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.
@Bubblebustin
I guess we’re looking at it from two different angles. I don’t see it as “get out of here” I see it as “if you want to get out of here, we won’t apply this burden as it wasn’t really intended for you in the first place.” I will agree that the time frame is a bit limiting, but who are they to say when you first found out about being American?
I don’t see accidentals as US citizens and I don’t think they see themselves that way either and I think this is the US recognizing that fact. So, I don’t see this as the US trying to get rid of their citizens. Yes, they could be doing a lot more to help others caught in this trap – totally agree. The proposal isn’t pushing anyone out the door if they don’t want to go. It just makes it easier for some who do want to go.
@Samuel Adams
I don’t get it. The ADCS lawsuit has nothing to do with CBT. If that’s your goal, then I would say back Bopp. Did you not read the claims of the defendants?
I’m not sure what will happen if ADCS wins, but it won’t end CBT. Other countries may follow and FATCA may fall apart and it may get CBT discussed and eventually gets replaced by RBT, but who knows.
@Kathy, Actually, the Bopp lawsuit is against FATCA, not CBT, although as you elude, each battle won gets us closer to the final victory.
@Kathy
You win, I’m shifting fire over to Bopp.
FWIW: This website says this at the top: “Liberty and justice for all United States persons abroad.”
Perhaps you should change the logo, it seems to have gotten lost along the way.
Sam Adams,
Perhaps you should ask some questions and find out what’s going on before making comments. The law suit that is being pursued here on this website is to take down FACTA. At this time there is no action going after CBT anywhere in the world. There is an anonymous donor who has put their personal money up to seek relief for accidental Americans. They have hired a different lawyer who works out of the USA. Mr. Kish keeps in touch with them, but it has nothing to do with the FACTA court case that this site is funding.
The Bopp court case (if it ever gets filed) is also going after FACTA, not CBT. Our court case here is the only one in the world and it is going after FACTA. Some of us here have talked about raising funds for a CBT challenge after we meet our funding goal for the FACTA court case.
So don’t be confused with the separate legal front that is being fully funded by an anonymous donor to seek some relief for accidentals with the current Canadian FACTA lawsuit. There are two completely separate issues, with separate lawyers, and separate funding sources. None of the fund raising here on this site goes towards the lawyer working in the USA seeking relief for accidentals.
Some new people to this site really need to take some time and try and catch up on what has been going on here for a while. I really don’t like some of the negative comments made regarding how our VOLUNTEERS are handling things. Look at the people who are running this site. They are all successful people trying to balance their successful careers while devoting dozens of hours per week volunteering for us all. Up until very recently this site has been friendly, harmonious, and unified. Some new comers are really bringing a selfish and negative vibe here.
@Phil
To the best of my knowledge, the lawsuit in the US is not directly related to accidentals and is being funded by an anonymous donor. The ADCS lawsuit in Canada is crowd-source funded.
2014.09.08
Jim Butera, a Washington D.C. attorney with Jones Walker LLP, is retained by the Alliance for the Defence of Canadian Sovereigntyto explore legal options to reverse some practices of the United States government that harm non-resident U.S. citizens and persons.
Samuel Adams is a long-term commenter here at Brock and as far as I know, has been participating longer than you have.
I guess Obama’s ‘divide and conquer’ tactic is working. Sauve que peut!
Oh, and it’s FATCA, not FACTA.
@Kathy,
My assumptions about what RBT would look like differ from yours. I think it’s reasonble to think that a US person living outside of the US would not be reported by FATCA, and would not have to file any FBARs. FATCA and FBARs are to find tax cheats, but since non US-residents would no longer file US taxes, surely these programs would no longer apply to them?
However, FBARs and FATCA would not go away. US residents would still file FBARs for their foreign accounts. I could see the US holding on to their FATCA extortion and continuing to force FFIs world-wide to report on accounts held by US residents. How sick is this? TD bank now estimates their FATCA compliance cost at $100 million. That’s just one bank. Just to catch US tax cheats who live in the US?
I’ve never seen any knowledgeable article about what will happen in Canada if the lawsuit succeeds (but I haven’t searched, and I’ve donated twice anyway). My guess is that the US will be forced to stick with their extortion threat in order to head off a flood of other countries backing out too. Extortion is a win-win for the extorter, and a lose-lose for the extortee. I imagine that it would screw up our banking and financial systems royally (as intended by the US extortionists), but at least all the cost and problems would be shared by all Canadian citizens equally without any violation of our Charter Rights. Our government would be off the hook for the new problem since it wouldn’t be their fault; it would be the fault of dual-US-Canadian citizens who funded the lawsuit to overturn a decision by the elected government of Canada (me included, twice). Maybe the “significant delay” in the lawsuit is for our government to work out a new deal with the US so everyone can save face! Some people think that’s what this Obama proposal is; I’d hope for a much bigger deal. Hey, one can dream.
@Samuel Adams
Phil is correct. The Jim Bopp action is a US-based constitutional challenge to FATCA. It is narrowly focused on the constitutional violations of FATCA.
The Joe Arvay action in Canada is narrowly focused on the violation of the Canadian Charter and certain other Canadian laws and agreements by the unlawful Canadian FATCA IGA embedded in Omnibus Budget Bill C31. CBT is not on the table in Canada; Canada does not espouse CBT (except for the unlawful FATCA IGA that makes Canada a de facto enforcer for the CBT-based law of a foreign state).
All the funding raised by ADCS goes to pay Joe Arvay at Farris Law for the FATCA Canadian legal challenge. The Bopp US suit is being funded by entirely separate fundraising efforts organized by Republicans Overseas.
@Dr. Phil
“Some of us here have talked about raising funds for a CBT challenge after we meet our funding goal for the FACTA court case.” — And you won’t pursue a special carve out for that too?
“So don’t be confused with the separate legal front that is being fully funded by an anonymous donor to seek some relief for accidentals with the current Canadian FACTA lawsuit. There are two completely separate issues, with separate lawyers, and separate funding sources. None of the fund raising here on this site goes towards the lawyer working in the USA seeking relief for accidentals.” — So why is Stephen Kish and WhiteKat asking for everyone’s opinion here about negotiating a special CBT carve out for so-called “accidentals?” I’m an accidental too, only I don’t fit your criteria.
What makes you think I’m a newcomer? And since when has this site always been harmonious?
I’m in it for everyone, you’re in it for yourselves. Who’s being more selfish here?
Bubblebustin
“014.09.08
Jim Butera, a Washington D.C. attorney with Jones Walker LLP, is retained by the Alliance for the Defence of Canadian Sovereigntyto explore legal options to reverse some practices of the United States government that harm non-resident U.S. citizens and persons”.
Yes this is what I am referring to. The lawyer Butera is being funded by a single donor. This above action doesn’t use any funds from the ADCS FATCA court case in Canada. It doesn’t make any sense to pull your funding from the FATCA court case here in Canada because you don’t like what some individual is doing with their private money. Once again, the work of James Butera has nothing to do with any of our funds for the FATCA court case, that is privately funded.
How am I in it for myself? I don’t qualify for this program. I see the bigger picture and realize if this proposal passes it will speed up the demise of CBT. The negative posts started picking up after this proposal was announced because some people are thinking selfish. I don’t qualify for this proposal but I would do anything to help others get out of this mess because its good for them and its good for our cause in the long run.
@Bubblebustin, your wrote “To the best of my knowledge, the lawsuit in the US is not directly related to accidentals and is being funded by an anonymous donor. The ADCS lawsuit in Canada is crowd-source funded”
1) I never said the lawsuit in the US is related to accidentals.
2) It is not funded by an anonymous person, it too is crowd funded.
The anonymous donor has hired a Washington DC based lawyer to explore potential relief for accidental Americans. At this time, there is not court action related to this. The lawyer has only sent letters to different government departments. It is this issue that is creating all the fuss. This individual has decided on their own to open a second front against the US government. It is a completely separate endeavour then the FATCA fund raising effort for the FATCA law suit in Canada. Just because someone disagrees with an individual hiring a lawyer to work on their behalf, should not in any result in them pulling the donations for the Canadian FATCA suit. They are two separate entities.
@Phil
Hmm. Confusion could have been avoided if what you wrote above had prefaced the Q&A session seeking people’s approval for widening the already pursued carve-out.
In any event, I will shift my money over to Bopp.
You said I was wrong and that you were not a new comer to this site. The role of the DC lawyer Mr. Butera and what he is doing for the anonymous person, and the fact that it is completely separate from the Canadian FATCA law suit has been well publicized on this site for quite a while now.
@WhatAmI
Yes, it’s reasonable to assume that we would no longer have the same reporting obligations as resident US persons if the US was to go to RBT. I believe that those who still wanted to report as a resident could however.
That’s two Canadian banks now saying that FATCA is costing them $100M just to implement:
http://en.m.wikipedia.org/wiki/FATCA_agreement_between_Canada_and_the_United_States
Great post by Embee on another thread:
In case anyone is getting confused about which lawsuit, where and why, let’s do some ABCs.
A) Joseph Arvay challenges the Canadian gov’t to repeal its legislation to implement the FATCA IGA. Funding — ADCS donors. [ http://www.adcs-adsc.ca/ ] and [ http://isaacbrocksociety.ca/2015/02/17/adcs-adsc-litigation-updates-key-actions-milestones-and-timeline-estimates/ ]
B) James Butera challenges the U.S. gov’t to get immediate relief for “Accidental Americans” from both FATCA and the high renunciation fee. Funding — a single anonymous donor. [ https://adcsovereignty.files.wordpress.com/2014/10/adcs_prr_oct27_2014-efinal.pdf ]
C) Jim Bopp challenges the U.S. gov’t to get FATCA abolished. Funding — FATCA Legal Action donors. [ https://fatcalegalaction.com/ ]
A), B) and C) are steps towards what we hope will eventually be D) a challenge to the U.S. gov’t to abolish CBT and adopt RBT. (Sometimes you have to make some passes before you reach your ultimate goal.)
There is also the X) factor — the lawsuit being pursued by Florida and Texas banking associations. Their success would completely demolish the faux “reciprocity” meme which would then force those governments who were banking on the “rewards” of reciprocity to do a rethink about the IGAs they signed. [ see: http://isaacbrocksociety.ca/2015/02/15/florida-bankers-assoc-versus-treasury-department-deliberations-begin/ ]
@Phil
I was vaguely aware of the separate Butera lawsuit because it only comes up from time to time. And because I am not a Canadian “accidental” and don’t contribute to it, I don’t give it much attention.
As I wrote earlier, if the Q&A session had been prepped with the name “Butera,” the confusion could have been avoided. I guarantee you that I am not the only one who was confused.
In any case, I will shift my fire over to Bopp. That is NOT being selfish.
“I was vaguely aware of the separate Butera lawsuit because it only comes up from time to time. And because I am not a Canadian “accidental” and don’t contribute to it, I don’t give it much attention.”
There is no lawsuit. Mr. Butera has only sent a letter to the department of state seeking relief of the $2350 renunciation fee and will soon send another letter seeking further relief. There is no avenue for you to donate to this. ADCS is NOT seeking or collecting donations for this effort as it is fully funded by one anonymous individual.
@Phil
If the carve-out effort is only linked to privately funded Butera action, then why was a carve-out Q&A opinion / “save the children” poll asked on this public site which is doing the vast bulk of crowd funding for the ADSC lawsuit without drawing the attention to the issue being related to the “independent” Butera actions?
In case you didn’t notice, there are many deemed non-accidentals here who, after donating money for the good of all US “tainted” persons (in Canada anyway), felt like they were being pushed aside by those running for their own special lifeboats.
@Phil
After reading through your comments, you seem quite knowledgeable. You must be a tax lawyer.
@Samuel Adams
If you have supported the ADCS legal action in the past, I see no reason to stop now, just because of varied opinions about a proposal that may never become reality.
I satisfy all of the criteria of Obama’s proposal but that doesn’t change my basic feelings about supporting the ADCS. The Harper government has violated our Charter rights and must be held accountable. As a Canadian citizen living in Canada why should I have to worry about a bank or FI asking about where I was born? Just because the Harper government has stated that the “US has the sovereign right to tax its citizens” (and silently cares more about protecting the banks than its own citizens).
No Canadian citizen or resident who possesses some degree of US origin should be discriminated against in this manner. This is the crux of the legal action. If you believe in this worthy cause, please continue to support it. Of course any harm to FATCA worldwide resulting from a ADCS legal victory would also be most welcome.
@Mr. A
My moral support will remain with ADSC. However, I can see that the Obama “divide and conquer” tactic is in fact taking hold in Canada. We are all “accidentals” one way or another. Nobody asked to be born into US slavery.
I have been donating to both the ADSC and Bopp’s FATCA Legal Action.
But I do not live in Canada so I don’t have much dog in that particular fight anyway. Therefore, it makes more sense for me to shift my resources to where I believe they will be more in line with the particular interests of my own family, which is the Bopp lawsuit. I have already saved myself by renouncing. But I need to fight to save my family members, who do not fit into the proposed Canadian “accidental carve-out” lifeboat.
My contributions towards the Bopp lawsuit will benefit those who live in Canada as well as everyone else on the planet cursed with US “indicia.” So I am in no way abandoning any Canadians still caught in this mess.
I sincerely do hope that the “accidental carve-out” does not turn out to be a “Trojan Horse” for those getting into that lifeboat as well as those being left behind.
Sam Adams,
I am not affiliated with with those who run this site so I can’t speak for them. I did get a good laugh at your comment about me being a tax lawyer. Not even close. The issues related to Americans abroad matter a great deal to me so I have educated myself on as many of the topics as possible. I am still learning every day. I don’t follow your logic regarding ending your financial contributions to this law suit. It is the same law suit as the proposed Bopp law suit in the US with the exception that this one is actually filed and about to start making its way through the courts. We have been hearing about the Bopp law suit for several months now. If the Canadian law suit is successful, it has a chance to snow ball and end FATCA. However, you are obviously free to do whatever you wish with your money. Its too bad a misunderstanding of the various legal proceedings is the reason for you loss of financial support.