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.”
@USCitizenAbroad
“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.“
Wow, you too? This is just now dawning on you?
A. Use FATCA to force other countries to locate the assets AND BANK ACCOUNTS; and
B. Confiscate the assets AND APPLY FBAR FINES.
Must not forget FBAR.
am following this on an unfamiliar device while on a long planned but stunningly ill timed vacation. Am watching anxiously for publication of the senate version. If no better than what has been reported here over the past hours watch for a new post re the UN Complaint. We are not close to being finished here!
My apologies to the administrators if this comment appears without my usual avatar. This device did not recognize my Brock moniker.
“It is incredibly obvious that the USA is using citizenship-based taxation as a mechanism to extract capital from other nations.”
It’s BEEN obvious for several years. Wake up and smell the coffee, for cryin’ out loud!
“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.”
As every country seems to be following the US in much of this, it will not be long until dual citizens are not allowed. No one will be allowed to live outside the country of their origin and duals living outside the US who can not shed their USCship will be in real trouble, getting deported “back” to the US.
‘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’
No, that 12 or 14 percent tax doesn’t get levied on her for this. PENALTIES get levied on her for failing to file a form pretending that she acquired 100% of the shares from her husband even though she didn’t.
‘ – 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).’
Yup.
‘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.’
Japanese citizen, you say? Now who’s confusing citizenship with residence? Though yes some of those Japanese residents (such as those related to JapanT) are Japanese citizens.
“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.”
Or better: Pass a law confiscating 100% of every corporation located in a country that Canada has an IGA with. Do not make any exception for corporations that have no personal connection to Canada. Just being located in a country that Canada has an IGA with is enough.
“2. Put a complete stop to the immigration of U.S. citizens to Canada.
3. [roughly the same]”
Also put a stop to immigration to Canada of Canadian citizens who have a US green card, or who have had too long of a physical presence in the US, or who have married a US citizen regardless of whether the marriage resided in the US or not. Charter override available as necessary.
“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.”
Negotiations will be useless. Canada needs to act unilarerally, allowing its residents to renounce allegiance to foreign princelings for a fee of C$100.
“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
[…]”
Yeah, 1 and 2 would have been a lifeline for me. They’d have figured out they owe me the refunds I claim, they’d have figured out I didn’t fraudulently claim large foreign tax credits that have no basis, they’d have discovered that IRS employees perpretrated the fraud by altering IRS records … and then they’d punish me anyway, just as they continue doing after it’s already proven. But they still refuse to audit me, and it still needs to be done.
“Japanese citizen, you say? Now who’s confusing citizenship with residence? Though yes some of those Japanese residents (such as those related to JapanT) are Japanese citizens.”
Japanese citizens too, if born in the US or spent 183 or more days in the US over the past 3 years.
http://kluwertaxblog.com/2017/11/10/part-1-excise-tax-related-party-transactions-give-one-hand-take-international-tax-reform-provisions-align-rule-common-honesty/
USCA:
No. FATCA, and this business of treating non-US-source income as US-source when received by a USC, both sprang from the Swiss banking episode, and the ensuing search for new ways to “bring back” foreign income, but they aren’t two prongs of a co-ordinated strategy.
FATCA/IGA is in line with OECD models for automatic exchange of information, and is enforced by local laws coercing local FIs.
The proposed demand for USCs to pay US tax on income generated by non-US corporations, can’t be enforced through local laws. This is USCs’ protection and USCs need to understand it and use it. To avoid the tax, stop filing US tax returns. That jurat is the bullet. Don’t hand them the bullet.
JC:
The Competent Authorities of two states who have negotiated a double tax treaty, do indeed have a legal obligation to defend their taxpayers from double taxation, but this has to be requested by the taxpayer. Don’t throw away this right. USCs need to be aware that they do have rights against the US. Complaining to the Competent Authority is the way a USC can call on their country to protect them from double taxation. It’s far from perfect, but the fact that it’s there is important. People need to know about it, and use it.
This is not US source income. USCs, don’t let the US “deem” that it is. Renounce, or stop filing, or if neither of those avenues to self-protection can be made use of, complain under the Mutual Agreement Procedures. Force US behavior into the light of day!
FATCA/IGA is in line with OECD models for automatic exchange of information, and is enforced by US LAW COERCING local governments to pass local laws coercing local FIs.
When I looked into this earlier, the OECD model came after FATCA. Either way, the fact that they are in line with each other should NOT be comforting. The exact opposite, actually.
“The proposed demand for USCs to pay US tax on income generated by non-US corporations, can’t be enforced through local laws.”
And? FATCA could not be enforced by local laws either, until the US coerced or tricked local governments to change their local laws to allow for it. Done once you can bet it will be happen again.
“USCs need to be aware that they do have rights against the US. Complaining to the Competent Authority is the way a USC can call on their country to protect them from double taxation.”
The FATCA letter I received says “ If you have any questions regarding the application of FATCA or its tax implications, please consult with U.S. rax specialits, such as attorneys, certified tax accountants, etc.”.
@JapanT
you said to @USCitizenAbroad
USCitizenAbroad is one of the few (if not the originator) who took this position (extraction/confiscation) very early on.
.Please see:
http://isaacbrocksociety.ca/2012/06/12/how-citizenship-based-taxation-steals-from-the-treasury-of-other-countries-pfic-edition/
Thanks. I do wondrer, though why USCabroad then makes some of the recent comments they have been making.
“The FATCA letter I received says “ If you have any questions regarding the application of FATCA or its tax implications, please consult with U.S. rax specialits, such as attorneys, certified tax accountants, etc.”.
FATCA is a reporting obligation imposed on banks; there’s no avenue for a complaint under the MAP procedures.
And? FATCA could not be enforced by local laws either, until the US coerced or tricked local governments to change their local laws to allow for it. Done once you can bet it will be happen again.”
You attribute to the US, power which it fortunately doesn’t possess.
Re my earlier post.
In the Senate tax reform markup the authors choose to support provisions by certain facts. https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman's%20Mark.pdf
Many papers, models, plans, etc. are presented this way where authors have confidence in their facts and assumptions, and as stated supports the overall proposition. If a key fact or assumption is faulty then the underpinning of the paper, models, plans, etc. then is in question.
The markup states: For individuals, the test for residence may depend upon nationality, or a physical presence test.
It is stating nothing unusual here [in the way the U.S. determines “residency”], not a problem here, what we have presented is sound/not out of the international norm based on this.
This stated fact on the international norm of determination of residency has to be restated to make way for residence based taxation.
Restatement: For individuals, the test for residence predominately depends on a physical presence test. Only in cases of U.S. or Eritrean nationality does residence currently include nationality.
This then suggests something out of line here, and would support, in a major tax reform document, the questioning of the current system and thus making way for Territorial/Residence Based Taxation for individuals.
I searched the document for any mention of “territorial.” One would think if they would state the above as a fact for the determination of residency for individuals, that if they wanted to support territorial for business that they would state that only the U.S. taxes its corporations based on worldwide income. This would support territorial for business as the current system, out of line with all other countries, then raises the question in a major tax reform document of is it right to continue this.
As nothing was found on territorial taxation for business, then this makes me think that the whole territorial argument is yet to come through.?
Or, are they giving up on territorial for business? Is territorial for business in the House version?
I searched the word “territorial” which appeared 10 times. One interesting section hints that the international norm is for extraterritorial effect to be limited legally:
“For example, most legal systems respect limits on the extent to which their measures may be given extraterritorial effect.”
Of course we know limits on U.S. extraterritorial effect of citizenship based taxation is mitigated by tax treaties, but also guaranteed in certain aspect by those treaties in what has been called tax treaty gaps. Once again the makup seems to point out no problems here. NOT!
“When I looked into this earlier, the OECD model came after FATCA. Either way, the fact that they are in line with each other should NOT be comforting. The exact opposite, actually.”
Of course it’s not comforting. It’s why FATCA is now entrenched worldwide.
JC – both House and Senate versions seem to believe that all foreign business activity is done through controlled foreign corporations. Under current law, US tax is paid when those foreign subsidiaries return their profits to the US parent company by way of dividends. Both House and Senate versions get rid of this tax by allowing a 100% deduction for dividends received from foreign subsidiaries (with certain exceptions to avoid “abuse”).
JC:
This subject comes up again a few pages later (p. 191), with copious references to the US Model Treaty of 2016, and its Preamble. I believe, having just now read through the Preamble, that this is to do with the US resistance to the OECS BEPS initiative, which in some respects conflicts with the US view of how primary taxing rights (e.g. over the profits of the giant multinationals) should be allocated. This could indeed have a bearing on the position being taken by the proposals with regard to non-US-source corporations owned by US citizens, even though that’s not the main reason for adopting the position.
A parallel argument, also referred to obliquely in the Preamble, is the US desire to have the aim of double tax treaties redefined to include not only avoidance of double taxation, but also avoidance of non-taxation (which seems to be the way the US justifies taxing USC income which is “tax-favored” by the home jurisdiction, such as tax-free savings accounts).
https://www.treasury.gov/resource-center/tax-policy/treaties/Documents/Preamble-US%20Model-2016.pdf
“And? FATCA could not be enforced by local laws either, until the US coerced or tricked local governments to change their local laws to allow for it. Done once you can bet it will be happen again.”
You attribute to the US, power which it fortunately doesn’t possess.”
Not at all. Local govs did not enact FATCA enabling legislation on their own nor for their own benefit. Several, in fact, fought against it.
““When I looked into this earlier, the OECD model came after FATCA. Either way, the fact that they are in line with each other should NOT be comforting. The exact opposite, actually.”
Of course it’s not comforting. It’s why FATCA is now entrenched worldwide.”
So why even bring up a comparison of the two?
“Local govs did not enact FATCA enabling legislation on their own nor for their own benefit.”
Actually, they did, and promptly extended it via CRS to cover all their residents, not just USCs.
“Several, in fact, fought against it.”
Yes, small countries whose economies depend heavily on US inward investment and US/EU corresponding banking relationships have been hard hit by FATCA.