Saturday, January 5, 2013

Current status of US tax treaties, with FATCA IGA update

Latest US tax treaty update is available here, with a new section covering the developments on FATCA IGAs. I'm still not convinced they should be included in such a list, since from the US perspective these appear to be nothing more than competent authority agreements, presumably entered into under the CA's authority "to clarify or interpret" existing treaty & TIEA provisions.  Certainly, it seems that no internal legislative procedure will be undertaken to get these in force in the US--they await only the internal ratification by FATCA partners.

I have seen absolutely nothing offered by the IRS or Treasury that explains the character of these agreements, so I am deducing that they are being considered CA agreements from what I've seen so far.  But I'll admit the evidence is conflicting and confusing: for example, the IGA with the UK was apparently signed by a non-Treasury embassy official, and not the CA, so how could it be a CA agreement?

Fortunately, at some point the mystery will be solvable: I'll be able to confirm the legal status of the IGAs as soon as the first one enters into force, by checking to see if it lands in the pages of the US treaties and international agreements series. If it does not (as I suspect), then the IGAs really belong only in a list of competent authority agreements, where they will be treated not as treaties or international agreements per se but merely as interpretations of existing treaties. That will be interesting because it really stretches the boundaries of how I think we've understood up until now the competent authority's ability to stray beyond the text of the treaty. Of course, even if they do not end up in the TIAS I can certainly understand why Connery et al included them in their regular tax treaty update, because they sure look like treaties, don't they.

If I am wrong, though, and the IGAs do land in the treaties and international agreements series, then things get even more interesting.  We will be witnessing an unprecedented first in the history of US treaty making: the introduction of sole executive agreements on tax, not pre-authorized by congress, not expressly authorized by any existing treaty, and serving to override existing statutory tax law without any congressional oversight at all. Intriguing to say the least.

Of course, none of this has any bearing on the legal force of the IGAs from an international perspective. In the eyes of the world, these are just like any other international agreement. But in terms of those who think about the treaty making power in the US, I would think this would be a very interesting and controversial development.


  1. As of a day two ago Rand Paul officially has suceeded in killing the new protocol to the US Swiss Tax Treaty. While the new protocol isn't completely dead as no action was taken before the end of the last Congress at the start of this Congress it is automatically referred back to the Senate Foreign Relations Committee to which for it move forward requires another vote at committee and new hearing. Additionally guess who has now been appointed to the Senate Foreign Relations Committee. Senator Rand Paul himself.

    Along this lines you should also read the letter from Congressman Dave Reichert to Geithner and now departed IRS Commissioner Schulman(which has not been responsed to). It brings up many of the same points that you do.

    Some may disagree with but I believe under both the 46 APA and internal IRS IRM guidance Reichert should be responded to prior to a release of the Final FATCA or regs or at least simultaneously. As of yet that has not happened.

  2. Another thing to add on the Reichert front. In the past when Members of Congress sent comment and complaint letter related to FATCA they got a response back in a few weeks. Reichert letter has been outstanding for almost three months.

  3. Article in the Globe and Mail on FATCA today.

    The involvement of Peter Hogg in opposition to FATCA(the previously unnamed Canadian Constitutional Lawyer I had mentioned in the past not knowing myself who it was)should make a lot of people in DC nervous. Hogg isn't just a very good Constituional and Charter lawyer he also has represented the Government of Canada in several high profile cases including representing Flaherty and the Department of Finance just last year relating to the Constitutionality of Canadian National Securities Regulator.