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.
@Innocente, at the end, when she receives her CLN and her cancelled passport, she says she sad that she was forced to make this decision: Ich sollte erleichtert sein. Aber ich bin bloss traurig, dass ich mich gezwungen fühlte, zwischen dem Land, in dem ich gern lebe und arbeite, und dem Land, in dem ich geboren wurde, zu entscheiden.
i have not been a resident of the us of a since 1989 however my wife and i (given our geographic location) use to make at least one longer trip and perhaps a couple long weekend trips to some amazing parts of the states for camping in and just hanging out in general.
we have talked about our decision to never cross over the line again and have agreed that with that door closing all it did for us was to force us to take out long weekend trips here in our home province (which is not such a bad thing keeping our travel dollars in our own province)
for our longer trips we will just fly somewhere just as long as the airplane does not stop at an american destination (there by spending our longer vacation dollars in what i would imagine be a country that could use our tourist dollars) since does not seems to care or want those cheap tourist dollars but rather wants its pound of flesh to go along with the tax penalties.
i am gonna miss some of the places we traveled to and were looking forward to going back to however our world has changed and we will change with it. 🙂
I just emailed a US lawyer specializing on discrimination the following question:
“What can one do in the situation where Americans living abroad are being discriminated against due to US government policy?”
The highly professional legal response was:
I got a similar response from our US family attorney. HUD and VA stated that they do not assist individuals living outside of US jurisdiction. I suppose that one could begin documenting the inability or unwillingness of America to assist individuals outside of US jurisdiction?
@Polly, actually tourism of any type from anywhere beyond its borders is way down in the US. Read a fascinating piece at Zero Hedge that basically said that because the US requires visas from about 81% of the world’s countries, and these are notorious difficult to obtain due to the requirements and the fact that consulate’s routinely veto applications for nonsense reasons) people just aren’t going to the US anymore. So you are in good company with the majority of the world.
badger, It doesn’t matter if you are in or out of the country where the USG is concerned when it comes to “foreigners” as spouses. My Canadian husband was routinely harassed by US Border guards when we were dating and it wasn’t until he told them that I was emigrating north as opposed to him coming south that it stopped. The USG simply hates extra-territorial dating/mating. The higher tax rate is a way to punish us though for not coercing our spouses into filing jointly so they too can be USP’s for taxable purposes. They see our marriages as tax evasion and while I would rule out entirely that someone somewhere at sometime may have married a non-USC for that purpose, I seriously doubt that the percentage of “mixed” marriages have tax issues to thank for their existences.
Americans in the country can think whatever they like about us. They live in a nearly sealed off from the real world/reality bubble that is destined to burst sooner or later and I am past caring anymore. JEG and his like are trolls. Quit feeding them.
You began with “autopsies” and ended with “relax”. Oh my! I’ll try but I inherited worry genes. My only option, at this time, is to fight. I don’t intend to surrender to an alien government.
I truly want to see what possible rationale someone could offer for the abuses of our children’s legal, local education savings and also our dependents disability grants and savings plans.
I want to see someone rationalize how a discriminatory and immoral result is acceptable.
The more steadfast one is in trying to rationalize this as a ‘good’ result, and one that citizens abroad are being told we must accept, the further from an ethical, just and moral worldview one must move.
The double taxation grabs of the disability and education savings of minors and disabled dependents, and the punitive discrimination against those with non-US spouses, etc. are unacceptable, and I doubt that they result in much actual tax revenue for the US whereas they punish us, eat up our legal locally earned, saved and taxed assets, and lay us open for life altering penalties – even when NO US tax is owed.
This is wrong, and I want the US and its apologists to have to answer each one of these grievances in detail, one by one.
It will never happen, and that is precisely why the bulk of the Democrats and also the Republicans will never support a Commission to look at our issues, and precisely why the Democrats dropped Obama’s promises to listen to our concerns after the 2008 platform. US homeland residents do not want to have to justify what they are doing to us.
That is why we are being forced to renounce and relinquish – because US apologists are evasive and refuse to acknowledge what is being done to us and our children and dependents is very wrong.
Eternally thankful for your clarity of thought and steadfastness, Badger.
Likewise @bubblebustin, thank you. It has been and remains a long road, glad for the company and camaraderie.
Thanks but I’m getting tired, Badger. I don’t know if we’ll ever have closure with OVDI. I wrote a letter tonight to someone at the BC Real Estate Association filling them in on our story. Realtors who know their clients are USP’s should be knowledgeable about US capital gain tax on the sale of their clients homes in Canada. I was a realtor, and if I had known, I wouldn’t be in this predicament.
Hang in there bubblebustin. And it is hard not to feel that this is all just random bad luck since if you had known about the rules you wouldn’t have sold it, and thus had no capital gains to report. Timing has proved to be so crucial – those who came forward first and tried to comply and disclose loudly – as directed, are punished by being left hanging and by incurring significant (and life altering legal and accounting fees). There are also those who owed zero who are still in limbo as well. Time would have provided more opportunity and leeway for more of us to become knowledgeable and to protect ourselves.
I am so thankful for IBS. I believe that it has made a real difference to outcomes and helped many to see what they are truly up against and what limited options are available.
No one will trust the US government after this experience, as well as the Snowden and NSA revelations, their crossborder harmonization initiatives (intending to operate on Canadian soil but not be bound by Canadian laws or even by the US constitution within the ‘exemption’ zone which spans 100 miles inland of US border http://www.cbc.ca/news/politics/u-s-wants-cross-border-officers-exempt-from-canadian-law-1.1359107 http://motherboard.vice.com/blog/us-border-patrol-can-search-your-laptop-and-phone-for-no-reason http://rt.com/usa/court-upholds-laptop-border-searches-041/ ).
I am interested to see what the Taxpayer Advocate Nina Olson reports this time round. She is one of the only blessings. I am very afraid for the day that she retires. The IRS and Treasury must really pray for that so that there is no-one left to call them to account publicly or otherwise.
I will second that. What I’ve learned from what badger has dug up is incredible (aptly named; badgers do dig); for example all of badger’s most recent diggings that I’ve just read before this comment. How too from so many here, including you bubblebustin. I know I’ve said it before and I think it every day — I am so lucky to be among such people who stand up for themselves and for others who cannot stand up for themselves and their families. I am so glad that bunch of persons who were being “censored” and their words deleted from ExpatForum.com decided to become a site that has helped so many in education and emotional support. Thank you, Petros, for maintaining this site and to Lynne for your site and all you’ve accomplished to get out this absurd story even further. Damn, you’re fine human beings; you make me proud; though I’ll never know you face to face, I consider you all very special friends. Happy New Year — may we make even more progress this year and encourage each other through the times we are weary. Thanks!
Thank you @calgary411, and all the others who started IBS and maintain it and make up the IBS community.
Pleasure to share and to learn from and with you all.
Least I can do in thanks is to keep doing what badgers do.
Happy New Year and best wishes to you all.
The bottom line remains that double taxation is just plain WRONG.
Alice Neuhaus’ article in “Annabelle” about her renunciation was sad. I posted it in this thread because it describes the overt discrimination against Americans in Switzerland, which led to her renunciation, and which has been one of Swisspinoy’s themes.
I was surprised to learn in the article that there is a one-year wait for renunciation appointments at the US Embassy in Bern which caused her to renounce at an embassy outside of Switzerland. Since Ambassador Beyer left his post in May 2013, little information on renunciations has come from the embassy. On that topic, a new ambassador has not been appointed and it is speculated by some that this posting has become undesirable for political appointees, who have normally held it. An experienced Chargé was appointed in July and so it may stay that way for some time.
The writer’s name is not listed on a Federal Register expatriation list yet. Perhaps it is too early to appear for a recent 2013 renunciation. Then again perhaps it will never appear.
I wish her the best of luck in the future. As she wrote, her head told her it was a rational decision but her heart did not favor it.
A smart young woman to see her future with ‘US citizenship’ and make the choices she did before she is more into her career in her adult life in Switzerland. What is happening in Switzerland should concern any so-called ‘US Person’ as it is surely the canary in the coal mine. Good luck now going forward, Alice Neuhaus. You were wise beyond your years, despite the regret you and so many others feel. Dual citizenship with this country that practices citizenship-based taxation law and living outside the US is deadly and a dead-end to all you can achieve and enjoy where you have chosen to live and work.
Thanks for the words of encouragement. Part of my therapy is trying to help others avoid what I’ve been through and to try to effect change. I guess until the threat is gone, I’ll continue. It’s so nice to not be alone!
Thank you too, Calgary411 :-), everyone.
@Calgary411, @bubblebustin, @badger
I log onto IBS every day in the hope of catching your posts. they are inspirational; your posts keep me going and keep me sane even after receiving my CLN. Keep up the great work; I am honoured and humbled to follow your work
You made MY day, crystal london. Thank YOU! Congratulations on your CLN.
@badger, it’s getting a bit late in the day, but after thinking about it, I think that I should have refuted JEG’s flame-bating a bit differently. The solution to the discrimination problem is equality by residency.
The main issue with this discrimination is that US policy causes individuals living in non-US jurisdictions to be treated differently from other individuals living in the same jurisdiction. By treating all US citizens kind of “equally” regardless of where they live in the world, US policy causes individuals living in non-US jurisdictions to be denied job access, banking services, retirement benefits, relationships, etc. Being equal in US jurisdiction means being unequal in any non-US jurisdicton. JEG’s position would be correct if it applied only to US jurisdiction, but it is incorrect when enforced globally. Individuals need to be treated equally according to the rules of their residency, not according to the rules of their citizenship. Citizenship applies to jurisdiction, residents of a jurisdiction must be treated equally and equality spilled over into other jurisdictions causes discrimination. This is why citizenship-based taxation results in national origin discrimination, since it forces the equality of one jurisdiction to conflict with the equality of another.
Maybe this might be something that human rights groups could understand?
Makes sense to me.
The support for CBT is based on four arguments: jurisdiction, protection, rights and services provided by the US.
The texts in a US passport essentially nullify claims of jurisdiction and protection.
Travellers are warned that they are subject to the law and legal systems of the countries they visit.
Dual citizens are warned that the US can not help them in the country of their other citizenship.
Dual citizens in their country of citizenship are neither living under the jurisdiction nor the protection of the US.
Non-residents pay local taxes for their services and do not receive any services for any taxes paid to the US. Consular services are provided on a user-pay regime and are not subsidized by taxes paid.
Rights accrue by virtue of status and are not acquired by paying taxes. All US residents pay taxes but do not as a result acquire the rights reserved for citizens, such as voting and running for office.
I will leave it for the better wordsmiths on the blog better to flesh out the above
@swisspinoy, I agree re; …”This is why citizenship-based taxation results in national origin discrimination, since it forces the equality of one jurisdiction to conflict with the equality of another.
Maybe this might be something that human rights groups could understand?…”
And also because the result is inequality of result and outcome in BOTH jurisdictions. US residents (except those new immigrants and new residents with pre-existing accounts in their home country) and our fellow NON-US citizens are able to bank, save, earn, normally, and we cannot. And nothing we can do can get around the fact that our ‘local’ accounts are NOT in the US, because we are NOT in the US.
I like your boiled down set of arguments @Patricia.
Otherwise, the US argument really is condensed down to: “because we say so” AND, “because we can make you” – so basically the US is saying to us and to every other country in the world that, ‘US might makes right’.
@crystal london, I can’t really take credit, because the others here have done the same for me and continue to do so. I was relieved from some important part of this burden and felt more able to carry on when I saw the regular posts of others here. In the middle of many sleepless nights, I looked for the now familiar icons, and learned and continue to learn so much from following them – and from new participants too. I won’t even try to name all, since some I don’t see here anymore (I wish them all well), and because I don’t want to leave anyone out. Newcomers became regulars and supported others in their turn. The great need for and continuing interest in IBS only underscores how needlessly harmful and arrogantly the US has behaved towards those living outside it. They have done nothing but further obstruct and obscure the path to the compliance they say is their goal. How needlessly wasteful this all has been. So much time, our already once-taxed legal savings, and our wellbeing and peace of mind lost for nothing – and most often with ZERO or minimal US tax resulting.
I could not have come this far without others. I am very thankful for them and for the company of others like yourself.
The truth is there is no justification for CBT: NONE. How can anybody in the world think that being doubly taxed is any kind of fair or right? There are no arguments to justify taxing people twice. Its all just rationalizations in order to get more money into the coffers of the American treasury. If people can vote to put their hands into other people`s pockets free from recrimination – of course they will do so. This is why it really should be a human rights issue.