Jim Bopp, the hard-charging lawyer who persuaded the Supreme Court to strike down crucial elements in the McCain-Feingold campaign finance law, has a new target in his legal sights: a bank and taxation statute that hits Americans overseas.
Mr. Bopp is assembling a legal attack on the Foreign Account Tax Compliance Act, which he and other critics say intrudes on financial privacy and scares banks from doing business with Americans living overseas.
“The U.S. Constitution protects every citizen’s liberty and freedom, while FATCA undermines both,” Mr. Bopp told The Washington Times. “This astonishingly bad law manages to thumb its nose at the Constitution.”
His legal challenge once again will put him on the opposite side of Republican John McCain, the long-serving senator from Arizona who was one of the two key sponsors — along with then-Sen. Russ Feingold, Wisconsin Democrat — of the campaign finance limits that Mr. Bopp defeated before the Supreme Court in 2010.
In addition to his authorship of the McCain-Feingold law, Mr. McCain was one of the main proponents of the tax compliance act, which takes full effect July 1 — unless courts intervene.
Mr. McCain is the ranking Republican on the Senate Armed Services Committee’s permanent subcommittee on investigations, headed by Sen. Carl Levin, Michigan Democrat. Mr. McCain, always on the lookout for ways to foil tax cheaters, sees another important role for the compliance act — as a foreign policy tool.
On April 29, Mr. McCain and Mr. Levin co-signed a letter urging Treasury Secretary Jack Lew to punish Russia if it does not enforce the tax compliance law.
“FATCA sanctions provide a powerful, nonmilitary option that, when added to the other financial sanctions already imposed, could help deter Russia from continuing its threatening actions against Ukraine,” the senators wrote.
Foreign policy aside, the law has real-life implications for the 7.6 million Americans who the State Department says are living and working abroad. The tax compliance act will require all banks in numerous countries to gather and report to the U.S. government full information on those Americans’ earnings, deposits, transfers and cash on hand.
The goal of the law, its proponents say, is to cut down on tax cheats who have hidden income in foreign banks. But the pragmatic effect, critics warn, is to scare foreign banks from doing business with Americans overseas because they don’t want to deal with the bureaucratic red tape.
“McCain seems to think that all Americans abroad are tax cheats, when in fact they aren’t, and their work overseas is vital to our economy by promoting the sale of our products around the world,” Mr. Bopp said.
Mr. McCain’s office did not respond to telephone and email requests from The Times for comments from him or his staff about the law and about Mr. Bopp’s planned legal attack.
Though vastly different issues, the court case against the campaign finance regulations and the case against the tax compliance law provide a common political backdrop for Mr. Bopp: Both laws were supported by a Republican and Democratic senator and have subsequently generated disdain on the left and the right.
Mr. Bopp sees in both legal fights an assault on American freedom.
In the earlier case, the Federal Election Commission used McCain-Feingold to prevent the conservative nonprofit advocacy group Citizens United from running a TV ad against Hillary Rodham Clinton during her 2008 presidential nomination race against Barack Obama.
Mr. Bopp led the initial legal assault, arguing with support from liberals and conservatives that the McCain-Feingold law infringed on the rights of nonprofits to express their opinions on election issues.
On Jan. 21, 2010, in a 5-4 decision, the Supreme Court agreed that the law violated the First Amendment. Score: Mr. Bopp 1- Mr. McCain 0.
That case, though, had less sympathetic victims in mysterious-sounding nonprofits seeking roles in elections.
The people who see themselves as victims of the tax compliance act — Americans overseas — say the law leaves them unable to establish retirement and savings accounts, acquire mortgage loans and avail themselves of other modern banking services.
As a result, thousands of Americans are, in frustration, reluctantly renouncing their U.S. citizenship as the only way to escape two consequences: double taxation, once by the host country and again by the Internal Revenue Service; and having their privacy violated by the law’s requirement that foreign banks provide information on U.S. customers overseas that domestic banks do not.
Mr. Bopp told The Times that he plans to attack the act on three legal grounds: that it violates the Senate’s sole possession of foreign treaty power, the Eighth Amendment’s ban on cruel or unusual punishment and the Fourth Amendment’s personal privacy guarantee.
Mr. Bopp came to the fight indirectly, after joining a Republican effort to identify and register overseas Americans and motivate them to cast absentee ballots.
Mr. Bopp and like-minded fellow Republicans formed in September a get-out-the-vote mechanism called Republicans Overseas, which for reasons of campaign finance constraints is not an appendage of the Republican National Committee and has to raise money on its own in order to organize Americans abroad to cast their lot with Republicans.
It dawned on Republicans Overseas that the best way to represent Americans abroad is to take up their chief cause — opposition to the tax compliance act.
Some research convinced Mr. Bopp that the act violates the treaty powers that the Constitution grants members of the U.S. Senate. The U.S. government has forged agreements with foreign governments to have their banks reveal all financial matters about their American customers or face huge penalties.
These country-to-country agreements are in effect treaties but ones that no U.S. department or agency bothered to seek the U.S. Senate’s advice on or approval for, he plans to argue.
Finding senators to serve as plaintiffs in a drive to get the Supreme Court to acknowledge the act’s unconstitutionality is task No. 1 for Mr. Bopp and the board of Republicans Overseas.
Mr. Bopp, as general counsel to Republicans Overseas, presented to its board two other constitutional objections: violation of the Eighth Amendment’s prohibition against unusual punishment in the form of gargantuan monetary penalties and violation of the Fourth Amendment’s ban on unreasonable search and seizure of the financial assets of Americans abroad.
What has Americans abroad aggravated is that the IRS can grab 30 percent of their money if a foreign bank fails to do everything the law demands. Foreign banks are refusing to comply because of the costs resulting from extra paperwork and labor.
“Seeking legal rather than legislative remedy on behalf of Americans living abroad before the scheduled July 1 full implementation of the law is the only available course for now,” said Solomon Yue, the Republicans Overseas chief operating officer and an Oregon RNC member.
Even waiting until 2015 on the assumption that by then Republicans will control the Senate as well as the House won’t do the trick, Mr. Yue said.
“To repeal FATCA legislatively in 2015 would require the GOP to win enough seats to have a two-thirds majority in both the House and Senate this November to override President Obama’s veto,” Mr. Yue said. “A more likely scenario is that we take the White House back and keep a simple majority in both chambers in 2016 so we can push for a repeal of FATCA in 2017.
“The legal help is on the way since we have three potential constitutional claims against the FATCA beast that was created in the U.S., forced upon other nations and must be brought down in the U.S. justice system,” he added.
Mr. McCain and Mr. Levin see it differently. They not only want to sustain the law, but they also want to strengthen it.
In a joint report by their Senate permanent subcommittee on investigations, the two lawmakers signed on to a call for “the U.S. Treasury and the IRS [to] close gaping loopholes in FATCA that have no statutory basis.”
Political watchers at home and abroad will be watching to see whether Mr. McCain evens up the score by July with Mr. Bopp or the scoreboard reads: Bopp 2 McCain 0.
• Ralph Z. Hallow can be reached at rhallow@gmail.com.
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