Are Sole Executive Agreements Next on the Roberts Court Chopping Block?
A constitutional challenge is in the works to Foreign Account Tax Compliance Act, the anti-offshoring tax measure that is the bane of ordinary US citizens worldwide. The law adds a burdensome layer of administrative requirements to longstanding citizenship-based tax liabilities. If you’re an American living in France, say hello to thousands of Euros in accountant fees.
Foreign banks are a key location for and target of FATCA enforcement, and the Treasury Department has been bringing them into FATCA’s orbit wholesale through bilateral executive agreements with industrial economies. These so-called inter-governmental agreements — “IGAs” in the FATCA glossary – facilitate FATCA compliance by allowing banks to report information to their own governments, who will pass it along to the IRS in turn. (For more on the IGAs, and to get a sense of how accountants and others will benefit, see fatca.thomsonreuters.com.) IGAs have been controversial in other countries, not the least because the regime may override domestic privacy laws. But other governments have a reciprocal incentive to sign on: we report on offshoring that’s hurting you, you help us out with offshoring that hurting us.
In the US, FATCA (much less the IGAs) has hardly been a blip on the policy screen. The interests of external US citizens consistently fail to register in US politics. But the issue has now caught the attention of the GOP anti-tax crowd. Enter Jim Bopp with a constitutional argument that FATCA and the IGAs violate the Treaty Clause, the Fourth and Eighth Amendments.
I wouldn’t be taking this too seriously (the latter two arguments are not very credible), except that Jim Bopp was the lawyer behind . . . Citizens United.
The Treaty Clause argument is a plausible one, the doctrinal terrain at least unsettled. The FATCA agreements enjoy implied congressional authorization, at best, in the form of prior tax treaties. (McGill’s Allison Christians explains the argument — and its weakness — in this excellent piece for Tax Notes.) We have Dames & Moore taking a contextual approach to the legality of executive agreements undertaken without express congressional approval (before or after the fact). More recently, Justice Roberts adopted a constricted historical view of so-called sole executive agreements in Medellin.
There is a lot of history behind sole executive agreements but not much judicial precedent. Executive agreements have figured importantly in the Obama Administration’s muscular exercise of executive branch power (see this essay from then-Legal Adviser Harold Koh in defense). Could this be another platform for the Supreme Court to advance its formalist turn in foreign relations law?