Neill says:
My expat question has been accepted by WSJ.
Bubblebustin comments:
@Neill
That’s great news. When it’s published, do you mind posting it on this other tread also for easy reference?
http://isaacbrocksociety.ca/brockers-making-news/
They’re really hot to trot to tell our stories at WSJ Expat, aren’t they? Maybe some of the journalists we’ve been talking to there were listening when we said we needed a voice in the media. They need our support in return. I don’t believe that the WSJ Expat has been advertised on Brock. Would one of our moderators mind making a new post of it?
You can follow them on Twitter and friend them on Facebook too.
*********************
From some of the prior related commentary:
Vote (Do you think the U.S. needs to rethink its taxation rules for nonresident U.S. citizens?) and comment on this new “Ask An Expert” “EXPAT” article:
Wall Street Journal, December 16, 2014: U.S. Expats Find Hope in Senate Finance Tax Reform Proposal
About Expat
Expat is The Wall Street Journal’s hub for expatriates and global nomads – spanning the globe in expat hotspots like London, Paris, Hong Kong, Beijing, Sydney and many more.
Here you’ll find stories about expat living – housing, education, healthcare and more – expat jobs and managing your finances abroad. Whether you’re an expat in Dubai or Delhi, Sao Paulo or Singapore, Tokyo or Tel Aviv we’ll bring you stories the world over.
Share your expat stories with us at expat@wsj.com.
************
Trish reported on a comment…
John Richardson wrote:
Thanks to Mr. Lachowitz for his initiative and insight which is reflected in this quality article.
His article includes:
“Comprehensive tax reform is high on the priority list of many members of Congress and with a Republican majority in both houses the chance for a tax reform bill being sent to the Oval Office for a signature in 2015 has been significantly increased. All this said, legislators must also be careful that, in their efforts to improve the lot of overseas Americans, they don’t inadvertently make things worse for some American expats by exposing them to higher taxes under a different part of what is a very complex federal tax code.”
Yes, Congress must take care to NOT make things worse (which is easy to do) but more importantly the time has come for America to decide whether it values all Americans (including Americans abroad) or whether it wants to perpetuate a system of laws (not even found in one section of the Internal Revenue Code) that not only penalizes Americans for living outside the United States but is now forcing them to renounce U.S. citizenship to survive. Yes FORCING them to renounce.
With the exception of the “Foreign Earned Income Exclusion” the U.S. Internal Revenue Code “in it’s majestic equality” treats Americans abroad and Homeland Americans in exactly the same way. It’s just that the Internal Revenue Code punishes anything that is “foreign” and anything that is NOT a U.S. sanctioned form of tax deferral. The effect of this in plain English is:
1. All the financial accounts of U.S. citizens abroad are deemed foreign and are therefore subject to complex, punitive and and expensive reporting requirements. The penalties for mistakes can be life altering and can destroy assets. (That includes your neighborhood bank.)
2. Retirement planning throughout the world is generally based on principles of “tax deferral”. This means that it is very difficult (and I would argue impossible for people of modest means) to engage in retirement planning abroad. The tax compliance community is even treating Canadian mutual funds as vehicles that are subject to special punishment (PFIC taxes and reporting requirements).
3. Business planning – Americans abroad who run their business through corporations (in Canada think Canadian Controlled Private Corporations) are subject to unbelievably punitive requirements.
4. This regime is enforced by expensive accountants and lawyers who (truth be known) don’t completely understand how this complex system of laws interact and don’t fully understand them (not that anybody could). The result is that they interpret the laws in the most conservative ways (generally to protect themselves). Consider the new 3.8% Obamacare surtax. Everybody knows that this is for the purpose of financing Obamacare for Homeland Americans. There is no specific clarity on whether it applies to Americans abroad. What’s interesting is that if the Obamacare surtax applies to Americans abroad, it is likely that a higher percentage of Americans abroad will pay this tax than Homeland Americans will pay it. The main reason is that Americans abroad are married to “foreign spouses” (AKA “aliens”) will almost certainly use the “married filing separately category”. The result of this filing category is that the threshold for this tax is lower making more people subject to it. Think of the unfairness and absurdity. The Obamacare surtax – which is designed to fiance medical care for homeland Americans – is likely to be applied to a higher percentage of Americans abroad than to Homeland Americans.
5. Before stopping (I could go on all day) I am aware of elderly Americans abroad who are (I am going to put this in CAPS) FORCED TO RENOUNCE THEIR U.S. CITIZENSHIP TO SAVE THEIR RETIREMENT. Here is an increasingly common scenario which I am seeing in Canada. In Canada the sale of a principal residence is tax free and the U.S. it is subject to capital gains tax (and possibly the Obamacare surtax). Imagine a person reaches the age of retirement and has lived for years in a house that has increased in value (along with the rate of inflation). In other words, the house is the persons source of capital and retirement plan. Once the person stops working they really can’t afford to pay the expenses of running the house. So the idea (and possible long term objective) was to sell the house, downsize and live off the capital. As a U.S. citizen, the person is NOT able to do this and preserve the capital. Why? Because the sale of the house will be taxed. The solution AND OBVIOUS NECESSITY is to renounce U.S. citizenship so that the person can sell the house and preserve the capital. Does the person want to? No. Does the person have to? Yes.
6. But hold on just a minute. Since 2008 U.S. citizens who renounce U.S. citizenship (I don’t move physically MOVE from the United States) may be subject to (get this) a tax on the renunciation of their U.S. citizenship. This is nothing more and nothing less than the confiscation of the assets of people (which were not accumulated in the United States) because they chose to live outside the United States.
I could go on but I am going to stop. Thanks again to Mr. Lachowitz for this fine article. I certainly share his view that Congress must be careful to NOT make things worse, But, actually it’s time for the U.S. to stop this nonsense and move (just like the rest of the world) to residence based taxation. The situation is urgent!!!!
And I almost forget, I didn’t even mention FATCA – the new U.S. “Foreign Account Tax Compliance Act”. The purpose of FATCA is to enforce these tax rules on Americans abroad. But to enforce the rules, one must locate Americans abroad. Hence, FATCA. Since July 1, 2014 banks around the world are now searching for U.S. citizens who are account holders. Obviously this primarily affects U.S. citizens abroad. If you were a non-U.S. bank would you want to put up with this garbage? Of course not. The obvious solution if possible – close the accounts of U.S. citizens.
To repeat – the U.S. must reform (tax and otherwise) the way that it treats its citizens abroad!! (That is if it cares about them)
I kept my question short. I focused on forward issues for me personally rather than the stuff that hit me in the past.
As a US immigrant along with my wife with prior working lives in the UK we find the burden and risk associated with filling FinCen 114 and 8938 extensive.
We feel like these are traps set for us and expect additional traps to be set. Is there any chance that the administration would allow foreign pensions to be moved into the US to avoid all this risk?
The block for such transfers is clearly on the part of the US and we can move our pensions around in Europe and many other countries with ease (though with some expense).
Sophia Yan @ CNN Money has expressed interest in hearing form “Accidental Americans”. On a different note, I have been granted a meeting with my MP January 6th @ 2:30 p.m.. I am hopeful as he was my neighbour in the past, I taught his children Sunday School and helped him paint his basement one summer. He doesn’t know my birth place and I think he’ll be surprised!. Anyone have anything they would like me to say?
Thank you, Calgary411. Their Facebook page, although moderated, allows you to post articles and comments too. I don’t know of any other major news outlet that’s taking this kind of interest in American’s abroad.
@ Ann#1 Not sure how forthcoming your MP will be. Because of the lawsuit it is likely that he will be muzzled on the subject of FATCA. It;s as opportunity however to discuss how people are feeling and the stress and other issues we are all feeling. How this is affecting not just US Persons but also their families.
Bubblebustin,
You’re welcome.
…and of course, we’ve had good articles at WSJ by Laura Saunders and Liam Pleven at Wall Street Journal.
FATCA Tracker https://www.taxconnections.com/community/FATCA-Tracker/10008#281 would also like stories. I’ve put quite a bit of *stuff* there, but not much back from the lawyers who have signed onto that forum.
Ann #1,
Is he your Conservative MP? Given your background with your MP and him not knowing your birthplace, it should be an interesting meeting. Feel free to bring up anything you’d like about *entrapped* by ‘mental incapacity’ US-defined US citizenship children born in Canada to US parents who the Conservative government calls *US citizens who happen to reside in Canada* — and others also unable to renounce because of ‘mental incapacity’. And, of course, all other US-defined US-citizens, born in the US to other-country parents but who returned to their parents’ home country when they were still minor children — no CHOICE in the matter at all.
I especially liked the comment in answer to this:
On the Jonathan Tepper article,
http://www.nytimes.com/2014/12/08/opinion/why-im-giving-up-my-american-citizenship-passport.html:
… a comment to a comment there:
Tor Krogius
Northampton MA 5 days ago
It is odd that the author points out that he has very little connection to America, has lived in America very little, and does not vote in America, but then complains about how difficult it is to maintain his American citizenship. I don’t get it. There seems very little there there.
If there is a posterchild for why the US should change its treatment of expats, this person is not it.
with another comment regarding my son’s situation (and any others like my son – it is by no means JUST my son) that appeared in The Economist:
@ calgary411… Most definitely bringing up the challenges that individuals with developmental and physical handicaps are facing because of this mess. My very good friend came to Canada as a small child. She had German measles during her first pregnancy. Her son is 31 and is challenged. The US considers him their citizen because his mother lived common – in – law with his CANADIAN father. He receives $856.00 per month from Canada and the US thinks he should pay taxes on benefits he gets from Canada? Really? And of course, he can’t renounce. He absolutely lacks the ability to understand what renouncing means. Her response “you’ve got to be joking”. He can’t understand citizenship so he wouldn’t miss it. She has managed to stay off their radar for now. The child’s birth wasn’t registered and he has a Canadian birth certificate. She doesn’t have a ss#, but she only took citizenship in 2009.
Your friend who came to Canada from the US as a small child, then, passes US-defined US citizenship on to her challenged born-in-Canada son per http://www.uscis.gov/policymanual/HTML/PolicyManual-Volume12-PartH-Chapter3.html (disregarding the offensive (to me) *out of wedlock* definition of a child’s birth)
Of course, I would say don’t register that child — maintain that child is ONLY CANADIAN with his CANADIAN birth certificate. Try to stay off the radar. One of us out here, dodging the absurdity of this for someone with a ‘mental incapacity’, is more than enough. (As my son and may others like them, they would have no more ‘mental capacity’ to go through the hoops of getting a US SSN to be able to comply with back US tax and reporting to then be able to renounce — which they cannot do anyway because of lack of mental capacity — and neither can the mother or a guardian or a trustee renounce on behalf of her son. It is absolute definition of absurdity!)
Would you MP maintain that such a child born in Canada, one of Canada’s most vulnerable, is a *US citizen who happens to reside in Canada*? How can any Canadian MP of any party say that with their own real moral conviction — would you vote for someone who thought that? Might also ask if that child should be eligible for a Canadian Registered Disability Savings Plan the same as any other Canadian who has a disability. (Of course, the child would be eligible for that registered investment — just would not have the benefit from it as any other would.) And ix-nay on the *Conservative party line* that Canadian registered accounts are exempt (i.e. they are only exempt for the bank to turn over that information to the CRA — there is NO exemption for the requirement for tax and reporting obligations to the US).
@calgary411,
You would think they would be ashamed to have such wording in the laws.
Yesterday I met a woman from ND in dairy queen (took my kids after school). Never met anyone like this before. Very entertaining. Launched into an incredible rant about Obama that I won’t repeat. Made me look like a major supporter of the democrats.
Anyway she was adamant that children of illegals born in the US are not citizens. I thought they were but haven’t looked at it since I am not illegal (this woman asked me if I was legal, never been asked that before).
This is off-thread. I’m not sure if this has already been commented on, but here is Title 18 › Part I › Chapter 44 › § 922 of the U.S. legal code:
Section (d) “It shall be unlawful for any person to sell or otherwise dispose of any firearm or ammunition to any person knowing or having reasonable cause to believe that such person—…
… (7) who, having been a citizen of the United States, has renounced his citizenship; ”
You know you’re considered special when the U.S. won’t let someone sell you a gun.
@Ann#1
As Calgary asked, is your MP a Conservative? I ask because I too have a meeting scheduled with my Conservative MP in the new year. It’s my third one with him however. The first one was 3 years ago when I started advocating against Canada signing the IGA. In the beginning, like Minister Flaherty, he was was appalled by the US’s intrusion into Canada and even encouraged me to participate in the pre-2013 budget submissions where I could express my concerns about FATCA. You could imagine how my latest encounter with him at his Christmas open house last Wednesday took on an entirely different tone now that he expressed being “thrilled” about Canada entering into the IGA. Let’s just say he sensed my feelings of betrayal on his part and insisted I meet with him later order to discuss the matter further. He suggested that rather than “lament the past” we should seek solutions. I’m only agreeing to meet with him in the off chance that something good might come of it. Right now I’m concentrating my efforts in bringing our riding’s new Liberal nominee up to speed and trying to get a policy statement relating to the Harper FATCA IGA from the Liberal Party. Thankfully I’m making some progress there.
@Neill
I wonder what this lady at DQ’s response would have been if you asked her what she thinks the status should be of a child born in the US who has one illegal parent. Should they be denied citizenship/be granted citizenship/ be given 2nd class citizenship?
Children born in the US are US citizens unless their parents are diplomats. I dare say most illegals aren’t diplomats.
BB give Mr. Weston my best! He never answers my lettere, e mails or personal visits to his office with anything other than the standard form letter. You can tell him I and others will vote for whoever has the best chance of defeating him. ( prob. the ex mayor)
@Duke of Devon
I know of at least one other Brocker he’s ignoring also. I’ll mention it to him.
If you haven’t contacted Pam Goldsmith-Jones, I’m urging you to do so. We’re trying to organize a coffee meeting where she can discuss this with others affected by the IGA.
The stupidity of Citizenship based taxation is supported by both parties by the old school politicians, not the Tea Party Wing of the Republican Party, but all the old line Democrats support citizenship taxation, instead of residential taxation. Car Levin of the Marxist democrats and John Mc Cain of the RINO republicans, are leaders of that faction. If they would just retire or get defeated, perhaps we could get the FairTax passed and save the Republic from collapse from within, because of gross stupidity.
@rkljdf
From the post above: “You know you’re considered special when the U.S. won’t let someone sell you a gun” — I noticed that persons who have renounced U.S. citizenship are number 7 on some list. So, I wondered, who are the other designated people, listed along with former citizens who have renounced, who are apparently considered in the same category of risk? Well, good grief. Here’s the list from the legislation, condensed a bit:
Sxn 922 (g) — List:
(1) convicted of a crime punishable by imprisonment for more than one year;
(2) fugitive from justice;
(3) unlawful user of, or addicted to, any controlled substance (defined in the Controlled Substances Act);
(4) adjudicated as a mental defective or committed to a mental institution;
(5) an alien who is illegally in the U.S;
(6) dishonorably discharged from the Armed Forces;
(7) who, having been a citizen of the United States, has renounced his citizenship;
(8) subject to a court order, e.g., restrained from harassing, stalking, threatening a partner or child; a credible threat to physical safety of such a person;
(9) convicted of a misdemeanor crime of domestic violence.
canoe,
Punitive, punitive — nothing else for leaving the *homeland* to make a life elsewhere. We see the message in so many comments and here it is enumerated. Wonder just when and with whom *the list* was legislated? (Not that most of us want any of their guns, most likely.) Really — there should be a movie — not made in Hollywood.
calgary,
Afer some fishing around on internet, to search for an answer to your (and my) question, “Wonder just when and with whom *the list* was legislated?”, I found some clues:
— The list came in the Gun Control Act of 1968, signed by Pres. Lyndon Johnson, following assassinations of J. F. Kennedy and others.
— I couldn’t find any legislative explanatory notes, but I came across an article by David T. Hardy in the Northeastern University Law Review, Vol. 3, where he mentions, with regard to the list of prohibited persons, renunciation of citizenship as “a 1960’s fad used as a means of protesting the Vietnam War”.
Again, good grief. Punitive, as you said.
Progress happens.
At first, most media articles about FATCA were all about going after tax cheats. Dissenting expats who commented to these articles always faced the uphill battle of posting rebuttal, while writing to an unknown audience.
Gradually, some articles began to appear about harms being done to expats by FATCA/CBT. Commenters to these articles faced an easier time, chiming in with agreement or elaborating on points the article made or missed, but still writing to an unknown audience.
Now things have advanced to identifying places actually asking for expat stories. It’s phenomenal progress that high-profile media like the WSJ ask, and by all means the opportunity must be seized. But just who the audience is still is uncertain.
Calgary411 notes it above, but I think https://www.taxconnections.com/community/FATCA-Tracker/10008#281 should be singled out for going the next step. Not only do they ask for the stories of negatively affected expats, they say who their ultimate intended audience is.
“You have my promise we will be bringing the FATCA Tracker Community to the attention of Congress.” That promise can be found in a response to comments at: http://taxconnections.com/taxblog/is-fatca-doing-more-harm-than-good/#.VIZNpYg76rU
The more pressure that can be put where it counts, the better.
A very good discussion is going on over on this thread. It is the same WSJ story, but on a different thread and with different commentators.
http://blogs.wsj.com/totalreturn/2014/12/16/u-s-expats-find-hope-in-senate-finance-tax-reform-proposal/tab/comments/#comment-225401
Perhaps some Brockers would like to weigh in.
@ JDL
RE: the WSJ article
I think RockyMtnDreamer has been turned 150 degrees from his original trajectory. At least he read the comments and came very close to a full understanding of the trouble with U.S. extra-territorial taxation. Perhaps he’ll never do a full 180 degree turn but compared to some commenters we’ve encountered (the Hunter for instance) this is a significant victory. And who knows how many others followed the trail to truth and reason by reading those comments.
@EmBee…..He almost made it to 150 degrees but then went back into his bunker. Logic can never seem to undo the effects of the brain washed exceptional folks. But for anyone else reading this conversation with functional cells could see how his method of thinking doesn’t hold. He most probably speaks for most “homelanders” and our arguments, the superior of course, won the day.
It’s definitely becoming a much less frustrating atmosphere out there. I believe the general public will eventually end up in two camps – those who consider it a sin to move abroad (and the penance being taxation),or those who believe that Americans should be able to leave the country relatively unimpeded for however long they like.
And should the litmus test for a person’s loyalty to the country continue to be whether they pay tax or not, then the US better be prepared for a dwindling diaspora and bigger percentage of nothing.
WSJ’s Expat blog has 23.4K Twitter followers, as compared to ACA’s 612 and AARO’s 371.
Incredible really, considering they’ve only been in existence for a few months. Be sure to include @WSJexpat in your tweets.
Over at the WSJ Expat blog, RMD comments include a recurring theme that “Renunciation does sound inconvenient but not unreasonable nor expensive IMO.” This person (real?) mentions he/she has 20+ years to retirement and “pays a lot of federal taxes (over 6 figures annually)”. I don’t know how much money a person has to make to have a $1M+ federal tax bill annually, but that surely is in a different ballpark than probably most of us here, which may affect ability to comprehend the problems for us normal/”little” folk. A lot of excellent points have been made by commenters, but they are apparently not registering. [Note: Current cost to renounce (the fee alone), given the exchange rate, $2350 = $2726.27 CDN — a substantial amount to me. But I can see that this is “not unreasonable” for someone making enough to pay over six figures in federal tax.]
Well RockyMtnDreamer looked promising there for awhile as someone who might see the light but he appears to want to remain plugged into the US exceptional matrix — no red pill for him — blue will do. Anyway we took a good kick at the can and hopefully those who read the rational comments at WSJ will take a few steps forward.