Notwithstanding any other provision of law, not later than 30 days after the close of each calendar quarter, the Secretary shall publish in the Federal Register the name of each individual losing United States citizenship (within the meaning of section 877 (a) or 877A) with respect to whom the Secretary receives information under the preceding sentence during such quarter.
Notices to be printed in the Federal Register for 30 July 2014 have just been placed on public inspection, but the Quarterly Publication of Individuals Who Have Chosen to Expatriate is not among them. This means that for the eighth quarter in a row, the list of certain expatriates will not be published in a timely fashion as required by 26 USC § 6039G(d).
Defenders of the poor beleaguered Secretary of the Treasury will claim that he already approved the list for publication, and it’s someone else’s fault that it failed to actually get published on time, and that he hasn’t broken the law. But applicable case law shows quite clearly that when a statute requires publication of a notice, mere agency approval or placement on public inspection is not enough to meet the requirement of the law.
And since the IRS is so concerned that about international reporting requirements these days, shouldn’t they be enforcing 6039G(d) just as strictly as they enforce its neighbour, 6038D?
Promulgation, filing, publication, and time limits
The Secretary of the Treasury has never been taken to court over late expat honour rolls — I haven’t been so mean and vindictive as to dob him in on a Form 211, otherwise I’m sure the IRS’ fearless Criminal Investigations Division folks would fly right back from London and Hong Kong to DC to have a chat with him. However, more important plaintiffs have sued government officers over other, higher-stakes stuff in the Federal Register, and the government has occasionally responded by arguing that the suits should be thrown out because some 30 or 60-day deadline allegedly started running on the date of filing rather than the date of publication.
There’s limited support for the government’s position in 44 USC § 1507, a fairly old provision of law which has survived intact ever since it was created by the Federal Register Act of 1935, with only minor changes in wording since then:
Unless otherwise specifically provided by statute, filing of a document, required or authorized to be published by section 1505 of this title, except in cases where notice by publication is insufficient in law, is sufficient to give notice of the contents of the document to a person subject to or affected by it.
However, the “unless otherwise specifically provided by statute” part is often fatal to the government’s arguments, because statutes almost always require publication, not mere filing. Rowell v. Andrus, 631 F.2d 699 (1980), turned on this point:
… the Government argues that even if the 30 day deferred effective date provision of § 553 is construed as applying to final rules, the regulation in question here was filed with the Office of the Federal Register on December 30, 1976; that this was over 30 days prior to the February 1, 1977, effective date; and that such date of filing for publication with the Federal Register office commenced the 30 day waiting period. Consequently the Government says that the time period prescribed by § 553(d) was satisfied in any event.
It is true that 44 U.S.C. § 1507 states that the filing of a document with the Office of the Federal Register is sufficient to give notice of its contents. However, we feel that another part of § 1507 is the key to the answer here … [t]he “unless otherwise” language of § 1507 leads us to 5 U.S.C. §§ 552(a)(1) and 553(d) which require publication 30 days before the effective date, as opposed to mere filing with the office. The common meaning of the word should apply, there being no statutory definition. Clearly “publication” in the Federal Register requires more than mere “filing.”
Both of those sections cited in Rowell are part of the Administrative Procedure Act (APA). The first one, 5 USC § 552(a)(1), requires each agency to publish its regulations in the Federal Register, and goes on to require that:
Except to the extent that a person has actual and timely notice of the terms thereof, a person may not in any manner be required to resort to, or be adversely affected by, a matter required to be published in the Federal Register and not so published. For the purpose of this paragraph, matter reasonably available to the class of persons affected thereby is deemed published in the Federal Register when incorporated by reference therein with the approval of the Director of the Federal Register.
The second one, 5 USC § 553(d), states that “[t]he required publication or service of a substantive rule shall be made not less than 30 days before its effective date”. And so the court decided that since the APA uses words like “published”, the regulations could only come into effect 30 days after the date of publication, not 30 days after the date of filing.
Similar cases
In the late 1980s and early 1990s there were at least two more cases involving disputes over date of filing vs. publication: National Grain & Feed Association v. Occupational Health and Safety Administration, 845 F.2d 345 (1988) and Sea Watch International v. Mosbacher, 762 F.Supp. 370 (1991). In both of those, the government argued that the plaintiffs’ petitions against regulations were time-barred (each case involved different statutes: 29 USC § 655(f) and 16 USC § 1855(d), respectively) because the petitions came more than X days after the regulations were filed with the Federal Register, and the government claimed that the date of filing should be regarded as the date of “promulgation”.
And in both cases, the DC courts rejected that argument because the petitions came within X days of the actual publication in the Federal Register. (Regardless, 26 USC § 6039G(d) does not use the word “promulgate” anyway, so even the long-rejected argument that “filing” = “promulgation” could not excuse the government’s lateness.)
Just to make things confusing, different agencies have different rules on when a notice should be regarded as “promulgated”, “released”, or some other such vague term. The FCC, for example, provides in 47 CFR 1.4(b) that two documents actually published on the same day in the Federal Register can be considered to have different dates of “public notice” if one is part of a rule-making proceeding while the other is not. Naturally, there have been lawsuits about this too, such as Adams Telcom v. Federal Communications Commission, 997 F.2d 955 (1993). But, as mentioned above, the “expat honour roll” statute uses the plain old word “publish” and not other unclear synonyms like “promulgate”, so cases like this FCC one aren’t relevant anyway.
And of course, none of the above cases show the slightest concern for the date which the authoring agency itself puts on the notice (for example 23 April for the previous quarter’s list of ex-citizens, which was not published until 2 May) — that date is legally irrelevant, and could not possibly constitute “publication”, since the notice certainly was not available to the public on that date.
Who cares when some stupid notice gets printed?
There’s another difference, of course: the Quarterly Publication of Individuals Who Have Chosen to Expatriate does not consist of regulations. It is a meaningless, error-filled list of names (with the occasional street address, village, job title, or corporation thrown in for good measure). The inclusion or exclusion of a name has absolutely no legal implication, notwithstanding long-dead proposals to use the list to enforce the Reed Amendment. (The IRS could have required, for example, that banks subject to FATCA check the Quarterly Publication if customers previously known to have U.S. citizenship later claim that they’ve given it up — but the IRS did not, presumably because they’re just as aware as the rest of us that the Quarterly Publication is garbage.)
So it’s doubtful that there is even any “person subject to or affected by” the Quarterly Publication for purposes of 44 USC § 1507. In simpler terms, no one can actually demonstrate harm when this law is broken. Even if the actual expatriates included (or not included) could argue that they are “affected”, it’s not clear what relief a court might grant them.
But that doesn’t mean the law should go unenforced, right? No one can actually demonstrate harm when U.S. Persons outside of the U.S. fail to fill out Washington’s endless, incomprehensible paperwork on their local-government-approved bank, retirement, disability, and health savings accounts which the IRS treats as if they were offshore tax avoidance instruments. But Jack Lew and John Koskinen are off on a pointlessly costly, legally-dubious worldwide crusade to enforce 26 USC § 6038D and similar provisions of law which demand all that paperwork. And before that crusade, there were the equally meaningless FBARs that “U.S. Persons in Un-American Countries” are required to file with the Financial Crimes Enforcement Network — which had to arrive in Detroit by the 30 June due date, not be postmarked by that due date, at least until they made us switch to their ridiculous e-filing system.
Conclusion
Ever since all of us here at the Isaac Brock Society started arguing against FATCA, FBAR, Form 8621, and the rest of the citizenship-based taxation mess that the U.S. imposes on its emigrants, government officials and Homeland “tax justice” crusaders and their loyal enablers have been calling us “tax evaders” and “anti-tax zealots” — even when we owe no tax — because we fail to fill out all this meaningless paperwork, or argue that it should be abolished.
So I simply ask that the IRS be held to the same standard as us — required to comply with pointless, incomprehensible procedural minutiae, while facing life-altering fines, ejection from banks, attacks on honour & dignity & privacy, and inability to live a normal life like all of your neighbours. After all, the law is the law, right?
We are dealing with a powerful dictatorship. What can one expect! They could care less!
They can’t use the excuse “I was just doing my job”, can they? When there’s no accountability, there’s no hope.
The 2014 US Mid Term elections are coming up. Do the Democrats really want headlines like “10,000 citizens renounce over unfair tax law” and risk FATCA becoming an election issue?
They won’t care if FATCA is an election issue. In fact they welcome it so they can paint us all as “economically unpatriotic” The facts will be twisted and used utterly against us and to their advantage. Lies or not, it will not matter.
The web site data.gov/open-gov/ contains the following statement:
Yet that same Data.gov has so far not responded to a request make in February 2013 to make public the numbers of Certificates of Loss of Nationality that are being approved by the Department of State each month or quarter. See https://explore.data.gov/nominate/2412
If it weren’t for the fact that the Treasury Department and the FBI are required by statute to report data related to the numbers of CLNs issued, however indirect and inaccurate those data may be, we would have no way of knowing or even estimating how many people are giving up US citizenship. Clearly the US government is not really interested in open data, especially if it finds such data embarrassing.
Go PRA ! Stop complaining!
You might notice that the new FinCen FBAR saves you time!
In the TD form from prior years it stated it would take 75 minutes to complete. In the 2013 Form 114 it takes a mere 20 minutes.
http://www.gpo.gov/fdsys/pkg/PLAW-104publ13/pdf/PLAW-104publ13.pdf
I think it’s beautiful that the USG created this ‘name and shame’ list to punish people. They were probably eager to get it out each quarter to bash those that chose to renounce or give up their long term green card.
Think of the bureaucrat hopping and skipping with a document in hand to publish with a big smile on their face. Sticking it to the evil people.
Now they delay the document or it’s size delays them. They likely dread the numbers now knowing that the media will pick it up immediately if the numbers are big.
It’s gone from entertaining to embarrassing. After all it gets hard to keep claiming the rules aren’t a burden to people abroad (and people in general) when people are rushing for the exits. It gets harder to claim they are all millionaires as the numbers keep climbing.
@Eric, another wonderful post full of research and educational links. Please keep educating and informing us. I am sure they take much time and effort, but they do us a world of good – you do for us that which we could never do for ourselves. And it does the US and the larger world a good, as the posts serve to inform countless readers on into the future – and serve as a primer into this hitherto unexplored dark corner of US government sanctioned hypocrisy.
I particularly enjoyed this;
“……. ask that the IRS be held to the same standard as us — required to comply with pointless, incomprehensible procedural minutiae, while facing life-altering fines, ejection from banks, attacks on honour & dignity & privacy, and inability to live a normal life like all of your neighbours. After all, the law is the law, right?”
This is interesting. A couple looking to expatriate to avoid capital gains on a residence.
http://www.taxprotalk.com/forums/viewtopic.php?f=8&t=691
They would sure to be covered expatriates though with a 1.9M capital gain.
James Jatras has an article on Forbes.
http://www.forbes.com/sites/realspin/2014/07/28/unauthorized-fatca-intergovernmental-agreements-are-part-of-obamas-executive-overreach/
@AnonAnon
“Since his first full day in office, President Obama has prioritized making government more open and accountable and has taken substantial steps to increase citizen participation, collaboration, and transparency in government”
Ha, ha, ha, ha. ROTFLMAO!
I expect them to cook the books by only registering a pre-determined number of names that will not be considered politically damaging, probably another 1,000 names give or take a couple in order to make the cooking not too obvious.
@ Neil,
Surely they are allowed a net worth of 2,000000 each before being considered a covered expat.
If the house is in both their names then it’s value will be split.
Exit tax would only apply on the gain if either one of them had a net worth of over 2,000000 and only on that half of the house. It all depends how they chose to divide their assets and if one or both expatriates.
@Heidi,
Your probably right. I didn’t think about the numbers doubling up for a couple.
Interesting to see the wheels turning in pro circles.
@Neil
It’s also possible to be a covered expat with assets in the many millions but have no exit tax to pay as long as your unrealised gain is under $650,000! Try leaving any of your wealth to your US person kids on your death though. A covered expat’s estate is subject to the highest possible tax rate if left to a US relative. (40% at the moment I believe)That’s on top of the estate tax one has to pay in ones own country of residence.
@AnonAnon
A basic internal control for documents is that they are pre-numbered. This helps to ensure that there is control over all documents issued. Cliff Notes writes:
“Adequate documents and records provide evidence that financial statements are accurate. Controls designed to ensure adequate recordkeeping include the creation of invoices and other documents that are easy to use and sufficiently informative; the use of prenumbered, consecutive documents; ….”
In the case of CLNs, prenumbering and issuing them consecutively would allow an outsider to determine how many CLNs had been issued between two dates.
Last year I discussed this issue with an internal auditor who was surprised that the US federal government’s internal auditors, the GAO, had not identified this as an internal control issue. She mentioned that the poor “design” could be intentional to allow the US government to more fully control the information, i.e., report what it wants to report. She also said that this information is undoubtedly recorded in an IT system and given a number by the system so that the GAO might consider this to be an adequate control. However, she thought that prenumbering the CLNs would increase the likelihood of a forged CLN being detected.
@Innocente, “However, she thought that prenumbering the CLNs would increase the likelihood of a forged CLN being detected.”
Think about it for a moment.
A Certificate of Naturalisation (USA) is numbered.
A US Passport is numbered.
A US registration of Birth Abroad is numbered.
Why are those documents numbered? In the eyes of the beholder they are “VALUABLE” documents because in the eye of the beholder they represent US Citizenship which in their eyes is the “most valuable citizenship on earth.”
What is a CLN? Those are walking papers as you are cast aside. Lets face it, the USA has designed the renunciation process to be shameful!!
I know some Brockers might disagree but I have this working idea that if someone was overseas and had a iron clad visible relinquishment that they in theory could apply for a US Passport stating in full their relinquishment that eventually they would be issued a CLN without stepping foot in a consulate.
Remember in the old days, the Dept of State issued CLNs to do just that, cast people away!! It was a certificate of shame.
The Dept of State and many Homelanders actually think expats are proud to be an American and actually use their US Passport in preference to any other passport!!
To be blunt, if someone calls me a Son of a B”!^&, I do not care. If someone calls me an American, I correct them very quickly as its insulting and discriminatory to me.
It is only a recent phenomena where a CLN has become a badge of honour. Either out of respect to someone who endured the abject humiliation and came out of it or as a congrats you have the golen ticket!!
So homelanders and Dept of State would say why do we need to control a document that has “zero value” because no one gives up prized citizenship.
But there may come a time when they do number CLNs and that will be a tantamount admission that a CLN is a very valuable document. That will be a watershed moment.
@Neill, Heidi
They should have the flexibility of using the lifetime estate tax allowance to gift between each other or to others.
“The obvious planning opportunity to avoid status as a covered expatriate is to give assets away prior to expatriation so as to avoid the net worth test. If the asset transfers reduce the taxpayer’s net worth below the USD2 million threshold, the exit tax may be avoided. (The taxpayer will also have to fail to satisfy the tax liability test to avoid status as a covered expatriate.) Gifts prior to expatriation will qualify for the gift tax exemption of Code s2505.” (http://www.step.org/advising-us-citizens-and-long-term-residents-expatriating)
For instance, they could borrow against the value of the house to extract cash. Spouse A gifts cash to spouse B such that Spouse A is under the $2m threshold. A expatriates. A files 1040/8854. Spouse B then gifts to non-US citizen spouse A (filing 709 if gift to A above $143k). B expatriates. B files 1040/8854/709. There should be a way for them to avoid covered expat status. Covered expat status would bring not only the capital gain on the house but also the deemed distribution of all their retirement assets in the year of expatriation.
@Edelweis
I believe someone suggested this to Phil Hodgen, ie A to B, then A expatriates, B to A then B expatriates, he said it was feasible in theory but he would be looking to heaven and whistling Dixie.
@Innocente and @George,
Those are good points. As you note, there’s a question of who values CLNs and whose purposes they serve. To the individual the value of a CLN is that it serves as evidence against claims by the U.S. regarding obligations of citizenship. To the U.S. government it presumably serves as a reminder not to continue granting rights of citizenship to persons who are no longer citizens. The U.S. interest in preventing forgeries would arise from a concern that some persons might use forged documents to escape obligations of citizenship such as payment of taxes or, potentially, military service if the draft were restored.
It would seem to make sense for the U.S. to institute a numbering system, but that would (a) make public the number of CLNs being issued, (b) make it clear that CLNs are an official government document, not a “private” matter for the individual (an excuse they have used for not making the number of CLNs public), and (c) make it even more of a badge of honour to hold a CLN — with a specific official serial number yet!
Also, there would be the problem of what number to start with: just 1 from some arbitrary date or going way back to the issuance of the very first CLN? And what an exclusive club it would become for those of us who hold un-numbered CLNs — perhaps valuable as collectors’ items to our grandchildren.
Anyway, they seem to have gotten themselves into a bit of a dilemma over CLNs, now that they are being forced to issue so many of them and now that what used to be portrayed as a badge of shame is now seen by many of us as a badge of honour. It will be interesting to see what the U.S. government does about its CLN problem over the long run, unless, of course, it comes to its senses, converts to residence-based taxation, and undercuts the demand for CLNs.
You’d think that with the growing importance of CLN’s as being necessary to prove to banks that one is no longer’s obligated to pay US taxes, the US would find it necessary to be able to cross-reference specific CLN’s to their data base via a number. So far CLN’s have been mostly of benefit to the recipient, sort of a receipt of sorts. It’s only when it is of benefit to the US (the ability to maintain the collection of information and revenue) that they’ll get serious about tracking and authenticating them.
It’s interesting that in order to close my mother’s bank account in the US I was required by the bank to have my mother’s Canadian death certificate notarized by the US consulate in Canada, as I was told that a bank in the US has no way of authenticating another country’s death certificates. Is it logical to think that Canadian banks may require CLN’s also be notarized for the same reason? After all, how can someone in a bank in Canada be expected to verify a US CLN?
It’s interesting that since my comments about Data.gov appeared here yesterday the link to the suggestion for a data set on numbers of Certificates of Loss of Nationality issued no longer works, after being active for a year and a half:
https://explore.data.gov/nominate/2412
Is that just coincidence or does it seem that someone has been following our posts. Is it too much to hope that the suggestion is being implemented?
In fact, the web address explore.data.gov now redirects to catalog.data.gov/dataset. Maybe they have stopped taking suggestions for further data sets.
According to Wikipedia under FATCA: As the report of people renouncing citizenship is only of those who pay exit tax, generally the relatively more wealthy, the numbers are understated, some say considerably.
http://www.forbes.com/sites/robertwood/2014/05/03/americans-are-renouncing-citizenship-at-record-pace-and-many-arent-even-counted/
@JC
The Wikipedia article is correct about the numbers being considerably understated. It is definitely incorrect about reporting only on those having to pay the exit tax, however. (I haven’t read the article, just addressing your specific points.)
notamused,
Let’s hope so about being on the Name and Shame list and having to pay the Exit Tax. Mine and my husband’s and my daughter’s names are on there and none of us would have to pay that — unless we are in for another big surprise.