Final indignity perpetrated by @BarackObama admin: @USTreasury SLAMS DOOR ON SAME CNTRY EXEMPTION 4 #AMERICANSABROAD https://t.co/SbMHP8IZZX
— U.S. Citizen Abroad (@USCitizenAbroad) January 4, 2017
You can read it at the Americans Citizens Abroad site. Highlights include:
In denying the request for SCE, the Treasury Department’s final FATCA regulations focused solely on the risk of US tax avoidance. “The Treasury Department and the IRS have also decided that the risk of U.S. tax avoidance by a U.S. taxpayer holding an account with an FFI exists regardless of whether the U.S. taxpayer holds an account in his or her foreign country of residence or another foreign country.” The regulations say nothing about the problem of lock-out. They fix only on the unquantified and un-weighted risk that what must be a relatively small population of US taxpayers residing in a foreign country and banking at their local bank might evade US tax. The regulations do not say whether, and, if so, to what extent, Treasury Department took into consideration the widely-admitted fact that FATCA continues to put the community of 8 million Americans overseas at risk of lock-out from access to financial accounts needed for the management of basic living expenses (paying bills, paying rent, receiving paychecks). The problem of foreign financial account lock-out exists, and it has been proven that the FATCA rules are one of the root causes. The Congressional Americans Abroad Caucus, the National Taxpayer Advocate, and ACA, as well as other overseas organizations, have testified to the existence of the problem and have asked for redress by the adoption of SCE. ACA believes that Treasury Department either missed the point or failed reasonably to balance the considerations.
Updates January 6, 2017: From Treasury Regulations AKA “The Horse’s Mouth”
1. DEFINITION OF U.S. ACCOUNT
Comments requested that the definition of a U.S. account exclude accounts held by U.S. individuals resident in the same jurisdiction as the FFI with which the account is held. This comment is not adopted. The U.S. federal income tax system largely relies on voluntary compliance, and third party information reporting of the financial accounts of U.S. taxpayers is used to encourage voluntary compliance. For this reason, U.S. financial institutions are generally required to report under chapter 61 U.S. and foreign source investment income paid to account holders that are U.S. individuals. However, before FATCA, FFIs (in particular, non-U.S. payors) generally were not required to report foreign source payments made to U.S. taxpayers. The information reporting required by FATCA is intended to address the use of foreign accounts to facilitate tax evasion, and also to strengthen the integrity of the voluntary compliance system by placing U.S. taxpayers with accounts held with FFIs in a comparable position to U.S. taxpayers with accounts held with U.S. financial institutions. This is the case even for U.S. taxpayers resident abroad, since U.S. citizens and U.S. resident aliens are subject to U.S. income tax on their worldwide income regardless of where they reside and regardless of whether their accounts are maintained by U.S. financial institutions or FFIs. The Treasury Department and the IRS have also decided that the risk of U.S. tax avoidance by a U.S. taxpayer holding an account with an FFI exists regardless of whether the U.S. taxpayer holds an account in his or her foreign country of residence or another foreign country.” https://www.federalregister.gov/documents/2017/01/06/2016-31601/regulations-relating-to-information-reporting-by-foreign-financial-institutions-and-withholding-on
No, the administration of Barack Obama did NOT miss the point. The point is a simple one:
Time for #Americansabroad to understand. The @BarackObama admin is intent on destroying you. Renounce and rejoice! http://t.co/9KwyKQQx5D
— U.S. Citizen Abroad (@USCitizenAbroad) February 11, 2015
Unfortunately it’s the proponents of the FATCA Same Country Exemption Proposal who are missing the point! It’s simple: “All Roads Lead To Renunciation“.
******* UPDATE THURSDAY JAN 5, 2017
US Treasury Dept ‘slams door on Same Country Exemption’ for expat Americans https://t.co/MTbVdCzl0E via @intlinvestment
— Patricia Moon (@nobledreamer16) January 5, 2017
Great article on this here Brock gets a mention (and link to earlier one)
‘Final indignity’ Among the places expats turned to vent their anger on Wednesday, as the news about the Same Country Exemption came out, was the Isaac Brock Society website, where a regular blogger who goes by the name USCitizenAbroad referred to the decision as the “final indignity perpetrated by…Barack Obama”. The Isaac Brock Society is a Canadian website that was founded in 2011 by a number of Canadian-Americans who were fed up with the way FATCA and other relatively new US laws aimed at curtailing tax evasion were costing them money and causing them problems. President Obama had signed FATCA into law in March, 2010, in the wake of the global financial crisis.
@Tricia – yes, same conclusion – US citizens are US persons for FATCA regardless of residence. The only cure for the “disease” of US-person-status is to relinquish/renounce. I’m so glad I “cured” myself 😉
@BB
The more they use “avoidance” and “evasion” as the same, the more homelanders will come to see these as the same, many already do. They surely do in regards to international corporations.
But what to do about it?
‘The more they use “avoidance” and “evasion” as the same, the more homelanders will come to see these as the same, many already do. They surely do in regards to international corporations.
But what to do about it?’
It is intentional, and it’s already too late. The IRS and CRA both used to emphasize that avoidance is legal and evasion is illegal. Lately they both abused the word avoidance to demonize more witches. Like what the Nazis did when they ran out of Jews and found some Christians to abuse. This is intentional, they know what they’re doing, and the average homelander cannot be taught the difference.
That’s how politicized the Treasury Department has become.
“Actually I’m glad the door was slammed on the ACA’s SCE.”
@Embee, I’m glad too that it was closed, however…this just gives me no hope that the government is in any frame of a listening mood and will not even consider revoking FATCA (why kill their golden goose?) nor will they even entertain a thought towards changing from CBT to RBT.
All I can see is homelanders want the cash flow to keep coming by “raping our bank accounts one account at a time.”
@Animal – this is the parting shot of a lame duck administration. Don’t give up before the new administration has a chance to show whether or not they have heard our message.
And ACA’s SCE and RBT proposals are worthless anyway.
@Fred and all,
Wow, WTFO. That proposal is next to useless. Who do they think that would help? Certainly not me. A one time payment of $5,000? That is about 25% of my yearly pay! am I suppossed to knock over the Quickie Mart?
FBAR laws stand as they are? It is the FBAR that causes me the most concern.
The ACA’s proposal sems to be a very Japanese Chuto-hanpa. Taken from a Sept. 26, 2002 Japan Times piece by Geoff Botting, Chuto-hanpa is an arrangement “that doesn’t serve the purpose of either group; both are inconvenienced.”
A “belief that it’s better that everyone endures some degree of inconvenience rather than having one particular group coming out ahead.”
“The compromises ensure that no one ends up losers, although no one can claim to be winners.”
This system is ripe for abuse and is abused. All that need be done is for one to make and unjustified claim against an innocent and the innocent must pay half the unjust claim. It also seems to be a key component of the tax policy of the outgoing administration.
The “fair share” Obama speaks so much of sounds a lot like “A belief that it’s better that everyone endures some degree of inconvenience rather than having one particular group coming out ahead.”. It also seems to be behind the homelander belief that we are somehow not paying our “fair share”. I have written in the past that I felt that there was a belief amoung homelanders that we were somehow escaping one of the only two certainties of life, death and taxes. The fact that we pay taxes where we live does not matter to them, only that we are not paying for the roads and bridges that they drive on, the schools they send their children to and the hospitals that medicate them. We, like them, must endure some degree of inconvenience and must not come out ahead by choosing to live abroad and thus avoid paying taxes to the US.
From group think, to identity politics to this chuto-hanpa proposal by the ACA, is see the US turning ever more Japan like. For the ACA to offer such a “solution” may indicate that these ideas may now be mainstream. If this is in fact that case, then we must prepare for an even larger fight for the individual must always yield to the will of the group and smaller groups to the wishes of larger groups under this system. For us to give up half of what the US demands while they receive only half of what they demand means they gain and we lose.
I know this is not the only proposal on the table, but I think it is neccessary to oppose it and anything less than a full repeal of FATCA and switching to RBT and excluding USCs resident abroad, and of course all former USCs, from all reporting requirements, including FBAR.
To prevent further misunderstanding of our various situations, it is also important to publically call out those who misuse terms, such as “tax avoidance” for “tax evasion” lest the two become inseparable in the minds of those who can vote in the US.
@ ND
I have no doubt it is intentonal, as you say, and fear you are correct that it is too late. I know those homelanders I have spoken to about it are happy in their misunderstanding.
@JapanT
The ACA proposal is lose-lose. We need to re-frame the discussion to demonstrate that RBT as practiced by 99% of the countries in the world is actually a win-win proposition. Both expats and the US win when US Persons are able to compete globally on a level playing field. We should be sending everyone the testimony of Roger Conklin who convincingly argued that discrimination against overseas Americans reduces US exports as US firms are unable to give their executives international experience. For those expats with US assets, US tax may actually be higher after renouncing (while overall tax may be lower, this is not a contradiction).
And I totally agree that we should be making the distinction between tax avoidance and tax evasion whenever possible. If Congress wants to reduce tax avoidance, then they should repeal the loopholes that make avoidance possible.
@Karen
I agree with all your last comment except for addressing tax avoidance. There is nothing at all wrong with tax avoidance. It is a very broad activity includes choosing when, where or how to purchase something to get a lower tax rate.
Just before the sales tax in Japan went up from 5% to 8% a few years ago, there was a massive nation wide shopping spree as just about everyone stocked up on consumables and made planned large purchases early to AVOID the increeased tax rate.
When in the States, I would always top off my tank just before reentering my home state as its gas tax was a lot higher than the neighboring states.
We shop for the lowest prices regardless of why the prices are lower here that there. If it is due to tax, then we are avoiding taxes.
Not having enough money to buy any investment instruments, I know little of them but it seems that certain of these have tax incentives that others do not. Choosing those then would be tax avoidance.
Another point is that loopholes are not mistakes in the tax law but put there to solve certain problems. SCE would be a “loophole”. The FEIE is a “loophole”. Loopholes exist to address a problem tax law creates. One persons “exclusion” or “write off” is another’s loophole.
There are those who do think it is wrong to make decsions based upon not owing more tax, when others do it.
@Karen
I should add that my remarks about some thinking something is wrong only when others do it was NOT directeed at you nor at anyone in particular.
@Japan T – I didn’t mean to imply there was anything wrong with tax avoidance; I just wanted to make the point that Congress could change the rules if they were not happy with the way the rules were being used.
You’re quite right that a) everyone legitimately minimises their tax payments in lots of little ways and b) many of the “loopholes” are actually policy decisions and tax incentives.
Mark Twain, you will find the ACA quote from their “press release” at the bottom of this paragraph in the new FATCA regulations:
“E. Comments and Changes to § 1.1471-5—Definitions Applicable to Section 1471
1. DEFINITION OF U.S. ACCOUNT
Comments requested that the definition of a U.S. account exclude accounts held by U.S. individuals resident in the same jurisdiction as the FFI with which the account is held. This comment is not adopted. The U.S. federal income tax system largely relies on voluntary compliance, and third party information reporting of the financial accounts of U.S. taxpayers is used to encourage voluntary compliance. For this reason, U.S. financial institutions are generally required to report under chapter 61 U.S. and foreign source investment income paid to account holders that are U.S. individuals. However, before FATCA, FFIs (in particular, non-U.S. payors) generally were not required to report foreign source payments made to U.S. taxpayers. The information reporting required by FATCA is intended to address the use of foreign accounts to facilitate tax evasion, and also to strengthen the integrity of the voluntary compliance system by placing U.S. taxpayers with accounts held with FFIs in a comparable position to U.S. taxpayers with accounts held with U.S. financial institutions. This is the case even for U.S. taxpayers resident abroad, since U.S. citizens and U.S. resident aliens are subject to U.S. income tax on their worldwide income regardless of where they reside and regardless of whether their accounts are maintained by U.S. financial institutions or FFIs. The Treasury Department and the IRS have also decided that the risk of U.S. tax avoidance by a U.S. taxpayer holding an account with an FFI exists regardless of whether the U.S. taxpayer holds an account in his or her foreign country of residence or another foreign country.”
In: https://www.federalregister.gov/documents/2017/01/06/2016-31601/regulations-relating-to-information-reporting-by-foreign-financial-institutions-and-withholding-on
There is that pesky “risk of U.S. tax avoidance” again. Some one should send them a dictionary.
I posted this over at the Media thread. Should have visited this thread first:
I have three thoughts on the death of the Same Country Exemption:
1. We now have absolute proof that the current United States government is, without a doubt, intentionally hunting down ordinary “expat” citizens. We little folk are not just “caught in the crosshairs” while they were really aiming at somebody else. We ARE the target and the current government has no interest in making our lives any easier.
2. Halfway measures, as this one was, are always dead ducks anyway. We should not waste our time fighting for a halfway measure. We must fight for a COMPLETE end to the existence of citizenship-based taxation. We must cut out the cancer at its root.
3. The current United States government has 15 more days to live. After that it is a new day with new people in charge who are poised, and have promised, to undo the injustices the “overseas community” has endured for so long.
January 20 cannot come a day too soon.
The tax credits and the FEIE non-resident US taxpayers use to reduce our US taxes are “tax avoidance” – yet many homelanders use the fact that we can reduce or eliminate our US tax through the use of them as justification for CBT.
I don’t know that it’s the revenue that’s so important to homelanders, but the willingness to ‘pitch in’ and ‘do our part’ as citizens.
How do we overcome such hurdles?
@Muzzled, hallelujah and Praise God!
The Obama Administration and the Democrat Party has caused grave harm to me and my family minding our own business outside the USA carrying solely non-US Passports.
In the last year I have been helping typically old age pensioners in my neck of the woods who are accidentals and have become scared to the point of suicide. These are folks who have just enough money to have problems but not enough to have a champagne lifestyle.
Being age 65 with your lifetime savings of around $15,000 is piss poor but they are facing mind altering penalties and compliance costs that would eat up one hundred percent in fees of the savings. Yes a compliance shark quoted this old couple $10,000 in fees to do a streamlined package and a final filing after renouncing. PLUS they would then have renouncing fees to the USA. Retirement savings….gone.
I am counting the days and hours, there will be tears of joy in my eyes on that day.
The GOP in the 2016 Manifesto made promises in writing that if they won the trifecta (House,Senate,POTUS) we would get relief.
God Bless Donald J. Trump
God Bless the US Republican Party
@Bubbles, I have learned that Homelanders think expat Greeks, expat Irish……….all pay taxes back home.
We need to show them what will happen if the world adopts CBT to protect their tax base!!
I am 100% in support of Greece and Ireland to adopt CBT to bring home the Euros from the USA.
@BB
“The tax credits and the FEIE non-resident US taxpayers use to reduce our US taxes are “tax avoidance” – yet many homelanders use the fact that we can reduce or eliminate our US tax through the use of them as justification for CBT.
I don’t know that it’s the revenue that’s so important to homelanders, but the willingness to ‘pitch in’ and ‘do our part’ as citizens.”
I think this is a big part of the problem. As I wrote earlier, “A belief that it’s better that everyone endures some degree of inconvenience rather than having one particular group coming out ahead.” Sometime after my departure, this foreign idea seems to have taken root. I am sure the seed was planted long ago but had not spread yet.
“How do we overcome such hurdles?”
I have no idea. Everytime I try to talk to homelanders about it they end up chanting “You pay, you pay”. ND is right, all this is intentional. Not only that, they have been at work on it for a very long time. Students in the US have been such nonsense for at least two generations. Seriously, why would anyone think we have any part to play in their society? We arenot a part of it? Yet they do and they have some very strange ideas about it too. They have thus been taught. Hard to overcome that, but not impossible, I hope…I pray.
@George
If this is not done away with, I will have my spouse suggest to their government, Japan (I can’t…Logan act) to implement taxation along the lines that they treat nationality. That is to say, that if you are decendent of a Japanese you are Japanese, and apply it only to the offending nation, the US. So too should Ireland and Germany and any other that allows ancestry as a route to citizenship. Wouldn’t it be a hoot to hear all the homelanders with Irish, Gerrman, Greek, French, Spanish, Japnese, Chinese or Korean surnames freak out when they find they owe more money than they ever earned to the lands of their ancestors?!
@Karen
Actually, I had little doubt that you knew this, but many people read this and it seems few homelanders understand these points. Thank for including “incentives” as a reason for many loopholes. I neglected to include that very important point.
One of the most notable differences between the US and Canada is that in Canada, by paying a departure tax one need not renounce one’s citizenship to end one’s tax obligations.
The US expects its citizens to pay the ultimate price, that is to no longer be a citizen, in order to “avoid” paying US taxes. The US would rather have taxpayers than citizens.
Meanwhile, the con Don or Liar-in-Chief hasn’t paid federal taxes for 20 years. Good luck with getting substantial change.
@Dod, “Meanwhile, the con Don or Liar-in-Chief hasn’t paid federal taxes for 20 years.”
As Rhett Butler said; Frankly my dear I do not give a damn.
Let me revise that. “The US would rather have taxpayers who pay no tax than citizens.”