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. @PM

    “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.”

    Good to know.

    A couple of questions, the first just out of curiosity, did you doctor recieve a CLN back in the 60s and need it replaced or did he apply for a back dated CLN at a later date?

    In my example of losing it and all copies on file with local authorities, how long does it take to replace a CLN. Having once lost my wallet, going 6 weeks without my ATM, credit card and DL was a most unpleasant situation. Add losing your CLN would not make it less so, me thinks.

    “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…..”

    I was able to have maintain my account for so long after the Patriot Act only because all statements went to my home of record which was my parent’s home in the US and activity conducted by them with Power of Attorney. Fearing that this might be seen as an attempt to skirt the Patriot Act, I had them close it as soon as I learned of it.

    Maintaining an address used to be a faily common thing, now it is seen at best as suspicious and perhaps criminal at worst. I suspect that there are many who are completely unaware of any of the changes affecting this practice.

  2. “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.”

    Some non resident aliens have to do 1040NR regardless of whether they’re former citizens.

    Does a covered expatriate have to do 1040 or 1040NR?

    Does an expatriate who didn’t file 8854 have to do 1040 or 1040NR?

  3. I think his point is that the people he mentions have no business filing any forms with the US.

  4. @JapanT

    As far as I know it was fairly quick. I faxed him the info (he already actually had it) and that was that. If my son ever gets around to getting his request in, I will post the time frame between sending/receiving. He has a CDN birthplace so its not as necessary as for others in a different situation….

    No, he actually renounced (not a back-dated relinquishment) in the 1960’s and needed a replacement. His Dad was a rabbi who had been seen to the US etc etc I don’t know why he chose to renounce but he is so fortunate!

    Double Irony: When my Dad died, after certain assets were distributed there were two things left- an IRA and an annuity to split equally amount us four kids. I wanted to keep my share in the US because the exchange was not good – at times the CAD = USD and other times, CAD was actually worth more. She would not accept it. However, apparently quite common but unknown to me (never was financially literate), there was this option to keep it there for a maximum of five years, receive the interest until one either cashed it in or the five years was up. So it WAS kept there but not in an individual account. And then of course, one I had renounced, I was terrified they might take it in FBAR penalties so I cashed it in and paid a fair chunk of tax plus lost bigtime on the exchange. And you know what they did? They fined me for not making installment pmts. GRRRRRR

    The earlier part of the inheritance ended up as “cash” so I opened a US account here, hoping not to lose on the exchange. That was the only time I ever had any money and was a major source of what I feared would be the FBAR penalty. You just cannot win with these people.

  5. @PM

    “They fined me for not making installment pmts. GRRRRRR”

    The IRS fined you for making a lump sum payment instead of paying in installments?

    “That was the only time I ever had any money and was a major source of what I feared would be the FBAR penalty.”

    That is what scares me, but notfrom my own money, from the joint account shared with my spouse.

    “You just cannot win with these people.”

    No, we can not.

  6. @JapanT

    They sure did. It was outrageous as far as I was concerned. But I wanted it to be OVER so I paid it.

    Probably not helpful but is it at all possible for you to simply take your name off of the account?

    I spoke to someone today who is OVDP. It is still unreal what these people are going through. Every possible opportunity to add another penalty is taken advantage off. And meanwhile, the condors keep taking more and more and more. Of course, it is the person’s retirement money. I swear they are absolutely evil, period.

  7. @PM

    If it is any consolation, there is probably a fine for not making a lump sum payment and/or a fine for making installment payments. Seriously, I would not be surprised at all if this is the case.

    “Probably not helpful but is it at all possible for you to simply take your name off of the account?”

    The short answer is, not yet. What we did was to open a new account in my spouse’s name and switch all the direct deposits and automatic payments to it and then close the joint account. Took three months.

    I can not recall the specific reasons why now, only that I realy got my hopes up that I could get a CLN without backing filing FBARs only to learn that that route would not leave me free of them. So, I am having to wait out 5 or 6 years before renouncing in order to prevent having to spy on my spouse to get free. The account is gone but the requirement to report it on FBARs remains.

    Well, I have no retirement money for them to take. But, my spouse does and it serms like their route to that money is through me. So I wait. It is like holding my breath in a sinking ship.

  8. @PM

    Oh! Forgot to add, not sure if we were able to close the account before it was collected and sent via FATCA. The first set of data was to be collected before we were able to close the account. But they kept moving up the date of the actually data transfer and I do not no know if this also moved up the date of the collected data.

    Actions have been taken but have no way to know if they have been effective or not. So much uncertainty other than the points you have made such as not being able to win against these people, they are totally evil and I will add that they are not to be trusted.

  9. @ Patricia Moon and Japan T,

    Re: “@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.”

    Yep, I have the link for that handy. For a certified copy of your CLN you send the request with $50 to DoS in Virginia. Full instructions at https://travel.state.gov/content/passports/en/passports/services/obtain-copies-of-passport-records.html It’s listed under “Order Copies of Passport Records,” but that includes CLNs:

    “Passport records may consist of applications submitted for the issuance of a passport or other records such as a Consular Report of Birth, a Certificate of Witness to Marriage, a Certificate of Loss of Nationality, or a Consular Report of Death.”

  10. Thanks. It is good to know they have thought far enough ahead to include a way to get copies of a CLN.

    However, it is another barrier to getting one’s life back in order after a natural disaster, act of war, fire, flood or even “just” a burglery and a time consuming one at that.

  11. @JapanT

    ““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.”

    Your response:
    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.

    I lived there for eighteen years ,not born there though ,but naturalized.

    If you have a choice and no ties and no intention of returning stateside, do not join the IRS lifetime membership club.

  12. “If you have a choice and no ties and no intention of returning stateside, do not join the IRS lifetime membership club.”

    Great advice! Just wish my chidren and I had a choice.

  13. Ya know, I thought this was the other thread on this hearing, didn’t know there was a new one. Just got to watch the video where they comment on Mrs. Bean perjurious testimony.

    You folks are great teachers. Much more clearly articulated than what I have been able but I find that my take very very closely follows theirs. I am glad to hear my concerns so clearly stated by others in a forum other than this one. Nothing wrong with this one, but we are despite our differences, we are pretty much preaching to the chior here.

  14. iota said: “I didn’t vomit when I renounced, I socked the air and went off to celebrate with a champagne lunch.”

    I went home and had a Cuban cigar (*) and a glass of port to celebrate. I took the full day off from work because I knew I’d be too high on my newly acquired mono-citizenship status to be useful.

    (*) that was one of only about 3 cigars I have ever smoked. The next one was smoked when my CLN arrived.

  15. @tdott said:

    “that was one of only about 3 cigars I have ever smoked. The next one was smoked when my CLN arrived.”

    LOL – that’s when I opened another bottle of champagne. But no cigars! 🙂

  18. “Yep, CRS, it’s a great thing.”

    I don’t think so. The malware was an NSA production.

  21. I vomited when I had my moment of awakening, but it was not because I had realized that I had to rid myself of my US citizenship; it was because I was entirely overwhelmed by the pure evilness of the US government. My US citizenship no longer meant anything for me.
    After my appointment, I was shell-shocked, but not because I just applied for a CLN, but because of the extreme interview and the pure hatred that I felt was directed at me for not wanting to be one of them and the fact that it was plainly clear that they KNEW why so many were leaving, but refused to recognize that it was in any way unfair from them to treat us like bad dogs.
    .

  22. @ND
    “The US government brought us this and FATCA. CRS wasn’t involved.”

    If computer networks are volunerable to attacks such as this, then too are any used to store the data shared via CRS. CRS should be opposed as strongly as possible as it WILL lead to the misappropriation and misuse of your personal financial data.

    CRS is a BAD idea and should NOT be looked to as a replacement for FATCA.

  23. @Unforgiven Too – it sounds like you had a very unpleasant experience. The consular staff in Amsterdam, where I renounced, weren’t like that at all. They were perfectly friendly and polite. Sorry you got such grim treatment. I’m sure I would also have felt shell-shocked.

  24. The consular staff in Tokyo were polite in my renunciation interviews too. Our discussions wandered off a bit and actually seemed a bit friendly. It was amazing.

    Though that reminds me… When the IRS used to have offices in the US embassy in Tokyo and US consulate in Toronto, their staff were polite too. They had a friendly tone in their voices when telling lies, and even though they couldn’t help with the questions I asked, they didn’t get angry and they didn’t threaten. Maybe that’s why the IRS closed their overseas offices.

  25. Proposals as requested by Mark Meadows

    To remedy unintended consequences of U.S. law on 9 million U.S. persons living overseas.

    * Shift to territorial/residence based taxation for individuals. To “level the playing field” this must be the same residence based taxation as practiced by all other nations of the OECD.

    * Repeal FATCA.

    * Limit FBAR requirement only to U.S. residents.

    * Outlaw barring of financial services by U.S. based financial institutions to U.S. persons based on an overseas address.

    * Allow Americans who had renounced U.S. citizenship because of FATCA opportunity to regain citizenship at $0 cost.

    * Provide all U.S. designated U.S. persons resident overseas, including those considered “accidental”, opportunity to renounce U.S. citizenship/terminate a Green Card at $0 fee and $0 tax requirement, and with no requirement to obtain a social security number if they do not have one. Guardians of those with mental incapacity shall be able to renounce for these persons.

    * Respect the sovereignty of other nations with the following tax treaty changes: state that U.S. persons tax resident in another nation shall not also be considered a tax resident in the U.S. except in transitional circumstances; exempt foreign pensions from U.S. double taxation. Additionally, if one moves from a country to the U.S. then their holdings in their country of origin should not be taxed punitively.

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