Liberty and justice for all United States persons abroad

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Tag Archives: Citizenship-based taxation

Will There or Won’t There be Tax Reform by the End of 2017?

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tax reform 2017

I wrote this introduction for a program to be presented to tax professionals outside of North America back in March 2017. It was only meant as a general guide for those who might have been completely unaware of our grassroots movement as well as several attempts made by Congress to study our situation. It was not meant to be a complete discussion of the entire history of all our efforts but simply to inform them that we exist. To stimulate them to be more than paper-pushers and blind parrots for the IRS.

I still have a hard time believing effective tax reform for our dilemma will happen. Partially because awareness is not “new.” Since Dave Camp and the W&M call for submissions 4 years ago, there have been no less than 9 different studies, drafts etc and up to now, no real progress, no change. In addition, the general dysfunction of Congress (they can’t get health reform right) and the Trump Administration continues. It is now nearly September. There will be a huge effort needed to deal with Hurricane Harvey.

Will we or won’t we see tax reform?

Can this situation be tolerated as is for years to come?

What do YOU think?

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The Canada U.S. tax treaty does NOT protect Canadians from U.S. tax liability but does mean that Canada will NOT assist the U.S. in collection!

Posted on by Posted in Ethics, Issues regarding US persons abroad, Law & Morality, Tax Treaties 14 Comments

cross posted from citizenship solutions

Can the common law “revenue rule” be used to stop the enforcement of U.S. “citizenship taxation” on non-U.S. residents?
What the United States calls “citizenship taxation” is actually U.S. taxation of certain citizens and residents of other countries. The U.S. claims the right to impose full U.S. taxation on the “world income” of certain people who do NOT even live in the United States.

Prologue: In August of 2017 it was widely reported that the Canada Revenue Agency had assisted the IRS in enforcing a massive penalty ON A CANADIAN RESIDENT levied under the U.S. Internal Revenue Code. The penalty was imposed on that Canadian resident was for failing to report to the IRS, that he had been carrying on a Canadian business, through a Canadian Controlled Private Corporation. At the time of collection, the penalty was for approximately $133,000 U.S. dollars!

Q. How did this happen? A. He entered the 2009 IRS OVDP (“Offshore Voluntary Disclosure Program”). Those who entered #OVDP were basically “signing up” to pay penalties to the IRS. Those interested in reading about the horrific treatment of another Canadian resident, who tried to “do the right thing” by entering OVDP should read this.

For the rest of the story, please see here .

Wisdom of “Three Monkeys” explain why: Although there is little support for “citizenship-based taxation” repeal is difficult

Posted on by Posted in Issues regarding US persons abroad 10 Comments

cross-posted from citizenshipsolutions
by John Richardson

 
 
 
 
 
 
 
 
Wisdom of “Three Monkeys” explain why: Although there is little support for “citizenship-based taxation” repeal is difficult

 
 
 
 
 
 
 
 
 
 
 
 
 

The uniquely American practice of “imposing direct taxation on the citizen/residents of other nations” (“citizenship-based taxation”) has NO identifiable group of supporters (with the exception of a few academics who have never experienced it and do not understand it).

The Uniquely American practice of imposing direct taxation on the citizen/residents of other nations has large numbers of opponents (every person and/or entity affected by it). In addition to the submissions of Jackie Bugnion, “American Citizens Abroad“,
“Democrats Abroad“, Bernard Schneider there is significant opposition found in the submissions of a large number of individuals. It is highly probable that the submissions come from those who are attempting compliance with the U.S. tax system.

The “imposition of direct taxation” on the “citizen/residents of other nations” evolved from “citizenship-based taxation”. “Citizenship-based taxation” was originally conceived as a “punishment” for those who attempted to leave the United States and avoid the Civil War. I repeat, it’s origins are rooted in PUNISHMENT and PENALTY and not as sound tax policy.

In 1924, the U.S. Supreme Court in Cook v. Tait upheld the U.S. practice of “citizenship-based taxation”. This means only that (assuming the validity of the decision almost 100 years later), the U.S. has the right to impose “punishment and penalty” (Justice McKenna actually said that “government by its very nature benefits its citizens”) in the form of “citizenship-based taxation”. This does NOT mean it’s a good idea to do so. Cook v. Tait should be considered in terms of (1) the evolution of citizenship and (2) the evolution of taxation.
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Form 8621 and Form 5471 are required even if the tax return is NOT!

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cross-posted from the citizenshipsolutions blog

IRS

The Internal Revenue Code of the United States requires two things:

1. The calculation of taxes; and

2. The reporting of information.

The Internal Revenue Code of the United States is based on three basic principles:

1. A dislike of all things “foreign”. (If you see the word “foreign” a penalty is sure to follow.)

2. A hatred of all forms of non-U.S. “tax deferral”

3. An attempt to stop the “leakage” of “U.S. taxable assets” from the U.S. tax base. (Examples include the U.S. tax treatment of the “alien spouse”and the U.S. S. 877A “Exit Tax” that may be payable when one makes the decision to renounce U.S. citizenship).

“Forms” AKA “information returns” are for the purpose of forcing disclosure of information relevant to “foreignness”, “deferral” and “leakage”.

The above tweet references an earlier post describing many of the “forms” required to be filed by Americans abroad. The post also describes the significant penalties which can be potentially imposed for failure to file the forms.

For Americans abroad the information reporting requirements are extensive, burdensome and penalty laden. Normally (but not in all cases) the “forms” are filed as part of the tax return (1040 or 1040NR).

NEVER FORGET MR. FBAR – THE NEW SYMBOL OF U.S. CITIZENSHIP – AND THE POTENTIAL FBAR PENALTIES FOR FAILURE TO FILE THE FBAR! THOSE WHO HAVE FAILED TO FILE MR. FBAR SHOULD BE CAUTIOUS ABOUT HOW THEY “FIX THE FBAR PROBLEM“.
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Reminder: Solving US Citizenship Problems Toronto Sat Nov 5, 2016

Posted on by Posted in Issues regarding US persons abroad 3 Comments

WHEN: Saturday – November 5, 2016 4:00 – 6:00 pm
WHERE: 100 St. Joseph St., Toronto ON M5S 2C4 MAP
ADMISSION:PLEASE REGISTER IN ADVANCE by email to nobledreamer16 at gmail dot com and kindly include your phone number, or phone 416-519-8172 ;
COST is $20 payable in cash at the door
WHO: John Richardson, B.A., LL.B., J.D. (Of the bars of Ontario, New York and Massachusetts), Toronto citizenship lawyer and Co-chair of the Alliance for the Defence of Canadian Sovereignty and the Alliance for the Defeat of Citizenship Taxation. citizenshipsolutions.ca

The “Exit Tax”: Dual US/Canada citizen from birth, no Canada citizenship today = no exemption to US “Exit Tax”

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cross posted from citizenshipsolutions.ca

The above tweet references a “guest post” written by Dominic Ferszt of Cape Town South Africa. The post demonstrates how the “dual citizen from birth” exemption to the S. 877A “Exit Tax” relies on the citizenship laws of other nations. In some cases those laws of other nations are arbitrary and unjust. If these laws were U.S. laws, they might violate the equal protection and/or due process guarantees found in the United States constitution. For example, Mr. Ferszt describes how the “dual citizenship exemption” to the “Ext Tax” is dependent on South African “Apartheid Laws”. He describes a situation where a “black” U.S. citizen from birth is denied the benefits of the dual citizen exemption to the Exit Tax, which are available to a “white” dual citizen from birth.
(During the “Apartheid Era” Blacks were not entitled to South African citizenship.)

So, what’s the S. 877A “Exit Tax” dual citizen exemption and how does it work?

The dual citizen exemption, which I have discussed in previous posts, is found in Internal Revenue Code S. 877A(g)(1)(B) and reads:

(B) Exceptions An individual shall not be treated as meeting the requirements of subparagraph (A) or (B) of section 877(a)(2) if—
(i) the individual—
(I) became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country, and
(II) has been a resident of the United States (as defined in section
7701(b)(1)(A)(ii)) for not more than 10 taxable years during the 15-taxable year period ending with the taxable year during which the expatriation date occurs, or

Entitlement to the “dual citizen exemption” depends entirely on the citizenship laws of other countries …


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Good News from the French Commission

Posted on by Posted in Issues regarding US persons abroad 41 Comments

Very good work being done by those at the Accidental Americans FB group. Fabien Lehagre posted this today.

Good Afternoon –

Please find below the links to the final report (original in French and a rough translation in English) from the French Ministry of Foreign Affairs of the French Commission on US Extraterritorial Overreach which includes FATCA (Foreign Account Tax Compliance Act) and the US practice of Citizenship Based Taxation and the adverse effects on French citizens who are Accidental Americans and French/American nationals which was published today. I have also added the link for the video presentation of the report (in French).

I have also attached a summary both in French and in English of the French Commission’s findings.

FINAL REPORT (FRENCH)

ROUGH ENGLISH TRANSLATION
INTRODUCTION 9

I. EXTRATERRITORIAL: EXTERNAL PERCEPTION OF “NO PROBLEM” THE AMERICAN PERSPECTIVE

A. EXTRATERRITORIALITY, VIEWPOINT QUESTION

B. DESIGN SOME OF THE ROLE OF LAW

C. CONFLICTS OF AGGRAVATED BY BLOCKING CURRENT POLITICAL SYSTEM

II. ISSUES OF CERTAIN EXTRATERRITORIALITY US LAWS

A. THE ECONOMIC AND FINANCIAL ISSUES

B. ISSUES POLITICAL AND DIPLOMATIC: THE DANGER OF COUNTER-PRODUCTIVE, INCLUDING THE AMERICAN PERSPECTIVE

III. ANALYSIS OF LEGAL EXTRATERRITORIAL LAWS OF US

A. GENERAL FOUNDATIONS OF LAWS TO REACH EXTRATERRITORIAL

B. PRACTICE: KEY “INPUTS” US LAWS OF EXTRATERRITORIAL

C. AMERICAN PRACTICES OF ACTION IS BASED ON UNCERTAIN CRITERIA, METHODS OF INTRUSIVE, OR ABUSIVE

IV. A POLITICAL AND LEGAL IN FRANCE AND EUROPE DO NOT POSING LIMITS extraterritoriality AMERICAN LAW

A. NO POLICY “CONVINCING” REPRESSION OF INTERNATIONAL CORRUPTION MAY LIMIT THE INTRUSION EXTRATERRITORIAL AMERICAN

B. RECOGNITION OF THE APPLICATION OF FRENCH FATCA TO ADVERSE SIDE EFFECTS: THE PROBLEM OF “AMERICAN INCIDENTAL»

C. THE EMBARGO AND INTERNATIONAL SANCTIONS APPLIED BUT MAINLY EUROPEAN AND SANCTIONED NATIONWIDE

V. RECOMMENDATIONS OF THE MISSION: WEAPONS EQUAL TO PLAY

A. DEMAND RECIPROCITY AND EQUAL TO ACQUIRE WEAPONS TO FORCE POLICY CO-

B. THE EMBARGO AND ECONOMIC SANCTIONS: STRENGTHENING OF EUROPEAN MEDIA AND CLARIFICATION REQUIRED WITH DIPLOMATIC THE UNITED STATES

C. THE NECESSARY TOOLS TO ACQUIRE THE MEANS TO BE “WEAPONS TO EQUAL”

D. ANOTHER TRACK COOPERATION: INTERNATIONAL NEGOTIATIONS IN PARTICULAR THAT OF THE TRANSATLANTIC PARTNERSHIP, THE OFFER THEY FORWARD OPPORTUNITIES?

CONCLUSION

SUMMARY OF PROPOSALS

CONTRIBUTION OF JACQUES MYARD

WORK OF THE COMMISSION

APPENDIX 1: LIST OF PERSONS INTERVIEWED BY THE MISSION

APPENDIX 2: LETTER UNAI

VIDEO PRESENTATION OF THE REPORT (FRENCH)

See also:

Accidental Americans FB group

The Reed Amendment – Another one to Throw on the Pile

Posted on by Posted in Issues regarding US persons abroad, Relinquishment, Renunciation 42 Comments

 
UPDATE:

Someone strongly disagreed with my conclusion (Reed cannot be applied) due to worry of dealing with border guards. However, if a border guard were to claim he/she was denying one entry based upon a perception of Reed, such an action would not constitute an application of the Reed Amendment but an inaccurate assessment by an overzealous/ignorant border guard. This reminds me of something I have heard John Richardson say many times; that there will be a solution to one’s compliance predicament but that it won’t likely be a “good” one or one to like. IOW there are no perfect (or necessarily likeable) solutions. If any US govt employee (or compliance or media person for that matter) misapplied the Reed Amendment, that does not constitute wrong conclusions or information in this post. And it certainly does not suggest I am “misleading.” The DHS has indicated Reed cannot be applied. The State Dept has said it can’t apply it. An IRS counsel could not draft regulations and says it cannot be applied. If one thinks a compliance person or a misguided govt official or a media person should be believed over all these, then what more can be said?

If one needs a “stock answer” to a border guard, the simple answer to “Did you renounce for tax purposes” is “No.” If one feels the need to say more something like “I’ve lived in/been a dual citizen for x-number of years and simply feel more CDN/French whatever.” Something as neutral as possible. A zealot would still see such a statement as treason. There are no perfect solutions. I really dislike adding this because the whole point of this post is to give expats the information to STOP that reaction of “but what if”..IOW, the fear factor. I am NOT writing this to diss any firm, govt agency etc (even though I will not hide my anger or disgust at how this is abused). However, I am responding to the criticism mentioned above. FWIW, I hope this helps.
 

See also:

Stop! Enough Already!! The Reed Amendment is a Myth!!!
Homeland Security Enforced Reed Amendment Twice in 14 Years Banished Two Ex-Citizens Who Mentioned Tax Motivations
Who Voted For the Reed Amendment in 1996
BiPartisan Attempts to Exile Former U.S. Citizens
No civilized country would ban Eduardo Saverin

 

no fear montering symbol

NO ONE has been stopped at the border and refused entry because a CBP agent suspected they renounced “for tax purposes.” There is NO CONNECTION between an expatriate’s tax liability and a renunciant’s intent. NONE!   Once again, I see a major firm bringing up the idea of the Reed Amendment as a possible consequence of expatriation.
 

Individuals who choose to renounce their US citizenship need to be aware of the potential negative consequences of doing so and take steps to avoid them. The negative consequences can include the imposition of the US exit tax[9], permanent inadmissibility from the United States, and the imposition of the inheritance tax.[10]

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Forms required by #Americansabroad 101 – The Explanation

Posted on by Posted in Issues regarding US persons abroad 21 Comments

reposted from Forms required by #Americansabroad 101 – The Explanation by John Richardson

The above tweet references a comment that I left on a medium.com post written by Rachel Heller titled “Why I renounced my US citizenship” (Hint: It’s not because I’m avoiding taxes!“.

The article was well written, interesting and attracted responses from Homeland Americans. (It was reproduced here and attracted even more comments.) The comments from U.S. residents demonstrated again that they do NOT understand the problems experienced by Americans abroad. Although Rachel DID mention the problem of “forms” as a contributing factor to her renunciation, at least one comment – ” indicated “disbelief” that “forms” could be a contributing factor to the renunciation of U.S. citizenship.

It is clear that this person, well intentioned as he/she may be simply does NOT understand what forms mean in the lives of Americans abroad. It’s as though he/she thinks that filling out a form is akin to completing a customer satisfaction survey.
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The Internal Revenue Code does NOT explicitly define “citizenship” or require “citizenship-based taxation”

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reposted from citizenshipsolutions dot ca
 
UPDATED July 6 afternoon. Some text additions and I have clarified that the author of this post is John Richardson, B.A., LL.B., J.D. (Of the bars of Ontario, New York and Massachusetts), Toronto citizenship lawyer and Co-chair of the Alliance for the Defence of Canadian Sovereignty and the Alliance for the Defeat of Citizenship Taxation.
 

It is widely understood that the United States Internal Revenue Code requires that “U.S. citizens” are subject to U.S. taxation wherever they may live in the world. Although this is true, Subtitle A (Income Taxes) of the Internal Revenue Code:

  1. Does NOT explicitly say that U.S. citizens are subject to
    U.S. taxation on their world income wherever they reside;
    and
  2. Does NOT explicitly define the term “citizen” or “U.S.
    citizen”. (This contrasts with the the terms: “U.S. Person”,
    “Permanent Resident”, “Substantial presence”, etc. that ARE
    explicitly defined in the Internal Revenue Code here and
    here. This means that the starting point for
    the definition of “U.S. citizen” is in the 14th Amendment of the
    Constitution and the United States Immigration and Nationality
    Act.

(Interestingly it appears that only the “Estate Tax” provisions in Subtitle B of the Internal Revenue Code (Internal Revenue Code S. 2001) specifically impose tax liability on the “taxable estate of every decedent who is a citizen or resident of the United States”.)

Some thoughts on each of these points …
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