cross posted from ADCSovereignty WordPress Blog
With such an amazing group, it’s simply NOT possible to NOT succeed! Thanks from @ADCSovereignty https://t.co/qm23ib8Ah1
— ADCSovereignty (@ADCSovereignty) August 18, 2015
This afternoon I received news that the Alliance For The Defence of Canadian Sovereignty had met its $500,000 funding goal. I had two simultaneous/thoughts or reactions.
My first thought was that I was always completely confident that we would achieve our funding goals. You would never allow us to fail. (Ask Stephen. I have never for a moment doubted the funding!)
My second thought was a feeling of amazement. Did we really do this? It’s simply amazing!
Q. How could I both be so confident of our success and amazed by that very success?
A. These seemingly irreconcilable thoughts are easily reconciled because:
It’s obvious that we would achieve our funding goals because we were working with such an amazing group of people!
It’s also important to recognize the important role played by both the Isaac Brock Society and Maple Sandbox for allowing us to publicize our FATCA lawsuit on their respective blogs. I offer a special thanks to Peter Dunn of the Isaac Brock Society and Lynne Swanson of the Maple Sandbox blogs. Without their generosity and support it would have much much harder to have reached this milestone.
Back to the beginning …
My first post on this blog was on October 1, 2014. In that post I noted that:
But, when it comes to opposing injustice, the simple truth is that:
Some people make things happen.
Some people watch things happen.
Some people ask “What happened”?
You made it happen. I knew you would. Congratulations!
I can tell you that there are a lot of people who would have been (and still) would be very happy to see us fail. But, that’s not going to happen. We are on the way. We are on the right side of the moral issue.
Why we will win …
It’s very simple. At the end of the day, FATCA, CBT, FBAR, etc. are moral issues. They are just plain wrong. They trample the human spirit and impede human progress.
As I also said on many occasions:
We are in a marathon and not a sprint!
We are also in the early stages of what will certainly be a long struggle. Understand that you are in this NOT only for yourself. You are in this for future generations of ALL people, in ALL countries, who are affected by the extreme injustice of U.S. “extra-territorial taxation” and FATCA. You are in this to motivate “like minded people” in other countries to show their governments that:
If those governments do not protect them from U.S. extra-territorial laws, then
People will defend themselves from those governments!
On a very sad note …
Today we received word that Dr. Marcio Pinheiro died. You may not recognize him by his real name. He posted on numerous blogs under the moniker of “ThatIsMe” and “Mark Pinetree“. He was a Brazilian psychiatrist. You can learn about his life here. You will learn that he moved to the United States and became a U.S. citizen. He was therefore a U.S. citizen living outside the United States. His submission to the House Ways and Means Committee included:
I am a dual citizen. I lived and worked in the USA thirty years and I am very proud of being an American Citizen. About ten years ago I decided to come back to my country of origin. Now, 80 years old and with failing health I regret having become an US citizen.
I had an USA CPA doing my US taxes until 2008. He never told me about FBARS. I learned about them by chance when visiting my two daughters and son who live in the USA. Since then my life has become a nightmare. I have spent sleepless nights trying to comply with the demands being placed on me and the threats of stiff penalties that do not apply to Americans living in the mainland. I have spent a lot of time and money trying to find out what I should do to comply.My situation has become so impossible that I don’t know what to do.
I have no representation. Because my country of origin has neither a tax treaty nor a Social Security equalization treaty with the USA I am required and have been paying SS Self employment Taxes to both countries, earning nothing in return. I cannot claim a credit on my USA tax return for the double Social Security tax I pay in my country of origin. Also I have a pension in my country of origin from my working here. In this country this pension is not subject to tax so I don’t pay income tax to my country on this pension. But the USA taxes me on this pension. In this country I also have some savings, the earnings on which are not subject to tax so do not pay tax here on this income. Yet I have to pay taxes to the USA on this income.
It seems to me that I have now three possibilities: return to the USA with my failing health using my Medicare and Supplemental Insurance, renounce my citizenship or stop work altogether. I can’t afford to pay this much tax to two countries.Mind you that I have never invested one cent of what I earned in the USA in my country of origin. I have savings and tax shelter plans the USA which I will never bring to my country of origin. They will stay with my son, daughters and grand daughter who are Americans and live in the USA. On the contrary I frequently send money earned where I am now to them in the USA.
When I heard about Amnesty to Americans living abroad who did not know about FBARS I thought that I needed to do was to start sending my FBARS to the Treasury Department. But this was not the case. I was being threatened with penalties for not knowing about them. I felt that the amnesty was a trap set for me which was very unfair. I am glad to know that Nina Olson, Tax Payer Advocate, does feel the same way.I think that the USA, as all other countries in the world, should not tax its citizens who live and work in a foreign country. We are not the same as Americans who live in the mainland who hide investments in foreign countries to avoid paying taxes. Yet we are being placed in the same category: one size fits all, when it does not.
If the USA continues to tax Americans living and working abroad, which no other country does to its citizens abroad and which I do not recommend be continued, they must simplify the paper work, give more support for us, allow us to have representation in the US Congress. They should not tax our tax free pensions received from working in the other country (as it is now they tax in certain countries unless there is a tax treaty which specifically excludes them from taxation, and not in others if there is no treaty). They should allow these Americans to chose to contribute or not to SS self employment taxes to one or both countries but not obligate those living in another country to this double Social Security taxation. And there are more suggestions to be made so that we all can remain proud Americans living and working in another country.
Thank you
M. Pinheiro
I once had the privilege of a telephone conversation with Dr. Pinheiro. He was a good man. He was a decent man. He was a family man. He was a man who “tried to do the right thing”. He was a man who believed in compliance with the law. He tried hard to comply with U.S. laws. He was a proud American citizen. He was a loyal Democrat. He supported President Obama. For all of the preceding reasons, the last few years of his life were a “living hell”.
He was one of millions of people whose life was severely damaged by U.S. “Extra-territorial” taxation, FBAR and FATCA.
@Fred, you are exactly correct and Norman is missing the boat.
Claims would need to be made in a Court foreign to the USA, Foreign Court X, against a Citizen of Country X and it would be perfect if the jurisdiction had a jury of Citizens of X.
The IGA did NOT require asking parents place of birth/citizenship for a reason, because though that would have rightly perfected the witch hunt, it would have been the bridge too far in foreign public opinion.
@George
I’ve always thought the significant swath of born in Canada accidentals would end up being FATCA’s Achilles heel. At the very least it’s discriminatory. I brought this point up with Solomon Yeu and ask that he would talk to Mr Bopp about it. It’s too bad ADCS couldn’t find this type of accidental Canadian willing to stick their neck out, but perhaps treating one Canadian differently form another might be enough for the judge.
or, they could always say *Just Reounce* — just as they say to Gwen and Ginny and to those families who have a member like my son (who are entrapped because they CANNOT renounce due to some *mental incapacity*). I would hope asking the parents’ places of birth IS the bridge too far! There it lurks, ready to bite — just as the rest of the absurdity has lurked and bitten.
“And in the end the Eigth amendment could come into consideration, as it has in United States v. Bajakajian.”
U.S. v. Zwerner came later than U.S. v. Bajakajian. The eighth amendment is as dead as the fourth and fifth.
“Claims would need to be made in a Court foreign to the USA”
If the person is a non-resident US citizen, claims could be made in US District Court for the District of Columbia. If the person is a non-resident alien[*], the US government can choose any US district court.
[* with no exception for renunciants as far as I can see]
@Norman, “If the person is a non-resident US citizen, claims could be made in US District Court for the District of Columbia. If the person is a non-resident alien[*], the US government can choose any US district court.”
Norman, I do not think you get the ethos with many here. We do not care about a FOREIGN (US) Court. These are largely matters that must be settled by our own Nations and our OWN Courts and by Jurys of fellow Citizens in our own lands.
When I was a Homelander I proudly stood on the hill and yelled to the EU to keep out of USA business!!
I still hold true to that ethos as well.
Norman said: “You won’t laugh and cackle when they discover you’re a US citizen and they prevent employers from hiring you until you pay them penalties.”
I’m not a US citizen though, well I have a CLN and my name is on their shame list. I can’t see them revoking the CLN as they made pretty clear that there is no going back.
It all boils down to this, whatever it is I am supposed to have done to be “compliant” or “final filings” or what not, I can’t afford to get it done. Not financially or time wise and to wreak havoc on my life here and my family all so I can show I owe no taxes is quite ludicrous. The “final filing” form should be 2 options: 1) have you made over x amount of US dollars in the last 5 years? [Yes] [No] *if Yes proceed to forms x, x,and y. I check the [No] box and be done with it.. but no, they want to have endless hoops to jump through and if you don’t jump right you get outrageous fines. Anyway… It’s a no win situation unless you can bankroll expat tax accountants etc.
@Norman wrote:
“And in the end the Eigth amendment could come into consideration, as it has in United States v. Bajakajian.”
U.S. v. Zwerner came later than U.S. v. Bajakajian. The eighth amendment is as dead as the fourth and fifth.
A U.S. District Court cannot, not ever, override a U.S. Supreme Court decision: it can only misinterpret or finesse it, subject to the Circuit Court of Appeals, which in Zwerner never happened. As Anthony Verni wrote in his blog last year:
“United States v Carl Zwerner FBAR case has been finally settled despite the many speculations regarding the Eighth Amendment rights. Carl Zwerner has entered a settlement agreement with the U.S. Department of Justice contrary to what most tax practitioners and attorneys thought. “Mr. Zwerner believed that a settlement at this time was in his best interests,” Press told Bloomberg BNA. “The Eighth Amendment issue will have to be litigated at some future date by others. We were fully prepared to litigate that issue.” This settlement agreement therefore finally closes the case of United States v. Zwerner.:
http://www.vernitaxlaw.com/fbar-case-united-states-v-carl-zwerner-settled-1-8-million/
With few exceptions, virtually always where there are assets, income, physical presence or heirs in the USA, the IRS and DoJ have chosen not to seek judgments against nonresidents — least of all those who might possibly contest the issue of US citizenship.
Although Treasury and DoJ want to get enforcement and recogntion provisions into tax treaties and extradition treaties, as of now no other country has accepted the US notions of “exceptionalism” and “extraterritoriality” that would allow it to act against a foreign or dual national physically present in his (other) country of nationality. (It remains to be seen how that will work as against EU/EEA/Swiss citizens exercising their right of establishment in another country, much less Irish citizens in the UK (Ireland Act 1949 and Good Friday Agreement: Irish citizens are not aliens in the UK).
Canada has applied its reciprocal tax collection provision (per the provision’s text) only against those who were not Canadian citizens when the US tax accrued. Nobody thought of Jay Treaty issues, and AFAIK Native cases have all related to Customs evasion.
As time goes on it seems to me that the 3.5 or 7.5 million (nobody has justified any number, least of all the larger one) US citizens and maybe-citizens abroad are likely to gain reassurance. Most, including some I know, have simply written off the USA, will never go there or have assets there. And the last thing they are going to worry about is PFIC, never mind renunciation and form 8854 or relinquishing to the USA assets that belong to the next generation.
It seems to me that as to those who have never, ever, exercised an “attribute” of US citizenship the US Government simply will not be heard (by any foreign government) to assert a claim of allegiance and duty. Or tax debt. Nor is there any forum the IRS can approach, not since United States of America v Harden.
There’s also a lesson here in relation to all those offspring of US citizens (as to whom US nationality depends on qualifying prior parental presence or residence in the USA) and whose birth was never registered. The FAM addresses this: they are in practice admitted as nonimmigrant aliens until and unless citizenship is claimed.
As I think they teach in dental school, whatever arrangement you make only needs to survive as long as the patient does. It troubles me to meet, as I have, elderly Accidental Americans in distress over the whole FATCA mess: not least because FBARs are part of the Financial Crimes Enforcement Network. A gratuitously nasty terminology that says it all about “exceptionalism” and all the rest.
@George wrote:
“Claims would need to be made in a Court foreign to the USA, Foreign Court X, against a Citizen of Country X and it would be perfect if the jurisdiction had a jury of Citizens of X.”
Norman is correct that the IRS could (and would) if it thought advantageous (in other words if it could “encourager les autres” by fright, presumably by suing a celebrity like Boris Johnson in Federal Court (not that State would let them since Boris is a sitting MP; it’s more likely IRS would quietly levy against Boris’s book royalties).
But in the absence of assets, income or future inheritance by a US resident, a US judgment would still need to be enforced abroad. And except in the case of a reciprocal collection agreement (only the one with Canada is operative but others are pending or expected), collection would be in the fashion of the other country’s own taxes by the foreign tax agency, using the foreign courts.
This, however might allow for obstacles such as community property rights of non-US spouses, and whatever asset-protection arrangements are workable in that other country. The IRS commonly invokes fraudulent conveyance law, and civil-law countries have an equivalent (Paulian actions): but they may well not work in IRS’s favour. And levies and liens probably would be useless as the (non-)taxpayer would have enough time to emigrate with his or her assets to a place inhospitable to the IRS.
Canadians worry about these things because Canadians are, by and large, law abiding. It is said that they don’t even jaywalk.
Andy05 Another voice of reason. We’re getting there.
@andy05, Duke of Devon
I agree … this is a campaign of FEAR, not of substantive enforcement.
While a blog post like this is no substitute for professional legal advice, the following is widely accepted as factual …
No foreign government has the power to collect taxes or penalties directly from Canadian residents in Canada. Only the government of Canada can enforce tax collection here. The US cannot directly take money from Canadian bank accounts, seize wages or payments, or attach any Canadian asset. Further, Canadian courts generally do not enforce foreign tax revenue claims, especially against Canadian citizens resident in Canada.
Under the Canada – US Tax Treaty, the Canadian government will NOT assist in collecting US taxes or penalties from any Canadian citizen, unless the tax debt arose before they became a Canadian citizen. This was first reported by Don Cayo in Vancouver Sun and has been stated repeatedly by Finance Minister Jim Flaherty in his letters to Canadians on this issue. It was also the subject of a 2011 article in “Canadian Tax Highlights”.
That’s the final summary paragraph from legal opinion article.“US Tax Collection in Canada”, published in “Canadian Tax Highlights” Vol. 19, Number 9, Sept 2011-10-14 Canadian Tax Foundation. The authors are: Erin L. Frew and S. Natasha of Reid Thorsteinssons LLP, Vancouver (leading tax law firm). This is subscription only, but libraries and tax professionals would have a copy.
Article documented the difficulty of enforcing US tax claims in Canada.
The executive summary is:
– Canadian courts have not enforced US tax revenue claims in Canada
– Under the Canada-US tax treaty, Canada Revenue Agency cannot collect US taxes from Canadian citizens, unless the tax claim proceeded their date of citizenship.
“Norman, I do not think you get the ethos with many here. We do not care about a FOREIGN (US) Court. These are largely matters that must be settled by our own Nations and our OWN Courts and by Jurys of fellow Citizens in our own lands.”
Of course no one WANTS to care about a foreign court, but you will care when enforcement takes place. There are some broad general treaties where countries (or sufficiently wealthy persons or companies) can apply for a court order in one country to be applied in another country. If the IRS gets a decision from the US District Court for the District of Columbia saying that you owe millions of dollars of tax on phantom or alleged income, or millions of dollars in penalties for underpayment of one dollar of tax, they can apply for the court order to be enforced in Canada. Even if a tax treaty only provides mutual assistance in collecting taxes and not in collecting penalties, trickery is still available. You might not get a court case in Canada to argue that you didn’t have the phantom or alleged income that is supposedly being taxed, if you didn’t fight the original case in the US.
Furthermore, a Canadian bank or stockbroker might happily confiscate funds from your Canadian account and pay them to the IRS in hopes that the IRS will be less likely to confiscate funds from the bank or stockbroker’s US operations.
As I mentioned to someone else recently, the ethics classrom is that way ——————–>
Nowhere near the law classroom.
“A U.S. District Court cannot, not ever, override a U.S. Supreme Court decision: it can only misinterpret or finesse it, subject to the Circuit Court of Appeals, which in Zwerner never happened.”
US District Courts, Court of Federal Claims, and Circuit Courts of Appeal CAN and DO override US Supreme Court decisions.
The only institutions that can force trial courts to obey Supreme Court decisions are appeals courts, and appeals courts only do that forcing if they want to. If appeals courts need to invent facts or laws that neither party believes, appeals courts can do so because no one tells them not to. The only institution that can force an appeals court to obey Supreme Court decisions, or even force an appeals court to comply with the appeals court’s own decision, or to not invent facts that neither party believes, is the Supreme Court, and the Supreme Court doesn’t want to bother with such stuff.
The most famous cases have been where circuit courts uniformly overturn Supreme Court rulings in US v. Sullivan and Garner v. US, and the Supreme Court has uniformly denied cert.
“Nor is there any forum the IRS can approach, not since United States of America v Harden.”
http://scc-csc.lexum.com/scc-csc/scc-csc/en/item/7322/index.do
Thank you andy05.
But I still worry. Canada and the US have signed new tax treaties after that ruling, still calling for mutual assistance and collection. Even when a new law resembles an old law in this way, isn’t the new law still a new law?
Also, in countries other than Canada that also have mutual assistance and collection in their treaties, victims can still be attacked by the US.
While it is clear that the US government does not (currently) have the power to collect a perceived tax “debt” from a Canadian resident, and the Canadian government will not assist in the collection of said “debt” if the resident was a Canadian citizen, it remains that with the FATCA IGA in place our account balances will be sent to the IRS along with our *names and addresses*. Once the IRS has this information I would hardly expect them just to sit on it. More than likely they will sift through the data, select the individuals who have enough to make it worth their time, and harass them via the postal service until they pay up!
I believe it is very reasonable to be afraid.
@MuzzledNoMore
Some may recall how my MP John “thrilled about the FATCA IGA” Weston touted the IGA as being of great benefit to Canadians in that various accounts are exempt from FATCA reporting – even though we know them to be reportable for US tax purposes. They tell us that the Canadian government is either in the process of dealing with RDSP’s, RESP’s and TFSA’s under the treaty as RRSP’s are, or they are tacitly suggesting we use tax evasion as a way of dealing with FATCA.
Ironic, isn’t it considering their defence claims the FATCA IGA’s are justified under the treaty.
@MuzzledNoMore
I believe it is reasonable to be concerned, but not afraid.
Fear is destructive.
It is reasonable to be defiant, considering the circumstances.
It is reasonable to do a risk assessment.
About 600,000 Canadians may also be considered so-called “US Persons”. Most of these probably have one or more financial accounts. I venture that fewer than 10% these so-called “illicit offshore accounts” have ever been reported to the US.
Canada is probably the world headquarters of “undeclared and illicit offshore accounts held by US persons.”
You wrote: “Once the IRS has this information I would hardly expect them just to sit on it. More than likely they will sift through the data, select the individuals who have enough to make it worth their time, and harass them via the postal service until they pay up!”
I guess these folks will receive an official letter from a foreign government stating:
Wondering. You and the Duke must have similar DNA!
@Wondering wrote:
“The US cannot directly take money from Canadian bank accounts, seize wages or payments, or attach any Canadian asset. Further, Canadian courts generally do not enforce foreign tax revenue claims, especially against Canadian citizens resident in Canada.”
Actually both are true, sort of:
“In a 1989 case, Van deMark v. Toronto-Dominion Bank [68 O.R.(2d) 379 (Ont. H.C.J.)], the Internal Revenue Service had levied upon the U.S. branch of a Canadian bank in which a Canadian citizen-resident held accounts, asserting that the Canadian held certain funds fraudulently transferred to him by his father, a U.S. resident and tax debtor. A Canadian court held the bank liable to its Canadian depositor for the funds, irrespective of its own susceptibility to the jurisdiction of the United States courts, stating that ‘the effect of permitting the Ontario branches to defend the applicants’ claim on the basis of the bank’s liability in New York [ ] State would be to enforce indirectly a claim for taxes by a foreign state’. In this regard, the USA PATRIOT Act, in providing for seizure of funds in the U.S. correspondent bank of a foreign financial institution, invites policy conflict of the sort seen in prior assertions of extraterritorial jurisdiction.'”
The reciprocal enforcement tax claims is subject to various limits. But the validity of the claim itself can’t be re-litigated in Canada (or other countries once such agreements are operational). Last I looked there were reciprocal tax collection clauses in the U.S. treaties with Canada, Denmark, France, the Netherlands and Sweden and in estate tax treaties with France and South Africa. But only the one with Canada was operational.
@Norman wrote:
“US District Courts, Court of Federal Claims, and Circuit Courts of Appeal CAN and DO override US Supreme Court decisions.”
Your choice of the word “override” is bad. Congress can and does override tax treaty clauses: treaties may be the “supreme law of the land” under the U.S. Constitution but so are statutes and last in time governs.
A lower court can never override a higher court, least of all the Supreme Court’s interpretation of law. Of course it can ignore it, or try to distinguish it. Hey, there are judges in certain Southern U.S. states who have been trying to ignore the judgment in Obergefell v. Hodges on same-sex marriage: http://edition.cnn.com/2015/08/17/us/same-sex-marriage-battles-across-america/index.html
These things tend to settle down once the press has ridiculed the scofflaw judge. Summary judgment on appeal, an application for an injunction: these are relatively cheap remedies.
@andy05
Under the Canada-US Tax Treaty, Canada will not assist in collecting US from a Canadian citizen, unless the tax claim proceeded their date of becoming a Canadian citizen. Also, the US categorically will not collect any tax debt from a US citizen; they have reserved participation in any kind of reciprocal collection of Treaty-based tax claims from their own citizens.
The fact that Canada will essentially not assist in collecting US taxes from Canadian citizens has been reiterated repeatedly in communications from the late Jim Flaherty re the FATCA IGA, Gov of Canada press releases, and legal articles about the Canada-US Tax Treaty.
Changing this fundamental aspect Canada-US Tax Treaty would likely require both Parliament and US Congress to collaborate
When this issue broke into the news in 2010 -11, many Canadians had the misapprehension that the US could easily collect taxes from them using the “Assistance in Collection” obligation of the Canada–US Tax Treaty. This was very incomplete information.
On August 23, 2011, Don Cayo at the Vancouver Sun had a scoop – a direct communication from CRA regarding collection of US FBAR penalaties in Canada. Here are the details from his August 2011 article.
Vancouver Sun story on Canadian Finance Department and CRA declining to collect US offshore bank penalties.
Don Cayo is likely first reporter to query the practicality of extra-jurisdictional US revenue collections on dual citizens in Canada. His digging prompted a official statement from CRA & Finance Department to the effect that will not enforce US “offshore” penalties in Canada.
Great blogs, it is beyond my head but all I can say I was at the summary trial and could see the judge was sympathetic to our cause. However I need a CD of the proceedings as I could not hear much of it (the microphones were directed to recording and not to the audience). Also, it is easy to be euphoric at this time and we have 3 weeks to fantasize — that Canada can rock the world boat — incredible!!
“Once the IRS has this information I would hardly expect them just to sit on it. More than likely they will sift through the data, select the individuals who have enough to make it worth their time, and harass them via the postal service until they pay up!”
That means they will select everyone, because they can penalize everyone, including those with zero tax liability.
I wrote: “US District Courts, Court of Federal Claims, and Circuit Courts of Appeal CAN and DO override US Supreme Court decisions.”
andy05 replied: ‘Your choice of the word “override” is bad. Congress can and does override […]
A lower court can never override a higher court, least of all the Supreme Court’s interpretation of law. Of course it can ignore it, or try to distinguish it.’
Despite the wording being different between “override” and “ignore it and make a ruling which violates it”, the effect is the same. Famous cases are where numerous circuit courts ignored and made rulings which violate Supreme Court rulings in US v. Sullivan and Garner v. US. Since the Supreme Court denies cert, circuit rulings penalize victims the same way as it would be for overrides. I bet trial courts will continue to comply with the circuit rulings instead of Supreme Court rulings too (even though the don’t really have to).
If a trial court conflicts with a higher court’s precedent, the trial court’s risk is that it might get overturned. Well, if a trial court complies with a higher court’s precedent, the trial court’s risk is still that it might get overturned. A circuit court can ignore and conflict with its own precedent too. Courts don’t have to worry; they don’t get jailed or penalized. Ordinary people suffer, if they rely on precedents that get ignored and conflicted with.
‘The finance department statement adds, “Moreover, the obligation to collect taxes imposed by the other country does not apply in cases where the individual was a citizen of the requested state at the time the tax liability arose in that other country.’
Do you happen to know the reason why that obligation doesn’t apply in those cases: Does the current tax treaty say that, or did Parliament pass a law using the US’s “Last in Time” rule to override the treaty’s clause, or is there some other reason?
Some tax treaties don’t offer such exceptions. Though maybe it doesn’t even matter — I’ve had to contend with around four countries that choose to comply with convenient parts of treaties but violate inconvenient parts. (Two of them are the US and Canada).