@Tim alerted us to this “opinion paper” just issued by the Republican staff of the U.S. Senate Finance Committee.
The December 11, 2014 paper, entitled “Continuing the Conversation on Comprehensive Tax Reform” has a section dealing with the question of citizenship-based taxation.
This is a very brief outline “analysis” only and does NOT equal introduced legislation — which I hope will happen during the next two years — and which may well fail to be passed into law.
Go to page 282/293:
“The United States needs to rethink its taxing rules for nonresident U.S. citizens.
If a U.S. citizen is living and working abroad with some permanence, and the primary nexus the individual has to the United States is citizenship, we think it makes sense to tax the individual, as a general rule, only on income from U.S. sources.
A test would need to be developed to determine at what point a U.S. citizen is considered a nonresident of the United States and then at what point the U.S. citizen is considered to be a resident again.
Some factors that may be considered include the permanence and purpose of the stay abroad, residential ties to the United States, residential ties to the foreign country, and regularity and length of visits to the United States.
The test could be adopted, in some part, from the existing rules that are used to determine residency of alien individuals, i.e., those individuals who are not U.S citizens.
In addition, an exit tax could be applied when the U.S. citizen is considered a nonresident and no longer subject to U.S. worldwide taxing jurisdiction. If the U.S. citizen later becomes a resident and then becomes subject to U.S. worldwide taxing jurisdiction, then the individual’s basis in her assets would be the fair market value of the assets at the time she again becomes a resident.”
[—Many readers believe that ANY position taken by the United States is not deserving of attention or comment and will have nothing whatsoever to do with the U.S.
It is irrelevant to them whether the U.S. moves towards residence-based taxation, or not.
Others appreciate that this slight “snippet” of an opinion by the U.S SFC Republicans does not go far enough and is short on details (I don’t like the “exit tax” either). The “opinion” might well have zero future consequence.
The default and expectation is that CBT WILL ALWAYS be imposed on U.S. citizens. The options then include resistance to an unjust law, compliance for life (and beyond death) or compliance for the purpose of renunciation, if one is willing and financially able to afford the costs.
But do we really feel that it would be preferable if the SFC Republicans had NOT stated in a public document an opinion beginning with the sentence: “The United States needs to rethink its taxing rules for nonresident U.S. citizens.” — or if the RNC had NOT passed a resolution moving towards residence-based taxation?
I have asked my (Democrat) reps on the SFC and the House W&M Committee, Senator Maria Cantwell and Congressman Jim McDermott, respectively, to work with the Republicans on the two committees to help introduce legislation during the next two years that will move us closer to RBT. I also emailed Senator Orrin Hatch, who probably will soon be the Chair of the SFC, and asked him to help get this legislation moving.
If you have any interest in the Republican majority introducing legislation during the next two years to kill CBT I suggest that you send your thoughts to Republicans Overseas, your reps in House/Senate (if you have any), Orrin Hatch and other members of the SFC, etc. Be specific and provide your timeline. Appreciate that the positive SFC opinion and RNC resolution are a long long way from legislation.
[You might also want to contact the SFC by sending an email to Aaron_Fobes@Finance.Senate.gov who is the Republican Press Officer for the SFC. Ask him to forward your thoughts to the relevant staffer/Members.]
Also, I asked and will continue to ask that John Richardson, our ADCS legal counsel, provide expert testimony at the SFC hearing at which the RBT proposal will be discussed. The January 2014 submission John Richardson, former IRS attorney Willard Yates, and I made to the SFC can be found here.]
I sincerely hope “foo”‘s suggestion will become part of the Republicans’ move for tax policy change: “I would like to see some special provisions for transitional cases, like an exemption from the exit tax for those who have already been out of the US for more than some number of years.”
I am deeply concerned about those who left the U.S. as children many decades ago and, in the intervening years, had an occurrence in their lives (i.e. having to get a U.S. passport) that makes it impossible to pursue an inexpensive relinquishment. These people are just as “already gone” as those who didn’t lose the border-crossing lottery yet I fear they will still be in danger of being hung out to dry if an exit tax remains as part of a switch to RBT. This is the reason I have never cared for the ACA proposal. I believe that a solid statement of exemption for *anyone* who has not resided in the U.S. for a to-be-determined length of time must absolutely be included in any switch to RBT.
I do understand there is tremendous trepidation over the exit tax proposal. However, quite a few RBT countries have them including Canada itself, Australia, Denmark, France, and a couple of others I forget.
I discussed this issue with ACA earlier this morning and they are well aware of the concern over non resident US citizens who have not lived in the US for many years having to pay the exit tax.
@Tim, to the best of my knowledge, Canada and those other countries do not attempt to impose an exit tax on those who may have emigrated as infants or children.
@foo @MuzzledNoMore
I moved to Canada as a child in 1968 and my husband is a US citizen but has never lived in the US. We’ve paid to come into compliance. Can we expect a reimbursement on our taxes if our departure date was taken into consideration? I think not, but it would not be any more fair to charge us an exit tax on top of what we’ve paid in taxes if the departure date was made current. The danger here is that those who’ve done their best to comply with the law will be punished for having done so, even when the fair thing to do would be to exempt those who fall within the “to-be-determined length of time”.
@Bubblebustin,
I could imagine a couple of ways to make the imposition of an exit tax fair to those who have already been outside the US for a long time.
1) Exempt anyone who has already been a bona fide non-resident of the US for at least N years at the time of the law coming into force. (N= 5 years? 10 years? 20 years?)
2) Allow someone to back-date the calculation of their exit tax to the date that they actually left the US, or back to birth if they have never lived in the US.
Actually, 2) might have the best chance of being accepted.
@Bubblebustin and those interested in U.S. RBT legislation,
There is no exit tax proposal to discuss and no legislation introduced, only a few tentative thoughts mentioned in an SFC document.
Given that the Republicans will be in the majority, if you have specific suggestions or directives (e.g.,”I insist that RBT legislation be introduced during the next two years — I have waited long enough.”), send your thoughts to Republicans Overseas, your rep (if you have one) in Congress, SFC Orrin Hatch, etc. I did.
Yes, could all be a waste of time, but the Republicans cannot know your point of view about the exit tax etc. unless you tell them.
—It could also be argued, as @Mark Twain does, that the vocal Brocker complaints, comments in the press, etc. resulted in the mention in the SFC Republican opinion paper. At least one person on the Committee must have been listening.
I left America as a child 52 years ago.
Sigh.
@Stephen, and all, I previously commented that my exit tax (filed earlier this year) form should be completed in crayon, listing a baby bottle and blanket as my assets in 1967, when my parents repatriated me to Canada.
I’m wondering about a mailout campaign to US reps, from those if us that left as minors, that consists of exit tax forms completed in crayon, listing what would have been our assets upon leaving the US, with a picture of us at that age? We could include a brief explanation of how we found ourselves caught up in this mess.
Would it catch the attention of anyone?
@Mark Twain, “For those that are not renouncing, it’s important to do what Stephen did–and write to both of your Senators and your rep.”
Those that have relinquished that are self documented relinquishers should not be contacting anyone because they have no reps.
@The Animal, Your wife MUST get her Canadian Citizenship. The rest can all be damned but that CC must be obtained no matter how tight your budget is.
@The Mom, your mail in proposal is not too bad….
@All, any proposals that give any number of people freedom is a blessing. Some maybe many will not benefit, we have to take what we can get piece by piece.
Interesting conversation, and yes, Stephen, one that will remain a hypothetical one unless we take some kind of action. I would like to think that Mark’s right – that this is a direct result of the many submissions make by Brocker’s and others to the SFC. Wouldn’t the problems of implementing RBT be ones we’d like to have?
@foo
What we’re talking here is a total amnesty for back-taxes and penalties for those who qualify – something my husband and I would most certainly qualify for. In either of your scenarios, what do you suppose would happen to make it equitable for people like my husband and me who’ve paid coming into into compliance in the last few years? I’d like to think that the fact that the IRS has accepted as reasonable cause the fact that we had no knowledge of our tax filing obligations could work to our benefit somehow.
@The Mom
What a great attention-getting idea. I don’t suppose 12 is too old to be using crayons?
@Badger, “I agree. The expatriations will continue (silent or noisy, overt or covert) – as you say, they don’t deserve us.”
Self documented relinquishments will continue to rise for those that are not in the system or those that no longer want to re-engage.
And for those that can deny USC, that will grow as well.
I know some on IBS do not like the comparison but its similar to 1930’s Germany in denial of Jewishness.
I’ve written my reps (all Dems), multiple times, and they have no interest whatsoever in what I say.
I guess I can try writing to Solomon Yue and Orrin Hatch.
What the heck, can’t be any more frustrating or useless than writing to my reps has been.
@The Mom,
Yes!
Your approach might help those reps (who have an open mind) easily grasp the absurdity of it all.
I am going to make a new time capsule and put a copy of my CLN inside it.
Perhaps IBS can make one as a group.
@The Mom Sounds like innovative thinking
@ the mom All I can say is brilliant thinking!! My wife likely might have had a small bike to also list as assets. This would clearly show how totally absurd this really is. I was chatting on ham radio to a group of people in Erie PA last night and everyone there had no idea what the Obama government was doing to people who left the US as kids. They wer astounded on how the USA threatened Canada and how the USA is keeping SLAVERY alive and well. This shows us that Canada AND the USA need a huge eye opener. How we can educate on a large scale is still something we need to work on.
@NativeCanadian Needs Canadian Government to take head out of the sand and to speak out.
If the legislators receive 100 letters about better conditions for cats, they will start making legislation about cats. Short letters on one topic can make a difference in quantity.
You’d think a bunch of loudmouth Americans spread around the world would get more attention than we have :-/
Some might remember my comments about drawing attention to all the puppies and kittens, so to speak, who are being affected by CBT, that is the children, the elderly, the poor and the disabled to counteract all the yacht-living, champagne-sipping, racehorse-owning stereotypes people have about about us.
Thanks once again, Stephen Kish!
Stephen: Thank you so much for writing to your Congressmen and Senators on behalf of us all. Some of us simply cannot write to U.S. government officials for fear that such an action places us directly in harm’s way. It’s a deplorable situation to have to ask others to shoulder this burden. But you are right. Each and every Congressman and Senator needs to learn from as many of us as safely possible that their government’s current tax policies towards us must come to an end, preferably without an exit tax and with full refunds to those who left the country decades ago but stepped up to the compliance plate in recent years.
Hear, here, MuzzledNoMore!
“If (…) the primary nexus the individual has to the United States is citizenship, we think it makes sense to tax the individual, as a general rule, only on income from U.S. sources.”
This is historic. As far as I know, it’s the first time that Congress (well, a part of it at least) has officially declared that citizenship should not be a basis for taxation. Not because of some made up economic justification, but because of logic and fairness, as it should.
This comes as a result of the many letters we sent to the committees, and of ACA and others who met with the staff. Congress took way too long to respond, but better late than never. I’m expecting more progress next year.