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Author Archives: USCitizenAbroad

#FATCA Historical (R)evolution: The War On U.S. Criminals With Foreign Bank Accounts; A Subsidiary Of The Wars On Everything Else (i.e., Terror, Drugs, etc.) Part II

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Patricia Moon posted part I:

Legislative History Reveals FATCA Had Nothing To Do With Collecting Tax Revenue From U.S. Persons With Foreign Accounts Evading Taxes (Part I)

In Part II, the author argues (among other things) that FATCA is nothing more than a continuation of the “FBAR Fundraiser“.

Here we go …

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Reposted with permission of Tax Connections.

Written by Gary Heald | Posted in FATCA • Gary Heald

In FACTA Part I, I argued that in light of the Joint Committee on Taxation (JCTX-5-10),[1] Congress failed to engage in the necessary due-diligence to reasonably relate FATCA to the collection of tax revenue lost through “tax schemes” and “tax evasion” by U.S. persons with foreign financial institution accounts. Congress operates as America’s legislative fact-finder. They are charged with determining whether relevant and reliable evidence negates the underlying policy-purpose for a particular law, when presented with evidence to that effect. JCTX-5-10 was directly relevant because it offered a direct answer to the question of “how much” FATCA revenue. As for reliability, the Joint Committee on Taxation produces some of the most reliable evidence on The Hill, and this was no exception to that general rule. Congress knew FATCA would collect less than one-half of one-percent of what was sworn to during the Ways and Means hearing estimates.[2] They also knew that even after ten-years, FATCA would not fully-fund the Hiring Incentives To Restore Employment (HIRE) Act (and that does not take into account the costs for implementation and renewed requests for additional expansion and implementation funding).

In Part II, I want to touch on three related areas of concern. First, and as has been discussed by more than a few other people, the $10B that the IRS collected between 2009 and 2016 included a disproportionately low amount of tax revenue coupled with a substantial amount of penalties associated with FBAR. Further, alongside a disproportionate amount of penalties, FATCA and Offshore Voluntary Disclosure Programs (OVDP) illegally filled the gap left by Qualified Intermediaries (QI) pooling, forcing foreign financial institutions to report on the account value of U.S. persons in violation of their own law, and if reproduced domestically, in violation of our own laws as well.[3] Finally, FATCA has become a continuation of the IRS war on FBAR perpetrated by Treasury’s Financial Crimes Enforcement Network (FinCEN), federal law enforcement and the intelligence community all of which sought to curtail the use of secret foreign bank accounts for illegal purposes (e.g., tax evasion as well as securities manipulation, insider trading, evasion of Federal Reserve margin limitations, storing and laundering funds from illegal activities, and acquiring control of U.S. industries without detection by the SEC) [4] by establishing a worldwide-financial-industry informant system.[5]
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The problem is not the petitions: The problem is lack of participation. Probably a good idea to target specific lawmakers

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Greg Swanson of PurpleExpat.org created a change.org petition to abolish “citizenship-based taxation”. You can still sign it. But, as it stands only 700 people in the whole wide world – even though they have nothing to lose – signed this petition. The problem is not the effectiveness of the petition. The problem is that Americans abroad as a group will not stand up for themselves.

https://twitter.com/Keith__REDMOND/status/1009101233066598400

Mr. Swanson published an interesting post where he summarized the comments and added some additional commentary.

The comments include:

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Brock project: Is there a parallel between renouncing Indian status in 1958 and #Americansabroad committing #citizide in 2018?

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I recently became aware of a fascinating article at CBC titled:

Why my grandfather dissolved the Michel First Nation and renounced his Indian status

The title suggests a discussion of two separate issues:

1. “Renouncing Indian status” – Is this analogous to U.S. citizens renouncing U.S. citizenship today?

2. “Dissolving the Michel First Nation” – Is this analogous to “tax residents” of other countries returning to the United States to avoid the indignities inflicted on Americans abroad?

For some time I have been interested in some of the parallels between the U.S. treatment of its citizens living abroad and the Canadian and U.S. Government treatment of their First Nations people. To be clear: I am NOT suggesting that the treatment of Americans abroad is of the same caliber as the treatment of First Nations peoples.

Nevertheless:

– First Nations people have historically been subjected to a separate regulatory regime – the Indian Act – by the Government of Canada. U.S. citizens abroad are subjected to a separate tax regime by the Government of the United States

– First Nations people are subjected to a separate financial reporting regime by the Government of Canada. U.S. citizens abroad are subjected to a separate reporting regime by the U.S. Government

– First Nations people have historically been subjected to policies that have resulted in diminished opportunities relative to other Canadians. U.S. citizens abroad simply do NOT have the same opportunities as those who are not U.S. citizens
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First a delay in payment – Is it possible that a legislative fix to the “transition tax” is in the works?

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The above tweet references CBC reporter Elizabeth Thompson’s latest article on the U.S. “transition tax”. While reporting on the delay (referenced at the Isaac Brock Society here), Ms. Thompson’s article offers the tantalising possibility that the “delay” may be linked to a desire for a legislative fix.

Her article at CBC includes:

Brian Masse, an NDP MP who sits on the Canada-United States Interparliamentary Group, said U.S. lawmakers were very much aware of the tax reform’s unintended consequences when MPs and senators met with them in Washington last month.

Masse said he was told legislation to fix the problem could be introduced in the coming weeks.

“There seemed to be a genuine understanding and appreciation that these are victims.”

By the way, the comments to the article are (as usual) not off to a good start. (In fact they are indescribably ignorant.) It appears that the average Canadian:

1. Hates corporations; and

2. Hates U.S. citizens (even when they are also Canadian)

But, when you have (1) “U.S. citizens” (2) owing Canadian “corporations” these people lose any semblance of rationality. (You can actually see their abilities to reason and process information implode in real time.)

It would be helpful to add some comments (calling all Brockers) that would provide some balance and education. Seems like a number of commenters don’t believe that “dual” citizens (usually they call them “duel” citizens) are actually Canadians.

There are a couple of really good comments from one “Karen Alpert” (a familiar name) which includes:

Technically, yes. It applies to any US citizen who owned a foreign corporation when the tax reform bill was signed last December. Anyone who renounces after that point would be liable for the tax. However, I suspect that a number of affected Canadian citizens will decline to comply with this tax and will hide behind the tax treaty provision that states that Canada will not help the IRS collect in Canada on tax liabilities that arose when the taxpayer was a Canadian citizen,

Ms. Alpert is absolutely correct – the issue of the “Canadian citizenship” defence to collection was recently explored at the Isaac Brock Society here.

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Elizabeth Thompson’s article about the “transition tax” have been featured on Brock as follows:

https://isaacbrocksociety.ca/2018/05/05/brock-project-advice-on-how-to-explain-the-effects-of-the-ustransitiontax-through-a-question-in-the-house-of-commons/

and

https://isaacbrocksociety.ca/2018/04/28/be-on-the-lookout-bubblebustin-to-be-on-cbc-the-national-on-the-transitiontax/

Interrupting our regularly scheduled programming: It appears that there is a delay to the June 15, 2018 @USTransitionTax payment

Posted on by Posted in Citizenship Issues, FATCA, Tax Treaties, Transition Tax 30 Comments

Update from “Accounting Today” – June 4/18 – 11:00 p.m. EST:

https://www.accountingtoday.com/news/irs-provides-penalty-and-filing-relief-on-transition-tax-in-tcja

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I haven’t had time to really read and digest this Bulletin from U.S. Treasury.

You will have to read and draw your own conclusions, but it appears that paragraph 16 speaks to this issue:

Q16: If an individual fails to timely pay his or her first installment of tax due under section 965(h), will the IRS assess an addition to tax for failure to pay? Will the taxpayer’s requirement to pay all subsequent installments be accelerated under section 965(h)(3)?
A16: If an individual meets the criteria in this paragraph and pays the total amount of the first installment on or before the due date for the second installment, the IRS will not assess an addition to tax for failure to timely pay the first installment and will not accelerate subsequent installments under section 965(h)(3). An individual with a net tax liability under section 965 is required to report the liability on his or her tax return for the year in which or with which the inclusion year of the deferred foreign income corporation ends and pay the full amount of that liability on the unextended due date of that return, unless the individual elects to pay the liability in eight annual installments pursuant to section 965(h)(1). However, the IRS has determined that, if an individual’s net tax liability under section 965 in the individual’s 2017 taxable year is less than $1 million, the individual makes a timely election under section 965(h), and the individual did not pay the full amount of the first installment by the due date under section 965(h)(2), the failure to make the payment will not result in an acceleration event under section 965(h)(3) so long as the individual pays the full amount of the first installment (and its second installment) by the due date for its 2018 return (determined without regard to extensions). For this purpose, the relevant due date generally is April 15, 2019. In the case of United States citizens or residents whose tax homes and abodes, in a real and substantial sense, are outside the United States and Puerto Rico, and United States citizens and residents in military or naval service on duty, including non-permanent or short term duty, outside the United States and Puerto Rico, the relevant due date is June 17, 2019, which is provided by Treas. Reg. §1.6081-5(a)(5) and (6). Although the IRS will not assess an addition to tax for failure to timely pay the first installment, a taxpayer will be liable for interest on such amount from the due date of the installment. See I.R.C. §6601.

If the IRS sends a taxpayer a notice of an addition to tax for failure to timely pay the first installment, and the taxpayer meets all the conditions for relief described above (including making the required payment by the due date for the second installment due under section 965(h)), the taxpayer should contact the IRS office that issued the notice and request abatement of the addition to tax for failure to timely pay the first installment in accordance with the provisions in these FAQs.

Posted: 06/04/2018

Note that this does NOT apply to all people (appearing to give relief only to small businesses).

Brock project: Is the application of the U.S. Transition Tax to Canadian residents possible only because of the “savings clause”?

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In my previous post about the June 15, 2018 “transition tax deadline” I referenced the letter received from Minister Morneau’s office which included:

… Canada recognizes the sovereign right and policy choice, of the U.S. to tax its citizens, including citizens who are resident abroad. The Canada-United States Tax Convention (the Convention), preserves this right.

467306-470243
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As the June 15, 2018 deadline for payment of the U.S. Transition Tax draws near

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This post should be construed as an information bulletin. It is not to be construed as practical advice, legal advice, moral advice, retirement planning advice or any other kind of advice. If you feel that you need professional advice then you should go and get it. This post contains the following five parts:

Part 1 – A reminder of what the transition tax is and what it (according to the tax professionals) requires you to do

Part 2 – A statement of part of the Canada U.S. Tax Treaty that you might find to be of relevance

Part 3 – Confirmation from the Department of Finance that the Canada Revenue Agency will not assist the IRS in collecting the "transition tax" on Canadian citizens

Part 4 – It is likely that the same situation would also apply to citizens of France, Sweden, Netherlands and Denmark

Part 5 – Residents of countries other than France, Sweden, Netherlands, Denmark and Canada

Again, this post is an information bulletin and is NOT to be construed as providing any form or advice.

There have been a large number of Brock posts devoted to the "transition tax".

For example:

https://www.google.com/search?source=hp&ei=nMgNW9SIMcnUjwSQw7K4Dg&q=isaacbrocksociety.ca+transition+tax&oq=isaacbrocksociety.ca+transition+tax&gs_l=psy-ab.3..33i160k1l2.1167.11294.0.12000.48.33.11.0.0.0.1323.5545.13j13j3j2j7-1.32.0….0…1.1.64.psy-ab..5.40.5309.0..0j0i131k1j0i10k1j0i10i30k1j0i5i30k1j0i8i13i10i30k1.0.7RBe24E66Mg

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Brock project: How has awareness of @citizenshiptax AKA @nonresidenttax changed your attitude toward investing and retirement planning?

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Direct effects of U.S. tax compliance on residents of Canada or other countries

The most recent “Brock project” posts (here, here and here) have focused on the directs effect of the U.S. tax system on Americans abroad who have attempted compliance and on issues related to the “transition tax”. Those posts have focused on the punitive taxation, the compliance costs, etc.

Indirect effects of being subject to U.S. taxation as a nonresident

The purpose of this post is explore the “indirect effects” of being subject to the U.S. tax system. How has it changed your attitude toward basic financial and retirement planning? Over the years I have talked with a large number of people who simply say things like:

– I can’t have a TFSA

– I can’t have mutual funds

– I can’t have a life insurance policy

– I would have incorporated but I am afraid to

– I worry about having to report my spouse’s bank accounts to the IRS

– I am no longer the financially responsible person I was

– I see no point in attempting financial planning

– Because I have a Canadian Controlled Private Corporation for which I am filing Form 5471, I have to keep a separate set of books for my company

– I have been declined business opportunities or certain kinds of employment because I made the mistake of admitting I was a “U.S. Person”

– etc.

Your comments and thoughts on the indirect effects of being subject to U.S. taxation would be appreciated. Comments from those who have attempted compliance and those who have not attempted compliance are encouraged.

Thanking you in advance!

Chapter 2 – Brock project: Seeking stories from current or former “U.S. Citizens” who are/were destroyed by attempting to comply with U.S. @CitizenshipTax AKA @NonresidentTax

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Background …

In a rare instance of “concern” for Americans abroad, Congressman George Holding (Republican North Carolina) may be proposing a bill that could allow some U.S. citizens to live outside the United States and NOT be subject to U.S. tax on their “non-U.S. income”. This would be a “shocker” and a real “Game Changer”. Unsurprisingly this possible initiative has large support including support from ACA, Republicans Overseas, Democrats Abroad, Accidental Americans, etc. Each of these groups (yes each of them) has contributed to and supported this initiative in various ways. Even so, there are partisan fault lines …

There are certain groups/individuals who would NOT support this change (some for ideological reasons and some because they don’t believe the changes would benefit them personally). In any event …

How you can follow the developments …

Interestingly, @SolomonYue of (dare I say) Republicans Overseas, is actively communicating with individuals impacted by this in an ongoing Twitter discussion. “JC” of Isaac Brock fame, (who you all know) is also an active contributor to the Twitter conversation. (You will see other participants) who you will recognize.

In any event, as you all know, the central issue is that U.S. tax policies:

1. Make it impossible for U.S. citizens to move from the United States AND integrate into the tax systems of other countries (if you don’t “quite” understand this, then this post is not for you);

2. Impose very severe punishment on those who (ironically) do attempt compliance with this collection of U.S. tax laws that make life impossible.

As I suggested in the previous post, it seems to me that:

The penalties imposed on Americans abroad who attempt U.S. tax compliance, are far worse than:

The penalties imposed on Americans abroad who do NOT attempt U.S. tax compliance.

The purpose of this post and the anticipated comments is to explain why this is the case!

So, why I am writing this post?

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Brock project: Seeking stories from “Proud Americans” who are being destroyed by @NonResidentTax and @CitizenshipTax

Posted on by Posted in Issues regarding US persons abroad, Non Resident Taxation, Tax Treaties, Transition Tax 80 Comments

This post is motivated by the following Brock comment from “JC”. His comment concludes with:

So do we have a feature here on Brock to come up with stories about being proud Americans? So we may give them to Solomon.

Why not? Yes, let’s use this post to create a “Brock Feature” from expected comments. This can be the the “Isaac Brock Society” contribution to U.S. Tax Reform!

I realize that the Isaac Brock Society is not a site that is populated particularly by “Proud Americans” (am I wrong?). But, the idea of compiling a set of comments, about how U.S. tax policies have destroyed the lives of those who have attempted compliance could be valuable. They could be forwarded to all groups (RO, DA, ACA, FAWCO etc.) in this fight.

For once, let’s focus on those who are compliant!

I have a request though. Much of the focus on this and other sites is on people who have NOT complied with U.S. tax laws – usually because they have not bothered to enter the U.S. tax system. I don’t understand why those who have not entered the U.S. tax system have TAX problems. It seems clear that, those who have NOT complied, have NOT had their lives destroyed. They still have their pensions and their marriages. Noncompliant Americans abroad are in no danger of having their passports revoked (because those not in the U.S. tax system cannot have a tax debt). Noncomplaint Americans are in no danger of having their retirement savings stolen. Noncompliant Americans have no fear of crossing the border. But, I digress …

The reality of U.S. tax compliance for Americans abroad

It is those unfortunate people who have complied (with the assistance of the “very best” U.S. tax advisors), who have suffered the most. Think of all those who were ushered into OVDP. Think of those who entered “Streamlined” with their Canadian Controlled Private Corporations. After being assured that the “business earnings” were not subject to U.S. taxation, they are NOW retroactively subject to the transition tax. Think of the “transition tax” (punishment for your past). Think of GILTI (punishment for your future).  Only those who have filed U.S. taxes generally and Form 5471 in particular are subject to the great “pension confiscation”. Those who have not complied will still have a happy retirement.

U.S. citizenship is primarily about penalties: Comparing the “penalties” for noncompliance with the “penalties” for compliance

Penalties for noncompliance: For years people have been forced to listen to a constant noise (that’s the problem with the internet isn’t it)  warning people about the penalties for noncompliance. These are expressed in the language of either “tax crimes” or “form crimes”. Yes, the penalties for noncompliance are truly frightening! But, they are suffered randomly and sparingly. Let’s compare them to the …

Penalties for compliance: Nobody (don’t understand why) really talks about the “penalties” for compliance. They are real! They are NOT speculative! They are automatically assessed! Think I am kidding? Talk to anybody who is suffering the “transition tax” or somebody who has a real fear of “passport revocation”. Talk to somebody in Australia who has had problems with their Superannuation.

Americans abroad are subject to penalties no matter what they do. What were you thinking when you left the Homeland? You should be punished! And you are punished. Americans abroad are NOT subject to the same tax rules that Homelanders are subject to. They are subject to a different set of punitive rules. You should NOT be permitted to, simply leave the Homeland and expect those left behind, to pay your “fair share”! It is the duty of ALL Americans, wherever they may be, to support the Government of the United States (which as Cook v. Tait teaches – confers benefits to you wherever you may be).

Your experiences please …

Therefore, I think it would of great value to hear from those who have complied with – that Great Bible of American Life – the U.S. Internal Revenue Code (whether you have complied from inception/conception or whether you have recently come into compliance).

Remember that ALL U.S. citizens who were “Born In The USA” are presumptive “Tax Cheats By Birth”! This is because the  USA confers citizenship by birth and imposes tax based only on citizenship.

Could you address the following 3 questions in your comment?

1. Why as a “nonresident” of the United States did you decide to enter the U.S. tax system? For example, did your accountant tell you do do it? Were you simply heeding “The Call Of The Condor?” Was your entry into the U.S. tax system associated with another significant life event (illness, divorce, etc.) Do you snap to attention when you hear the U.S. National Anthem?

2. How has U.S. tax compliance caused you specific damage (calling all “transition tax” victims and more)?

3. Will the proposed #TTFI bill (the one from Congressman Holding) solve your problems or not?

If you are not in U.S. tax compliance, you could comment on why you do not intend to enter the U.S. tax system. Were you lucky (probably) or clever (maybe)?

And now, turning it over to JC …
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