Category Archives: Issues regarding US persons abroad

SEAT (Stop Extraterritorial American Taxation) has announced that they and AARO (Association of Americans Resident Overseas) have filed a joint amicus brief in Moore v. United States, a US Supreme Court case which deals with the Transition Tax.  (Amicus curiae refers to an organisation or person that isn’t involved in the litigation, but has expertise in the subject matter and receives the Court’s permission to submit information and arguments in support of one of the parties.) Although the lawsuit involves US residents, this amicus brief explains why Moore is important for overseas Americans.

Reposted with permission from SEAT:

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Today SEAT and the Association of Americans Resident Overseas (AARO) joined to file an amicus curiae brief with the U.S. Supreme Court in relation to Charles G. Moore, et al. v. United States (Docket No. 22-800).

SEAT co-founder John Richardson has explained:

Moore [is] the most important case the U.S. Supreme Court has ever heard. The Court stands between the possibility of freedom and a society ruled completely [by the Internal Revenue Code].

SEAT co-founder Karen Alpert blogged about the problems of the “Mandatory Repatriation Tax” being challenged by Moore back when the Tax Cuts & Jobs Act (TCJA) was legislated:

In all of the hearings on [the TCJA], not one Representative or Senator mentioned anything about the applicability of this provision to corporations owned by tax-residents of other countries, for whom the idea of “repatriating” profits to the U.S. is not only absurd, but also a drain on the economy of the country they call home.

The case concerns Charles and Kathleen Moore, who live in Washington State. In 2006 they invested in 13% of an Indian corporation, KisanKraft, created to import, manufacture, and distribute affordable farming equipment in India. The Moores never realized earnings from the investment.

In 2017, the Moores discovered they owed nearly $15,000 in U.S. income tax based on the unrealized earnings of KisanKraft going back to 2006. Believing the “transition tax” (or “repatriation tax”) to be unconstitutional, the Moores took their case to court arguing that because the tax was imposed on accumulated foreign earnings, it was not a tax on income and is therefore unconstitutional under the 16th Amendment. In June 2022, the Ninth Circuit Court of Appeals affirmed the district court’s decision rejecting the challenge. In its decision, the court held that whether income is realized is not a determinative factor regarding the validity of the transition tax.

In June, 2023 the Supreme Court granted the Moores’ petition for a writ of certiorari – that is, the Court agreed to hear the Moores’ appeal. The Court is expected to hold arguments in the case in December, 2023.

The question posed in granting certiorari is “Whether the Sixteenth Amendment authorizes Congress to tax unrealized sums without apportionment among the states.”

SEAT’s and AARO’s joint amicus brief explains both why Moore is important for overseas Americans and additional grounds upon which the Court may rule in favor of the Moores.

For more information about Moore and its importance – in particular for overseas Americans – see Richardson’s in-depth discussion on his website Citizenship Solutions.

SEAT’s and AARO’s joint brief is available here:

I used to use two e-mail accounts for Brock matters.  Going forward, please e-mail me only at Pacifica@IsaacBrockSociety.ca  

Fabien Lehagre of l’Association des Américains accidentels has provided an update on the Belgian FATCA IGA case, which includes:

“The Belgian State has appealed the Belgian data protection authority (DPA) decision ordering the prohibition for the Belgian tax authority to process personal data of accidental Americans in the context of FATCA and to transfer the data to the IRS, the US tax authority. An introductory hearing took place at the Brussels Court of appeal yesterday [29 June 2023]. The Court of appeal decided to suspend the effects of the Belgian DPA decision.  . . . ”

Fabien notes that, “this prohibition . . . is now suspended by the Brussels Court of Appeal [pending the appeal decision].  The main reasons for doing so are to avoid the risk of damaging Belgium’s international reputation towards the United States and the diplomatic relationship with the United States as well as the difficulties for FIs who can no longer meet their FATCA obligations.”

Key Dates:

24 May 2023.  Decision.  Press Release. “The Belgian Data protection authority today declared unlawful, and decided to prohibit, the transfers of personal data of Belgian ‘Accidental Americans’ by the Belgian Federal Public Service Finance (FPS Finance) to the US tax authorities under the intergovernmental FATCA agreement.”

30 Jun 2023 From Fabien’s Update. “The Belgian financial institutions (FI) must, in principle, transfer FATCA relevant data to the Belgian tax authority for the fiscal year 2022. As the Belgian DPA prohibited the Belgian tax authority to process these data, this also means that the FIs cannot transfer the data to the Belgian tax authority as reception of these data by the latter also constitutes a form of prohibited processing.”

30 Sep 2023. “Belgian tax authority is supposed to transfer the data to the IRS.”

15 Nov 2023.  “Pleadings on the merits are scheduled for 15 November 2023.”

Several of us are getting together to celebrate Travis’ new CLN with dinner at The Keg, 75 York Street, Ottawa, on Tuesday, June 20^th, 6 pm.  Good food and drink and, important for us, it’s a good place for conversation, quiet and comfortable.  We’re currently expecting nine people.  All Brockers are welcome, whether local or visiting Ottawa from out-of-town.  On that latter note, we’re pleased that John Richardson of Toronto will be attending. 

Hope you can join us!   Please RSVP by leaving a comment or emailing pacifica.isaacbrocksociety@gmail.com

“The Belgian Data protection authority today declared unlawful, and decided to prohibit, the transfers of personal data of Belgian “Accidental Americans” by the Belgian Federal Public Service Finance (FPS Finance) to the US tax authorities under the intergovernmental FATCA agreement. According to the Belgian DPA, the data processing carried out under this agreement does not comply with all the principles of the GDPR, including the rules on data transfers outside the EU. It also asks the FPS Finance to alert the competent legislator of the shortcomings identified by the DPA.

. . . .

“Hielke Hijmans, Chairman of the Litigation Chamber: ‘Tomorrow we celebrate the 5th year of application of the GDPR. Article 96 cannot be intended to allow that international agreements remain contrary to the GDPR over time. The exception provided for international agreements concluded before the implementation of the GDPR does not exempt EU member states from (re)negotiating an agreement to make it GDPR compliant.’

“The Litigation Chamber also finds that the FATCA agreement does not contain appropriate safeguards to ensure that exported personal data is afforded a similar level of protection as data within the EU.

“The Litigation Chamber concludes that the transfers of data of Americans residing in Belgium to an authority located in a country outside the EU (which cannot offer an adequate level of data protection) are unlawful. For this reason, the Belgian DPA prohibits the FPS Finance from processing the complainants’ data and asks it to alert the competent legislator of this prohibition and of the shortcomings found”.

. . . .

https://www.dataprotectionauthority.be/citizen/belgian-dpa-prohibits-the-transfer-of-tax-data-of-belgian-accidental-americans-to-the-usa

The DPA has given the Tax Authority three months to confirm its compliance. The TA can also appeal the ruling.

Thanks to Ron Henderson for posting news of this decision on our Media thread.

Further reading:

Decision

American Citizens Abroad statement on the recent Belgian Data Protection Authority ruling on FATCA

Belgium stops ‘unlawful’ sharing of Accidental American’s data, Isabel Gottlieb, Bloomberg Tax.

John Richardson examines the US Supreme Court’s Cook v. Tait decision, a seminal case in US citizenship law, and the role it had in the “weaponization of citizenship”:

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Introduction And Purpose

The focus of this blog has always been on citizenship, taxation and citizenship taxation. Although taxation has always been perceived as a necessary burden, citizenship has sometimes been a benefit and sometimes been a burden. James Dale Davidson, writing in “The Sovereign Individual”, expressed the view that in the 20th Century US citizenship was generally a benefit. In the 21st (digital) century US citizenship based taxation has transformed US citizenship into a burden. The numbers of people renouncing US citizenship are a testament to this new reality.

The Weaponization Of US Citizenship – Two Methods

The history of US citizenship as documented in Amanda Frost’s “You Are NOT American”, is an epic story of the “weaponization of citizenship”. I highly recommend Professor Frost’s book – “You Are NOT American” to those interested in the evolution of US citizenship.

Method 1: Weaponization By Claiming The Individual Does NOT Meet The Requirements Of Citizenship

Regardless of the benefits or burdens of US citizenship, it is clear that the United States has a long history of “weaponizing US citizenship”. Professor Amanda Frost in her superb book “You Are NOT American” provides many examples of how the United States has used the concept and status of citizenship to either punish or reward individuals. Generally, Professor Frost describes a history where the use (or misuse) of America’s “nationality laws” has created hardships for people. Citizenship is a part of who people are. It’s part of their personal identity. Citizenship (presumptively) gives people a place or country they can call home. Citizenship (presumptively) gives people a place where they can live without fear of removal. Citizenship matters and the loss of citizenship can be a frightening and destabilizing event in the lives of an individual. It was not until 1967 that the United States Supreme Court in Afroyim ruled that US citizenship was conferred by the Constitution, belonged to the individual and could not (at least if born or naturalized in the US) be taken by the Government. (Of course that is of little comfort to those who can’t prove their US citizenship.)

Method 2: Weaponization By Claiming The Individual Does Meet The Requirements Of Citizenship

A minority of countries in the world confer citizenship based on and only on birth in the country.

Only two countries in the world impose worldwide taxation based on and only on the fact of citizenship.

The United States is the ONLY country that does both!

FATCA assisted the United States in exporting US taxation into other countries and on to the individuals who live in and are tax residents of those countries. In short: the accusation of being a US citizen living outside the United States subjected one to the “disabilities” and “criminalization” imposed by the US extra-territorial tax regime.

The US tax treaties have been discussed on Brock, most frequently those the US has with Canada and Australia but not so much about the others. In this article, John Richardson examines facets of the France-US Tax Treaty.

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Introduction, purpose And summary

It is clear that US citizens, who are tax resident of countries outside the United States are generally subjected to a more punitive system of taxation than US residents. That said, the U.S. has different tax treaties with different countries. Some treaties (example Australia) make living outside the United States very difficult. Other tax treaties (Canada and the UK) make living outside the United States easier in a relative sense. The relative difficulty is somewhat dependent on the extent to which the treaty contains provisions for U.S. citizens who are “resident” in the treaty partner country. These treaties are an additional recognition of U.S. citizenship taxation.

If a U.S citizen contemplating a move abroad asked the following question:

Q. How will I be taxed if I move outside the United States and live as a tax resident of another country?

The answer will be:

A. I don’t really know. It depends what country you are considering moving to.

Not only are US citizens living outside the United States taxed more punitively than U.S. citizens living inside the United States, but their taxation by the United States depends on the country they move to! (In addition, both income tax treaties and estate tax treaties may contain provisions that affect the way U.S. citizens may be taxed by the treaty partner country!)

The curious case of the U.S. France Tax Treaty and U.S. Citizens resident in France

In 1994 the United States and France entered into a new tax treaty. The 1994 treaty replaced the previous treaties. Generally, the 1994 treaty continued the “spirit” of the earlier treaties. Of particular note in the introduction to the 1994 treaty is the paragraph:

The new Convention preserves the special French tax benefits for U.S. citizens residing in France and for French residents who are partners of U.S. partnerships.

https://www.irs.gov/pub/irs-trty/france.pdf

(Note also that the 1994 Treaty has been revised by various protocols in 2004 and 2009.)

Much of what follows is rather technical. Therefore, I will begin with a summary of the main points gleaned from an analysis of the U.S. France Tax Treaty. What are those “special French tax benefits for U.S. citizens residing in France”?