Media and Blog Articles Open for Comments – Part 5 of 11 (Year 2018)

1,714 thoughts on “Media and Blog Articles Open for Comments – Part 5 of 11 (Year 2018)”

1. I’m placing links to the recent CBC articles and newscasts relating to the Repatriation/Transition Tax here for greater exposure. Let’s keep the issue trending with CBC by sharing through either Facebook or twitter:

   http://www.cbc.ca/news/politics/transition-tax-trump-corporations-1.4639020

   @14:30: http://www.cbc.ca/listen/shows/cbc-news-the-world-at-six

   http://www.cbc.ca/player/play/1222849091745

   @1:29:45: http://www.cbc.ca/player/play/1223560259697

   http://www.cbc.ca/news/politics/trump-trudeau-tax-reform-1.4644074

2. From a link posted on the American Expatriates FB page:

   “Irish ‘accidental Americans’ could be subject to US tax bills”

   “Brian Hayes, MEP, said that [FATCA] is having unintended and “deeply unsettling” effect on many Irish and EU citizens.

   “There are potentially thousands of accidental Americans in Ireland who could be subject to huge US tax bills and they don’t know about it. Because of our long-standing cultural and family ties with the United States, Ireland could be worse affected than many other countries in the EU,” he said.”

   https://www.irishtimes.com/business/personal-finance/irish-accidental-americans-could-be-subject-to-us-tax-bills-1.3480754?mode=amp

3. Nothing to do with taxes, but it will be interesting to see whether the judge ultimately throws out this case, claiming the litigants lack standing, since neither has actually been killed by American drones.

   In ‘kill list’ case, judge questions government’s unilateral authority to kill U.S. citizens abroad

4. @Barbara

   Hmm, seems to depend upon whether or not they are or once were USCs or not. If so, they have no standing. If not, then they have standing.

   There was a very recent case allowed all the way up to the 9th Circuit of Appeals in which a Monkey in the jungle sued a British photographer. And we all know what happened to the FATCA lawsuit.

5. The French Accidental Americans have been doing a superb job at getting press coverage, and not just in the preaching-to-the-choir websites and journals we’re all used to.

   From the well-respected (by me, at least) Christian Science Monitor:

   For ‘accidental Americans,’ the hidden costs prove taxing

6. The CS Monitor piece has been picked up by Yahoo News. Mixed comments.

   https://uk.news.yahoo.com/accidental-americans-hidden-costs-prove-taxing-183955237.html?_guc_consent_skip=1525510698

7. CSM article is good except it does not mention why tthese taxes are ‘ owed’ or mention or explain the uniquely American CBT.

8. Great to see our issue raised in a high-profile and well-respected publication such as the Christian Science Monitor!

9. Likely interesting:

   https://taxfoundation.org/events/treatment-foreign-profits-tax-cuts-jobs-act

10. This is not a blog or news story to comment on, but it is worth reading. It is an in-depth June, 2017 report on
    ‘The 2% Tax for Eritreans in the diaspora
    Facts, figures and experiences in seven European
    countries’
    by DSP-groep Amsterdam, Tilburg School of Humanities, Department of Culture Studies

    https://www.rijksoverheid.nl/binaries/rijksoverheid/documenten/rapporten/2017/09/18/the-2-pct-tax-for-eritreans-in-the-diaspora/the-2-pct-tax-for-eritreans-in-the-diaspora.pdf

    It also notes the US use of citizenship-based taxation.

11. Somebody thinks the Cohn bank details came from a leak at FinCen or somebody with access to that data:

    https://talkingpointsmemo.com/edblog/is-this-how-avenatti-found-out

12. More on leak from FinCen

    https://www.stripes.com/news/us/treasury-ig-launches-probe-into-possible-leak-of-cohen-s-banking-records-1.526098

13. For USC foreign corporation owners, no refunds until the whole 8 years transition tax is paid:

    In a surprising development, the Internal Revenue Service (IRS) has announced that if a taxpayer’s 2017 payments, including estimated tax payments, exceed its 2017 net income tax liability described under Internal Revenue Code (Code) Section 965(h)(6)(A)(ii) (its net income tax determined without regard to Code Section 965) and the first annual installment (due in 2018) pursuant to an election under Code Section 965(h), the taxpayer may not receive a refund or credit of any portion of properly applied 2017 tax payments unless—and until—the amount of payments exceeds the entire unpaid 2017 income tax liability, including all amounts to be paid in installments under Code Section 965(h) in subsequent years. Thus, for taxpayers making an election under Code Section 965(h) to pay the transition tax over 8 years through installment payments, any overpayments of 2017 tax liabilities cannot be used as credits for 2018 estimated tax payments or refunded, unless and until the overpayment amount exceeds the full 8 years of installment payments.

    https://www.jdsupra.com/legalnews/irs-holding-2017-overpayments-to-42369/

14. So does that apply also to FTCs?

    Does it mean that a foreign corporation owner who takes money from the corporation to pay the first instalment (paying residence-country tax on this forced distribution) will find that the FTCs earned by the forced distribution get applied by the IRS against the second instalment rather than being applied against the US tax on the forced distribution? And all other tax-year 2017 passive-basket FTCs likewise? And similarly for tax-year 2018 and subsequent years until the business is bankrupt or the transition tax is finally paid?

15. That could be reversed.

16. News from Twitter chat with Solomon Yue. He says we may see the TTFI legislation this coming week. One comment to that is ‘we have heard that before.’

    It sounds like the treatment for Accidentals will be three years of compliance without FBAR & FATCA penalty and then may elect TTFI status. Comment to that: sounds like streamlined except 3 years instead of 5.

    Karen says:
    “Essentially, TTFI is saying go thru streamlined and then stop filing. For AA’s and LT expats that want to retain USC, this is a reasonable deal as long as they have no PFICs or CFCs or “foreign” pensions, or ….”
    https://twitter.com/FixTheTaxTreaty/status/995328964901122050

    Point of information about the above: FBAR and FATCA 8938 still exist under TTFI – so still filing! However, I ask as 8938 requires specification of the line on the 1040 return income from specified assets appears, and if no return is required under TTFI then would that end 8938? The devil is in the detail.

    Solomon Yue says he will ask the question about PFIC and its exemption. At least someone is listening (Solomon Yue). He has said before about the exemption of foreign pensions, yet it has always been in regards to after TTFI election, and not the 3 years compliance period before one may elect TTFI.

    In terms of AA: he has stressed that the TTFI bill is about asking Congress to do something for those who wish to remain American citizens, as the best chance to get buy in from Congress. Then of course once passed he will focus on other changes. So it sounds like perhaps multiple bills: 1) TTFI, 2) remove transition tax and GILTI from US Corps overseas, 3) remove FBAR and FATCA for USP overseas, 4 or more) Dems have a few including one that eliminates Social Security WEP. All this and there is no precedent of passage of a single focused bill helping US Persons overseas.

    I asked Solomon for a Preamble on the TTFI speaking about the injustices. He declined such preamble and it will be only to align with TTFC.

    Re: PFIC. A thought of today is a new acronym is needed for this. I like the word “curse” today. So Punitive Foreign Investment Curse for U.S. persons living overseas, or PFIC treatment. Innocuous and purposeful sounding names for these things should be changed to more representative names. Else, IMO, we give in to the narrative of the U.S. Compliance-Congressional Industrial Complex. Of course a name including “curse” would never fly in compliance code with DNA predisposed toward compliance. But we may give it a nick name.

    Re: Cursed Foreign Corporations. This is what SY says:

    Regarding small business owners abroad: we need 3 things 2 be done 4 them: 1) Pass #TTFI 2 connect w/ #TTFC, 2) exempt them from the transition/GILTI tax, 3) allow them 2 elect S Corp pass-through (corporate salaries/distributions r reported as personal foreign-source income).
    https://twitter.com/SolomonYue/status/995309965098340352

    Solomon Yue says that he likes this story about being Proud Americans, and has already used it:

    Tamar says:
    I’ve said this b4: I’ve raised my kids (Israeli expats) w/spoken English at home & proud of their US origins despite leaving as toddlers. One son refused any Army job that wld require him to renounce! Get rid of #CBT & expats can be proud US ambassadors & trade promoters again.
    https://twitter.com/tdbho/status/994952184147120128

    So do we have a feature here on Brock to come up with stories about being proud Americans? So we may give them to Solomon.

17. @JC

    I have and I’d love to, but having finally gained full employment here in Japan, whatever solution being further down the road than my passport renewal and at a cost of time and money I do not have, not really time effective to do so. However, my submission to the Senate’s subcommittee on tax could be a start.

18. JC – We’re all working in the dark here until an actual draft bill is released.

    However – my understanding is that TTFI/RBT will require an annual information return that consists of certification that the citizen is still a qualified nonresident. I expect that this is not on form 1040, and requiring additional forms to be attached would defeat the purpose.

    Current instructions for form 8938 state that the form does not need to be filed if the taxpayer is not required to file an annual tax return (1040 / 1040NR for individuals).

    Form 5471 does have to be filed, even if 1040 is not required. Whether corporations owned by non-resident citizens would continue to be CFCs will depend on the exact language of the bill. Similarly, form 8621 (PFICs) must be filed regardless of whether 1040 is required, and whether this reporting requirement disappears will depend on how the TTFI/RBT bill is written.

    As for FBAR, that is in Title 31 which will not be amended in the current bill. The IRS has very broad authority to exempt classes of people from filing FBAR, and could easily exempt those who elect non-resident status without any additional legislation.

19. Plaxy – I think the IRS has over-stepped their authority in applying excess 2017 payments to unpaid installments of the s965 transition tax, rather than refunding the excess or applying it to 2018 estimated tax. Congressional intent is clear that taxpayers should be able to spread the payment of the transition tax over 8 years, and this policy clearly grabs money before it is actually due under the statute.

    There’s no reason why FTC rules should be affected at all. FTC generated in 2018 will be used first to offset applicable US tax in 2018. If there is excess FTC I would think it could be carried back to 2017 to offset any US tax for 2017, including the transition tax (of course this will depend on the FTC and US tax being in the same “basket”).

20. Karen: “Congressional intent is clear that taxpayers should be able to spread the payment of the transition tax over 8 years, and this policy clearly grabs money before it is actually due under the statute.”

    Regretfully, I don’t think Congress had any particular intent about the transition tax instalments, considering most of them (if not all of them) will have voted for the bill without reading it. The instalment plan is there to try to improve the incentive for Apple to move more of its billions to America by spreading the transfer over eight years, thus financing the temporary tax cuts, which are due to expire after eight years.

    But who knows.

21. I suggested in another IBS thread that an expat USC owner/shareholder of a foreign corporation could simply ignore the transition tax altogether, taking the position:

    That a treaty grants a credit for a foreign tax which is not allowed by the Code;

    but not filing Form 8833 to report the position.

    https://www.irs.gov/pub/irs-pdf/f8833.pdf p3

22. Regarding the rationale for the transition tax instalment plan, see comments on Camp’s TT plan, in “Getting from here to there: the transition tax issue”, https://dash.harvard.edu/bitstream/handle/1/31958204/155tn0069-Fleming.pdf?sequence=1

    Generally speaking,46 under Camp’s transition tax, all U.S. shareholders (corporate and noncorpo- rate47) of either (1) a section 957(a) CFC or (2) a noncontrolled foreign corporation, at least 10 per- cent of the voting stock of which was owned by a U.S. corporation or at least 5 percent of the voting stock of which was owned by a U.S. corporation through a chain of foreign corporations connected by at least 10 percent voting stock ownership, would be taxed through subpart F on their pro rata shares of the corporation’s post-1986 accumulated E&P that had not previously borne a U.S. tax.48 Affected shareholders would be allowed to deduct 75 percent of their pro rata shares that were attrib- utable to cash or liquid assets and 90 percent of their pro rata shares that were attributable to other assets.49 The proposal assumed that when the tran- sition tax would be imposed, the top U.S. corporate tax rate would be 35 percent. Thus, the maximum expected tax rate on the cash and liquid asset portion was 8.75 percent, and the maximum anticipated tax rate on the remaining portion was 3.5 percent.(50) The tax would be payable in installments over seven years,(51) with no interest being charged on timely paid installments.(52) The installments would be backloaded, so that the final two payments would account for 45 percent of the deferred tax liability.(53)
    [..]
    The seven-year installment payment period would be adequate to address concerns regarding shareholders who have liquidity problems.

    ———–

    (51) The Camp proposal is sometimes described as providing for payment of the transition tax over an eight-year period. See JCX-15-14, supra note 3, at 29. This is basically true but somewhat misleading because the proposal actually states that payment is to be made in eight installments, with the first installment being due at the time of the tax return for the year in which the transition tax is imposed. See JCX-15-14, supra note 3, at 31. Thus, there are only seven deferred installments, and the deferral period is only seven years long.

    Most of the international stuff in the TCJA seems to have been kicking around for years, chewed over again and again no doubt by the taxwriters rubbing their hands in glee as they contemplated nailing the MNEs (especially Apple) for once and for all. The seven/eight years is intended to give Apple plenty of time to move everything back to America. IMO.

23. The “Getting here from there” paper ends with the following comment:

    U.S. treaty obligations and longstanding international tax policy principles will require that FTCs be allowed against the transition tax.

    I suggest again that the treaty position “That a treaty grants a credit for a foreign tax which is not allowed by the Code;” may be one way an expat owner can make sure that that’s what happens.

24. JC: “Re: Cursed Foreign Corporations. This is what SY says:

    Regarding small business owners abroad: we need 3 things 2 be done 4 them: 1) Pass #TTFI 2 connect w/ #TTFC, 2) exempt them from the transition/GILTI tax, 3) allow them 2 elect S Corp pass-through (corporate salaries/distributions r reported as personal foreign-source income).”

    Could Solomon Yeo be asked for clarification on this point? Small foreign corporations in Canada and presumably many other US treaty-partner countries, will continue to be untaxable by the US on undistributed earnings. Is the US proposing further pretend distributions in order to allow itself to tax the future undistributed earnings of the foreign corporation?

    At some point the small foreign corporation’s earnings will become so diminished, by forced distributions necessitated by the TT post-1986 instalments, plus future forced distributions necessitated by future ongoing pretend distributions, presumably a year’s earnings will be zero or negative and the owner can stop filing 5471s.

25. “Essentially, TTFI is saying go thru streamlined and then stop filing. For AA’s and LT expats that want to retain USC, this is a reasonable deal as long as they have no PFICs or CFCs or “foreign” pensions, or ….”

    And for those of us retired folk who do? Further tweaking to TTFI once it’s passed (as suggested by Solomon Yue) had better happen. Otherwise people like me will be “EF”s: Exiles Forever.

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