Mr Rand Paul, Senator of Kentucky and Presidential Candidate plans to sue the IRS declaring that FATCA (Foreign Account Tax Compliance Act) and FBAR (Foreign Bank Account Reporting) are unconstitutional.
According to FACTA, foreign banks are required to report any accounts that are held by US persons to the Internal Revenue Service so they can be taxed accordingly. However, six US expatriates, say they have been denied normal banking services in the countries they are currently residing in, as the strict regulations have deterred foreign banks from accepting them as clients.
According to the US expat plaintiffs’ claims, the FATCA and FBAR provisions violate the US Constitution’s prohibition on ‘unreasonable search and seizure’ as they mandate the collection and reporting of confidential information without any logical cause or warrant. As they continue, the heavy fines associated with the FBAR regime amount to supposed ‘cruel and unusual punishment’.
The central argument deployed by Mr Paul, is that as a member of Congress, he was denied his Constitutional right to vote on the IGAs signed by the US Treasury Department with other governments to implement FATCA.
A US tax law expert, Mr Jack Townsend states:
‘Tests need to be carried out to see if US expats really have lost access to banking services so they can determine whether these cases are anecdotal or are systematically affecting a large numbers of expatriates before a case can be established.’