What follows is a commentary on Virginia La Torre Jeker’s interview of ex-IRS Willard (Bill) Yates, recently retired from the Office of Associate Chief Counsel (International), If You Go, You Can’t Come Back. The Reed/Schumer Follies-Past And Proposed Anti-Expat Legislation: Interview With Bill Yates, Former IRS Attorney (International). Yates explains why US has never enforced the exile provision of the Reed Amendment.
It is said that you can tell a lot about a person by what he finds funny. Inside the IRS, they laugh at laws that intend to penalize people through taxation and exile for exercising their fundamental right to expatriate. The United Nations Universal Declaration of Human Rights states (Articles 13.2; 15) :
Everyone has the right to leave any country, including his own, and to return to his country. … Everyone has the right to a nationality. …. No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality.
Congress has passed tax laws aimed at attracting foreign capital: non-resident aliens may invest in the US exempt from interest income tax and capital gains. Therefore, some billionaires have taken advantage of this huge loophole by expatriating to gain tax-free income on their US-based investments. Congress therefore passed the Reed Amendment (1996) to close this loophole. It would penalize the renunciant of US citizenship with permanent exile and ten years of further taxation. Neither penalty is in conformity with fundamental human rights, and this law, and the proposed “Ex Patriot Act” of Charles Schumer, shred the dignity of thousands of alleged US citizens who dare not renounce their US citizenship, lest they be cut off from their loved ones in the US.
I have talked to a few US expats whose only reason for not renouncing US citizenship is that they still have close family members, usually parents, children and/or grandchildren, who are living in the US, and these beleaguered expats do not wish to risk permanent exile from the US. This effectively prevents them from exercising their fundamental right to change their nationality. In the age of NSA and FATCA, many Canadians, for example, would gladly expatriate, if they could, to protect themselves from having their banks reveal their accounts to the IRS, thus exposing them to extortionate FBAR fines, to rights violating extraterritorial taxation, to gouging cross-border tax specialists, and to friendly cross-border lawyers that are really wolves in sheep’s clothing. But the act of expatriating in many cases could potentially expose them to the bill of attainder called the Reed Amendment.
Now Bill Yates explains why the Reed Amendment has never been enforced. We had reason to suspect this, but we never knew why until now. The reason is that Section 6103 of the IRS code prevents the IRS from revealing tax information to other agencies of the US government, including Immigration and Naturalization Service (INS), which would enforce the Reed Amendment on any renunciant, whose loss of citizenship was motivated by the desire to avoid US taxation. Yates says that INS would have to detain renunciant entering the US and insist that the renunciant waive his 6103 rights so that the INS could obtain the private letter ruling (which determines if the person’s expatriation was to avoid taxes) from the IRS. If the renunciant refused, INS would send him off packing. However, this procedure never came to fruition only because the INS failed to finalize the regulations.
Yates uses the imaginary example of “AC”=”accidental citizen”, who was born in the US but lived from childhood in UK. AC had never paid US taxes and one day his tax account (another wolf in sheep’s clothing), hears that AC is a US citizen. The accountant then informs AC that he should be filing and paying US taxes along with his UK taxes. It is a very realistic story, and likely based on real-life examples. It shows that the IRS intentionally makes life hell for accidental Americans. It exposes the evil inside the IRS. It is a must read for people who wish to understand the mentality of career bureaucrats. Obviously, they have no concern for fundamental human rights. They only care about whether the bureaucracy has the ability to implement a law, once passed. A law is good or bad based on the ease implementation. If it is unworkable, Yates finds it funny, no matter how much misery it could cause. Yates only laughs because the other laws prevented him from implementing the full provisions of the Reed Amendment. Yet he is proud of his authoring of 877a which implements the current exit tax on expatriates, another major obstacle on the path to exercising one’s fundamental right to change one’s nationality.
Now please consider how much misery permanent exile could cause. I am an ex-American. Imagine that an INS agent in Toronto invoked the Reed Amendment when I joined in the search for my missing father last July. Luckily, there is no procedure for enforcing the Reed Amendment, and the border guard let me pass. Had INS barred me from entering the US, I would have felt regret to the end of my days–and that would be in addition to the great grief of losing a loved one.
Clearly, exile is punishment and the Reed Amendment is punishment via Congress made laws applied to single class of people–those who exercise their fundamental right to expatriate. The Constitution bans such laws by forbidding bills of attainder. This is no laughing matter.
NB: Please see Yates mysterious reference to the War of 1812. Does this indicate that Yates reads the Isaac Brock Society? If so, hi Mr. Yates! Feel free to make a comment below.
@badger, crystal london
I run a deficit here at Brock, in that I take more than I can ever give. I’m forever trying to correct that imbalance, which I think is the nature of any relationship that exits to help others. Does that make sense?
You’re right. There is no justification for CBT, but unfortunately, the US doesn’t need one. They have their laws which the whole world must make concessions for no matter how much inconvenience they cause anyone else. You see, they don’t deserve to have their citizens thrive outside the confines of the US. I’m not saying that as a human being you don’t deserve to enjoy a quality of life other emigrants have, it’s just that you can’t do it as a USP. Exceptionalism makes up the fabric of America – even if it makes them exceptionally dysfunctional in the world. It’s their world – they just let others live in it, and FATCA is just another manifestation of that attitude (again being sold as something good for the rest of the world). Thing is, the rest of the world won’t receive the same kind of benefits or suffer the same repercussions the US will because of CBT.
They could not have devised a better way to end their citizen’s global presence if they’d thought about it. That’s something no other nation will have to live with under FATCA’s regime.
Thank you for giving me such invaluable information, advise and support. I remember the day I read about FATCA and how devastated I felt. I became more devastated going to a Democratics Abroad meeting and hearing the tax accountants put the fear in me, of the penalties and their costs. Then later on, after many sleepless nights I found Maple Sandbox and IBS. I went to a summer meeting held by IBS and got more informed .
Since then I have been here almost every day, learning so much. I also became aware of the different circumstances that brought each of us here. I got advise from IBS to relinguish, not to renounce, due to when I became a Canadian citizen. I am in this fight to the finish. There are times I feel down but then one of you bring me up. You are all my FATCA family.
I read Patricia’s reasons against CBT and it sounds like these reasons can be used in a court of law, a Canadian or International law court. I am not as informed as many of you but my gut says it could.
I am posting this link again here to a summary of double taxation issues faced by Americans abroad. the list is very good but not exhaustive.
In case anyone is interested, another attorney, unlike what @MiaChupacabra AKA J.E. Gutierrez thinks, now, upon reflection advocates that FATCA should be repealed.
So, not all attorneys are JEG-like in their thinking.
One final comment. I just caught up on my reading of this thread. The discussion that MiaChupacabra stimulated is probably healthy (wished Congress could have had some of this active debate before FATCA was imposed by stealth, democratic and bi-partisan as MiaChupacabra likes to remind me, yea right!), we probably should all attempt to avoid name calling or insulting as tempting as it might be. Characterization is fair game, but JEG your complaints about …
…. is really the pot calling the kettle-black. You have been doing that to me on Twitter for sometime.
I am ignorant and, need to take my meds.
At least when Petros insults, you know clearly who he is, and you, well we haven’t a clue who you really are. You won’t say! and refuse to answer the question, “what is your agenda?”
Although, I deduce you are female, not male, have an superior elitist attitude towards the “unwashed and less than middleschool educated”, and happy to be home playing tennis in Florida and of course compliant with sales tax reporting to the Florida government for all Amazon purchases. That is another law, like the Federal CBT that But…Almost Nobody Actually Pays it Homeland mass non compliance.
Enjoy the sunshine and your Canadian neighbors who are snowbirding over the winter. If the USA continues its revenue hunt beyond its borders, the ranks might be thinning out in the future. Cheers, and Happy FATCA New Year. Your dream of “Control” is coming true!
@ Just Me
Can you confirm that Mia is JEG? It certainly does seem possible. I’ve been watching you tryst-tweet with Mia for quite awhile. You are amazing to as you keep trying to open that very closed mind. Bet Mia/JEG doesn’t have a cheering section like you do — unless it’s a few, equally closed-minded compliomonsters.
@ Polly re: CBT and double taxation. It’s pretty obvious to me the US doesn’t care whether they are taxing twice. They practice double taxation even within their own borders. I’m talking about the death tax (sometimes euphemistically referred to as estate tax). The US government (and quite a few states) consider the occasion of a person’s death as an opportunity to tax already been taxed assets all over again. This is not a tax on income, this is a tax on assets, i.e. confiscation. (If you’ve got ’em, we’ll take some of ’em.)
The short sightedness of this is mind-boggling. Once those confiscated assets disappear into the black hole of government coffers it’s guaranteed they will never produce a penny of tax revenue again. If they were left in the hands of the heirs the heirs might continue to keep them invested (good for the economy and produces tax revenue), sell them and spend the money (good for the economy), live off the income (produces tax revenue), or sell and reinvest in modern new ventures with a big future payoff (good for the economy and future tax revenue).
The tragedy is even greater for family owned businesses which must often be sold to raise the cash to pay these death taxes. When these family businesses are sold that often triggers capital gains which incur even more tax. It’s often the death knell for the business which is no longer under the close care and control of the family. This causes further loss of jobs when the business ultimately fails (bad for the economy not to mention the workers who are no longer employed).
It’s clear the US government is not particularly concerned about double taxation. Especially for expats. If they were they would switch to RBT.
Yes, I think so, although I could be wrong as Mia has denied being JEG via twitter. However, the profile, the statements, the use of language, the arguments are all SOOO familiar, that I think they are one of the same. That little “inconvenience” statement about FATCA is one that Mia has said many times. And, there was another ‘tell’, but won’t give that one away.
I am just waiting for JEG to deny it here too. If I am wrong, I will apologize. I don’t mind the active debate, or even the disagreement, as I do recognize some see America through different eyes than I do. I welcome some of the more moderate tone displayed, here vs twitter, and seeing her arguments fleshed out in more than 140 characters is interesting. There even is some occasional empathy displayed, until it dissolves into dismissive haughtiness for someone that doesn’t know as much as she thinks she does.
What continues to puzzle me, is what is Mia’s agenda and why the need for her to hide behind anonymity. For non compliant or those just afraid of the IRS wrath the need is obvious, but if you are supportive the the regime, why not be more open?
Petros, love him or despise him, is at least man enough to face up to his charges and insults. I personally don’t think they are necessary, or even effective, but I understand the level of frustration from which they originate and tolerate them especially when dealing with FATCA apologist (yes, that is MY characterization of Mia) Why are they sooo blind to what is right in front of their eyes or feel this need to CONTROL everyone?
For the FATCAnatics ideologues, of which I would say she is a member in good standing, there is no cost too high, no burden too great, no war too long, if the intention is good. Like the NeoCons of the Right and their certainty of WMD, the Progressives on the LEFT are SOOOO CERTAIN of the justness of their War On Offshore Tax Evasion, that we should all just accept it. We and the FFIs have NO CHOICE but COMPLY or so Mia says. If FATCA’s 544 pages of regulations means that they can GET one RICH tax evader from the round up of EVERYONE, than it was worth it for just a mere ‘inconvenience.’
As for her characterization of me, I am someone needing “to take my meds”, “a moaner”, or a “conspiracy monger” when I talk about the effect of FATCA leading to a global GATCA.
So it goes.
But lets not underestimate Mia. She does have a cheering section, and it is Robert Stack at Treasury! Maybe that is the agenda. As a surrogate, she can sow a little discord and doubt and get ‘the myths’ to go away! 🙂 They are a pesky bother which makes the FATCA stealth project a wee bit more difficult.
I thought she might be our friend here, but I believe she hasn’t used the word “scofflaw” once. JEG is also not actively practicing law.
It sounds like Mia/JEG could almost be part of a COINTELPRO assignment. I personally love Petros’s passion. We need it because passive debate alone is not going to be enough to defang the FATCA monster. High costs, great burdens and long wars just don’t belong in the same sentence with “good” intentions. There seems to be some missing synapses in the brains of those who would bring down millions in the questionable search for one tax-evading miscreant. This is not a mere “inconvenience” to the millions. This is deliberate financial destruction, all for the purpose of absolute control. Please Just Me, never take those meds. You are functioning perfectly without them.
It is interesting to speculate who Mia/JEG could be. Mia could be a nickname for Michele. Didn’t Mrs. Obama used to be a practicing lawyer? Probably not her, but who knows.
You are now being quoted – the term ‘GATCA’ that you coined is turning up in several places where I doubt it is an IBS participant or Brocker writing. You saw that coming and tied it all in for us. And you were generous in sharing your compliance nightmare and were altruistic in providing access to your materials in order to help others here. And you display patience and forbearance over such a prolonged period of time, to a point where I could not. I don’t know how you do it. You’ve been steadfast, reasonable and logical – and can provide reliable sources for your arguments.
I noticed that JEG does not tend to answer, address, or discuss points which are uncomfortable or inconvenient, no matter how polite, reasonable or logical a manner in which they are made. Basically, if the system as it stands is working for him/her, that is what counts. It is very convenient to speak of the letter of the law, but not so convenient to address the results. As we know, many hurtful and unacceptable things were at one time law in the US that now we would not accept as just or acceptable. Laws are also sometimes found to be unconstitutional if someone has the resources to take them all the way to the Supreme Court. There is also the very inconvenient question of why US tax law as applied to people like Timothy Geithner – who had related financial training and experience, and also actually owed significant amounts of US tax, was treated so very differently from ordinary people abroad who owed much less or zero – and were already paying one full tax bill to their actual country of tax residence. He did not comply until audited, and did not pay up all that was owed until nominated.
What is the strong motivation for the FATCAnatics and CBT apologists to invest the time and effort it takes to participate here unless they are some how part of the compliance industrial complex?
When I compare Geithner’s treatment to Patricia d’Addario’s, I want to spit!
“display patience and forbearance?”. Boy, can I get you to send a note to my wife! She will be surprised to hear that…. LOL
I guess I have been on my “meds” as instructed by Mia/JEG.
And thanks for your comments. You are VERY prolific and I read and appreciate them all!
As for FATCAnatic motivation for IBS participation, your guess is as good as mine. It could be just an overwhelming desire to set us straight and “educate” us with their superior wisdom about what is “good for us”. They are the “best and the brightest” remember?
@Just Me wrote: “to take my meds”, “a moaner”, or a “conspiracy monger”
This is harassment. You need to tell her that her conduct is unwelcome, to explain why it offends you and to request that they do not do it again. If they do it again, the a complaint needs to be filed to the US feds.
Victims of harassment commonly believe that the harassment will stop if they ignore it, and victims tend to blame themselves while not wanting for the harasser to get into trouble. Victims are often afraid of retaliation.
Retaliation can come in the form of Audits, bank freezes, bank closures, renunciation fees, exit taxes, Reed amendemnts or irrevocable renunciations.
Americans living abroad are protected from retaliation even if they do not call it harassment or discrimination. One does not have to suffer a monetary loss to be a victim of retaliation. Expats do not have to use legal terms as long as they inform the authorities that the conduct at issue is discriminatory.
Here is an interesting book, partly available online:
Income Taxation and International Mobility
It explains why the UK adopted RBT when it created the income tax, which led the rest of the world to copy the same standard, and why the US adopted CBT. It also explains in detail the case of the Philippines, which initially adopted CBT because it inherited the US tax code, but later reduced it considerably as it started noticing various problems. Note that the book was written in 1989, and the Philippines eventually abolished CBT in 1997.
It seems that the countries that have of had CBT fall into two groups:
1. Influence from the US tax code: US itself (still uses CBT), Mexico (abolished later), Philippines (abolished later)
2. Dictatorships: Soviet Union (communist, CBT ended with the country), Bulgaria (communist, abolished CBT after democratization), Vietnam (communist, abolished CBT after opening the economy), Myanmar (military dictatorship, abolished CBT after democratization), Eritrea (still uses CBT, and still a dictatorship)
I wouldn’t be surprised if Eritrea ends up abolishing CBT before the US.
Mia’s an “alternative investment advisor”, according to profile. Also avid tennis player. Claims to be from Miami. Claims to be international.
There are a lot of such “alternative investment advisors” commuting back and forth to Bermuda and Bahamas. Some have a strong connection to Florida.
Likely she’s been setting up accounts for people herself over the years–alternatively her bosses. She knows the game because she has been running it. She’s the reason they brought in FATCA. Too bad she hasn’t gotten the call yet that the UBS execs got.
Well, if you find out the details you can get a 30% whistleblower cut.
As far as I’m concerned, Mia is JEG. I’m hated by Mia and, well, by JEG equally too. JEG’s hostility towards me would be totally unjustified if she was not Mia. The hatred goes back to the days when I was hinting that all of this hostility against expats leans towards unpatriotism. At that point, Mia censured my views with the remark of: “I don’t like the direction this is heading”.
“Expats do not have to use legal terms as long as they inform the authorities that the conduct at issue is discriminatory.”
I notice that the FATCAnatics and extraterritorial CBT apologists never address the discriminatory RESULTs. They like to pretend that equity lies in equal application. Which is absurd, as bubblebustin’s reminder about the plight of Patricia D’Addario illustrates. There is no equal application – Geithner with tens of thousands owing in US tax and no penalties http://online.wsj.com/news/articles/SB123198429552584175 got a result that is not available to most of the individuals who owe zero or very little, and was rewarded with the job of actually enforcing US federal tax and financial reporting laws. And apparently, that is what constitutes EQUAL application of US tax laws. You can have a family trust in the Caymans and become the Commerce Secretary http://www.usnews.com/opinion/blogs/pat-garofalo/2013/05/24/obama-commerce-nominee-penny-pritzkers-tax-problem . You can run for US VP and forget about an inheritance – without a problem if you are well connected http://www.forbes.com/sites/kellyphillipserb/2012/09/23/ryans-amended-returns-offer-more-questions-than-answers/ . You can be the head of the IRS, admit that US tax law is too complex for you to do your own taxes http://thehill.com/blogs/blog-briefing-room/homenews/58370-irs-commissioner-doesnt-file-his-own-taxes , yet insist that those born and living outside the US should have known about all the many arcane laws the US has invented for anyone deemed to be a ‘US taxable’ person anywhere in the world. They should have gone to IRS nursery school taught by enrolled agents, or better yet, their parent should have read them the US Internal Revenue Code in utero and sung the names of the foreign account reporting forms as a lullaby.
I’d be willing to write you a note!
There is also a small case of CBT besides the US and Eritrea, which I have mentioned before: the French in Monaco. Due to a treaty signed bewteen the two countries in 1963, France taxes its citizens who live in Monaco as residents of France. Monaco doesn’t have income tax so they can’t use a foreign tax credit, and they can’t even renounce French nationality because naturalization in Monaco is incredibly restrictive (the prince has to personally approve it, and he only does it in rare or exceptional cases).
Their problems and complaints are very similar to those of Americans abroad. They suffer from the stereotype that people in Monaco are supposedly all millionaires, but most of them actually have regular jobs. They complain that they have to pay taxes to France but don’t use any French government services, and that they do pay other kinds of taxes to Monaco (the social security tax there for example is very high). And what is most striking is that French people are about a quarter of the population of Monaco, but this proportion used to be much higher and has been decreasing steadily since the tax treaty was signed. In other words, the French can’t survive in Monaco paying French taxes and end up returning to France. But many of them were born and have always lived in Monaco, sometimes for generations, and don’t want to leave.
Anyway, what is interesting is that although they number less than 8,000 people, they surely know how to get the French government’s attention. One of them became a senator in France and he has been trying to change the situation. In 2009, they won a case in a French court, which would have exempted from taxation those who have never lived in France, but the French government decided to use a technicality to apply the ruling only in very specific cases. France also has representatives and even a minister specifically for its citizens abroad. In October, this minister visited the French community in Monaco for the first time, heard their problems, and then wrote on her website that the stereotypes are false and that this community truly deserves attention, including on the subject of taxation. In November, the president of France himself went to Monaco and visited the community, also heard and understood their problems, and said that he would address them with the parliament. Finally, in December, their representative followed up and wrote a formal question to the government regarding the situation.
I don’t know if the French government will really do something, but they are obviously paying attention and at least showing that they care. Meanwhile, Americans abroad, which number 7.6 million, can’t even get the US government to recognize their existence and are disregarded as myths. Maybe you could learn something from the French in Monaco. You can check their websites here and here (in French).
The whole american tax code needs to be revised.
@Polly, first one has to revise the people who revised tax code. Changing the tax code won’t do much good with the current state of the average mentality in the US. The US a long road ahead of itsself to fix its many cultural, economic and political problems. We’ll be long dead before things improve over there. But, if I can be proven wrong, then that would be all the better.
The irony for present day defenders of CBT is that for the creators and backers of the 16th amendement, taxation of foreign income was not a part of the debate. A series of supreme court cases from the 1870’s trhough the 1890’s the concept of the income tax as a “direct tax” or an “indirect tax” similiar to a tariff or excise tax
from the Tax History Museum
1895 In one of the landmark cases in the history of constitutional law, Pollock v. Farm Loan and Trust Co., the Supreme Court declared the Income Tax of 1894 unconstitutional. The Court had never before invalidated a congressional tax measure; in four cases since 1868, including the most recent, Springer v. U.S. (1880), the justices had deferred to Congress and upheld income taxation, ruling it an excise or indirect tax, rather than a direct tax requiring apportionment among the states.
But in two separate Pollock rulings in April and May, the Court reversed its prior pronouncements. Speaking for the majority, Chief Justice Fuller focused on the specific sources of income subject to assessment. Since it had long been established that a tax on land was a direct tax, Fuller concluded that a tax on the income derived from land (rents or real estate sales) must also be considered a direct tax. Similarly, he dismissed any distinction between real and personal property; the direct tax clause circumscribed federal taxes on personal property and the income derived from it just as it did for real estate. The justices also agreed that Congress could not tax the income from state and municipal bonds. This decision had nothing to do with direct taxation; it struck the court, rather, as a violation of the principle of federalism – the national government had no power to tax the instrumentalities of the state. Since the elimination of these bases of taxation stood to alter the tenor of the original income tax law as passed by Congress, the Court proceeded to strike down the entire measure.
The phrase “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. “ was in direct response to the court’s objection to a “direct tax”
@badger, so true. All of those wealthy and privileged political royalities in the US, with all of their tax breaks and tax advantages argue that I’m the “bad guy” since I figured that a local Swiss bank account charging debt interest is better paying apartment rental fees!
@JustMe: Shortly after JEG began posting here, I suggested she/he sounded suspiciously like MiaLaChuapacabra on Twitter. I asked: Any relation? I asked. JEF denied being on Twitter.
That was in a different thread (perhaps Citizenship Based Taxation). Maybe one of the administrators can dig it out.
JustMe, you, Swiss Pinoy and I all use our real names and our real photos on Twitter.
I don’t know if JEG is using a real name here. I am virtually certain Mia La Chuapacabra is not using a real name on Twitter.
A search of whitepages.com failed to turn up even one listing in the US for the last name La Chupacabra or Chupacabra (without La)
Wikipedia is more revealing. http://en.wikipedia.org/wiki/Chupacabra
“The chupacabra (Spanish pronunciation: [tʃupaˈkaβɾa], from chupar “to suck” and cabra “goat”, literally “goat sucker”) is a legendary cryptid rumored to inhabit parts of the Americas, with the first sightings reported in Puerto Rico. The name comes from the animal’s reported habit of attacking and drinking the blood of livestock, especially goats.”
Mia is Spanish for my. So Mia Chupacabra means My Goat Sucker. Since I learned that, I have refused to get sucked in to Mia’s tweets. Unfortunately, I did allow myself to get sucked in to JEG here.
Here is the Mystery of La Chupacabra Finally Revealed. http://www.youtube.com/watch?v=ggMWBHivne0
You can draw your own conclusions about Mia from this information.
“The US a long road ahead of itsself to fix its many cultural, economic and political problems.”
Long road? I’d say it’s imploding in slow motion.