N.B.: This raises some very good points, but note that the IGA, as written, does not require proof of parents’ birthplace or citizenship.
Thanks to TomOn for writing the following post:
Theresa Tedesco writes for the Financial Post. Her column titled “Ottawa Had Little Choice in Signing Controversial Deal with US Taxman” appeared Friday, February 7, 2014 [and in the print edition as “US Tax Deal: The New Reality” on Saturday, February 8th.] It begins,
“On Canada Day and thereafter, Canadians or anyone else living in this country who walk into a bank to open up an account, invest in a mutual fund or buy life insurance will be required to prove that they are not American.”
Imagine the new reality.
(1) You show the bank a certificate of loss of nationality (CLN), or you tell them a story explaining why you are not American.
You pass if the bank accepts your CLN or story, but what if the bank doesn’t accept your story? The Canada/U.S. intergovernmental agreement (IGA) fails to say how your conflict with the bank will be resolved. Your financial data will likely be passed on to the CRA and from there to the IRS, FBI, NSA, and so on. How well does the IGA serve these Canadian citizens/residents? Is it foolish to worry?
(2) You show the bank a Canadian passport with a Canadian birthplace.
You pass if the bank accepts your passport as sufficient proof that you are not American. But if the bank wishes to comply with U.S. law your passport is not sufficient proof. The bank will also need to know that you don’t have derivative U.S. citizenship, as you could if one or both of your parents were born in the U.S. So you will have to prove that neither parent was American. Now you have to show the bank a Canadian passport with a Canadian birthplace for each parent or show a CLN for each American parent or tell a story that explains why neither is American, a story that may or may not be accepted.
(3) You show the bank a Canadian passport with a Canadian birthplace for yourself and for each parent.
The bank will fail to comply with U.S. law if, for example, one or both of your parents, though born in Canada, were themselves a derivative American, having lived and worked for a time in the U.S. So maybe you will need to show the bank a Canadian passport with a Canadian birthplace for yourself, your parents, and all four of your grandparents.
Is it any wonder that the U.S. is outsourcing the responsibility, both financial and legal, for uncovering Americans to others? If the detectives deputized by the IRS fail to find an American accountholder, what penalties will the U.S. impose? Failure to file the Financial Bank Account Report (FBAR), which is only informational, can cost an individual taxpayer up to 50% of the value of each account for each year up to 6 years, i.e., 300% of assets. The banks and insurance companies have a lot more money than an individual taxpayer, so the take could be rich.
Is there anything in the IGA that protects Canadians from financial ruin as a result of the Canadian government agreeing to impose U.S. laws on Canadian citizens? Or anything that protects Canada itself from a similar fate as a result of our “competent authorities” signing away our country’s sovereignty?
This post by TomOn is fantastic — real but also entertaining. I feel that my CLN is my golden ticket (got it last Sept). But my bank knows was American, as when I moved to Canada in 1985 I had to show them my US passport as ID. I know my bank knows because when my wife went to renew the mortgage a few years ago, without, they noted that I was a US citizen. Its scary. I will have to be proactive about this.
I think I like what I just read. Finally some journalism that goes closer to the heart of the matter as we see it. Also, it will help educate the broader Canadian public what a jerk the USA really is. It’s win-win for us brockers.
Oh, and by the way, if you want to see a paper copy, it’s actually in my Saturday, Feb. 8 National Post, not the previous day as stated.
Thanks, Pierre D. I’ve updated the post to indicate the paper edition.
Now if the account holder’s parent is a US citizen but proves with sufficient documentation that that parent didn’t live in the US for the requisite number of years to pass citizenship on to the bank customer, (to prove a negative) then maybe the customer will be cleared. But wait! The number of years to pass US citizenship to a child is reduced to just one if the child was born out of wedlock by a US woman. So in order to prove that this bank customer’s mother didn’t pass US citizenship on to him, he’ll have to produce his mother’s marriage certificate dated prior to when he was born.
Cln works if you know ur banker well …Proactive is the key…make a big issue out of your cln…. You can enter the us. With a visa .. U can show a visa ..us people do not have visas for u.s
@ All. I think the demand for fake CLNs has shot up dramatically in the last few days. Where oh where is “Blackie” when we so desperately need him? He should have plenty of time available now that US passports are worthless.
Superman Renounces
http://cdn.newsday.com/polopoly_fs/1.2845337.1304034166!/httpImage/image.jpg_gen/derivatives/display_600/image.jpg
@Tomon, I wrote something like this: http://isaacbrocksociety.ca/2012/11/11/not-a-us-person-prove-it/
“In general, you are a U.S. person for U.S. tax purposes if you are a U.S. resident or a U.S. citizen.
A U.S. resident would not generally be expected to include a person that has economic and social ties that are closer to Canada than the U.S.”
And…
“If you are a green card holder (that is, a lawful permanent resident of the U.S.), the U.S. considers you to be a U.S. resident.
However, if you are a resident of Canada for tax purposes and do not hold U.S. citizenship, you should not identify yourself as a U.S. person to your Canadian financial institution.”
And…
“A financial institution complying with the agreement will not be required to ask its account holders about their place of birth.”
And…
“If you are a new client at a financial institution after June 30, 2014, your financial institution may ask you to certify whether you are a U.S. person when you open your account; it would then confirm the reasonableness of this certification based on the information you provide when you open the account. Alternatively, your financial institution may follow a process similar to that described above for existing clients, based on a review of the information you provide when you open the account.”
It seems to me that the banks will not be going on wild goose chases looking for the place of birth of your whole family ancestry, and that the CRA is intending to limit the scope of their ‘due diligence’ to find US Persons.
For example, they are deliberately excluding certain categories of US Persons that the US still technically considers US persons for tax purposes (former green card holders or citizens that didn’t file the required IRS forms). The guidelines above explicitly say NOT to identify yourself as a US Person if you have a green card but are a tax resident of Canada.
In another place they say they are excluding those who have more of an economic connection to Canada.
So it appears that they want to draw clear boundaries on their responsibilities to smoke out US persons.
My impression of the self certification process (for new accounts) is that they will simply ask you if you’re a US Person, and you sign yes or no. If any of your other info seems to conflict with this self certification, they may require more proof, but if it doesn’t conflict then that’s the end of the matter.
That’s just how I read it anyway.
A some point some a “wet behind the ears” covered in acne bank clerk will upset the wrong customer. A customer with influence and connections. The penny is going to drop when someone gets the hump to prove their ‘not American’ rather than I’m British for example.
In the UK a relevant parallel would be the one-sided US UK extradition treaty signed in 2003. Their have been a number of high profile cases of UK citizens brought to a US court when the ‘crime’ actually took place in the UK. Mostly financial, but one guy was selling technology to Iran contravening the US embargo.
Last I heard the treaty was going to be ‘reviewed’ in Parliament due to the media coverage.
People need in someway need to be reminded everyday that FFIs are now an agent of the IRS and turn it into being personal to them rather than “some issue that only affects the Yanks.”
Perhaps someone receiving a phony letter from the IRS stating their bank has handed their personal data to the IRS would serve as a wake up call and people storming into bank branches wasting their time trying to reassure customers it hasn’t happened.
We’ve all seen how complicated this issue is and I doubt a bank could make someone feel secure in a 60 second answer.
FATCA has to be brought home to people in a personal way.
This seems a pretty personal wake-up for ANY Canadian that has information “erroneously” passed on to the CRA and then the IRS:
From http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/fq-eng.html
14. Does my Canadian financial institution have to notify me if information on my accounts is being reported to the CRA?
Canadian financial institutions must be open about their policies and procedures for complying with the Agreement and must be prepared to make this information available to anyone who asks about them. Although there will be no obligation for financial institutions to automatically notify their account holders about reporting to the CRA under the Agreement, financial institutions must, upon request, allow account holders to have access to the personal information that has been reported.
15. What if a Canadian financial institution reports my account in error?
In the unlikely event that a Canadian financial institution reports your account in error, it can send the CRA a notice of correction. If we receive this notice after sharing the original data with the U.S. Internal Revenue Service (IRS), we will ask the IRS to disregard the original, incorrect data.
Is everyone lulled into contentment with those statements?
Petros: Looking back at earlier posts related to this one (Prove you’re Not American), I came across your 2012 FACTA Star Design posting
http://isaacbrocksociety.ca/2012/08/04/the-fatca-star-a-design-suggestion/
What a hoot (if it wasn’t so reminiscent of the 1930s Germany – – and we know what happened to those folks, and how the USA and Canada were very unwilling to take in any immigrants/refugees from that growing horror – – and how Germany was crippled in the end).
The whole idea of “prove it or you will be identified and all your private financial data will be forwarded to the IRS (and then the FBI and Homeland Security and NSA)” is completely Kafkaesque. How does one go about proving the negative?
And with all the FFIs having the right to use their own paperwork/investigation/documentation to ferret out “the potential US Person criminal”, one could easily be identified as – – and as NOT – – a US Person at different FFIs. What ever is the CRA going to do with that?
We all have read extensively or heard at length about the hurricane devastation in Haiti and the tsunami in Japan and the genocide in Darfur. Do you think we will hear anything at all about any of the financial ruin and mental/marital/occupatiional stories of US Persons in Canada (or elsewhere in the world)? Especially when the IRS (an arm of the dictator) believes categorically that no one is going to really suffer except those rich tax-cheats (who deserve what they get).
How long did it take the world to believe in the Holocaust and death camps? How long did it take the world to believe that anything untoward was happening in Rwanda?
Is the threat of being financially decimated, potentially occupationally isolated, and knowing this will always be a “badge” you have to wear out in public as bad as being part of an identified groups being killed? NO.
But is it so different in principle?
SerfingUSA above has made an excellent point, which I reluctantly was going to make on visiting this thread but then saw his post. However I am going to reinforce this.
READ THE LIST OF INDICIA IN THE AGREEMENT. There is NOTHING in that list about the citizenship of your parents or grandparents. Nor is it in any other Finance Canada documents I’ve seen (maybe someone else knows of something, if so please provide a link NOW or drop this line of discussion).
IMO it is irresponsible and disappointing to me to see needless possible panic caused by misinformation as posted in the original post, even as a sick joke (which isn’t funny at all). For now at least, there is no reason for persons born in Canada of US parents or grandparents or great-grandparents or any ancestors to get upset about anything that I can see. Unless they fall under some other indicia. FFIs and CRA have limited resources and time, and no sane FFI manager is going to unleash an expensive witch hunt for things that they don’t have to hunt for.
The valid point implicit in the post, and one that I am going to make in emails I am drafting to CCLA, the opposition critics, and Flaherty, is there is NOWHERE in this agreement and proposed legislation any provision for due process, I would even say due diligence, in ensuring that accounts are not being reporting inappropriately and without providing the account holder with a) awareness their account information is about to be sent off to a foreign government, b) on what specific basis or bases that account was flagged, and c) a reasonable opportunity to object or contest the accuracy of that basis or those bases if they are wrong. Which latter point is an appalling possibility if not likelihood, given that the wording of the agreement and the Finance Canada information for individuals indicates there is NO attempt being made to ensure that all FFIs are asking the same questions, following the same processes, or ensuring that their employees who are interpreting the indicia have a clue what the hell they are doing and what those things mean.
You can be extradited to another country on the basis of an extradition warrant under an extradition treaty, but NOT before there has been a court hearing in Canada at which you and your lawyer have an opportunity to examine the basis for that warrant and challenge it in front of a judge. I’m not suggesting there needs to be a court review of reportable accounts, but I am suggesting that CRA (I wouldn’t trust hundreds of FFIs to do this on their own, it would only compound the problem) absolutely MUST provide some reasonable opportunity for the account holder to review the basis for reporting and challenge it if they can. There are too many opportunities here for mis-reporting of non-reportable accounts by error, by misunderstanding, or frankly even deliberate malice by some bank clerk who has a personal grudge or prejudice. And the procedure needn’t be expensive or onerous for CRA. Most financial accounts have email addresses attached to them. Presumably accounts are being reported electronically, in some format that CRA can easily search and produce robo-emails to the email addresses of the holders, indicating a) your account X has been reported to us, b) for Y reasons, c) we will forward this to IRS on Z date unless you reply to this email before then giving us an explanation and appropriate documentation to contest those reasons.
THAT is a valid point and one I’m going to draft and send later today to the people mentioned above.
Raising panicky red flags about non-problems for Canadian-born persons with US parents or grandparents is NOT a valid point and NOT something to be bantied about here, given everyone’s nervousness levels, unless there is a CONCRETE weblink someone wants to produce in this thread that proves me and SerfingUSA to be wrong.
As a longtime blogger and sometime moderator of this website, I am ashamed and appalled this non-issue (as I see it for now) of US parentage or grandparentage or whatever, has been permitted on this thread at all, given the actual wording of the agreement and what I at least have seen of the related Finance Canada documents. On my personal behalf, I apologize to anyone who was offended or worried about this point.
I will reflect on how much further involvement I care to have on this website, if incidents like this are repeated without justification.
Good point, Schubert. I had read that as speculation of how this could play out. However, a person, particularly in their OMG days, might not pick up on that. As I posted the original post, I have now inserted a line at the beginning of it: “This raises some very good points, but note that the IGA, as written, does not require proof of parents’ birthplace or citizenship.”
@all
“If you are a green card holder (that is, a lawful permanent resident of the U.S.), the U.S. considers you to be a U.S. resident.
However, if you are a resident of Canada for tax purposes and do not hold U.S. citizenship, you should not identify yourself as a U.S. person to your Canadian financial institution.”
Does this statement mean that green card holder are off the hook?
Also note this comment from another thread. Is this what we should expect when the IRS gets ahold of our whereabouts?
…”I was born in the US to an Aussie and a Kiwi. We left when I was 18 months old and I’ve never been back, never voted in the US, never travelled on a US passport. And today I got an email from the nearest IRS (in Beijing!) saying I needed to file three years of tax and six years of bank forms. For which I first of all need a Social Security Number!”…
Read the rest of the exchange, apparently the resulting demand came after a complaint she made to the USG.
http://isaacbrocksociety.ca/relinquishment/comment-page-32/#comment-1077853
Lesson: Do not call the IRS for advice!!!!
Thanks, pacifica and schubert. That must be emphasized for very, now, scared persons — in their own OMG moments!
READ THE LIST OF INDICIA IN THE AGREEMENT. There is NOTHING in that list about the citizenship of your parents or grandparents.
———————————————
Agreed Shubert. But there is no need to. The first indicia in the list in Annex 1 is “Identification of the Account Holder as a U.S. citizen or resident;”. The definition of US citizen, on the State Department web site, includes children born abroad to a US parent. There is no definition in the IGA that says any different that I have found. If they wanted to exclude Canadian born children of US citizens why didn’t they just do it. This is an obvious concern to people. There are probably more Canadian borns to US citizens in Canada than there are US born citizens here.
I’m not a lawyer and not trying to be provocative. I just think this needs clarification.
For US tax purposes,”US Persons” also include individuals with “closer connection to the US” based on the Substantial Presence test (see http://www.irs.gov/publications/p519/ch01.html#en_US_2013_publink1000222118
I wonder how many unaware snowbirds will be caught in that one especially now that the US and Cda Border Patrol/Customs info RE entry/exit of US and Cdn citizens is soon to be coordinated and integrated)!
Also at the above site, there are the Non-resident spouses; so (when the technicalities are eventually formalized from the IRS) will the FFIs be required to to ask about one’s spouse’s citizenship? We would like to think this farfetched but the detailed regulations are not yet out and these “classes” of US taxpayers ARE identified in current IRS regulations…..
CLNs are the golden ticket, get em while theyre hot!
The Renunciation forms don’t require a SSN and one can deal with tax issues after receiving the CLN.
http://www.state.gov/documents/organization/81606.pdf
http://www.state.gov/documents/organization/81607.pdf
http://www.state.gov/documents/organization/81609.pdf
The main priority is to get the CLN so you can prove you are not a US person and start to normalize your life.
In regard to “Prove you are not American”, perhaps IBS might want to consider setting up a set of pages where we can document what our experiences HAVE BEEN with each of the major FFIs (banks, investment firms, online banking) – – similar to the pages where folks can write in RE their actual experience in renouncing/relinquishing at the various consulates. That way it would be easier for IBS folks to find what others have had to deal with, what policies/practices have been established at different FFIs & what FFIs may be at least more open to CLN or explanations RE loss of USC. This might help us all to make decisions in terms of where we want to keep our banking & investments.
@ Schubert1975. Re: your 12:06 pm post above.
You made many good points and I am in complete agreement with one exception. The FATCA agreement announced last Wednesday in effect legalizes a blanket warrant-less search of the account records of millions of bank customers across Canada. Any evidence of a “US connection” will then be forwarded to the CRA for transmission to the IRS.
This is not an extradition of a person which by law requires a court review but it is in effect an “extradition” of a person’s personal financial data. Why shouldn’t this also be subject to scrutiny by a judge with the accused and his lawyer given the opportunity to present evidence as to why the extradition should not occur? Yes, it would be cumbersome and time consuming but it’s the only way to ensure due process.
As presently written, the only way a person can tell if their info is going to be flagged and sent to the CRA is to inquire at their bank about the contents of their personal file. The inquiry itself may well be enough to cause the bank to suspect a US connection. (The old “if you’ve got nothing to hide then you’ve got nothing to worry about”) As the agreement stands now, the individual would not even know there was a problem until getting a letter from the IRS; at which point it would be virtually impossible to rectify the situation if a mistake has been made.
Automatically requiring the CRA to notify the individual and allowing that individual the opportunity to request a court review before the information is “extradited” seems only fair. (It also would be a bureaucratic “work to rule” which the US government richly deserves!)
The provision that upon request the IRS will expunge transmitted information that has later been found to be in error is laughable. We all know that once it is out there it is out there forever.
@ maz57
Absolutely right. After an error has occurred the IRS will not expunge anything except perhaps an “alias” of the document. This is like the NSA sending all of its raw data to Israel and saying please don’t peek at anything you shouldn’t be seeing but if you do then just don’t tell us you did and everything is fine by us.
My main concern with all of this has always been our right to banking privacy. My spouse especially but, for myself as well.
I still feel that way. It looks like from this agreement that you’ll have no way to know if your bank has sent off your data as a suspected “U.S. person” and no recourse if they do so incorrectly. How likely are you to be able to have the CRA send off a correction notice if you do not know the data was shared in the first place? What’s to be done with this data once it is “shared” and floating around out there in the ether?
To me it looks as if you will have little to no control over when your data is shared? For instance, lets say you got a one time inheritance from the U.S. but, you are not a “U.S. person” How are you to know if that data was automatically shared based on the “U.S. indicia” of the one time transaction? A lot of us have renounced or are renouncing but, still have family there. This could mean we are occasionally getting sums from the U.S. that already has had tax paid on it by the person gifting it. In no way would you ever owe tax on it or have any obligation to the U.S.
The idea that your banking data can be plucked out and “shared” without your knowledge, without some real justification for it if there is a mistake and without any real recourse for you as a customer is what bothers me. How can you trust a bank if they can do something like that? Certainly there will be mistakes.
Shouldn’t your bank have to notify you that they are about to share your information and ask you for some explanation BEFORE they send off the info? I can’t imagine CRA is going to take on the responsibility of sussing out whose information should go and whose should not. Therefore any and all data forwarded to them under FATCA by the bank will be forwarded on.