Americans Abroad Have Until April 29, 2024 To Tell FinCEN Why They Should Be Exempt From FBAR

Outline

To learn more about Mr. FBAR, I invite you to watch the following discussion with U.S. tax lawyer Virginia La Torre Jeker.

Part 1 – Introducing Mr. FBAR – Looking For Mr. FBAR
Part 2 – 2011 – Financial Crimes, FBAR and Americans Abroad – Perspective From The Isaac Brock Society
Part 3 – 2020 – Financial Crimes, FBAR and Americans Abroad – Comments From Americans Abroad And Treasury’s Answer
Part 4 – 2024 – Financial Crimes, FBAR and Americans Abroad – Americans abroad need to keep commenting
Part 5 – What should you include in your comment?
Appendix – Treasury’s 2021 response to the comments of Americans abroad

To cut to the chase:

Pursuant to 31 U.S. Code § 5314 the Treasury Secretary has the clear statutory authority to exempt Americans abroad from the FinCEN 114 AKA FBAR reporting requirements. The statutory language is:

(b)The Secretary may prescribe—
(1)a reasonable classification of persons subject to or exempt from a requirement under this section or a regulation under this section;

Therefore, it is important to make your views known to Treasury!

Treasury has provided another opportunity (the last one was in 2020) for Americans abroad to comment directly on the FinCEN 114 AKA FBAR requirement. I strongly recommend that Americans abroad take this opportunity to comment on the appropriateness of FBAR being required for the local bank comments of Americans abroad.

The site requesting comments is here..

A direct link to the place where you comment is here:

https://www.reginfo.gov/public/do/PRA/icrPublicCommentRequest?ref_nbr=202403-1506-001&fbclid=IwAR3onw_sIYUYJUPs7FE2peIqHvstLp6GWznHz_ES3wC3a3V9HS7YFcZJB94_aem_AZ4juvxyHvLGAFVzYZYrCQ13We1R4LDFI_ajzrZ1EVldNPEGw2Z8jNAb397dlqBeaGzAxjXeEySvXWDbPMjth6tv

Update April 16, 2024 – Understanding the context of the comment request

I just received the following note from a reader of this post – “Someone out there”:

The Paperwork Reduction Act mandates that agencies engaging in information collection must seek approval every 3rd year from the Office of Management and Budget to extend the collection for an additional 3 years. The agency must demonstrate that the information collection is necessary, has utility and that the burden is minimal. Here’s an overview of the process: https://pra.digital.gov/clearance-process/

The first comment period (step 2 in the renewal process) was initiated in October of last year and Treasury received 40+ comments). Now the process is at step 4. Treasury has read the comments from October and has summarized them into their supporting statement which has now been submitted to OBM. The current supporting statement as well as the October public comments can be found here: https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202403-1506-001

Comments during the current 30 day period are sent directly to OBM for consideration. If for whatever reason OBM finds the information collection to be unnecessary, it has the authority to take a few actions: approve, disapprove, file comment, or return the ICR to the agency if it fails to meet the procedural requirements. The OBM can even instruct the agency to undergo “rulemaking” which means that Treasury would have to propose new FBAR rules which could eventually make its way into the regulations.

The statutes for this PRA approval process is found in 44 U.S. Code § 3507 and 44 U.S. Code § 3508 but the key subsection is 3507(h).

So any comments submitted during this 30 day period should be aimed at convincing the OBM that Treasury’s supporting statement is inadequate or that FBAR is unnecessary, doesn’t provide utility, is a burden and that the OBM should instruct Treasury to propose new rules that would modify the FBAR regulations.

Those who are interested in learning more, read on … Otherwise please go directly to the comment page.

Part 1 – Introducing Mr. FBAR – Looking For Mr. FBAR

31 5314 of the Bank Secrecy Act requires the Treasury Secretary to create and administer Mr. FBAR. The specific rules are found in Treasury Regs 1010.350. More about Mr. FBAR may be found in the ““The Little Red FBAR Book”“.

Part 2 – 2011 – Financial Crimes, FBAR and Americans Abroad – Perspective From The Isaac Brock Society

A 2016 blog post at the Isaac Brock Society noted that while the Bank Secrecy Act gives the U.S. Treasury the authority to exempt Americans abroad from the FBAR requirement, Treasury has deliberately and consciously chosen not to. The 2016 Brock post references an excerpt from the 2011 Federal Register which includes:

With respect to the comments raised by United States persons living abroad, FinCEN does not believe that an exemption is appropriate simply because a United States person chooses to live outside of the United States.

The complete document is available here:

fbar-2011-4048

The post at Brock includes 28 comments from Americans abroad explaining why they believe that Americans abroad should be exempt from the FBAR requirement. It is impossible that the birth of Mr. FBAR in 1970 was accompanied by the expectation that the residents of other countries should be required to report their “local” bank accounts to U.S. financial crimes.

Since 2011, inflation has swept more people into the FBAR reporting requirement. FBAR penalties have increased to account for inflation.

Part 3 – 2020 – Financial Crimes, FBAR and Americans Abroad – Comments From Americans Abroad And Treasury’s Answer

The 2021 comments may be viewed here.

Comments from familiar groups and individuals include:

1. American Citizens Abroad’s (@ACAVoice) Comment

FBAR- American Citizens Abroad Inc- Comment 75

2. AARO’s (@AARO) Comment

FBAR- Assoc of Ameican Residents Overseas- Comment 81

2. Tim Smyth’s (@TPSmyth01) Comment

General Comment

All, I would like to make the following comments in the response to this request related to the FINCEN FBAR reporting requirements.

1. There does not appear to ever have been an analysis on the part of the Treasury Department of how many individuals are subject to filing in the FBAR ever since the Bank Secrecy Act was enacted by Congress in 1970. The only numbers used by FINCEN in determining the filing burden is based on those individuals that have actually been filing in previous years. For example the US State Department estimates the number of US Citizens living outside the United States to be close to 7 to 8 million many of which under the terms of the BSA regulations

2. There appears to be no basis in either this notice or the previous notice in 2011 of any useful law enforcement benefit(i.e. arrests, convictions, trials etc.) of applying filing requirements on the basis of citizenship to non resident individuals.

3. There additionally does not seem to be an acknowledgement that most Foreign Financial Institutions are themselves subject to home country reporting requirements coordinated through the Financial Action Tax Force similar to those imposed on US Financial Institutions through BSA in manner that was not necessarily true when the regulations were first enacted by the department in the 1970s.

Thank you for your consideration

Treasury’s response to the comments

Treasury’s complete response is found here and in relevant part is included as Appendix A to this post.

1506-0009 FBAR Supporting Statement 1-28-2021

Treasury’s response:

1. Acknowledges the comments from Americans abroad

2. Categorizes the comments (suggesting an effort to understand them)

3. Claims that the comments will be considered.

This is a clear improvement from 2011 and should incentivize Americans abroad to submit comments in 2024.

Part 4 – 2024 – Financial Crimes, FBAR and Americans Abroad – Americans abroad need to keep commenting

A March 29, 2024 notice from U.S. Treasury announces that Treasury is once again soliciting comments on FinCEN 114 (the formal name of Mr. FBAR).

2024-06697

Three reasons why Americans Abroad should comment!

First reason:
It is possible (given the response in 2021) that Treasury might read the comments. If the comments are read then Treasury will understand that there is principled opposition to the reporting requirement extending to Americans abroad.

Second reason: Treasury may not read the comments. This will be more evidence of Treasury ignoring Americans abroad (actually they ignore ALL Americans). This may be helpful in future litigation.

Third reason: As I write this post I note that the web page soliciting comments has been accessed (if I am reading correctly ONLY 46 times! Therefore, this is an opportunity for the comments of Americans abroad to be the dominant comments!

There is clear value in submitting comments!

Part 5 – What should you include in your comment?

I suggest that your comment should include a description of why/how the requirement that you report your “local” account to Treasury is NOT consistent with the purpose of foreign account reporting. You may want to note that the same information is included as part of Form 8938. The comments from the 2016 Brock post may give you some ideas. Interestingly, the Democrats Abroad Tax Committee (which is also encouraging comments) has provided a template for comments about FBAR that you may find useful.

Remember that – @InFBARWeTrust!

John Richardson – Follow me on Twitter @Expatriationlaw

Appendix – Treasury’s 2021 response to the comments of Americans abroad

Excerpted from Treasury’s complete comments:

1506-0009 FBAR Supporting Statement 1-28-2021

Notably the comments are a clear improvement from 2011 and should encourage Americans abroad and their groups to continue commenting!

8. Consultation with Individuals Outside of the Agency on Availability of Data, Frequency of Collection, Clarity of Instructions and Forms, and Data Elements.

The 60-day notice was published on November 16, 2020.10 The notice requested public comments on the proposed renewal, without change, of currently approved information collections relating to the FBAR regulations and report. FinCEN received 90 public comments in response to the notice.

Almost all of the comments were on behalf of, or directly from, U.S. persons living abroad. The consistent theme in these comments was that the FBAR requirement for U.S. persons living abroad is unnecessary and burdensome. Some of these comments also suggested certain exemptions to provide relief. The comments are summarized in the following four categories.

i. Unnecessary for U.S. Persons Living Abroad:

The FBAR requirements are duplicative of the FATCA requirements.

Almost all U.S. persons living abroad, even those with modest incomes, have to file the FBAR because the $10,000 threshold is too low.

U.S. persons living abroad need financial accounts in their country of residence for practical purposes. Maintaining these accounts is not suspicious.

ii. Burdensome for U.S. Persons Living Abroad:

There is confusion regarding the filing requirements for the FBAR, because the FBAR and FATCA requirements are different as they relate to the thresholds and types of accounts to be reported. This can lead to misinterpretation and filer errors.

The FBAR penalty for filing errors is excessive.

There is concern for data privacy because of U.S. government systems being compromised.

Foreign spouses are required to report their financial information along with the U.S. spouse living abroad.

U.S. persons living abroad are not afforded certain professional and charitable opportunities because of the FBAR requirements that they need to report on any financial interest in, or signature or other authority over, a bank, securities, or other financial account. For example, a company or a non-profit does not want to hire a U.S. person living abroad for certain financial roles, because that would obligate the U.S. person to report on the company or non-profit’s financial accounts to the extent the U.S. person had any financial interest in, or signature or other authority over, a bank, securities, or other financial account of the company or non-profit.

It can be challenging to determine the highest account value for certain accounts, because the statements do not always provide that information.

It is costly to hire a tax professional to assist with FBAR and FATCA filing requirements.

iii. Recommendations for Modification to FBAR Regulations and Exemptions for U.S. Persons Living Abroad:

Remove FBAR requirements, and permit U.S. Government sharing of FATCA information.

Make the FBAR thresholds the same as the FATCA thresholds.

Adjust the FBAR dollar threshold for inflation. The initial threshold of $10,000 has not been changed in over 40 years. It should be at least $70,000.

Exempt U.S. persons living in specific countries.

Exempt U.S. persons from reporting the financial accounts in their country of residence.

Exempt U.S. persons abroad with modest incomes or with modest total assets.

Exempt U.S. persons that have lived abroad for a long period of time.

iv. Estimate of Time to Complete the FBAR for U.S. Persons Living Abroad:

Determining the maximum value of one account may take an hour or two to determine because the information is not always readily available on account statements.

U.S. persons living abroad may have 15 to 20 accounts for practical reasons. For example, many U.S. persons living abroad have a checking account, a savings account, lines of credit, investment accounts, retirement accounts, and business accounts. With this many accounts, it may take such a filer well over an hour to complete the FBAR.

A different commenter noted that in light of the Panama Papers, it is clear tax evasion and money laundering are an issue, and that in addition to requiring the FBAR, more should be done to prevent hiding assets offshore.

These suggestions for modifications to the applicable regulations will be taken into account in FinCEN’s review of existing regulations, consistent with Treasury’s 2011 Plan for Retrospective Analysis of Existing Rules, and as part of the formal review of regulations implementing the BSA and BSA-related guidance, as required by Section 6216 of the Anti-Money Laundering Act of 2020 (“the AML Act”).11 FinCEN will continue to evaluate ways to clarify FBAR reporting requirements further and minimize burden to the public.

FinCEN appreciates the recommendations and intends to use that information as part of a larger project FinCEN is undertaking to better understand the PRA hourly burden and cost of the BSA as a whole.

3 thoughts on “Americans Abroad Have Until April 29, 2024 To Tell FinCEN Why They Should Be Exempt From FBAR

  1. L. Shaffer

    I have lived in Canada for 45 years. I am a Canadian Citizen and have no plans to return to the US to live. I am subject to Canadian tax laws and taxes are higher in Canada. There for I fell that I should not be subject to FBAR filing.

    Reply
  2. Someone out there

    The request for comments is mandated by 44 U.S. Code § 3507(h) whereby an Agency must seek an extension of the OMB Director’s approval in order to continue the collection of information. The agency must seek public comment on the continued need for, and burden imposed by the collection of information. If the Director disapproves of a collection of information, the Director shall instruct the Agency to undertake a rulemaking.

    In other words, if you’re an American abroad and you want to see changes to the FBAR, here’s your chance to convince the Director of the OMB.

    Reply
  3. Keeping my Head (Down)

    John you say there’s “nothing to be lost, everything to be gained” by registering a comment that opposes the FBAR. That seems true only for those who dutifully comply. For the rest of us, it feels to me that to lodge a dissenting comment is to single-out one’s self for investigation and enforcement. Is there a reason to believe lodging a comment wouldn’t be self-incrimination?

    Reply

Leave a Reply