From Moodys Gartner Blog, Roy Berg, February 11, 2015: US proposes relief for some who renounce US citizenship: Is FATCA a motivating factor?
The details of the Proposal, and the chances of being given the effect of law, while interesting, are less so than the Administration’s motive for advancing it. Politicians don’t get re-elected by winnowing away their constituency base or enacting legislation that has the effect of raising tax (even in small measures). Normal people, even politicians, behave rationally so there must be a reason for the Proposal. Could the Proposal play a small part in a more subtle strategy that might involve foreign opposition to FATCA and IGA-partner domestic legislation?
- Some Canadian dual citizens who wish to renounce US citizenship may qualify
- Will the Proposal become law, and is the back door unlocked?
- Termination of United States Citizenship
- Why would the Administration propose relief to people who wish to renounce US citizenship?
- Is there another motive to relieve these dual citizens from tax and filing obligations?
- Conclusion – Regardless of the Proposal’s chance of being given the effect of law, the Administration’s motivation for bringing it forward, or the narrow class of individuals to whom it would apply, the Proposal is positive step. It is evidence that the unenviable predicament faced by dual citizens living abroad has been heard in Washington, DC and there may be the political will to affect change. Change may come quickly or not at all, but it will never come until there is understanding of the issue. The Proposal is an indication that understanding may be taking hold.
Eric’s February 3, 2015 post, “Obama FY2016 budget proposes limited relief for accidental duals-at-birth who give up U.S. citizenship”
Analysis from Virginia La Torre Jeker JD, February 5, 2015, “Relief for Accidental Americans: Obama Administration’s 2016 Revenue Proposal“.
and, one more, to keep analysis (so far) all together in one post:
The 2015 Obama budget proposal for “dual citizens” cannot be implemented without Congressional approval
Part 1 – The Obama 2015 Budget Proposal – Change you can believe in?
Part 2 – My thoughts on this part of the Obama budget proposal
Part 3 – Differing perspectives on exempting a “sub-group” of “technical U.S. citizens” from the compliance and tax horror which is part of the U.S. “Tax responsibilities of expatriation“
Part 4 – Can this Obama budget proposal be implemented by Treasury without Congress?
I’m not so sure this is a positive step. It is the typical Washington response to a problem. The problem is citizenship based taxation. The solution is residence based taxation. But, instead they will create a complex and convoluted web of laws and regulation that creates no true winners but some escapees while others remain unfairly caught in the web. They will feel they have solved the problem because they have addressed it, even if inadequate.
Or…as others more in the know than I have said, it could be a strike at the ADCS lawsuit, as it would seem to apply directly to the plaintiffs that have been engaged, conveniently ignoring a great majority of we victims of the USA (and the Moody’s Gartner types).
In all honesty, do they think this will “fix it”? Are they that desperate for money that they will pull out an outdated law from the 1800’s, dust it off and enforce it as if it was a modern day law? What other barbaric 18th century laws are they going to enforce next? Yes, they are watching here and seeing what damage is being done and the fact that people will not stand for it. Just explain it to ANYONE and they will have the same “take” on it as we do ” The USA has completely lost ALL morals and Human rights standards in it’s quest for more money to fix problems that it’s own government has created” To the US government, Please reinstate the very standards that made us all love the USA and leave the innocent people alone. It is hard enough for these people to make an honest living in other countries. They need their lives back….
I agree very much with what you wrote, but would tweak it a little:
“I’m not so sure this is a positive step. It is the typical Washington response to a problem. The problem is citizenship based taxation. The solution is residence based taxation. But, instead they will create a complex and convoluted web of laws and regulation that creates no true winners but some [a few] escapees while others [the vast majority] remain unfairly caught in the web. They will feel [falsely claim] they have solved the problem because they have addressed it, even if inadequate.”
I think the last few paragraphs in the Moodys Gartner article sums it up:
“One reason that makes some sense is that the Proposal was included in order to quell opposition to FATCA in IGA-partner jurisdictions. Recall that IGAs are typically not self-executing and require domestic legislation to go into effect. Many of these IGA partner countries may find it difficult to pass legislation that disparately treats those with only domestic citizenship and those who have dual citizenship. The Proposal would make renouncing US citizenship for some a much less draconian process, and thus may stem domestic legal challenge.”
“For example, in Canada there is active litigation that challenges the legality of the legislation that implements the IGA. According to the Statement of Claim, both plaintiffs were born dual citizens. If the Proposal were given the effect of law, and if they qualified under the terms, presumably they would be entitled to renounce their US citizenship and avoid the appurtenant filing obligations, failure to file penalties, and tax obligations. Whether that would be sufficient to nullify the lawsuit is a question for Canadian constitutional and litigation lawyers, of which I am not.”
They’re bleeding Americans, and things don’t look so good. Raising the renunciation rate hasn’t stemmed the flow, so now they’ve decide that performing triage is in order, instead of getting to the source of the hemorrhage.
The more they bleed, the better. I will soon be added to their pool of blood.
Everyone is talking about Obama’s proposal of relief for certain accidental dual citizens.
What Obama is proposing is not important (other than its potential impact on the ADSC lawsuit). It is what he is silent about that is important.
Obama is dead silent about ALL other Americans living abroad. One has to wonder what the die-hard Democrats Abroad members have to say about that. Has it hit them yet that they are in fact on the FATCA target list?
OK, totally the wrong place for this comment, but is there any particular reason we can not comment on the Swedish video clip (I mean comment here at IBS)?
@Walter, interestingly, you said;
“…One has to wonder what the die-hard Democrats Abroad members have to say about that. …”
The US tax lawyer author of the Moody’s piece identifies himself as a Democrats Abroad (Calgary) member, and appears from his resume to have spent the vast majority of his life as a US homelander citizen, (though currently resident in Canada – coincident with the advent of the US extraterritorial CBT/FBAR/FATCA compliance bonanza in Canada, which started in the latter part of 2011).
He has issued regular blog posts/PR adverts praising the FATCA IGA in Canada, has appeared before the Finance Committee of Parliament in support of it, and has stated his opposition to the ADCS lawsuit http://www.adcs-adsc.ca/Issue_Cost.html He dismisses and belittles the concerns and pushback by Canadians regarding the US extraterritorial imposition of FATCA on Canadian citizens and residents in Canada by US extortion. He and his partner Kim Moody ( notably, neither are Canadian constitutional lawyers or constitutional experts) are unconcerned with the un-Constitutionality of the FATCA IGA, and the significant and unlawful conflict with our Charter of Rights and other Canadian laws. Canadian law and tax professors such as Arthur Cockfield (Queens U) and Allison Christians (McGill U) have presented thorough robust critiques of the FATCA IGA, ( See; Christians, Allison and Cockfield, Arthur J., Submission to Finance Department on Implementation of FATCA in Canada (March 10, 2014). Available at SSRN: http://ssrn.com/abstract=2407264 or http://dx.doi.org/10.2139/ssrn.2407264 and Cockfield, Arthur J., FATCA and the Erosion of Canadian Taxpayer Privacy (April 1, 2014). Report to the Office of the Privacy Commissioner of Canada, April 2014. Available at SSRN: http://ssrn.com/abstract=2433198 ) and Canadian constitutional expert Peter Hogg wrote the Harper Conservatives a letter to advise them of significant Constitutional issues ( see http://www.greenparty.ca/sites/greenparty.ca/files/attachments/peter_hogg_fatca.pdf which was obtained by Green Party leader Elizabeth May via Access to Information ) but the representatives from the compliance industry such as Berg do not bother to rebut or address any of that evidence.
Re: #Sweden Narc’s out its Own (accidental US citizens) to USA via #FATCA
This blog item says “comments closed” . . . so there’s no way to add any thoughts. Why are “comments closed”?
I think it’s a little snafu. Hopefully Admin will fix it soon.
I don’t know if it is just Canada. The word does seem like the word is getting out. Maybe that is why they have started to act. Maybe it is finally starting to dawn on them that the PR on this is going to be really, really bad. Well, U.S.government, we told you so.
Yesterday I gave a small talk on CBT to a group of non-U.S. people (as far as I could tell). I doubt that any of them were British conservatives, but they had all heard about what happened to Boris and felt that he had been hard done by. If the IRS had gone after a really badly behaved non-dom American who had been playing tax games Britons probably would have cheered. And there may be some: the press here has raised questions about the tax haven activities of Richard Caring, who pays less money to the British government since he claims to be a U.S. taxpayer. Why does the IRS go after Boris and not him? Does Caring’s association with Bill Clinton play a role? Like Marc Rich, Caring donated to Clinton’s foundation. Boris pays full British taxes and never pretends to be anything but British: going after him for one things the U.S. taxes more lightly just makes the U.S. look greedy,
It has hit the CNN website this morning, so hopefully, this helps get it out there & is discussed openly by the media.
JB: Could you be more specific about what issue is now being discussed on the CNN website? The Swedish video? The Democrat budget proposal regarding accidental Americans? There are several things being mentioned in these comments. Also could you provide a link to the CNN site? Thanks!
This Obama proposal is just trying to nip at the edges to soften the effect on duals at birth. It may even be an attempt to diffuse the Canadian suit. In a way it is a divide and conquer approach – let’s let a subgroup of the Accidentals/duals at birth off the hook but still go after the one’s we REALLY want – those (like me) that were born in the US, moved overseas as adults, got another passport (or not) and stayed overseas. THOSE are the ones that are clearly trying to evade US taxes. Of course this logic is BS, but frankly I believe that the narrow minded rocket scientists on Obama’s team that came up with this narrow carve out really believe we live overseas to avoid US taxes.
Duals at birth though doesn’t address people born in the US but moved to another country as children, became citizens and effectively grew up as “foreigners”.
What everyone everywhere else in the world gets and Americans like to ignore (where collecting taxes are concerned anyway) is that being born in the United States doesn’t make you an American.
My child was born in the US but call her an American and she bristles visibly because that is not her primary identification.
Being a minor she’s allowed a tiny six month escape window but she (and duals from birth) are still be extorted to the tune of $2350 to exercise their right to be free of US citizenship, which will nevertheless haunt them til they die because of the place of birth on their passports.
Birthplace citizenship is just as noxious (and antique) as CBT, imo, but citizenship should be an individual’s choice because anything else is just a fancy form of slavery.
Steve, I agree with your comment:
“frankly I believe that the narrow minded rocket scientists on Obama’s team that came up with this narrow carve out really believe we live overseas to avoid US taxes.” So do many Homelanders, and probably even some citizens of our current countries of residence and citizenship.
I’m afraid that the efforts to repeal CBT might reinforce this myth. After all, if CBT is changed to RBT, Homelanders could reason, overseas Americans will be happy. They will be so ecstatic that they’ll be sure to vote in U.S. elections, for the party that gave them this this relief.
Replacing CBT with RBT would be wonderful for Americans living outside of the Homeland, but it won’t help people born in the U.S. who left that country and became citizens elsewhere because they did not want to remain American citizens, and didn’t know that they or their family members were still deemed Americans or U.S. Persons. Obtaining a CLN is difficult, expensive, or impossible for many, and it’s issued by the U.S. State dept., not the IRS.
Certainly, “Overseas Americans” need relief from CBT for all Americans who intend to remain U.S. citizens, but until U.S. citizenship law is revised to allow a well-understood, simple and permanent method of relinquishment, there won’t be much “relief” from the country of our birth for many who thought we’d shed its taint.
Very sad, but true (to me), commentary that all of this *strategy* is aimed at getting votes, not about real threats and consequences already for persons’ human rights and lives ruined, financially and emotionally. I refer to both vote-gathering in the US where this should and could be resolved by the common-sense change to residence based taxation and in other countries, too damn meek to stand up to the US extra-territorial law that affects a good many (in fact, really, all in the cost to their countries as a whole) of their countries’ people. No political party (the Greens in Canada an exception), whether in the U.S. or abroad, wants the stigma of any hint of tax evasion to mar their chances of getting those valuable votes. Seems to me a bit like prostituting oneself.
We are seeing cracks in the media that tell the real story, and have it in results of scholarly surveys as Dr. Amanda Klekowski von Koppenfels. We need persons listening to Canadian Professors Allison Christians and Arthur Cockfield.
That this *proposal* is even in print, to me, gives some encouragement that this over-reach by US citizenship-based taxation wrongly affects many more than *just Accidental Americans*. I hope it is discussed and analyzed far and wide.
I was fairly surprised this was proposed by the current administration but probably a good change overall.
Getting it passed will be a different story however.
It’s all f*ng BS. Note the requirements?
…an individual will not be subject to tax as a US 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.
You still have to file 5 years of US taxes…spending god knows what to the tax CPAs to renounce. It’s just smoke and mirrors. This is a bunch of legal bullshit that puts us no step forward at all to solving anything. In fact, you’re still in the same exact position that you’re in prior to this legislation being tabled. Just that they state that they won’t go after you as a covered expatriate. This is complete and utter bullshit.
Phil Hogan, do you really HONESTLY think it’s good legislation? Maybe it’s good legislation for YOU perhaps – you’ll make a killing with regards to the taxes being filed by “born in Canada (and lived whole life in Canada); yet deemed American citizens.” I see this as a legislation filled with hot air accomplishing nothing but putting those deemed duals (whether they wanted to be or not) who were born in Canada or any other foreign country still through the taxation wringer. In other words – they’re no better off than before this piece of useless legislation was tabled.
All this tells me is that the only thing that American legislators are concerned about is how easily they can get a hold of expats’ foreign-earned income. And the American people are judged by their willingness to go along with their legislators. Which makes the entirety of you THIEVES.
The Animal Not quite. IF this is made law (unlikely) it will benefit a few accidentals- those who never had any connections- because they would be treated as non resident aliens during the five year period, they will have no tax filing requirements and can certify that they were compliant without having to file a thing.
@The_Animal I don’t think you truly understand the proposed changes. They are meant to help accidental Americans.
Also, unlike other practitioners we keep our rates relatively steady during the last few years on cross border work. Mainly because we wanted to help our existing clients and anyone new that needed to catch up on their US tax returns.
There were certainly lots of tax preparers and lawyers that took advantage of vulnerable people during this period, but please stop lumping us all in the same boat. Many of the CAs that I know that prepare US taxes for Canadians genuinely enjoy the work and helping clients.
See this: 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.
Doesn’t mean you don’t have to file.
The key words are “had been a nonresident alien during that period.”
Meaning any non-resident tax returns would need to be file for US source income aka US rental and alike