Not applicable to adult emigrants. No other proposals to simplify income taxes for individuals who don’t live in the United States. No help with the insane reporting requirements on foreign retirement & medical & disability savings plans. Some people may hope it’s a start from an administration which up until now has been totally deaf to the “special concerns and issues of Americans abroad” which the president claimed he would address when he was campaigning for our votes. Others will take it as what it appears to be at face value: a chance to get out while the getting is semi-good. At page 282 of the “Green Book” (all links added by me):
Individuals who became citizens of both the United States and another country at birth may have had minimal contact with the United States and may not learn until later in life that they are U.S. citizens. In addition, these individuals may be citizens of countries where dual citizenship is illegal. Many of these individuals would like to relinquish their U.S. citizenship in accordance with established State Department procedures, but doing so would require them to pay significant U.S. tax.
Under the proposal, an individual will not be subject to tax as a U.S. citizen and will not be a covered expatriate subject to the mark-to-market exit tax under section 877A if the individual:
1. became at birth a citizen of the United States and a citizen of another country,
2. at all times, up to and including the individual’s expatriation date, has been a citizen of a country other than the United States,
3. has not been a resident of the United States (as defined in section 7701(b)) since attaining age 18½,
4. has never held a U.S. passport or has held a U.S. passport for the sole purpose of departing from the United States in compliance with 22 CFR §53.1,
5. relinquishes his or her U.S. citizenship within two years after the later of January 1, 2016, or the date on which the individual learns that he or she is a U.S. citizen, and
6. certifies under penalty of perjury his or her compliance with all U.S. Federal tax obligations that would have applied during the five years preceding the year of expatriation if the individual had been a nonresident alien during that period.
The proposal would be effective January 1, 2016.
This didn’t appear to be covered in the table of revenue estimates. Correction: As Tim points out, the revenue estimate is in the summary tables file on the White House/OMB website, rather than the Treasury website. They estimate it would cost $400 million over ten years, with more than half of that coming in the first three years as people scramble to take advantage of the offer.
Details of revenue estimates
|Deficit increases (+) or decreases (-) in millions of dollars||Totals|
|Provide relief for certain accidental dual citizens||………||60||103||55||23||24||25||26||28||29||30||265||403|
I am quite interested to know the underlying number of relinquishers OMB used make these estimates (and for that matter, whether they have offset those estimates by the $2,350 fee that many accidentals are going to have to pay because they only qualify for renunciation and no other method of giving up citizenship). I assume that the estimates for ongoing deficit increases past 2018 are attributable to one-time losses of revenue from additional relinquishers,rather than ongoing loss of revenue from the initial group of relinquishers.
For example, they may be using the utterly false (and late again for this quarter) Federal Register relinquishment numbers and assuming that all of them would qualify for Obama’s plan. (That would also mean they’re assuming that no non-accidental Americans have ever given up citizenship because of the FATCA mess that Obama signed into law — clearly an incorrect assumption.) In that case they would be saying that in 2020 they’re expecting an average annual revenue loss of $8,000 per person, rising to $10,000 per person by 2025.
If OMB understands that only a small proportion of recent relinquishers qualify for Obama’s plan, then they’re trying to claim that the revenue loss per person would be much higher — which I don’t think is supportable. On the other hand, they may also understand that the actual number of relinquishers is higher and that only a small proportion of them will qualify for Obama’s plan. Though given the dubious earlier models of the effect of cancelling the FEIE, I get the sense that the government does not have this much of an in-depth understanding of emigrant tax issues.
Treatment of businesses owned by American emigrants
Another small mercy: the proposed 19% minimum tax on foreign earnings only applies to CFCs owned by “entities taxed as domestic C corporations” — finally, an implicit acknowledgement that some owners of CFCs are human emigrants rather than multinational corporations. Unfortunately the 14% tax on “previously untaxed” foreign earnings does not appear to include that same acknowledgement.
Will not affect ADCS lawsuit
Update, 6 February: Stephen Kish has already spoken with Mr. Arvay about the Obama budget proposal, and states:
Some you have expressed concern that should the Obama budget proposal, if ever enacted, provide some relief to duals-at-birth, like our two Plaintiffs Ginny and Gwen, this could mean trouble for our lawsuit — because both Plaintiffs are duals-at-birth. Apparently, Canada’s Mr. Roy Berg himself, a U.S tax compliance professional, is mentioned in an article (which I have not seen) which states that should the tax code on duals-at-birth change for the better, this might “spell the death-knell” to our Canadian lawsuit.
Please do not worry. The Arvay team has been quite aware of the issue of specific characteristics of plaintiffs from the very beginning.
Today Mr. Arvay also has confirmed with me, yet again, that our legal strategy is not limited to the specific characteristics of the two plaintiffs, that additional plaintiffs can be added to the lawsuit should this ever be necessary, and that our aim has always been to include affidavits from people who span a range of differing characteristics.
An example of Canadian “willful blindness” – Don’t know if Isaac Brock covered this, but found this and nearly regurgitated the contents of my supper.
“B.C. Man Richard Brunt Tells U.S. Voters To Send Obama Our Way”
And of course the Vancouver Sun regurgitated that letter verbatim:
With the Obama-led signing into legislation of the Foreign Account Tax Compliance Act, targeting American expatriates and accidental citizens abroad, the Obama administration has unleashed hell on earth for millions of American expats around the world. Renunciations of United States Citizenship are increasing every quarter. And all because of one simple reason: He expects those who have to pay for those who don’t due to slacking off.
Evidently Mr. Richard Brunt of Victoria thinks that Obama is the best person in the entire world. Why not have him be our Prime Minister? I presume he’s completely out of his mind.
Having those who have money pay for those who aren’t willing to work will result in the haves feeling put-upon by the masses. Hell even those dual-citizen expatriates who are making $20,000 an year before taxes are being asked to provide for those who don’t want to work and sit around on welfare in the United States. “Pay my way for me, Pay for my kids, pay for my health-care!” Why do you think American expatriates are angry and renouncing their citizenships in droves. Nobody wants to pay for a slacker.
Look up “Angel Adams”.
It’s people like this that gives expatriates a bad impression. When expats making $20K-$65K working their butts off and then having to pay taxes in the home country that they’re living in, they don’t want to hear this kind of shit. Why should we have to pay for someone who is too damned lazy to get their asses off welfare and get a job? Even a McJob would help her situation more than sitting on her ass demanding that… “Someone’s gotta pay for me and my 15 kids.” No…nobody has to do a damned thing for you. Angel Adams.
Obama and the Democrats have painted expatriates as unpatriotic 1% tax cheaters feeding off the frenzy of the Occupy Wall Street Movements that spawned similar Occupy movements all over the world – headed by professional slackers who don’t have a job and have developed a portfolio of professional protesting while maligning hard-working individuals who are just trying to make ends meet.
If one wants to meet a cross-section of the expatriate community that these professional slacking scumbags want to malign as rich one-percenter tax cheats; take a look at the following: Google “Dual Canadian-American Citizens: We Are Not Tax Cheats.” These hard-working expatriates aren’t tax cheats, but you professional Occupy Wall Street and Occupy Vancouver slackers…ARE.
“We Are Not A Myth” Tumblr in answer to Robert Stack stating: Some claim that Americans living abroad will give up their U.S. citizenship because of liabilities and burdens created by FATCA. His answer:
FATCA provisions impose no new obligations on U.S. citizens living abroad. Instead, FATCA’s withholding obligations fall on institutions making payments to FFIs, and the due diligence and reporting requirements fall on the FFIs themselves.
U.S. taxpayers, including U.S. citizens living abroad, are required to comply with U.S. tax laws. Individuals that have used offshore accounts to evade tax obligations may rightly fear that FATCA will identify their illicit activities. Yet a decision to renounce U.S. citizenship would not relieve these individuals of prior U.S. tax obligations, and might well create additional U.S. tax obligations for certain citizens and long-term residents who give up citizenship or residency.
Yet the IRS penalizes taxpayers with draconian penalties upwards of $100,000 for failure to file a form. Some have been assessed in excess of $450,000 on personal savings for retirement from working for 45 years at a job paying at best $16/hr. Do they really think that a regular working joe is using their off-shore accounts for illicit activities? Let’s be honest here. This is nothing but a money-grab.
And our Progressive Conservative government rolled over and decided to let US statutes take precedence over Canadian Law in Canada by instituting an intergovernmental agreement (IGA) between Canada and the United States to let the IRS take precedence over the CRA.
And that is why most expats who have some indicia of US ties whether by accident of birth or by marriage to a US citizen are pissed off as hell at the United States, at Obama, and at Stephen Harper
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Obama budget defeated.
The budget that some pinned hopes on and one yes vote shows what was said upfront — that there was little chance of the budget proposal passing. There will be no magic bullet that will solve US citizenship-based taxation consequences for all that the US defines as US citizens for taxation purposes.
If we all share our stories with the Senate Finance Committee, we may be better heard. If we get behind litigation so our rights are not trashed, we will be heard. More of us must come together in a louder voice and full support with our hard-earned and taxed in other countries — in Canada at http://www.adcs-adsc.ca/.
Complacency is not an option in this effort and many others: http://www.cbc.ca/news/politics/cbc-asks-many-canadians-distrustful-of-federal-politics-poll-indicates-1.3005779.