JANUARY 26, 2020 UPDATE: THANKS for TWO donations from a supporter in Western Canada — We are inching ahead: $35,792 donated, $9,208 more needed to make installment payment for Canadian FATCA IGA lawsuit
Are you an American moving to Canada or who has moved there in the last few years? I'd like to speak with you for a story I'm working on. Please DM me or reply.
— Bob Ortega (@Bob_Ortega) January 21, 2020
This may be of interest to some readers.
As you know, U.S. taxation of its citizens in other continues is a vexing issue. The US Federal Tax Cuts and Jobs Act of 2019 (the “TCJA”) imposed severe harm to business owners of all sizes throughout Canada through the imposition of a Transition Tax (which adversely affected the retained earnings of small business corporations owned by Americans abroad) and rules regarding Global Intangible Low-Taxed Income (or GILTI – this was designed to prevent individuals from using foreign corporations to defer income).
There is an ongoing effort to try to convince Washington to ease the burden on US citizens living abroad. One of the persons who is leading this effort is Monte Silver. He commenced a legal action against the U.S. Department of the Treasury for failing to consider the effect the regulations it promulgated under the TCJA would have on small businesses; the Treasury Department is required to make this consideration anytime it issues new tax rules.
Mr. Silver is scheduled to speak on this matter and on other related tax matters affecting US citizens in Canada at a seminar entitled “Onward and upwards – Mr. Silver’s lawsuit against the roll out of the Section 965 Transition Tax Continues”. This will take place on Wednesday January 29, 2020 from 6:00PM until 9:00PM at the Vault located at 1 King Street West in downtown Toronto.
There is no fee to attend this event but pre-registration is required. You may register by contacting John Richardson of Citizenship Solutions at firstname.lastname@example.org.
This will be a great opportunity to join Chapter members Trowbridge, Hanson Crossborder Tax and others in meeting Monte and others who have assisted individuals with Transition Tax and GILTI issues. This looks to be a stimulating and timely tax policy event.
If you would like more background on this issue please click here.
Tom Alciere is getting the word out to US presidential candidates as they campaign in his state for the critically important New Hampshire Primary (which takes place February 11th), He’s provided info on FATCA (see below) to several candidates and spoken with two of them at Town Hall meetings.
“It’s that quadrennial season again, and the candidates are in New Hampshire campaigning for the first Presidential primary. I was able to bring this up to Andrew Yang during a The FATCA letter reads:
18 January 2020
Imagine getting a birthday card with a check for college, and you like your other grandfather better because he sends toys. Mom and Dad bring you to the place where they have free lollipops and instruct you to write your name on the check and the bank form. Decades later you face criminal charges and devastating financial penalties for failing to report your “foreign” bank account to the U.S. Treasury, when you don’t even live in the U.S.A. This includes border babies born on the U.S.A. side and children of college students returning to their country.
Extraterritorial application of U.S. tax laws and bank account reporting requirements is causing hardships and fury in other countries. Victims now cannot accept employment involving signing the payroll checks because they’d be required to report the employer’s confidential information to a foreign government, the U.S.A. government. Victims infected with United States citizenship are forced to find accountants capable of completing U.S. tax returns that are far more complicated because another currency is involved. Some live in countries with high sales tax rates instead of income tax, and they cannot claim credit for the sales taxes.
U.S. statutes relieved some victims of U.S.A. citizenship when they became naturalized in their country. SCOTUS re-infected them with U.S.A. citizenship without asking if they wanted it.
Under the Foreign Account Tax Compliance Act, banks are forced to report these accounts of “United States persons” to the U.S. Treasury. That data is valuable, especially to hackers.
Some victims are called “accidental Americans,” but they are not Americans at all. Ted Cruz didn’t consider himself a Canadian when he learned in 2013 that he was classified as one of their citizens under their laws. Where the victims live is their country. What could be more infuriating to a proud, loyal, patriotic person than being called a “United States person”?
See: http://www.adcs-adsc.ca, http://isaacbrocksociety.ca
Tom Alciere, PO Box 106, Nashua NH 03061″
Introduction – Remembering Todundsteur 2013
The early years of Brock featured fascinating comments and analysis. Some of the best and most interesting comments and observations came from “TodundSteur”. Although referred to by Brockers as “Tod”, “Tod und Steur” means “Death and Taxes” in German – hinting at Todundsteur’s profession. Todundsteur exhibited a mastery of the application of how U.S. tax law applied to Americans abroad. I doubt that Brock has had as knowledgeable of a “tax commenter” since. For Brockers trying to understand the U.S. tax system he was a great teacher. For Brockers who were beginning to become FATCA activists he was a great mentor. In some of Todundsteur’s comments he identified Georgetown Law Professor Itai Grinberg as an individual who might be worth connecting with.
On January 6, 2013 Petros highlighted the following comment from Todundsteur:
FATCA is a large, clumsy, crude and unilateral attempt by the United States to cudgel, bluster and otherwise persuade the world to subscribe to the US American totalitarian assumption that the financial affairs of every denizen of the planet should be an open book to whatever sovereign entity claims the right to tax that person.
Over the years since the Civil War the citizens of the United States, with no historical experience – yet – of a totalitarian regime have been steadily surrendering power at every level: individual, familial, community and state to a centralized, Federal government.
The citizens of the US have been especially careless of their rights to privacy in the realm of financial and economic affairs. It began with the gradual introduction and imposition of electronic tax withholding and reporting on investment income in the early 60′s and then took a giant leap forward in 1970 with the massive wholesale surrender of financial privacy to the Federal government through passage of the “Bank Secrecy Act”.
The co-option of US financial institutions as the long arm of the IRS was part and parcel of that development.
The early 21st century has witnessed efforts – some more successful than others – by the democratically elected representatives of the US to expand the intrusion of the federal government into nearly every nook and cranny of economic intercourse; chiefly, by imposing reporting requirements on just about any individual or business that makes a commercial purchase of goods or services. Partly out of economic necessity the IRS has recently begun the process of co-opting the entire tax return preparation “industry” in the US and bending them to its will as the unpaid “deputies” of the tax collector.
It is perfectly natural that governments aspire to ominiscience and that is why citizens must always be on their guard and be prepared to challenge. But technological developments have abetted this megalomaniacal urge on the part of the US government to attain financial omniscience. There is serious doubt about the future of cash and the barter-based – and private – economy that cash enables.
Against this backdrop FATCA should be viewed not as an end in itself but rather a very large step in the direction of spreading the notion of the omniscient state throughout the world.
In the big picture, the US insistance on citizenship based taxation is simply a curiosity – but a potentially important one. If the US did not engage in the pointless stupidity of citizenship based taxation FATCA would have remained entirely invisible within the US and the political opposition to FATCA in and out of the US – weak as it is – would likely not have existed at all.
For those of you who are understandably focussed on the collateral damage inflicted by citizenship based taxation on US persons residing outside the US, I suggest that you consider looking for allies in the battle against US citizenship based taxation in a very unlikely place:
For those of you with the interest and patience to contemplate that possibility and who would like a clearer picture of the truly huge stakes for individual liberty and privacy that FATCA has put into play, I commend to your attention the recently published article by Itai Grinberg in the UCLA Law Review:
Itai is a very intelligent scholar who has only recently left the US Treasury Department to return to academia. He is young and idealistic and he is deeply – and primarily – concerned about the ability of the nation state to force the winners of a globalized economy to contribute to the commonwealth of whatever nation in which they reside.
The question in my mind that I cannot yet answer is: assuming that the goal Mr. Grinberg espouses is good, is it worth the price in the loss of individual liberty and privacy?
When reading his article, ask yourself: would Mr. Grinberg be amenable to backing an end to the tomfoolery of citizenship-based taxation if in so doing it enhanced the possibility that FATCA or something like it became a universal model for world tax administration?
Todundsteur’s comment explains why opposition to FATCA in general and the FATCA lawsuits in particular are important.
Broader context of US dollar and sanctions: Describing #FATCA as one (of many) example of how the US uses control over the US dollar as a way of sanctioning other countries. "Uncle Sam just used its financial nuclear weapon again" https://t.co/xVa8jhI8fc via @thesovereignman
— U.S. Citizen Abroad (@USCitizenAbroad) January 16, 2020
There have been many articles on Brock and other sites about FATCA. The above tweet references a recent article at Sovereign Man which mentions FATCA in the context of a series of financial sanctions the U.S. has imposed on the world. In general, the article explains that it’s the dominance of the U.S. dollar and NOT it’s nuclear weapons that gives the United States the global power that it has. Interestingly the article pegs 2001 as the time when the United States began to use the world’s dependence on the U.S. dollar as a mechanism to impose sanctions on other nations. The “Sanction Principle” has been (unintentionally) reinforced by Juan Zarate in his book “Treasury’s War” (in which he proudly describes the relationship between the U.S. dollar and financial sanctions). Of course U.S. citizenship-based taxation, (and the power given by the FATCA IGAs to allow the U.S. to designate any individual as a “U.S. Person”), is the ultimate sanction against the rest of the world.
The U.S. Dollar As The Dominant Reserve Currency
Episode 553: The Dollar At The Center Of The World https://t.co/9WeBWPhedj
— U.S. Citizen Abroad (@USCitizenAbroad) January 16, 2020
The root of the dominance over the world financial system was the 1945 Bretton Woods Summit (well described in the NPR episode) in which the U.S. dollar became the world’s reserve currency. One wonders whether the use of a nuclear bomb to end the second world war was what placed the U.S. in a leadership position that allowed the U.S. dollar to become the weapon that it is today. Does military dominance reinforce the dollar? Or does the dollar reinforce military dominance. Or is it both?
Continue reading →
This will be one of the most interesting tax residency problems in the modern world. Tax residency is usually different from immigration status. What should Harry do? https://t.co/CvlcbbGJxC pic.twitter.com/Xbh49A74e0
— U.S. Citizen Abroad (@USCitizenAbroad) January 9, 2020
It appears that Meghan, Harry (and Archie) are moving in a new direction. This includes creating a new life (where they become financially independent and cease the day-to-day activities of assuming the responsibilities of being “Senior Royals”).
The family has released a new website to discuss their plans.
The most interesting part of the announcement is that they will spend significant time in North America (Canada and/or the United States). Along with this decision comes the question of “tax residency”. Along with the question of “tax residency” comes the question of taxation of foreign income and the reporting of foreign assets.
All indications are that Meghan plans to remain a U.S. citizen and that Archie (whether by accident or design) will be treated as a U.S. citizen. This leaves Harry. At present (as far as I know) he is a British citizen.
In light of all of this, should the family become tax residents of Canada, the United States or even both?
Will they remain tax residents of Britain?
Should Meghan live in Canada (U.S. property temporarily staying in Canada)?
Should Harry count the number of days he spends out of the USA to avoid becoming a U.S. tax resident?
Will somebody convince Harry that he should get a Green Card?
Might Harry conceivably eventually become a U.S. citizen?
Will the Royal family become Canadian citizens?
Will Canada be designated as a tax haven by the OECD?
The plot thickens.
All of this and more.
— U.S. Citizen Abroad (@USCitizenAbroad) January 8, 2020
The article referenced in the above tweet – published in 1985 by Richard Pomp of the University Connecticut School of Law – was posted at one of Facebook groups here. The Facebook post includes some interesting commentary and begins with:
The Experience of the Phillipines in Taxing Its Nonresident Citizens:
I’ve often wondered about the process the Philippines went through when adopting a CBT system then going to one based on residency.
This study was written in 1985 to help determine whether CBT would be effective in deterring “brain drain” from less developed countries (LDCs). Although it was written prior to the Philippines adoption of residency-based taxation, it demonstrates very clearly the problems the Philippines had with enforcing CBT, problems that are strongly mirrored in the US today (complete with amnesties, passport revocation and the like). Unfortunately the US at this point doesn’t know there is a problem that needs to be addressed like the Philippines did as long as 50 years ago! I do think though the biggest difference between the Philippians then and the US now, is that the Philippines valued it emigrants in ways that the US does not.
As it began in the Philippines, they only taxed on citizenship because the US did!
“The early Philippine reliance on citizenship as a basis for tax jurisdiction reflects more the country’s colonial legacy from the United States than a carefully developed policy. Initially, Philippine citizens were taxed under the U.S. Revenue Act of 1913. This Act, adopted shortly after ratification of the sixteenth amendment in the United States, taxed the worldwide income of U.S. and Philippine citizens, regardless of their residence. Thus, early in its history, the Philippines incorporated citizenship jurisdiction into its own law following the U.S. model.”
When that didn’t work for reasons similar to what the US is currently experiencing, they went to a flat rate system one can compare to Eritrea’s, but with a deduction for taxes paid where one lives. It still didn’t encourage compliance.
The article is lengthy and the pdf is too big to upload here. But, you can download it yourself at this link.
I haven’t had time to read the article in any detail. But, if you look at the conclusion you will see all kinds of discussion about enforceability and the co-operation of other countries in enforcing the tax. The article was written in 1985 in a Pre-FATCA world.
This is an interesting article that may well shed light on why the Phillipines abandoned citizenship-baed taxation.
It would be interesting if Brockers were comment on:
1. Aspects in which you think the Phillipines situation is different from the U.S. situation.
2. Assuming automatic information exchange (FATCA and CRS) existed in 1985, how might the author have included this into the analysis.
For those who like to read the conclusion before reading Professor Pomp’s article, see:
A re-run from MapleSandbox …
From an anonymous donor come the top ten reasons NOT to donate to ADCS lawsuit
The Top 10 List To NOT Donate to the ADCS-ADSC.ca lawsuit:
10. You don’t like Canadian citizens of U.S. origin..
9. You want to help tax compliance vultures become wealthy.
8. In Congress you trust and Congress has spoken.
7. You are a shareholder in one of the big Canadian banks.
6. You are a shareholder in all the Canadian banks.
5. FATCA will give me grounds to divorce my U.S. spouse.
4. You believe in the Obama administration instead of believing in freedom and justice.
3. You believe that U.S. law should be imposed on Canada.
2. You are pretending to be a Canadian but are really a member of “Homelanders Abroad”.
and the NUMBER 1 reason to NOT donate is …
1. You believe that FATCA should be the Supreme Law of Canada.
Do NOT let American law become the Supreme Law of Canada. Donate now! Donate often. Donate as much as you can.
Mr. Monte Silver is legally tackling in a U.S. Court the United States Transition Tax by arguing that he has suffered from a “procedural injury”.
The DC Court Judge generally explains the lawsuit: “Plaintiffs do not seek a refund or to impede revenue collection. Instead, they challenge the IRS’s adopting of regulations without conducting statutorily mandated reviews designed to lessen the regulatory burden on small businesses. As relief, they ask the court simply to compel the agencies to do what the law requires—Regulatory Flexibility Act and Paperwork Reduction Act analyses. Tax revenues and their collection are unaffected by such relief.”
From the Court ruling:
‘Plaintiffs complain that the regulations have “imposed significant burdens on Plaintiffs and other small businesses,” including “forc[ing] small businesses to spend enormous amounts of time in futile efforts just to try and understand what [the regulations] mean,” and “forc[ing] small businesses to expend significant funds to try and comply” with the regulations. Id. ¶¶ 33–34.
Plaintiff Silver declares: “[I]n trying to comply with the statute and regulations . . . I have been forced to spend significant funds.
Worse still, I will be forced to expend money on Transition tax-related compliance for years to come, even though I did not report any Transition tax liability…”
“Plaintiffs allege that the agencies neglected to undertake procedural measures designed to protect small business from the burden of unwieldy and cost-intensive regulations—namely, the publishing of an initial and a final regulatory flexibility analysis, 5 U.S.C. §§ 601, 603(a), and a certification that the regulation has reduced compliance burdens on small businesses, 44 U.S.C. § 3506.”
Defendant IRS moved to dismiss the lawsuit claiming in part that Mr. Silver lacked “standing”.
On Christmas eve, 2019 the U.S. DC District Court disagreed, rejected IRS motion to dismiss —- and the lawsuit continues.
JapanT says: “Yes there is a Santa Claus!”