cross-posted from citizenshipsolutions.ca
by John Richardson
Introduction …
Most meetings with Mr. #FBAR take place in "The Twilight Zone" https://t.co/9UJw0GxGIf pic.twitter.com/uqjqYsKKtZ
— Citizenship Lawyer (@ExpatriationLaw) February 5, 2017
This post is one more of a collection of FBAR posts on this blog. The most recent FBAR posts are
here and here.
The “unfiled FBAR” continues to be a problem for certain Homeland Americans with “offshore accounts” and all Americans abroad, who continue to “commit personal finance abroad”.
Be careful what you "fix for"! What to do about the unfiled #FBAR https://t.co/sAh01HpWin via @ExpatriationLaw = "small steps = big results"
— Citizenship Lawyer (@ExpatriationLaw) February 5, 2017
The above tweet references a recent post which discussed how to “fix past compliance problems“. The introduction included:
This blog post will hopefully encourage those with U.S. tax issues to consider whether they can deal with minor/unintentional FBAR violations as a “stand alone single problem”. There may be no need to escalate and expand one single problem into a multi-dimensional full blown tax problem that may end up with unintended and unanticipated costly professional fees as well as undue time spent! Read on and learn why. Keeping a calm head is most important, even if it is most difficult
to do in the face of the scary situation of not being in compliance with the U.S. tax and regulatory regime.
Introducing Mr. and Mrs Kentara – When the innocent enter the “Twilight Zone” …
The facts (as reported by Virginia La Torre Jeker in her outstanding analysis) …
In Kentera v. United States, 2017 U.S. Dist. LEXIS 12450 (ED WI 2017), the US District Court dismissed a complaint filed by a husband and wife living in California. The Kentera’s were seeking review of FBAR nonwillful penalties asserted by the IRS. The nonwillful FBAR penalties were assessed pursuant to an audit after the couple withdrew from the IRS’ 2011 Offshore Voluntary Disclosure Initiative ( VDI).
The facts of the case are taken from the plaintiff’s complaint, which can be read here. In summary, they are as follows:
In 1984, after the death of his father, the plaintiff-husband, Milo Kentera, inherited a Swiss foreign bank account at Banque Cantonale de Geneve (Swiss Account). The account was automatically transferred to the plaintiff at the death of his father, so the plaintiff did not take any action in creating this account. Sometime soon afterwards, Milo added his wife’s name to the Swiss Account. The balance in the account was under USD10,000 through 2004 but increased somewhat in 2005-06 going over the USD10,000 FBAR filing threshold. The Swiss Account increased significantly in 2007 upon the sale of the plaintiff’s parents’ Montenegro real property. Some of the sales proceeds were distributed to plaintiff Milo and deposited in the Swiss Account, with the balance paid to Milo’s siblings.
Neither of the plaintiffs were well-versed in US tax matters. The husband was a pharmacist and his wife was a homemaker. Since 1984 when the account was inherited, the plaintiffs always disclosed the Swiss Account to their various accountants on tax organizers and always disclosed the account on their federal income tax returns (Schedule B). However, when the account first exceeded USD 10,000 in 2005, their first accountant failed to prepare or file an FBAR for the plaintiffs. Their second accountant continued this FBAR failure for a number of years despite the fact he clearly knew of the existence of the account from the prior tax returns given to him by the plaintiffs; he also failed to ask if any foreign interest was earned on the account, and consequently,interest income was omitted. In 2010, a third accountant acknowledged the existence of the Swiss Account on the plaintiffs’ return and included interest income from the Account, but she also failed to prepare or file an FBAR. Please note, certainly a tax professional should have been well aware of the FBAR filing rules by the time a 2010 FBAR should have been filed (i.e., June 30 2011). At this time the first IRS OVDI had been in full swing, having been initiated in 2009 and many professional and non-professional articles were written about the problems with FBAR.
Sometime in approximately September 2011, the plaintiffs entered the recently announced IRS 2011 OVDI program. They amended tax returns to include omitted interest income from the Swiss Account and filed completed FBARs for the 6 year period, 2005-2010. In August 2013, the IRS provided Plaintiffs with a Form 906, Closing Agreement assessing a miscellaneous penalty of $90,092. The complaint stated that plaintiffs “withdrew” from the OVDI program the following month. I believe the plaintiffs “opted out” of the program, but am not sure. They were soon the subject of examination by an IRS agent. The IRS agent recommended that plaintiffs be assessed non-willful FBAR penalties under the Bank Secrecy Act, and later proposed assessing the penalties as follows:
1) As to the husband, Milo Kentera: $500 for calendar year 2006; and
$10,000 per year for calendar years 2007, 2008, 2009, and 2010, for a
total penalty of $40,500.2) As to the wife, Lois Kentera: $500 for calendar year 2006; and $2,500
per year for calendar years 2007, 2008, 2009, and 2010, for a total
penalty of $10,500; andPlaintiffs protested the penalties at IRS conferences, but their protests fell on deaf ears and the IRS sent each of the plaintiffs a letter of an “appeals determination,” upholding the IRS’ proposed FBAR penalties against each of them. The plaintiffs then filed the complaint in District Court. In their complaint, plaintiffs asserted that the IRS incorrectly assessed the FBAR penalties. First, on grounds that the Bank Secrecy Act prohibits the imposition of an FBAR penalty if the violation was “due to reasonable cause.” 31 U.S.C. § 5321(a)(5)(B)(ii)(I). [I note here that the statute requires not only “reasonable cause” but also that “the amount of the transaction or the balance in the account at the time of the transaction was properly reported”.]
My initial thoughts …
The facts suggest that Mr. and Mrs. Kentera were people who believed in compliance with the law. The history of their tax filings suggests a conscious effort to comply with the applicable laws. They also (like everybody) were completely at the mercy of their tax advisers. The “offshore account” (which was not opened by them) was disclosed to their tax preparers. The tax preparers failed to advise Mr. and Mrs Kentera to file their FBAR (a requirement that few in 2011 knew about).
This series of events took place during the “2011 IRS Reign of FBAR Terror“. At this time many lawyers and accountants strongly recommended that people (1) correct their mistakes (the nonwillful ones that were the result of not knowing about Mr. FBAR) and (2) correct those mistakes by agreeing to the OVDP/OVDI penalty program (that is/was analagous to a form of “Civil Forfeiture“).
The evidence strongly suggests that Mr. and Mrs. Kentera were ordinary people, trying to do the “right thing”. They were victimized by advice to enter OVDI and then victimized by the IRS because they entered OVDI. (To get a sense of the context of how people were victimized by trying to do the “right thing”, read Phil Hodgen’s April 5, 2011 post here. There were many other posts written during this period. To see how Green Card holders were victimized by the OVDI program see here and here.)
How could the IRS possibly assess this kind of FBAR penalty?
All “armchair quarterbacks” must remember the context in which individual decisions were made. In 2011, there were NO streamlined compliance procedures. There were no delinquent FBAR submission procedures. There were no Delinquent Information Return Procedures.
That said, there was also NO requirement that people enter OVDI.
Tragically those who tried the hardest, and acted most quickly, to fix their non-compliance problems were the most harshly treated. (In fact, the history of the IRS assault on Americans abroad has shown that that those who did NOT rush to fix their problems fared much better. You may remember the “This is your last best chance to come into compliance” threats directed to those (including Americans abroad)with offshore non-U.S. bank accounts.)
To put it simply: The Kentera’s were victims of their desire to be in compliance with the law. It is regrettable that their law abiding sentiments coincided with the 2011 atmosphere of threats from the IRS and fear mongering from the compliance industry.
Why OVDP is extremely dangerous …
To enter OVDI or OVDP is to enter a program where you interact with the IRS outside the provisions of the Internal Revenue Code. You agree to interact with the IRS outside the framework of the existing laws. OVDP is appropriate for ONLY the very small group of people who may face serious penalties and (criminal) punishment.) OVDP is completely inappropriate for Americans abroad (where all of their assets are foreign and all assets are therefore subject to penalty assessment).
But, once you enter OVDP …
In my humble opinion, Mr. and Mrs. Kentera were subjected to this penalty because they entered OVDI. Because, they entered the program, there must have been a presumption that they somehow “deserved to be there”. As Virgina La Torre Jeker points out:
The point to be taken is the IRS’ apparent lack of sympathy with the taxpayers’ arguments concerning “reasonable cause”. It will be remembered that the IRS has discretion to assess FBAR penalties after taking into account all the facts and circumstances. See the IRS Manual regarding FBAR penalties here. Current IRS procedures state that an examiner may determine that the facts and circumstances of a particular case do not justify asserting a penalty and that instead an examiner should issue a warning letter. The IRS has established penalty mitigation guidelines, but examiners may determine that a penalty is not appropriate or that a lesser (or greater) penalty amount than the guidelines would otherwise provide is appropriate. Examiners are instructed to consider whether compliance objectives would be achievedby issuance of a warning letter; whether the person who committed the violation had been previously issued a warning letter or has been assessed the FBAR penalty; the nature of the violation and the amounts involved; and the cooperation of the taxpayer during the examination.
For more about FBAR penalties and the “FBAR Penalty Mitigation Guidelines”, see the discussion by Michael Deblis here.
What happened was that Mr. and Mrs. Kentera “signed up” to pay an FBAR penalty when there is a good chance that one would never have been imposed in the first place!
Incredible! What should/could have resulted in a “warning letter” resulted in a full blown FBAR penalty (plus the professional fees to attempt to reverse the penalties).
Why did people do it? Why did people enter OVDI in the first place?
The problem of people being “ushered into OVDI/OVDP” by their advisers has been the subject of much discussion. See the following discussion of Jack Townsend’s blog:
"Presumably, the couple entered OVDI on the advice of an attorney and, ultimately, were assessed…" — Stephen Kish https://t.co/XiPlOsz1GB
— Citizenship Lawyer (@ExpatriationLaw) February 4, 2017
"I'm a bit curious why there was omitted income, given that the account was (we are told…" — Michael J. Miller https://t.co/MEq0a4Wz9Y
— Citizenship Lawyer (@ExpatriationLaw) February 5, 2017
I’m a bit curious why there was omitted income, given that the account was (we are told) consistently disclosed on the taxpayers’ return, but mostly I’m curious why they were in OVDI in the first place.Presumably the taxpayers and their counsel could have predicted from the outset that they would need to opt out if they were unwilling to pay the 25% offshore penalty; and I generally see little merit in going into OVDP if you know (or should know) in advance that you’ll be opting out.
Obviously, the compete set of facts (most of which we don’t know) is critically important, so I’m certainly not purporting to reach any conclusions, but I think it’s fair to at least wonder if a non-program disclosure might have been more appropriate in this instance. I do vividly recall that some practitioners were vehemently opposed to the whole notion of a “quiet disclosure,” although I do not recall any coherent reason ever having been advanced for such opposition.
Conclusion: “Look Before You Leap …
To #OVDP or to NOT #OVDP – the greater the attempt to fix past compliance issues, the greater the punishment. https://t.co/HblKpihu0C
— Citizenship Lawyer (@ExpatriationLaw) February 5, 2017
I certainly agree with Virgina La Torre Jeker’s conclusion which states:
The IRS disposition of the case was disappointing, to say the least. One has to ask why, on these facts, the taxpayers joined OVDI in the first place? My guess is that the fear factor was ramped up significantly and they may not have been given full detailed advice by their tax advisor as to all of the possible options, risks with each one and so on. One must also remember that at the time the taxpayers joined OVDI, the Streamlined options did not exist. The case demonstrates that
one must be very careful in taking actions. Get a second or even third opinion.”
Yes, yes and yes!!
If you have FBAR problems …
Get a second or third opinion! Be careful what you fix for!
(For those who want further reading (including the details) see the following court documents:
United States Motion to Dismiss – here.
Memorandum in Support of United States Motion to Dismiss – here.
Mr. & Mrs. Kentera’s Brief in Opposition to United States Motion to Dismiss – here.
United States Reply to Mr. & Mrs. Kentera’s Opposition Brief – here)
John
Richardson
“For those like my son and for the *accidental Americans* born on US soil but who returned to their parents’ (and their own) countries in childhood and well before the age of majority, having never applied for or accepted a US passport, common sense should / would say that for them US citizenship should be a CHOICE, not automatically deemed, given exceptional US citizenship-based taxation and financial account reporting consequences (their only connection to that country).”
Common sense would surely say that simple free / cheap renunciation of citizenship should be a choice available to all citizens of every country.
I just don’t get this idea that some deserve to be able to renounce easily while others don’t deserve that right.
Yes, plaxy and Japan T — if only we had known of the US-ness disease contracted from the *land of the free*!
Non-dual individuals who get born in the US with no ancestral right to claim another citizenship, have to have a US passport in order to be able to leave. No choice.
Children born abroad to USC parents and registered as US citizens and issued US passports, can’t defend themselves against that fate. They’re US citizens, like it or not. No choice.
So, having been issued with a US passport is not evidence that an individual made a choice to be a US citizen.
An adult like me, who left the US and could have renounced but didn’t (until news broke of CBT and FATCA), did make a de facto choice to remain a US citizen. But it wasn’t an informed choice.
Nobody deserves to be forced to remain a US citizen against their will.
Many USCs who were removed from the US by their parents while still children, have also made the defacto choice to continue being US citizens, until FATCA arrived. Why is that different from a USC who left the US as an adult and didn’t renounce until FATCA arrived?
Lying and coercion are tools. True…
(As well as my and others’ experiences at the Canada / US border, as we were intimidated by statements, as to me when the US official saw I was born in NY State, *I will let you into the US this time but the next time it must be with a US passport.*. My history is one of many missteps, this particular one — applying for and obtaining a US passport, but certainly not from my choice of wanting to be a USC. My many mistakes occurred before the awareness-of-the-problem information was available on sites such as IsaacBrockSociety.ca, for I lacked that education from the US.)
***********
The human rights aspect for there is discrimination through our US national origin (however that is defined).
…and didn’t even know there was an option or need of formal expatriation by renunciation.
There is also the financial barrier to renunciation for some — not having the extra US$ to pay the ransom fee to obtain the Certificate of Loss of Nationality (CLN) document.
Nobody made an informed choice to be a US citizen before FATCA, as no one could reasonably known that US citizenship carried with it the risk of being reported to the IRS as a likely criminal. By one’s bank, for god’s sake! You couldn’t make it up.
The point I’m trying to make is that the word “accidental” is completely irrelevant, and only serves to normalise the persecution of those not deemed “accidental.”
The refusal to confirm your son’s non-USness, for any price, is on a different level of cruelty altogether. It’s a very clear human rights abuse and Canada should be ashamed of itself for not protecting its vulnerable citizen who is unable to protect himself.
None of us should be in this situation. I was as *accidentally* born in the US as my son was *accidentally* born to a US parent in Canada and thereby subject to US CBT — for none of us have a say where we are actually born or to whom. I understand what you are saying — the term *accidental* perhaps making others more able to see the tip of the US CBT iceberg.
I was able and did make my choices of free will to come to Canada, to become a Canadian citizen, to have and raise my children where my husband and I saw fit. Only speaking for myself, I had no barrier financially to buy my freedom as I had the *luxury* of funding my renunciation with retirement earnings when I saw another choice had to be made for my own sanity and being able to sleep — over and above my choice and the cost to come into US tax and reporting compliance.
In my (and other) family’s own little piece of the whole abomination, I cringe at the reality that anyone — for there will be more than my son — cannot renounce (or their parents or guardian on their behalf). That makes reality to have to live on the fringes, trying not to be noticed and criminalized by one’s own country who did not and seemingly will not stand up to the US as a real sovereign country.
As in US litigation, Canada will say no harm has been done. The *yet* has not come into play for many.
“I did make my choices of free will to come to Canada, to become a Canadian citizen, to have and raise my children where my husband and I saw fit. ”
Sure. That’s not the choice that’s being spoken of when the EU Parliament, for example, calls on the European Commission and the European Council to do this and do that for US citizens resident in the EU – “particularly accidental Americans.”
However. It is what it is. Ultimately it seems unlikely that the Commission and the Council are going to do anything at all, and equally unlikely that America is going to allow cutprice renunciation to anyone who needs a CLN.
It’s a sellers’ market, and don’t they know it.
“Common sense would surely say that simple free / cheap renunciation of citizenship should be a choice available to all citizens of every country.”
Common sense doesn’t work in the US. For the US, you would need the Expatriation Act of 1868.
The IRS helpline was still “lying” in 1991:
“We are not interested in foreign income.”
“Just enter your US-sourced income and leave out the non-US-sourced income.”
@plaxy wrote:
Generally true, but not always. There is a certain amount of fraud, much of it related to adoption or surrogacy abroad. A CRBA and passport can be cancelled at any time for error of fact or law. https://www.uscis.gov/ilink/docView/SLB/HTML/SLB/0-0-0-1/0-0-0-29/0-0-0-10531.html in principle (and depending on the relevant foreign or U.S. state law of the domicile on paternity, DNA proof of lack of biological relationship (and lack of gestational relationship under present interpretation of the INA) could nullify citizenship.
The Hizam case is only the most publicized and tragic; the State Department promised to seek a special bill in Congress on Hizam’s behalf but I haven’t seen any sign of that happening; on the other hand Hizam is still in the Bronx with no sign of deportation. Or citizenship. https://www.nytimes.com/2012/02/27/nyregion/us-error-costs-bronx-resident-from-yemen-his-citizenship.html
My daughter was never questioned as to the alien status of her son on arrival at U.S. airports. She is also foreign-born but I would not expect a border guard to know, or ask, about any prior residence or presence other part in the USA. Sometimes their ignorance can be astounding; barking at my sister many years ago when he saw she had both U.S. and Irish passports, as if that were unlawful or impossible.
I’m sure with the US’s current attitude towards immigration (both illegal and legal) and naturalization this case / law will be getting a lot of mileage in the near future.
However, seeing as the US also wants to “have it’s cake and eat it” when it comes to citizenship, I’m sure if this man had not actually come to the US, they would have been fine with him keeping his citizenship so he could help “balance” their budget.
Good question is: did they give him a free CLN or did he have to buy it? Will they be coming for his assets with an exit tax when they get around to deporting him?
“did they give him a free CLN or did he have to buy it? Will they be coming for his assets with an exit tax when they get around to deporting him?”
I think the only people who get CLNs are those who were US citizens and lost their US nationality. I haven’t found a way for those who were US non-citizen nationals to voluntarily lose their US nationality the way US citizens can, but Congress has done it to some US non-citizen nationals involuntarily, and those people do not receive a CLN even though they lose their nationality. However, Mr. Hizam was neither. He was not a US citizen and not a US non-citizen national, he was an alien who received an erroneous certificate of US citizenship from the US government, and he is still an alien who is now stateless. So I don’t think he gets a CLN.
I don’t think he had a green card either, so the exit tax won’t apply when he gets deported. However, he has to refile all his past Forms 1040 as Forms 1040NR, because he was a nonresident alien who was taxable under the substantial presence test. He loses most of his deductions and exemptions.
Cannot see how or why the us empire would want FATCA and/or CBT to go away?!
the us desperately needs money (they’re broke)–likely they’re will be a “freedom greatness” program tax/fee for retirement withdrawals coming to generate even more revenue for the ontologically empty and dying empire.
Even if it was realistically possible for it to be repealed–could one imagine the pro-FATCA folks with advert (propaganda) showing FATCAT usa-er playboys lounging in a hot tub surrounded by buxom blonds smoking cigars while laughing, while panning to corporate american hamster-wheelers barely treading water, for ‘comparisons.’ Yup, dead in the water.
Would realistically anticipate:
1. heavier ramping up of FATCA (no change to CBT). Very minor changes to FATCA for window-dressing PC to those ‘accidentals.’
2. More calls for resistance, revolting, letter writing, signage, we must/we should/we ought to talk, associations/clubs fighting for relevance and more we must/we should talk.
3. Lawyers and other “experts” selling false hope, newsletters, or blogs that are underlie a typical usa-er hu$tle–get money, get more money. Sell agita, watcha gonna do when that us empire comes for you!
4. tax-compliance/lobby industries salivating over programs, forms, documents, to create/generate relevance and keep the hu$tle alive to show that one owes basically $0.
Hope we’re wrong. But, reality is reality. And there is peace knowing the truth about the us empire. All roads lead to: Renounce Avenue
@Norman
When I was commercial officer in Algiers, the consular officer boasted to me that she had more than once denounced American passport holders for constructive relinquishment and seen their passports revoked. http://www.columbia.edu/cu/lweb/digital/collections/cul/texts/ldpd_6260645_006/ldpd_6260645_006.pdf
We can assume that the incidents she spoke of happened before Vance v. Terrazas, which she perhaps hadn’t heard of. Pre-1980 revocations of nationality by the State Department were retroactively voided by that case: on the other hand international law doesn’t allow the attribution of nationality to an adult without consent (attribution by marriage being an open question). So there you are.
@Andy5
” Pre-1980 revocations of nationality by the State Department were retroactively voided by that case: ” .
Do you have a case in hand where a person revoked of us citzenship was involuntarily reissued his citzenship as a result of naturalization law changes . I emphasize the word involuntarily .
I was/am of the opinion that whether a clause or law is amended or revoked or made retroactive, there is always a question of acceptance of the fact by an oath or signature.
Historically, what the SC said and what the SD said did not match up. So who is right , the one who makes the law or the one who admnisters it.
“We can assume that the incidents she spoke of happened before Vance v. Terrazas, which she perhaps hadn’t heard of. Pre-1980 revocations of nationality by the State Department were retroactively voided by that case”
Did that case revoke pre-1980 revocations of US nationality of US non-citizen nationals, or did it only revoke pre-1980 revocations of US nationality of US citizens?
I read Afroyim v. Rusk a few years ago and it seems to me US Supreme Court revoked revocations of US nationality of all US nationals without their consent, i.e. the court went beyond what the 14th Amendment says. It seems to me that people who were born in Okinawa or the Philippines at relevant times should still be able to get certificates of US non-citizen nationality. Such a certificate is a US passport containing an endorsement that the holder is not a US citizen. For Filipinos an additional endorsement would be needed, stating that the holder is not allowed to enter the US unless they separately obtain a visa. I’m not sure about Okinawans.
Anyway, they didn’t get CLNs and didn’t pay fees.
“We can assume that the incidents she spoke of happened before Vance v. Terrazas, which she perhaps hadn’t heard of. Pre-1980 revocations of nationality by the State Department were retroactively voided by that case”
Did that case revoke pre-1980 revocations of US nationality of US non-citizen nationals, or did it only revoke pre-1980 revocations of US nationality of US citizens?
I read Afroyim v. Rusk a few years ago and it seems to me US Supreme Court revoked revocations of US nationality of all US nationals without their consent, i.e. the court went beyond what the 14th Amendment says. It seems to me that people who were born in Okinawa or the Philippines at relevant times should still be able to get certificates of US non-citizen nationality. Such a certificate is a US passport containing an endorsement that the holder is not a US citizen. For Filipinos an additional endorsement would be needed, stating that the holder is not allowed to enter the US unless they separately obtain a visa. I’m not sure about Okinawans.
Anyway, they didn’t get CLNs and didn’t pay fees.
How about back taxes? Did they have to back file tax returns and FBARs?
“How about back taxes? Did they have to back file tax returns and FBARs?”
Some of them reported somewhere that they had to pay renunciation fees to re-relinquish, they got CLNs, and they had to back file some number of years of tax returns and FBARs. I wonder why they didn’t have to back file all the way back to their original relinquishment which was retroactively overturned.
““How about back taxes? Did they have to back file tax returns and FBARs?”
Some of them reported somewhere that they had to pay renunciation fees to re-relinquish, they got CLNs, and they had to back file some number of years of tax returns and FBARs. I wonder why they didn’t have to back file all the way back to their original relinquishment which was retroactively overturned.”
That’s what I thought, yet am told that the US does not, has not impose USCship on anyone.
“yet am told that the US does not, has not impose USCship on anyone”
I don’t know where you read that.
Some people think that the US shouldn’t be able to impose US citizenship on Calgary411’s son, but so what? “Shoudn’t” is “shouldn’t” and “doesn’t” is “doesn’t” and never the twain shall meet.
Some people think Canada and other countries shouldn’t cooperate with the US’s imposition of US citizenship on citizens of Canada and other countries.
@Robert Rose asked
Case law concerns almost entirely individuals who sought U.S. status that they had lost or been denied: the Chinese Exclusion cases, pre-Indian Citizenship Act native Americans, pre-Cable Act women, and of course Terrazas and Afroyim. There have been Revenue Rulings on involuntary restoration of citizenship and the IRS did not, could not, pursue enforcement outside the USA of tax laws for any time prior to when an individual did not avail him- or herself of an attribute of U.S. citizenship. How could they, whatever the law. (Of course today we have FATCA and IGAs, but this is now and that was then.)
Unfortunately the Supreme Court has not, itself, considered the perversity of its decisions because, one assumes, it considers American citizenship a precious attribute for all eligible persons at all times. Morales-Santana created the anomaly that my grandson, born in 1913 is not (and his mum does not want him to be) an American citizen whereas if he were born after 11 June 2017 he would be. Creating liability for 3520/3520-A and PFIC reporting and tax on his foreign disability trust.
Fortunately the IRS does not have standing to impose citizenship on anybody, and the State Department has no interest in doing so. There are doubtful cases, but the only ones that are likely to be pursued are those where someone is seeking status, not where someone needs to deny it.
See my unpublished 2007 article on cross-border tax enforcement, cited once or twice on IBS, and search on “rev. rul.” https://bit.ly/2utjcwc
“my grandson, born in 1913”
I want to say ‘no comment’ but I can’t because that would be a comment.
“Fortunately the IRS does not have standing to impose citizenship on anybody,”
Yes that’s fortunate.
“and the State Department has no interest in doing so”
That’s not what they said to Calgary411.
@norman;
2013, obviously. Gimme a break.
No, assuming I recall the facts correctly it wasn’t the State Department but some officious border guard (now part of DHS) who frightened Calgary411 into registering the birth of her child. If only she knew then what she knows now. There is no legal obligation to register. That said, her child’s status was never in doubt to anyone who knew the facts: my comments relate to cases with genuine doubt because lack of public proof of qualifying residence or presence in the USA. Amelia Shaw’s Foreign Service Journal article addresses the point, although she wrote before Santana-Morales.
Embassies and consulates sometimes have birth registration booths at American-sponsored fairs. Or they may have arrangements at military bases in their country. But they don’t otherwise leave their offices to search out potential citizens.
There may have been other cases, common in Prohibition times (and even now sometimes privatised to bounty hunters), where USG storm troopers invaded Canada to kidnap an American citizen. But the last case I know of is Ronald Anderson. http://uniset.ca/other/news/wp_ronaldanderson.html
In the notorious bounty hunter case Jaffe wasn’t American at all but Canadian: https://www.washingtonpost.com/archive/politics/1982/04/24/to-catch-a-canadian/c3ae78e2-9eb9-4a92-850d-60facc98a112/?utm_term=.34ec63181689