Liberty and justice for all United States persons abroad

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Author Archives: Eric

More than two thousand renunciants added to NICS in Q2 2016, but only 509 names in Federal Register list

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Notwithstanding any other provision of law, not later than 30 days after the close of each calendar quarter, the Secretary shall publish in the Federal Register the name of each individual losing United States citizenship (within the meaning of section 877(a) or 877A) with respect to whom the Secretary receives information under the preceding sentence during such quarter.

— 26 USC § 6039G(d), second sentence

For the third time since Jack Lew took office in 2013, he’s managed to meet the 30-day deadline for his quarterly homework, but only by handing in an incomplete assignment. The latest Quarterly Publication of Individuals Who Have Chosen to Expatriate is now available in pre-print PDF form, but it’s just 14 pages long and has barely five hundred names in it. That makes it the second-shortest list during Lew’s term, beaten by only the Q2 2015 list. (Clearly Lew is a firm believer in Petros’ principle that less is better when it comes to complying with the U.S.’ “Internal” Revenue Code.)

Meanwhile, the Renounced United States Citizenship category in the FBI’s National Instant Criminal Background Check System (NICS; note the new web address) went from 33,947 records as of 31 March to 36,028 as of 30 June, an increase of 2,081 records. (And NICS only covers 8 USC § 1481(a)(5) renunciants, not people relinquishing U.S. citizenship under other paragraphs of that same subsection.) Furthermore, based on the response to Shadow Raider’s latest Freedom of Information Act request with USCIS, it looks like about seven or eight thousand people are filing Form I-407 to give up their green cards each quarter. In other words, at least forty thousand people per year are deciding to cut their legal ties with the United States rather than retain or pursue citizenship.

Green card abandoners definitely not in list

The Federal Register list includes a very carefully-worded statement that “[f]or purposes of this listing, long-term residents, as defined in section 877(e)(2), are treated as if they were citizens of the United States who lost citizenship”. Certain inattentive journalists interpret to mean that the list actually includes people who gave up green cards which they’ve held in eight or more of the last fifteen years, but that’s clearly impossible.

The IRS complained more than 15 years ago that they couldn’t include ex-green card holders in the list because the files which the old Immigration and Naturalization Service gave them “do not distinguish former long-term residents from other former green card holders and generally do not include tax identification numbers”. That little inter-agency snafu has continued up to the present day: there’s still nowhere to write your SSN on I-407 even after the recent redesign, and USCIS explicitly stated last year (emphasis mine) that when you file I-407, “we will provide only your name and the filing date to the IRS”.

As always, after the jump please find a table of recent media reports naming individuals who have given up U.S. citizenship.

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Why aren’t Democrats Abroad screaming “Patty Judge for Iowa” at the tops of their lungs?

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JudgeGrassley

After decades of coasting to reelection, Sen. Chuck Grassley is facing his toughest race yet. Iowa political observers say the 82-year-old Republican senator known for his independent streak could be in danger in a turbulent, no-holds-barred presidential election year. A Loras College poll released Thursday had the Iowa lawmaker in a statistical dead heat against Patty Judge, his Democratic challenger. Grassley led by only one point, 46-45, against the former lieutenant governor. That nominal advantage was well within the poll’s four-point margin or error. (The Hill, 4 July.)

So, the Republicans have made some big promises to the diaspora in their platform. But it’s up to the actual legislators whether they want to implement those promises or not, and any Republican Senator who gets re-elected this November has six years to spend ignoring the platform before he next gets called to account. And as we well know, one prominent Republican member of the Senate Finance Committee is dead set against giving anything to the diaspora: Chuck Grassley, who’s been gunning for us ever since the Ford administration.

In the current election, there’s at least a slim chance of finally putting Grassley out to pasture: Iowa tends to lean more Democratic during presidential election years, and Grassley faces a strong challenger with excellent name recognition. And Democrats Abroad hope to capture the votes of middle-of-the-road emigrants who have been forced by circumstances to become single-minded single-issue voters. So I have to ask: why on Earth have Democrats Abroad been deafeningly silent about Patty Judge?

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More of the usual hypocrisy from the U.S. Treasury

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In a recent talk (archived) at a Tax Policy Center conference on international corporate taxation, Michael J. Graetz of Columbia University relates the following anecdote:

In Europe, countries generally wanted to strengthen their source-based taxation. The Obama Administration, however, has been determined to strengthen its residence-based taxation of US multinationals. This led a key US Treasury negotiator to remark that, when he was participating in the OECD’s BEPS negotiations, he felt like everyone in the room wanted the US to pay for all the drinks.

That anonymous negotiator represents a country which taxes Canadian disability savings grants, French unemployment assistance, and Hong Kong stimulus payments — all funded by people paying taxes in those places and paid out to people who don’t live in the negotiator’s country. And he’s complaining about other countries wanting to tax economic activity which actually involves their territory (hardly the first time we’ve heard such complaints from one branch of the U.S. government or another).

Well, this is also the country that gave the world the Jackson-Vanik amendment and 26 USC § 891. No surprise there. Meanwhile, Fran Hendy reports that the OECD, rather than complaining about U.S. hypocrisy, has endorsed it — by tweaking its tax haven blacklist criteria so that the U.S. can refuse to participate in the Common Reporting Standard without being declared an “uncooperative jurisdiction”

State Department employee ignorant of law, insults parents who want to get their 11-year-old a bank account

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Vice magazine recently published an article by Serena Solomon featuring interviews with ex-U.S. citizens about their reasons for giving up citizenship. The article doesn’t question the government’s more absurd policies, such as the obscenely-high fee or the so-called “Billionaire’s Amendment” exit & gift tax (which actually applies even to thousandaires if they can’t afford to come into compliance before renouncing). However, the author generally seems to understand the issues at stake, and over on Reddit she’s doing her best to defend herself against the usual knee-jerk Homelander reactions (sample: “It’s not meant for everyone to be a part of the Greatest Nation in the World”).

The debate’s mostly over by now, but Reddit user BrassAge, who claims to be “someone who administers renunciations” (which is possibly true, given that s/he is a frequent poster on the Foreign Service Officers’ subreddit), felt compelled to revive the mostly-dead thread to put in his or her insulting and incorrect two cents (archived).

Doesn’t know the law, tries to nitpick about it

3) Serena, I wish you also would have mentioned that only dual citizens can renounce their citizenship — the Hague convention on statelessness compels the U.S. to decline renunciation requests if it would leave the renouncee stateless.

The U.S. signed neither the 1954 or 1961 conventions on statelessness, and 7 FAM 1215 says that the State Department “will accept and approve renunciations of persons who do not already possess another nationality”. (Maybe BrassAge thinks the prohibition against voluntary statelessness is a peremptory norm of international law and should thus bind the U.S. even without its signature, though that’s a giant stretch, and really not something I’d expect to hear out of the mouth of a U.S. government employee.)

But all that is neither here nor there: very few people voluntarily make themselves stateless anyway, and everyone Solomon mentioned in her article was already a citizen of another country, so it’s unclear why BrassAge is getting so agitated about this non-issue. (Maybe s/he’s one of the folks who’s been getting yelled at for all the mess caused by Harmon Wilfred’s renunciation.)

Insults people trying to conduct ordinary personal finance

Solomon mentioned on Reddit that “Another guy I spoke with has an 11 year-old daughter in Europe. She can’t find a bank to open an account for her because of her US citizenship.” (I’m disappointed that her editor apparently thought Eduardo Saverin was worth mentioning in the final article but this wasn’t.) Our State Department friend’s response to that:

2) The argument that an 11 year old can’t get a bank account strikes me as particularly weak. Outside of the Mary Poppins Universe, what children have independent bank accounts? Do they have independent income to fill those accounts, or do their parents want to use those accounts for their own purposes?

This reflects the usual Homelander view that “foreign accounts” are nefarious and used only for money laundering, drug dealing, and terrorism. Meanwhile, most Homeland financial institutions, including the State Department Federal Credit Union, offer accounts to minors as well, even if they have no “independent income” and just want to deposit birthday checks from their aunts. (Clearly, if U.S. laws cause minors to be denied an account in the country where they live, the solution is for them to open offshore accounts in the World’s Greatest Tax Haven.)

Tries to justify the world’s highest renunciation fee

4) For most people, the entire process takes about 6 months. The final interview itself is about 45 minutes, but there are months of legal review before the act, which is largely responsible for the high cost. After all, it seems silly to charge American taxpayers for legal hours spent reviewing the process of unmaking an American.

Seeing as changing your nationality is a human right, enshrined in Article 15 of the UDHR, it seems equally silly to put all these absurd make-work barriers in the way of people who don’t want any further affiliation with your country, which is why other countries don’t do it, and instead figure out how to get the work done more quickly and cheaply. For example China — recently lambasted by the American press as a racist violator of international law for its policy (analogous to the U.S.’ own policy) of not letting Hong Kong dual citizens use their foreign passports to travel to the mainland — lets you renounce citizenship for US$19 by mail. Taiwan charges $30. Chile lets you exercise your right to change your nationality for free.

This is hardly the most Orwellian thing that the State Department has said in the service of defending its indefensible fee — that award goes to the statement last year by Undersecretary of State for Management Patrick Kennedy claiming that all this nonsense “does not impinge, but rather protects, the right of expatriation”. (Imagine the reaction from Homelanders if the U.S. government started trying to “protect” the right to marry or the right of free speech in a similar fashion.)

That said, many Brockers have testified to meeting polite, efficient, and competent State Department officers on their big day — so let’s hope that after you’ve waited 10 months for an appointment, you get one of the good ones, rather than a rude, ignorant ultranationalist.

Was ex-CIA agent Philip Agee the target of the 1994 “technical amendment” barring U.S. citizens from leaving the U.S. on non-U.S. passports?

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Agee-TeleSUR
Agee in a 2007 interview with TeleSUR’s Mesa Redonda in Cuba

With all the attention suddenly being paid to China’s policy of forbidding Hong Kong dual citizens from using foreign passports to enter & leave mainland China unless they renounce Chinese citizenship (by mailing a form to the Hong Kong Immigration Department and paying US$19), it’s worth taking another look at the origins of the U.S. policy of forbidding U.S. dual citizens from using foreign passports to enter & leave the U.S. unless they renounce American citizenship (by waiting ten months for a consular appointment and paying US$2,350).

As mentioned last year, Ted Kennedy and Alan Simpson had to lie and obfuscate to get this policy made into law (8 USC § 1185(b)); prior to their change, it was legal for U.S. citizens to use foreign passports to enter and leave. Kennedy vaguely mentioned “technical challenges to application of the Travel Control Regulations by United States citizens who enter or leave the United States using foreign passports” as a reason for the ban, without explaining what he meant. One theory was that Kennedy & Simpson were aiming at the suddenly-increasing number of Americans naturalising in foreign countries — after losing various court cases in the 1980s to people who wanted to keep U.S. citizenship (e.g. Vance v. Terrazas, 444 U.S. 252 (1980); Kahane v. Shultz, 653 F. Supp 1486 (E.D.N.Y., 1987)), in 1990 the State Department adopted a new policy of assuming that Americans abroad intended to keep U.S. citizenship even if they committed relinquishing acts such as becoming a citizen of another country or working for its government.

But around the same time as Terrazas, another American abroad lost a case in the U.S. Supreme Court: Haig v. Agee, 453 U.S. 280 (1981). That case wasn’t about U.S. citizenship per se, but about the right to a U.S. passport. And it was not a victory for “rights of citizenship”: SCOTUS ruled that State could cancel the U.S. passport of ex-CIA employee Philip Agee. Agee remained abroad for some years, but by the late 1980s he was travelling in and out of the U.S. freely by entering through the Canadian border and then returning to Europe on a Nicaraguan travel document and later a German one (his wife Giselle Roberge was a dancer for the Hamburg Ballet).

Agee was, undoubtedly, the most high-profile U.S. citizen at the time who used non-U.S. travel documents to enter and leave the United States, and who thus would have been affected by Kennedy & Simpson’s new U.S. passport requirement. However, at the same time, other politicians were pushing to use passport revocation for enforcing child support orders — which might have made them notice that, under the law at the time, such revocation would be ineffective against dual citizens, who could get passports from other countries.

So in this post, we’ll look at the evidence: was Agee the specific person Kennedy & Simpson had in mind when they enacted the foreign passports ban? Why didn’t the government enact the ban earlier? And did this provision actually have any effect on Agee’s travels to the United States, by making him afraid he wouldn’t be able to leave again after he’d entered?

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Canada pushes back against one foreign country’s jus sanguinis claims

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TD_PRC

A couple of weeks ago, Chinese-language media in Canada reported that some second-generation Canadians with parents from Hong Kong have recently been unable to obtain visas for visiting mainland China, and were instructed by a visa processing centre to apply instead for temporary travel documents (pictured at right) as Chinese citizens instead. (Their right to visit Hong Kong is unaffected; Canadians can visit Hong Kong for up to 90 days, and the Hong Kong government does not require those with a potential claim to citizenship to resolve it before visiting.)

Nevertheless, these reports provoked a large number of inquiries to the Canadian government, and so the issue has leaked over into the English-language press just in time for the anniversaries of both the British North America Act 1867 and Hong Kong’s 1997 handover to China; various sources (CBC; South China Morning Post; Reuters; Time) are reporting the following fascinating statement by Felix Corriveau, a spokesman for Canadian Minister of Immigration, Refugees and Citizenship John McCallum:

Canada is aware of recent reports of challenges for Canadian-Chinese dual citizens in obtaining visas to visit China from Hong Kong. We are looking into the issue and are following up with the Chinese authorities.

Oddly, Messrs. Corriveau and McCallum do not seem to have sent any similar enquiries to Washington, D.C. regarding the far more aggressive policy of the United States towards Canadian individuals it claims to be U.S. citizens, which doesn’t simply include asserting sovereignty over alleged dual citizens when they visit the country and forbidding them from using foreign passports to enter, but rises to the level of threats to impose sanctions on Canada if Ottawa does not hand over their private information to Washington DC. An accidental oversight, I’m sure.

After the jump I translate portions of the relevant reports from the Canadian editions of Hong Kong newspapers Ming Pao and Sing Tao, and provide further discussion.

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Someone on the U.S. House Appropriations Committee puts the tiniest bit of pressure on Treasury regarding FATCA

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Last week, Congress published H.Rept. 624 on the Financial Services and General Government Appropriations Bill (H.R. 5485). One paragraph in the report shows a slight concern for our issues. CTRL+F for “Foreign Account Tax Compliance Act”, or see p. 26 of the PDF:

Foreign Account Tax Compliance Act.—No later than 180 days after enactment of this Act, the Department of the Treasury shall submit a report to the Committees of Appropriations of the House and Senate on its decision (TD 9610 (78 FR 5874)) and TD 9657 (79 FR 12811)) to require withholding on non-cash value insurance premiums, including payments by foreign insurance brokers. No later than 180 days after enactment of this Act, the Committee directs the Government Accountability Office to determine the impacts of FATCA on United States citizens living abroad and make recommendations on FATCA implementation.

The Appropriations Committee could have done much more than this, such as prohibiting any of the appropriated funds from being used to implement FATCA. (Indeed, they did prohibit the funds from being used for far higher-profile Homeland causes célèbres, such as determination of tax-exempt status of non-profit organisations.) On the other hand, at least it’s a bit of progress from House Republicans’ earlier inattention to the issues of U.S. persons in other countries, such as last year when they voted nearly-unanimously to blow a giant hole in their own budget and repeal the estate tax while leaving the estate-tax-backstop § 2801 in place — which would have given Homelanders who leave $15 million or $15 billion to their kids a lower tax rate than emigrants who leave $15,000 to their kids.

If the executive branch’s past attitude towards deadlines is any guide, it will take far longer than 180 days for this report to get written. In June 2014, for example, the Senate Appropriations Committee directed DHS to report within 90 days on their efforts to implement the Reed Amendment. DHS’ report, discussed here at Brock, was finally published 350 days after the passage of the relevant bill.

And of course, when the report finally does come out, it will consist entirely of boilerplate lies about how FATCA doesn’t have any negative impacts on United States citizens living abroad (and even if it does it’s your own fault not the government’s fault, and even if it is the government’s fault it’s justified because of “tax evasion”, and even if the alleged individual international tax gap is utterly miniscule compared to the domestic tax gap the United States must do something and FATCA is something therefore it’s a Good Thing).

Conclusion

This is not a development that should cause any Brock readers to change their good plans. If you were planning to go get a CLN, keep that appointment at the consulate — it’s absurdly hard to get another one. If you were planning to continue your ordinary law-abiding life outside of the United States without obtaining a CLN, keep on keeping on. But if you think you’re U.S. tax compliant and have nothing to worry about, well, you’re lying to yourself — and even after this useless report comes out, you’ll still be lying to yourself.

Thanks to Bruce Schneier, IRS quietly retracts two grossly insecure FATCA XML encryption & processing recommendations (but doesn’t admit fault or give credit)

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IRS-logo-FATCA-encrypted

First, as renowned computer security expert Bruce Schneier first noted in February 2015 (and as we discussed last June), the IRS previously recommended that non-U.S. financial institutions use the insecure ECB mode of AES to encrypt FATCA data before uploading it to the International Data “Exchange” Service (IDES). The above image portrays the IRS’ logo encrypted using the IRS’ recommended settings. Several IDES users pointed out their concerns with that recommendation, but the IRS ignored them, and added the following to the IDES Technical FAQ (the date stamp in later versions of the FAQ falsely claims this was added in June 2015, but the question and its answer actually appeared on the IRS website as early as April):

E15. I read in a recent cybersecurity blog that there is a concern the encryption standards being used for FATCA data are no longer current. Is this correct?

No. The encryption process used to protect your FATCA data was assessed by the IRS prior to granting FATCA-related information technology systems the authority to operate. The IRS also assessed a number of security controls which are documented in NIST Special Publication 800-53 Revision 4. The IRS would not have approved IDES for use in transmitting tax information otherwise.

Second, as covered here last year, the IRS recommended that financial institutions having trouble due to a bug in IDES should submit their XML files to totally-unencrypted online tools in order to reformat them prior to IDES upload:

D13. I uploaded a FATCA Report to IDES 3 days ago and have not received a notification about the status of my FATCA Report. Does the XML format cause a problem?

The IRS has identified a specific scenario where notifications are not issued to filers when certain errors are present. A possible cause for a missing notification is XML that is not formatted and is contained on one continuous line. In this scenario, you can reformat the XML into an acceptable format using a variety of online tools, such as XML Pretty Print. The correctly formatted version of the XML can be resubmitted in a new data packet.

As of June 2016, both of these recommendations have been removed. D13 is totally gone and flushed down the memory hole with no acknowledgement of having been there. E15 is also now gone, but a new question E19 appeared in late March 2016, in which the IRS claim to have come up with the idea of fixing their absurd encryption recommendation all on their lonesome after a “routine security review”, with no credit whatsoever given to Schneier:

E19. We heard the IRS is changing the AES encryption cipher mode used during data packaging. What is this change?

The encryption standard used by the IRS meets current ISO standard(s). We continuously evaluate encryption algorithms to improve data security. During a routine security review, the IRS decided to improve encryption by replacing the Electronic Code Book (ECB) cipher mode with the Cipher Block Chaining (CBC) cipher mode. CBC is a stronger algorithm for encrypting data and its adoption will improve the current secure data packaging process. CBC requires an Initialization Vector (IV) for data packaging. Review the IDES Resources web page for more information

I wonder how many financial institutions will change their code to use CBC instead of ECB, but will leave the initialization vector on the all-zeroes setting previously recommended by the IRS (even though setting an IV at all should have been entirely unnecessary back then, as ECB doesn’t use it). If so, that will effectively nullify the benefits of switching to CBC.

I recall that the XML Pretty Print recommendation continued to appear on the IRS website earlier this year. Unfortunately, the Internet Archive did not automatically save any snapshots of the FAQ this year, and I didn’t remember to save it myself manually until today. The most recent previous Internet Archive snapshot is from September 2015, when both E15 and D13 still appeared. Question B11 makes reference to an “April 2016 maintenance release” of IDES; that release may have quietly addressed the line-length bug which caused the IRS to suggest XML Pretty Print as a work-around.

Ironically, XML Pretty Print is operated by a Canadian. I emailed him to point out the issue last year and he replied, but I didn’t hear back from him to get his permission to quote him for these posts.

What Canada & every other country should copy from the Philippines

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Neil Llamanzaras Renunciation

Early last month, just weeks before the election, the husband of one of the candidates for president of the Philippines renounced his U.S. citizenship. As Rappler reported:

Teodoro Misael Daniel “Neil” Vera Llamanzares filed his renunciation of his US citizenship on Thursday, April 7, before Carlos Alan Tañada Yam, chairman of Barangay Greenhills in San Juan.

Llamanzares signed 2 documents: the Affidavit of Renunciation of Allegiance to the United States of America/Renunciation of American Citizenship and his Oath of Allegiance to the Philippines.

Llamanzares, in his affidavit, said “I…expressly and voluntarily renounce my United States nationality/American citizenship, together with all rights and privileges and all duties and allegiance.”

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Creepy perverted ex named Sam stalks Americans who moved to Canada for love

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Uncle Sam the Peeping Pervert at Your Window

An unusual report from Metro News: MapleMatch.com offers to pair Canadians, Americans fleeing Trump

A new dating website is offering to pair Americans with Canadian singles to save them from a Donald Trump presidency.

MapleMatch.com promises love and a U.S. escape plan if Trump becomes commander-in-chief.

However, nowhere does MapleMatch.com see fit to warn their Canadian users about the severe dangers of becoming intimate with Americans: your new lover has a crazy stalker ex named Sam, who’s coming after you two across international borders to get his voyeuristic jollies. For the rest of your life, you’ll never be alone together: the weirdo will peep into the most private aspects of your relationship, keep trying to break into your house to help himself to money from your wallet, and threaten to drag your children into his perverted games.

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