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Author Archives: Eric

Foreign Earned Income Exclusion on the chopping block again

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As part of their newly-published paper on “Options for Reducing the Deficit“, the Congressional Budget Office has suggested, as Option 12 (at page 130), to “Include All Income That U.S. Citizens Earn Abroad in Taxable Income” — in other words, to eliminate the Foreign Earned Income Exclusion and Foreign Housing Deduction. They estimate that this would bring in US$33.3 billion over the next five years, and US$88.5 billion by 2023 — roughly an order of magnitude more than the US$8.7 billion that FATCA is expected to reap in the course of a decade.

This is the third proposal this year to eliminate the FEIE. Eight months ago, the Congressional Progressive Caucus derided the FEIE as the “Foreign Earned Income Loophole” and claimed that eliminating it would raise US$71 billion over ten years (not clear whether they include the FHD in that number). Days before that, when Dennis Ross (R-FL) presented his own hilariously hypocritical plan to kill the FEIE so that corporations could enjoy territorial taxation, the Joint Committee on Taxation estimated that cutting both the FEIE and the FHD would raise US$36.3 billion over five years. CBO states that they are are using the JCT’s new estimates as updated for 2014.

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Relinquishment has same tax consequences as renunciation for new ex-U.S. citizen Tina Turner, contra Washington Post

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Coincidentally, on the same day that the latest Federal Register “published expatriates” list finally came out, the Washington Post “In the Loop” blog reports that Tina Turner has finally visited the U.S. embassy in Bern to sign her DS-4079 to confirm that she naturalised as a Swiss citizen with the intention of giving up U.S. citizenship. (No doubt the latter news will overshadow the former, and I fully expect that in the coming days some newspapers will mix up the two news items and erroneously report that Tina Turner appeared in the list.)

Anyway, the news of Tina’s relinquishment comes straight from the horse’s mouth — an embassy “activity report” (but not a public one?) — and is likely to be quite accurate, but the Washington Post wrote something else that comes from an anonymous and entirely misinformed reader:

The key word in the embassy report apparently is the term “relinquishment.” That means, a knowledgeable source told us, that she did not “formally renounce her U.S. citizenship under 349(a)(5) Immigration and Nationality Act, but took Swiss citizenship with the intent to lose her U.S. citizenship.” As opposed to formal renunciation — a much more complex process, we were told — there are no “tax or other penalties for loss of citizenship in this fashion.”

Writer Al Kamen was probably anxious to get the news out, but he was right to hedge this un-fact-checked quotation with “apparently” and “we were told”. (Update, 14 November: he has since issued a correction.) A reading of the actual text of 26 USC § 877A — the portion of the Internal Revenue Code which imposes the “exit tax” on newly-minted ex-citizens — confirms that the “knowledgeable source” is incorrect: the tax consequences are the same whether you renounce citizenship, relinquish citizenship, lose citizenship by court-ordered denaturalisation like an ex-Nazi, or even give up your green card when you were never a citizen at all.

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Federal Register published expatriates list: late and incomplete as usual

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Innocente lands the first punch again: the latest “name-and-shame list” has been placed on public inspection for printing in tomorrow’s Federal Register. You can view it here. It is, of course, nearly two weeks past the October 30th deadline for the list to be printed, but perhaps it’s because the list compiler is still getting used to her new role: Ann V. Gaudelli has moved on to bigger and better things, and the naming & shaming is now the responsibility of Dorothy A. Harbison.

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Orlan Calayag gave up U.S. citizenship, says official U.S. government notice from August 2013

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Recently, newspapers in the Philippines have reported on accusations that National Food Authority administrator Orlan Calayag is still a U.S. citizen. For example, The Philippine Star writes that Calayag “acquired dual citizenship as American and Filipino on Jan. 7, 2013″, while the Manila Standard Today quotes an unnamed source who claims that Calayag “reacquired Philippine citizenship … but still did not renounce his US citizenship”. 

However, the people they quoted are missing a crucial fact: in August 2013, the U.S Internal Revenue Service (IRS) confirmed in an official notice that one Orlan Agbin Calayag had given up his U.S. citizenship. Calayag was one of more than a thousand people whose names appeared in the IRS’ most recent official list of newly-minted ex-U.S. citizens. Most of them seem to have given up U.S. citizenship sometime between mid-2012 and early 2013.

Whether or not Calayag is a natural-born citizen of the Philippines (a question of Philippine law on which I take no position), he is definitely no longer an American or a dual citizen.

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9% of Homelanders have considered renouncing U.S. citizenship

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Strange findings from a recent survey by Rasmussen Reports: when asked “have you ever considered giving up your U.S. citizenship?”, nine percent of 977 U.S. adults responded that they had:

Few Americans have ever thought about giving up their U.S. citizenship … Perhaps in part that’s because 93% consider it at least somewhat important to be a U.S. citizen, including 79% who think it is Very Important … Men are more likely than women to have considered giving up their U.S. citizenship. Democrats are less likely than Republicans and unaffiliateds to have considered it. But sizable majorities across all demographic categories have never given a thought to quitting their U.S. citizenship.

Keep in mind however that this is a so-called “national survey” — by which they mean a survey conducted throughout the territory of the State, not among a representative sample of members of the nation located both on State territory and abroad. But just think: if 9% of Homelanders have toyed with the idea of renouncing U.S. citizenship, how many Americans abroad do you imagine are considering it?

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FBI withholds monthly NICS citizenship renunciation statistics due to government shutdown

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The FBI’s main NICS page has been updated with working links to most monthly reports on NICS: Federal Denials (still stands at 57 firearms denials to ex-citizens, down from 58 two months ago), Total Checks, and Top 10 Highest Days/Weeks. However, the same page gives an incorrect link for the Active Records report, which would include information on how many Certificates of Loss of Nationality the FBI received from the State Department in the preceding month: if you follow that link you’ll get a “this page does not seem to exist” 404 error message.

At first glance this just looks like a URL redirection hiccup in the Plone Content Management System which the FBI uses to run their website. But oddly, if you go to the URL where you’d actually expect the Active Records report PDF file to appear (by analogy to the still-working URL from two months ago — the URLs generally end with the date on which the report was issued in MMDDYY format, and all the other latest reports for this month have a date of 3 October 2013), you don’t get that same “this page does not seem to exist” message; instead you’re redirected to the top page, which shows a message about the government shutdown: “Due to the lapse in government funding, information on this website not directly related to the protection of life and property will not be routinely updated”.

FBI-Government-Shutdown

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U.S. State Department: “We cannot make India look at you as an American” (unless there’s money in it for the U.S. government)

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Salman Nouman (Twitter: @ImFilmmaker), a U.S. citizen based in Dubai, recently tried to apply for a student visa to attend film school in Bollywood, only to find that the Indian government does not permit naturalised U.S. citizens of Pakistani origin to apply for Indian visas on their U.S. passports. In an Outlook India article about his experience, he mentions the reaction of the U.S. government when he asked them for help dealing with his problem:

After working through the maze of departments within the DOS, I was finally routed to the American Citizen Services and India Desk. They asked me to email them the details, which I did, expecting a quick resolution. Surely the all-powerful Secretary of State, Hillary Clinton would get Consular Affairs to immediately ask India to not discriminate against US citizens based on their origin and treat all Americans uniformly for visa applications?

American Citizen Services told me that India has a right to deny my visa – to which I replied, of course, that that was not the problem. I would accept a denial on my US passport if I was put through the same process as any British, Irish, Italian, Arabic or other origin US citizen. As a US national, I wanted equality, and to be able to travel as a US national without my origin playing any part in that. It is the State Department’s job to ensure that US citizens are not discriminated against. And yet, they told me: “We cannot make India look at you as an American”.

Isn’t it great to see that US$1.20-per-American-abroad American Citizens Services budget is bringing us so many “great benefits of American citizenship”?

If Mr. Nouman’s story has a happy ending and he makes it to India with a visa in his Pakistani passport instead of his U.S. passport, he’ll find in fact that the U.S. has been putting out all efforts for more than three years to make India and every other country on earth look at him as an American. The U.S. is so intent on achieving this that they’re threatening (through FATCA’s provisions on gross proceeds withholding) to confiscate 30% of U.S. assets owned by residents of other countries if those countries don’t look at you as an American for tax & banking purposes — even if that violates their own laws, and even if you have another passport and emigrated from the U.S. long ago.

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Hong Kong retirement plan administrators don’t expect FATCA IGA negotiations will bear fruit for industry

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As we previously discussed, China and the U.S. decided during their annual Strategic & Economic Dialogue in June to hold another round of discussions on FATCA “as early as practicable this summer”. Well, the autumn equinox has come and gone, but we haven’t heard any more rumours about how an Intergovernmental Agreement is “imminent”. Hong Kong’s Oriental Daily News has been keeping up with local financial institutions’ FATCA preparations, earlier reporting on Standard Chartered’s updated account opening procedures requiring new customers to declare whether or not they are U.S. citizens. After the jump I’ve translated their latest article from Monday about FATCA’s impact on local retirement plans.

Though the article doesn’t directly mention those ongoing Beijing–Washington negotiations nor their effect on Hong Kong, the implication is that they’re not going too well; apparently, most plan administrators aren’t expecting the success of the Hong Kong government’s efforts for the system to gain a FATCA “deemed compliance” exemption either through an amendment to the regulations or through a hypothetical IGA, and they’re making preparations to report the information required by FATCA themselves. However, there remain legal difficulties with that approach as well, and I’ve seen no evidence that the Hong Kong government plans to ameliorate those either.

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Why people renounce citizenship: a view from London

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Most Homelanders think Americans abroad renounce citizenship because they “hate America” and “don’t want to pay their fair share for being a citizen of such a great country”. But really, if your only motivation is hatred, you might well come to regret your decision to renounce. In reality, as pointed out in a heartfelt piece by Dr. Leigh-Davis, now a proud citizen of the United Kingdom, people are happiest when they renounce for love, whether love of a person or love of the country which took them in and gave them a wonderful life:

Sure, one could argue, if you are making over $155,000 in another country, one will have to pay the U.S. taxes on this excess. But certainly, if you are making a lot of money, isn’t it worth spending a little of it on the pleasure of having a U.S. Passport to go back and forth as one desires, and benefit from all the great attributes of the United States? Moreover, the process of renouncing one’s citizenship and getting one’s U.S. affairs in order is an arduous and confusing one, which will most likely require the “expensive” assistance of financial professionals and attorneys. Additionally, if you are truly making so much money, the exit tax alone could offset any financial benefit.

Many people thought I was crazy, when I left the U.S. for love, and then thought I was pathetic when it turned out to be an unrequited love, and today I may never find the love of another. However, when weighing the financial benefits against the financial disadvantages, I would reiterate my argument: that love is always the motivating factor. Whether it be love of a new country; love of a new culture; love of new people; or love of a career; few people would undertake the complicated and difficult task of renouncing their citizenship, if there was not some love in there somewhere.

This is what the people in the country we left behind find hardest to stand: that among nearly two hundred other countries & territories on earth, the U.S. is not only one that is worthy of love. There are many places that can give us a good life, there are many that take in foreigners to whom they have no obligation and treat them as neighbours, and there are many in which we emigrants can become proud citizens.

Go read the whole piece.

Falling proportion of American emigrants requesting Consular Reports of Birth Abroad for children

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In a comment, bubblebustin asked for statistics on the number of Consular Reports of Birth Abroad. Unfortunately I wasn’t able to find the actual numbers, but the State Department does make Paperwork Reduction Act filings with the Office of Management & Budget giving estimates on DS-2029 (the form parents fill out to apply for a CRBA).

State started out with an estimate of 70,000 filers per year in 1975, but apparently they found this was an overestimate and quickly revised that downwards to 35,000 per year in 1980. In about two decades after that, State increased their estimate of DS-2029 filers by about 31% to 46,000 in 2002, then increased by about 50% more over the decade to 68,627 per year. In other words, it took more than three decades for the estimated number of reported births to double. Yet the doubling time for the total population of Americans abroad is far shorter than that, apparently around a decade: in 2002 State estimated that 3.2 million Americans lived abroad, while last year they said 6.3 million.

In other words, the proportion of overseas Americans requesting Consular Reports of Birth Abroad has decreased by nearly 25% in the last decade. The obvious question: is this due to a drop in birthrates, or a drop in the proportion who choose to report their babies’ births to the U.S. government?

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