Rand Paul Files Federal Lawsuit Against U.S. Treasury and IRS over IGA’s

Rand Paul Files Federal Lawsuit Against U.S. Treasury and IRS over IGA’s

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Kentucky Senator and 2016 Republican Presidential hopeful Rand Paul recently announced that, in partnership with Republicans Overseas and five others, he would head to court to stop the vile Foreign Account Tax Compliance Act crackdown. At the risk of comparing the noted Republitarian/Libripublican figure with a certain single-cell cartoon villain, the effort may turn out something like this.

The lawsuit, which was filed in an Ohio federal court, actually contains some pretty good arguments. In any other environment, this lawsuit might go somewhere. But they say that timing is everything, and the timing is just all wrong.

Breaking It Down

The lawsuit is a first-of-its kind affair, in that no other recent Presidential hopeful has sued the IRS in the midst of a campaign. If you have in mind to sue the government that you want to lead, there’s definitely something going on.

First, Senator Paul says that so-called “Inter-Governmental Agreements” circumvent his Constitutional rights. The Obama Administration labelled FATCA accords with foreign powers as IGAs – a clever term that the Democrat-controlled Congress basically invented ex nihlio in 2010. To date, the Obama Administration has negotiated and finalized over 100 FATCA treaties, without a sliver of participation from the Senate.

Republicans hate these things because they require foreign banks to gather and share financial information about Americans who live and/or work abroad; the data would be private if these individuals worked and lived on American soil. As a result, nearly nine million expats have somewhat reluctantly renounced their citizenship, a matter that I blogged on previously.

Furthermore, the lawsuit maintains that the high penalties, as well as the rather arbitrary nature of these penalties, along with mandatory withholding and a few other provisions, amount to cruel and unusual punishment.

More importantly for our purposes, the other plaintiffs claim that FATCA has effectively denied them access to banking and financial services in foreign countries, because these institutions don’t want to mess with expats and their political baggage. Expats have been complaining about this issue for years. Can someone say “discrimination?”

Predictably, the suit is also somewhat politically motivated. “Republicans Overseas,” which is the brainchild of longtime conservative activist Solomon Yue, is basically a vehicle for the Republican National Committee to identify GOP voters and convince them to register in swing states, like Ohio and Michigan. Republicans Overseas is funding the entire effort.

Mr. Yue denies that the suit is all about votes in November. “The best way to defend 8.7 million overseas Americans’ right to privacy and constitutional protections is to cripple the IRS, FATCA and enforcement tools through legal action on constitutional grounds all the way to the U.S. Supreme Court,” he boldly proclaimed.

Advice and Consent

Article II, Section 2 hasn’t been in the news much lately. Foreign policy is pretty well centered on anti-terrorism, and although the methods used have sparked considerable debate, everyone agrees on the overall goal.

It wasn’t always that way. Some graybeards may remember the 1973 War Powers Resolution, which a hostile Congress passed over President Richard Nixon’s veto. The War Powers Act, as it is popularly known, prohibits the President from committing military forces for longer than 60 days, unless there is a declaration of war. Ronald Reagan was a vocal critic of the WPA during his term in office. He liked to declare that having “535 Secretaries of State” hamstrung his foreign policy initiatives, which included selling missiles to a sworn enemy of the United States and illegally funneling the profits to Nicaraguan rebels. Well, he never mentioned that last part.

So, there’s some history here. But in a case that lacked the sex appeal (pardon the pun) of gay marriage and Obamacare, the Supreme Court addressed this very issue in the last term. Zivotofsky v. Kerry involved a passport dispute that may seem innocuous to some, but is an incredibly big deal for Jews. Congress passed a law which declared that children born in Jerusalem could list “Israel” as their country of origin, a provision that the Obama Administration refused to enforce. Writing for the majority, Justice Anthony Kennedy declared the law unconstitutional. “Recognition [of foreign governments] is a topic on which the Nation must ‘speak with one voice,’” he wrote, adding “[t]hat voice must be the President’s.”

The decision was significant, in that it marked the first time the Supreme Court gave the President the exclusive right to recognize foreign governments. It’s pretty unlikely that a federal judge would see things differently.

Cruel and Unusual Punishment

The Eighth Amendment was part of the Bill of Rights which, in turn, was part of a political compromise to enact the Constitution. Some larger states – most notably New York, Virginia, and Pennsylvania – bitterly opposed the document. After all, the states had just fought a long and bloody war to get out from under a strong central government. So, James Madison, Alexander Hamilton, and the other Federalists promised to pass a Bill of Rights that laid out what the government could not do.

This topic was just on the High Court’s docket as well, in Glossip v. Gross. Oklahoma death row inmates sued to stop lethal injections, on the grounds that midazolam, a sedative, was ineffective. In a majority opinion by Justice Samuel Alito, the Supremes held that even if the drug wasn’t working properly, the executions weren’t “cruel and unusual punishment.” In dissent, Justice Sonia Sotomayor compared lethal injection without a sedative to being burned at the stake.

So, not to put too fine a point on it, if it’s okay to burn a paralyzed person to death, it’s probably okay to withhold a few dollars from a bank account.

The Environment

Just for grins, I Googled “wealthy expats” and got 7,770 hits. Judging from the article titles I saw, I’m guessing that the term was pejorative in almost all of them. There’s a lot of vile out there against foreign account-holders, and although nearly all of it is undeserved, try explaining that in an op-ed piece.

If you have the unsettling feeling that the IRS may have your foreign bank account in its sites, Senator Paul’s tilting at windmills can’t help you. Only an experienced attorney can do that.

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