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.
@Whitekat
My view is that the only way to win is by keeping an “all for one, one for all” position among ourselves. Anything less than that is a recipe for failure.
Stephen Kish first asked the question about the proposal as written, and nobody stepped forward to say they are against it. Then he asked the question again but with a hypothetical new and improved proposal to include more people. Why? What is he up to?
Stephen Kish can propose RBT for ALL on my behalf.
I cannot advocate proposing to help some, but sacrificing the rest.
Walter, I see the ‘save the children’ proposal as one step towards the desired final endgame (i.e. RBT), and taking advantage of a moment in time that will allow the more egregious cases, escape sooner rather than later.
Sometimes people confuse, ‘all for one and one for all’ with ‘if I can’t have it now nobody can’.
@WhiteKat
I see it as bullshit and just falling into Obama’s trap.
“Save the Children”, “Same Country Exemption” — all just PR gimmicks that will ultimately undermine the effort to bring an end to the tyrannical practices of CBT, FATCA and FBAR.
I say stick with the Republicans and don’t weaken their position, which is what the Obama proposal and any variation thereof does. That was the purpose behind Obama making the proposal in the first place — was it not?
As I wrote earlier, we should see what Jim Bopp comes up with. If he comes up with crap, then we need to re-think.
Is there any news from Bopp about timeline and plaintiffs? Will he file for an injunction?
Isn’t Bopp’s case likely to take years?
I read somewhere that the intent is to file for an injunction right away. They want to block FATCA reporting, so they say.
Obama is not only taking aim at undermining the ADSC lawsuit, but most likely the coming Bopp lawsuit as well. Hence his offer of a small olive branch before the real fight begins.
This proposal would discriminate against Accidentals born dual who are deemed to be legally incompetent – and thus will never be allowed to relinquish/renounce UScitizenshiptaxablepersonhood. They are among the most vulnerable, but will never be allowed to escape – and nor will their responsible parents/legal guardians be completely free until their wards/children are.
RBT or Bust!
@badger,
I keep posting the same thing over and over, and nobody has yet pointed out an error in my thinking. Here it is again…
This proposal is purely a tweak to _tax law_ admininstered by the IRS, and there is no hint of any change whatsoever to citizenship law administered by the DoS. The Points 1 to 6 mostly match issues in the IRS Form 8854, because this is a tax law change. The points also (lamely) try to define perople who have not benefited from their US citizenship, IE, a nod to Congress’s justification for CBT.
This proposal even says “relinquish their U.S. citizenship in accordance with established State Department procedures”, which clearly means renounce or relinquish and yes, of course, pay the $2350 DoS fee in the case of renunciation. That is the “established State Department procedure”. There is no suggestion of a change to the DoS procedure anywhere in the proposal.
People who are deemed incompetent cannot renounce/relinquish because of _citizenship law_ “in accordance with established State Department procedures”. This proposal only effects people’s IRS tax obligation _after_ they relinquish USC through the DoS.
If the DoS changed the citizenship law to allow a family/guardian to renounce for the legally incompetent, then this proposal, _as written_, would in fact cover the legally incompetent Accidental American as well as any other person who qualifies. How then can one possibly say this tax law discriminates against persons deemed incompetent to decide their own citizenship?
I’m just as sickened as everyone else that these pour souls cannot excape, but saying this tax law discriminates against them makes no sense to me.
Stephen Kish,
I think we already went through this last week. The majority of people SUPPORT an improved version of this proposal to help as many as possible. There are a few people who have been posting a lot against this, but when first mentioned last week I think the vast majority of us said YES GO AHEAD!!
There seems to be some new people to this website that don’t really know what has been going on here for a while. I currently wouldn’t qualify for this proposed program because of the passport condition. If that was changed and I could qualify for this program and I got out of this mess that would not change a thing. I would still support all of our efforts.
Even if I never qualify for this program, I would fully support those that do. We can’t think selfishly. If this program was enacted, that would not in any way mean our fight to repeal FACTA and move to RBT would be hindered. Some people seem to think “If it won’t work for me, I don’t want it to work for anyone”. That is selfish. This fight will take a while and we will have to go through many steps along the way. So once, again, there are a couple people making a lot of noise speaking out against this now. As others have already mentioned, the majority of people here support the amending of this proposal!!
Oppose. Support. Propose. Amend. Vote.
So weird to watch mostly pseudonymous Brocker statists simulate an incongruous congress.
Amidst cyberian aether, a vaporous constituency bombinates blank clouds of cartoon balloons.
@USXCanada, from now on I remain non-anonymous. I got nervy and did this once before WAY back when, but then freaked out and had Pacifica delete my comment. My name is Kathleen Power.
Badger, re: “This proposal would discriminate against Accidentals born dual who are deemed to be legally incompetent – and thus will never be allowed to relinquish/renounce UScitizenshiptaxablepersonhood. They are among the most vulnerable, but will never be allowed to escape – and nor will their responsible parents/legal guardians be completely free until their wards/children are.”
I assume you are referring to Stephen Kish’s ‘Save the children’ proposal which is much improved but not perfect. You are right that it excludes the group of children you describe, but is this ‘discrimination’ per say or does it mean that the fight is not finished, and there are more left to save?
Badger, the discrimination is CBT, not the proposal to help a significant number get out of the burning building now.
In a few short words, Obama floats the idea of a dodgy lifeboat for a few carefully selected people (just so happens to include the plaintiffs in the ADSC lawsuit) and some Brockers immediately start fighting among one another to add a few more seats for themselves.
Meanwhile, the die-hard lovers of CBT, FATCA and FBAR laugh their asses off.
I must admit I am torn on this one. In the situation of my wife and I, this proposal offers no relief. On the positive side, my children would be saved from the tyranny of the USA though, and on these grounds, my answer to Stephen Kish is….YES, I would be willing to proceed with making this one hole in the dyke.
Thinking out loud, and I’m sure like many others, I would be concerned that if a sizeable subset of this current group were to be suddenly freed from the tyranny of the USA, our support/funding base for the ADCS lawsuit would be lost, and I`m sure this would be true for some…not all (Eh WhiteKat?). Then my mind kicks into gear and says, whatever we lose will be minimal compared to the “troops” we will gain once other affected people discover how evil the Obama regime really is and that they’re caught in the cross hairs. The only problem left is the time frame in which this will happen, as we have tight deadlines for funding our suit, but then again, nothing is going to happen in congress before our last deadline……..ramble ramble…
Once again, long story shortened, YES, Stephen Kish, I would support the proposal you make, with a bittersweet feeling.
And….let’s not forget to learn from this blatant “divide and conquer” technique being used against us.
@Samuel Adams, the proposal we are debating here (not fighting about), despite the original title and intent of this post, is not the Obama proposal.
@PierreD
I’ve got skin in both games too.
My prevailing feeling is that the Obama administration is on the run here. Unfortunately, those who’d benefit from this proposal don’t make the rules and shouldn’t really have any say over how this proposal will be challenged because after all, they aren’t US citizens are they?
Consider how much those who’d benefit the most from this proposal need those who would not benefit from it to advocate on their behalf.
All for one, one for all.
I support the proposal – even if not amended to alter the ill thought out passport restrictions – and I also support WhiteKat’s statement that ‘some of the most ardent fighters in this battle have already escaped from the dark side, yet they are still working to help get the rest of us out as well’.
Even though I’m no longer a US person I can’t imagine my bitterness towards the US tax policy, it’s life control and the anguish it causes, ever diminishing. My donations are modest but I will continue to do what I can as long as I can to save anyone else from losing their right to live legally and freely in the country of their choice without the burden of US CBT. Maybe I’ll be proved wrong, but I believe every step taken is one more step to freedom for all.
@WhiteKat
“Brockers immediately start fighting among one another to add a few more seats for themselves.”
I understand what is being discussed here. Some Brockers are asking others to give a thumbs up to asking to save some (more than Obama proposed) while the rest continue to drown.
This is the moral equivalent of the Nazis getting ready to torch a bunch of Jews, but offering to spare only “accidental” Jews. So some Jews ask the others if they agree with the idea of proposing to the Nazis an expansion of the definition of “accidental” so more (but not all) Jews will be spared. Everyone left out will of course still get cooked.
@Samuel Adams,
If the ship we were on was sinking, yet we knew that two rescue boats had been dispatched one a fair bit later than the other, such that the first boat to arrive could only hold some of the victims, and the second boat could hold all of the victims, would you insist that we all wait for the second boat?