Monday, September 28, 2015

Latest Update in Canada FATCA IGA litigation

The Federal Court of Canada (Martineau J.) issued a decision in the Canadian FATCA IGA litigation on September 16, ruling against the plaintiffs by finding that the provisions of the IGA are duly enacted law, thus clearing the way for the Canadian tax authorities to furnish information to the United States. You can read the decision here.  Today, the Plaintiffs made a motion for an interlocutory injunction pending appeal of the decision.

Because of my role as an expert witness I will abstain from detailed comments other than to stand by my submissions, but I do note the overwhelming sense of judicial impotence expressed in the September 16 decision. The decision notes that the issues at stake involve injustice at the individual level as well as harsh dealings in terms of sovereign relations. As to the former, the legality of the regime is given as its justification, while the latter are deemed inappropriate matters for judicial intervention. Instead the plaintiffs are directed to seek redress for the personal effects of these circumstances though political and administrative channels.

In my view it was political malfunction in both the US and Canada that brought forth FATCA and then the FATCA IGA, and that FATCA as applied can be summed up in terms of administration as a case of continuous indifference to individuals who are wrongdoers in no real sense yet bear the brunt of severe punishments meant for others. If the judiciary is also not to blame and not to fix, then it seems there is no avenue to right the wrongs of FATCA anywhere. I hope that is not the case.

In any event, two days after the decision was released, the IRS announced another delay in FATCA, this time for Model 1 IGA countries. Model 1 IGA countries involve government-to-government sharing, as compared to Model 2, under which financial institutions directly report to the IRS pursuant to authority granted by their home governments. Canada has a Model 1 IGA so it could delay furnishing information to the United States if it notifies the IRS before September 30, 2015 "and provides assurance that the jurisdiction is making good faith efforts to exchange the information as soon as possible." There have been some efforts to compel the Canadian government to avail itself of this option (see, e.g., here and here), but I am not sure how to monitor the government's response.

More to come as events unfold.


  1. Here's an appeal to delay from within the Harper government itself,

  2. It looks like Douglas O'Donnell Commissioner of IRS LB&I is now on record as saying Canada will be non compliant as of September 30th even if an injunction is granted.

  3. As Canada jumped now it must land.

  4. And jump they did. This is what happens when you put the cart before the horse by discarding obstacles like the constitution and the best interests of your citizens. Unless it's something you really want - delay, delay, delay!

  5. I will also note that the Florida Bankers Association and their attorney Jim Butera have now filed there second appeal of the most recent court decision to go against them(This one is an "en banc" appeal to the full DC Court of Appeals). This appeal will be totally procedural in nature and will not have any impact in terms of deciding the merits of non resident alien reporting.

    FWIW, its worth I first got involved in FATCA issues in 2011, 4 years ago I fully expect to be involved in 2019 4 years from now.