023-11. Notice 2023-11 prescribed procedures for non-U.S. banks to avoid a designation of FATCA non-compliance in return for:
1. The Government of the FATCA “Partner” Country taking steps to “encourage” their U.S. citizen residents to provide their SSN to their banks
2. The banks in the FATCA “Partner Country” taking specific steps to continue their hunt for and harassment of their U.S. citizen residents
3. The banks notifying their U.S. citizen customers of the opportunity to renounce their U.S. citizenship and manage U.S. tax compliance under the “Relief Procedures For Former” citizens“. (Clearly the U.S. is a country that would rather have taxpayers than citizens.)
In summary:
The Biden administration’s message to U.S. citizens abroad is that if you don’t want to be in U.S. tax compliance that you should renounce U.S. citizenship.
The Biden administration’s message to foreign government and banks is that that we won’t punish you if you take specific steps to locate your U.S. citizen residents and report their SSNs to the IRS.
This does NOT sound like an administration that is interested in helping Americans abroad with their tax, banking and financial services problems!
The problem this is designed to address …
Those familiar with FATCA IGAs will know that the FFIs (“Foreign Financial Institution” AKA your local bank) are required by the FATCA IGAs to obtain a US TIN (AKA SSN) from their U.S. citizen clients. Failure to obtain the SSN places the FFI in violation of the FATCA IGA (and theoretically subject to the FATCA penalties potentially imposed on banks). Therefore, the FFIs are EXTREMELY motivated to obtain the SSNs. It makes perfect sense for the FFIs to cease doing business with those U.S. customers who do not supply SSNs. That said, there are many U.S. citizens living outside the USA who simply do NOT have a U.S. SSN.
In late 2022 the IRS issued Notice 2023-11 which prescribed conditions under which the FFIs would avoid a designation of non-compliance (even when they are/were unable to obtain an SSN from their U.S. citizen clients). Notice 2023-11 covered the FFIs for the years of 2022, 2023 and 2024. We are coming to the end of 2024. There are still many U.S. citizen customers who have not provided CLNs to their banks. The banks are getting nervous and are reaching out to non-compliant customers. Those customers are being threatened with the closure of their bank accounts.
Because the problems continue, on October 24, 2024 the IRS issued Notice 2024-78 which is just a repackaging of Notice 2023-11. Notice 2024-78 “kicks the can down the road” for another three years (2025, 2026 and 2027). The FFIs will continue to avoid a designation of non-compliance in return for meeting the same specific conditions described in Notice 2023-11 and described in the Appendix below.
Clearly the U.S. has opted to continue its harassment of FFIs and Americans abroad. The purpose is to enforce U.S. taxation on the residents of other countries.
See the appendix below for the relevant text in Notice 2024-78 which outlines the conditions that FFIs and foreign governments are required to meet to avoid a finding of noncompliance under the FATCA IGAs.
The Democrats have NO INTENTION of ending U.S. citizenship taxation!
The continuation of Notice 2023-11 reminds me of the movie “Ground Hog Day”.
Understanding the problem and Notice 2023-11
What follows are the three posts I wrote in early 2023 discussing Notice 2023-11. This post is “Post Number 4” as part of the series.
Part 1 – Notice 2023-11: The Carrot, The Stick And Heightened FATCA Enforcement On Overseas Americans
Part 2 – Notice 2023-11: Non-US Banks May Be Forced To Sever Ties With US Citizen Clients Because Of FATCA
Part 3 – Notice 2023-11: Is FATCA Aimed At Resident Americans, Residents Of Other Countries Or Both?
Part 3 – Notice 2023-11: Is FATCA Aimed At Resident Americans, Residents Of Other Countries Or Both?
Part 4 (November 3, 2024) Notice 2023-11: Notice 2024-78 Is A Continuation of Notice 2023-11
John Richardson – Follow me on X.com @ExpatriationLaw
Appendix – Excerpts from Notice 2024-78
The complete notice is here:
SECTION 3. EXTENSION OF TEMPORARY U.S. TIN RELIEF
.01 Extension of relief for reporting on certain preexisting accounts that are U.S. reportable accounts
This notice extends, for calendar years 2025, 2026, and 2027, the temporary relief provided in Notice 2023-11 for reporting Model 1 FFIs required to report U.S. TINs for certain preexisting accounts, subject to the conditions set forth in this notice. Reporting Model 1 FFIs that comply with sections 3.02 and 3.03 of this notice will not be treated as in significant non-compliance with their obligations under an applicable Model 1 IGA solely because of the failure to report a required U.S. TIN with respect to a preexisting account. Section 3.04 of this notice limits this relief to reporting Model 1 FFIs that are in an eligible jurisdiction that makes good faith efforts to increase the likelihood that U.S. citizens residing in that jurisdiction will report their U.S. TINs to the FFIs and that takes other steps specified in section 3.04.
This relief is limited to reporting on preexisting accounts. It does not apply to U.S. reportable accounts opened after the determination date specified in the applicable Model 1 IGA, including new accounts held by account holders of preexisting accounts. Nothing in this notice prevents the U.S. Competent Authority from finding significant non-compliance by reporting Model 1 FFIs that do not report required U.S. TINs for preexisting accounts and that do not comply with the relief requirements of this notice or Notice 2023-11, as applicable. Further, nothing in this notice or Notice 2023-11 prevents the U.S. Competent Authority from finding significant non-compliance due to a failure to satisfy an obligation under the applicable Model 1 IGA other than a failure to obtain and report each required U.S. TIN for preexisting accounts.
.02 Requirements for reporting Model 1 FFIs
JR Commentary – Requirements imposed on the FFI
To obtain the relief for preexisting accounts described in section 3.01 of this notice for the 2025, 2026, and 2027 calendar years, for each U.S. reportable account (including new accounts) with a missing required U.S. TIN, the reporting Model 1 FFI must do the following:
(1) obtain and report the date of birth of each account holder that is an individual and controlling person whose U.S. TIN is not reported;
(2) annually request from each account holder any missing required U.S. TIN, as described in further detail in section 3.03 below;
(3) annually search electronically searchable data maintained by the reporting Model 1 FFI for any missing required U.S. TINs;
(4) report an accurate TIN Code for each account that is missing a required U.S. TIN;
(5) if the FFI’s electronically searchable account information contains a foreign taxpayer identification number (or functional equivalent) assigned to a taxpayer by its country of residence (FTIN), report an FTIN for each specified U.S. person that is
missing a required U.S. TIN; and
(6) using the AddressFix element, as described further below, report the city and country of residence for each specified U.S. person with a missing required U.S. TIN. The AddressFix element is intended to be used generally for all address reporting. To ensure conformity of data reporting and the IRS’s ability to process reported data, reporting Model 1 FFIs should use AddressFix for all address information to the extent possible and may use AddressFree as a supplemental element. However, to comply with requirement (6) of this section, the only requirement is that the city and country of residence of the specified U.S. person must be included in AddressFix.
.03 Annual request for missing required U.S. TINs Reporting Model 1 FFIs must also make annual requests for missing required U.S. TIN information.
JR Commentary – More requirements on FFIs
To satisfy the requirement to make an annual request from each account holder for missing required U.S. TINs, reporting Model 1 FFIs must use the method of communication that is, in the FFI’s reasonable judgment, most likely to reach the account holder. In addition, the communication must include either of the following:
• the web address of the State Department’s Joint FATCA FAQs (as of the publication date of this notice, https://travel.state.gov/content/travel/en/international-travel/whileabroad/Joint-Foreign-Account-Tax-Compliance-FATCA-FAQ.html),2 or
• (i) a copy of the FAQs described in the preceding bullet and (ii) either a copy of the relief procedures provided by the IRS for certain former citizens, or the web address for such procedures (as of the publication date of this notice, https://www.irs.gov/individuals/internationaltaxpayers/relief-procedures-for-certain-former-citizens).
FFIs seeking to obtain relief under this notice for the 2025, 2026, and 2027 calendar years must retain records of the policies and procedures adopted to satisfy this and relevant U.S. tax consequences (including a link to the IRS’s relief procedures for certain former U.S requirement and documentation that those policies and procedures were followed to establish its compliance with the requirements of this section until the end of calendar year 2031. To obtain the relief described in this notice, the FFI must also retain until 2031 any records or documentation adopted in previous years for the purpose of obtaining relief under Notice 2023-11 to the extent applicable.
.04 Eligible Model 1 IGA jurisdictions
JR Commentary – Requirements imposed on the IGA Partner country
For a reporting Model 1 FFI to be eligible for the relief described in this section with respect to reporting for a particular calendar year or other appropriate reporting period, the applicable Model 1 IGA jurisdiction must make good faith efforts, by the date that is nine months after the end of the calendar year to which the information relates, to do the following:
(1) Encourage U.S. citizens resident in the jurisdiction to provide U.S. TINs to FFIs when requested;
(2) Take measures to enforce compliance by reporting Model 1 FFIs identified by the U.S. Competent Authority to the Model 1 IGA jurisdiction as potentially noncompliant;
(3) Encourage FFIs located in a Model 1 IGA jurisdiction to not discriminate against U.S. citizens that do provide a U.S. TIN; and
(4) If notified by the U.S. Competent Authority, take steps to conclude Competent Authority Arrangements with the U.S. Competent Authority, to implement an IGA, amend an Annex II to an IGA, or exchange country-by-country information.
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2 The Joint FATCA FAQs provide information on how to obtain an SSN, how to renounce U.S. citizenship, and relevant U.S. tax consequences (including a link to the IRS’s relief procedures for certain former U.S. citizens). Additionally, FFIs may wish to include a direct link for U.S. citizens and residents seeking to obtain a U.S. TIN (as of the publication date of this notice, https://www.ssa.gov/foreign/foreign.htm).