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.
@WhatIAm, Thank you for attempting to explain #6 because I understood YOUR wording: quote: “For the people who qualify, tax filing as a non-resident alien means little or no tax filing is required (NONE if they have no US source income).”
The way they worded it, it sounds like a trap. They require “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”. Nonresident aliens with NO US connections have no US Federal tax obligations (duh!), so the word “compliance” makes no sense. The rest of us by US law are supposed to have filed with the IRS to show “compliance”: e.g. former green card holders, dual citizens, and their spouses, even if no taxes are owed. So it sounds like they still demand 5 years of filing, but you somehow get a tax break comparable to a “nonresident alien”. I guess what I’m saying is I’m confused on the point, how do they expect you to show 5 years of compliance?
Also, until the Americans enshrine it in law, I’m very concerned about Reed and his cohorts who have been trying to bar American-citizens-who-relinquish from entering the country. Also, although people with a CLN are getting in, I think it’s still on the books that anyone with US birthplace is supposed to enter the USA with an American passport, and we’re lucky if the border guards don’t enforce it.
Yes, American laws are very hypocritical for the reasons you say and the things they continue to do, treating Americans living outside their borders so poorly, and so much worse than naturalized Americans who reside there.
Jan,
Do you have a link that shows “anyone with US birthplace is supposed to enter the USA with an American passport” VS “US citizen is supposed to enter the USA with an American passport”? That is what I am *assuming* and why I consider my Certificate of Loss of (US) Nationality (CLN), my most important document.
Here is one reference, showing *US citizen* in their FAQs — http://london.usembassy.gov/cons_new/faqs/faq_citizenship.html.
It also pointed me to another page: http://london.usembassy.gov/cons_new/acs/passports/citizenship.html, where it discusses *Claiming US Citizenship* — my son doesn’t seem to have any of those required documents and I will, for now, leave it up to the US to prove that THEY have a CLAIM to my son’s citizenship.
(I, too, am trying to put my head around the passport to depart statement. Perhaps that US passport would be to get anyone, like Gwen or Ginny, born in the US to Canadian (or other country) parents their way to depart the US. Do we really think that is how any of such persons actually departed the US with their parents to live in their own country, with a US passport? Perhaps that is a requirement for such happening going forward? More absurdity?
MuzzledNoMore wrote:
“As I have said before on other threads, half-measures (and this is far less than half!) simply create more confusion and more unfairness. Witness the discussion on point #4! CBT must be 100% eradicated. Anything less is unacceptable.”
I couldn’t agree more. The only thing which will give me complete clarity and closure is RBT.
@Jan
You said “Nonresident aliens with NO US connections have no US Federal tax obligations”, but it should be “Nonresident aliens with no US _INCOME_ have no US Federal tax obligations”, so the reference to “compliance” does make sense.
You asked “how do they expect you to show 5 years of compliance?”. It’s simply s Yes/No checkbox on Form 8854, required after you give up US citizenship.
You said (and Calgary411 caught it already): “I think it’s still on the books that anyone with US birthplace is supposed to enter the USA with an American passport” but it’s “anyone with US _citizenship_”. Even if you were born there, once you renounce you are no longer a citizen and are no longer required (or even able) to have a US passport. You are as free to visit the US as anybody else. Yes, there is the threat of new revisions of the Reed amendment, but at least such ammendments would only apply to covered expats. Hopefully, the US will next recognize the existance of Accidental US Expats, etc, etc, leading them to eventually switch to RBT! “Anything less is unacceptable”.
Entering and exiting the US is not a right reserved for US citizens, but holding a US passport certainly is. This is why, I think, Point 6 of this provision seems to allow the definition of an Accidental American to include people who have held US passport for simply entering and exiting the US. Again, I think, one will be excluded if they have exercised other rights us US citizens such as entering a US embassy abroad with a US passport. They didn’t list it, but I’m surprised voting in US elections is not listed. These are activities of people who clearly embrace their US citizenship, took advantage of the benefits, and such activites by expats are the present-day justification for CBT by the US. Of course, we know that only a small percentage of US persons abroad benefit from USC and deserve to be taxed.
Is it just me or is anyone else surprised this proposal hasn’t appeared on any site like Republicans Overseas or Democrats Abroad facebook pages? This is a really HUGE announcement. It is historical. It is the first time the United States has ever admitted there is something wrong with forced American citizenship to accidentals and the tax repercussions that going with that. It is just a first step, and other Americans abroad need relief as well. I also realize this program may never see the light of day, but its a huge admission by the American government. Democrats Abroad has taken a beating lately for their pathetic stance on CBT and FACTA, I would think they would be all over this proposal as it shows some MINOR good will from the Obama administration.
Let’s assume that the duals-at birth proposal is “cleaned up” in a common sense way but that still, only a subgroup of victims (some duals-at-birth) will be helped.
Assume that the change could take place immediately (Obama, executive order or Treasury, “re-interpretation” of tax code). Is there consensus that this change which could provide relief to some should be opposed?
“Is there consensus that this change which could provide relief to some should be opposed?”
Nope.
@ Stephen Kish
How could we oppose something that is a positive, small step forward? I certainly would not oppose it but this in no way should shake our resolve to have the problems of CBT solved for everyone, not just a subset of everyone. They’ve shown they have at least given the problems a glance so now we have to keep pressing them to give the problems full and complete deliberation and when they do, provided they do it with open minds, they will have to conclude that RBT is the right solution.
I would not oppose something that provides relief to some and makes CBT look bad in any way.
Presently written, I would not qualify for this proposal (I was told to get a USA passport to enter USA). However, even if I don’t qualify, I would never oppose such a program. If some people can get out of this mess, I would fully support them.
If this program was changed and somehow I could qualify and get out of the American system, I would keep contributing to this cause until all are freed!
Apparently the lawsuit will continue unaffected by this ‘cleaned up’ proposal should it be effective immediately in this hypothetical situation we are discussing.
Why on earth would anyone be opposed to letting some victims go free now, when it does not affect the lawsuit?
@ Stephen Kish
I would not oppose it, for the reason several have already expressed so well.
I don’t think it should be opposed, it does need to be clarified, point 4 regarding passports is creating a lot of confusion and may narrow the group that would be covered for this “relief”. Point 3 could be a sticking point as well if the burden of proof is on those claiming “relief”, proving decades of living somewhere other than the US,somewhat like trying to get a SSN as an adult.
This should be considered a start, a door opening to negotiate even more relief to a wider group of people. We still need to get rid of CBT, it is the real source of all the problems.
@Phil, so would I continue to contribute to the ACDC lawsuit even if I did get a ‘get out of jail cheap’ card now. This isn’t just about me. This is about living in a free Canada and a free world. I don’t want my kids and grandchildren to be citizens of a country where the Charter of Rights and Freedoms means diddly-squat.
I believe the US could quite readily take the stance that this morsel thrown our way shows that they understand the problem and have addressed it. If they TRULY understood the problem they would convert to RBT. I think they are testing our resolve, let’s see how little they will settle for. You KNOW they will make a big deal out of this convoluted proposal and we will be left as ungrateful whiners unwilling to compromise. This is rubbish, CBT is simply wrong on every level and it must go period.
@Charl, No one is saying that CBT won’t continue to be fought.
The FATCA lawsuit is not affected by the implementation of the proposal. Stephen has already explained in an earlier comment on a different thread that Joe Arvay has assured him of this.
Further to strengthening our resolve to have the problems solved for everyone, while welcoming relief for a few like Ginny and Gwen, I would like Brockers who may not regularly visit the Maple Sandbox to read a recent comment by gailie:
http://maplesandbox.ca/2015/it-hurts-my-heart-on-renouncing-american-citizenship/comment-page-1/#comment-358962
When a family loses one of their own in a needless war they take comfort, albeit false comfort, that their loved one died for a “better” future for others. War never brings a better future for its victims on both sides. I think of our early OVDP victims like Just Me and how he and others will never be compensated for their lost LCUs and the depletion of their savings. They have moved on but they are wounded and if they could at least have the comfort of seeing the U.S.A. come to its senses by abolishing CBT thus giving a truly better future for others, then that in itself is good reason for all of us to continue to fight to make the U.S. do what’s right.
The United States used to be a country that prided itself in being number one in just about everything. All we hear about now is settling for second-best, including this latest underachieving idea of putting lipstick on the twin scourge of FATCA and CBT instead of outright eliminating it. I’m sick and tired of proponents of “incremental, achievable change”. Those people said the same thing about slavery and civil rights and why it would take generations more to make any inroads.
Make no mistake – the strategy here is classic divide and conquer since only a few lucky people might qualify for relief while others will be left out in the cold – again. Same approach that Democrats Abroad is taking – treating the symptom instead of the disease.
I absolutely would not agree with opposing a change like this one, which affects some but not all. Duals-at-birth who have never as adults exercised US citizenship (except in the sole case of getting a US passport after being bullied by a border guard on entering the US; I’ve never heard of anyone being bullied on that score on leaving the US), are IMO the most outrageously affected of all affected groups. To oppose a proposal (properly amended re the wording on the passport issue, already discussed extensively above now), because everyone else doesn’t qualify, would strike me as downright churlish. Not something I want to be part of. Not something I could ever defend.
@Stephen Kish: I am delighted to hear the Arvay believes that this proposal, enacted or not, does not affect the legitimacy of the lawsuit. The issue of the violation by our own government in Canada of Section 15 of the Charter doesn’t go away, even if the specific plaintiffs have a relatively painless ($2350 USD is painless???) way out.
Section 15 of the Charter says there shall be no discrimination on the basis of national origin, period. It doesn’t say it’s OK to discriminate if there is no “damage” done, or if the damage done is “minor” or “painless” or whatever, defined however. The Government of Canada crapped all over every US-origin Canadian by signing that IGA, and thereby crapped all over our Charter of Rights and Freedoms, and set a precedent for crapping all over EVERY naturalized Canadian and every dual-at-birth Canadian, no matter what their national origin or duality. That HAS to be addressed in court, and the Harper government has to be held to account for that. No matter what the US government does or doesn’t do about this proposal. What the US has done with FATCA is outrageous on any number of grounds, but what the Harper government did in signing the IGA and passing enabling legislation is equally but separately outrageous. As Canadians, we have no legal recourse against US actions, but we damn well have recourse against treasonous actions by our own excuse for a government.
As I’ve already explained at length over at Sandbox on a thread on this point, I am utterly disgusted that the Canadian Civil Liberties Association has remained publicly silent to date on the Section 15 issue. They’ve lost my 2015 membership renewal because of that failure. (And ADCS got an extra $75 donation from me, which is what that renewal would have cost me.) But that’s slightly off-thread, sorry.
Truck on, and everyone keep donating to the ACDS fund!
@calgary411:
I haven’t found where the U.S. birthplace was the defining factor, but that is what we’ve been told. An American birthplace marks you as a U.S. citizen until you have a CLN, like you have.
Here is where Canada tells “duals” to use an American passport.
http://canada.usembassy.gov/consular_services/dual-citizenship.html
See paragraph 3: “Most U.S. citizens, including dual nationals, must use a U.S. passport to enter the United States.” Notice this is up to date, with the current renunciation fee.
Here on the U.S. Passports page, it says: “By law, U.S. citizens, including dual nationals, must use a U.S. passport to enter and leave the United States.” http://travel.state.gov/content/passports/english/abroad/events-and-records/birth.html
Last, but not least, the FAQ page here: http://travel.state.gov/content/visas/english/general/frequently-asked-questions.html
Q. I have dual citizenship. Which passport should I use to travel to the United States?
A. All U.S. citizens, even dual citizens/nationals, must enter and depart the United States using his/her U.S. passport.
My DH and I’ve never had a problem with our Canadian-born kids using Canadian passports to cross the border, while we’ve used the American ones due to our American birthplaces.
@Deckard, You are correct of course; “the strategy here is classic divide and conquer since only a few lucky people might qualify for relief “, except that their strategy won’t work, because the fight carries on even if some lucky victims escape.
Also note, that to date, some lucky ‘US persons’ already HAVE ESCAPED quite easily; i.e. those that were able to claim past relinquishment. Many of these ex-victims continue to be anti-FATCA, anti-CBT fighters and supporters of ADCS despite having made it to the other side. Don’t underestimate the anger of ex-victims and their willingness to continue to fight for those still caught in the mess.
@ Jan
I have never had a problem either with using my Canadian passport with a US place of birth to enter the US. The last time I went was in 2013. I have traveled to the US infrequently over the years and since learning that the US claims me as a citizen, I will not enter the US again. The US place of birth is like waving a big red flag in their faces, I would think children carrying passports from another country different from their US parents would be another red flag. I would be concerned about going across the border these days, the border agents are becoming increasingly aware of the situation. The CLN will be important for those wishing to cross the border with a US birthplace and a non-US passport in the years to come.
Blackie wanted me to pass on that Obama’s product is quite inferior to what he offers.
https://bancdelasteroideb612.wordpress.com/2014/01/05/we-used-to-sell-us-citizenship-now-we-sell-non-citizenship-to-us-says-black-marketeer/
@Phil
I find it totally unsurprising that nothing about this is mentioned on RO’s and DA’s facebook pages. RO and DA are organizations for Americans who want to be Americans. This proposal is aimed solely at Americans who do not want to be Americans. So why would DA, or even RO, think it’s anything worth talking about. OK, RO might try to bring it up as a way to make Obama and the Dems look bad, but that would be the extent of it.
@Stephen Kish
I agree with others that the proposal should NOT be opposed. Doing so would make us little better than the USG which is perfectly fine in racking up collateral damage to achieve its tax goals. For the record the proposal makes no difference to my situation.
Why is it a question as to whether the proposal should be opposed? If I’m reading between the lines correctly, the proposal would weaken an aspect of the lawsuit, but because the lawsuit is multipronged it would not be fatal.