From Shadow Raider:
Sorry, folks, the big news didn’t come today. The draft only deals with corporations.
However, the end of the summary says:
“The staff discussion draft does not address the international tax rules addressing individuals, whether for U.S. citizens living overseas or foreign nationals moving to the United States. The Chairman’s staff is considering reforms to simplify the rules in this area while appropriately taxing such individuals. Comments are requested regarding the scope and mechanics of reforms in this area.”
“All comments should be submitted to tax_reform@finance.senate.gov. While comments will be accepted at any time, the staff requests comments by January 17, 2014, in order to be able to give them full consideration.”
Sigh. All right, so they haven’t decided what to do about individuals yet. I suppose we should send the same or similar comments as those sent to the Ways and Means Committee earlier this year. This time it’s to the Senate Finance Committee. I’m planning to send them my latest suggestions, with perhaps some updates.
I know this is frustrating, but at least they mentioned the topic and are looking for detailed ideas.
I think this news should be in a new thread.
I would strongly encourage IBS members to write in to the Senate Finance Committee as they did for the House Ways and Means Committee. I will also be encouraging ACA to write a submission. I know it gets so very tiring to fight the tide.
All of the previous submissions need to be collected, downloaded and put on this site in a separate category. One general letter needs to go referencing the previous submissions as a group (whether on this site or where they were originally posted).
To not re-invent the wheel, is there someone still a US citizen able to contact the Ways and Means Committee, with cc to Max Baucus, that all previous submissions to that Committee be made available for the US Senate Finance Committee in its request for comments on international tax rules for individuals.
Is the US Senate Finance Committee now requesting further individual comments even another from the combined one mentioned below? If the Senate Finance Committee and the Ways and Means Committee are part of TaxReform.gov, will the Senate Finance Committee not then already have all of the Ways and Means Committee submissions? Is this just more spinning of wheels in US government duplication / obfuscation?
I did include my previous submission in my above stated letter to the Senate Finance Committee, but I agree that there should be a formal request that all be included, assuming that Baucus et al haven’t done so already. I can forward another letter making that request if someone would help with the drafting of the letter.
Something to consider about the comments here.
I remain optimistic about changes to CBT. If this were not on the table, I doubt they would have mentioned this at all and invited submissions. My sense is that if the USG sees that there are costs to CBT and that there is not sufficient offsetting revenue that there may be room for change.
Therefore I strongly suggest:
1. Keeping the pressure if in the form of submissions to the Senate Finance Committee, etc.
2. Refrain from comments to the effect that the U.S. will never change CBT. People rise and fall to the level of one’s expectations. There is nothing lost by taking the “high road”. I believe there is something lost by actively promoting the idea that CBT will never change.
Nothing to be lost by being an optimist. Everything to be lost by being a pessimist.
Dealing with corporations—this means that all of the new reporting related to your business partners is discussable.—those for establishing a corporation as an individual, those for narcing out your partners 10% or 25% — the slew of forms that came in with 8938.
If an US person establishes a corporation in his country, his tax form burden is enormous. (Harry Reid assumes it is a”SHELL CORPORATION”.)
Anyone with a business—anything from hot dog stand to family business would be devastated by those rules.
Write those in, minimum!!!
@USCitizenAbroad
People seem to be in two camps. It’s easy to see which camp those who’ve renounced are in and it’s easier to see why they’ve made that choice. Although our issues are on the table so to speak, they’re moving at glacial speed in relationship to the urgency of the situation. Should the brush off to the Senate Finance Committee be viewed as progress?
Maybe there should be strong suggestions to the Canadian government that they suggest the US should switch to RBT as part of their IGA negotiation. FATCA is not wrong in itself if the US tax model was RBT. The government of Canada should make it clear that the US can’t have it both ways: FATCA and CBT.
They want automatic tax exchange. Fine. But the US can’t tax Canadians. They also can’t tax ex-green card holders who went home without properly ditching their card. It is not valid anymore anyway if you leave the US for too long.
Another way to negotiate would be to tell the US that they would treat Canadian citizens as such and not report the info on duals. If the person is Canadian, the bank info will not be transferred. In fact, I suspect that if an IGA is signed, this is probably going to be one of the clauses. They might agree on transferring the info of Americans only citizens, even if they reside in Canada, but not the info of duals. Just my guess. If we read between the lines, this is what Flaherty said not long ago about not penalizing duals… As long as you can prove you’re Canadian, you’ll be safe, regardless of US indicia. This would be the best way to comply with the charter and still meet half ways with the US. I doubt the US won’t provide any info on Americans anyway, even if they’re duals.
FATCA might be the end of dual citizenship.
@Chris
One astonishing thing that came out of all of the submissions made to the Baucus tax reform committees was a willingness on their part to examine RBT based on a model similar to Canada’s.:
“IV. NON-RESIDENT U.S. CITIZENS
1. Provide an election to citizens who are long-term nonresident citizens to be taxed as nonresident aliens if they meet certain conditions (Schneider, “The End of Taxation Without End: A New Tax Regime for U.S. Expatriates,” 2013; similar to the law in Canada)
a. Require a minimum period of residence abroad
b. Impose an exit tax on electing taxpayers where deemed to sell all assets at the time of election
2. Repeal the foreign-earned income exclusion (H.R.2 (108th Congress), Jobs and Growth Tax Relief and Reconciliation Act of 2003, sponsored by Rep. Thomas)”
http://www.finance.senate.gov/issue/?id=0587e4b4-9f98-4a70-85b0-0033c4f14883
This primarily came about because individuals and groups made “international” submissions to the Committee on Ways and Means for Tax Reform. The US government is asking us to continue making those submissions here: tax_reform@finance.senate.gov
The Canadian government can vetch as much as they want about what the US is doing to its citizens, but they have no leverage in this matter. The USG needs to hear how CBT effects individuals.
“The Canadian government can vetch as much as they want about what the US is doing to its citizens, but they have no leverage in this matter. The USG needs to hear how CBT effects individuals.”
I don’t necessary agree with that. The power lies in being able to get the message across and talk to the USG. Right now, the government of Canada is negotiating with them, and the subject is relevant.
The message should be “FATCA + CBT = you’re taxing our citizens. This is not acceptable. We’ll agree to better tax information exchange in the FATCA context if you switch to RBT or if we report American citizen only”. Why is it wrong for Canada to ask Americans to change some laws, when the US is asking to change Canada’s charter of rights to accommodate FATCA?
Also, the Canadian government might have more influence than the plea of expats regarding the fact that CBT is actually stealing from their coffers.
One thing is sure. You can’t have multiple masters. This whole FACTA mess is killing multiple citizenships.
It only make sense to have citizenship in the country where you reside…
This will impact migration big time, and will result in negative consequence in a globalized world.
@chris
I’m not saying that Canada should not try whatever diplomatic means it has to have the US see the error in the way they tax their citizens, in fact, that was one of the suggestions I made to the Canadian government in the contribution I made to Canada’s 2013 Pre-budget submission last year. I wrote:
“In my opinion, Canadians who are deemed “US persons” face the greatest challenge of any group of Canadians. There are by estimates 1M Americans living in Canada, or almost 3% of Canada’s population. A significant portion of the population, such as we are, cannot help have an influence on Canada’s economy. The recent actions of the US government against its citizen’s living in Canada have been life altering for many. Many US persons and their families feel under siege and worry tremendously about their future, resulting in a large number of Canadians adversely affected by the actions of the US. Canada should use its seat at the UN General Assembly to denounce United States extra-territorial taxation as a violation of the Universal Declaration of Human Rights and as a violation of the sovereign rights of other nations to have exclusive rights to tax within their own borders. With this, the Government of Canada should explore the allocation of funds it would need to make a legal challenge to the USA’s extraterritorial overreach into Canada and the taxation of its non-residents in Canada. It would be valuable to examine whether the US policy of taxing its citizens abroad may in the long run cost the Canadian government more than if the Government of Canada was to invest in negotiating an end to citizenship based taxation now, and if in fact it could be achieved through treaty negotiation or through the courts. The Canadian government must use whatever means at its disposal, diplomatic or through the courts, to persuade the US government that its policy of taxing its citizens abroad is harmful to those citizens, and will cost the US government more in the long run by continuing to do so. Barring that achievement, the Government of Canada should also make significant effort to renegotiate the Canada-US tax convention to better achieve reciprocity between the two nations. Through its “Last in
Time Rule”, US has already explicitly violated the treaty both in letter and spirit. This is not acceptable in any future agreement. Canada should insist that the US inform Canada of how much tax revenue is being collected from Canadian sources from Canadian residents. In a new treaty, Canada should insist that income that is purely Canadian be taxed solely in Canada, regardless of the amount. Parliament should create a commission by which to study the negative effects of US taxation on Canadian residents and create various means of reciprocity for the US to comply with by paying compensation for those effects. Both the US and Canadian governments must make efforts to educate US persons in Canada of their US tax obligations. The IRS has the responsibility, duty and obligation to reach out to US persons
living abroad to make filing requirements discoverable and known to those who are required to make them. The IRS seems to have deliberately ignored their citizens living abroad in its education and outreach efforts, when in fact these groups should have been the primary audience. Accepting this, should the Canadian government be unable to make a compelling argument for the US to invest in responsible and adequate means to educate its citizens, the Canadian government itself must step up to do so in order to protect its citizens from the potentially life altering consequences through the actions of the IRS. The Canadian government should be informing US persons in Canada of which measures our government is taking to protect their rights as Canadians or permanent residents. Finally, the Government of Canada must give consideration to the long-term effect its permanent residents and citizens with US tax and reporting requirements will have on the economic stability and tax base of Canada. Eventually, Canadian immigration authorities may need to recognize that US persons seeking residence here have inherently divided loyalties forced upon them by US tax policies, therefore becoming potential liabilities to Canada. As a result, it may become necessary for the Canadian
government to restrict US persons from seeking permanent residency and citizenship in Canada.”
You say Canada should threaten to not cooperate on FATCA unless the US changes to RBT. What does Canada hold as leverage?
Re: calgary411 (and ACA), on IBS you asked:
Q&A:
Q: I am still a US citizen and Jim McDermott, who is my rep, is a senior member of the House Ways & Means who has responded to me in a letter. Victoria I believe has the same rep.
Is ACA already contacting the House W&M to have the House letters made available to the Senate Committee, or is is obvious that the transfer will happen? —Or should we (minnows) make a request to McDermott cc…?
A: Good question. I don’t think it is at all obvious and we cannot assume that those Ways and Means submissions would have been turned over to the Senate Finance Committee – that we are sure they would automatically do something so sensible.
ACA would be the obvious organization to ask if all of the Ways and Means submissions are automatically submitted to the Senate Finance Committee. Maybe ACA – AND you to your representative, as well as Victoria.
Although my story was submitted to the Ways and Means Committee by bubblebustin on my behalf, in an attempt to not to out my son, I am considering an updated submission of my own regarding my son’s (and persons like him) entrapment into “supposed” US citizenship – but at risk to my family’s situation.
DOS issues regarding ‘who is a US citizen’ should also be in play here.
Here are relevant comments at Isaac Brock this morning.
and there are the “discrimination” issues. Why, oh why, don’t these discrimination laws (whether in the US or any other country) apply??????? (I realize this is why the US will not let a parent, a guardian or a trustee renounce their family member’s “supposed” US citizenship, even with a court order.)
This is an economic war. I am sure the Canadian government can think of equivalent levels of sanctions it can put on the US.
@Chris
I agree absolutely! This could easily escalate into something much uglier than what it already is, including trade wars and bank runs. Who’s in a better position to win, the US or Canada?
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Calgary411, I just spoke to someone at the Senate Finance Committee who confirmed that past submissions to the House W&M Committee on this topic will not be automatically considered by the Senate Committee. The only “joint submissions” that will be considered are those that have been submitted to taxreform.gov. It’s still unclear whether anyone is forwarding the House submissions in a systematic manner to the Senate Committee.
I am going to make a short submission to the Committee and include as an attachment the House W&M submission by “Patricia” which I could never improve upon:
http://waysandmeans.house.gov/uploadedfiles/patricia_anderson_daddario.pdf
Others could forward individual (or more) House W&M submissions as part of their submissions to the Senate Committee as well to make a point. These are at: http://waysandmeans.house.gov/taxreform/workinggroups.htm
As USCitizenAbroad suggests, for this submission I will be “positive” and focus on residence-based taxation.
It doesn’t take a lot of effort to send an email by January 17 to: tax_reform@finance.senate.gov
@IRSCompliantForever
Thanks for finding this out. ACA should be notified, as there isn’t anything I can see on their Facebook page and website that informs anyone of this. They after all were a major catalyst in the large number of international submissions made to the Ways and Means Committee.
Thanks, IRSCompliantForever,
And, just why would this not be? All the work that people have gone to for their submissions to the Ways and Means Committee that CANNOT be used. The wheel has to be re-invented? Is this what is called a cock-up? To me, it is just more obfuscation for US Persons Abroad having their voices heard.
I’m glad that YOU can remain positive in your communications.
Related: http://isaacbrocksociety.ca/2013/12/15/wondering-why-has-the-world-turned-more-upside-down-for-some-than-other-us-persons-abroad/comment-page-1/#comment-818011
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An interesting submission to the committee from Law Prof Jeffrey Kadet, a vocal opponent of residence-based taxation for corporations:
Submission No. 6 to Senate Committee on Finance
He won’t go for CBT for individuals but he has experienced the pain that is US tax filing for US persons outside the USA. He recommends that individuals from certified high tax countries should be excused from filing US taxes given certification that they are tax resident in that country.
This would solve the problem for many of us although too bad for folks living in Switzerland, Hong Kong etc.
@Johnson
I don’t know how a non-resident would ever be exempted from IRS reporting when reporting is what makes a tax liability discoverable. For instance, it was through US filing that I became aware that the sale of my home three years prior was taxable by the US. I’m sick and tired of CBT apologists making their case for a system of taxation that will never work.
@Bubblebustin
His proposal is certainly less than ideal. But it does seem that US tax law tends to derive from US tax law professors. The most likely outcome is that the Senate does nothing but when even the serious opponents of RBT admit that the current CBT regime is too onerous, maybe there’s a chance of some useful concessions. It seems very unlikely that the current Senate would actually go for RBT.
The National Tax Advocate keeps trying to push Congress to take measures that would make CBT less onerous for US persons living abroad. it would seem to me that to make CBT tolerable for USP’s living abroad you’d have to make so many carve-outs that you may as well abolish it.
The only thing CBT has had going for it was the fact that very few people knew about it. As Allison Christians writes:
…”In the case of residence-based taxation, however, this is not an OECD-created norm but one that dates to the very beginnings of modern income taxation and while flawed is the best available structure if more than one country in the world is going to have an income tax and people are going to be allowed to leave their countries freely if they so choose. Relax either of those assumptions and legal status-based taxation might become technically feasible, though it would still be fundamentally unjust. Neither is the reciprocity norm an OECD invention: instead, its roots trace back to post-Westphalian fundamental international legal principles.”…
CBT can only survive as an anomaly.