Smoke ’em out … whatever means necessary …
Recent Brock discussions of Form 8854, dates of cessation of US citizenship, and incoherence of the formal statements and instructions that emanate from both Department of State and Department of Treasury/IRS — all of these look like nasty aftermath to 9/11. A case can be made that over the past decade the United States has turned from hot pursuit of handy political “enemies” to cynical redefinition of its own extraterritorial persons as resources of interest who can help to foot the bill for the unspeakable financial costs of their extravaganza of idiot revenge. FATCA and passport revocation sure smell like smoke!
Think what doing a relinquishment or renunciation would have been like ten years ago. Pretty straightforward, apart from figuring out the technicalities, which might well have meant a big one-time payout to an “expert” to help with the “private letter ruling” regime of the day, as demonstrated by this heavily footnoted paragraph {page 421 from: Yu Hang Sunny Kwong, “Catch me if you can: relinquishing citizenship for taxation purposes after the 2008 Heart Act,” Houston Business & Tax Law Journal 9:3 (Fall 2009) 411-444}
Another, perhaps more serious, loophole turned out to be a by-product of the presumption of tax-avoidance motive itself.[85] Although wealthy expatriates who failed the twin net-worth and tax liability tests needed to request a private letter ruling from the IRS to overcome the presumption of tax-avoidance motive, [86] in reality the IRS was quite lax in granting such rulings.[87] According to Forbes, about half of the 270 applications for the private letter rulings between 1997 and July 2002 received favorable responses from the IRS, and all but 11 of the remainder received neutral responses.[88] Applicants that received either favorable or neutral responses could continue with their lives with little fear from the IRS’s alternative tax regime.[89] “In theory the IRS could later audit the ‘neutral’ [applicants] and assess a tax, but there is little evidence this happened.”[90] Most telling is an admission from the U.S. Treasury that “significant numbers of wealthy citizens have continued to expatriate since the expatriation tax laws were amended in 1996.”[91]
The final Q & A (number 35) in Tax-motivated expatriation: enforcement of IRS and Immigration Act provisions (2000) shows that execution of Form 8854 was a total joke ten years ago. Definitely less of a joke today, since failure to file that form will directly result in “covered” status and ensuing perpetual servitude to US bureaucracy.
Here is what Kwong concludes {pages 443-444}:
The IRS has a vested interest in closing any tax-evasion loopholes it finds, so as to capture lost revenue from Americans who try to expatriate to lessen their taxes, and, ultimately, to discourage the practice completely.[281] It is the author’s opinion that this tussle will not end until potential tax-driven expatriates see that there is no longer any financial incentive for them to relinquish their U.S. citizenship or long-term residency.
This foregoing academic opinion, set alongside the punitive tendencies of the IRS, points to a future of further closing of loopholes and increasing of disincentives to expatriation. The obvious increase to disincentive would be abandonment of personal taxation of nonresidents — but that would be a positive move and therefore unacceptable!
So how about negative disincentive possibilities? (1) Lower the thresholds for “covered” status. (2) Further increase the relatively new $450 renunciation fee. (3) Expand wait times, inconsistencies, and uncertainties. (4) Continue to increase infraction penalties à la OVDI and step up enforcement against all mistakes. (5) Institute routine border screening and harassment based on tax compliance. (6) Introduce a wealth tax and make exit from the system impossibly punitive. (7) Add to FATCA reporting requirements on all former U.S. persons, starting from the indicator of U.S. place of birth. (8) Add your own malignant possibility as a comment below.
Concluding Sidelight: Exit now, backdate your CLN, and face a requirement to demonstrate that you were compliant with the IRS rules then in effect, since before that you still were a U.S. person? Using forms and history that only the most expensive specialist could hope to decipher? Much akin to the complex expensive annual filings that prove you owe no tax?
(1) “Lower the threshold of ‘covered’ status”: That’s being accomplished by the Bernanke through dollar devaluation. The threshold for FBAR would have been in 1970 dollars about $400K adjusted for inflation. In a few months to years (depending on when inflation comes in earnest), $2 million will be pocket change and nearly everyone who owns a half a house in Canada will be covered. My house is worth about US 440K–I paid only US $144K in 1997. So the greenback has already dropped to 1/3 of its worth in 1997 according to “normal” inflation–when hyperinflation sets in (the Bernanke has already tripled the money base since 2008, and he may implement QE III today). So in other words, they don’t have to lower the threshold at all. They just leave it as it is and inflation will lower it. As far as I know, HEART made no provision for adjusting the threshold for inflation.
It isn’t just being coerced into filling out tax forms for nothing that drives good and honest people to renounce. It is the complexity, arcane nature, and the uncertainty about complete compliance that make the system unbearable. Throw in a steady stream of new laws that constantly change the ground rules and various retroactive threats like special taxes and visa bans.
And for what purposes are these taxes used anyway? To feed the corrupt and bloated bureaucracy and their crony capitalist partners and to wage wars. There are many reasons to renounce, taxes are actually just a material end effect. The most important reasons have to do with the depravity of the government and the idiot homelanders that continue to elect these jerks. The real reason has to do with self respect.
@ConfederateH,
I like that — it is not about the taxes!!!
The real reason we are renouncing and claiming our relinquishments is our preservation of our own self respect, taking action to be free of the cost of compliance and reporting (for no or little taxes actually owed), the fear put into us of obscene penalties, our believing from past experience that the US laws will continue to change. Why would we continue to put up with the abuse, year after year after year?
@ ConfederateH, @calgary411; re ‘self-respect’ – you’re right, and it’s hard to respect yourself when you feel that you are ‘owned’ like chattel, and through descent, children are too. If the only consideration given to those ‘abroad’ is punitive in nature and application, and we’re subject to the continuing whims of powerful and unethical/unjust forces with no limit or recourse, then what is the true nature of this supposed relationship between the governed and the US government?
You’re right, it has nothing truly to do with taxes (most of us do not and have never owed any). It has to do with a broken and abusive relationship between a country and it’s ‘citizens’. I look at the others around me and I wonder why I am chattel, and why they are not. That makes me feel like a shackled prisoner. It is making me feel claustrophobic, like I can’t breathe.
This ‘motherland’ is eating its own ‘children’.
Who was it who said: “It’s not the tax, it’s the tax collector”?
@badger, at least animals are civilized enough to only eat their young as a last resort!
@badger: “I look at the others around me and I wonder why I am chattel, and why they are not. That makes me feel like a shackled prisoner.”
Renunciation was for me a kind of catharsis. Now I look at government in general differently. I used to love coming back from travels to my little safe and secure Switzerland. No more. Every time I listen to some prick politician open his/her pie-hole I want to punch them, even here. They are all a bunch of sociopaths, it doesn’t matter what country they are from. It has even caused me to break up old friendships. I no longer communicate with my brother in law, a National Park Service Ranger and head of the Nation Park Service Swat Team. The guy is an environmentalist, a big proponent of “zero tolerance” and believes with his entire existence in the Federal Government.
The fact that the National Park Service has a “SWAT” team is part of the problem.
“It is the complexity, arcane nature, and the uncertainty about complete compliance that make the system unbearable. Throw in a steady stream of new laws that constantly change the ground rules and various retroactive threats like special taxes and visa bans.”
@ConfederateH: You put it perfectly!
And I know what you mean about wanting to punch the politicians, no matter the country. I feel nothing but contempt for most of them. And LOTS of anger! Argrhrgrh.
😉
The crackdown on Americans abroad, other recent laws and actions by the US government, and the lack of response from government officials have greatly damaged the admiration I used to have for this country. I also no longer believe in democracy, and I realized that any kind of government has absolute power to do anything within physical limitations. I now question many things that I assumed were good or correct, and I see the world in a different way. I consider myself a smarter and better person than I used to be a few months ago, but at the same time I am more humble because I see that I was wrong and that there is always more that I don’t know. I wish more people and especially politicians would have the eye-opening experience that I had.
@ConfederateH, I would hate to lose a friend because of politics. Have you tried talking to your brother-in-law? Maybe he would change his mind if you showed him, objectively, the problems with various actions of the US government, for example regarding taxation of Americans abroad. Sometimes people just don’t know what happens to other people.
I used to enjoy singing the US national anthem, but the other day I declined an offer to sing it. The lyrics were inspired by the War of 1812.