reprinted with permission of the author Helen Burggraf
American Expat Financial News Service
Photos by Steven Edginton, Politics UK
steven.edginton@hotmail.com
September 24, 2018
updated 1:02 PM CEST, Sep 27
Legislation that its proponents say would significantly improve the lot of American expatriates, many of whom have been left reeling by the Trump tax reforms introduced at the end of last year, will be introduced in Congress before the end of the month.
This was the message delivered to a London audience of around 80 mainly expatriate Americans last week by Republican Overseas global chief executive Solomon Yue, (pictured above, far left, and below), and again a few days later to an also mainly expat audience in Paris.
Today Yue is due to bring his message to expats in Frankfurt, with similar events scheduled for Berlin and Rome over the next few days.
Yue’s appearances were his latest on a global whistle-stop tour of key foreign business centers around the world that aims to rally support among – and ideally as well, the active involvement of – American citizens living abroad for legislative changes in the way their country currently taxes them, in the run-up to the midterm elections in November.
Although targeting many of the unintended consequences caused to American expatriates by President Trump’s tax reform legislation introduced in December, known as the Tax Cuts & Jobs Act, the fixes Yue says are soon to be proposed are not included as part of “Tax Reform 2.0,” according to Yue.
Tax Reform 2.0 was formally unveiled on Sept. 10 by House Ways and Means Committee chairman Kevin Brady, R-Texas, to make permanent certain individual tax cuts, small-business income deductions, and other features of last December’s bill, which had been set to expire after 2025.
“The reason it is not going to be part of [Tax Reform 2.0 is because] we got left out,” Yue, who is based in Oregon but who is frequently to be found lobbying Congressional leaders in Washington, D.C. on behalf of expatriate Americans, told those attending last week’s London session.
Yue said he was nevertheless optimistic about the chances of passage of the as-yet-un-named legislation, expected to be introduced by Rep. George Holding of North Carolina, citing a growing awareness among key Washington lawmakers of the issues overseas Americans, and their companies, are facing.
Whistle-stop tour
Yue’s London appearance took place at a private members’ club in London’s Mayfair district, and was free of charge and open to the public.
He was joined by David Treitel, managing director of London-based American Tax Returns Ltd (pictured above, to the right of Yue); Andrew Grossman, a retired American foreign services officer now living in London; and John Richardson, a Toronto-based tax lawyer with dual Canadian and American citizenship, who specializes in U.S. expat issues.
Yue began his tour in May in Hong Kong, before making a number of appearances in Toronto last month, one of which was filmed and posted on YouTube.
A video version of Tuesday’s event is also due to be posted online in due course, the event’s organizers said.
Yue was accompanied in his appearance in Paris Last Friday morning, at the American Chamber of Commerce Paris’s rue de Miromesnil office, by Richardson as well as Democrats Abroad France chairman Joseph Smallhoover.
TTFI
According to Yue, Holding’s bill aims to give expatriate Americans the option of replacing the U.S.’s current citizenship-based tax (CBT) regime, as it applies to them, with a “territorial taxation for individuals” (TTFI) regime. Those who would prefer to continue to be taxed under the existing CBT regime could, under this legislation, be allowed to do so.
The territorial approach is seen by Yue as being an easier sell to Congress at the moment than certain other options for replacing CBT that have been proposed, because Territorial Taxation for Corporations was a key element of Trump’s recent tax reform legislation.
Although popular with Congress for providing a mechanism for forcing giant, multi-national companies like Apple and Google to repatriate earnings they’d been holding offshore for tax reasons, TTFC has hit American expatriates (and “Homelanders”) who have stakes in small overseas businesses with an unavoidable, retroactive and significant tax charge that many say will financially ruin them, if they are forced to pay up.
The original deadline to begin to comply with this tax has past, but those affected by it have been granted an extension.
Proponents of the TTFI concept argue that it corrects this and other problems in the Trump legislation that emerged only after it was signed into just law three days before Christmas, and which some say were the result of the speed at which it was drawn up and passed by both houses of Congress, in an apparent effort to ensure that it could take effect on the first of January, 2018.
40% premium
Many observers are skeptical that Holding’s bill stands much chance of passage, given the lack of interest most members of Congress have for the problems faced by American expats, but Yue remains optimistic.
He thinks that with a bi-partisan lobbying effort, U.S. lawmakers could be persuaded to appreciate the business case for ending what he says is a current “40% premium” that American companies are having to pay to hire Americans to work overseas, simply “because [of the need to compensate them] for the double taxation and [such other issues as] the difficulties involved in getting bank accounts, and so on,” due to the current CBT tax regime, Yue said.
A Republican sponsor for a companion bill in the Senate has been lined up, according to Yue, who didn’t say who it was.
A search is understood to be under way to find Democratic Congressmen who will promote the Holding legislation, or at least vote in favour of it, which could, Yue and other proponents of the bill say, help to make it a campaign issue in the coming 2018 midterm elections, set for Nov. 8.
Although America’s expatriates have historically voted in small numbers, their estimated total number, 9 million, is larger than the populations of all but 11 U.S. states.
“This is not a Republican issue, not a Democrats issue, not independent issue,” Yue told his audience.
“It is an American issue.”
Scale of the problem
Grossman – whom Richardson said had particular insight with respect to the relationship between tax and nationality – said that for him the “astonishing thing” about the tax issues surrounding Americans who live outside of the U.S. was the fact that “millions” didn’t know they were American until discovering it, typically “when [they’re] told by their banks that they’re closing their accounts” because of the fact of their American citizenship.
That so many people were finding themselves in this situation, Grossman went on, is due to the fact that “the U.S. nationality code is so archaic.”
“Until last June, it mattered whether your parents were married,” he said, citing a recent article which detailed “how you can have siblings in which one is an American citizen, and the other is not, simply by the accident of whether the parents were married, when they were married, how many days they stayed [in the U.S.]
“And then last year, [Supreme Court] Justice [Ruth Bader] Ginsburg invented a new nationality law, by saying that it’s unconstitutional to treat non-marital children differently from marital children.
“And I can say, from personal experience, that one of my grandsons, who is British, would be an American citizen if he were born after last June, 2017, but he isn’t, because he was born in 2013.
“That’s the arbitrariness…there are any number of ways that you can be a U.S. citizen without ever having had any contact with the United States.”
Grossman then described how particularly unfairly Americans living outside the U.S. have been treated by the regulations affecting trusts and estates.
“There was a 10 year period when Canadians’ estates were taxed double – once as a capital gains tax [by Canada] and once as estate tax, by the United States. And the fact that it went on for 10 years, and nobody cared, is part of the trouble that we’re discussing tonight.”
Richardson: ‘Get involved’
Richardson called on those in the room, including others working in the legal and tax professions who look after Americans affected by the issues, to get actively involved in bringing about a change in the system, and not, for example, to continue to allow “government officials to negotiate tax treaties in the darkness,” or to merely show their clients how to pay certain taxes rather than “standing up for their clients, and looking for reasons they shouldn’t have to pay [them]”.
“One things it seems to me we can do with individual activism is to force the negotiation of these tax treaties out into the open,” he said.
“Make it clear how, in fact, governments like Canada are simply selling their citizens out – turning their citizens over to the U.S. tax system for reasons of political expediency.”
Countries like the U.S. and Canada have the right and the obligation, he went on, to interpret their tax treaties with the U.S., starting with “the transition and GILTI taxes, on the basis that they violate the general presumption against double taxation.
I recognize that these are hard arguments, but these tax treaties exist for a reason – and the prohibition of double taxation is one of them.
“The final thing is, get involved politically. Run as candidates yourselves, on these platforms, so you can get these things out into the open.”
The panel discussion on tax wasn’t without its lighter moments, one of which came when the American Tax Returns Ltd’s Treitel recalled an event from an earlier time, when American citizenship was seen rather differently than, increasingly, it is now.
Treitel drew rueful laughs from the audience when he noted that during his presidency, John F. Kennedy “kindly” gave then-former British prime minister Winston Churchill – whose mother had been American, a fact that, back then, “did not make him an American” – “honorary American citizenship.”
“I’ve often wondered whether that gave Churchill the opportunity to pay tax in the United States,” Treitel said.
“…will be introduced in Congress before the end of the month.”
We keep hearing this in various speeches, articles, and tweets. At the moment I write this, the end of the month, Washington DC time, is 70 hours away.
Isaacbrocksociety is dominated by people who didn’t even knew who he was. Too bad there is no Canadian voice.
Honestly I don’t know how any Canadian would want to be a US citizen given current politics. Pick a side? Yet IBS focus is on US constantly.
IBS admin is American at there roots. Other wise they would get it. Sorry guys. There’s no more Canadians here
@Jules
The reality is that only the US government can fix this problem, not the Canadian government, whose help has been sought on numerous occasions, but has basically rolled over for the USG like a trained poodle.
The people at IBS understand this.
“Isaacbrocksociety is dominated by people who didn’t even knew who he was.”
Oh yeah? And who is it that charges tolls for driving the General Brock Parkway? Didn’t we already know that freedom isn’t free?
“IBS admin is American at there roots.”
Former American. You don’t have to keep US citizenship in order to support the cause of Liberty and Justice for all United States persons abroad.
“The reality is that only the US government can fix this problem, ”
The reality is that the US government doesn’t want to fix FATCA, and couldn’t even if it wanted to. To fix FATCA, the US Government would have to get rid of AEOI, which it can’t do.
The US Government can’t even lower the fee for renouncing US citizenship, now that it’s been raised: reducing the cost would have to be paid for by raising other charges to balance that bit of the budget; and the people affected by the increases would be USCs who aren’t trying to renounce their US citizenship and can’t be required to pay more in order to let renouncers pay less.
Only court action can challenge the situation and possibly achieve a non-discriminatory resolution to the problem. The Canadian legal action could do that, for US-born Canadians; legal actions in Europe might do that for Europeans. The IBS website supports the action in Canada and helps raise awareness of legal actions elsewhere.
@plaxy
“Only court action can challenge the situation and possibly achieve a non-discriminatory resolution to the problem.”
So you are saying that legislative lobbying such as what Republicans Overseas is doing is a waste of time?
Not necessarily. Theoretically, it could help bring about changes to US tax law that might be beneficial for some who want to keep US citizenship and want to keep compliant, or come into compliance. And could conceivably be beneficial to some who can’t afford to renounce, as I’ve recently suggested in another thread.
USCs living outside the US and wanting to keep US citizenship and comply with US tax law are in the minority – quite a small minority. They’re always going to be treated as tax-resident in the US, therefore reportable as long as AEOI persists.
Changes to US tax law could make FIs less reluctant to deal with USCs, especially compliant USCs (for instance, an end to the predatory taxation of locally-tax-favoured retirement savings plans). But they’d still be reportable.
So Congress is in recess until after the election, Norquist is now saying about TTFI: “Maybe next year.”
Is there any point anymore in maintaining any hope? Not for me. What little hope I have remains with the ADCS lawsuit, which seems very iffy at the moment and is unlikely to affect anyone outside of Canada (such as me (Sorry, Jules, I’m not Canadian, haven’t even set foot in Canada in over 20 years; am I still allowed here?), and the French accidentals’ lawsuit, for which I have the same hunch.
I officially give up. I no longer have the energy or the belief to take part in any more letter writing, petition signing, etc. I’ve been very active until now. But it exhausts me and only raises false hopes. Having been compliant until now, it’s time to go underground. And to possibly go stateless.
@ Barbara
So sorry to hear of your continuing disappointment, but don’t you still have the prospect of another passport through an investment program?
@Heidi: thanks. My prospect for citizenship by investment is underway, but will take several years before it comes to fruition. Seriously, though, I will now start looking into how I might continue to live in my country of residence as a stateless person. I just can’t stand the constant false hopes of congressional or judicial reform. I’d rather just put it behind me now. I hate the USA so very, very much for doing this to me. Curses on all those politicians with their BS false promises of “Maybe next time we’ll manage to do something. Meanwhile, vote Republican.” Sorry, I don’t believe you anymore.
Barbara: My sentiments precisely; I feel your pain although our situations are different. I hope you will remain a participant here. You are a kindred spirit.
@Barbara
Re Stateless
Try to hang in there, you have got by until now, I am sure that Stateless will bring its own problems .
I too despise the US with a vengance, I hate the thought of venturing there again, yet I have close family and so many good friends there
It is atrocious what the US government have done to their once loyal citizens.
Barbara: Could you tell us where you found that statement by Norquist? The source document might make a good new thread.
Norquist says regarding TTFI in a Twitter dialogue: “We will next year if the GOP controls the house and senate in November.”
Do you get the feeling that once again we are being duped into a political game just to get our votes? They will never, never help us, as long as we can be strung along.
https://twitter.com/GroverNorquist/status/1046503896246624259
Thanks, Barbara. And yes, I do feel as though we’re all being strung along, promise after promise, deadline after deadline, election after election. Time and again we are told that things are about to change and nothing happens. And now it’s suggested that what we expected to happen at the end of September will now not happen until the New Year . . . . if . . . . .
@Barbara
Going stateless is a very bad, bad idea. And as far as I’m aware while it is legal to renounce US citizenship without having another citizenship, in practice they don’t let people do it as to prevent statelessness. It would be best to put up with the BS that is CBT and FATCA until you get a second passport and then renounce/relinquish.
I am 100% in favor of fighting CBT, FATCA, and FBAR on all fronts.
However, for the time being, the grim reality still remains — All roads lead to renunciation.
@Aaron
You most definitely can renounce without having another citizenship – it is allowed.
It’s probably not a good long-term plan but there are situations where people do it for short periods. For example, in most cases taking on German citizenship requires proof of having renounced other citizenships – one is stateless during the time that the German citizenship application is being processed.
And the tax lawyer giving the Moody’s presentation earlier this year mentioned cases of renunciation and statelessness before certain taxable events, if another citizenship was soon to be acquired, or the taxable event in question was the death of an old rich person with a very large estate.
@Bob
If you live in Canada or any other country with loose FATCA enforcement, or you don’t have a US birthplace, then all roads do not necessarily lead to renunciation – some roads lead to continued non-compliance with no negative consequences.
@Bob
Forgot to add, the non-compliance roads are more likely to be open to dual citizens.
“Countries like the U.S. [presumably a typo for U.K.?] and Canada have the right and the obligation, he went on, to interpret their tax treaties with the U.S., starting with “the transition and GILTI taxes, on the basis that they violate the general presumption against double taxation.”
I don’t think the UK has any obligation to save residents who have US citizenship from the consequences of their decision to ask the US to tax their UK business as if it were a US business.
Some US-tax-compliant dual US/UK citizen owners of small businesses – perhaps the majority – accepted the other option: they checked the box to have their UK small business treated as a UK small business, meaning, if I understand correctly, that US tax was not deferred?
Other owners of UK small businesses presumably just pay their taxes to the UK.
I sympathise with the small business owners who got tricked by America. I hope they’ll all refuse to pay. I don’t think the UK has any duty to do the refusing for them.
Tax treaties are elective. If your country of residence has a tax treaty with the US that offers you a tax break (for example, exemption from US tax on certain items of US-source income), you can invoke the treaty to claim the exemption. Nobody’s forcing you to invoke the treaty. Generic you.
A tax treaty does not represent a guarantee of protection from double taxation. How could it? The US citizen chooses to file US tax returns – a choice which is all too likely to mean double taxation, that being US tax policy. Stop filing US tax returns, is the solution to US double taxation.