Liberty and justice for all United States persons abroad

The Isaac Brock Society

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J-bnn
Reposted from the citizenshipsolutions blog
“Guest post by
John Richardson – “Citizenship Solutions”

FATCA Hearings in Washington, DC – April 26, 2017
 
 
 
 

Beginnings – It all began in July 2016

The purpose of this post is NOT to describe the hearing in detail (that has already been well done), but rather to provide my overall (and perhaps broader) impressions based on actually having attended the hearing.

The April 26, 2017 FATCA hearing in Washington was long in the making.
Its genesis was rooted in a meeting that took place in July of 2016 at the Republican National Convention. The planning and preparation involved the efforts and consistent cooperation (weekly meetings since August) of a number of people in different countries and on different continents. It was a privilege to have been part of this group. A list of the people who worked on making the hearing happen – the “FATCA prep team” – is described here. Those efforts culminated in what some witnessed “in real time” on April 26, and what thousands more will see (thanks to Youtube) in days to come.

The hearing has already been documented IN DETAIL and discussed in various places IN DETAIL, with the best commentary coming from posts at the Isaac Brock Society here and here and various Facebook groups here, here, here and here. (An example of ridiculous commentary is here.) When I say “commentary” I mean NOT ONLY the posts, but the rich and insightful comments. Seriously, this collection of “digital experiences” really is “History In The Making!”

Thinking about FATCA, What is it anyway?

I have written numerous posts about FATCA – “The Little Red FATCA Book” which you will find here. An explanation of how the Meadows “Repeal FATCA” bill would actually work is here.
Basically, FATCA is the collective effect of a number of amendments (including the creation of a new Chapter 4 of Subtitle A of the Internal Revenue Code – which has made largely irrelevant by the FATCA IGAs) which are designed to identify, attack and impose sanctions on:

A. FATCA: Non-U.S. banks and other financial institutions

Forcing them to “hunt down” the financial accounts and entities (examples include mutual funds, corporations, trusts and some insurance policies) owned by “U.S. persons”. The goal is to “turn them over” to the IRS.

This imposes enormous compliance costs on non-U.S. banks. The obvious effect is that they will not want U.S. person customers. Would you? Interestingly the focus of the witnesses
(Mr. Crawford and Mr. Kuettel) was primarily on the denial of basic access to financial and banking services.

Although important, this is only one half of the equation. What happens when “U.S. persons” learn (the vast majority had no idea) that they are subject to U.S. taxation?

B. FATCA: “U.S. Persons” with non-U.S. financial assets and bank accounts

It is not possible for “U.S. citizens” to BOTH: be U.S. tax compliant and live a productive life outside the United States, when they are also subject to the tax laws of other nations. (Digital nomads are the exception.) The reason is that U.S. citizens living outside the United States are living under a system where:

  1. They are presumed to live in the United States (which they
    don’t); and
  2. Their assets (which are local to them) are presumed to be
    “foreign” to the United States.

If you don’t understand (or don’t believe) why this is true, you will find an explanation here.

Just remember:

“When In Rome, Live As A Homelander” and do NOT “Commit Personal Finance Abroad!” (It’s UnAmerican)

Although a major effect of FATCA is to subject Americans abroad to a very special set of tax rules (think PFIC, foreign pension, CFC, and a crushing burden of forms that impact ONLY Americans abroad), there was NO witness that even alluded to this as one of the effects of FATCA. (FATCA is the enforcer of the uniquely American policy of “taxation-based citizenship”). There was also no witness that described how a “FATCA letter” can lead to absolute financial ruin for honest taxpayers, who have made a life outside the friendly borders of the United States of America. There was no witness who explained the confiscatory effects of entering one of the IRS “Amnesty – Ministry of Love” programs.

This had the effect of making it seem as though FATCA (in terms of the effect on Americans abroad) was just a simple “disclosure- Form 8938 issue. Nothing could be further from the truth.

If it were not for “taxation-based citizenship”, FATCA would be no more or less a problem for Americans abroad than it would be for Homelanders (which doesn’t mean it is not a problem). Unfortunately, the hearing did not provide evidence on this point.

(This is NOT a criticism. But, just imagine if there had been witnesses who had been
identified as a “U.S. Person” because of FATCA, did NOT know about “taxation-based citizenship” and then were forced into the “Offshore Voluntary Disclosure Program“. Now that would have been a story …!)

It is “taxation-based citizenship” that makes the effects of FATCA so hard on Americans abroad! In 2011, I remember thinking:

The United States can have either FATCA or it can have “taxation-based citizenship” but it CANNOT have both!

My perception of the hearing itself …

It was clear that some members of the panel had NO idea what the purpose of FATCA was. There were suggestions that FATCA was enacted to combat terrorism, drug dealing, organized crime, human trafficking and who knows what else. The truth is that FATCA was a “revenue offset”
provision to the HIRE Act and few Congressmen even knew that FATCA was part of the legislation. This has resulted in a discussion of FATCA
that:

  • fails to ask “what was the intent of FATCA”; and
  • often asks “what can we use FATCA for and the information received from FATCA for”?

(With regard to the “intent” and “purposes” of FATCA much can be gleaned from the
definitions in the FATCA IGAs.)

It’s as though FATCA is a law that is in search of a purpose!

I encourage everybody to invest the two hours in watching the live video. While watching the video try to imagine that you had no preconceived notions about FATCA. Try to imagine that you were learning about FATCA for the first time (which I believe was the case for various committee members). In fact, my impression is that ONLY Mark Meadows had educated himself about the basics of FATCA and its effects on Americans abroad.

Had it not been for Mark Meadows, the hearing would have been:

“Two ships (pro and anti-FATCA) passing in the night.”

The “opening statement” …

As you know, the hearing opened with a compelling video of Donna Lane Nelson (author of the first FATCA novel) and reluctant renunciant of U.S. citizenship) explaining (among other things) how FATCA forced her to end her requirement to pay taxes to the United States.

Rick Adams, (spouse of Donna Lane Nelson) who attended the hearing and participated in the “door knocks” (the day before) shares his impressions of “being there” in two blog posts referenced in the following tweets:

 

 

Ship Number 1: FATCA Opposition – Mr. Bopp and crew mates (Crawford and Kuettel)

 
Jim Bopp (lawyer in Crawford v. U.S.
Treasury) did a solid job of outlining how FATCA is a draconian law, that presumes that every person with a “non-U.S. bank account”, is presumed to be a criminal. He explained why this was unconstitutional, etc. He outlined the general theory and principles leaving Mark Crawford and Daniel Kuettel to explain the details of how FATCA has specifically impacted their lives.

All three witnesses (Mr. Bopp, Kuettel and Crawford) did an outstanding job. That said their testimony was limited to the access to “banking and financial services” aspect of FATCA. There was no evidence provided on the aspects of FATCA that are aimed directly at Americans abroad (mutual fund disclosure rules, form 8938, etc.)

Further commentary from the crew of Ship 1: Press Conference – Post FATCA Hearing

Ship Number 2: FATCA Support – Wayne State Law Professor and Carl Levin Protégée Elise Bean

Reactions to Professor Bean have been widely discussed. I see no need to comment further on her testimony.

Here is a video that does a good job of breaking down many of her comments:

It was discouraging that Ms. Bean could not see FATCA from anything but a “Homelander Perspective”, with seemingly no awareness of the broader implications of FATCA.

The Moderator: Representative Mark Meadows – Getting The “Two
Ships”: To Stop And Communicate

All of the witnesses played their roles well (including Ms. Bean who was given the thankless job of defending the indefensible). But, Mr. Meadow’s performance eclipsed the performance of all others. He guided the hearing well. He forced each “Ship” to address the concern of the other. The hearing ended with his request that:

Each witness provide three suggestions to improve the FATCA situation.

This is incredible!

Anybody who understands anything about FATCA understands that the effects of FATCA are so devastating to Americans abroad because of “taxation-based citizenship”. If there were no “taxation-based citizenship” then the specific problems experienced by Americans abroad would (for the most part) cease to exist.

Therefore, ALL witnesses (and perhaps others) should use his invitation to argue for:

“The end of taxation-based citizenship”.

(We have a Congressman who wants to hear and is listening to the story!)

Whether this is done through a move to pure residence based taxation, territorial taxation or some combination the point is that:

The abolition of “taxation-based citizenship” would be a solution to all the problems that the FATCA hearing was convened to address. (The abolition of “taxation-based citizenship” would NOT be an admission that FATCA was constitutional. But, if the definition of “U.S. Person” did NOT include “Americans abroad”, that would address many of the specific problems that the FATCA hearing was convened to explore.

The abolition of “taxation-based citizenship” could (in general) be accomplished in either (or both of two ways):

  1. Congressional Fix: Amend the Internal
    Revenue Code so that “U.S. citizenship” was NOT a sufficient
    condition for taxation (presumably
    making residence the
    condition for taxation    ); or
  2. Treasury Fix: Amend the Treasury
    regulations     under Internal Revenue Code S. 1 so that
    “Americans abroad” were NOT defined as “individuals” for the
    purposes of taxation.

(Note that “1” and “2” above are not intended to be precise or exhaustive. My point is that this can be achieved through either Treasury regulations or through amendments to the Internal Revenue Code.)

It is after all “Tax Reform Season1” What Mr. Meadows has done has been to say:

Q. How can we fix this?

A. We end “taxation-based citizenship” – the “U.S. taxation” of Americans abroad!

All individuals and groups representing Americans abroad should work together on this!

Speaking of groups representing Americans abroad. Who did make it into the video? Those attending the hearing included (but are not limited to)…

In addition to the complete FATCA hearing Prep team (see here, here, and here), it was interesting to see that the following were curious enough to appear on April 26, 2017, in that particular room at the appointed time:

Democrats Abroad – Although much maligned, it was interesting to see that

– Katie Solon – International Chair of Democrats Abroad – attended the hearing;

–Joe Smallhoover A man with a long history of involvement with Democrats Abroad (and current Chair of Democrats Abroad France) was in attendance

(I find this interesting given DA’s long support of FATCA.)

AARO – Lucy Stensland Laederich and Paul Atkinson and Tim Ramier of AARO’s board were in attendance.

ACA – Charles Bruce – legal counsel for ACA (and likely principal architect of the ACA RBT proposal) was in attendance.

FAWCO – I believe but am not certain that a representative attended.

James Jatras of Repeal FATCA fame.

Although the FATCA hearing was an achievement of Republicans Overseas and the FATCA Prep team, it clearly attracted wide interest from the various groups that focus on “Americans Abroad issues”.

(Regrettably, there was NOBODY there to represent the interests of “accidental Americans” and “long term resident/dual citizens of other nations and those who never dreamed they were considered to be U.S. citizens, but have lived with the frightening experience of learning they may be considered to be U.S. citizens. But, why should anybody have represented them? They are subject to U.S. laws but have no access to the U.S. political process. To put it another way:

Those who are the most affected had the least representation!)

Although, there has been tension among these various groups, it’s time to “come together” with a unified voice and message that:

In this season of tax reform, it’s time for the USA to join the world and adopt taxation policies that allow its citizens to leave the United States and live productive meaningful lives.

(All of the research has been done and hundreds (if not thousands) of people have explained their story See here and here for examples.)

Believe me:

  • the United States of America will benefit from these policies
  • Americans abroad will benefit
  • the IRS will benefit (I have always thought the IRS is probably the biggest victim of these
    insane U.S. tax policies

and

people will no longer be forced to renounce U.S. citizenship!

And what of the FATCANatics? Would they support residence-based taxation?

In my view, it is entirely reasonable and possible to both SUPPORT FATCA and oppose “taxation-based citizenship”. At the hearings, Professor Bean was clearly supportive of FATCA (even wanting to extend it to Homelanders), but she did NOT (in the hearing proper) reveal her views on “taxation-based citizenship”.

Interestingly, Rick Adams (in his description of the hearing) reported that:

Ms. Bean was standing with the ACA rep, and surprisingly, when I said the real problem was citizen-based taxation (CBT) … or as I prefer, taxation-based citizenship … and that we need to abandon CBT and adopt RBT — Residency-Based Taxation — which is the way every other civilized country in the world administers taxes, SHE AGREED!
That’s right, Ms Bean, oppressor of expats, said she is for RBT instead of CBT. Now, she may recant later, or say I misheard her, but then again maybe she did absorb some of the pain she and her compadres have inflicted on innocents.

Concluding thoughts …

The purpose of the hearing was to explore the unintended consequences of FATCA. I believe that the hearing did a good job of achieving this goal.
But, the best thing to come from the hearing is the opportunity to:

Make the case to Congress that the time has come to end the destructive practice of U.S. taxation-based citizenship.

It’s time for ALL groups and individuals (including Ms. Bean) to work together to achieve this goal!

The hearing illuminated why:

The United States can have either FATCA or it can have “taxation-based citizenship” but it CANNOT have both!

I conclude my observations from sitting in the hearing room!

In the event that “taxation-based citizenship” is not resolved, well:

John Richardson

176 thoughts on “Impressions of the @RepMarkMeadows April 26/17 #FATCA Hearing in Washington, DC – Opportunity to make case to end “taxation-based citizenship””

  1. @Norman

    I was told directly, that the reason I could not open a bank account after my Dad died, in my hometown, was due to the Patriot Act.

  2. @ND
    Honesty can be tricky.Give it to friend ,it builds bridges.Give it to an enemy,it can destroy you. The IRS is no friend. Nothing I ‘ve mentionned is new,but you do have my sympathy.

    @MuzzledNoMore
    You may be some sort of an accidental,so am I ,a naturalized one ,50 yrs in Canada,45 yrs as a Canadian.When I came here ,Goodbye, US citzenship and hello ,Canadian citzenship..Goodbye,US income tax and hello,Canadian income tax. No clue about CBT til alas. No worries til alas. Fortunately,have followed another wise man’s advise “never follow a crowd and don’t do something that doesn’ t make sense”.Haven’t always followed that but when it comes to money and financials,well, I naturally hesitate.

    My appreciation goes out to these witnesses as well but I stil feel that an accidental with more to lose and ,possibly with immunity , should have some representation since they are part of the 95% of expats,who never complied,or finallly answered the question of why am I doing this,or simply refused to comply.

    I believe Mark Twain might have said ” Never underestimate the ignorance and shortsightedness of politicians”

    Thanking you all for your input

  3. @Robert Ross:

    “My appreciation goes out to these witnesses as well but I stil feel that an accidental with more to lose and ,possibly with immunity , should have some representation since they are part of the 95% of expats,who never complied,or finallly answered the question of why am I doing this,or simply refused to comply.”

    The hearing wasn’t a representative event, it was a bit of political theatre. I don’t think the witnesses were meant to be speaking “for” others, or saw themselves as speaking “for” others – they were simply explaining how they themselves had been affected by FATCA. They certainly weren’t speaking for me – I didn’t vomit when I renounced, I socked the air and went off to celebrate with a champagne lunch. 🙂

  4. “I didn’t vomit when I renounced”

    I almost vomited. A few days later I realized I had half-escaped from the Mafia. But only half. If I had never invested in the US, I could have escaped 100%.

  6. I was born there. If I had not invested there after leaving, renunciation would have given me 100% escape.

    Also if IRS data entry clerk Monica Hernandez had not embezzled the withholding that brokers reported on Forms 1099, and if IRS employees had not corruptly altered records of my US tax returns, then renunciation would have given me 100% escape.

    If I had US$2,000,000 then renunciation couldn’t give me 100% escape, but luckily I never owned a house.

  7. “I was born there. If I had not invested there after leaving, renunciation would have given me 100% escape.”

    Unfortunately not. A US birthplace forever marks one as dangerous to FIs until proven innocent. I don’t think that perception is ever going to go away, now, whatever legislative changes there may be.

  8. ” A US birthplace forever marks one as dangerous to FIs until proven innocent.”

    I got a CLN after renouncing. I’ve presented it to three FIs.

  10. I couldn’t imagine people like Ginny, Gwen and Kazia testifying before what they feel is a foreign government. They, and all other Canadians deserve the full protection of the Canadian government.

  11. If I understand the aim and intention of the hearing correctly, testimony from witnesses who regarded the US as a foreign government would be counter-productive.

    Rand Paul’s FATCA suit was dismissed for lack of standing:

    On April 25, 2016, the United States District Court for the Southern District of Ohio, Western Division, dismissed a challenge that had been brought by United States Senator Rand Paul and several other plaintiffs in Crawford, No. 3:15-CV-00250 (S.D. Ohio 4/26/16) that had sought a declaratory and injunctive relief against enforcement of the US Foreign Account Tax Compliance Act (FATCA), the Canadian, Czech, Israeli, French, Danish, and Swiss intergovernmental agreements (IGAs) entered into under FATCA, and the Report of Foreign Bank and Financial Accounts (FBAR) administered by the US Treasury’s Financial Crimes Enforcement Network (FinCEN).
    [..]
    Judge Thomas M. Rose granted a motion to dismiss in favour of the United States Department of the Treasury, the United States Internal Revenue Service and FinCEN, (collectively, the Defendants) on the basis that the plaintiffs lacked standing to institute the proceedings, with the result that the Court did not address the merits of the lawsuit.

    http://www.lexology.com/library/detail.aspx?g=ee181ec4-bdb0-4fc7-8ddd-889055c1d08d

    The case was taken to the Sixth Circuit Court (https://www.courthousenews.com/overseas-banking-taxes-debated-in-sixth-circuit/) and is awaiting a decision. If the decision of the lower court is upheld (dismissed for lack of standing) presumably the case can then be taken to the newly Trumpified SCOTUS, with perhaps (IANAL) a reasonable chance of being at least allowed to be heard rather than dismissed for lack of standing. And if the case is allowed to be heard, it’s not impossible that it could be ruled unconstitutional.

    The Democrats are obviously aware of this; the hearing will have underlined it by showing (among other things) that FATCA causes harm by forcing even deeply patriotic USCs to renounce, just to be able to live a normal life.

    And thus a bipartisan solution perhaps becomes more likely. Presumably some version of SCE.

    Of course, this is just my speculation.

  12. @Patricia Moon
    ” What makes these witnesses so atypical was that they were CBT compliant citzens and would have eagerly remained as such.

    I do not have any way of knowing where you get the idea they would “eagerly remained as such.” I believe Mr. Crawford is still an American citizen. Dani is not and I have never heard him say he was compliant prior to renouncing. If you please, I think you are putting some things together wrongly. It isn’t at all just accidentals who didn’t know- most ALL of us didn’t know.

    I’ve revisited the video ,Mr Kuettel said ” I liked doing my income tax” which I assume would be his US income tax. I also assume that since he liked doing his patriotic duty he was compliant til FATCA stopped his living a normal life .I would take it ,without FATCA ,Mr Keuttel would have continued liking and filing his income tax forms,like an exemplary CBT overseas citzen. I had the same impression of Ms Nelson who paid $1200 for a “specialized” attorney to do her forms so it seems valid to say that she was compliant til the end.I would say that it is also reasonable to say that she would have continued on her merry way til FATCA cut her purse strings.

    For clarity sake, whether accidentals or anyone else knew isn’t my point.
    Point being that they serve as a perfect example of how ludicrous FATCA is by extreme example.

    I was surprised that France was in the vanguard for accidental ‘s awareness.Reason being that there are probably more accidentals in the border towns of Quebec or Ontario alone than all of France.

    Amen.

  14. @Norman Diamond

    Major differences between CRS and domestic reporting include the fact that with private personal information is shared between nations with differing standards of data security and penalties for sharing it instead of within a single nation with a single national set of laws.

    Just as with a chain, the strength of any system is never greater than its weakest link. So, if country A has the world’s best data security, it will be reduced to that of the world’s worst data security system for those individuals whose data is shared. If the laws of country A severely punish anyone who provides any person’s data to an unauthorised third party, we may feel less concened with the domestic data reporting of country A but when country must share the same info with a country where the selling of such info is common, what recourse does the individual have? And, as with any secret, the more people who know or handle it, the more likely it will become public. Not good.

  15. @ Robert Ross

    I used to file US tax returns even though I lived in Japan. Spending just a year each of two occasions as a student, I had to. When I returned to Japan work I planned on staying no more than five years. Knowing it would be a big headache if I returned to the US with a five year gap in filing, I filed. My income was well below the FEIE threashold, so it was just the nuisance of filing.

  16. @ PM

    “I was told directly, that the reason I could not open a bank account after my Dad died, in my hometown, was due to the Patriot Act.”

    Thank you so much for this. There is so much information out there and often it seems that either I am the only one who has found a certain piece or that I misrecalled. It is nice to have corroborating experiences related.

  17. @iota

    ““I was born there. If I had not invested there after leaving, renunciation would have given me 100% escape.”

    Unfortunately not. A US birthplace forever marks one as dangerous to FIs until proven innocent. I don’t think that perception is ever going to go away, now, whatever legislative changes there may be.”

    That is eaxactly what I believe.

  18. @ND

    “” A US birthplace forever marks one as dangerous to FIs until proven innocent.”

    I got a CLN after renouncing. I’ve presented it to three FIs.”

    And the requirements will never change, you’re free.

    On a more serious note, what if you had lived in the area hit by the tsunami and escaped with nothing more than the clothes on you back? For those who may not know; homes, banks and government offices of several communities were all swept out to sea along with all their records.

    What then?

  19. [About being able to present a CLN when needed]

    “On a more serious note, what if you had lived in the area hit by the tsunami and escaped with nothing more than the clothes on you back? For those who may not know; homes, banks and government offices of several communities were all swept out to sea along with all their records.
    What then?”

    I could apply for a passport and get another CLN ^_^

    Lawyer joke, updated:
    Lawyer 1: “… and then a fire burned down the building where my office was, destroying my US birth certificate.”
    Lawyer 2: “… and then a tsunami carried away the building where my office was, destroying my US birth certificate.”
    Lawyer 1: “How do you arrange a tsunami?”

  21. “And what do as you await your new passport and CLN?”

    I would not expect to get a new passport. I would expect the passport application to result in a replacement CLN.

    What would I do while waiting? I guess the same as everyone does while waiting. Suffer.

  22. How long does take? Awful long time to have to go with out banking.

    BTW, is there even a system for replacing lost/damaged/destroyed CLNs? Remember the quote RR provided us with, ‘Never underestimate the…short sightedness of politicians.”.

  23. @JapanT

    Yes, there is a system for replacing a CLN. One of my doctors actually renounced his citizenship in the 1960s. He needed a replacement and so does my son – it’s either $50 or $75 dollars and you send the request somewhere in Virginia….I have somewhere in my many piles of papers laying all over the place.
    I bet Pacifica knows.

    Glad we both remember this about the banking – this is why I never understand when people say they can just get a US account or they have one. I guess they mean it was opened before all this…..

  24. @Japan T
    Your circumstances are certainly different from my own. I take it that you are responding to my response to Ms.Moon and regarding the two witnesses( Keuttel and Nelson) and their willingness to file income tax . You mentionned your reasons of filing so as not to create filing gaps if you were to return stateside to live and maybe that is their reason for filing as well. But I took it as it was intended to be viewed,as two wiiling patriots doing their it out of duty rather than fear.

    Americans who accidentally or purposelly acquired it and then moved abroad ,and acquired another citzenship and made their lives abroad have no business in filing US income tax forms.

    During the period of CBT , no one ever questionned me about filing income tax when crossing the border nor anyone from the IRS asked me why I hadn’t done my income tax for fifty years and I am not the only one. They better not ask me now.

  25. @RR

    “Americans who accidentally or purposelly acquired it and then moved abroad ,and acquired another citzenship and made their lives abroad have no business in filing US income tax forms.”

    Agreed, but those who testified at the hearing were born in the US and lived in the US and are much more closely aligned with my situation….I think.

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