I am taking the liberty of cross-posting here at Brock this current post from MapleSandbox: http://maplesandbox.ca/2015/no-crisis-see-you-in-court/. Lynne Swanson’s post of Tricia Moon’s reply on the Jack Townsend blog needs to be read far and wide…
No Crisis? “See You In Court.”
Tricia Moon has responded on Jack Townsend’s blog where he suggested U.S. Senate did not listen to submissions on citizenship-based taxation because they “are not yet willing to say there is a crisis.”
Tricia’s words are powerful. I post them here with her permission.
I came to know of the situation involving expats in late 2011. At that time, this blog was one of the only places to come for reliable information. I was much too frightened to be anything more than a lurker. I had never been one to participate online or engage in any sort of “cause.”
I renounced in 2012. The only way for many of us to deal with the anger and feeling of betrayal was to fight back. A completely American trait. I have lived in Canada more than 33 years and came due to marriage. I am an original “Brocker” and am the
Secretary-Treasurer for the Alliance for the Defence of Canadian Sovereignty.ADCS-ADSC put together a massive submission to the Senate Finance Committee; a total of 7 separate parts. See: (https://app.box.com/s/yn25x1gk….
The comments and stories of American expatriates is nearly 200 pages, demonstrating real-life circumstances of people affected by the U.S. hunt for ”tax cheats.” See:
(https://app.box.com/s/yn25x1gk…
& videos: https://vimeo.com/citizenshipt… ).Needless to say, the lack of any real, substantial indication of change for American expatriates is deeply disturbing. As I understand it, there was a total of 347 submissions to the International Working Group. Seventy-five percent of the submissions are from individuals. On top of the dismay created by the SFC’s insignificant “nod” to the plight of expats, now we hear that those 260 submissions (compared to the estimated 7.6 million expats abroad), indicate this is not a crisis and therefore, it’s perfectly reasonable for the U.S. government to sit on this until they recognize one.
Surely, one can understand that this is much more than a “numbers” game. Not all of those 7.6 million are adults. Not all of those people speak/write English well enough to feel comfortable making a submission. Not all of those 7.6 million know they are about to be
exposed by FATCA. And many are probably still too frightened to say anything with their name attached to it. It must be understood that the number of submissions speak for thousands more. In no way can the number of submissions be a sole factor in determining the depth of the problem.As to whether there is a “crisis”, I ask that the following be considered:
Ø more bank accounts being closed; France is now the focal point
Ø cancellation of mortgages continues
Ø U.S. taxation of tax-deferred accounts (in countries of residence)
(in Canada two types of accounts are matching grants by the Canadian government; this amounts to a tax directly on the Canadian people)Ø capital gains taxation on principal residences in countries where no capital gains tax is imposed (and no interest for mortgages is deductible as it is in the U.S.)
Ø unwarranted insistence that accidental Americans with no meaningful ties to the U.S. other than birth are liable for exactly the same tax and information reporting requirements as Americans who lived in the U.S. for decades
Ø inability of parents/guardians/trustees to renounce for those unable to form intent
Ø disproportionate cost involved in tax compliance (compared to Homeland Americans)
Ø disproportionate information reporting requirements (compared to Homeland Americans)
Ø the undeniable psychological effects including:
§ destroyed marriages
§ people with serious stress, anger and depression, some are suicidal
§ people terrified they will never be able to cross the border to care for elderly parents, etc.
§ people humiliated by the requirement to report their legitimate financial accounts to FIN CEN
§ people labeled as “traitors” etc for trying to protect their “alien” families by renouncing/ relinquishing
I would like these committees to ask the people who HAVE been affected, “Was this a crisis for you and your family?” Or would they say to such people, “I’m sorry but unless there are thousands upon thousands of you writing to the Committee, your misery doesn’t matter.”
They have, in fact, just said exactly that.
There have been endless letters, emails, visits to Washington, forums, information sessions, media coverage, a large presence in cyberspace etc etc etc. It is abundantly clear:
The US government could care less about the American Diaspora and as far as they are concerned, it is perfectly acceptable to simply let this continue.
This situation is incomprehensible. The long, long history of no enforcement of these requirements, nor due diligence of any kind.
The misapplication of FBAR, designed to be applied to resident Americans with foreign accounts. The hideous situation of OVDP 2009 and FAQ#35.The horrible penalties that were inflicted on those who tried to come forward and “do the right thing.” Ratio of penalty for tax owed: 10th percentile (“minnows”) -129%;
90th percentile (“whales”)- 4.17%.Douglas Shulman’s endless threats and humiliating manner. Douglas Shulman’s arrogant attitude that he need not respond to a TAD.
The outrageous extra-territorial behavior of the US requiring all other countries of the world to pass laws to break their own privacy laws or else a 30% sanction applied.
The absolute myth that expats have any real representation in Congress with the reality that this is indeed “taxation without representation.”
And then there is Mr. Schumer: “Nearly 10,000 people in the last 10 years have renounced their citizenship. Not a single one has been penalized. They will be.”
It must be remembered (and matters very much), that the majority of expats are law-abiding and tax-compliant where they live. Where is the need for all this demeaning treatment? Did it ever occur to someone in Treasury, the IRS, anywhere, that they might just let us
know and ask first? There would always have been time later for all the punishing.This seems endless and is nearly the last nail in the coffin. For those retired or close to it, there is virtually no chance of change in their lifetime. Wait another 30 years? Even 20 will not cover it.
And many more will look at this and say “It’s time to get out.” There really are no options for these people.
In Cook v Tait, the standard (and very tired) justification for citizenship-based taxation, Justice McKenna writes:
“In other words, the principle was declared that the government, by its very nature, benefits the citizen and his property wherever found and, therefore, has the power to make the benefit complete.”
I don’t see it. I just don’t see it.
And our answer to the U.S. Government, as stated many times after the release of this report is:
“See you in court.”
I seem to recall that many of the submissions addressed this issue, EmBee. I wonder if Mr Townsend has read many of the submissions.
Regarding Jack’s suggestion in EmBee’s post above, sure — more ways to try to get through to Congress. However, why would all the 260 individual submissions be treated as “anecdotal complaints”, but presumably even 1 corporation have standing and credibility if it said the same thing? (Yeah, I know…)
Tricia, thank you for your comment.
Precisely. Townsend’s comment is insensitive and thoughtless. It is exactly those cushy-expat-package US expats who have that “what, me worry?” attitude. I meet them all the time, the ones who never let their feet touch the ground in their country of residence, never bother to learn even “please” and “thankyou” in the local language, who hang out at expat clubs, and spend half their time planning their next home leave back to the USA, and the other half on that home leave. Sure, they have to deal with tax forms in two countries, but the companies often provide accountants to help them. They are never going to rise up and complain about CBT, FBARs or FATCA.
foo,
You’ve identified why many, *US Persons* just working overseas who have every intention of returning to the US to live one day, have no interest in this cause. It doesn’t concern them. Others abroad, with deeper pockets than many here, might not contribute to litigation or make noise and call attention to themselves — just concerned perhaps in getting their own circumstances in line with what the US wants and moving forward, no taint to their or their families’ reputations.
@Trish,
You mean like the one over there on Facebook who says its stated quite clearly on the last page on our passports what our US tax filing obligations are?
If the US government considers these people to be America’s true representation abroad, then we have an even greater uphill battle than we thought.
@ Barbara
“Townsend’s comment is insensitive and thoughtless.”
That was my impression too. He may have read Tricia’s comment but he didn’t comprehend it. I was trying to express my dismay of both him and Congress. Those 260 submissions ARE significant and it infuriates me that they were given such short shrift.
I guess by Jack and the US’s counting system, the ADCS lawsuit – being only ONE legal challenge, is merely “anecdotal”, and does not constitute robust evidence of any crisis.
Jack’s advice to go through UScorporations in order to reach the ears and attention of Congress displays the usual willful blindness or ignorance of why and how most of those deemed US taxable persons come to be outside the US – according to Van Koppenfels research (” Some overseas Americans are naturalized Americans who have returned to their country of origin or moved elsewhere, either in search of employment or a sense of connection, or both. Some were born in the United States and have returned to their parents’ country of origin, while other overseas Americans were themselves born overseas and have never lived in the United States. Retirement is another key reason for migration to some countries…” https://americansabroad.org/files/8613/5972/6757/acapiecejan2013.pdf http://www.palgrave.com/page/detail/migrants-or-expatriates-amanda-klekowski-von-koppenfels/?isb=9780230296961) , most of those deemed UScitizens living outside the US did not do so for work reasons, and many were born ‘abroad’. Can Jack, like many of his fellow UShomelanders not conceive of US citizens who have been born and reside outside the US for their entire lives – and have NO US connection, NO US employer, etc., much less a US corporation? If US corporations cared about the taxation of their employees, they certainly never demonstrate it in their US tax lobbying submissions.
It is all blame the victim and willfully blind refusal to even entertain the idea that there might be a problem.
I have no doubt that the corporate execs mentioned above have just that “what, me worry?” Attitude. But aren’t they in for a huge OMG moment? Don’t they have to have local accounts that are also under threat of closure? Japan now has it’s own version of FATCA for all residents of Japan. Regardless of nationality, if one has any investments outside Japan, both the FI and I believe the account holder must report to Japan’s Finance Ministry. That is why a British friend of mine has had his accounts in Great Britain closed and why he can not open any other share accounts anywhere outside of Japan.
Are these corporate types allowed a way around these requirements that the rest of us must meet? Or, will they too have their own OMG moments?
@Japan T,
They won’t have any OMG moments with respect to Japanese tax issues until they have been in Japan for 5 years, which is when they start having to report overseas income and assets to the Japanese tax authorities. I have heard some companies even rotate people out of Japan assignments just before the 5-year mark for that reason.
As for account closures, I haven’t heard of any denials of basic banking services to US persons in Japan, only of investment services. For an expat-package exec, they probably have all their retirement accounts etc. in the US, and only need a basic savings account in here in Japan to pay for rent, utilities and daily necessities. So their financial life is almost completely US-based, and they are not affected by service denials abroad.
There are 5.2 million corporations registered in the United States. Less than 90 of them commented to the International section of the Senate Finance Committee. Obviously, with such intense disinterest in the US corporate population, international corporate tax reform is not a crisis, and there need not be any changes to the US international corporate tax system.
This all represents the logic of the United States of America, and explains why it has had a trade deficit year after year, while countries such as Germany have run surpluses each year.
But the US indeed is best at exporting financial and legal services to countries which are forced to implement US regulations.
@ foo
Thanks forthe info. You have given me a big missing piece of the puzzle. I did know that many USC over hear are not really here and have argued that point in the past. However, I had thought that FATCA and its offspring must have changed that. I did not know that there was a time in residence factor.
For account denials, I recently found an app for US expats and in its Japan section there are people who reported having been denied new accounts as far back as three years ago.
Sadly, people aren’t corporations, Mark Twain.
Jack Townsend is a tough nut to crack but Anon, Samuel Clemmons, Mr. A, FromPatriotToExPatriate, gottaloveUStax1, Andre Weiss and Steve Klaus are certainly trying. Again, thanks Tricia for leading the way. It’s amazing that JT can see so much merit in CBT. I sure don’t.
@Japan T,
What app is that?
@ foo
The app is ExpatForum
@Japan T,
Is that the same as expatforum.com?
I see a Japan sub-forum, with a 3-year-old thread titled, “Bankless In Japan,” but it seems to be by someone who wants to give up his bank account in order to avoid FBAR/FATCA reporting, not someone who was denied an account. I do see some threads about difficulty getting credit cards, but I don’t think that is FATCA related (probably visa- or employment-status related?). I also see an Expat Tax sub-forum, with lots of FBAR/FATCA threads, though with my limited search skills I don’t see any reports of bank account denials in Japan.
(On the other hand, I do know US persons have restrictions on investment options in Japan — they are listed right on the brokerage home pages.)
@ foo
I do not know if it is the same as the website but it probably is. I do not remember how I ran across the app, perhaps from the website.
I a fairly certain that I saved what I saw, probably as a screen shot. It may not have been the title of the thread but a comment, someone saying they were new to Japan and tried to open an account but were denied and asking for advice.
Will try to find it again.
A student of mine has a great interest in all this. He asked a friend of his who works for a bank in Yokohama if they accept USC clients for regular accounts. He was told yes, if they can complete a large amount of paperwork.
Jack Townsend should be asked; If there is no crisis, then why this letter?
http://www.fawco.org/images/stories/US_liaison/Urge%20IRS%20to%20provide%20banking%20relief%20for%20Americans%20living%20abroad.pdf
posted at http://www.fawco.org/us-issues/us-liaison/3359-americans-abroad-caucus-co-chairs-urge-fatca-reporting-relief
And if there is no crisis, and no problem, then why that recommendation by the Taxpayer Advocate, and all her MOST SERIOUS PROBLEMs raised in her reports to Congress re expat tax, FATCA and FBAR issues (for example https://www.aaro.org/taxation/512-taxpayer-advocate-most-serious-problems-recommendations ) ? Is Jack saying that the IRS Taxpayer Advocate is not in possession of facts, but is acting and reporting based on mere “anecdotes” (as he calls everything individuals submitted to the SFC, and all the comments over the years at his blog which don’t accord with his worldview). Is he saying that the Taxpayer Advocate reports have been incorrect for the many years in which she has reported expat “international” issues as “most serious problems” to Congress?
And if there is no crisis and no problem, then why did the IRS Taxpayer Advocate ask why they were tormenting those abroad re FATCA? “…”This is a piece of legislation that is so big and so far-reaching, and [has] so many different moving pieces, and is rolling out in an incremental fashion . . . that you really won’t be able to know what its consequences are, intended or otherwise,” Olson said. “I don’t think we’ll know that for years. And by that point we’ll actually be a little too late to go, ‘Oops, my bad, we shouldn’t have done this,’ and then try to unwind it.” ….
……..”…….Again, that comes back to that proportionality issue,” Olson said. “So you’re really looking at this and thinking, why are we doing this to folks? Why are we tormenting them in this way?”………”
as reported
October 8, 2014
‘FATCA ‘Tormenting’ Taxpayers, Olson Says’
by William Hoffman
http://www.taxanalysts.com/www/features.nsf/Articles/FD2860D17810639485257D6B0052AC9C?OpenDocument
And if it is not the IRS but Congress that is the problem, then why is the letter addressed to the IRS and Treasury?
And if there is no crisis and no problem, then why are both chairs of the Americans Abroad caucus ( a Democrat and a Republican) circulating this letter?
There are none so blind as those who will not see.
Willfully blind.
Tricia, Thank you so much for your magnificent work on our behalf. Thank you!
@All
Very much appreciate all the kind comments. Have been away for a few days and just seeing the post, etc.
@Badger,
I am baffled as well. I wish I had thought now, to include so many more things….PFICs, the greater likelihood of being caught up in the AMT and/or the 3.8% Obamacare tax but even more so, what you have brought up. It is no small thing that TAS has come forward and indicated what we are talking about is not “anecdotes.”
I think we have a long, hard battle ahead of us. That it is this difficult for a tax professional to understand us is perplexing. Changing the minds of resident Americans to try and get Congress to get it? Probably impossible. I can only see more and more lawsuits, unfortunately.
Maybe I will just keep adding all these things to create what JC has suggested?
BB: yeah, that little line was screaming at me for like, 10 years. Right next to “agricultural products, or some such thing. I still haven’t read all the little sections there…HA!
usx: silly me. of course there is no American Diaspora. The exceptionalism is eternal. Your comment makes my day! thnx
More lawsuits AND renunciations, many more.
US lawsuits will fail. I was a victim of Monica Hernandez and all I get from courts is that I was frivolous for telling the truth on US tax returns. The IRS even finally figured out that they should have paid my refunds, and the IRS doesn’t accept the Federal Circuit’s ruling that the IRS rejected one of my refiled returns (the IRS still insists that they accepted it), but courts know that any return whatsoever from a non-resident US citizen needs punishment for breaking some law or other.
More lawsuits in other countries, let’s hope some will win.
More renunciations, of course.
@Bubblebustin
It strikes me that all business really cares about when it comes to individual taxation is the foreign earned income exclusion and perhaps the foreign housing exclusion. That is all they ever have fought for. Most of the stuff that has hit us hard doesn’t even get discussed, just rubber stamped.
If you have enough money in Britain, you can live there for quite a few years without being treated as a full U.K. tax payer. Those people, who really are the real yacht and champagne set, don’t have to contort themselves too much. Life is much less easy for the rowboat and prosecco crowd who don’t get paid out of some Delaware shell corporation and who have to live within two sets of incompatible rules..
I recently reread Zelinsky’s whole citizenship = domicile article and wondered why I and all the Americans abroad I know are treated like mythical beasts.
I think it’s magnificent timing that the Bopp lawsuit has been filed right after the Senate Finance Committee dismissed us with their “we’ve read your submissions but we can’t really be bothered with you right now” decision. If anything bespeaks a crisis it is this massive lawsuit.
I guess Jack won’t believe the latest criticism from the IRS Taxpayer Advocate herself either:
“…FATCA starts with the unsubstantiated assumption most taxpayers are bad actors and implements a draconian enforcement regime applied to everyone, even to the vast majority of taxpayers who have been, and likely will continue to be, fully compliant….”
http://www.taxpayeradvocate.irs.gov/Media/Default/Documents/2016-JRC/Area_of_Focus_4_Implementation_of_FATCA.pdf
Thanks to Neill on another thread for alerting us to this latest from Nina Olson.