…
Under the proposed amendment, a renouncing individual who would be classified as a Covered Expatriate under §877A, must prove to the Department of Homeland Security by “clear and convincing” evidence that he or she did not renounce for tax avoidance purposes. The burden of proving this negative falls on the renouncing Covered Expatriate if he or she desires to ever re-enter the US.
…
In a nutshell, all Covered Expatriates will now have the burden of proving that tax avoidance was not a primary purpose of their renunciation. Under the original Reed Amendment, the burden was with the US government to show that the renouncing US citizen did so to avoid US tax. This shifting of the burden of proof is enormously important and greatly increases what is at stake for a Covered Expatriate. Under the original Reed Amendment the advantage was clearly with any renouncing US citizen (whether a Covered Expatriate or not). It can be very difficult for the US government to meet its burden of proof regarding tax avoidance motives. Under the proposed Reed-Schumer Amendment, the advantage would be squarely with the US government when dealing with a Covered Expatriate.
Under the newly proposed regime of the proposed Reed-Schumer Amendment, the importance of avoiding the US exit tax under §877A could be even more important than before. Not only will the repercussions of being classified as a Covered Expatriate under §877A result in a deemed disposition of the renouncing individual’s worldwide assets under the exit tax rules, but the burden to prove that a primary purpose of the renunciation was not to avoid US tax, falls on the Covered Expatriate and not the US government.
…
CONCLUSION
The Reed-Schumer Amendment is not law yet, but the danger of inadvertently being barred from the US while also being hit with the US exit tax are real concerns for those considering renouncing if it becomes law. Any US citizen, who renounces their US citizenship with either the original Reed Amendment or the proposal Reed-Schumer Amendment regimes in place, needs to understand the repercussions and timing of this decision.
Click HERE for a summary of filing and reporting obligations required by US citizens residing in Canada.
Good concise report. What I am unclear of yet, and is whether or not the Reed Amendment made in through the Senate in the final version of the Immigration Act that was just passed. I know it got moved, but was it retained..? I haven’t looked, but hoping someone else has.
The mean-spiritedness of this amendment and demonisation of former USCs is not exactly a surprise, but it has a bizarre new twist. I find it interesting that the proposed amendment would charge DHS, with determining if a person had not expatriated for tax purposes. Like what’s the connection between tax avoidance and security? What expertise does a Security Dept have with financial matters? Only in America! They are getting really good at conflating things, especially when it involves expatriation.
Do they really have any feet left to shoot themselves in? If this passes, what do you think will happen to small border towns in the US? The US sister city to my city is probably less than 15,000. It relies heavily on Canadian cross border shoppers. It is in an economically devastated state. Being a border town, many of us were born “over there”. People who have not renounced, likely won’t bother. They also will stop cross border shopping, and going across to the casino, concerts, using their campgrounds, etc. The city will be doomed.
Shocking and breathtaking arrogance.
This amendment fortunately (??) doesn’t apply to me as I barely have two nickles to rub together….
Question: why have I almost never seen in any of the news reports of “wealthy US citizens fleeing to avoid taxes” a mention of the fact that they have ALREADY paid (lots of) tax on their money when they made it?
So… tax on the original income, tax when expatriating, barred from re-entering the US, labelled as a tax cheat and a traitor…. sweet.
@The Mom
I grew up in Sault Ste Marie ON, so I know what you are talking about. At least those born in the US twin city(I’m not one) could consider applying for a Canadian passport with city only, and maybe get away with saying they were born on the Canadian side. 🙂
No, shunrata, it should not apply to you or most of us — unless we somehow FAIL TO FILE the Form 8854 on our way out. $2 million net worth is relative to where a person lives and a whole lot of other things. Hard-earned other country pensions are especially at risk as many now draw down those accounts in our retirements.
Just because a person works hard in a country abroad and earns a whatever he or she may earn, by luck or hard work does very well, does not make that person a criminal, a tax evader or a traitor — or anything else they may want to define us as. US Persons that meet ‘the definition’ may want to exit the US for the same reasons that we do, but are more entrapped by the “wealth” they’ve earned and accumulated very legitimately, as they are now deemed by the US, by some magic number pulled from a hat, “covered expatriate.”
The only way to solve the injustice is for the US to change to residence-based taxation. Is that in their best economic interest as they have no qualms about extracting from the economies of other countries?
The U.S. seems to be going all out to prove, beyond all reasonable doubt, that it is the worst/most hated country in the modern world. Who in their right mind would choose to be associated with these absolute lunatics? I still can’t believe I opted for dual citizenship when I was in my late teens. What a misguided putz!
This is old news, the Senate already passed the immigration bill and it didn’t even consider these amendments. It’s over, for now.
Oh my god, I couldn’t help but comment on this gem by Reed:
“American citizenship is a privilege. But it seems that a privileged few are trying to game the system by accumulating wealth and benefiting from the greatness of the United States…”
Wow, astonishing arrogance and the absolute height of brainwashed hubris. “Privilege”??? “Greatness”????? What could possibly be further from the truth! What a deluded dildo!
Does ANYONE seriously consider not being “allowed” to re-enter the U.S. a punishment? Move aside — where do I sign?
Over for now and until next time. Thank you Shadow Raider.
@WhiteKat…this Goulais girl says hello from the Pine hill area. Small world. LOL
I would love to just drop the country off my passport, but I was born on the air force base, not in their city. That’s a really good thought for anyone born over at War Memorial, though. I’ll stick that in my back pocket for anyone I run into in that situation.
WOW…can we please have “stripped citizenship with that too…”…and a side of fries? Maybe a milkshake. My wife was destined for poverty and no future in the United Delusions of America. She left the USA to come to Canada, is in the process of getting her degree (thanks to Canada) and has got a secure job, thanks to Canada…and that two-bit money-grubbing…dipshit by the name of Jack Reed says this:
“American citizenship is a privilege. But it seems that a privileged few are trying to game the system by accumulating wealth and benefiting from the greatness of the United States…”
FUCK YOU, JACK REED!!! FUCK YOU!!! ~pardon my language, but that’s what I’d prefer to say to him. UNEDITED VENOM!!!
Senator Reed,
We are not the privileged few. We are the huddled masses yearning to breathe free.
This is a “tax war”.
See: http://www.law.nyu.edu/idcplg?IdcService=GET_FILE&dDocName=ECM_DLV_013804&RevisionSelectionMethod=LatestReleased.
‘TAX TREATIES AND HUMAN/CONSTITUTIONAL RIGHTS:
BRIDGING THE GAP?
Tax relief in a cosmopolitan context’
Theodore Georgopoulos
…………”…“Tax war” *43 among sovereignties obeys the same logic. By trying to expand tax power in order to increase collected taxes juxtaposed tax jurisdictions are potentially at permanent war. The impact of such conflicts on taxpayers is far from being trivial.
Heavy tax burden is placed upon taxpayers’ shoulders because of the overlapping of tax sovereignties. Thus, the need to ensure peaceful coexistence of tax jurisdictions leads to settlements at the international level through the classical legal instrument of treaty…”
*footnote 43 Martin Norr, “Jurisdiction to Tax and International Income”, 17 Tax L. Rev. (1961-1962) 431.
This should be our battle-cry!
https://lh6.googleusercontent.com/-89hmyYI10sU/UdZjHpVo-fI/AAAAAAAAAns/Z8BSy8-bqxs/w526-h395-no/Eagle_American_newholiday.jpg
Actually, THIS is our battlecry.
https://lh5.googleusercontent.com/-4kk-XqWqOyo/UdZpTlu53JI/AAAAAAAAAoE/F2brmXQRVjI/w600-h480-no/ExpatBattlecry_rs.jpg
@shunrata: And, for good measure, taxing the surviving US children and grandchildren on any property they inherit from the covered expatriate—even property accumulated by the expatriate after leaving and paying the exit tax! Punishing children for the “sins” of their parents is the ultimate deterrent to exercising one’s inherent right to expatriate.
@ Bob, yes it is a privilege, but too many take it for granted these days.
Everyone is trying to game the system by accumulating wealth. That’s what pursuit of life, liberty and happiness has come to. Not that they really mind that. What they hate is that you make your money and then take it elsewhere. The worst aggressors are those in government. How many like Romney have bank accounts and other assets tucked away outside the US.
The simple fact, Medea, is that American Expats did not make their money “in the United States and take it elsewhere”, they made their money outside of the US without the benefits given to US homelanders (EI, Social Security, etc…) and yet the United States wants a piece of what they made. There’s a word for that. EXTORTION.
I think the Canadian Bald Eagle (to Canadian Expats) should be our battleflag.
https://lh6.googleusercontent.com/-Ep6ebWqb3tU/UdaAjYn3eZI/AAAAAAAAAo0/i-IKJhl4AS0/w600-h480-no/Canadian-Expat-Eagle_rs_norighttooursavings.jpg
Bombard Flaherty and Harper with this https://lh6.googleusercontent.com/-Ep6ebWqb3tU/UdaAjYn3eZI/AAAAAAAAAo0/i-IKJhl4AS0/w600-h480-no/Canadian-Expat-Eagle_rs_norighttooursavings.jpg…all over their Facebook and e-mail. Make them aware that we will not go down quietly and we will fight all the way. The Canadian government has no right to throw Canadian citizens, duals or Canadian residents to the ravening hyenas and more of a duty to protect us.
@Bob, being not allowed to enter America is a benefit, saving one of thousands of dollars in travel expenses. As such, we should probably be supporting Reed’s effort to help us to save money.
Bob:”Does ANYONE seriously consider not being “allowed” to re-enter the U.S. a punishment? Move aside — where do I sign?”
It would be punishment for me. I have family down there, some of whom are too elderly to travel here to see me. Being barred would mean never seeing them again. I would not be a covered expat and so that’s unlikely to happen to me but, these sorts of threats are so low minded and onerous. Does Reed honestly think every person who loses U.S. citizenship is a rich person who made their wealth in the U.S. and then “ungratefully” left. Does he not consider that the person has a right to leave and perhaps contributed quite a lot to the U.S. while living there? Does he not consider that the vast majority of those giving up U.S. citizenship are not the imaginary “rich”of his fantasies? This man and others like him are attempting to make laws that affect a population they have zero knowledgable facts of.
Given the present situation and the people affected by FATCA it does not escape me that some legislation barring former citizens at all could be slipped in somewhere at some time. These people are off the hook out of control and have way too much power. They make laws that bring misery to many while not caring or even knowing what they are doing. It is ALL grandstanding for local votes and the outcome be damned!
Bob says
July 4, 2013 at 8:33 pm
Yes. It is a punishment of the most cruel nature. My pop has started to show signs of Alzheimers. If I am banned from visiting the United States, my brother and sisters will have care for him and eventually bury him and Schumer and Reed will deprive him of my presence and help that I could render to him.
Permanent banishment in the Roman empire replaced capital punishment in the cases of upper classes who received generally less severe punishment in law. Thus, exile is a little lower than the death penalty. I wrote an article for the American Thinker on the uncivilized nature of punishing via legislation people, who do things which are legal–i.e., unconstitutional bills of attainder. The problem with Reed and Schumer is that they are stalinists who believe that the state should control the citizen. We however are guided by decency and human rights, so that we can see what low-life assholes that they are.
If it is a right to expatriate, then punishing expatriation is an example of a bill of attainder. A dumb piece of idiot who attended a law school in the United States but doesn’t understand basic human rights needs to taken out of office.
http://isaacbrocksociety.ca/2012/05/21/no-civilized-country-would-ever-banish-eduardo-saverin/