Tax Lobby Builds Ties to Chairman of Finance Panel and nyti.ms/Y4BIpJ – #americansabroad need a lobbyist too! #FATCA #FBAR
— U.S. Citizen Abroad (@USCitizenAbroad) April 8, 2013
As this article in the New York Times demonstrates, U.S. democracy has become a “marketplace” where votes are bought and sold. In other words, the legislative agenda is driven by special interests and money.
The last major U.S. tax reform was in 1986. That was the year that the PFIC was introduced. It is likely that the PFIC legislation was largely driven by mutual fund lobbyists who wanted to keep “Homelanders” investing in the United States. Nobody could have seen (at least I hope) the severe, punitive consequences of the PFIC rules on U.S. citizens abroad and on their countries of residence.
The PFIC rules may well have been originally intended to prevent “Homelanders” from investing in foreign mutual funds. Their primary effect is now to punish U.S. citizens abroad and extract wealth (in the form of penalties) from their counties of residence.
During this era, the Chair of the Senate Finance Committee was Senator Bob Packwood of Oregon. What was the original intent of PFICs? Were they intended to apply to the mutual fund holdings of U.S. citizens abroad? I am sure the answer is NO they were not originally intended to punish U.S. citizens abroad. To this day there are no IRS regulations that specifically state that Canadian mutual funds are PFICs.
“However, you need to look further. In 1991, twenty-one years ago, the I.R.S. published proposed regulations on PFICs which have never been finalized. The proposed regulationsare not binding on taxpayers. They are considered a body of informed judgment but accorded no more weight than the I.R.S.’s litigation position. The proposed regulations are where the bulk of the rules related to PFICs are located.”
As a result of the 2010 IRS policy review, the IRS issued Chief Counsel Advice 201003013, stating Canadian mutual funds should be classified as corporations for U.S. tax purposes. Therefore, if an American citizen receives income from a PFIC or sells a Canadian mutualfund that is a PFIC, U.S. tax and interest penalties could apply.
http://www.advisor.ca/tax/tax-news/tax-planning-and-dual-citizenship-46794
Imagine that! The IRC does NOT specifically include Canadian mutual funds in the definition of PFICs. The IRS has NOT published regulations including Canadian mutual funds as PFICs. Yet because of a 2010 ruling by an IRS counsel, Canadian mutual funds have been retrospectively defined as PFICs.
(Those willing to invest the time, should read what shows up when “Bob Packwood PFICs” is searched. At at minimum you will see how Tax Reform hearings work.)
Another very sad case of “unintended consequences” from 1986
Suicide Note of Joseph A. Stack III Cited 1986 Tax Law: nyti.ms/110lblw – Remember this while tax reform is going on!
— U.S. Citizen Abroad (@USCitizenAbroad) April 11, 2013
NobleDreamer posted the story of Joe Stack. Eventually the frustration of dealing with U.S. tax laws drove him to suicide. He flew a plane into an IRS building in 2010. This was the result of a law passed for the benefit of a special interest group at the expense of the average American.
The New York Times reported that:
The law, known as Section 1706 of the 1986 Tax Reform Act, made it extremely difficult for information technology professionals to work as self-employed individuals, forcing most to become company employees.
Many software engineers and other such professionals say that the law denies them the opportunity to become wealthy entrepreneurs and that it makes it harder to increase and refine their skills, eventually diminishing their income.
Harvey J. Shulman, a Washington lawyer who represented companies that supported the desires of software engineers to be independent contractors, estimated that the law currently affects at least 100,000 such people.
“This law has ruined many people’s lives, hurt the technology industry, and discouraged the creation of small, independent businesses critical to a thriving domestic economy,” Mr. Shulman said in an interview Thursday. “That the law still exists — even after its original sponsors called for its repeal and unbiased studies proved it unfairly targeted a tax-compliant industry — shows just how dysfunctional and unresponsive Democratic and Republican Congresses and our political system have been, even on relatively simple issues.”
The law was sponsored by Senator Daniel Patrick Moynihan, Democrat of New York, as a favor to I.B.M., which wanted a $60 million tax break on its overseas business.
Under budget rules in effect at the time, any tax breaks had to be paid for with new revenues. By requiring software engineers to be employees, a Congressional report estimated, income and payroll taxes would rise by $60 million a year because employees had few opportunities to cheat on their taxes.
This reminds me very much of the PFIC rules!
Have a look Commissioner Shulman’s comments on Joe Stack and offshore tax evasion beginning a the 3 minute mark.
MaryLouise Serrato, of ACA is now living in DC doing exactly that. It is her full time mission. 🙂 Can’t afford to hire past aides to help, but she is working it hard.
That’s an incredible article about Baucus and his aides. How can anyone possibly take seriously the claims that those of us born and or living outside the US are the source of lost revenue when McDonald’s, other huge corporations, and those with deep pockets can hire an ex-Baucus aide of their very own.
And these people want to tax our Canadian born children just for having a US parent?
Our children, and those without means, and those without paid lobbyists and those without a vote or representation, or political voice in the US are doomed to be subjected to lifelong ‘unintended consequences’ – and further downloading of the US debt. In our cases the ‘offshoring’ and shifting of the US debt onto those outside the US – not only Canadian and other duals, greencard holders, some Canadian snowbirds, and other so-called ‘taxable persons’. As well as the enforcement costs to be borne by the taxpayers of every other country and financial institution in the world, as our governments and banks become agents of the IRS and US Treasury.
How can Stephen Harper justify signing a FATCA IGA in the face of articles like this one? They should just tell the US to get their own house in order before extorting funds from Canadian citizens and residents via FATCA and US extraterritorial taxation – and downloading and offshoring the US debt onto Canada and the rest of the globe.
Who’s to say that with all the stepped up lobbying around tax reform things won’t actually get worse?
@Bubblebustin, I share your fears.
It seems to me that America has shifted from being a free country with open opportunity and where individual rights were respected to a pyramid powered by big money interests. If I understand things correctly, corporations are legally considered people, even huge ones; this would mean that some of us are obviously more equal than others; the notion of us all being equal under the law is thus a lie.
The Internal Revenue Service is collecting a lot more than taxes this year–it’s also acquiring a huge volume of personal information on taxpayers’ digital activities, from eBay auctions to Facebook posts and, for the first time ever, credit card and e-payment transaction records, as it expands its search for tax cheats to places it’s never gone before.
The IRS, under heavy pressure to help Washington out of its budget quagmire by chasing down an estimated $300 billion in revenue lost to evasions and errors each year, will start using “robo-audits” of tax forms and third-party data the IRS hopes will help close this so-called “tax gap.” But the agency reveals little about how it will employ its vast, new network scanning powers.
Tax lawyers and watchdogs are concerned about the sweeping changes being implemented with little public discussion or clear guidelines, and Congressional staff sources say the IRS use of “big data” will be a key issue when the next IRS chief comes to the Senate for approval. Acting commissioner Steven T. Miller replaced Douglas Shulman last November.
http://finance.yahoo.com/news/irs-high-tech-tools-track-202006116.html
@monalisa1776 …… you are much too often in fear my dear ! Stay the course 🙂
Petros, how safe is our email address on IBS? IBS administrators have access to them and can contact us.
But how about people who would be analysing the pages?
I noticed the site is using Gravatar. Can someone easily get the email address from the gravatar?
A google search on an email address can sometimes easily reveal someone’s identity.
Darn, this thread made me even more paranoid. I wished I hadn’t used my first name, especially knowing that the IRS is reading, according to 30 years IRS vet. 🙂
Not sure how they can use data from “friendbook” as my MIL is calling it to see patterns of fraud…
On the other side, if they can match the visas and green card immigration database with bank transfers to/from the US, they can catch a lot of immigrants who don’t declare their foreign bank account but transfer money to/from their country of origin, and go after them with FBARs fines etc…
Interestingly enough, they don’t list that source of data in the article.
It might do well for those at the forefront of tax reform to brush up on the eight guiding principles of “good governance”, as set out here by UNESCAP, the United Nations Economic and Social Commission for Asia and the Pacific:
“Good governance has 8 major characteristics. It is participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable and inclusive and follows the rule of law. It assures that corruption is minimized, the views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision-making. It is also responsive to the present and future needs of society.”
Specifically: “There are several actors and as many view points in a given society. Good governance requires mediation of the different interests in society to reach a broad consensus in society on what is in the best interest of the whole community and how this can be achieved.”
http://www.unescap.org/pdd/prs/ProjectActivities/Ongoing/gg/governance.asp
@Chris, I can’t guarantee that the email addresses are secure. One can use a fake email address, but of course that means that the administration can’t contact you. As far as it depends on us, the Isaac Brock Society has always been very discrete. What a hacker or a determined government official can do or how far they would go to obtain information, is beyond my technical skill to answer. I assume that there is no true anonymity and that one should therefore use their own discretion at their own risk.
That said, I don’t think there is much that you or others really have to worry about. We are generally small fry in this whole issue, and the IRS would be wasting tax payers’ money if they allocated resources to tracking down the people who have made comments here.
@ Chris and monalisa … regarding IT technicals (hypothetically) I can assure you if you used your proper e/mail address and even part of your name here it is not very hard to find out your details 🙁
but I would seriously doubt that the “Service“ would be wasting any resources on minnows to track down the people who have made comments here. So sleep well tonight.
@badger, right now, I’m feeling so very non-American. I just read that many Americans are horrified that they might end up living in “walkable communities” and thus they are working hard to ban sustainable development:
Kansas Sustainable Development Ban Proposed By State Legislator
http://www.huffingtonpost.com/2013/04/09/kansas-sustainable-development_n_3045118.html
Thus, I fear that even an American abroad lobbyist for tax reform won’t make America any better for me!
@bubblebustin, in manufacturing, we have GMP or Good Manufacturing Practice. Yet, in German, this tends to be called “Grosse Menge Papier”, which translates to “a big amount of paper”. I fear that Good Governance is a similar oxymoron.
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