70 thoughts on “Republicans Overseas Will Be Launching Legal Challenge to FATCA”
@Anne Frank,
I know that Michael DeSombre and the Republicans Overseas team are serious about this effort. The group is made up of people already aware of the problems you mentioned.
You are right not to hold your breath, but Republicans Overseas is also intent on going after the bad tax rules associated with CBT (the “disease”), but this will be a much more difficult struggle.
@stephen Kish – I certainly know that his law firm is right up there among the top ones in the US. I’m not sure what resources they’ll let him use on what is likely a pro bono case which probably will generate more brick bats than plaudits from an ill-educated homeland audience at least. However, a smart guy willing to invest a bit of money and a lot of his own time could make a pretty darned serious run at this rotten structure. My own little back of the envelope analysis if course is just amateur hour compared to what a serious US constitutional litigator could do with this subject-matter.
I think the last ten years of anti-expat piling on legislation by Schumer et al has just made patent what was always lurking beneath the surface: the only way to erect a FAIR diaspora tax is to forego doing it in the first place, or do it with such a light hand as not to be worth the bother in the first place. However, they have gotten so extreme in their desire to punish people for living outside the land of the free that they have started to become that which they most detested (a government building walls to keep its people IN). At some point, the US is going to have to realize that the revenues it can generate to fund itself are fundamentally a function of the size of its economy (huge, but not growing any more) and not the size of someone else’s. They’ll get more tax revenue when the grow their own economy and they can’t treat expats like little fiscal trojan horses to suck revenue out of foreign countries. For as long as they don’t actually raise any revenue abroad, the rest of the world will view their demands as an annoyance. If as and when they seriously siphon funds from country like Canada, the co-operation they seek will be shut down hard. Which simply is to say that it can NEVER be worth their while to try to enforce CBT. Far more productive to construct a rational and relatively leak-proof RBT system (and of course grow enough stones to fund your government with a GST/VAT system).
Enough philosophy, even if it is Sunday. My life is a little brighter knowing that someone who refuses to be driven away from the US has courage enough to take them on. Good luck to him. Most of the million in Canada have simply sighed and turned the page.
As much as I dislike FATCA, I don’t think it can be successfully challenged in court. The enforcement of IGAs by countries on their own residents might be unconstitutional in those countries, because it would be a recognition of US sovereignty over them and discrimination based on nationality, but I don’t think it’s unconstitutional from the US point of view. If it’s a violation of privacy, then so are the myriad of other reporting requirements. I don’t think a court would rule that FATCA is against the 4th amendment.
The FBAR penalties are another story. These are obviously unconstitutional under the 8th amendment, and there is already a clear judicial precedence (United States v. Bajakajian). The problem is that only someone who was actually charged the draconian penalties can challenge them in court.
CBT is also different. I’m not a lawyer, but I did some research and wrote my opinion that it is unconstitutional, and why it does not conflict with Cook v. Tait.
I praise Republicans Overseas for their initiative, but I think they are focusing on the wrong spot. I even wonder if they are just making a scene to get votes and donations from Americans abroad. Challenging FATCA in court won’t get anywhere, and even if it’s successful, it won’t really solve the problem. If they want to use the courts, I suggest they challenge CBT instead.
@Anne Frank
Pretty impressive back of the envelope assessment, thank you.
@George
“But instead of asking for capital gains, dividend and interest payments they are asking for account balance information. What they are asking for does not help determine accurate tax liability.”
The fact that the CRA will provide the system by which this information will be received and potentially used by the CRA itself should worry a lot of Canadians. I know it’s of concern to our Canadian tax accountant that the CRA is targeting one group of Canadians in the FATCA IGA.
@Shadow Raider, They might take the position that Treasury does not have the authority to negotiate IGAs.
They could also seek relief on extraterritoriality.
They could also claim that it is discriminatory against two types of Americans. Resident Americans are subject to limited Form 1099 reporting. Non-resident Americans are subject to far more invasive reporting.
That law firm is heavy hitting so I assume they can see a small yet fatal flaw they can attack.
But………I thought the individual mandate of the affordable care act would fall but then John Roberts spun fabric out of the air……
@Shadow Raider
It will be interesting how this plays out to overseas voters. Speaking for myself – ‘fool me once…’
@George, I think you’re right. FATCA may be constitutional, but the IGAs are probably unauthorized unless ratified by the Senate. They could challenge the IGAs on that argument, and as we know, FATCA is impossible without the IGAs.
However, I don’t think the other two points are valid. The US has never cared about extraterritoriality. The reporting does not exactly discriminate between resident and nonresident citizens, it discriminates between US and foreign accounts. FATCA applies to residents with foreign accounts and does not apply to nonresident with only US accounts. It’s true that nonresidents naturally have more (or only) “foreign” accounts, but FATCA isn’t aimed at them specifically. In fact, the original focus was (and still is, I suppose) on residents with foreign accounts.
@Shadow RaiderL
Your Comment:
:As much as I dislike FATCA, I don’t think it can be successfully challenged in court.
The enforcement of IGAs by countries on their own residents might be unconstitutional in those countries, because it would be a recognition of US sovereignty over them and discrimination based on nationality, but I don’t think it’s unconstitutional from the US point of view. If it’s a violation of privacy, then so are the myriad of other reporting requirements. I don’t think a court would rule that FATCA is against the 4th amendment.”
I think a court would view FATCA unconstitutional for it bypasses altogether the 4th Amendment assuming criminality without cause. Congress certainly takes that view. On a number of counts. A bill has been sitting in the Senate by Sen. Rand Paul for the repeal of FATCA since May of 2013. His bill is based on both the 4th Amendment (Warrantless searches and Probable Cause.) and states clearly that the ‘negotiations’ undertaken by the IRS with sovereign countries is illegal. Treasury and the IRS have no authority whatsoever to negotiate anything not ratified by Congress and their quasi- treaties certainly have not been ratified. Nor would they be as Congress sees them as illegal in the first place. With Democrat control in the Senate that bill will sit there until at least the mid-terms and perhaps longer depending on the outcome. If Republicans gain senate control, then all bets are off.
FATCA has other problems and so does the IRS in the US. It is completely lawless and out of control and FATCA is only one example of it. The calls for IRS abolishment are getting louder and more strident for their egregious overreach and blatant political involvement to target, damage and destroy the current admin’s political opponents. A clear constitutional violation.
What amazes is that Canada ever undertook to negotiate at all under the circumstances. They had to know it was not legal for them to negotiate with Treasury instead of authorized entities within the US. Yet they did and make excuses.
For FATCA is a US problem and the IGA is a Canadian problem. Without the IGA , FATCA is unenforceable and they know it. That is why they are lying about the IGAs to begin with.(all one has to do is READ what is planned in the IGA proposed implementation to know they are both lying about it and why they are lying about it.) If the IGA is implemented in Canada it effectively makes Canada agents of the US and the IRS via CRA. Using the banks and giving banks permission to use third party snitches with payoff is abhorrent to anyone who wishes their privacy , especially their financial privacy to be respected. It is foundational to a free society.
Their argument that the banks would have to pay the 30% “withholding” is another misstatement. Sanctions is a better word.
For the US under FATCA:
They WANT what they are trying to criminally obtain: Something that belongs to someone else they covet. Canada should have recognized that and didn’t and now are trying to sneak it through Bill-C31
A court challenge in Canada via the Charter of Rights is most viable and doable.
The trouble I have with it is that by the time it wends its way through the court process a great many people will have been ruined entirely . There is NO excuse for it.
None of the issues regarding FATCA would need to be of interest in Canada if our government had done what they are mandated to do: Protect society in Canada from any and all threats. FATCA is a threat not just to banks, who are garnering the lions share of concern by our government, but to all society in Canada. Canada should be saying banks are not allowed to comply nor are Canadian Citizens and Permanet Residents to be considered “US Persons” (the moving target the IRS reserves the right to move around at it’s pleasure). And be done with it. Simple, concise and effective. FATCA without an IGA will fall. Period.
There have been numbers bandied about and landing on about the 1 million mark of those in this country who will be initially and immediately impacted.
I submit it will be many more millions than that. Canadian and American society has been interwoven since before the War of 1812 and certainly much more interwoven since.
( I was watching a History Channel special on the War of 1812 some years ago. One segment has remained with me ever since: In the Niagara region there was a grave uncovered. In it were 12 bodies. Both American and Canadian. They died together with their guns and uniforms and were buried as they lay. And they were very young )
That scene, more than anything I can remember illustrates what a mixed society American and Canadians are. Love , hate relationship? Perhaps. More love and respect than anything else I believe. Canada has many millions of individuals and families who will be severely targeted without cause or merit and FATCA has the capacity to completely decimate the Canadian economy. How could our government not see this and act accordingly?
America is a country in turmoil and is in danger of becoming something entirely different than it’s founding. They need help and they know it. But it is no excuse for our government to allow Canada to be taken down with the US.
If anything, they should stand stronger than ever and our government should be reminded of Canada’s governments past who recognized the problems south of the border and acted accordingly to present a haven for those freedom loving souls who needed a refuge and a hope for the future ( the underground railroad comes to mind)
Perhaps our government needs a history lesson just as our cousins in the US are getting one now. They are fighting back against the tyranny the US government now presents.
Our Canadian government should recognize and assist not buckle under to the lunacy.
Right on, FuriousAC.
Perhaps our Conservative government needs a big history lesson is right. How can they all be lockstep?
Despite the fact that the opposition parties cannot out vote the Cons I think that writing to them could be helpful right now (all senators as well). They are looking for ammunition and boy do we have it. The Cons, even though I’m certain many of their members are secretly on our side, have been given their talking points and that will be all we will hear officially from them from here on in. Above all, I’m placing most of my hope in the Charter Challenge, especially in light of the court defeats the Cons have been experiencing lately. We’ve had some fantastic ammunition come out of the Brock fact factory just today alone. Thank you Badger (as always), Anne Frank and FuriousAC and everyone. Their talking points are the targets for our bullets and their targets will soon become very tiresome and are already looking quite Swiss cheesy.
@ Anne Frank
Thank you! A wonderful synopsis. Your words give hope.
To hear such skill used in setting forth our case, leads me to picture you standing before the US Supreme Court on our behalf, and being thoughtfully listened to… and respectfully understood….
So good to have cause for hope amidst this darkness…! Thank you for your work.
@george
re:I think there will be a wave of “undocumented relinquishers” who do not even want CLN exposure. They will relinquish and say they are done, no more US passport, self imposed exile from the USA.
color me with that brush. i am not about to tell the americans who and where i am and while i will and do miss being able to travel to some favorite parts of america i will never cross into that country again.
i know of several others who like me are taking this approach and glady be spending their travel dollars in any place but america.
☝️I think there are many who are just going to consider themselves relinquished as per their oath of citizenship.
Most expats are clearly too afraid to go to an embassy to renounce/relinquish. Instead they quietly hide their Americaness like the Jews who were forced to hide their Jewishness from the Nazis.
@mettleman – I suspect that your assessment is correct and that the true number of quiet relinquishments is in the hundreds of thousands.
As I look back at almost 50 years in this country (Canada), I have to say that not a year has gone by where I have not been surprised to learn that some acquaintance or another was actually born in the US. They don’t settle in Canada with US flags on their lapels after all! I could probably name and call about a hundred today with little effort on my part. Of all of these in my entirely unscientific survey, I know of not a single one who has formally relinquished in the sense of getting a CLN – I had never heard of the things before coming to this site and I strongly doubt most people will want to stand in the spot light and ask for one. Almost all have gotten Canadian citizenship and most figure – rightly or wrongly – that that is enough. I certainly never heard of people going through the lunacy of filing tax returns every year, still less filing the dozens of ridiculous forms that I have now heard about (thanks to this site) and the mere thought of which fills me with equal measures of laughter, tears and rage. A number of people I know were pretty negligent about taking out Canadian citizenship (I did so proudly as soon as i could) but that has changed in the past couple of years – I would say the number who have NOT taken out Canadian citizenship at this stage is pretty close to zero. Obviously, the tardy naturalizers will have held on to their US passports until recently as well, but none that I know have renewed or retained them .
If someone wants to know the TRUE number of Americans driven to abandon the US by FATCA and the CBT jihad of the IRS mullahs, they might want to find out the number of outstanding US passports issued by country. State must have it – I have seen tables of passports issued by year and by state with “international” being its own column, but it includes of lot of extraneous stuff (territories and the like) that needs sorting. The other complication is the fact that more passports are being issued these days simply because post-911 they are needed by Canadians to go the US whereas a drivers license used to suffice. I strongly suspect that a proper analysis will show the number outstanding that were issued out of Canada, Mexico and most major European countries has dropped pretty considerably and will keep dropping over the next few years (nobody is going to tell the Consulate that they dropped their US passport in the fireplace and roasted marshmallows with it, so the US won’t know for up to ten years).
One last relinquishment comment: I have to bite my lip every time I see a survey asking “why people are renouncing”. Be honest – there is only ONE reason to renounce or relinquish and we all know it: the ridiculously burdensome web of filing obligations associated with the CBT lunacy. We all know that USUALLY little tax actually results (although the anomalies – many of which can arise through ignorance such as non-resident trusts can be ruinous even for the middle class). It may not be the actual tax bill per se, but the constant threat of ruinous penalties, the prospect of hundreds of hours per year as an unpaid form-slave of the IRS – all of it makes the idea of staying as a dues paying member of the club unthinkable. I know people who happily collect second passports from other “homelands” through their parents or even grandparents in Europe. They think it is great that maybe, some day, if they want, they could use that passport to live or work in Europe some day. They probably never will (and at this stage in most of their lives, maybe it is time to admit it!), but it is a “nice to have”. Alone among potential 2nd passports, the US demands to be first in your heart or it will turn to acid in your hands. There is but one reason to shred the damned thing: it is a ticket to perpetual slavery. If it weren’t, I’m sure that most of the relinquishers would gladly take it back. We all have/had lots of reasons for taking up citizenship in the place where we live and have made our homes. Those reasons did not usually preclude keeping a link to the US as well save and except the toxic by-product of keeping that link. I think the press articles I have read have tiptoed around that hard fact. Without CBT, there would be no more than a handful of renunciations every decade, let alone every year. Uncle Sam needs to spend some quality time looking in the mirror.
@Anne Frank
It’s been reported that Canada has about 180 renunciations a year. At approximately 9 X the population of Canada, the US should have no more than about 1620 per year. Even at by the register’s account (which we know is low), Americans are renouncing at more than 4 X the rate of Canadians if numbers only just hold. Peculiar, I’d say – for the best country on earth.
@anne: for me renouncing yes its mostly due to CBT and the endless forms and fines. But also USA has totally changed since I moved to Canada almost 30 years ago. It is not the country I grew up in. So good riddance! Canada has much better infrastructure and a sense of community and sharing which is totally foreign to the USA.
@ Anne,
Re:
“One last relinquishment comment: I have to bite my lip every time I see a survey asking “why people are renouncing.” Be honest – there is only ONE reason to renounce or relinquish and we all know it – the ridiculously burdensome web of filing obligations associated with CBT lunacy.”
I believe there are other reasons that people renounce or relinquish their US citizenship.
I relinquished mine because I preferred to be a citizen of only my country of residence. I’ve always felt, for me personally, that a second citizenship would be more extraneous than desirable, although I was, and am, aware that dual citizenship is a concept that many people do find desirable.
Perhaps people like myself, who actually prefer uni-citizenship, are a minority — I don’t know — but we do exist. I have known, and know, others like myself who just didn’t want to have more than one citizenship, as well as some who relinquished their US citizenship because they didn’t want to be part of the US due to its political policies.
It was only in 1987, about 8 years after I relinquished, that I learned that the US had citizenship-based taxation (which at that time was a piece of trivia to me – I had no idea in 1987 of the problems and suffering inherent in CBT.)
Obviously if my move to Canada had occurred in the current era, I would get my Canadian citizenship and relinquish asap, as I did years ago, but today tax compliance insanity would be a component in it — that’s a no-brainer — however there would still be at the root I just don’t want to be a dual citizen of any two countries.
Although I believe that US tax policy and its compliance problems/inability to live a normal life outside the US is the driving force in most relinquishments/renunciations today, I do assume that, even today, as it was in the 20th century, for some people relinquishing/renouncing, they basically just don’t want to be a dual citizen, and that for some, they basically just don’t want to be part of the US due to its political policies.
I also assume that anyone relinquishing/renouncing today, regardless of their basic motivation, would feel a huge sense of relief at being freed from predatory US tax policy and compliance problems – and quite likely resentment towards the US because of that policy, resentment being something which the US of today has managed to cause even in those of us who terminated our US citizenship long ago when we didn’t even have a clue about US tax policy.
Re:
“Without CBT, there would be no more than a handful of renunciations every decade, let alone every year.”
It seems that here in Canada the US’ CBT policy didn’t become widely known until 2011; though “widely known” is questionable, as even today, in 2014, there’s a general feeling that most US-born people in Canada still don’t know about US’ CBT. But let’s say it became widely known in 2011.
Five years earlier, in the 2006 census, 117,000 US-born Canadian citizens self-identified as “Canadian citizen only.” Given the human lifespan, that’s a lot more than “a handful” a decade.
I absolutely do not want to minimise the evil that CBT is, but this 2006 census stat implies that a lot of US-born people, who didn’t know about CBT, just did not want to be US citizens.
Even if the US goes to RBT (and I hope it does), there have been, there are, and there will always be, people who do not feel that US citizenship is intrinsically better than that of some other country.
@kermitzii, I was the first generation born in the USofA and was the last having left. My parents came for a better life, I left for a better life.
@Pacifica, I too can respect people that want or consider multi citizenship desireable, But I agree it is something that I can not accept philosophically at my personal level.
@bubblebustin
It may not be people living in the U.S. who are leaving. There are an unusually large number of German and French names on the list (Swiss perhaps?). There are also lots of first names that haven’t been in popular for U.S. babies in a long time. Zelinsky’s argument in favour of CBT is that citizenship is pretty much the same as domicile (based pretty much on the assumption that people make their decisions on purely economic criteria), but I wonder if some of these are people who have pretty much build lives abroad already..
@Anne Frank
When you said survey I take it that you meant general discussion of the problem, not an actual survey of why people leave. I don’t think there has been an actual survey.
@Publius
I didn’t mean to imply that Americans are fleeing the US. The renunciations are most certainly made up of mostly long-term non-residents. Perhaps I should have written: “Pecular, I’d say – for the best country on earth to be a citizen of.”
I suspect a Canadian’s reason for renouncing Canadian citizenship has more to do with increased opportunity rather than a matter of survival.
@publius – no actual survey being cited (if you don’t count the occasional blog that has a voting button on it with a few dozen “votes”). What I reference is the numerous articles that appear in the US press every couple of months (i.e. every time the quarterly name-and-shame list appears). The line invariably taken is “there are lots of reasons why people choose to renounce” and they pretty much always downplay tax and compliance. My view is that almost every expat I have ever met in Canada at least has taken out Canadian citizenship and finding out about their American origins is usually just a random comment or chance (confessed to less and less these days due to FATCA-fear). The reasons for becoming Canadian (or Swiss or French…) are pretty clear for someone who has married, settled down, built a career and family somewhere and that is the case of most of the millions of expats who are not servicemen or executives on temporary assignment. if not for the tapestry of oppressive laws coercing them to dropping claims to membership in the US club, most would probably have been happy to keep dual citizenship (@Geroge obviously an exception, and I respect that).
My point is simply that the Supreme Court of the US has told Congress in the Affroyim case, in effect, “you can’t force people to relinquish” and Congress’ answer has been “Oh yeah? Just watch us” and they have passed a myriad of laws designed to turn the screws until people either return or relinquish. it’s called doing indirectly what you can’t do directly. Schumer was just being honest and calling his anti-expat law spade what it is: a club with which to punish and beat treasonous dirty people who dare to turn their back on the greatest country God ever made in history or ever will (trade mark soon to be registered, I’m sure!). Schumer’s exit tax is being carefully studied by the casinos in Vegas. After all, wouldn’t it be great if the Casino could put in small print on every gambling chip: “By purchasing or using this chip, you agree that you can never leave the Casino until you have lost all your chips or surrendered them to the Casino”. Immigrants – come to America, some of you will strike it rich, but you can’t leave unless you give it all back! The Hotel California of passports.
@Anne Frank,
I know that Michael DeSombre and the Republicans Overseas team are serious about this effort. The group is made up of people already aware of the problems you mentioned.
You are right not to hold your breath, but Republicans Overseas is also intent on going after the bad tax rules associated with CBT (the “disease”), but this will be a much more difficult struggle.
@stephen Kish – I certainly know that his law firm is right up there among the top ones in the US. I’m not sure what resources they’ll let him use on what is likely a pro bono case which probably will generate more brick bats than plaudits from an ill-educated homeland audience at least. However, a smart guy willing to invest a bit of money and a lot of his own time could make a pretty darned serious run at this rotten structure. My own little back of the envelope analysis if course is just amateur hour compared to what a serious US constitutional litigator could do with this subject-matter.
I think the last ten years of anti-expat piling on legislation by Schumer et al has just made patent what was always lurking beneath the surface: the only way to erect a FAIR diaspora tax is to forego doing it in the first place, or do it with such a light hand as not to be worth the bother in the first place. However, they have gotten so extreme in their desire to punish people for living outside the land of the free that they have started to become that which they most detested (a government building walls to keep its people IN). At some point, the US is going to have to realize that the revenues it can generate to fund itself are fundamentally a function of the size of its economy (huge, but not growing any more) and not the size of someone else’s. They’ll get more tax revenue when the grow their own economy and they can’t treat expats like little fiscal trojan horses to suck revenue out of foreign countries. For as long as they don’t actually raise any revenue abroad, the rest of the world will view their demands as an annoyance. If as and when they seriously siphon funds from country like Canada, the co-operation they seek will be shut down hard. Which simply is to say that it can NEVER be worth their while to try to enforce CBT. Far more productive to construct a rational and relatively leak-proof RBT system (and of course grow enough stones to fund your government with a GST/VAT system).
Enough philosophy, even if it is Sunday. My life is a little brighter knowing that someone who refuses to be driven away from the US has courage enough to take them on. Good luck to him. Most of the million in Canada have simply sighed and turned the page.
As much as I dislike FATCA, I don’t think it can be successfully challenged in court. The enforcement of IGAs by countries on their own residents might be unconstitutional in those countries, because it would be a recognition of US sovereignty over them and discrimination based on nationality, but I don’t think it’s unconstitutional from the US point of view. If it’s a violation of privacy, then so are the myriad of other reporting requirements. I don’t think a court would rule that FATCA is against the 4th amendment.
The FBAR penalties are another story. These are obviously unconstitutional under the 8th amendment, and there is already a clear judicial precedence (United States v. Bajakajian). The problem is that only someone who was actually charged the draconian penalties can challenge them in court.
CBT is also different. I’m not a lawyer, but I did some research and wrote my opinion that it is unconstitutional, and why it does not conflict with Cook v. Tait.
I praise Republicans Overseas for their initiative, but I think they are focusing on the wrong spot. I even wonder if they are just making a scene to get votes and donations from Americans abroad. Challenging FATCA in court won’t get anywhere, and even if it’s successful, it won’t really solve the problem. If they want to use the courts, I suggest they challenge CBT instead.
@Anne Frank
Pretty impressive back of the envelope assessment, thank you.
@George
“But instead of asking for capital gains, dividend and interest payments they are asking for account balance information. What they are asking for does not help determine accurate tax liability.”
The fact that the CRA will provide the system by which this information will be received and potentially used by the CRA itself should worry a lot of Canadians. I know it’s of concern to our Canadian tax accountant that the CRA is targeting one group of Canadians in the FATCA IGA.
@Shadow Raider, They might take the position that Treasury does not have the authority to negotiate IGAs.
They could also seek relief on extraterritoriality.
They could also claim that it is discriminatory against two types of Americans. Resident Americans are subject to limited Form 1099 reporting. Non-resident Americans are subject to far more invasive reporting.
That law firm is heavy hitting so I assume they can see a small yet fatal flaw they can attack.
But………I thought the individual mandate of the affordable care act would fall but then John Roberts spun fabric out of the air……
@Shadow Raider
It will be interesting how this plays out to overseas voters. Speaking for myself – ‘fool me once…’
@George, I think you’re right. FATCA may be constitutional, but the IGAs are probably unauthorized unless ratified by the Senate. They could challenge the IGAs on that argument, and as we know, FATCA is impossible without the IGAs.
However, I don’t think the other two points are valid. The US has never cared about extraterritoriality. The reporting does not exactly discriminate between resident and nonresident citizens, it discriminates between US and foreign accounts. FATCA applies to residents with foreign accounts and does not apply to nonresident with only US accounts. It’s true that nonresidents naturally have more (or only) “foreign” accounts, but FATCA isn’t aimed at them specifically. In fact, the original focus was (and still is, I suppose) on residents with foreign accounts.
@Shadow RaiderL
Your Comment:
:As much as I dislike FATCA, I don’t think it can be successfully challenged in court.
The enforcement of IGAs by countries on their own residents might be unconstitutional in those countries, because it would be a recognition of US sovereignty over them and discrimination based on nationality, but I don’t think it’s unconstitutional from the US point of view. If it’s a violation of privacy, then so are the myriad of other reporting requirements. I don’t think a court would rule that FATCA is against the 4th amendment.”
I think a court would view FATCA unconstitutional for it bypasses altogether the 4th Amendment assuming criminality without cause. Congress certainly takes that view. On a number of counts. A bill has been sitting in the Senate by Sen. Rand Paul for the repeal of FATCA since May of 2013. His bill is based on both the 4th Amendment (Warrantless searches and Probable Cause.) and states clearly that the ‘negotiations’ undertaken by the IRS with sovereign countries is illegal. Treasury and the IRS have no authority whatsoever to negotiate anything not ratified by Congress and their quasi- treaties certainly have not been ratified. Nor would they be as Congress sees them as illegal in the first place. With Democrat control in the Senate that bill will sit there until at least the mid-terms and perhaps longer depending on the outcome. If Republicans gain senate control, then all bets are off.
FATCA has other problems and so does the IRS in the US. It is completely lawless and out of control and FATCA is only one example of it. The calls for IRS abolishment are getting louder and more strident for their egregious overreach and blatant political involvement to target, damage and destroy the current admin’s political opponents. A clear constitutional violation.
What amazes is that Canada ever undertook to negotiate at all under the circumstances. They had to know it was not legal for them to negotiate with Treasury instead of authorized entities within the US. Yet they did and make excuses.
For FATCA is a US problem and the IGA is a Canadian problem. Without the IGA , FATCA is unenforceable and they know it. That is why they are lying about the IGAs to begin with.(all one has to do is READ what is planned in the IGA proposed implementation to know they are both lying about it and why they are lying about it.) If the IGA is implemented in Canada it effectively makes Canada agents of the US and the IRS via CRA. Using the banks and giving banks permission to use third party snitches with payoff is abhorrent to anyone who wishes their privacy , especially their financial privacy to be respected. It is foundational to a free society.
Their argument that the banks would have to pay the 30% “withholding” is another misstatement. Sanctions is a better word.
For the US under FATCA:
They WANT what they are trying to criminally obtain: Something that belongs to someone else they covet. Canada should have recognized that and didn’t and now are trying to sneak it through Bill-C31
A court challenge in Canada via the Charter of Rights is most viable and doable.
The trouble I have with it is that by the time it wends its way through the court process a great many people will have been ruined entirely . There is NO excuse for it.
None of the issues regarding FATCA would need to be of interest in Canada if our government had done what they are mandated to do: Protect society in Canada from any and all threats. FATCA is a threat not just to banks, who are garnering the lions share of concern by our government, but to all society in Canada. Canada should be saying banks are not allowed to comply nor are Canadian Citizens and Permanet Residents to be considered “US Persons” (the moving target the IRS reserves the right to move around at it’s pleasure). And be done with it. Simple, concise and effective. FATCA without an IGA will fall. Period.
There have been numbers bandied about and landing on about the 1 million mark of those in this country who will be initially and immediately impacted.
I submit it will be many more millions than that. Canadian and American society has been interwoven since before the War of 1812 and certainly much more interwoven since.
( I was watching a History Channel special on the War of 1812 some years ago. One segment has remained with me ever since: In the Niagara region there was a grave uncovered. In it were 12 bodies. Both American and Canadian. They died together with their guns and uniforms and were buried as they lay. And they were very young )
That scene, more than anything I can remember illustrates what a mixed society American and Canadians are. Love , hate relationship? Perhaps. More love and respect than anything else I believe. Canada has many millions of individuals and families who will be severely targeted without cause or merit and FATCA has the capacity to completely decimate the Canadian economy. How could our government not see this and act accordingly?
America is a country in turmoil and is in danger of becoming something entirely different than it’s founding. They need help and they know it. But it is no excuse for our government to allow Canada to be taken down with the US.
If anything, they should stand stronger than ever and our government should be reminded of Canada’s governments past who recognized the problems south of the border and acted accordingly to present a haven for those freedom loving souls who needed a refuge and a hope for the future ( the underground railroad comes to mind)
Perhaps our government needs a history lesson just as our cousins in the US are getting one now. They are fighting back against the tyranny the US government now presents.
Our Canadian government should recognize and assist not buckle under to the lunacy.
Right on, FuriousAC.
Perhaps our Conservative government needs a big history lesson is right. How can they all be lockstep?
Despite the fact that the opposition parties cannot out vote the Cons I think that writing to them could be helpful right now (all senators as well). They are looking for ammunition and boy do we have it. The Cons, even though I’m certain many of their members are secretly on our side, have been given their talking points and that will be all we will hear officially from them from here on in. Above all, I’m placing most of my hope in the Charter Challenge, especially in light of the court defeats the Cons have been experiencing lately. We’ve had some fantastic ammunition come out of the Brock fact factory just today alone. Thank you Badger (as always), Anne Frank and FuriousAC and everyone. Their talking points are the targets for our bullets and their targets will soon become very tiresome and are already looking quite Swiss cheesy.
@ Anne Frank
Thank you! A wonderful synopsis. Your words give hope.
To hear such skill used in setting forth our case, leads me to picture you standing before the US Supreme Court on our behalf, and being thoughtfully listened to… and respectfully understood….
So good to have cause for hope amidst this darkness…! Thank you for your work.
@george
re:I think there will be a wave of “undocumented relinquishers” who do not even want CLN exposure. They will relinquish and say they are done, no more US passport, self imposed exile from the USA.
color me with that brush. i am not about to tell the americans who and where i am and while i will and do miss being able to travel to some favorite parts of america i will never cross into that country again.
i know of several others who like me are taking this approach and glady be spending their travel dollars in any place but america.
☝️I think there are many who are just going to consider themselves relinquished as per their oath of citizenship.
Most expats are clearly too afraid to go to an embassy to renounce/relinquish. Instead they quietly hide their Americaness like the Jews who were forced to hide their Jewishness from the Nazis.
@mettleman – I suspect that your assessment is correct and that the true number of quiet relinquishments is in the hundreds of thousands.
As I look back at almost 50 years in this country (Canada), I have to say that not a year has gone by where I have not been surprised to learn that some acquaintance or another was actually born in the US. They don’t settle in Canada with US flags on their lapels after all! I could probably name and call about a hundred today with little effort on my part. Of all of these in my entirely unscientific survey, I know of not a single one who has formally relinquished in the sense of getting a CLN – I had never heard of the things before coming to this site and I strongly doubt most people will want to stand in the spot light and ask for one. Almost all have gotten Canadian citizenship and most figure – rightly or wrongly – that that is enough. I certainly never heard of people going through the lunacy of filing tax returns every year, still less filing the dozens of ridiculous forms that I have now heard about (thanks to this site) and the mere thought of which fills me with equal measures of laughter, tears and rage. A number of people I know were pretty negligent about taking out Canadian citizenship (I did so proudly as soon as i could) but that has changed in the past couple of years – I would say the number who have NOT taken out Canadian citizenship at this stage is pretty close to zero. Obviously, the tardy naturalizers will have held on to their US passports until recently as well, but none that I know have renewed or retained them .
If someone wants to know the TRUE number of Americans driven to abandon the US by FATCA and the CBT jihad of the IRS mullahs, they might want to find out the number of outstanding US passports issued by country. State must have it – I have seen tables of passports issued by year and by state with “international” being its own column, but it includes of lot of extraneous stuff (territories and the like) that needs sorting. The other complication is the fact that more passports are being issued these days simply because post-911 they are needed by Canadians to go the US whereas a drivers license used to suffice. I strongly suspect that a proper analysis will show the number outstanding that were issued out of Canada, Mexico and most major European countries has dropped pretty considerably and will keep dropping over the next few years (nobody is going to tell the Consulate that they dropped their US passport in the fireplace and roasted marshmallows with it, so the US won’t know for up to ten years).
One last relinquishment comment: I have to bite my lip every time I see a survey asking “why people are renouncing”. Be honest – there is only ONE reason to renounce or relinquish and we all know it: the ridiculously burdensome web of filing obligations associated with the CBT lunacy. We all know that USUALLY little tax actually results (although the anomalies – many of which can arise through ignorance such as non-resident trusts can be ruinous even for the middle class). It may not be the actual tax bill per se, but the constant threat of ruinous penalties, the prospect of hundreds of hours per year as an unpaid form-slave of the IRS – all of it makes the idea of staying as a dues paying member of the club unthinkable. I know people who happily collect second passports from other “homelands” through their parents or even grandparents in Europe. They think it is great that maybe, some day, if they want, they could use that passport to live or work in Europe some day. They probably never will (and at this stage in most of their lives, maybe it is time to admit it!), but it is a “nice to have”. Alone among potential 2nd passports, the US demands to be first in your heart or it will turn to acid in your hands. There is but one reason to shred the damned thing: it is a ticket to perpetual slavery. If it weren’t, I’m sure that most of the relinquishers would gladly take it back. We all have/had lots of reasons for taking up citizenship in the place where we live and have made our homes. Those reasons did not usually preclude keeping a link to the US as well save and except the toxic by-product of keeping that link. I think the press articles I have read have tiptoed around that hard fact. Without CBT, there would be no more than a handful of renunciations every decade, let alone every year. Uncle Sam needs to spend some quality time looking in the mirror.
@Anne Frank
It’s been reported that Canada has about 180 renunciations a year. At approximately 9 X the population of Canada, the US should have no more than about 1620 per year. Even at by the register’s account (which we know is low), Americans are renouncing at more than 4 X the rate of Canadians if numbers only just hold. Peculiar, I’d say – for the best country on earth.
@anne: for me renouncing yes its mostly due to CBT and the endless forms and fines. But also USA has totally changed since I moved to Canada almost 30 years ago. It is not the country I grew up in. So good riddance! Canada has much better infrastructure and a sense of community and sharing which is totally foreign to the USA.
@ Anne,
Re:
I believe there are other reasons that people renounce or relinquish their US citizenship.
I relinquished mine because I preferred to be a citizen of only my country of residence. I’ve always felt, for me personally, that a second citizenship would be more extraneous than desirable, although I was, and am, aware that dual citizenship is a concept that many people do find desirable.
Perhaps people like myself, who actually prefer uni-citizenship, are a minority — I don’t know — but we do exist. I have known, and know, others like myself who just didn’t want to have more than one citizenship, as well as some who relinquished their US citizenship because they didn’t want to be part of the US due to its political policies.
It was only in 1987, about 8 years after I relinquished, that I learned that the US had citizenship-based taxation (which at that time was a piece of trivia to me – I had no idea in 1987 of the problems and suffering inherent in CBT.)
Obviously if my move to Canada had occurred in the current era, I would get my Canadian citizenship and relinquish asap, as I did years ago, but today tax compliance insanity would be a component in it — that’s a no-brainer — however there would still be at the root I just don’t want to be a dual citizen of any two countries.
Although I believe that US tax policy and its compliance problems/inability to live a normal life outside the US is the driving force in most relinquishments/renunciations today, I do assume that, even today, as it was in the 20th century, for some people relinquishing/renouncing, they basically just don’t want to be a dual citizen, and that for some, they basically just don’t want to be part of the US due to its political policies.
I also assume that anyone relinquishing/renouncing today, regardless of their basic motivation, would feel a huge sense of relief at being freed from predatory US tax policy and compliance problems – and quite likely resentment towards the US because of that policy, resentment being something which the US of today has managed to cause even in those of us who terminated our US citizenship long ago when we didn’t even have a clue about US tax policy.
Re:
It seems that here in Canada the US’ CBT policy didn’t become widely known until 2011; though “widely known” is questionable, as even today, in 2014, there’s a general feeling that most US-born people in Canada still don’t know about US’ CBT. But let’s say it became widely known in 2011.
Five years earlier, in the 2006 census, 117,000 US-born Canadian citizens self-identified as “Canadian citizen only.” Given the human lifespan, that’s a lot more than “a handful” a decade.
I absolutely do not want to minimise the evil that CBT is, but this 2006 census stat implies that a lot of US-born people, who didn’t know about CBT, just did not want to be US citizens.
Even if the US goes to RBT (and I hope it does), there have been, there are, and there will always be, people who do not feel that US citizenship is intrinsically better than that of some other country.
@kermitzii, I was the first generation born in the USofA and was the last having left. My parents came for a better life, I left for a better life.
@Pacifica, I too can respect people that want or consider multi citizenship desireable, But I agree it is something that I can not accept philosophically at my personal level.
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@bubblebustin
It may not be people living in the U.S. who are leaving. There are an unusually large number of German and French names on the list (Swiss perhaps?). There are also lots of first names that haven’t been in popular for U.S. babies in a long time. Zelinsky’s argument in favour of CBT is that citizenship is pretty much the same as domicile (based pretty much on the assumption that people make their decisions on purely economic criteria), but I wonder if some of these are people who have pretty much build lives abroad already..
@Anne Frank
When you said survey I take it that you meant general discussion of the problem, not an actual survey of why people leave. I don’t think there has been an actual survey.
@Publius
I didn’t mean to imply that Americans are fleeing the US. The renunciations are most certainly made up of mostly long-term non-residents. Perhaps I should have written: “Pecular, I’d say – for the best country on earth to be a citizen of.”
I suspect a Canadian’s reason for renouncing Canadian citizenship has more to do with increased opportunity rather than a matter of survival.
@publius – no actual survey being cited (if you don’t count the occasional blog that has a voting button on it with a few dozen “votes”). What I reference is the numerous articles that appear in the US press every couple of months (i.e. every time the quarterly name-and-shame list appears). The line invariably taken is “there are lots of reasons why people choose to renounce” and they pretty much always downplay tax and compliance. My view is that almost every expat I have ever met in Canada at least has taken out Canadian citizenship and finding out about their American origins is usually just a random comment or chance (confessed to less and less these days due to FATCA-fear). The reasons for becoming Canadian (or Swiss or French…) are pretty clear for someone who has married, settled down, built a career and family somewhere and that is the case of most of the millions of expats who are not servicemen or executives on temporary assignment. if not for the tapestry of oppressive laws coercing them to dropping claims to membership in the US club, most would probably have been happy to keep dual citizenship (@Geroge obviously an exception, and I respect that).
My point is simply that the Supreme Court of the US has told Congress in the Affroyim case, in effect, “you can’t force people to relinquish” and Congress’ answer has been “Oh yeah? Just watch us” and they have passed a myriad of laws designed to turn the screws until people either return or relinquish. it’s called doing indirectly what you can’t do directly. Schumer was just being honest and calling his anti-expat law spade what it is: a club with which to punish and beat treasonous dirty people who dare to turn their back on the greatest country God ever made in history or ever will (trade mark soon to be registered, I’m sure!). Schumer’s exit tax is being carefully studied by the casinos in Vegas. After all, wouldn’t it be great if the Casino could put in small print on every gambling chip: “By purchasing or using this chip, you agree that you can never leave the Casino until you have lost all your chips or surrendered them to the Casino”. Immigrants – come to America, some of you will strike it rich, but you can’t leave unless you give it all back! The Hotel California of passports.