Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in Law & Morality 712 Comments

Today (11/16/2017) the floor of the House passed the House tax reform bill. The earlier version is here .

Today also the Senate Finance committee passed the Senate tax reform bill. See link

Do not yet have the final versions of either bill but suspect that we are not helped in the bills. Will post here final versions when they become available.

Listen to the C-span clip found by BB in which Residence-based taxation is mentioned by Golding and Brady in the House tax bill debate — none of this however, appears to have been incorporated into the House or Senate bills passed on 11/16/2017

Republicans Overseas (RO) continues to press on, to make changes in the final tax package that will help us. The fight is not yet over, but it continues, right from the beginning, to be an uphill battle — and the odds don’t seem very good right now. RO says: “Again we need to focus on the Senate side since this fight is far from over.”

Personally, it makes no sense to me to blame Solomon and the handful of people at Republicans Overseas for trying to make a change and, so far, failing. Yesterday a friend reminded me that there was this Ismene, who kept telling her sister Antigone that it was pointless to even “try”: “…but you’re bound to fail…No sense in starting a hopeless task…Go then, if you are determined, to your folly, etc. etc.” Antigone responded: “When I have tried and failed, [then] I shall have failed.”

712 thoughts on “11/16/2017 UPDATE: HOUSE TAX REFORM BILL PASSES FLOOR VOTE; SENATE TAX BILL PASSES SENATE FINANCE COMMITTEE — Do not have final versions yet but strongly suspect that we are not helped in either bill”

  1. Tricia,

    The text of that document does indicate that the Senate is at least aware of the existence of United States Tax Citizenship (which it could kill, replace with TTFI, etc.).

    It explicitly says:

    “U.S. persons are subject to tax on their worldwide income. The Code defines U.S. person to include all U.S. citizens and residents as well as domestic entities such as partnerships, corporations, estates and certain trusts…”

    https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman's%20Mark.pdf

  2. This seems to be an opportune time to relate how one couple is dealing with this mess.
    W met H at school in the 60s. They married and started working in the 70s. W was American. H was Canadian. She obtained Canadian citizenship soon after. Believing it would be useful, and after dual citizenship became possible, she reclaimed US citizenship. Later she let her US passport lapse and stopped filing US taxes in the 80s.
    Fast forward to 2011. W’s accountant brought up the issues of FATCA and OVDI. They consulted a citizenship lawyer who insisted she was still American. They consulted a tax specialist who ran the numbers on OVDI. It was prohibitively expensive. (She had a private corporation, RRSP and other investments). After sleepless nights the idea of OVDI was discarded.

    On to plan B. At the suggestion of a trust lawyer specializing in US issues, W transferred all of her assets to H. She was retired and was able to wind up her company. For the next 5 years , she had very little taxable income.

    In year 6, she renounced and backfiled 5 years of 1040s and FBARs. No tax was owed. Her net worth, consisting only of a RRIF was well under the exit tax threshold. So far, W has heard diddly from down south.

  3. Or W could have simply avoided consulting the four different advisers, and renounced if FATCA+US birthplace made it necessary to obtain a CLN. No sleepless nights required.

  4. Indeed. I’m sleeping quite well these days, I must say.

    Regarding the earlier commentary about the case of the US-citizen spouse potentially owing money due to the possibility of a 12 or 14 percent tax on some sort of something for a corporation solely owned by a non-US spouse – while recognizing that this is all rather speculative and hypothetical and quite possibly pessimistic on our part – that just seems to me yet another case of the only ones being punished are those who volunteer for punishment (or are “volunteered” by tax advisors). What sane person would voluntarily report the financial details of a spouse’s corporation when, presumably, said corporation is completely free of any FATCA reporting?

    Except of course in Japan, where, apparently, the details of every financial transaction of any Japanese citizen remotely connected to any US person are transmitted to the US government, which knows exactly what to do with all that data.

  11. Have quickly read the Senate Finance Markup document.

    It is far more descriptive of the certainty of the confiscation of assets affected by the proposal (hard to believe that this could really apply to Americans abroad who carry on business through corporations) and far more certain with respect to the process. As was pointed out in an earlier document , the report also reinforces the concept of citizenship-based taxation.

    The discussions in the Senate Finance Committee apparently begin on Nov. 13 with very little time for amendments.

    My thinking is that there are no limits to the extent to which the USA plans to confiscate the assets of other nations. It’s quite simple really:

    A. Use FATCA to force other countries to locate the assets; and

    B. Confiscate the assets.

    Canada (and other countries) must do one or more of the following:

    1. Enact laws triggering equivalent Canadian taxes so that the Canadian taxes would be used as tax credits against the U.S. taxes. This would appeal to Mr. Morneau, who would be open to the idea of confiscating the retained earnings of private corporations.

    2. Put a complete stop to the immigration of U.S. citizens to Canada

    3. Begin the process of giving existing U.S. citizens in Canada a choice: They can either renounce or be deported.

    It is incredibly obvious that the USA is using citizenship-based taxation as a mechanism to extract capital from other nations. Right now we are talking only about these new rules. Don’t forget about PFIC, taxation of capital gains on homes, etc. It’s no longer possible for any country to allow U.S. citizens to live in it.

    Finally, I have repeatedly suggested that Canada should enter into negotiations that would include a “buy out” of dual citizens. It would cost a lot less to “buy them from the U.S.” than to continue the ongoing problem of allowing them to live in Canada as U.S. citizens.

  12. And/or has been suggested before …

    Perhaps Canada can enter into negotiations to make possible for Canadian citizens to terminate their U.S. more easily and more humanely.

  13. A little gem for those who are compliant and were hoping for relief, according to the IRS medic.

    The IRS has announced four new audit campaigns on international filers, the first two are the life line you were expecting?

    1. Those who file the Foreign Tax Credit
    2. Those who file the foreign income exclusion
    3. Those who used a proxy to hide ownership of Swiss bank Accounts.
    4. Controlled foreign corporations who make loans back to the US-based parent code (sec 956).

    There are a LOT of bad filings out there, a LOT who think they are incompliance and they are not because they missed entire forms..

    That’s a lot of $10,000 penalties, and the IRS know it. That’s why they are doing it of course.

  14. George wrote:
    “Expats pleaded for a life jacket.
    Congress threw them an anvil.”

    Refuse to grab that anvil. Renounce. Resist. Become a recluse.

  17. Starting on Page 182: TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS

    A. General Overview of International Principles of Taxation

    2. Source and residence principles

    For individuals, the test for residence may depend upon nationality, or a physical presence test,

    The characterization is that determination of “residence” based on nationality is quite ordinary in the world. They make no reference to the fact that only the U.S. and Eritrea do it.

    3. Resolving overlapping or conflicting jurisdiction to tax

    The document refers to tax treaties. If any problem the tax treaty will resolve it! As if the tax treaties represent negotiation between two equal parties, and the governments of the world and their competent authorities can take the bother to actually defend their residents from double taxation and tax treaty flaws, savings clause, aka “takings clause,” NOT !

  19. I expected “nothing” out of the US Government… I have to say, I’m not surprised.

    “FUCK ‘EM ALL!” They want the money. Come n’ GET IT!

  22. @JC

    Starting on Page 182: TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS

    A. General Overview of International Principles of Taxation

    2. Source and residence principles

    For individuals, the test for residence may depend upon nationality, or a physical presence test,

    The characterization is that determination of “residence” based on nationality is quite ordinary in the world. They make no reference to the fact that only the U.S. and Eritrea do it.

    This is taken right out of the report written by the staffers in the summer.

    I don’t think that they think nationality is the norm. I think that they equate residence with nationality and that residence/nationality is the norm.

    Remember all of U.S. immigration assumes that every person in the world wants to RESIDE in the USA. Green Card holders live in fear of deportation, etc.

  23. “The sequence of events would be:

    a) reduce net worth
    b) renounce
    c) file 1040NR and 8854”

    And if it is your spouse who owns the corporation?

  24. “They always said FATCA wasn’t about tax. Turns out they were telling the truth. They had in mind a different trajectory for the tax grab.

    FATCA/IGA makes use of the double tax treaty, and relies on international co-operation.”

    You are just NOW realizing this?

    I have saying that the IRS is not goung to chase anyone, they have forced our FIs to turn us in.

    I have pointed out that it does not matter if one has wealth ot not, they want the info. And I have tried to point out some of the dangers of the info being in the hands of people who do not even bother to try to keep it secure.

  25. “Except of course in Japan, where, apparently, the details of every financial transaction of any Japanese citizen remotely connected to any US person are transmitted to the US government, which knows exactly what to do with all that data.”

    It is my understanding from other posts, that Japan is not unique in this regard.

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