updated 7:00 PM CEST, Jul 2, 2022

IRS reported to 'welcome' EU Council prez proposal for an 'accidental American' bank accounts fix

U.S. Treasury officials meeting last week with representatives of the French Presidency of the Council of the European Union (PFUE) have been said to "welcome" an EU proposal that would address the major problems so-called "accidental American" EU citizens have been having in trying to obtain and keep bank accounts in their home countries, due to these banks' efforts to comply with the 2010 U.S. tax evasion-prevention law known as FATCA.

The problems stem from the fact that FATCA obliges non-U.S. banks and financial institutions to obtain the Social Security and/or Tax Identification numbers of any of their clients whom they know to be U.S. citizens, which under U.S. tax law, automatically includes anyone who was born in the U.S., or who was born outside of the U.S. but who had at least one U.S. citizen parent.

EU citizens and others born in the U.S. but who've spent most or all of their lives outside of the U.S. (accidental Americans) typically don't have such SSNs or TINs, and normally are reluctant to enter into the U.S. tax system to the extent that they would need to just to be able to satisfy a bank's FATCA form-filling requirements.

As many as 300,000 or more such "accidentals" are estimated to live in Europe alone.

Fabien Lehagre at EU FATCA hearing 2019According to Fabien Lehagre (pictured left), founder and president of the Paris-based Association of Accidental Americans (AAA), the U.S. delegation that met last Tuesday with PFUE representatives "welcomed" the concept of  adopting an alternative set of questions that EU banks could ask accidental Americans who are resident in the EU, in place of the questions about Social Security numbers (SSNs) and/or Tax Identification numbers (TINs), in order to accept them as clients. 

Lehagre was unable to give the names of anyone from either the U.S. nor PFUE delegations, nor provide such other details as where the meeting took place, or how long it lasted. U.S. Treasury officials didn't immediately reply to a request for comment on Sunday evening. 

The PFUE's proposal: A summary

In a statement released over the weekend, however, Lehagre was able to summarize the PFUE's proposal, which he said hinged upon the concept of a new, systemic means by which non-U.S. banks and financial institutions could rule out the possibility that an individual born in the U.S. or who was born abroad to an American parent was in fact a U.S. taxpayer – and thus that they were, in fact, as they claimed to be, a European citizen, and therefore entitled to a basic bank account at the very least, under EU law. 

"The purpose of this meeting was to get the opinion of the U.S. tax authorities on a proposal to avoid bank account closures in the absence of an SSN, [a] number that most accidental Americans do not have," Lehagre said, in his statement.

In 2019, he noted, the IRS published an answer to a "Frequently Asked Question" on its website in which it noted that the U.S. would "take account of facts and circumstances leading to the absence of a TIN, such as the reasons why the TIN could not be obtained; whether the FI [financial institution] had adequate procedures in place to obtain TINs, and the efforts made by the FI to obtain them," suggesting at least a degree of flexibility on the part of U.S. officials with respect to the TIN requirement.

Given this, Lehagre went on, the Council of the EU (PFUE) proposal sets forth the following four cumulative criteria:

  *  Instead of providing a U.S. SSN or TIN, which they don't have, any EU resident who wished to open (or keep) a bank account would first of all satisfy potential anti-money laundering/know your customer concerns by producing a valid EU Member State passport;

  *  Next, they would prove that they were tax resident in an EU Member State, and back this up with a relevant TIN;

  *  The bank or financial institution in question would, relying on its own research, be unable to produce any "U.S. indicia with respect to that account-holder [or would-be account-holder] other than [their] U.S. place of birth";

  *  For IRS-filing purposes, a "new, specific code" would be introduced that would enable bank and IRS officials to "populate the SSN/TIN field" of the relevant documents that the bank would be expected to file, in compliance with the FATCA regulations. 

 Added Lehagre, at the end of his statement: "Stay tuned, one of the objectives of the Association des Américains Accidentals may soon be achieved!

"P.S.: Thank you to [French Finance] Minister Bruno Le Maire for his support in this matter." 

Later, in an exchange on Twitter, Lehagre pointed out that if the U.S. accepts the fix being proposed by the Council of the European Union presidency's office, "it would not concern only those [accidental Americans] who live in the European Union" but those who live in other countries as well. 

Seven years of advocacy

As reported, last week's meeting came in the wake of seven years of lobbying on the part of Lehagre's organization and others, with little, until now, to show for it.

It also comes at a time when growing numbers of EU banks have been tighten up their enforcement of FATCA, as they're obliged to do under the intergovernmental agreements the countries in which they operate have signed with the U.S.

Such IGAs initially established a grace period during which the IRS said it wouldn't be enforcing the banks' FATCA data-reporting requirements, but this grace period was initially scheduled to end at the end of 2019, and although it has subsequently been extended, banks in certain EU countries in particular, such as the Netherlands, have been aggressively pushing their accidental American account-holders to either provide them with their U.S. TINs, or take their accounts elsewhere. 

Although some individuals in the "accidentals" category have entered the U.S. system long enough to sort out what the U.S. considered to be their obligations, and then renounced their citizenships, others have resisted, in part because of the costs involved.

One such accidental – a U.S.-born, retired KLM pilot from the Netherlands named Ronald Ariës – took his bank to court rather than comply with its insistence that he provide it with a U.S. TIN. And after losing the first round of his legal challenge, in 2020, an appellate court ruled last December that he was actually entitled to keep his accounts with his local bank, even if he didn't provide it with a U.S. TIN, as long as his total holdings there didn't exceed US$50,000. 

Le Maire, in Feb: FATCA
'on the agenda'

As reported, last week's meeting between U.S. Treasury officials and the French Presidency of the Council of the European Union came a little more than three months after French Finance Minister Le Maire reassured Lehagre that he was on top of the matter of the bank account problems that EU citizens who also happened to be considered to be American citizens were having in keeping their EU bank accounts.

Le Maire told Lehagre in a letter dated Feb. 14 that he had in fact "recently contacted Ms. Janet Yellen, Secretary of the American Treasury" in connection with the continuing problems FATCA was causing to French citizens.

Lehagre had received Le Maire's letter hours after a letter to Le Maire – signed by eight members of France's Senate – emerged, via social media in France, which called on the finance minister to "finally grant French- and European-citizen 'accidental Americans' effective protection" from what they referred to as "Kafkaesque, discriminatory" predicaments that were often "financially disastrous for many [of those] concerned."

The eight French lawmakers cited the fact that Le Maire would be better-positioned from that point until the end of June, at which point France is due to cede its current role in possession of the office of the presidency of the Council of the European Union.