Presidential Candidate Rand Paul, and six others who filed suit in an Ohio jurisdiction challenging portions of the Foreign Account Tax Compliance Act or FATCA have been handed a severe setback in their case. The Judge, the Honorable Thomas M. Rose ruled that the parties had no jursidiction in the case, and refused injunctive relief.
The Judge noted that the harms claimed by Sen. Paul and the other parties were “remote and speculative harms, most of which would be caused by third parties, illusory, or self-inflicted” and that they aren’t likely to succeed based upon the merits of their case.
In a strong rebuke of the arguments made in Sen. Paul’s suit, the Judge supported FATCA and noted that it would help the US government and the IRS to catch US taxpayers who are hiding money in offshore banks in order to avoid taxes.
The Judge also affirmed the requirements for U.S. taxpayers to disclose all of their offshore bank accounts on the Report of Foreign Bank and Financial Accounts or FBAR and the associated penalties have a “rational basis,” contrary to the plaintiffs’ assertions in their lawsuit.
The Judge Also Made Substantial Statements on FBAR and FATCA Penalties
The Judge rejected Sen. Paul’s assertions in his lawsuit that FBAR and FATCA penalties are unconstitutional “excessive fines” under the Eighth Amendment, noting that the issue isn’t “ripe for adjudication” because no such penalties have been imposed on any of the plaintiffs, and none of them would ever face the FFI 30 percent penalty under FATCA because they are individuals.
“The FATCA withholding tax rate of 30 percent is remedial because it is the same rate imposed on all fixed or determinable annual or periodic income paid from a U.S. source to a non-resident alien,” he wrote.
The penalty for willful failure to report a foreign bank account on the FBAR “also survives a facial challenge because the maximum penalty will be constitutional in at least some circumstances,” Rose said.
San Diego FATCA and FBAR Tax Attorneys
The issues surrounding FBAR reporting, and the failure to disclose offshore bank accounts, investments, assets and real property are quite complex, and have survived a serious challenge in Court. The IRS has dug in its heels, and appears prepared to take a harder line on “willful” versus “non-willful” conduct by US taxpayers attempting to avoid paying US taxes.
If you are concerned about coming into compliance with FATCA, FBAR reporting, your offshore accounts and assets, as well as discosures through OVDP or the streamlined option we invite you to call for a free and substantive consultation at 866-631-3470. The results in Ohio have strengthened the government’s hand when it comes to FATCA and FBAR. You need expert tax and legal representation.
