Who Is a U.S. Person? Disparities Between U.S. Tax and Immigration Law

March 2014

The question of who is a U.S. person has always been relevant for tax purposes because it determines who is subject to (a) U.S. income, gift and estate tax, (b) filing Foreign Bank Account Reports (FBARs), and (c) the ‘‘exit tax’’ under what is now Section 877A of the Internal Revenue Code (the ‘‘Code’’ or ‘‘I.R.C.’’). The inquiry has become increasingly relevant, however, in the context of the Foreign Account Tax Compliance Act (‘‘FATCA’’), as foreign banks and other financial institutions must make determinations as to the identity of the beneficial owners of accounts.

Under FATCA, foreign banks, brokerage firms, investment firms, and other ‘‘foreign financial institutions’’ must agree to report certain information on their U.S. account holders or else face withholding on certain payments made from U.S. sources beginning in July 2014. In many cases, the institutions’ own governments (through intergovernmental agreements signed with the United States that implement FATCA) may require the determination in order to report on U.S. accounts.

To continue reading Henry Bubel and Jenny Longman's article from the March 2014 edition of Bloomberg BNA’s Tax Planning International Review, please click here.