Not applicable to adult emigrants. No other proposals to simplify income taxes for individuals who don’t live in the United States. No help with the insane reporting requirements on foreign retirement & medical & disability savings plans. Some people may hope it’s a start from an administration which up until now has been totally deaf to the “special concerns and issues of Americans abroad” which the president claimed he would address when he was campaigning for our votes. Others will take it as what it appears to be at face value: a chance to get out while the getting is semi-good. At page 282 of the “Green Book” (all links added by me):
Individuals who became citizens of both the United States and another country at birth may have had minimal contact with the United States and may not learn until later in life that they are U.S. citizens. In addition, these individuals may be citizens of countries where dual citizenship is illegal. Many of these individuals would like to relinquish their U.S. citizenship in accordance with established State Department procedures, but doing so would require them to pay significant U.S. tax.
Under the proposal, an individual will not be subject to tax as a U.S. citizen and will not be a covered expatriate subject to the mark-to-market exit tax under section 877A if the individual:
1. became at birth a citizen of the United States and a citizen of another country,
2. at all times, up to and including the individual’s expatriation date, has been a citizen of a country other than the United States,
3. has not been a resident of the United States (as defined in section 7701(b)) since attaining age 18½,
4. has never held a U.S. passport or has held a U.S. passport for the sole purpose of departing from the United States in compliance with 22 CFR §53.1,
5. relinquishes his or her U.S. citizenship within two years after the later of January 1, 2016, or the date on which the individual learns that he or she is a U.S. citizen, and
6. certifies under penalty of perjury his or her compliance with all U.S. Federal tax obligations that would have applied during the five years preceding the year of expatriation if the individual had been a nonresident alien during that period.The proposal would be effective January 1, 2016.
This didn’t appear to be covered in the table of revenue estimates. Correction: As Tim points out, the revenue estimate is in the summary tables file on the White House/OMB website, rather than the Treasury website. They estimate it would cost $400 million over ten years, with more than half of that coming in the first three years as people scramble to take advantage of the offer.
Details of revenue estimates
| Deficit increases (+) or decreases (-) in millions of dollars | Totals | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Heading | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2016 – 2020 |
2016 – 2025 |
| Provide relief for certain accidental dual citizens | ……… | 60 | 103 | 55 | 23 | 24 | 25 | 26 | 28 | 29 | 30 | 265 | 403 |
I am quite interested to know the underlying number of relinquishers OMB used make these estimates (and for that matter, whether they have offset those estimates by the $2,350 fee that many accidentals are going to have to pay because they only qualify for renunciation and no other method of giving up citizenship). I assume that the estimates for ongoing deficit increases past 2018 are attributable to one-time losses of revenue from additional relinquishers,rather than ongoing loss of revenue from the initial group of relinquishers.
For example, they may be using the utterly false (and late again for this quarter) Federal Register relinquishment numbers and assuming that all of them would qualify for Obama’s plan. (That would also mean they’re assuming that no non-accidental Americans have ever given up citizenship because of the FATCA mess that Obama signed into law — clearly an incorrect assumption.) In that case they would be saying that in 2020 they’re expecting an average annual revenue loss of $8,000 per person, rising to $10,000 per person by 2025.
If OMB understands that only a small proportion of recent relinquishers qualify for Obama’s plan, then they’re trying to claim that the revenue loss per person would be much higher — which I don’t think is supportable. On the other hand, they may also understand that the actual number of relinquishers is higher and that only a small proportion of them will qualify for Obama’s plan. Though given the dubious earlier models of the effect of cancelling the FEIE, I get the sense that the government does not have this much of an in-depth understanding of emigrant tax issues.
Treatment of businesses owned by American emigrants
Another small mercy: the proposed 19% minimum tax on foreign earnings only applies to CFCs owned by “entities taxed as domestic C corporations” — finally, an implicit acknowledgement that some owners of CFCs are human emigrants rather than multinational corporations. Unfortunately the 14% tax on “previously untaxed” foreign earnings does not appear to include that same acknowledgement.
Will not affect ADCS lawsuit
Update, 6 February: Stephen Kish has already spoken with Mr. Arvay about the Obama budget proposal, and states:
Some you have expressed concern that should the Obama budget proposal, if ever enacted, provide some relief to duals-at-birth, like our two Plaintiffs Ginny and Gwen, this could mean trouble for our lawsuit — because both Plaintiffs are duals-at-birth. Apparently, Canada’s Mr. Roy Berg himself, a U.S tax compliance professional, is mentioned in an article (which I have not seen) which states that should the tax code on duals-at-birth change for the better, this might “spell the death-knell” to our Canadian lawsuit.
Please do not worry. The Arvay team has been quite aware of the issue of specific characteristics of plaintiffs from the very beginning.
Today Mr. Arvay also has confirmed with me, yet again, that our legal strategy is not limited to the specific characteristics of the two plaintiffs, that additional plaintiffs can be added to the lawsuit should this ever be necessary, and that our aim has always been to include affidavits from people who span a range of differing characteristics.
Pingback: The Isaac Brock Society | More analysis on the U.S. proposal to provide relief for certain Accidental Dual Citizens
Republicans Overseas says the Obama proposal “discriminates” against American expats.
“During a 45 minute call, Solomon Yue. Republicans Overseas Vice Chairman and CEO, questioned Jim Black, leader of Democrats Abroad (DA) FBAR/FATCA Task Force why he is not lobbying Obama for DA’s “Safe Harbor Exemption”. When Mr. Black’s party occupies the White House, Obama is the real leader of the party of FATCA, not DNC Chairman Debbie Wassermann Schultz.
Obama intends to provide “accidental Americans” FATCA relief. This has never been proposed or asked for by the DA and it discriminates against non-accidental American expats under the Constitution. Expats have already questioned if the DA FATCA Door Knock team on Capitol Hill next week is really just providing cover and more lip service since the DA can’t even get its parent organization – the DNC – to lobby Obama for it’s Safe Harbor Exemption proposal. Mr. Black was also informed that, without Obama’s support, the Safe Harbor Exemption will not go anywhere. Last October, when Sen. Mike Lee, Jim Bopp, and Solomon Yue attended the AARO’s FATCA breakfast event in Paris, we were told by another member of the DA FBAR/FATCA Task Force, Joe Smallhoover of France, that Democrat lawmakers will not support any FATCA repeal legislation for two reasons: 1) they do not want to vote against Obama and 2) they do not want to be seen as helping FAT CAT tax cheats by their Democrat grassroots.”
https://m.facebook.com/story.php?story_fbid=351628491687619&id=187406564776480&refid=17
More regarding Democrats Abroad and their not entirely true, misleading statements:
https://www.democratsabroad.org/group/fbarfatca/januaryfebruary-2015-update-february-fatca-dc-door-knock-additional-task-force – a little, or a lot, deceiving statement…
Do they really believe this?
Someone needs to send: http://hodgen.com/dual-citizen-exit-tax/ or something similar:
This applies to renunciate-to-be Boris Johnson as well. (I hope the good Ambassador he will consult with knows the correct information. And, hopefully, the US Ambassador to the UK will be more forthcoming with *US citizens abroad* in the UK than ex-US Ambassador to Canada David Jacobson and successor in Canada, which there is a lot about on Brock.)
Obama can’t think of better ways to fix the problems the US government has created for its citizens abroad than to reduce the number of citizens living abroad?
The more they try to make “carve outs” for certain non-residents such as the proposal for so-called “accidentals” (like everyone else chose from the womb to be born in America), the more confusing they are making the issue.
Soon people will be needing even another form to determine whether or not they are “accidentals.”
Its like they need a jackhammer to open up their brains to the fairness and simplicity of RBT.
The first step in solving a problem is to realize you have one. This proposal is the first real recognition by the administration I know of where there’s recognition of a problem. What they don’t realize yet is that can’t isolate it to a few accidentals.
RO is claiming the proposal discriminates against other expats.
“RO is claiming the proposal discriminates against other expats.” — It does!
Yes, I believe it does too. It’s also anti-American at its heart, in that it encourages Americans to renounce rather than deal with the source of the problem.
So easy to be fair to almost everyone (except the poor permanent residents of the US) — just change to RBT as for the rest of the world or the only reason to have CBT is a US cash cow. Band-aid, *safe* measures in half-assed proposals will never solve this properly.
@Bubblebustin
Yup, it puts the burden of solving a problem created by the US government squarely on the shoulders of the victims.
Come on Barry ole boy, how about an Emancipation Proclamation for non-resident Americans?
@Calgary411
Do you think we can read “without any advance warning” to mean that Democrats Abroad was left completely in the dark by the administration they claim to represent and be such an important voice for? By DA’s own admission, the Obama administration left DA out of one of the most critical proposals the US government has made in a long time concerning US expats. What does this tell you about DA’s relevance to even the Obama administration?
Rough roads ahead for Democrats Abroad as they’re torn between continuing to be a propaganda arm for the Obama administration and those they claim to represent.
The Obama administration (Dictatorship of the Proletariat) controls everything from the top down.
What Wasserman actually does as head of the DNC escapes me. From looking at her official Facebook page, she appears to be pretty disconnected from Team Obama.
As for DA, just have a look at their Facebook page, everything is fed from Washington. It looks like a one-way street to me – very different from RO’s decentralized approach.
I asked this question before in this thread, but I am still not sure that there is a consensus from you on this issue, so I will ask the question again:
Let’s assume that the Obama “duals-at birth” proposal, unlikely to be passed, is partly “cleaned up” in a somewhat common sense way but that still, only a subgroup of victims will be helped.
“Cleaned up” means for example changing one criterion along the lines of what @WhiteKat proposed (includes everyone who left U.S. before the age of 18.5 and who, before or since that age, acquired citizenship in another country) and removing some unreasonable criteria including not holding a U.S. passport, requirement to certify under “penalty or perjury”, relinquishment fee more than zero dollars, etc.).
Assume that the change could take place immediately (Obama executive order or Treasury, “re-interpretation” of tax code, whatever) but that there will be still be further aggressive efforts to save more victims.
Is there consensus that this change which could provide relief to some, but not all, should be OPPOSED because not everyone will be immediately saved (e.g., I left at age 21) and because the proposal “discriminates” against some “expats”?
This proposal should be opposed because not all will be helped and proposal does not go far enough?
@Stephen
I am curious what Bill Yates thinks of this proposal. I know he feels from the IRS perspective these rules are already very difficult to administer and my sense is this proposal will make them even more complex.
@Stephen Kish
I would not oppose it as originally written or as you have improved it.
Stephen,
I don’t think we (anyone defined by the US as a *US Person or Citizen*) can ever feel free of extra-territorial US government reaching into our lives and our finances until the US taxation law is residence-based.
My fear with this restrictive *proposal* would be that too many in the US would think great relief was given to those *expats*. Momentum and any dialogue could come to a screeching halt. Yes, we would have to continue to be very aggressive. I would not want to oppose this proposal entirely — to me it is a step in the right direction, but only a step with much more necessary. If I answer if I oppose this proposal as it now reads, yes — but it cannot be the end.
I can probably never let go of what I feel regarding *Accidental Americans*. If RBT is not possible (for whatever inane reasons) and since CBT entraps, no *Accidental American* should be caught up in this. They had no choice where or to whom they were born. With CBT, I believe they need, rather, the right to make a choice or a claim to US citizenship when they are deemed adult AND with requisite mental capacity, with full knowledge of all of the consequences as well as the rights that would give them. To me, with the consequences of CBT, it should be an OPT-IN to US citizenship, not an OPT-OUT as we have now — and it should be retroactive. Could that not make sense to any US lawmaker with any sense of morality?
Personally, if ADCS has a chance to implement/influence/encourage a broader form of this proposal (drop passport requirement, and extend to all those who left as children), but chooses NOT to support it, I would withdraw all support from ADCS.
I am coming a little late to the discussion but for completeness and future referance I would like to give the text of the Canadian Citizenship act of 1947 where it defines citizenship by decent.
The full text of the act can be found at http://www.pier21.ca/research/immigration-history/canadian-citizenship-act-1947
This act was replaced in 1977, I believe that the basic premise is the same.
The requirement that only the married father could pass on Citizenship was retroactively changes by later legislation and now either parent qualifies somebody for canadian citizenship.
I would not oppose it, with the above-mentioned changes, AND if it was made retroactive, AND the “later of” 2016/2 year bit was dropped. It doesn’t help me one bit in it’s current form, having renounced in 2013, AND having been told by State in 1992 that I was not a US citizen, with no CLN offered.
I’ll repeat what I said much earlier in this discussion thread. I don’t agree that any proposal that provides relief to any group of currently affected people should be opposed on the grounds that it doesn’t extend to everyone or to a broader range of people. I think folks should support such proposals BUT then continue to press aggressively for broader or other exemptions, or (if you think there’s a reasonable chance it would actually work) lobbying the US for RBT to replace CBT.
So FWIW no you do not have a consensus from me on opposing the proposals being discussed now, on the grounds they don’t go far enough.
However I’m not an American citizen, and I’m not lobbying anyone in the US government for anything because it’s not my government and I don’t recognize or accept in any way shape or form of jurisdiction by them on Canadian soil over me nor any other Canadian resident. No more than I’d be lobbying the Saudi government if they were trying to impose a ban on women drivers in Canada. My lobbying and other efforts are focused IN CANADA against my Canadian government.
And I repeat what I said earlier: IMO the effects of FATCA on duals-at-birth who have never lived in the US since childhood, or ever for that matter, are nastier and more unfair than the effects on most other categories of affected people. Which is why I can’t support opposing ameliorations to those folks because everyone else doesn’t benefit. You can support partial ameliorations and still demand more and hold out for more, I don’t see a problem with that.
And I remain convinced that the Charter challenge issues still stand, regardless of whether the exemption of some duals-at-birth goes through in the US or not. That doesn’t change the FACT that the IGA that Harper and crowd signed tramples all over Section 15 of our Charter. That has to be opposed in court, regardless of what happens with this proposal, IMO. Section 15 doesn’t permit second-class treatment on the basis of national origin, no matter how dual nationality was acquired and at what time. The wording of that clause is very clear, simple and clean. No discrimination on the basis of ethnic or national origin. Period. Harper doesn’t get that, and it’s time the courts and the citizenry shoved it down his miserable throat. And throw him and everyone in his caucus out of office in the next election.
I truly understand the complete travesty being inflicted on accidentals as one of my children falls into this category. It would be wonderful if she could be set free. Yet I remain conflicted. Is this divide and conquer? (We are already in conflict over this and it is just a proposal). Is it an opportunity to lessen our numbers thus decreasing our ability to fund raise and render our voice weaker? Of one thing I am certain, this is NOT about correcting a horrific injustice and benevolence on behalf of the Democrats, there are other motivators. I would have to question the justification for relief for some but not for all. What is it that makes a long term expat different from an accidental if CBT is based on a benefits rationale?
On paper an accidental American being taxed looks simply beyond ridiculous so by removing them they can both save face and simultaneously take some wind out of our sails.
In my particular family situation when asking my daughter how she felt about this her response was if I cannot get out along with her then she is still suffering. At the end of the day it does not help her one single bit to have her mother financially unstable.
The RO’s position seems to be “……it discriminates against non-accidental American expats under the Constitution”. Hopefully this counter position will back Obama into a corner. (Yes, I am dreaming!)
I agree with you, Schubert, the Canadian Charter challenge should still be front and centre in Canada, for all Canadians. Harper and the Conservative government don’t get it and we don’t have clear indication / policy from other parties how they will deal with this issue on whether they will allow discrimination by ethnic or national origin. That must go before the Canadian courts.
The RO’s position seems to be “……it discriminates against non-accidental American expats under the Constitution”.
IMHO this is a silly position for them to take. This proposal is targeted at Accidental Americans who relinquish their US citizenship. RO’s (and DA’s) are most likely “active” US citizens who renew and use US passports, and vote in US elections, and have no desire or intention of renouncing. The best they can claim here is that this proposal discriminates against US expats who do not renounce their US citizenship, which is ridiculous. This proposal has nothing to do with RO’s. The benefits of this propasal only apply to EX-citizens (after they relinquish USC) who have never claimed any of the citizenship benefits that RO’s have “enjoyed”.
What RO’s and all US expats deserve is a same-country exemption in FATCA and RBT. Of course, with these things in place not even Accidental Americans would have any need to give up US citizenship.
I would not oppose it. Why on earth would you? Especially if is fixed and quickly. There are a great many accidentals, worried sick, who would benefit. Don’t forget, even if the charter challenge succeeds, great uncertainty will abound for everyone and it will take years.
Don’t oppose something that offers help- even if to only a small subset.
Stephen Looking over the previous comments starting Feb 5, it sure seemed to me that there was a consensus.