U.S. Sixth Circuit - The FindLaw 6th Circuit Court of Appeals Opinion Summaries Blog

Court Rejects Senator's Suit Against Foreign Taxes

It's one thing when a U.S. Senator can't get a bill passed; it's another when he can't get past standing to sue in court.

But that's what happened to Senator Rand Paul on his way to the Capitol, where he introduced a bill to repeal the Foreign Account Tax Compliance Act. In Crawford v. United States Department of the Treasury, Paul argued that the Act gave the IRS too much power to collect account information from citizens living abroad.

The U.S. Sixth Circuit Court of Appeals rejected the argument, saying Paul and other plaintiffs had no standing because the government had not enforced the Act against them.

'Sweeping Financial Surveillance'

The six plaintiffs filed their complaint in federal court in Ohio, calling the Act "a sweeping financial surveillance program of unprecedented scope that allows the Internal Revenue Service to peer into the financial affairs of any U.S. citizen with a foreign bank account."

Congress passed the law in 2010, ostensibly to crack down on wealthy Americans who were dodging taxes by keeping money in overseas accounts. FACTA allows the IRS to collect information about citizens in other countries that it cannot collect domestically.

The lawsuit sought to enjoin enforcement of the Act and its self-reporting requirement, as well as a declaration that the law was unconstitutional. A trial court dismissed the complaint, and the appeals court affirmed.

The judges said the plaintiffs lacked standing because they had not been harmed.

No Harm, No Foul

Writing for the unanimous Sixth Circuit, Judge Danny Boggs said none of the plaintiffs had enough money in foreign accounts to be subject to the reporting requirement. In addition, no plaintiff had alleged actual enforcement of the Act against them.

The appellate panel also rejected Paul's claim that he had been denied the opportunity to vote against internal provisions of the Act as a senator.

"Any incursion upon Senator Paul's political power is not a concrete injury like the loss of a private right, and any diminution in the Senate's lawmaking power is not particularized but is rather a generalized grievance," Boggs said. "Senator Paul has a remedy in the legislature...."

Paul introduced his bill to repeal the FACTA in April.