The deadline has now passed to submit comments to the Ways and Means Committee on Tax Reform. Comments are posted here. There were (and hopefully continue to be) a large number of letters from U.S. citizens abroad. Who knows what will happen? I am hopeful that Shadow Raider’s optimism will “carry the day”. For those who missed his comment:
Shadow Raider says
@Just Me, You can keep your hopes up. The reporters who wrote that article on The Hill probably contacted both chairmen of the international tax reform working group, Devin Nunes and Earl Blumenauer, and I suspect that the Republican aide who responded is the same Devin Nunes’s assistant whom I met last year. Yes, he defends citizenship-based taxation, but he is the only aide that I met who does. His opinion is not representative of what Congress thinks about the subject, so I think we can safely ignore his comments. All other aides that I met were supportive or at least open to changing the tax system to one based on residence.
Speaking of congressional aides, most of them are young, as you noticed (20-40 years old), highly educated, motivated and friendly. Also, most of them have traveled abroad, and they live in or around DC, which has a substantial international presence. Perhaps because of these characteristics, they are open-minded about the rest of the world and are interested in new ideas. A 150-year old policy that restricts international mobility is not something that they support. I think citizenship-based taxation is not going to survive much longer.
Also, Earl Blumenauer responded himself to the article on The Hill, and his response seems positive. I think I finally found the point that makes Congress care about the subject: thecompetitiveness of Americans for jobs abroad. When Bill Alexander proposed expanding the FEIE to all kinds of foreign income in 1992, he titled his bill “Overseas American EconomicCompetition Enhancement Act”. When Jim DeMint and Gregory Meeks proposed making the FEIE unlimited in 2007, they titled their bill “Working American Competitiveness Act”. Earlier this year, Dave Camp wrote that tax reform is needed to make US workers more competitiveinternationally. Now Earl Blumenauer mentioned something similar. The Senate Finance Committee scheduled a meeting on “international competitiveness” for next month, and I don’t think they are just talking about corporations. So congressmen don’t care much about logic, simplicity or fairness in the tax code, banking problems, exports or additional tax revenue, but they don’t want Americans to be undesired for jobs outside of the US simply due to their citizenship. In the past, this problem could be mostly solved with the FEIE, but today, with FATCA and the enforcement of FBAR penalties, even excluding all foreign income wouldn’t be enough. For Americans and foreigners to be considered equally for jobs abroad, Americans abroad can’t have tax or financial reporting requirements to the US either.
The Joint Committee on Taxation should say something about the subject in its report on May 6, and the Senate Finance Committee should also say something after its meeting on May 23. I think we’re in for a pleasant surprise.
Here are some comments that really captured the life of “U.S. citizenship abroad”.
Somebody trying to live an “every day life” in Canada
I suspect that #americansabroad in Canada can relate to this waysandmeans.house.gov/uploadedfiles/… – Accurate portrayal of the burdens of US citizenship
— U.S. Citizen Abroad (@USCitizenAbroad) April 17, 2013
This is an excellent submission from a U.S. citizen in Canada who is nowhere near retirement and is faced with the prospect of trying to live and build a life. What is particularly interesting in this one is that she suggests that many U.S. citizens abroad are afraid to write because they are not compliant.
And from a person at a similar stage of life in Switzerland
Excellent description of how “US citizenship abroad” is a punishment and why #americansabroad must renounce waysandmeans.house.gov/uploadedfiles/…
— U.S. Citizen Abroad (@USCitizenAbroad) April 17, 2013
The complete community of U.S. citizens abroad owes a great debt to those who are writing to the Ways and Means Committee.
Not all letters have been posted! (at least yet)
For those who have not been following this discussion, comments on this blog reveal that at least three people have written letters that have not been posted. Hopefully they will show up. But I am beginning to wonder (some were clearly written before some that have been posted). Perhaps those who wrote and find that your letters were NOT posted should post them here.
In any case, many helpful letters have been posted.
@Abused Expat, your friend’s daughter would have been US citizen whether or not she was registered with the US consulate. Registration provides written proof of US citizenship but does not convey citizenship. If she had not been registered she would likely have been undetected by the IRS, unless someone blew her cover. This can happen, for example, when traveling to the US with a Canadian passport together with a parent born in the US. If the border guard were to ask the parent “is this your child?” and the parent answered “yes,” then the child could have fallen into the US citizenship trap. So be careful who you tell.
What happens when a Puerto Rican resident moves abroad? Does he/she have to begin IRS reporting like all other US citizens?
@ Just Me
You wrote, “U.S tax policies have forced me to physically move my tax residency from New Zealand back to America …” I’m curious as to how this is done. Do you now have to return each year to the USA for a set number of days or can you simply ship all your crates of tax compliance forms over to the USA for storage? After all, DNA DPs mean nothing but forms and penalties to the IRS so why not give them custody of the paper work and remain living in your country of first choice by virtue of US tax “form” residency? (I am in a silly mood today.) Anyway I enjoyed reading your submission. It was well thought out and I did like the digs at the congress critters. We all know how the complexity is created but it was great you pointed that out to them so now they know we know. Your good, better, best suggestions were a fine touch but we are all hoping for the best — RBT.
@rodgrod, Yes. Puerto Rico residents (there is no such thing as Puerto Rico Citizenship) become subject to US taxation just like all other us citizens when they leave Puerto Rico to go anywhere else. Puerto Ricans are US citizens and travel with US passports. As a resident of Puerto Rico no person is permited to vote for President of the US. Puerto Rico residents do, however elect a resident commissoner who is a member of the US House of Representatives. The current person is Pedro Pierlusi. He can introduced legislation and participate in the debate on the floor, but he is not permitted to voie. His position is similar to the delegate elected by residents of Washington, DC who also has no vote.
Em
To give up tax residency in NZ, you have to take your wife, pack up and go home and then go through a small paper work process, (although not so complex as the US), to show that you have moved and your enduring relationships and associations are now back in the States. As a US citizen with all family and home back in America it isn’t hard to do. I did this via an accountant I use.
Since I had not yet taken out Kiwi Citizenship, and only had a NZ residency permit, it was not hard for me to undo the double taxation, at least the form filing kind. I do still pay NZ Non resident tax on funds I have here for maintaining the house and still have all the FBAR and FATCA form filing requirements as any US resident would have..
Then of course, you can only be in NZ less than 183 days a year in the future. I am not pushing that timeline that close. Essentially, I have become the Kiwi equivalent of a snow bird. I just now have to be careful of my number of days here. If RBT came in, I might reconsider, but I am doing what the USA wants, and that is to come home!. That is what CCW means. If I was younger I might not have made the move back to the Fubarland, but with an elderly mother in failing health, and my wife who is working back in the States, staying a tax resident in NZ did not make sense any longer, especially when they too wanted to tax my foreign to them (US) earnings, 401ks, IRAs, coming SS, etc.. The complexity of all that and essentially the “rent” (as they say) became too high.
BTW…The IRD is however tightening up these rules on Kiwi Citizens, especially those that go abroad to work, but have homes back in NZ. They are making an almost defacto Citizenship taxation for them, and those rule changes are something to watch carefully. I fear America is teaching all these countries how to saddle their citizens with taxation without end, too.
@ Just Me
That was even more complicated than I imagined. Is that 183 days the same as that messy 3 year back in time calculation which can snare a Canadian snowbird at anytime they decide to crack down on days spent in the USA? I totally understand the situation with your elderly mother. It was the same reason my husband didn’t apply for Canadian citizenship sooner. He wanted the border crossing to be as easy as possible whenever it was necessary to visit his mother. At least you have the possibility of living in perpetual summer if you so choose. You can’t imagine how appealing that sounds to we who are perpetually bound to Canadian winters (recently had 3 days in a row of on and off snow here). 🙂
Em…
It wasn’t that complicated, actually, and the form was more of a questionnaire than anything lengthy with exit calculations, etc. Filed it via the CPA, and was done. Took me about 10 minutes. As for the 183 days thing, not sure it is that complicated, but I haven’t looked that closely, because the practicality of things now, is that I am only here this year 5 months. I hate to leave, (May 1st) even though winter has approached here, and summer beckons back in the Pacific Northwest. The winters here where I am, are very mild, as my bananas keep growing, so you know it can’t be too bad!
I just read the ACA submission. It includes a departure tax and some other anti-abusive measures such as:
“The Treasury would designate certain countries tax havens; Americans residing in those countries would be treated as U.S. residents and remain subject to U.S. income taxes. As stated above, an American with a Departure Certificate who moves from one country to another must report the change of residence to the IRS. If this move is to a country deemed to be a tax haven, the Departure Certificate is no longer valid and the individual is taxed henceforth as a U.S. resident.”
This is okay for an ex-pat moving to a G20 country but really screws the guy who, for example, moves to the carribbean to open a scuba diving shop.
Once someone leaves the US and pays what they owe on the way out, that should be the end of it. No more ball and chain, period.
I had noticed Abused Expat’s comment. I had read the same and had commented appropriately in my submission. I had also emailed ACA folks once about that.
I think it is weird to negotiate away US person rights prior to the negotiations.
I think the Pinto submission got rid of much of that, but I don’t remember specificially
RBT needs to go completely. Let’s hope the Ways and Means goes that far.
I hope things work out for the best too! I had a feeling that a ‘once in a lifetime ‘ opportunity like this would indeed occur within the next couple years which is why I was originally going to wait till 2016 or 2017 before deciding whether to expatriate. However, as I realised it could go either way, I decided in the end to go ahead and renounce while I saw a window of opportunity to do so. After all, I’ve lived in the U.K. for the past 25 years and am settled there; and as I don’t see myself ever realistically desiring to repatriate, I concluded that I would hedge my bets by ‘getting out while the getting out was still semi-good.
I’m just afraid that Congress will only consider very limited reform for corporations or for American companies offering temporary assignments abroad. I hope I am proved wrong for the greater good.
But my decision was essentially a hedge because, in the meantime, I would have continued having to pay out over $2000 to a specialized tax preparer annually. Even if RBT is ultimately enacted, I’d imagine it would still take several years to fully implement. But the system seems too rigged in vested interests for major reform any time soon….please God, even though I will have missed out, I pray though that things will get better for those who still want to keep their U.S. personhood!!
@Abused Expat, I agree with you. What divine law is there in the Universe that decrees that you are immoral if you live in a jurisditction the government of which has chosen to geenerate its revenue through means other than an income tax? To me that is one of the basic defects in citizenship-based taxation in that it does not really matter who you pay your income tax to, either a foreign government or to the US, just as long as it is paid to “somebody.” that has a legal mandate to collect it. In other words if you have not paid an income tax to somebody, you have sinned and therefore must pay the IRS the difference between what you have paid to a foreign country and what the total US tax would theoretically be on that same income. Why should the US believe you should be punished with a US tax on your income if you live in a country with a tax system different from our own?
It is clearly a punishment rather than a revenue-generating tax.
As far as the exit tax is concerned I also have my doubts as to its constiutionality. As long as you have paid the US tax on you income as a resident of the US, you should be free to spend your tax-already-paid income any way you see fit, or take it with you wherever you go.
@Roger, I also hate how Congress devised punitive ‘PFIC ‘ taxation on local mutual funds what are perfectly legitimate investments in our countries of residence. It particularly hurts the little man because people of modest means tend to use mutual funds rather than individual stocks to spread risk.
It’s a sneaky way to get around foreign tax credits by imposing U.S. tax on phantom gains; it ensures that expaT’s are hit with double taxation even if they haven’t sold the mutual fund; this double taxation also ignores what are often tax-advsntaged or even tax-free investment accounts in the Expats country of residence; and perhaps worst of all, the tax preparation costs for the PFIC 8621 forms can be prohibitively expensive.
It’s a classic example of special monied interests (the U.S. mutual fund industry and cross border specialists) having lobbied against genuine Expats so we either stick with U.S.-registered investments or stay dependent on our accountants.
@just me
Unfortunately for you and many Americans, the tax tail wags the dog solely because of citizenship based taxation.
The problem is not the fact that Americans can’t see past their own problems or even the injustice of the taxation system itself. Until the American government and the American people get their heads out of their collective behinds and realizes that the belief of American “supremacism” is a fallacy and that they cannot go with this merry belief that they are superior to the rest of the world; there is going to be backlash. And that backlash will come in many different forms.
The simple fact that the US thinks that it is so exceptional that it figures the entire world will roll-over for FATCA is a symptom of the “american supremacism” that permeates this United States government and the brain-washed masses that spout off jingoistic phrases such as “If you want to be American, you’d better pay your fair share.” or “America is the best country in the world; if you don’t like it then leave.” This American supremacism is the reason why the government of the United States thinks it has the right to tax their citizens who live in other countries, who do not take from the collective benefits pot.
As I have stated before, America is a CULT and Americanism is a symptom. There are too many people who are angry at the 1%, which was cleverly done as a way of painting those who live in other countries as “tax cheats”. This is a well known cult-tactic which is “smear those who are not members of that exclusive group of homelanders who have full benefits and affect those members’ line of thinking so that they are sympathetic to your cause.”
What I fear most is that the US will try their best at implementing FATCA and then if the world doesn’t step in line, start trying to use force of arms to get other countries in line if the financial war doesn’t sprout financial benefits. What we have is an “entitlement President” in the White House and it doesn’t seem like he’s prepared to stop digging into people’s pockets. As someone else said “The US seems to be digging itself into a hole just like the Empires that have fallen before.” The only problem with that analogy is that this Empire has weapons of mass destruction. It will take out others before it implodes in what would be the world equivalent of a “murder-suicide”.
I wonder how many countries will stop being American sycophants and let the “monster” die of its own accord. And whether China will do a mercy kill on the United States to put the rabid monster out of its misery. And there I’ve done it. I think I’m now on the drone-kill list. Any neighbours might do well to move away now.
@the Animal
Yours was an interesting rant more than it was a drone, and if the USG was intent on killing us for either, we’d all be dead (including many living within the borders of the US itself).
I’m just waiting for Herr Obama to write up a Kill List for his remote-controlled drones. 😛
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This would have been what I would have sent into the Ways and Means committee if my wife was keeping herself hidden in the rabbit hole.
To: International Tax Reform Committee
Attn: Representative Nunes and Blumenaur,
As the fully Canadian Spouse of an American citizen, I would like to put my opinion forward on the citizenship based taxation and the fact that it should be replaced with residency based taxation which is upheld by 99% of the world. In citizenship based taxation your only ally is Eritrea.
1. With regards to the FATCA extra-territorial over-reach of your legislation, you purport to “snoop” into my financial dealings based on any joint accounts that I should hold with my American spouse. This is in direct contravention to my rights as a Canadian citizen and a violation under my rights under the Canadian Charter of Rights and Freedoms and the Banking Privacy Act of Canada and could potentially be subject to grounds for litigation under the Criminal Code of Canada. My objective now is to find out who to send that Canadian Supreme Court summons to; to the head of the IRS, to the senators responsible for the legislation or to the President of the United States who signed this draconian law into effect.
2. With these extra-territorial, unilaterally implemented United States laws, you have violated the national sovereignty of nations all over the world forcing their banks to become “reporting arms” of the Internal Revenue Service or should it be henceforth known as the International Revenue Service?
3. while your aim to repatriate foreign income tax is commendable, the current working tax code is outdated and contrives to implement a) excessive financial burdens on working Americans abroad who are of modest or low-income means who cannot file their taxes without seeking outside taxation help at considerable expense. b) draconian penalties for “failure to file” which in some cases amount to many times the amounts that were originally in the bank account. c) many taxpayers were guided to the OVDI under a “bait and switch” scheme which bluntly put is “legal extortion”. Many tax-payers are “frozen like deer in the headlights” for fear that their life-savings will be utterly destroyed. Is this a fair and equitable tax system?
4. Also, your expatriation methods though not directly tied to taxation are also hindrances. Several expats whom I’ve had the pleasure of making a passing acquaintance have children whom under the law of “transmittal of United States citizenship from an American parent” are US citizens taxable under United States law. In order to not have the problematic situation of double-taxation as well as faithfulness to one country (the country of their birth), they have opted to make their choice of citizenship known by the act of renunciation or relinquishment of their United States citizenship. Where the problem comes into play is when the child is mentally disabled or has developmental disabilities. One of the key factors of renunciation or relinquishment is the knowledge of the ramifications of the act of renunciation/relinquishment of citizenship. This is the catch-22. When the child is mentally disabled or has developmental disabilities, there is no way that he would recognize any form of citizenship or the act of renunciation of such. In this way the United States can continue to keep its hooks in this child’s financial future and deplete the disabled child’s bank account like a vampire. Perhaps the expatriation allowances should also be revised and allowable for the disabled child’s parent to renounce or relinquish the child’s citizenship on their behalf. To not allow so is tantamount to extortion and financial kidnapping.
5. The simple fact that Americans abroad are being discriminated against in their prospects for employment and career advancement, in their financial dealings, in their ability to save for their retirement (should they retire abroad) should provide ample proof of the problems that this law has inflicted upon the American communities living abroad in foreign nations.
American citizens abroad are not tax-cheats or tax evaders. They pay income taxes to the country in which they reside. Most American citizens abroad are just every day workers who have fallen victim to the US tax complexities and are penalized harshly for not knowing every single punctuation of the United States Tax Code which frankly is impossible for even a tax lawyer.
I support American Citizens Abroad in their quest to have the United States Tax Code amended and to change the US citizenship based taxation requirement to residency based.
Sincerely,
@Animal,
At least what we think is clear in our minds, even if we were gagged in making a submittal to the US Ways and Means Committee for doing so would have harmed family members. I did not feel the same threat of harm in giving my identify and making my family’s story known (and that of many others) to the Canadian federal government. With IRSCompliantForever’s encouragement, I made another plea to our government to incorporate our subset of concern for those who cannot renounce in their ongoing negotiations with the US. I got the following acknowledgement.
Yours would have been a powerful submittal to the US and would be to Canada.
Petros, the deadline has passed but I sure wish you had sent this on behalf of your wife.
the US congress needs to junderstand how US extraterritorial lax laws are criminally damaging to the human rights of foreign citizens who are married to US citizens and living abroad together.
It is clearly expressed in this letter.
The US has absolutely no right to impose extraterritorial legislation which so massively violates the basic human rights of citizens of other countries.
Hi, Roger, Animal here.
I sure wish I did, but unfortunately, it would have exposed my wife to the vampires that inhabit the United States screeching that “she’s not paying her fair share.”
@The Animal
Why don’t you just send it in. It is very very good and expresses the problem well. The submission could be from the Isaac Brock Society.
sent to Kevin Shoom.
cc: Kevin Shoom, Senior Chief, International Taxation and Special Projects
Dear Kevin Shoom,
I am putting this cc: to you, because a) I would have ended up causing irreparable financial harm to my family if I had sent it in to the International Tax Reform Committee as it would have opened my low-income family to the vultures that inhabit the United States Government seeking to feed on the carcasses of any family with American ties b) I feel that you need to know who it is that you are dealing with in terms of the United States. You have a country that is 16+ Trillion in debt that is seeking to garner every possible cent that they can regardless of the damage that they inflict on any person or family. c) I am keeping my wife’s name private under the 5th Amendment of the US as well as the Canadian Charter of Human Rights and Freedoms. And my wife has filed her Canadian taxes every single year that she has been employed in Canada. She is seeking her Canadian citizenship through proper channels as per her qualification under Canadian residency for the requisite number of years.
The United States is seeking to destroy the sovereignty of every other country in the world. It is time for Canada to show it’s true patriotic colours. Are we going to continue to be a sycophant of the United States and throw 1 million Canadian dual citizens and their Canadian families under the bus to show solidarity with the United States or are we going to do as Trudeau did and tell the United States that their extra-territorial over-reaching legislation is not welcome here. I,. for one, value our Canadian sovereignty.
Did anyone read John Hanson’s submission to the Ways and Means Committee. It’s hysterically sarcastic, but absolutely sympathy-inducing. http://waysandmeans.house.gov/uploadedfiles/hanson_wg_comments_redacted.pdf
John, if you’re here on IBS. God, I hope that these assholes in the House and Senate have a “sense of humor and a sympathetic heart”.
Thank you for your family’s service from the son-in-law of another US serviceman.