Hillis – Federal Court rejects arguments that the FATCA disclosure obligations of CRA should be read down in light of the Canada-U.S. Treaty

Although the Hillis suit is challenging the Canadian FATCA legislation primarily on constitutional grounds, a summary trial has dealt first with the non-constitutional arguments - including that the FATCA procedure, requiring CRA to automatically pass along to the IRS all the U.S. account holder information gathered for it under the FATCA rules by Canadian financial institutions, exceeds an implicit limitation imposed by Article 27 of the Canada-U.S. Treaty that only "relevant" information should be exchanged, i.e., only the account information for U.S. citizens who likely have a substantive liability for U.S. taxes. Martineau J rejected this argument (along with other Treaty-based arguments), noting that this interpretation would render the FATCA Intergovernmental Agreement "practically impossible to perform."

He also noted that the Crown took the position before him "that the IRS cannot use [FATCA] information to administer non-tax laws (such as the US Bank Secrecy Act) or in its dealings with federal entities (such as the Financial Crimes Enforcement Network of the US Treasury Department) who are involved in money laundering repression."

Neal Armstrong. Summaries of Hillis v. A.G. (Canada), 2015 FC 1082 under Treaties, Art. 27, Art. 26A and Art. 25.