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 – If your husband was naturalized, he would have a Naturalization Certificate?
Calgary411 –
This is a proposal and, as pointed out by some, the odds for it being passed are slim.
Yes. The disproportionate and minute scrutiny being devoted to this entrail of go-nowhere boilerplate astounds.
Someone was / is listening.
This sentiment is a noose that frantic hope always hangs by till it ceases to breathe. Collateral damagees do well to assess the probablity that apparent bright spots usually coruscate with the fool’s gold of gotchas. It looks like half-assed patchworkers imagined a fast smother of a pesky legal challenge. Oooh — further ripping is already apparent? Then toss that purposeless paste-over scrap faster than dog’s breakfast.
@Stephen Arvay
My husband was born in Canada and obtained US citizenship through his father, but I must correct myself by saying that in 2011 he took the citizenship certificate he received at 19 to the US consulate to obtain his first ever US passport because we understood that a US passport was required to enter the US. He never voted, worked or exercised any of his rights or obligations as a US person until he filed US taxes in 2011. So not only were we railroaded into OVDI, but were railroaded into obtaining US passports too? Has this nation gone completely off the rails? It seems the more you try to do what’s right, the more you’ll end up doing things wrong!
@Eric
Virginia writes: “Obtaining another country’s citizenship later in life due to eligibility from a parent or other ancestor will not count.”
Are they saying that a dual citizenship from birth doesn’t exist when someone claims another birthright citizenship later in life? Do only registrations at birth count? If that’s the case, in all fairness Calgary411’s son should not be considered a US citizen either, as he’s never claimed it!
I also recall that tdott was not born a Canadian, but due to changes to Canada’s Citizenship Act he was able to claim US citizenship at birth through a Canadian parent. The documents he received from the Canadian government now state that he’s a Canadian citizen “at birth”, even though he only became eligible for that status later in life. How will they reconcile something like that?
This proposal creates more problems than it solves, except for maybe a few unicorns.
@usxcanada
You should come with a de-coder.
Has it occurred to you that someone may be listening because of the hard efforts made by many of the people who participate here? I think we should interpret any effort by the Obama administration to derail the ADCS lawsuit as a sign of success, don’t you?
There is a break in the wall!
Whatever else is wrong about this proposal (particularly the never-held-a-passport requirement when it has been made abundantly clear that if you are a US person, the law requires you to use a US passport to enter the US), at least it rests in some part on non-residency. So there is a non-residency requirement here, one in the “dual citizen at birth” exit tax exemption, and one in the 18 1/2 years exit tax exemption. Furthermore, here it seems that the people who qualify will only have to have paid US tax to the extent they would have been liable as non-resident aliens (despite their being citizens). The legislators are apparently taking tiny, tiny steps in a process of assessing how many contacts you have to have with the US to justify the US’s taxing you just because of your citizenship and, naturally enough, they are looking at residency as a relevant contact. The more often the lawmakers see that applying a particular tax law to non-residents is unfair, the closer we will be to getting what we want in the long-term, residence-based taxation. The lawsuit and anger about FATCA, the reciprocity issue, etc., can only help to raise awareness.
Thanks, WhiteKat! I do feel better today and I’m not envious. I just abhor half-way measures. This thing needs to be fixed at the root. And if the root offends it should be plucked out altogether (probably a poor paraphrase but it’ll do!). Why don’t they just do it?! CBT has to go, hook line and sinker. But …. I reveal my impatience. Perhaps this is, indeed, the beginning.
After writing all the following, I was tempted not to post it, but I think I have a couple of good points buried in all the crap. Also, I want to smooth ruffled weathers.
As Blaise Pascal famously said over 350 years ago, “I have made this letter longer than usual, because I lack the time to make it short”. I spent hours on this post and now I fear few will read it to the end. Of course, it may be all for naught if the proposal never passes as most people believe.
So, here goes…CLICK!
@WhiteKat,
Sincere apologies, nothing up my butt intended. I wrote the post while running back and forth to the kitchen where I had supper cooking on the stove and didn’t do my normal level of proof-reading. I know you’ve been here a very long time and I even said in the post that I know you know about the differences between renunciation/relinquishment. But for the life of me, I couldn’t see what you were seeing that I wasn’t seeing such that you raised the issue again. If your concern/interpretation is correct, then Point #5 could be every bit as stupid, unfair and restrictive as Point #6 is if #6 is indeed intended literally as written and not as in the law to which it defers (enter AND exit). Actually, I’m still not clear if your question is if Point #5 might exclude people who renounce, or whether it not it implies that the $2350 renunciation fee might apply or be waived, or both, so I’ll discuss both.
Therefore I think it’s worth continuing this discussion a bit more to see if we can converge on something or at least make the nuances clear for people to form their own opinions. I’ll summarize my thoughts to see if we can find a flaw or hole, but as I often do I’ll will include well-known details for the benefit of people who did in fact just show up last week (as I did when I composed that last post to you, which you took as offensive).
Another disclaimer that I have made before: I often write these posts very matter-of-factly, as if I know them to be true and as if I consider myself an expert or at least more expert than whomever the post is directed, that you should give up trying to sway _my_ opinion, that I’m dismissive or belittling of other’s opinions, etc. I see clearly that this post reads this way, but, please allow me, not at all. I write this way purposely because inserting dozens of pleasantries and disclaimers, etc for every difference of opinion and every contentious statement of an already long post makes it longer and harder to read and easier to mis-understand my point and the reasoning I use to get to my point. Mostly, I’m seeking not to change another Brocker’s opinion but to arrive at a conscious in a friendly and mutual manner as is my nature as a Canadian and nothing but a Canadian (the answer, of course, to the question “WhatAmI”). Yes, it doesn’t read like that but I’m just trying to make my point clearly as a means to and end. @WhiteKat, you posted to @Calgary411 that if she agrees with me, she doesn’t need any clarification of the proposal”. I fully realize that many of my posts deserve such a reaction but honestly, that’s not where I’m coming from. I absolutely agree that the proposal is not clear and needs clarification. At the moment, compared to some others, my interpretation is giving the draft the benefit of the doubt. That said, I am starting to fear that Point #4 really does exclude those who obtained a US passport to _enter_ the US. I post against that interpretation because it’s just so absolutely ridiculous as to be hard to believe (but they do have such a track record, that is clear!). I seem to be one of the few who think it could be a simply mistake in the wording. In fact, there may only be one other, which is the person who first posted that possibility (it wasn’t me – I originally saw the exclusion but the other post changed my mind). The fact that so many people believe the exclusion is attended is not lost on me.
We certainly need to push somehow for clarification and changes, if this is possible.
The rest is directed to everyone in general, inviting all who care to continue to help decipher the proposal. For the record, I’ll repeat that I was born dual in the US to Canadian parents, returned as a child, and never had a US passport. There is nothing in the existing wording or either extreme of interpretations that would exclude me. Rather than be happy for myself and ignore this thread I’ve spent the time on these posts and issues because it will truly break my heart if any of my fellow Brockers are excluded from this proposal unfairly.
I am loath to apply logic to anything to do with the IRS or US law in general and citizenship law in particular, because clearly it’s illogical to apply logic to these people and their laws. Even though applying logic is arguably often indistinguishable from simple wishful thinking, it’s all we have. Personally, once I latch on to, and am comfortable with, some interpretation made here that applies to me, it helps me sleep a little better at night.
Review for newcomers: As somebody has recently pointed out, we use “relinquish or renounce” as a sloppy shorthand reference to the 7 provisions of INA 349. For example, the sidebar link that says “Relinquish US Citizenship don’t renounce, if you can”. Technically, that is as non-sensible as saying “you can enter Spain by traveling or by flying”. “Flying” is just one of a list of transportation modes that make up “traveling” just like renunciation is only one of several potentially expatriating acts in INA 349. “Renunciation” is always clear and applies specifically to INA 349(a)(5). Our reference to “relinquishment” usually means any one of the other 7 potentially expatriating acts in INA 349. This division the the need for the shorthand is natural for us at IBS because renunciation is unique to our situation in that it costs $2350, is something that a person still considered a USC by the Department of State decides to do in the future, and comes with a tax filing obligation (when done in the future or after 2004). The remaining reasonable expatriating acts (we ignore #6 and #7: the rare renouncing while physically in the US and treason), which we lump into “relinquishing”, are for the most part acts that Brockers have done in the past. Unlike renouncing, such a claim is free and if done long enough ago (arguably prior to 2004; less arguably before 1994 or so), the claim can be made without incurring a tax filing obligation. Hence the IBS advice, “Relinquish US Citizenship don’t renounce, if you can”.
Born-dual-citizens are already restricted from claiming INA 349(a) #1 and #2 (naturalization or making an oath to their other citizenship country) because they already have the citizenship and these acts don’t change their status in that country and therefore are not potentially expatriating. That only leaves numbers 3, 4 and 5 as reasonable expatriating acts: military service, government employment and renouncing.
I keep saying that this proposal is a change to tax law, not citizenship law or DoS procedures. I note that Point #6 of this provision, the punchline that actually defines the tax relief, is clearly a direct replacement for Form 8854 Section IV item #6: “Do you certify under penalties of perjury that you have complied with all of your tax obligations for the 5 preceding tax years (see instructions)?”. Form 8854 is an IRS tax form, not a DoS citizenship/relinquishment form. It is an IRS form submitted only after expatriating by completing DoS forms and procedures and yes, IMHO, already paying any applicable fees to the DoS (US$2350).
This budget proposal suggests a subtle tweak to IRS tax law for a small subset of dual-citizens. It only applies _after_ such citizens give up their USC, and this has to occur within 2 years of the law coming into affect or the date that such people discover they are a USCs, whichever is later. The proposal clearly suggests a tax law change that would be allowed by and presumably administered by the IRS. It does not require or suggest a change to citizenship law or procedures, which are administered by the Department of State, a completely separate legal entity. I see no reason to think that a reference by a US budget proposal for a tax law change would use the term “relinquish” in Point #5 as we do at IBS to imply the exclusion of INA 349(a)(5) “renunciation” while retaining the other 6 acts, 2 of which already don’t even apply to the dual-citizens at birth for which the proposal apples. Suggesting that the wording of Point #5 excludes renunciation would also have to also the suggestion that it born-duals would be able to claim naturalization or oath-taking as expatriating acts! Therefore, IMO, there is no reason to think that the tax relief in this tax law proposal for the IRS would have any effect on DoS procedures or the fees they charged. If Point #5 excluded renunciation, and we know INA 349(a) #1 and #2 are already excluded, that only leaves military service and government employment as expatriating acts for this tax relief. As stupid, spiteful and hypocritical as US lawmakers are when it comes to our citizenship and taxation woes, I cannot believe that the drafter of this proposal intended that it would only apply to born-dual citizens who lived outside of the US for their entire adult lives, and who make a point of joining the military or taking on government employment in the 2-year period following the (possible) enactment of this tax law on Jan 1, 2016 voluntarily and with the intension of relinquishing US citizenship . Removing renunciation from the requirement of Point #5 implies this! I can’t see that!
I would go on to guess that the stated $403 million cost of this _tax relief_ provision does not include lost collection of the $2350 renunciation fees that the DoS collects, but lost tax collection on foreign pension and other non-earned income, the punitive taxes on mutual funds and other investments considered PFICs, etc. Allowing the benefactors of this proposed provision to file as a NRAs only on US source income relieves these duals from paying these taxes on world-wide income. With this in mind, I retract my post that says the cost of this provision would be nearly zero tax dollars. The payment of 5 years of tax on world-wide income for Form 8854 certification by recent (post-2004) relinquishers (including renouncers! 😉 can be substantial for the type of income that I just listed. For some, this taxation could easily exceed the $2350 renunciation fee and some Brockers (who presumably have no choice other than to chance doing nothing or to renounce) have already posted that they would gladly pay $2350 (to renounce) under this provision and be taxed as a NRA. I would.
My interpretation of the poorly-worded Point #4 is that it’s a lame attempt at defining an Accidental American as one who has never made use of a billable claim of the benefits of US citizenship. Point #4 should not exclude people who have a passport only for the purpose of the law to which it defers (which clearly states enter and exit). In my mind, it’s no stretch at all to agree with the exclusion of this benefit of USCs who have been doing any of the things we know that a consular official will say invalidates a past relinquishment claim by way of an act of naturalization, government employment or military service by later still acting as a USC: voting, seeking protection or service from a US embassy, registering a claim of USC for a child born abroad _after_ such a person claims to have given up USC, etc. Also, there is passport renewal and usage, but this is a huge gray area. For the purposes of a past relinquishment claim, obtaining a passport one time due to fairly recent threats and bullying by a border official is reasonably argued against and people posing on IBS have both failed and succeeded. Making the claim after continually renewing and using a US passport over decades since the claim of such a past expatriating act is unfortunately a harder sell.
I think the people who would most often fit this proposal are the ones with no expatriating act other than to renounce, which they would do after this passes, if it passes. But there are other scenarios. While getting my thoughts of Point #5 together for the ridiculously long post above, a new question came to me.
Point #5 says “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,”.
I think it’s clear that a person who, within the specified time period, joins the military or starts a government job, fits the requirement of Point #5. Renouncing too, IMHO 😉
What about a person who has not yet had an appointment to make a claim of relinquishment based on mility service or government employment after 2004 (or 1994 or whatever year you believe)? Say this person’s such act was in 2010, and further say this person makes a relinquishment appointment next year? (yes, assuming this proposal pases yada yada). Now we’re back with the expatriation (relinquishing) date-determination defined differently by the DoS and the IRS!
I maintain that we are talking about IRS rules for tax relief in this proposal, not DoS rules about expatriation or citizenship, and we know the IRS defines the expatriation date for tax purposes (at least after 2004 or your believed date) as being the date of the consulate appointment.
But, is there a perceived exclusion here? The wording is “relinquishes USC during…”. Will the IRS claim that the relinquishing expatriating act in 2010 was not in the time period of this proposal’s requirement in that it came before the law was passed, or will they stick with their stance that the expatriation date for tax purposes is the date of the appointment and allow the tax relief?
Oh my, what a tangled web they weave, but who are they deceiving here?
I do not believe this is a gift or a break in the wall, call me cynical but I think it is a feeble , face saving PR attempt by the IRS as it is increasingly exposed in the press for taxing a certain section of duals who have only had childhood or no exposure to USness.
Whatami is correct, this is not a change from the state dept’s perspective but a change in IRS rules, so I very much doubt that the omission of the word ‘entry’ was unintended and those who continued to use a US passport to re enter the US would be excluded from this crumb they throw us, although one should still be able to argue the point if one has been bullied into getting a US passport to enter.
Again the 2350 fee is a state dept rule and I can’t see any reason or change to imply that they would drop this.
@Stephen Kish ” Is there consensus that this change which could provide relief to some should be opposed?”
If this was enacted into law two good things could happen;
1. Some would gain freedom and freedom for any is good.
2. Once a law is on the books it is subject to amendment at a later date. We are in the mess we are today because citizenship law has been amended and basterdized by the Policticians and Judges. We learn from that……..if this became law it would only take a very tine amendment to open the floodgates. Such an amendment would appear innocent and inconsequential, maybe pass with an unrecorded voice vote.
Hey all, always remember…this is FOREIGN Law by a FOREIGN Government…..
I may be better prepared in all this because a long long time ago, the USG warned me..as in USG Lawyers sitting down with me, to not enter certain Foreign Countries because said countries considered me a citizen, but otherwise it was FOREIGN Law that had no bearing on me as a then USC inside US Territory.
@ Ann Yes, I see it as “a break in the wall” as well. It’s time for the Republicans to take it and make it better.
@ WhatAmI I am torn on the interpretation of point 4, is it poorly written or is it a deliberate attempt to penalize those who may have had family still in the US and, knowing the law, obtained passports to visit them? The fact that this is in the proposal at all is encouraging. The history of Presidental budget bills seems to be that they provide a starting point for discussions. Let’s hope it gets them all thinking about this issue.
It could be fascinating to know who put this proposal forward to be included in the budget. Who is this ally? Such a person could coach us on “next steps” (or is that illegal?). Surely it wasn’t Obama’s personal idea based on his own knowledge of the situation? What was the discussion “around the table” that got the provision into the budget? I’d love to have been a fly on that wall!
For anyone who missed Eric’s early comment and his further thoughts on the *US passport* portion (http://isaacbrocksociety.ca/2015/02/03/obama-fy2016-budget-proposes-limited-relief-for-accidental-duals-at-birth-who-give-up-u-s-citizenship/comment-page-8/#comment-5493806) and that of bubblebusin (http://isaacbrocksociety.ca/2015/02/03/obama-fy2016-budget-proposes-limited-relief-for-accidental-duals-at-birth-who-give-up-u-s-citizenship/comment-page-9/#comment-5495089), here is one US tax lawyer’s, Virginia La Torre Jeker J.D., take on the *US passport* and what she thinks the future might hold: http://blogs.angloinfo.com/us-tax/2015/02/05/relief-for-accidental-americans-obama-administrations-2016-revenue-proposal/. You can comment or ask questions there.
With analysis from Ms. Jeker and other US tax lawyers, we’ll see where our focus best needs to be. We KNOW the easy, common-sense solution: US Residence-Based Taxation.
This is incredible / laughable for all of the crossings, land and air, from Canada to the US and return where the border officials just waved people through, with few applying the law that a US citizen must enter and leave the US on a US passport. If *the law wasn’t the law is the law* (as Mr. Mopsick told us) then how does any of this make sense, especially for family visits back and forth from Canada — no problem for most crossings to this day?
@Calgary411
I read it when Eric made the post. She gets it, eh? After reading her biograpghy, I registered on her website and asked if she thought it possible that the reference to using a passport was simply missing “or entering”. My comment is in moderation. If she’s adamant that it’s very intentional, then lordy be, I guess it has to become my new understanding of the matter.
I have to take the time to read this closer, but on the surface I suspect the Obama administration may be trying to take some protective measures regarding the lawsuit in Canada, which has two so-called accidentals as plaintiffs. I guarantee they are watching closely (and probably advising the CA govt) on the lawsuit.
Therefore, the lawsuit needs to expand the number of plaintiffs to include people who were born in the US and emigrated to Canada as adults. I think the Obama administration is on a mission to protect FATCA at almost any cost, even at the cost of having to go to RBT. They have invested too much into FATCA and will lose credibility worldwide if FATCA fails. Therefore, we need to push them harder on the Canadian lawsuit (more plaintiffs) and get started on other lawsuits, including CBT in America.
The US will not change the status quo of CBT without pressure. Full stop.
And just for the record, I truly hope to bury CBT, FATCA and FBAR all together. These are all laws based on pure tyranny.
@Walter
As @Stephen Kish has said, Mr. Arvay has this covered and Obama’s proposal (NOTE: proposal NOT legislation … yet) will not derail the ADCS lawsuit.
I have noted, as others probably have, that this proposal is suspiciously directed at Ginny and Gwen (see below). It’s amazing really how specific it is. I don’t believe this is coincidence. Our plaintiffs easily check off points 1, 2, 3 and 4 and can easily execute points 5 and 6. We’ll gratefully accept their freedom but it will in no way deter us from seeking freedom for all.
Virginia La Torre Jeker has some excellent posts at AngloInfo (Dubai) regarding the US tax situation for US citizens / persons / expats abroad. Stephen Kish and John Richardson have referenced her work in some of their many submissions. Her posts are informative and often right on the money.
Your observations of the possible why’s of this proposal should be of great interest to all of us, EmBee and Walter.
Yes, WhatAmI, wouldn’t it have been great to have been a fly on the wall in discussions leading to it?
@WhatAmI, apology accepted. I get bitchy trying to cook and blog at the same time too. 🙂
“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:”
“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.”
Am I missing something or is this contradictory gobbledygook and completely open to interpretation?
As I wrote earlier, I highly suspect the Obama administration is attempting to artfully undermine the current focus of the Canadian lawsuit (on accidentals).
Moreover, it may also be trying to reduce some of the criticism it will inevitably receive as a result of the UN Human Rights Complaint. It should be assumed that the US received a copy the moment it was sent.
The Obama administration appears to be showing a token degree of mercy, but its real intent is damage control.
WhatAmI?
“It could be fascinating to know who put this proposal forward to be included in the budget. Who is this ally?”
Ally? Please see what I wrote above.
@Walter,
You wrote 2 things above. One is that you don’t understand what the proposal is offering as a tax relief, and the other is that you don’t trust their motivation or intent.
I don’t know what the motivation is for their administration to include this provision in the budget, but I can explain the tax relief again.
It’s exactly what you quoted. For this unfortunately too-small set of dual-citizens, they can reqlinquish their US citizenship and not file any FBARs and only file taxes on their US-sourced income instead of on their world-wide income, for the last 5 years. If a person has less than about $3900 in US-sourced income, they don’t have to file at all and therefore also don’t have to apply for a US Social Security Number. For the people who benefit, this is huge.
The proposal exaggerates in one regard. It’s written as if this proposal is newly relieving these people of being a covered expat and paying the exit tax, but born-dual citizens are already exempt form the exit tax if they certify to the 5 years of tax compliancy. The difference is only in being able to file those 5 years (if needed) as a non-resident alien instead of a US citizen.