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.
THis could be called the “Boris Johnson Proposal”.
All it does is remove the exit tax. And it would have to be legislation going back against the exit tax law.
It’s only in there to appease a few governments that are making their IGAs into domestic law today—countries that want to believe what the administration is feeding them.
And a lame attempt to possibly weaken lawsuits.
What—is Obama going to fight for this proposal with Congress and it’s going to sail through like a greased pig?
@Samuel Adams
Not only are some Brockers asking for a “thumbs up” on the proposal, but for those of us who are excluded to actually advocate for them and to actively protest any efforts on the part of those who’d oppose it (like RO) even if opposing these efforts may detrimental to us in the long run, such as possibly having the effect of undermining the effort to repeal CBT.
I guess the glaring question here is: Does the implementation of this proposal help or hinder the long term goal of ridding ourselves of CBT? If it hinders this goal, then I can’t support it.
Women and children must go down with the ship!
1.) Where is the second life boat? Did Obama propose one?
2.) If the ship has enough people to keep up with bailing the incoming water and perhaps stay afloat long enough for everyone to make it to land, should some agree to stay on the ship while the others try to stretch the size of a single lifeboat so they alone can escape?
3.) What if those not offered a lifeboat have been contributing to the lawsuit that has prompted Obama to propose sparing some but not all?
4.) Is it morally just for some to abandon the ship the first chance they get while knowing that those left behind have been rowing and bailing out water since the beginning?
These are the times that try men’s souls.
This needs to be supported legislatively.
Why?
1. The republicans and others might actually improve on it helping more people.
2. Once its on the books, it is far easier to make teeny tiny amendments to an existing law under the cover of night which have far reaching implications. Few would object to something as small as removing a comma, deleting one word or adding word, on a voice vote late in the term of a session congress before a holiday.
“Does the implementation of this proposal help or hinder the long term goal of ridding ourselves of CBT? If it hinders this goal, then I can’t support it.”
That sums up my feelings as well. My loyalty is to every single person on this planet who is getting fucked by CBT, FATCA and FBAR. Not just to a few who ask me to support only sparing them to the detriment of everyone else.
@George
Your logic is wrong. The time to bend the metal is while it is hot.
@WhiteKat
Just to be clear, my vote is NO to anything less than saving everyone!
@Mark Twain said:
All it does is remove the exit tax
NO!
The DA blog made this same mistake.
Dual-born-citizens are already exempt from the exit tax as long as they certify tax filing compliance. The proposal changes their 5-year tax filing obligation from world-wide income to US-sourcred income, nothing more. This is not a get-out-of-jail-free card.
@Samuel Adams,
1) I thought you understood we were debating Stephen Kish’s ‘Save the Children’ proposal, not the Obama proposal. The second rescue boat is actually a small fleet of ships, including the FATCA lawsuit here in Canada that has already been launched, as well as the hopefully soon to be launched Bopp case in the USA, and no doubt there will be more to come.
2) I’m not getting your point here, but would suggest that if the women and children get off first, the boat will be lighter, and the men won’t have to work so hard at bailing. 🙂
3) Again, we are debating Mr. Kish’s ‘Save the Children’ proposal, not the Obama proposal. The ‘Save the Children’ proposal does not negate the Canadian lawsuit. Lots of the donors have already escaped, yet continue to donate. Anger is one hell of a motivating factor for donating, which does not easily dissipate even when one is no longer a victim.
4) No, of course it is not morally just for some to abandon the ship the first chance they get while knowing that those left behind have been rowing and bailing out water since the beginning.
However, this is not the scenario we are describing with the ‘Save the Children’ proposal which is not mutually exclusive from the lawsuit against the FATCA IGA in Canada, nor the fight against FATCA in the USA (Bopp lawsuit), nor the fight against CBT in general. The first rescue boat is not the only boat. The escapees are not abandoning their friends.
Yes, these are times that try men’s souls.
Unless we know whether the proposal (if successful) helps or hinders a change to CBT, we won’t know whether saving a few will be to the detriment of everyone else. Is there any way of predicting that unless it’s implemented?
@WhiteKat
Sometimes one has to be cruel to be kind (tough love).
My vote is NO!
I would like some clarification. Many have stated here that “our” goal is to get rid of CBT. But that is not the goal of the lawsuit, is it? Isn’t the lawsuit about that fact that the implementation of FATCA in Canada through the IGA is a forfeiture of Canadian sovereignty and infringes against our Canadian Charter of Rights and Freedoms?
Ultimately, getting rid of CBT would be great. But even that would not solve all the problems we’ve discussed on this forum. US citizens should not have to pay a $2350 USD fee to renounce. FBARs would still exist and as a US citizen living outside the US, your local accounts would be treated as an offshore account and would you would likely have to file or face crazy penalties. Mentally challenged individuals still cannot renounce. Americans abroad still have no real representation in Congress.
So there are many things that we agree are wrong and should be fixed. I don’t see how supporting either a modified or the orginal proposal would change that. Some accidental Americans would be off the hook for the tax implications. OK. They still have to deal with FATCA and pay the $2350 (+ time off work, travel and misc. costs). Accidental Americans are only a small piece of this whole crazy puzzle. And it’s not a piece that would end the rest of the fight.
What do you think will happen if we win the lawsuit? CBT is still around. All the other issues are still around except FATCA in Canada. And there will be a new issue for the banks.
If Obama had proposed no FBAR filing for those not resident in the US, would we have an objection to supporting that because it wasn’t everything we wanted fixed? If he had proposed that the renunciation fee was eliminated, would we object to that? If a parent of a mentally challenged individual could renounce for their child, would we object to that?
Changing CBT to RBT is not the be all and end all. It may be a big piece, but it’s not the whole puzzle. And this proposal and the Save the Children version are not the be all and end all either.
I’ve relinquished prior to Feb 1995, but I’m still here and still donating. I see no problem in supporting either proposal, but stating that it is ONLY A SMALL START in correcting the issues around CBT, FATCA and the treatment of Americans living outside the US.
In fact, if getting rid of CBT is our all or nothing goal, why are we even bothering with the lawsuit?
You’re right, Kathy. Canada’s government, whatever party, has no say in whether or not the US has CBT. The challenge we are supporting with our donations here in Canada is against the Canadian government for having made *US-defined US Citizens / Persons* in Canada second-class to any others, no matter their national origin or the national origin of their parents / grandparents. It for for ALL Canadians as it allows US (or any other countries’ law by precedent) to override Canadian laws and the Canadian Charter of Rights and Freedoms. A law suit in any country outside the US will not affect whether or not the US retains its citizenship-based taxation law. US tax law is US business and up to any US law suit to help implement change.
Hopefully our Canadian lawsuit would have the affect of making the US more clearly see why US CBT for *US-defined US Citizens / Persons Abroad* is just plain bad and immoral law for those who ever want to leave the US, permanently or not, to live and work in other countries. Not only for us, but in the long run for every America in the *homeland*. US lawmakers continue to look through their own short-sighted and exceptional very smoky lens right now.
Were this proposal in any form successful, would it help in dismantling CBT piece by piece, or is its real success in making fewer people US citizens? Renouncing US citizenship does the same thing, but should the Obama administration be encouraging that too? Lots of people are accidental Canadians, but you don’t see them scurrying to renounce Canadian citizenship (for obvious reasons that Canada doesn’t exercise CBT). This proposal is anti-American at its heart, and if you value US citizenship, you may not choose to support it. If you don’t value US citizenship, as obviously anyone who’d take advantage of the proposal wouldn’t, then hope others who can support it for you will.
@calgary411
OK, that’s what I thought. Outside the US all we can do is shine the light on the stupidity and unfairness of CBT and support whatever movements there may be within the US to get rid of it. Those who can vote in US elections from abroad I suppose have some “say”, but we all realize that votes from abroad have little weight.
Here in Canada, I want to stop my government from bowing to the extortion that is FATCA and from denying Canadian citizens their Charter Rights and Freedoms. And I will continue to shine any light I can on the unfairness of US CBT and the restrictions the US has placed on its citizens’ right to expatriate freely.
@Bubblebustin
Again, is dismantling CBT goal here?
And I’m not sure how anti-American the proposal is. I would think that most accidental Americans are just that – accidentally American. They don’t identify as American, but through no fault of their own are caught in a trap. I think the proposal is eliminating a unfair burden, not encouraging renunciation.
IMO, the renunciation fee and the burden of the steps of renouncing are anti-American. The War of 1812 was fought in part because of expatriation issues with Britain. This proposal is freeing some of the burdens the US has put on its citizens’ expatriation rights. As far as I’m concerned, they shouldn’t have to travel to a consulate and pay a fee either.
As for accidental Canadians, you’re right you don’t see many rushing to rid themselves, but that’s not all due to CBT. Before FATCA, not many Americans were rushing to renounce either. If there wasn’t any FATCA or CBT and it was simple to renounce, I would have happily given up my US citizenship as a dual. I would not want to be associated with that country in any way.
Wow, lots of metaphors flying around (I like that) but is it actually possible that someone down there (in Mordor) would even listen to suggestions about tweaking the Obama proposal? Did someone actually ask someone outside the Obamasphere to do this? If so, the tweaking is okay by me. Sometimes I think that as far as the Lords of Mordor are concerned we are just trees (Ents) falling in the forest. They know full well we are making crashing sounds but they don’t give a damn.
@ WhiteKat — We’ve known your real name for ages but it’s too long to type both. Can you still be simply WhiteKat, PLEASE?
@Kathy
FATCA is definitely adding to the renunciations, but I found out about CBT and FATCA at the same time, as a lot of Canadians did when the media stories came out about both in 2011.
Accidental Canadians are Canadian citizens through birth rite. Any one of these Canadians can decide at any time in their life to move to Canada in search of whatever it is they choose, and it would be within their rights to do so. I can’t imagine any circumstance where the Canadian government would say “sh!t, or get off the pot – and you have two years to do it, and expect to spend a large portion of that time waiting in line to do so” to any one group of citizens like the US is doing. In fact it would probably be unconstitutional to do so. The US would rather get rid of its citizens than admit it has a problem.
@Embee, I can be whoever you want. KP or WK works if that’s easier. 🙂
YES. If this proposal were to go through IT WOULD HELP the overall cause. It would be the first major breath through EVER in tax policy for Americans abroad. It would also be a small crack in the dam that would eventually break the dam open.
Lets not forget the fundraising for this court action is for eliminating FACTA. This other stuff (relief for accidentals) is something being done on the side with funds from an anonymous donor. So I am actually surprised Mr. Kish is asking for input on this regard as people’s donations are not involved. Mr. Kish, please go ahead and seek an expanded version of this proposal to include more accidentals. If we don’t push for this, we could lose out on a major opportunity to eventually end CBT.
Forgot to touch on something else. There seems to be a notion going around that if some people were to benefit from this proposal that they would all of a sudden leave this group, pull funding, and abandon those still fighting for relief from CBT. That is not the case at all. Are people aware that the people who run this site and are coordinating the court action with the lawyers are all people that have CLN’s or are tax compliant? These people are not in any way benefiting from all of this. Mr. Kish and others are doing this for us. So stop worrying that if we get a victory on one issue, that everyone else will be left behind. The people who started all of this for us are in it for the long haul and until the end. Just relax. I am surprised that some people don’t see how Obama’s proposal is such a major event. It is the first time any president has ever acknowledge there is a problem with how Americans abroad are treated. It is just the first step. If we can get expand this proposal to include more accidentals, get rid of the passport requirement, then we should. Then we work on getting more ground. This is something that needs to be chipped away at unfortunately.
@Phil, Here here!
@Phil
I wouldn’t count on “left behind donors” being very happy with settling for anything less than saving everyone. Obama’s proposal and Steven Kish’s tweaking do nothing for “saving my children.”
Perhaps I should have put my money into Bopp only, seeing as though Bopp is going after saving the whole lot.
Go ahead and pursue your carve out. Just remember you are carving out future ADSC donations as well.