Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in Issues regarding US persons abroad 15 Comments

Cross posted from the Renounce U.S. Citizenship blog.

 

Introduction – The general principles of Civil Forfeiture Reexamined

Civil forfeiture is becoming increasingly prevalent in the United States and in Western democracies. In it’s simplest form, Civil Forfeiture is a process where governments seize your property without going through the judicial process. Governments love it. It’s efficient, profitable and risk free.  It’s on the rise in both Canada and the United States. It has been the subject of numerous posts at the Isaac Brock Society. Certainly, FBAR penalties and other penalties for “Form Crime” are instances of civil forfeiture. I have argued that OVDP is a form of Civil Forfeiture.

 

Your property, your U.S. citizenship and the forcible taking of your U.S. citizenship

As I have pointed out time after time, after time ….

The Supreme Court of the United States has made it clear that those born or naturalized in the United States have a constitutional right to NOT have their citizenship “stripped from them”. I explored this in:

Cook v. Tait 12: Afroyim v. Rusk, the 14th amendment, and the forcible destruction of citizenship

In Afroyim, Justice Black wrote:

Citizenship is no light trifle 268*268 to be jeopardized any moment Congress decides to do so under the name of one of its general or implied grants of power. In some instances, loss of citizenship can mean that a man is left without the protection of citizenship in any country in the world—as a man without a country. Citizenship in this Nation is a part of a co-operative affair. Its citizenry is the country and the country is its citizenry. The very nature of our free government makes it completely incongruous to have a rule of law under which a group of citizens temporarily in office can deprive another group of citizens of their citizenship.We hold that the Fourteenth Amendment was designed to, and does, protect every citizen of this Nation against a congressional forcible destruction of his citizenship, whatever his creed, color, or race. Our holding does no more than to give to this citizen that which is his own, a constitutional right to remain a citizen in a free country unless he voluntarily relinquishes that citizenship.

Hmm….

If U.S. citizenship belongs to the individual, and the Obama administration is forcing people to renounce their citizenship, is this not a form of “Civil Forfeiture”?

The following posts and comments bear on this question.

The “Renunciation Chronicles” – It’s not like Americans abroad have a choice

The above tweet references the following post at Keith Redmond’s Americans Expatriates Facebook group. The post reads as follows:

It is so sad and quite upsetting to receive the number of e-mails, phone calls, etc. from young adults of Americans overseas deciding to renounce their US citizenship which was transmitted to them by their American overseas parent(s). The common theme is that they do not want to be handicapped with US citizenship as they cannot live normal lives in their countries of residence. They want to be able to bank, save, invest, qualify for a loan, buy a home, et al. like others but as a US citizen outside the United States it is becoming more and more arduous Renouncing is an emotional decision and a costly process for many but they are finding it is their only option. Homeland Americans truly need to see what the US government has inflicted upon its citizens living outside the US which is resulting in a rise of animosity toward the US government. It is important to note that 8.7 million is a low-end figure of how many Americans live overseas. For many, Citizenship Based Taxation (CBT) is not sustainable with the current US government imposed policies on other countries. If you see a way where CBT is sustainable for Americans living overseas, please share your thoughts, expertise, etc.

Mr. Redmond’s sentiment is echoed by Ruth Freeborn in the following comment at Trish Moon’s “Citizenship Taxation Facebook Group“.

FATCA is generating expatriates most definitely. It puts you in a place where you simply cannot do otherwise if you want to live normally at all. I think eventually there will be a lawsuit. The U.S. cannot keep putting people in this impossible position to have to give up their citizenship. It’s arm twisting and that ought to be illegal.

This whole discussion reminds me of the 2012 letter from a Canadian Businessman to his Son that appeared on this blog:

Fantastic discussion at Robert Wood’s blog – Two particularly relevant discussions with thousands of amazing comments

 

1. This “Letter from a Canadian Businessman To His Son” was reblogged (in edited form) at Robert Wood’s blog under the title: “Dear Son, Why You Should Leave America Now“.

2. While I’m at it, let me remind you of the letter to President FATCA Obama from a 45 year “U.S. tax compliant American” living in the Toronto area who had made the decision to renounce U.S. citizenship. This letter with thousands of relevant comments appeared at Mr. Wood’s blog under the title of:

Dear Mr. President: Why I’m Leaving America

It is no surprise, as discussed in this post, that the fastest growing and most articulate expressions of “anti-Americanism” (verging on outright hatred) are coming from Americans abroad!

Remember this poll?

 

My point is a simple one:

First, the Obama administration knows full well that they are forcing Americans abroad to renounce U.S. citizenship; and

Second, they don’t care.

Renounce U.S. citizenship and rejoice. You really have no choice!

Epilogue – The Wisdom of Jackie Bugnion

U.S. citizens abroad are living under siege. A wonderful express of this comes from Jackie Bugnion in her submission to the House Ways and Means Committee on Tax Reform. She said:

In 1776, the United States declared independence because the mother country on the other side of the ocean was imposing taxes on the colonies for the benefit of England. Resentment started when Britain tried to enforce the Navigation Act after 1763. Resentment increased with the Stamp Act in 1765, a way for Britain to tax the colonies. The British Tea Act of 1773 led to the Tea Party and we all know the outcome – the American Revolution and independence crying out “no taxation without representation”.

Today, the estimated 7 million Americans resident abroad, of whom the majority are long-term overseas residents in high tax OECD countries, face a comparable situation. Their representation in Congress is non-existent in reality. Americans abroad amount to only 1 to 2% of the votes in any particular state; Congressmen and Senators have ignored their tax issues. The unjustified myth that Americans abroad are wealthy and disloyal restricts a rational approach to the problems because of political image issues.

Citizenship-based taxation (CBT) has existed ever since the federal income tax was adopted. Despite CBT being an anomaly involving double taxation, taxation of phantom gains and explicit tax code discrimination, it was grudgingly tolerated by Americans abroad because it was essentially voluntary, most often involved little tax or no U.S. tax liability and basically was not enforced. In particular, the FBAR filing requirement was so obscure that even the big four accounting firms were not aware of the filing obligation dating from 1970 and failed to inform Americans abroad of the need to file the FBAR.

Since 2001, a series of legislative events have radically changed the situation:

 In 2001, the Patriot Act made anything foreign suspect, including Americans residing overseas.

 In 2004, Congress, under the Jobs Act, drastically increased the FBAR civil and criminal penalties to confiscatory levels, creating a disguised form of taxation on assets held overseas.

 In 2006 administration of the FBAR reports was transferred to the IRS for enforcement.

 In 2006 the Tax Increase Prevention and Reconciliation Act (TIPRA) extended the Bush tax cuts and included a compensatory revenue raising provision that reduced the benefit of the foreign earned income exclusion, limited the foreign housing allowance and pushed Americans overseas into higher tax brackets, thereby increasing U.S. tax liabilities for many Americans abroad.

 In 2008 the law relating to renunciation of U.S. citizenship was revised under Section 877A and introduced an Exit Tax on wealthy individuals (defined as “covered”). The law also provided that Americans who inherit from estates of former “covered” U.S. citizens are subject to U.S.
inheritance tax with no exclusion. This outrageous discriminatory provision aims to discourage renunciation of citizenship, but in fact penalizes children of former U.S. citizens for an act they did not commit. In practice, it encourages the children to also renounce their U.S. citizenship.

 In 2009 the IRS launched its initiative against tax evasion linked to foreign assets through the Overseas Voluntary Disclosure Programs and a threatening public relations campaign. While it justifiably targeted U.S. resident tax evaders, it simultaneously trapped Americans abroad who necessarily have foreign assets. The IRS’s one size fits all policy and bait and switch tactics led to abuses of Americans abroad which inspired sharp criticism from the National Taxpayer Advocate.

 In 2010 FATCA was slipped into the HIRE bill with no debate in Congress and no cost/benefit
analysis. FATCA aims to provide the door that closes the fiscal trap by requiring foreign financial institutions to report to the IRS on assets held overseas by U.S. persons. It effectively cuts off many Americans from foreign financial institutions which find it too onerous to maintain American clients. FATCA creates a barrier to free movement of capital and people.

 In 2012 S.3457 proposed to grant the IRS the authority to have a U.S. passport cancelled or not issued if the IRS determined that the individual owed $50,000 or more U.S. tax.

 In 2012 the Ex-patriot Act, S.3205, proposed to deny any “covered” expatriate re-entry into the United States, with retroactive effect for ten years prior to enactment of the law. The Reed
Amendment of the 1996 Illegal Immigration Reform and Immigrant Responsibility Act already
allows the United States to deny entry of former citizens into the United States.

 In 2013, S.268 was introduced; it compounds difficulties created by FATCA.

 In 2013 the Senate Finance Committee included in its tax reform recommendations a provision which would grant the IRS authority to cancel a U.S. passport for tax collection purposes.

This stream of legislation and proposals categorizes Americans abroad as suspected criminals seeking to escape U.S. taxes. Congress has outdone George III and has turned the United States into a fiscal prison, including legislation which is deemed anti-constitutional under the Fifth Amendment1 and is contrary to Articles of the Universal Declaration of Human Rights.2
The foundation of the U.S. fiscal prison is citizenship-based taxation. Americans working and living abroad carry a ball and chain of dual taxation throughout their entire lives up to and including death.

Americans abroad already pay taxes in the country where they reside and receive governmental services.

The additional U.S. tax obligation creates inevitable incompatibilities and discrimination and even requires Americans abroad to break foreign exchange control laws to pay U.S. taxes.

A revolution among long-term overseas residents is now underway. Five years ago, Americans abroad never talked about renunciation of citizenship. Today, it is a common topic in the press and among the community abroad. For more and more individuals, renunciation is the only solution to an intolerable situation created by the U.S. imposing its laws beyond its borders. The United States is literally destroying the community of Americans abroad, which plays an essential role in representing U.S. interests and goodwill overseas. The United States is shooting itself in the foot.

While the absolute number of renunciations, currently around 2,000 a year, is insignificant compared to the average annual U.S. citizenship naturalizations of 680,000, renunciations have multiplied seven times over the last four years. So far we have seen only the tip of the iceberg if CBT remains in force.

Today’s situation leads to serious hidden prejudice for the United States. U.S. exports are far below where they should to be because citizenship-based discourages U.S. companies from deploying U.S. citizens overseas to sell U.S. products; the law makes them too expensive. U.S. tax law and FATCA create insurmountable barriers for small and medium-sized companies to establish beachheads abroad to develop exports. The loss represents millions of U.S. jobs, hundreds of billions of dollars of exports, billions of dollars of U.S. tax revenue, and an unsustainable trade and budget deficit. Americans married to a foreign spouse, who represent about a third of the Americans resident abroad, now hesitate to register their children born abroad with the U.S. Embassy. The hot thing among young adults in their twenties is to renounce U.S. citizenship; they are aware of the impossible web of U.S. regulations that restrict job opportunities and personal freedom. Pushing away the young generation of Americans abroad is an immense loss to the United States. In prior generations, many highly educated multi-lingual American children returned to the United States, founded companies and created jobs in the U.S.

Adopting RBT will stop this revolution immediately. RBT law needs to be drafted in the spirit to allow free movement of individuals to leave and return to the United States, to reinforce the competitiveness of Americans and the United States overseas, to provide a simple, non-penalizing transition to RBT for the community of Americans already overseas, to ensure that Americans abroad are not subject to FATCA and FBAR, to adapt existing bilateral tax treaties and enter into new tax treaties so that withholding tax rates on U.S. source income are reasonable and to ensure that Americans abroad who have the majority of their assets in the United States (retirement funds, pension funds, real estate) are not disadvantaged under RBT with regard to either income or estate taxes.

I thank you for the opportunity to comment and hold high hopes that your bi-partisan efforts will lead to the constructive tax reform so necessary for Americans residing abroad.

Sincerely yours,
Jacqueline Bugnion

15 thoughts on “Forcing #Americansabroad to renounce US citizenship is like #Civilforfeiture – Now “ain’t that America””

  1. The fight is bigger than it looks.

    I left USA in 1973 at the age of 7 years old and never went back.
    Somehow, I always new that there was a bad stroke in american policy and the way the US gouvernment acted.
    Ever since I found out about FATCA in october 2014, I realised that whatever step I would take to comply or not, I was trapped. The only reasonable thing to do being giving away my assets to my 100% french children who’ll never ask for american citizenship and who arne’t americans automatically being born to an american father, thank god (link : https://americansabroad.org/issues/citizenship/citizenship-requirements-faqs/).

    Luckily enough, I divorced from my ex-wife in 2008 so at least she is not trapped in this mess either. Nore is my new french spouse since we’re not married yet, but now probably never will be.

    So, no assets and mimimum money in my bank account. IRS has nothing to cease from me and never will. Isn’t it great to be an american expat…

    But, in reallity, what people don’t realise, is that the ones who own the private federal reserve corporation & the IMF, want to cease the assets of every person in the world by putting us all deeper and deeper in debt while planning their new world order scheme to bring out one world currency. They are seeking total control.

    That’s why the fight is a lot bigger than it seems and FATCA is just a tiny winny piece of it that prooves how they are acting towards us. They don’t care, they want to rob all our assets.

    Just watch : Federal Reserve and IRS = private corporations!
    https://www.youtube.com/watch?v=VVzkceT521A

    And especially : Glenn Beck Exposes the Private Fed; Gets Fired by Fox :
    https://www.youtube.com/watch?v=vB5LK-jihgk

    I guess it will take a new worlwide revolution to finally obtain liberty.

    I am Sooooo disillusionned by what the futur will look like. A chip under the skin of everyone and virtual money to control us all. The ones who won’t obey will just be disconnected from society and thrown in prison.

    From the end of WW2 until now, we are lucky to have lived the greatest of all times in our western countries.

  2. NONE OF THE ABOVE.
    I dont feel good with any of the choices here.
    But if civil forfeiture is becoming the norm, then why would I want to continue to be a part of that? I feel relieved to be free – of all these complications and the dictate that I “owe”. Thats about all I can say. When I read about this form and that form which has to be filled out now, and all the complications involved, I am just so happy that I no longer have to fill out an american tax return and then tremble over whether I got it right.
    However I do understand that other people feel more strong ties to America than I do. I feel nostalgia at times, but nothing intense in the way of yearning.

  3. Her statement reeks of frustration. Interestingly nothing is mentioned about ‘Second Country Exemptions,’ has the ACA toughened its stance with the US Congress?

    Would the ACA now start using there likely dual citizens to begin the process in their respective home countries to organise other FATCA lawsuits?

    It would be nice if the ACA put front and centre on the website they want FATCA repealed, CBT scrapped, call on local governments to stop enforcing FATCA on its resident citizens, and publicly state that FATCA needs to be challenge in respective foreign courts.

    Although her statement is spot on in terms of content, the US Congress will only change its ways if they suddenly have a flurry of FATCA lawsuits and tens of thousands of renunciations each quarter.

    Please ACA change your website and stop trying to pander to a US Congress that frankly doesn’t care about US ex-pats.

  4. Steven
    In Canada all you have to do is CLN for you to be out of FATCA reporting.
    Is that the case in France or do they use US person for tax purposes?

    this is for green card and would apply to people who have CLN but not done exit taxes
    “I hold a U.S. green card. How does this affect my tax residency?

    If you are a green card holder (that is, a lawful permanent resident of the U.S.), the U.S. considers you to be a U.S. resident.

    However, if you are a resident of Canada for tax purposes and do not hold U.S. citizenship, you should not identify yourself as a U.S. person to your Canadian financial institution.”
    http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/ndvdls-eng.html

    “IRS Publication 519 states that the U.S. domestic rules that determine if a non-U.S. citizen is a U.S. resident do not override tax treaty definitions of residency. If you are considered a resident of Canada and the U.S. under each country’s laws and the Canada–U.S. tax treaty considers you a resident of Canada, the U.S. has to treat you as a non-resident taxpayer and you should not identify yourself as a U.S. resident to your Canadian financial institution.”
    http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/fq-eng.html#q2-5

  5. People who’ve had their assets seized through civil forfeiture at least have recourse in the courts. What recourse do American have when they renounce? None for the recovery of assets of course (as it was done voluntarily) but what about the loss of representation? I’m sure there are many on the anti-expat side who are happy about the fact that with every renunciation, there’s one more person stripped of their representation in congress.

    “If you aren’t at the table, you are on the menu.”

    By renouncing, Americans abroad have become a self-correcting problem for Democrats Abroad and the rest of the FATCAnatics.

  6. @Don – The State Department controls the number of renunciations per quarter with their quota on consulate appointments. When I first contacted the nearest consulate near the beginning of October, 2014, I was told they were booked up through May, 2015 and were not even making appointments for June-August, 2015 until “early November”. I was instructed to resubmit my request at that time. I didn’t even become a statistic on their waiting list until November 1.

  7. Bubblebustin
    “I’m sure there are many on the anti-expat side who are happy about the fact that with every renunciation, there’s one more person stripped of their representation in congress.”

    The founding father of USA talked about taxation without representation scientific logic would have representation without taxation. Forgetting that about 50% of the people in USA do not pay income taxes, they are still forced to file taxes if they made enough money. If you are an ex pat taxation is even less.
    Would you give up your representation if you did not have to file taxes?

    In Canada the law for the last 22 years was that long term ex resident Canadian citizen can not vote. There has been a legal challenge to this and it will end up at the Supreme Court (unlike FATCA which any government can apply the non withstanding clause) voting rights are non subject to non withstanding clause. Trudeau was alive and active when it was applied. I am not certain if it was Liberal or PC who implemented it (1993 was an election year), but the Liberal were in power for at least 10 years since it was implemented. Therefore they could have changed it.

    “Globe editorial
    Should non-resident Canadians get the vote?
    .
    .
    “In a procedural decision in this case this week, Justice Robert Sharpe of the Ontario Court of Appeal, put the issue clearly: Is the five-year limit “necessary to sustain our geographically determined, constituency-based system of representation?” The highest court will eventually have to answer that question. We think it can reasonably answer “yes.”

    Parliament, especially the Commons, since its beginnings in medieval England, has been a body that consents to – or rejects – taxes. But Canadian expatriates pay their taxes in the country where they live, and receive the benefits of government there, too. They do not pay taxes here, or receive most public services. It is reasonable for the law to say that, if you live outside Canada for a sufficiently long time, after some number of years you can no longer exercise the right to vote for members of the House of Commons. You do not lose Canadian citizenship – that can never be taken away. And no matter how long someone lives abroad, they have the absolute right to return to Canada whenever they wish.

    The five-year limit is not strictly necessary. But there’s a compelling logic to placing some limit on how long one can live abroad and still vote in Canada. It makes it more likely that Canadian voters will have a strong, living connection to Canada.”
    http://www.theglobeandmail.com/globe-debate/editorials/should-non-resident-canadians-get-the-vote/article19320692/

    Canada may implement CBT, if Supreme Court rules for changes to voting rights.

    I am wondering if non-resident Canadian would want to file Canadian taxes, if you were given the right to vote?
    Bubblebustin unlike a sizable portion of dual citizen you voted.
    You wanted Obama you got Obama.

  8. @news

    Canadians abroad may one day be faced with paying Canadian taxes as a direct result of losing their right to vote. It’s a slippery slope from there.

    Obama lied, or at least his overseas propaganda arm, Democrats Abroad did. I’ve found the antidote for the Obama/Democrats kool-aid – it’s called FATCA.

  9. Bubblebustin says
    July 27, 2015 at 4:33 pm

    @news

    Canadians abroad may one day be faced with paying Canadian taxes as a direct result of losing their right to vote. It’s a slippery slope from there.”

    Long term non resident Canada citizen do not have the right to or the requirement to file taxes. If the Supreme Court of Canada upholds non resident voting I imagine any Canadian government would look at implementing a CBT system.

    Do you think all these non resident Canadian would trade their non tax filling situation for the right to vote?

    Citizen and government is a system and obligation.
    Under the rules that have been used for last 22 years:
    Canada long term non resident Canadian citizen do not have the right to vote or the obligation to file income taxes.

    In United States non resident have the right to vote and the obligation to file taxes.

    Which do you choose?
    Instead of FATCA using definition of place of birth or parent citizenship, It would have been more equatable that the American would have used the term active USA citizen (e.g. people who registered to vote and passport holder). A large percentage of the so called American would have been excluded. Calgary411 etc.

    For non tax shelter countries.
    This could have been done using voting registration records and US passport application. In both these application they could ask you for income information. They can easily get a rough idea of your income from credit limit on credit cards. Both credit rating agency in Canada are US subsidiary.

    Of course that would have taken someone with more intelligence to figure out than the current administration.

  10. news says missing word in above
    July 27, 2015 at 5:10 pm

    Bubblebustin says
    July 27, 2015 at 4:33 pm

    @news

    Canadians abroad may one day be faced with paying Canadian taxes as a direct result of losing their right to vote. It’s a slippery slope from there.”

    Long term non resident Canada citizen do not have the right to vote or the requirement to file taxes. If the Supreme Court of Canada upholds non resident voting I imagine any Canadian government would look at implementing a CBT system.

  11. “My point is a simple one:
    First, the Obama administration knows full well that they are forcing Americans abroad to renounce U.S. citizenship; and
    Second, they don’t care.”

    Third, the courts don’t care. Bopp will lose all the way up to US Supreme Court.

    Anyway, being forced to renounce US citizenship is not like civil forfeiture.
    Civil forfeiture is like having my shoes stolen (of course it’s worse than that, but…)
    Being forced to renounce US citizenship is like having shit removed from my shoes.

  12. “People who’ve had their assets seized through civil forfeiture at least have recourse in the courts.”

    Not really. Even if statutes say they do, courts don’t.

  15. Though I feel huge relief, I nonetheless feel traumatised that I had to give up my birthright to be able to lead a normal life. If I hadn’t renounced, I would have faced severe restrictions in my retirement planning and substantial accounting fees north of 10% of my earned income. That is simply too burdensome.

    It seems cruel though that I was essentially forced into a ‘Sophie’s choice.’ And it’s true that no one (apart from my Mother) really cares about my loss.

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