A group representing French-American taxpayers said Thursday it had filed a suit against France with the European Commission, hoping to avoid strict US compliance rules that could see them blacklisted by French banks starting in January.
The "Accidental Americans" association has been battling for years to be exempt from a US demand that all its citizens overseas file bank details along with yearly tax returns.
The group says thousands of French and other foreigners are deemed Americans because they were born in the US, even though they may have lived there only a few months or years when they were young.
They want to be freed from the annual filing requirements with the Internal Revenue Service, and from seeing their banks forced to hand over their banking details to the US taxman.
In 2017, Washington accepted a partial moratorium on the rule, known as the Foreign Account Tax Compliance Act (FATCA), set up to battle offshore tax evasion.
But the exemptions expire at the end of this year, and the French banking federation FBF has warned that 40,000 accounts could be closed come January if no accord is reached on the filing requirements.
In refusing to hand over information required by the United States, French banks would expose themselves to penalties.
Accidental Americans considers that a Franco-American agreement from 2013 which allows for FATCA's application in France, "violates EU laws on data protection" by authorising "the transmission and storage of huge amounts of personal data in the United States," it said in a statement Wednesday.
As a result, the advocacy group says French nationals with dual American citizenship face de facto discrimination, even though "most of these people have no links with the United States."
It says the European Commission has a year to decide if it will launch any proceedings against Paris on the issue.