Two weekends ago, I had the opportunity to visit Normandy, France. This is where D-Day occurred on June 4, 1944, when the Allied Forces, including 73,000 Americans came to fight the Germans and bring freedom back to France. In other words, this is where Americans (and others) sacrificed their lives in great numbers in order to make the world better for France, and eventually the rest of Europe.
I was there with the Boy Scouts of America, as a Cub Scout mom. Why do I talk about this? Because I overheard a conversation between our Cub Scout Pack Leader and a woman who had volunteered to take over the role of pack secretary. It went something like this:
Pack Leader: Thank you so much for volunteering!
New secretary: I'm happy to. I used to do this in our scouting group in England.
Pack Leader: The best thing about you is that you're not American so you can be a signatory on the bank account. The bank doesn't allow any Americans to be on the pack bank account.
Think about this: The Boy Scouts of America can't have any American passport holders listed on the bank account. Sounds pretty ridiculous, doesn't it? It is until you understand that I live in Switzerland and our Boy Scout/Cub Scout troop is an international troop here.
Why can't there be any Americans on the bank account? Because of law you probably haven't heard of and probably don't care about.It's called the Foreign Account Tax Compliance Act (FATCA), and it's a big deal. Forbes describes FATCA as follows:
FATCA requires foreign banks and governments to hand over secret bank data about American depositors. Non-compliant institutions are frozen out of U.S. markets, so there is little choice but to comply. Under FATCA, non-U.S. banks worldwide want to know if all American customers are compliant with the IRS. The IRS announcement that its collections from offshore account issues have topped $10 billion is due in part to FATCA.
All of this means it's very difficult for Americans who live overseas to have bank accounts. For instance, I've lived in Switzerland for 8 years but only have American bank accounts.
Last week, Congress held hearings on FATCA on S. 869. and H.R. 2054. which would repeal FATCA. Senator Rand Paul, the sponsor of the Senate version, testified that the law was " abusive." Many Americans living abroad would agree with Paul's assessment.
Why You Should Care
If you're a US citizen, living in the United States, why on earth should you care about a law that only affects Americans living abroad? Think about a few of these things:
- Do you want to go global? Your business may be awesome, but if you want to take it global, having an American passport can be an anchor around your neck. Can you do it? Yes. Can you do it as easily as someone without this restriction? No.
- Do you want to take an international job? Living overseas is a good experience for everyone. Being exposed to different cultures can make you more empathetic to different people. But, don't expect to be promoted in a foreign company to a position that requires you to have banking access. That means the entire company has to report to the IRS. They don't want to do that.
- It divides the US from other countries. Keith Redmond, a dual American/French national American overseas global advocate the rights of Americans living overseas said, "If American entrepreneurs can't get a simple bank account, then the US is becoming an insular country." If Americans can't take businesses globally easily, they won't. That's a big problem. For full disclosure, I have financially contributed to Redmond's organization.
Should You Care if You're Not an American?
If you're a citizen of any other country in the world who spent time in the United States, did you have a baby while you were there? Let's say you went to the US for graduate school, had a baby two months before you graduated and moved back to your home country. That baby is a US citizen and is now burdened by the FATCA requirements. These "accidental Americans" are especially burdened because they have no social or cultural ties to the United States, but their accident of birth means banks don't want to deal with them.
Renouncing Citizenship or Moving to the US is the Only Way to Avoid FATCA.
Lynne Swanson, a woman who renounced her citizenship said in an open letter to President Trump:
But hear me out on a real "total disaster." The United States demands that I file tax returns to a country where I haven't lived for 47 years just because I was born there. Even worse, the U.S. Treasury Department demands invasive information about all of my Canadian accounts. You see, Democrats, with support of some Republicans, passed the Foreign Account Tax Compliance Act (FATCA) back in 2010. It is nasty, believe me.
I know you're a really, really smart guy because of that not paying taxes thing. So let's talk about FATCA, which is complex, believe me. Imagine if all of Melania's accounts--including personal, business and even joint accounts with you--had to be reported to Slovenia just because she was born there! Or, if all of your accounts were required to be reported to Scotland because your mother hailed from there. Or, if the Czech Republic demanded all of the financial records of your three oldest children because of their mother's birthplace. You get the idea.
As this letter points out, other countries don't demand reporting for their citizens abroad, and you can be certain the US would not like it if another country demanded that US banks report information on their citizens.
If America wants to be a world leader, it needs to consider how this law burdens citizens and stunts entrepreneurship.