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.
TrueNorth makes a good point. Canadians have certain rights under NAFTA: for example, if the United States barred a West Jet pilot, who is specified expatriate who has renounced his citizenship, on the basis of the Ex Patriot Act or the Reed Amendment, it would violate a number of international agreements on trade, including NAFTA. But we have many cases of the US’s failed reciprocity. This is nothing new. But it would require Canada to arbitrarily ban pilots, because they are of US origin, working for Continental or one of the other US carriers. This could get quite fun, but it would not be productive.
Also, JEG probably missed this part of Worster’s paper:
In other words, at least one federal court has already said that the practice of national origin in the handing out of entry visas is unconstitutional.
@JEG, by the way, SwissPinoy served in the US military, but was forced to renounce his US citizenship in order to renew his mortgage and thus to keep his house in Switizerland. He has a right to vent his frustration and anger any time he wants–though that’s not exactly what he was doing in his comment.
Stop blaming the victims here for our anger. We are the victims.
@Polly, of course not, but many stateside Americans demand that you pay 30% of your life savings so that they can donate more billions to Egypt, Israel, Turkey, Syria, Iraq, Afganistan, Libya, Al Qaeda, etc. Basically, it means forcing you to pay for war in other nations on the other side of the globe.
@JEG,
regarding your comment that; …”Under the constitution, all US citizens are equal in rights and obligations’….
I have repeatedly raised the issue of the unequal access of US citizens abroad to register and to vote in US federal elections. This results in ALL the millions of us abroad being deemed ‘equal’ in the obligation to be a ‘US taxable person’, but NOT equal enough in fact to be a US voter. I noted that as those who have never resided in the US, or have not met the residency rules as enacted variously by each individual state, millions who were born US citizens via birthplace or parentage are effectively disenfranchised by being refused registration as US voters, and by being refused the access to the US vote.
I have raised this several times on various threads here, but you have not addressed this issue.
Could you give us your thoughts on why it is ethical, just and constitutional for the US to effectively deny millions of us the right and access to vote from where we live outside the US, but enforce the obligation of taxation on ALL those living (and often born) abroad?
And, how is it just or constitutional that the US chooses to enforce taxation on those abroad as if they were US residents, but chooses NOT to enforce our right and access to vote in US federal elections?
@TrueNorth
I am not familiar with the provisions within NAFTA that deal with Canadians’ ‘rights’ to gain admission to the the United States. However I know a little bit about the situation for Mexicans and I assume it will not be too dissimilar.
Mexicans’ rights to live and work in the US under FATCA are far from unconditional. The applicants must be admissible under general immigration laws in addition to having to fullfil a number of specific factors (educational achievements, etc). If former citizens were made inadmissible under immigration statute, that would almost surely override any treaty arrangement under NAFTA. It is not a satisfactory outcome, but this is the situation under the law.
@Petros and Calgary411
From my experience, the ATM overseas cash withdrawal method works at first, BUT may raise a problem long-term.
A year or so after leaving the USA, I received letter from my US bank that since my account’s debit card had been inactive, it would be withdrawn if not used in an ATM machine by the end of the year. I made the three-hour round-trip bus journey to the nearest ATM machine and made a withdrawal successfully before the deadline; but nonetheless the debit card was not renewed. It appeared that the foreign withdrawal maybe “did not count” in keeping the card active…?
Has anyone else experienced this? (In my case it occurred about ten years ago.)
Fresh in the press:
Americans are unwanted worldwide (at least by banks)
http://www.forbes.com/sites/robertwood/2014/01/01/americans-are-unwanted-worldwide-at-least-by-banks/
@badger
Like you I am struggling to find any justification to find any acceptable justification for this disenfranchisement. I cannot think any. Please alert me if you find anybody capable of articulating one.
Fresh in the press:
«Amerika scheint immer weniger Respekt vor anderen Rechtssystemen zu haben».
Translation: America appears to have continuously less respect towards other legal systems.
http://www.finews.ch/news/fina…
@SwissPinoy
I am simply not going to engage with you in a discussion about the so-called ‘rights’ you have enumerated, because I do not believe for a second that you are genuinely interested in a conversation. You can draw whatever conclusion from this.
Culture and citizenship are different things. The former is a social concept, the latter a legal one, which has been codified on the basis of the Fourteenth Amendment, passed during one of the nation’s most troublesome period.
@Polly
I never was subjected to the threat of having 30% of my net worth confiscated, but I have suffered enough PFIC punitive taxes, and taxes on currency-driven phantom capital gains, to know that the current system of taxation on offshore investments needs serious reform.
@JEG, I am not really that familiar with NAFTA my self, I am aware that my particular profession is covered by NAFTA. My rights to work in the US under NAFTA are not “immigration”, it was a new category of employment mobility it is not immigration so I’m not sure why an immigration law could make me inadmissible.
@J.E. Gutierrez, I never once for a minute believed that you were prepared to discuss these “rights” in detail, as the facts now demonstrate. These “rights” are just not something that US foreign policy advocates are proud of disclosing. You sure don’t want to talk about them.
You wrote: “Culture and citizenship are different things”
Bingo! One does not need to be a US citizen to have American culture and not everyone with US citizenship is American. This means that many individuals without US citizenship are far more American than some individuals with US citizenship. At the going rate of things, being American means not being a US citizen, since the two have no relation as your interests request!
The bottom line is this:
No Representation, CBT, FATCA, FuBAR, Reed Amendment, Exit Tax, Ex-Patriot Act etc, etc are all designed to screw anyone who has the AUDACITY to emigrate from the self-proclaimed “Land of the Free” and pursue the so-called American Dream elsewhere.
Long-term American expats/emigrants worth their salt are giving Uncle Scam the one finger salute the moment they get their paperwork in order. It takes longer for some than others due to the waiting time for obtaining citizenship in their countries of residence.
2013 and 2014 will each set new records for long-term expats tossing their blue passports into the bin.
Further to the above, thats a whole lot of laws designed to keep people (expats) on a leash who don’t even consume any US public goods or services whatsoever. That is, people who don’t use US highways, bridges, dams, power grid, hospitals, schools, fire, police, courts, medicare, medicaid, welfare, unemployment, food stamps etc.
And don’t give me that crap about sending the Marines, emergency evacuations and embassy services. Its all a bunch of baloney. The cost for emergency evacuations are paid by the evacuees. The cost for consular services are paid by users (charged at extortionist rates). And sending the Marines? Thats only goon happen if the country your’e in has a bunch of oil or other resources Uncle Scam wants to get his greedy hands on.
@TrueNorth
As I understand it, the various Reed-led amendments would add to existing immigration laws one or more clauses making former citizens inadmissible for entry into the United States if they fail to demonstrate that their renounciation was not in part tax-driven.
So essentially, unless you are able to satisfy that tax considerations played no role in your decision to expatriate, you would be denied entry into the country.
Harsh, completely counter-productive, but in my view at least entirely constitutional.
@SwissPinoy
Whilst I believe I vaguely understand your point about citizenship and culture, I really fail to see its relevance in this particular conversation. Regardless of how ‘American’ a no-citizen may feel, he/she will not be treated as one under US law.
@J.E. Gutierrez, Americans living abroad do not live under US jurisdiction and thus they don’t want to be treated as one under US law. US law is designed for US jurisdiction, not for Americans.
As we discussed, US law has nothing to do with being American, meaning that Americans abroad continue being Americans without US law and even without US citizenship.
It is fair for US laws to prohibit Americans from visiting America, preventing Americans from being subject to US jurisdiction and US law. It is not logical, though, for US law to be applied outside of US jurisdiction. Americans living abroad are not “under US law”. They are under the law of other jurisdictions and they are still Americans (even without US citizenship).
So, we both seem to agree that US law cannot and should not have any impact upon Americans living abroad, unless they were to choose to seek entry into US jurisdiction, for which the US government has every right to deny Americans entry if it must.
Also, US citizenship is simply a US law thingy which gives the US government excuses to deny Americans entry into US jurisdiction when they do things like expressing political criticism, fighting for human rights, liberty or justice. Basically, Reed-led amendments are efforts of making the two-party rule more fascist.
@SwissPinoy
That is not the way it works. The rights and obligations of US Citizens, whether in the homeland or abroad, are not like the menu of a buffet restaurant. They come as a package. If Americans abroad are uncomfortable with their obligations under US laws, they are free to expatriate, under the condition that they have satisfied all their obligations.
@J.E. Gutierrez, US rights and obligations end where the US border ends. Everything beyond that is non-US jurisdiction. You yourself said that being American has nothing to do with US law, meaning that Americans living outside of US jurisdiction cannot be subject to US law.
So, this shows that Americans living abroad must renounce US citizenship since they no longer live under US jurisdiction. Each renunciation is thus forced and not voluntary.
@SwissPinoy
You are confusing a few things here:
‘American’ is not a legal concept. Only US Citizenship is. And the law clearly imposes obligations (and confers rights) to US Citizens (and some other categories of taxpayers) wherever they reside. Whether you agree or disagree with it, this is the legal situation. US Citizens who wish to do away with their obligations under US law can, but are not forced to expatriate. Expatriation is a voluntary procedure as per the Fourteenth Amendment.
@JEG
“If Americans abroad are uncomfortable with their obligations under US laws, they are free to expatriate, under the condition that they have satisfied all their obligations.”
One of my obligations was to submit form 8854, the form for the year I renounced was not published until a year after I renounced and was not due until a few months after that. How far into the future do my obligations extend. The fact is people are free to renounce no matter what obligations they may or may not have.
@TrueNorth
You are so right. One is always free to take any decision, for as long as one assumes the consequences.
I have often wondered what would happen if overseas citizens engaged in an act of mass civil disobedience over tax.
That may be the way to go.
@JEG
With estimates of up to 1 million US citizens in Canada, very few paying taxes. I would say that mass civil disobedience over tax has been going on for many decades now.