Liberty and justice for all United States persons abroad

The Isaac Brock Society

Proposed Legislation Would Allow Limited Penalty Relief For Americans Held Hostage Abroad

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It’s truly “The American Way”

Citizenship taxation is the defining feature of U.S. citizenship. U.S. citizens are subject to U.S. taxes, forms and penalties without regard to where they live in the world. The reason for being outside the country is irrelevant.

What if an American is incarcerated or otherwise held hostage abroad?

Equality demands that ALL Americans be treated the same. All Americans are required to comply. The story of Jack Swigert failing to file his tax return is amusing. But, this leads to an interesting question:

Q. What if a U.S. citizen is held hostage outside the United States or otherwise incarcerated and simply cannot file a tax return an/or pay his taxes?

A. The Internal Revenue Code absolutely requires that the individual be subject to interest and penalties for not filing. Yes, it’s true. It’s part of the beauty of citizenship taxation.

This important principle (reinforcing the equality of American citizenship) is explained in the following NPR article which includes:

 

When journalist Jason Rezaian returned to the U.S. in 2016 after being wrongfully imprisoned in Iran for 544 days, he got a surprise from the U.S. government.

“I got one of those bills from the IRS saying, you owe this much on this year, you owe this much on this year because of failure to pay on time — here’s the interest that’s accrued,” he told NPR.

The bill was for more than $6,000 — representing late penalties and interest on taxes he wasn’t able to file while imprisoned. Lawmakers on both sides of the aisle say it’s an unjust reality of U.S. law but a bill to fix the issue remains stalled in the House.

https://www.npr.org/2024/06/11/nx-s1-4964638/americans-detained-abroad-tax-penalties

Deleware Senator Chris Coons provided the initiative for legislation called the  “Stop Tax Penalties For Hostages Act”. The purpose of the Act was to ensure that Americans held hostage abroad would NOT be subject to interest and penalties on taxes owed while they held hostage. The following article is really interesting. For a synopsis of the legislation see Appendix A.

https://www.npr.org/2024/06/11/nx-s1-4964638/americans-detained-abroad-tax-penalties

It appears that Senator Coon’s “Stop Tax Penalties on American Hostages Act of 2025″ has become Title VIII of the 2026 “Taxpayer Assistance And Service Act”.

 

The Taxpayer Assistance And Service Act

On September 30, 2026 the Senate passed “The Taxpayer Assistance And Service Act” which includes a number of provisions to benefit U.S. taxpayers. (The legislation includes a section mandating the research of tax issues impacting Americans abroad.)

Notably the legislation includes Title VIII:

TITLE VIII—HOSTAGES

Sec. 801. Postponement of tax deadlines for hostages and individuals wrongfully detained abroad.

Sec. 802. Refund and abatement of penalties and fines paid by eligible individuals.

Title VIII appears on pages 154 – 162. Yes, it takes eight pages to describe the relief. You can see the full text of the legislation at the PDF below.

Click to access s5441thetaxpayerassistanceandserviceact.pdf

s5441thetaxpayerassistanceandserviceact

Conclusion

The proposed relief is (of course) narrow. Notably it does NOT and CANNOT include FBAR relief. (FBAR is in Title 31 and not Title 26.)

That said, Title VIII is proposing a movement towards a kinder and gentler “form” (pun intended) of citizenship taxation.

Who knows? If Congress can provide relief for hostages, perhaps it can provide relief for “some”  Americans abroad?

 

John Richardson

Appendix A – “Stop Tax Penalties on American Hostages Act Of 2025”

https://www.congress.gov/bill/119th-congress/senate-bill/655

A summary of the bill follows …

Introduced in Senate (02/20/2025)

Stop Tax Penalties on American Hostages Act of 2025

This bill extends certain federal tax deadlines for U.S. nationals who are unlawfully or wrongfully detained abroad or held hostage abroad and their spouses. The bill also allows for an abatement and refund of additional taxes, interest, and penalties assessed to such individuals for failing to meet a federal tax deadline during a period of detention.

Specifically, under the bill, the time period during which a U.S. national is unlawfully or wrongfully detained abroad or held hostage abroad is disregarded in determining certain federal tax deadlines, including deadlines for

  • filing a return for and paying federal income, estate, gift, employment, or excise taxes;
  • a tax credit or refund claim; and
  • the determination, assessment, and collection of additional taxes, interest, or penalties.

The bill requires the Department of State and the Department of Justice to annually provide the Internal Revenue Service (IRS) with lists to identify U.S. nationals who qualify for an extension.

The bill also requires the IRS to (1) abate and refund additional taxes, interest, and penalties assessed for any tax year ending during a period of detention for which an extension of a federal tax deadline is permitted; and (2) establish a program allowing U.S. nationals unlawfully or wrongfully detained abroad or taken hostage abroad (or their spouse or dependent) to claim a refund of additional taxes, interest, and penalties assessed for any tax year ending during a period of detention from 2021 to the bill’s enactment date

The Tyranny Of FORMPlexity – What FATCA And Food Stamp Administration Have In Common

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Prologue – Conditioning Food Stamp Eligibility On Compliance Conditions

Suggest listening to the following New York Times podcast which is based on the this  New York Times article about access to food stamps.

https://www.nytimes.com/2026/08/05/podcasts/the-daily/arizona-food-stamp-snap.html

 

What is striking is the interaction among sanctions imposed on the State as the administrator of the the program, eligibility for food stamps conditioned on meeting difficult compliance requirements and access to food stamps.

Although not focused on forms on compliance, this podcast makes it very clear that requirements must be defined in a way that makes it possible for individuals to comply.

The story is remarkably similar to implementation of FATCA and the impact on foreign banks and Americans abroad.

In both cases we have individuals needing a service from a third party when that third party can be sanctioned by the U.S. government for failing to meet standards of due diligence in providing that service. Americans abroad need bank accounts. Arizona residents need food stamps.

For those interested in more, read on …

Continue reading →

Reminding Of The Dangers Of Applying For A “Back Dated” CLN

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In January of 2025 Pacifica, wrote a post reporting my warnings about requesting a CLN based on a previous relinquishing act. (This is sometimes referred to as a “back dated” relinquishment.) This is a scenario where an individual (for example) requests a CLN based on previously naturalizing as a citizen of another. country, government employment, etc.

Pacifica’s post, based on my post at Citizenship Solutions, is here:

John Richardson’s Observations on Current Processing of Relinquishment-Based CLN Applications

We are now in September of 2026. I wanted to provide an update confirming that:

I see NO evidence that individuals are currently successful in obtaining a CLN based on a past relinquishing act. This change seems appears to have happened during 2022.

The law has not changed. What has changed is that the State Department appears to not process requests for a CLN based on past relinquishing acts.  In other words, these requests appear to land on a desk where nobody sits. This change in State Department procedure took place before the introduction of the DS-4079 which came into effect on November 1, 2024.

The DS-4079 – in use since November 1, 2024 – provides an option to treat a past relinquishing act as grounds for obtaining a CLN. The form provides some clues for what might meet the evidentiary standard to prove voluntariness and intention.

Yet, what appears to be happening, is that the State Department is accepting applications for a CLN based on a past relinquishing act, but not processing them. I actually know people who have been waiting close to three years for a response. Obviously, I can report only on my experience and those who I have assisted. Nevertheless, it’s clear that the path of least resistance (by far) is to simply renounce U.S. citizenship.

It’s also important to note that a CLN based on a past relinquishing act could help you (from a tax perspective) ONLY if the relinquishing act was documented as being prior to June 3, 2004. Note also, that a documented relinquishing act prior to June 3, 2004 would mean that you would not be eligible to use the 2019 “IRS Relief Procedures For Former Citizens” (which requires a relinquishing act after March 18, 2010).

In any case, this post is simply a friendly reminder, based on observations of what is really “going on in the trenches”, that a formal renunciation of U.S. citizenship is BY FAR the “path of least resistance”.

 

John Richardson

 

United States Court Of Appeals Confirms U.S. Citizens In Canada Subject To Double Taxation On Non-US Source Investment Income

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Introduction and context

I have written numerous posts about the double taxation and the Net Investment Income Tax on my citizenship solutions blog.

 

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On August 3, 2026 Petros wrote about how the U.S. taxation of the gains on the sale of a principal residence causes Americans abroad to do things that may be contrary to their interest. His post was about an American abroad wishing to avoid U.S. taxation on the sale of her principal residence.

An August 31, 2026 ruling from the United States Court of Appeals, has made the U.S. taxation of the gains on the sale of a principal residence even more problematic for U.S. citizens living in Canada and other countries of the world.

On August 31, 2026 the United States Court of Appeals, per Judge Stark, delivered the long anticipated rulings in the Bruyea (Canada) and the Christensen (France) rulings.

Mr. Bruyea and the Christensen’s are U.S. citizens living outside the United States. These decisions reflect an unusually vicious assault (even by U.S. standards) on the lives of U.S. citizens who are tax residents of another country.

Pure double taxation on Americans abroad with non-U.S. investments

Specifically the court ruled that the U.S. tax treaties with Canada and with France (and by extension other countries) do NOT prevent the United States from subjecting Americans abroad to double taxation. In these decisions the contest is double taxation on their “non-U.S. source” investment income. Double taxationis accomplished by denying U.S. citizens (wherever they may live) the opportunity to use tax paid in Canada, France (or any other country) as a “foreign tax credit” to offset the 3.8% Obamacare surtax on Net Investment Income (“NIIT”). Note that the “NIIT” is designed to fund Obamacare. In general, Americans abroad cannot participate in Obamacare.

To put it simply, Judge Stark’s ruling means that:

If a U.S. citizen generates “foreign” income subject to the 3.8% “Net Investment Income Tax”,

THEN the individual must pay a 3.8% tax to the United States PLUS any tax payable to the foreign country.

This can reasonably be viewed as a 3.8% tariff on investing on non-U.S. investments!

Continue reading →

U.S. double taxation costs a mother and her children their home: Testimonial at Tax Fairness for Americans Abroad

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The story of an Israeli with a US parent showed up on my Facebook timeline this morning. She moved to UK with her husband, and they put their house in his name due to bad advice to put the assets in the non-USA spouse’s name. I recall suggesting that was a bad idea over a decade ago, and here it is played out in a real life situation:

When we bought a home there (UK), we were advised that the safer course was to put it in his name alone. The reason was simple: if the house rose in value, the United States could tax me on that gain, as though our family home were the foreign investment portfolio of a multimillionaire rather than the modest house of a family living on one salary. So that is what we did. I signed away my name on my own home because of a tax law written six thousand kilometres away, for a country I had lived in for one year of my life.

A few years later my husband went through a severe midlife crisis. We divorced. He moved abroad, leaving me in England with our children. Because the house was in his name, I could do nothing to stop him from selling it. My children and I lost our home. I want you to hear this clearly: that upheaval was entirely avoidable. It happened because I was warned away from owning the place where my own children slept.

Read the whole story at Tax Fairness for Americans Abroad.

The IRS Has Ended The “Delinquent FBAR Submissions Program”

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Introduction and purpose

As important as this post is, it will be of interest to only a limited number of people.

 

The statement from Bloomberg that “IRS Retains Relief for Late FBAR Reports” is misleading. It makes it sound as they the removal of the “Delinquent FBAR Submission Procedures” doesn’t matter. It matters hugely! Many individuals must now rely on defending FBAR penalties on the basis of “reasonable cause” arguments. This is very difficult and very expensive.

Here is the Bloomberg article:

IRS Retains Relief for Late FBAR

About the “Delinquent FBAR Submission Procedures” progam

For many years the IRS has had informal programs that have allowed individuals with “foreign asset reporting and foreign income” issues to come into compliance in a “penalty free way”. The “Streamlined Program” and the “Relief Procedures For Former Citizens” programs are examples. Unsurprisingly, until June 30, 2026 the IRS also had an “Delinequent FBAR Submission Procedure” which (in limited but common circumstances) allowed individuals to file “delinquent” FBARs in a penalty free way.

The bottom line is this:

Effect July 1, 2026 the “Delinquent FBAR Submission Procedures” program was removed from the IRS site. This means that the IRS no longer has a program that comes with an advance offering of no penalty for late filed FBARs. This means that individuals no longer have assurance in advance that they will not be assessed FBAR penalties. Delinquent FBARs may or may not result in penalties (likely not). But, whether penalties can be assessed cannot be known in advance.

Does that matter? If so, how much? Are people likely to be assessed FBAR penalties?

For the moment I suspect that it doesn’t matter a great deal. It will likely be “business as usual” where FBARs can be filed without penalty. I am NOT “sounding a penalty alarm”. That said, the removal of the program has made it more difficult to understand how to approach the problem of “unfiled FBARs”.

What has happened is that:

  1. Late FBARs (unless they are filed under the “Streamlined Program”) will be treated under normal IRS procedures. This means that FBAR penalties may or may not be  levied.
  2. The world has reverted to what it was before the “Delinquent FBAR Submission” proecures.

The whole purpose of the “Delinquent FBAR Submission Procedures” was to provide an assurance that penalties would not be imposed provided that the conditions to use the procedures were satisfied.

Bottom line: It is unlikely that people will be penalized. But, the guarantee of a late “penalty free FBAR submission” is over.

 

For a more detailed discussion of the end of the “Delinquent FBAR Submission Procedures“:

IRS Ends “Delinquent FBAR Submission Procedures” Leaving No “Guaranteed Penalty Free Option”

In addition, here is a podcast I did with U.S. tax lawyer Virginia La Torre Jeker:

 

In Conclusion …

At a bare minimum, after July 1, 2026 one must be more thoughtful in terms of managing FBAR non-compliance.

John Richardson – Follow me on X.com/Expatriationlaw

 

 

 

 

 

 

The Saga Continues – What To Hold And What NOT To Hold In A TFSA Or ISA

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Purpose and summary

This post is motivated by another incredibly frustrating discussion I had with someone this morning. The problem is aggravated by the reliance on a financial planner selecting the composition of a TFSA portfolio aggravated by what (in my opinion) is unnecessary churning of the account.

While it is important that U.S. citizens in Canada DO have TFSAs, it is important that they keep track of the income earned in the TFSA. It is also important that they do NOT invest in mutual funds or ETFs inside the TFSA or ISA*. People should invest in individual stocks which pay dividends. I will now explain why.

Continue reading →

“Subject to the jurisdiction thereof”: SCOTUS Decision (6-3)

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“All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.” 14th Amendment

The SCOTUS decision places the onus of citizenship on the person born in the USA: It must meet two criteria: (1) Birth on USA soil; (2) being subject to the jurisdiction of USA at the time of birth. The decision maintains that only two groups of persons born in the USA would have been excluded at the passing of the 14th Amendment: children of foreign nationals with diplomatic immunity and Indians (who were only made citizens in 1924). Everyone else born in the USA is a citizen because they are subject to the jurisdiction of the USA because the birth happened within the territorial control (jurisdiction) of the USA. The immigration status of the parents is irrelevant.

The anti-immigration zealots would like to strip a lot of people of their USA citizenship only because their parents did not have legal status when they were born in the USA. This would lead to extreme injustice in many cases. The zealots mischaracterize the decision, typically as follows: “SCOTUS just ruled that a foreigner can invade our country 9 months pregnant and pop out a child that is an American citizen. This might be the worst modern ruling from SCOTUS.” Others are lamenting that such people are taking advantage of the welfare state, and that may be true in part. But that is problem with the welfare state that needs to be fixed–and should not be confused with citizenship rights.

On January 20, 2025, President Trump issued Executive Order No. 14160, titled Protecting the Meaning and Value of American Citizenship. The Order provides that children born in the United States of parents who are unlawfully or temporarily present here are not “subject to the jurisdiction” of the United States—and thus do not qualify for citizenship under the Fourteenth Amendment or the Immigration and Nationality Act (INA), which uses the same language.

Given what Trump was trying to do, I think the USA dodged a bullet with this SCOTUS decision. If you thought Minneapolis was bad, and I did, then the chaos that would take place when ICE implemented Executive Order No. 14160 could have led to war. Because they were NOT aiming only at 9 month pregnant women who cross the border and have so-called “anchor babies”, they were aiming at anyone whose parents weren’t citizens when they were born in the USA.

The SCOTUS decision means this: A person whose parents immigration status was undocumented can be born in the USA, grow up there, serve in the military, be honorably discharged, start a business, employ hundreds of Americans, and that that person shouldn’t have to worry about ICE arresting, detaining and deporting him or her because of Trump’s executive order. Furthermore, how many generations back would Trump and ICE go? If my parents weren’t citizens when I was born, then is it possible that my grandchildren wouldn’t be citizens either. Like Trump, in the late 19th century, the USA government wanted to exclude some people’s children born (namely those of chinese ethnicity), but that attempt was also rightly overturned by United States v. Wong Kim Ark. So Trump’s executive order is deja vu.

The history of the USA is replete with examples of the USA denying citizenship to people who want it and have a right to it, and forcing citizenship on people who don’t want it. An example is a Canadian border baby whose only connexion to the USA was a hospital on the south side of the Canadian border where he was born. He went back to Canada, was somehow drafted by the USA during the Viet Nam period, but was already a member of the Canadian military–he had to get his draft-dodger status in the USA sorted out when he was involved in joint USA/Canada military operations–so he told me. Many people here north of the USA are dismayed because the IRS wants us to report our income and our private bank accounts. Now, they force our banks through FATCA rules to disclose this information to the IRS. I’ve not heard Trump say, “We want to free the tax slaves in Canada of their ‘birthright’ tax obligations to the IRS.” Nope. His interest and that of his supporters is to expulse some native-born citizens from the country who actually want to stay and work and pay their taxes there.

Institute for Justice takes FBAR Excessive Fines Case

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My excessive fines post of February 22, 2012, suggested that the IRS would not risk an excessive fines lawsuit against money legitimately gained:

It seems unlikely, if the money is legitimate, that the IRS would charge a penalty at all.  If taxes are owed, perhaps a small FBAR penalty.  But in case the penalty is confiscatory, the IRS is well aware that the Eighth Amendment protects the taxpayer.  … it is sufficient at this point to say that fines must be proportionate to the crime and to the damage done to the government, and if the tax code already applies fines and interest against unpaid taxes, it seems unlikely to me that the IRS would risk applying any FBAR fine to foreign accounts because the Supreme Court could possibly strike down the entire FBAR law as unconstitutional under the Eighth Amendment.

But I soon retracted that view because of the penalties the IRS was actually handing out. Now, 14 years later (!), the Institute for Justice has take up the case of US citizen and resident whose bank account in Switzerland contained money he had earned through legitimate consulting. The fine of US $437K seems excessive when the damage to the IRS on the undisclosed income was a mere $29K and there was already $12K late payment tacked on to that. There is no penalty for money laundering in this case. It is innocent money. However, it seems extremely unlikely to me now that the whole FBAR law would be struck down merely because the fine structure is excessive.

 

Help Needed: Time For The Canadian TFSA To Be Treated As A Pension Under The Canada U.S. Tax Treaty

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Introduction

Help Needed: Time For The Canadian TFSA To Be Treated As A Pension Under The Canada U.S. Tax TreatyIntroduction In my last post about the TFSA, I suggested that the time had come to pressure Canada's Competent Authority to engage with U.S. Treasury to agreement that Canadian TFSA should be…

— Isaac Brock Society (@isaacbrocksociety.bsky.social) 2026-06-11T00:56:15Z

 

In my last post about the TFSA, I suggested that  Canada’s Competent Authority should engage with U.S. Treasury to seek an agreement that the Canadian TFSA should be treated as a “pension” under Article XVIII of the Canada U.S. tax treaty.

Here is what the Canada/U.S. tax treaty says in Article XVIII:

(b) The term “pensions” also includes a Roth IRA, within the meaning of section 408A of the Internal Revenue Code, or a plan or arrangement created pursuant to legislation enacted by a Contracting State after September 21, 2007 that the competent authorities have agreed is similar thereto. Notwithstanding the provisions of the preceding sentence, from such time that contributions have been made to the Roth IRA or similar plan or arrangement, by or for the benefit of a resident of the other Contracting State (other than rollover contributions from a Roth IRA or similar plan or arrangement described in the previous sentence that is a pension within the meaning of this subparagraph), to the extent of accretions from such time, such Roth IRA or similar plan or arrangement shall cease to be considered a pension for purposes of the provisions of this Article.

The Canadian TFSA is a plan that is similar to the ROTH IRA and was created after September 21, 2007. This provides the factual predicate to make this request. Here is a link to the consolidation of the Canada U.S. Tax Treaty. See Article XVIII.

https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997-2007.html

 

What is needed

An application must be made to Canada’s “Competent Authority”. I will do the legal work.

Who is needed

U.S. citizens who are residents of Canada who have a Canadian TFSA and include the income earned inside the TFSA on their U.S. tax returns as taxable income. Bonus points for those who file a Form 3520 and From 3520A as well.

The type of stuff is never fun. It will likely take a long time. But it is part of the process of achieving a less unfair tax system for U.S. citizens living in Canada. Certainly the Government of Canada has an interest in its tax residents not being burdened by U.S. taxation of income earned inside a Canadian TFSA.

I see no danger to any person(s) who is willing to step up for the purpose of helping to get this change.

If you are willing to participate, please contact me at: TFSAfairness at citizenshipsolutions dot com.

 

John Richardson