Yesterday, the world welcomed Pope Leo XIV, a U.S. citizen, as the newly elected Pope, marking a historic moment for the Catholic Church. But amid the papal fanfare, a quirky tax question arises: could His Holiness need to file a Report of Foreign Bank and Financial Accounts (FBAR) for the Vatican Bank’s accounts? It’s a wild intersection of tax law and theology, and in this blog post I explore whether Pope Leo’s role as sovereign of the Holy See triggers U.S. tax reporting. Pope Leo XIV not only has the potential to shake up the global Catholic power structure, he has the potential to shake up the global reach of FBAR and FATCA.
Let’s dive into the Vatican Bank, the Holy See’s financial agreements, and what this means for a Pope with a U.S. passport!
What is the Vatican Bank?
The Vatican Bank, officially called the Institute for the Works of Religion (IOR), is a unique financial institution founded in 1942 to manage the Holy See’s assets. It serves Catholic entities like religious orders, dioceses, and Vatican employees, not the general public. Think of it as a private bank for the Church, handling accounts but not issuing loans or credit cards.
As stated in the 2023 IOR annual report, the IOR managed €5.4 billion in assets for 12,361 clients.
The IOR has a colorful history, marred by 1980s and 1990s scandals involving alleged money laundering. Since Pope Francis’s reforms starting in 2013, the Vatican Bank has prioritized transparency, closing questionable accounts and aligning with global financial standards. These changes are crucial to understanding Pope Leo’s potential U.S. tax reporting obligations.
The Holy See and Vatican City: Who’s Who?
To unpack this tax puzzle, let’s clarify the key players. The Holy See is the Catholic Church’s governing authority, led by Pope Leo, and is recognized as a sovereign entity by over 180 countries. Vatican City State is the 44-hectare sovereign territory where the Pope serves as head of state. The Vatican Bank operates under the Holy See but is based in Vatican City.
As Pope, Leo has supreme authority over both entities, including oversight of the Vatican Bank, the IOR. In 2022, Pope Francis mandated that all Holy See assets be consolidated in the Vatican Bank, a policy Pope Leo inherits. This centralized control raises questions about whether Leo’s role equates to signature authority over IOR accounts for FBAR purposes.
FBAR Basics: A Tax Obligation for U.S. Citizens
The FBAR (FinCEN Form 114) requires U.S. persons—citizens, residents, or U.S. entities—to report foreign financial accounts if their aggregate value exceeds $10,000 at any point in the year. Reporting applies to those with a financial interest (e.g., ownership or benefit) or signature authority (e.g., ability to control funds, like signing checks). Penalties for non-compliance are steep: up to $10,000 for non-willful violations and the greater of $100,000 or 50% of the account balance for willful ones, per year.
With the IOR’s €5.4 billion portfolio, accounts under Pope Leo’s purview likely surpass the $10,000 threshold, making FBAR a relevant issue if he has a financial interest in, or signature authority over, the accounts.
Pope Leo and De Facto Signature Authority
Could Pope Leo, as a U.S. citizen, face FBAR filings? Let’s look at whether he has a financial interest in or signature authority over Vatican Bank accounts.
Financial Interest: A financial interest exists if Pope Leo owns, holds title to, or personally benefits from IOR accounts. Typically, Vatican Bank accounts are held by the Holy See or IOR for Church purposes, like funding charities or missions, not for the Pope’s personal use. It is possible that the Pope does not have a financial interest for FBAR purposes, but I am not sure. Interestingly, the Pope is the sole shareholder of the IOR. This might mean he can use the profits of the bank at his discretion; he can also decide to dissolve or continue the existence of the Vatican bank. This entire issue requires further research and thought.
Signature Authority: Here’s where it gets interesting and more concrete. Signature authority is “the authority of an individual (alone or in conjunction with another individual) to control the disposition of assets held in a foreign financial account by direct communication (whether in writing or otherwise) to the bank or other financial institution that maintains the financial account.” Signature authority applies if Pope Leo can control IOR funds, even without ownership. As Pope, Leo inherits significant authority over Vatican finances. The 2022 rescript consolidating Holy See assets in the IOR suggests the Pope can definitely direct how funds are used. This is probably strengthened if he is the sole shareholder of the Vatican Bank. I think all of this points to a very strong argument that the Pope has de facto signature authority that is FBAR reportable. If Pope Leo can authorize transactions or appoint officials who do, the IRS could view him as having FBAR-reportable control. In summary, if Pope Leo has signature authority over IOR accounts exceeding $10,000, he’d technically need to file an FBAR annually.
Query: Would the IRS really send a delinquent FBAR notice to the Vatican?
The Holy See’s FATCA Agreement: Transparency Rules
The Foreign Account Tax Compliance Act (FATCA) adds another layer. On June 10, 2015, the Holy See signed a Model 1 Intergovernmental Agreement (IGA) with the U.S. to comply with FATCA, which combats tax evasion by U.S. citizens with foreign accounts. Under this IGA, the Vatican Bank must identify accounts held by U.S. taxpayers or U.S.-linked entities and report details (balances, names, and Taxpayer Identification Numbers) to the IRS via Vatican authorities.
This agreement, part of Pope Francis’s transparency push, means the IOR’s U.S.-linked accounts are under IRS scrutiny. For Pope Leo, a U.S. citizen, any IOR accounts he controls would likely be reported to the IRS, increasing the odds that FBAR obligations are flagged if he doesn’t file.
Real-World Challenges: Auditing a Pope?
As Pope Leo, a U.S. citizen, settles into his role, his de facto signature authority over the Vatican Bank’s €5.4 billion in accounts could trigger FBAR filings, especially with the Holy See’s FATCA IGA reporting IOR data to the IRS. Practical enforcement seems unlikely (just imagine the headlines!) but the technical obligation certainly may exist.
Let’s face it: the IRS pursuing Pope Leo for FBAR violations would be a diplomatic and PR nightmare. Pope Leo could, however, play it safe by filing an FBAR. Even a Pope might need a good tax attorney! I am here for His Holiness.
BEWARE of U.S. Citizens
Listen to the Podcast
Attorney John Richardson and I did a podcast several days before Pope Leo was elected covering the FBAR issue that would arise if a U.S. citizen Pope was appointed. Imagine our surprise when we learned that indeed, a U.S. Pope is here. You can listen to the podcast at this link.
Posted May 9, 2025
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Donald J Trump pledged to END double taxation on Americans overseas.
This is a point where the Republican Party definitely understands the difference between good and bad tax policy.
All other OECD countries apply Residence Based Taxation. Only the U.S. does not.
MAGA means making Americans first were there live and work. The U.S. should NOT make American citizens tax resident abroad 2nd class in their communities because of their American citizenship.
It is WRONG to double tax residents of other countries as if they are U.S. residents, but then offer zero in the way of resident services in exchange.
Plus Americans double taxed abroad are a prime example of the harms of U.S. over-regulation: costly double and often incompatible tax code compliance, life changing deterrence from activities such as retirement savings including with excessive penalties, and of course double taxation.
The above includes the Pope.
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Great piece — one important point to add: Alongside FBAR liability, Cardinal Prevost (now Pope Leone XIV) is also likely to face State Department scrutiny under 8 U.S.C. § 1481(a)(4). By accepting the role of head of a foreign state and performing official duties, he may be considered to have involuntarily relinquished U.S. citizenship, even without filing a formal renunciation. The DOS has the authority to initiate a determination of loss on its own, especially in high-profile cases like this, where intent to relinquish can be presumed based on the nature of the position. If he doesn’t proactively assert an intent to retain citizenship, he could lose it by default.
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very interesting…. Thank you for adding this. IMO I think if Pope Leo wants to keep his US citizenship he can do so (“no intent to relinquish”) and can you imagine the press — “Pope stripped of US citizenship by DOS.” Regardless, expatriation might not be a bad idea for the Pope. He certainly has enough to deal with without worrying about US tax, FBAR and DOS issues. What do you think?
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In the short term he has a problem regardless whether if and when DOS sends him a CLN.
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