Author Archives: USCitizenAbroad

Update – February 15, 2020

See the following exchange in Parliament – this is riveting!

While the US continues to deny justice to Harry Dunn, will the Prime Minister commit today to seek an equal and balanced extradition relationship with the US? pic.twitter.com/uBcFgV5Fzu

— Jeremy Corbyn (@jeremycorbyn) February 13, 2020

Prologue

I have urged the Home Secretary to delay the extradition of Mike Lynch until his UK civil trial has finished. In the long term, we need to re-balance our extradition treaty with the US. We need to give British citizens the protection, certainty and the justice that they deserve. pic.twitter.com/fm1Mklq5f2

— David Davis MP (@DavidDavisMP) January 23, 2020

David Davis is a British MP – with an interesting career. The video referenced in the above captures him speaking to an almost empty (how can this be) House of Commons about:

1. The imbalance in the UK US Extradition Treaty**

2. The inappropriateness of the imbalance

3. The need to “rein in” the US extraterritorial tendencies.

If you go his Official Site, you will find a link an article written by him discussing the treaty in the context of UK Businessman Michael Lynch.* I highly recommend the article to: (1) Freedom loving individuals everywhere as an example how international agreements and treaties can restrict opportunities and freedom and (2) Individuals the world over who want to understand how international agreements (which appear to be for the purposes of preventing terrorism practised by individuals) can be used as (instruments to promote terrorism by governments).

About the Lynch case

The US-UK extradition treaty is a bad treaty. Last week's arrest of Dr Mike Lynch for his potential extradition to America is a vivid example of the problematic nature of our extradition arrangements with the United States. https://t.co/HSrSAIcdHB

— David Davis MP (@DavidDavisMP) February 10, 2020

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And so the @USTransitionTax came to be … https://t.co/oG4BRfxphI pic.twitter.com/qhplJeLhuE

— U.S. Citizen Abroad (@USCitizenAbroad) February 5, 2020

The article referenced in the above tweet (although long) is worth the read.

It helps explain why:

– individuals who live in other countries are subsidizing tax reform for U.S. corporations

– U.S. corporations are not likely to pay much U.S. tax anytime soon

and more.

Please retweet:
Are you an American moving to Canada or who has moved there in the last few years? I'd like to speak with you for a story I'm working on. Please DM me or reply.
Thanks!

— Bob Ortega (@Bob_Ortega) January 21, 2020

This may be of interest to some readers.

Introduction – Remembering Todundsteur 2013

The early years of Brock featured fascinating comments and analysis. Some of the best and most interesting comments and observations came from “TodundSteur”. Although referred to by Brockers as “Tod”, “Tod und Steur” means “Death and Taxes” in German – hinting at Todundsteur’s profession. Todundsteur exhibited a mastery of the application of how U.S. tax law applied to Americans abroad. I doubt that Brock has had as knowledgeable of a “tax commenter” since. For Brockers trying to understand the U.S. tax system he was a great teacher. For Brockers who were beginning to become FATCA activists he was a great mentor. In some of Todundsteur’s comments he identified Georgetown Law Professor Itai Grinberg as an individual who might be worth connecting with.

On January 6, 2013 Petros highlighted the following comment from Todundsteur:

FATCA is a large, clumsy, crude and unilateral attempt by the United States to cudgel, bluster and otherwise persuade the world to subscribe to the US American totalitarian assumption that the financial affairs of every denizen of the planet should be an open book to whatever sovereign entity claims the right to tax that person.

Over the years since the Civil War the citizens of the United States, with no historical experience – yet – of a totalitarian regime have been steadily surrendering power at every level: individual, familial, community and state to a centralized, Federal government.

The citizens of the US have been especially careless of their rights to privacy in the realm of financial and economic affairs. It began with the gradual introduction and imposition of electronic tax withholding and reporting on investment income in the early 60′s and then took a giant leap forward in 1970 with the massive wholesale surrender of financial privacy to the Federal government through passage of the “Bank Secrecy Act”.

The co-option of US financial institutions as the long arm of the IRS was part and parcel of that development.

The early 21st century has witnessed efforts – some more successful than others – by the democratically elected representatives of the US to expand the intrusion of the federal government into nearly every nook and cranny of economic intercourse; chiefly, by imposing reporting requirements on just about any individual or business that makes a commercial purchase of goods or services. Partly out of economic necessity the IRS has recently begun the process of co-opting the entire tax return preparation “industry” in the US and bending them to its will as the unpaid “deputies” of the tax collector.

It is perfectly natural that governments aspire to ominiscience and that is why citizens must always be on their guard and be prepared to challenge. But technological developments have abetted this megalomaniacal urge on the part of the US government to attain financial omniscience. There is serious doubt about the future of cash and the barter-based – and private – economy that cash enables.

Against this backdrop FATCA should be viewed not as an end in itself but rather a very large step in the direction of spreading the notion of the omniscient state throughout the world.

In the big picture, the US insistance on citizenship based taxation is simply a curiosity – but a potentially important one. If the US did not engage in the pointless stupidity of citizenship based taxation FATCA would have remained entirely invisible within the US and the political opposition to FATCA in and out of the US – weak as it is – would likely not have existed at all.

For those of you who are understandably focussed on the collateral damage inflicted by citizenship based taxation on US persons residing outside the US, I suggest that you consider looking for allies in the battle against US citizenship based taxation in a very unlikely place:

FATCA PROponents.

For those of you with the interest and patience to contemplate that possibility and who would like a clearer picture of the truly huge stakes for individual liberty and privacy that FATCA has put into play, I commend to your attention the recently published article by Itai Grinberg in the UCLA Law Review:

Click to access 60-2-1.pdf

Itai is a very intelligent scholar who has only recently left the US Treasury Department to return to academia. He is young and idealistic and he is deeply – and primarily – concerned about the ability of the nation state to force the winners of a globalized economy to contribute to the commonwealth of whatever nation in which they reside.

The question in my mind that I cannot yet answer is: assuming that the goal Mr. Grinberg espouses is good, is it worth the price in the loss of individual liberty and privacy?

When reading his article, ask yourself: would Mr. Grinberg be amenable to backing an end to the tomfoolery of citizenship-based taxation if in so doing it enhanced the possibility that FATCA or something like it became a universal model for world tax administration?

Todundsteur’s comment explains why opposition to FATCA in general and the FATCA lawsuits in particular are important.

Continue reading →

Broader context of US dollar and sanctions: Describing #FATCA as one (of many) example of how the US uses control over the US dollar as a way of sanctioning other countries. "Uncle Sam just used its financial nuclear weapon again" https://t.co/xVa8jhI8fc via @thesovereignman

— U.S. Citizen Abroad (@USCitizenAbroad) January 16, 2020

Introduction

There have been many articles on Brock and other sites about FATCA. The above tweet references a recent article at Sovereign Man which mentions FATCA in the context of a series of financial sanctions the U.S. has imposed on the world. In general, the article explains that it’s the dominance of the U.S. dollar and NOT it’s nuclear weapons that gives the United States the global power that it has. Interestingly the article pegs 2001 as the time when the United States began to use the world’s dependence on the U.S. dollar as a mechanism to impose sanctions on other nations. The “Sanction Principle” has been (unintentionally) reinforced by Juan Zarate in his book “Treasury’s War” (in which he proudly describes the relationship between the U.S. dollar and financial sanctions). Of course U.S. citizenship-based taxation, (and the power given by the FATCA IGAs to allow the U.S. to designate any individual as a “U.S. Person”), is the ultimate sanction against the rest of the world.

The U.S. Dollar As The Dominant Reserve Currency

Episode 553: The Dollar At The Center Of The World https://t.co/9WeBWPhedj

— U.S. Citizen Abroad (@USCitizenAbroad) January 16, 2020

The root of the dominance over the world financial system was the 1945 Bretton Woods Summit (well described in the NPR episode) in which the U.S. dollar became the world’s reserve currency. One wonders whether the use of a nuclear bomb to end the second world war was what placed the U.S. in a leadership position that allowed the U.S. dollar to become the weapon that it is today. Does military dominance reinforce the dollar? Or does the dollar reinforce military dominance. Or is it both?
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This will be one of the most interesting tax residency problems in the modern world. Tax residency is usually different from immigration status. What should Harry do? https://t.co/CvlcbbGJxC pic.twitter.com/Xbh49A74e0

— U.S. Citizen Abroad (@USCitizenAbroad) January 9, 2020

It appears that Meghan, Harry (and Archie) are moving in a new direction. This includes creating a new life (where they become financially independent and cease the day-to-day activities of assuming the responsibilities of being “Senior Royals”).

_______________________________________________________________________________

The family has released a new website to discuss their plans.

The most interesting part of the announcement is that they will spend significant time in North America (Canada and/or the United States). Along with this decision comes the question of “tax residency”. Along with the question of “tax residency” comes the question of taxation of foreign income and the reporting of foreign assets.

All indications are that Meghan plans to remain a U.S. citizen and that Archie (whether by accident or design) will be treated as a U.S. citizen. This leaves Harry. At present (as far as I know) he is a British citizen.

In light of all of this, should the family become tax residents of Canada, the United States or even both?

Will they remain tax residents of Britain?

Should Meghan live in Canada (U.S. property temporarily staying in Canada)?

Should Harry count the number of days he spends out of the USA to avoid becoming a U.S. tax resident?

Will somebody convince Harry that he should get a Green Card?

Might Harry conceivably eventually become a U.S. citizen?

Will the Royal family become Canadian citizens?

Will Canada be designated as a tax haven by the OECD?

The plot thickens.

All of this and more.

An opponent of @citizenshiptax is somebody who understands what it actually means: From 1985: "The Experience of the Phillipines in Taxing Its
Nonresident Citizens" https://t.co/Ip6y5VLzpz

— U.S. Citizen Abroad (@USCitizenAbroad) January 8, 2020

The article referenced in the above tweet – published in 1985 by Richard Pomp of the University Connecticut School of Law – was posted at one of Facebook groups here. The Facebook post includes some interesting commentary and begins with:

The Experience of the Phillipines in Taxing Its Nonresident Citizens:

I’ve often wondered about the process the Philippines went through when adopting a CBT system then going to one based on residency.

This study was written in 1985 to help determine whether CBT would be effective in deterring “brain drain” from less developed countries (LDCs). Although it was written prior to the Philippines adoption of residency-based taxation, it demonstrates very clearly the problems the Philippines had with enforcing CBT, problems that are strongly mirrored in the US today (complete with amnesties, passport revocation and the like). Unfortunately the US at this point doesn’t know there is a problem that needs to be addressed like the Philippines did as long as 50 years ago! I do think though the biggest difference between the Philippians then and the US now, is that the Philippines valued it emigrants in ways that the US does not.

As it began in the Philippines, they only taxed on citizenship because the US did!

“The early Philippine reliance on citizenship as a basis for tax jurisdiction reflects more the country’s colonial legacy from the United States than a carefully developed policy. Initially, Philippine citizens were taxed under the U.S. Revenue Act of 1913. This Act, adopted shortly after ratification of the sixteenth amendment in the United States, taxed the worldwide income of U.S. and Philippine citizens, regardless of their residence. Thus, early in its history, the Philippines incorporated citizenship jurisdiction into its own law following the U.S. model.”

When that didn’t work for reasons similar to what the US is currently experiencing, they went to a flat rate system one can compare to Eritrea’s, but with a deduction for taxes paid where one lives. It still didn’t encourage compliance.

The article is lengthy and the pdf is too big to upload here. But, you can download it yourself at this link.

I haven’t had time to read the article in any detail. But, if you look at the conclusion you will see all kinds of discussion about enforceability and the co-operation of other countries in enforcing the tax. The article was written in 1985 in a Pre-FATCA world.

This is an interesting article that may well shed light on why the Phillipines abandoned citizenship-baed taxation.

It would be interesting if Brockers were comment on:

1. Aspects in which you think the Phillipines situation is different from the U.S. situation.

2. Assuming automatic information exchange (FATCA and CRS) existed in 1985, how might the author have included this into the analysis.

For those who like to read the conclusion before reading Professor Pomp’s article, see:

Continue reading →

BREAKING: Happy Holidays! https://t.co/AJ8RC4YHhb

— U.S. Citizen Abroad (@USCitizenAbroad) December 21, 2019

In 2019 Helen Burggraf suggests Santa Claus may be an Accidental American – owing millions of dollars of back taxes. In 2011 Petros (writing one of the first and most important posts coming from the Isaac Brock Society) suggested that Santa may indeed be a U.S. citizen (possibly naturalized). Either way, it’s clear that:

Unless you can prove that you are NOT a “U.S. Person” you are subject to life problems!

That’s the bad news. The good news is that with or without the U.S. Government, the Holiday Season comes every year at this time. A good moment to include a recent comment from Embee:

Brock commenters (past & present), Brock post writers, Brock moderators, trial plaintiffs, legal teams (then & now), ADCS board members, trial fund donors (near & far) and so on …

I started to try to name all of them in order to wish them a Merry Christmas and Happy New Year BUT the list got very long and then I worried I’d miss someone.

Soooooo … MERRY CHRISTMAS and HAPPY NEW YEAR to EVERYONE who makes the Brock forum helpful, supportive and informative and to EVERYONE who made it possible for Canada to be the first country to challenge FATCA in a courtroom. SURGITE!

and response from Badger:

@Embee, may I heartily second your best wishes;

“..MERRY CHRISTMAS and HAPPY NEW YEAR to EVERYONE who makes the Brock forum helpful, supportive and informative and to EVERYONE who made it possible for Canada to be the first country to challenge FATCA in a courtroom. SURGITE!”

(Hope this message is considered an acceptable diversion from the main post. I believe that even little things like this can be powerful – to foster and maintain human connections – creating and cementing important bonds – particularly important when our contact and interactions here are only virtual. The early connections and sharing in a cooperative way forged strong bonds which are a large part of the reason IBS was so successful, in addition to the information sharing and problem solving re USextraterritorial CBT, FBAR and FATCA and is part of what keeps people reading and following here even when their US status and its concomitant burden was excised.)

Thinking back to the beginning of Brock in November and December of 2011:

This is a reposting of one of Brock’s first and best posts. It was written by Petros and was posted on December 24, 2011. If you go to the original post you will comments from some of the original contributors at Brock. In any case, it’s just as valid today as it was exactly eight years ago. This is also a good moment to recognize and thank the original founders (as in December 2011) of Brock (who I believe include) in no particular order: Petros, Pacifica, Deckard1138 and Calgary411. I don’t know whether Patricia Moon was an original founder, but she surely – for many years – provided the foundation upon which Brock rested, as the Premier forum for educating “U.S. Persons Abroad”.
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U.S. Federal agents arrested Santa Claus earlier today at the North Pole. Special Christmas Edition (Merry Christmas to all and to all a good night!)

A police composite sketch of man arrested today at the North Pole known as Santa Claus

The United States Department of Fish and Wildlife has arrested Santa Claus, an elusive figure with many aliases (e.g., St. Nicholas). On the morning of 24 December, 150 heavily armed Fish and Wildlife special agents raided Claus’ North Pole compound, seized several tons of exotic woods forbidden by the Lacey Act, arrested Santa Claus and a female accomplice identified only as Mrs. Claus, and liberated thousands of diminutive slave labourers known only as “Elves”. Claus has been charged with multiple counts of money laundering, illegal exportation of currency, illegally importing into the United States toys made of contraband–rare woods, ivory and other banned substances. He has also been charged with violations of slave labor and child labor laws, hundreds of patent and trademark violations, and illegally entering and exiting the United States. Indeed, Fish and Wildlife agents also seized an unidentified aircraft called a “sleigh” which had numerous secret compartments holding the contraband. Fish and Wildlife agents charged Mr. Claus with animal cruelty with regard to the caribou that he used to launch this “sleigh”.

Special Agent Hugo Smith, Department of Fish and Wildlife

Special Agent Hugo Smith said, “We arrived just in the nick of time. A moment later, and the caribou would have launched the sleigh and Claus would have escaped with the illegal materials. By now, he would be in the United States, breaking into people’s houses and selling this stuff.”

The United States Department of Immigration and the Internal Revenue Service have also had their eyes on Mr. Claus. An immigration official who also attended the raid said that they were able to obtain several dozen passports. He said, “It seems that this Santa Claus character has a different name in every country–his EU passport says, ‘Father Christmas’ and his Canadian passport says, ‘Père Noël’. We have, however, determined with certainty that Santa Claus is a United States citizen.” Apparently Claus worked in Hollywood during the 1940s and 50s making autobiographical films, such as Miracle on 34th Street. During that time he applied for and received U.S. citizenship.

Douglas Shulman, Commissioner of the IRS, has released the following statement:

IRS Commissioner, Douglas Shulman

At long last, the notorious tax cheat, Santa Claus, has been apprehended. He has been living in a foreign country for the last 50 years and during that time he has not filed his US taxes even once. It has become clear, however, that he has run a lucrative business at the North Pole and has never reported any of the income. In addition to criminal tax evasion, we intend to charge Santa Claus with 190 counts of criminal failure to file Foreign Bank Account Reports (FBAR), as we found evidence in his papers that he is operating or has signing authority on bank accounts in 190 different countries. It is our contention that the fines alone could help us bring billions in revenue into the United States government.

According to United States law, all United States Citizens are required to pay taxes to the IRS and to report any foreign bank accounts. Failure to obey these filing requirements may result in civil and criminal penalties including imprisonment.

The Obama administration declared that they were very pleased with the news. “It is about time,” Obama said from his Hawaian retreat, “that the United States returned those who have fled the country just because they don’t feel like paying their fair share anymore.”

The Republican candidate for president, Ron Paul criticized the raid, “The United States has neither the authority nor the right to go into another country and enforce its laws. Santa Claus is a citizen of the North Pole and it is overreach for us to go there and arrest him.” Also running for president, former Speaker of the House Newt Gingrich responded to Paul, “The United States must reserve the right to arrest terrorists and to violate the rule of law in order to provide safety for the People of the United States.” Prime Minister Stephen Harper of Canada said that his government did everything that they could to help the United States, even to the point of allowing the use of Canadian air space. “We are cooperating with the good faith efforts of the United States to eliminate terrorists in order to maintain the safety and security of all Canadians.”

Introduction and background …

As reported by Helen Burggraf of American Expat Finance with a general description of the problem …

Does Congress hate all Americans or only #Americansabroad who married an alien – AKA the #FBARMarriage: "Potentially significant error in 2018 IRS tax guide for 'certain married taxpayers filing separately' in Expatland" https://t.co/fHyFyaflhv

— U.S. Citizen Abroad (@USCitizenAbroad) December 19, 2019

As reported by Virginia La Torre Jeker of US-tax.org with a more technical description of the problem …

It's not that Congress doesn't care. It's that it doesn't care that it doesn't care! #Americansabroad get ZERO concern/attention from Congress: "ATTENTION! Married Filing Separately? $5 of Gross Income? Must File US Income Tax Return!" https://t.co/kp3kkb0PlZ via @VLJeker

— U.S. Citizen Abroad (@USCitizenAbroad) December 19, 2019

The TCJA created a situation where every “resident” member (nonresident aliens excepted) of America’s unique “Tax Form and Penalty Club” who is foolish enough to use the “Married Filing Separately” filing status, is required to file a 1040 even if they have no income.

Before moving to the main point of this post, two technical observations are in order:

1. The “married filing separately” status is generally the most punitive filing category there is (America does have a tax penalty for marriage) and is generally a separate tax on Americans abroad; and

2. The “married filing separately” status is particularly common in an “FBAR Marriage” (the type of marriage where a “nonresident alien” marries an American citizen).

As the post by Virginia La Torre Jeker (in particular) notes, Americans abroad are more likely to use the “Married Filing Separately” category because they are more likely to be married to an alien (grounds for special punishment perhaps?). The “alien” spouse can file jointly with the American (See Internal Revenue Code 6013(g). Although possible, and although there may be good tax reasons to do so, generally it would not be good for the health of the marriage to invite the “nonresident alien” spouse into the U.S. tax system. For examples of what this all means from a tax perspective read here. For an example of the problems this can cause see here. (Thanks to Virginia La Torre Jeker for all of these posts.)

Main point – Does equal protection require the “equal concern and respect of the legislature”?
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Article from U.S. Tax Lawyer Stanley C. Ruchelman and Toronto lawyer Sunita Doobay about the @ADCSovereignty #FATCA Canada lawsuit. The article is a good argument for donating to the appeal – this issue needs to go to the Supreme Court of Canada! https://t.co/BDHY0vorwm pic.twitter.com/e4M06HIPmY

— U.S. Citizen Abroad (@USCitizenAbroad) December 3, 2019

All I can say is that if you read the article referenced in the above tweet you will see why the FATCA lawsuits are important. An excerpt includes:

Deegan v. Canada

A similar conclusion was reached in Deegan v. Canada.18 The provisions of the Implementation Act and Sections 263 to 269 of the Income Tax Act, R.S.C. 1985 (5th Supp.), were challenged by individuals who were accidental Americans.

The plaintiffs alleged that those provisions cause Canada to act as an intermediary between Canadian financial institutions and the I.R.S. Those institutions are required to provide C.R.A. with certain information concerning financial accounts belonging to customers whose account information suggests that they may be U.S. persons. C.R.A. then provides that information to the I.R.S. As a result, the plaintiffs alleged that the provisions of the Implementation Act violate the Canadian Constitution,19 asserting that they constitute an unreasonable seizure of financial information belonging to U.S. persons in Canada. The plaintiffs also alleged that the information exchange under the Implementation Act violated other provisions of the Canadian Constitution because they singled out individuals based on citizenship or national or ethnic origin.20 Finally, the plaintiffs alleged that the violations do not constitute reasonable limitations on the privacy and equality rights of affected individuals.21

The Federal Court disagreed with the allegations and held that the disputed provisions of the Implementation Act are not unreasonable and do not violate the Canadian Constitution.

The information that is obtained by C.R.A. from Canadian financial institutions is not an unreasonable search and seizure. Departing from the approach taken under the revenue rule, the Federal Court determined that an expectation of privacy is appropriate principally when a Canadian statute is criminal or quasi-criminal in nature. Reporting of tax information by Canadian financial institutions to C.R.A., and ultimately to the I.R.S., does not fit into that protected framework. Tax is essentially a regulatory statute, and the information relates to the manner in which income tax is calculated and collected. Hence, a lesser expectation of privacy exists.

The Federal Court also disagreed with the plaintiff’s assertion that the information is not of a kind that is regularly obtained under the Income Tax Act and therefore should not be delivered to C.R.A. Following the holding in Hillis v. Canada, the banking information is foreseeably relevant to U.S. tax compliance and can be obtained by C.R.A. pursuant to a request from the I.R.S. under Article XXVII of the Treaty.

To the extent that the disputed provisions draw a distinction based on national origin and citizenship, they are not discriminatory. In reaching its decisions, the Federal Court took into account the detailed negotiations that were carried on by the Canadian government, attempting to negotiate a carve-out for Canada. When the Canadian government realized that a carve-out was not possible, it realized that entering into an I.G.A. was the only way to avoid a potentially devastating effect on the Canadian financial sector.

The plaintiffs alleged that the purpose of the Implementation Act was to assist the U.S. government in implementing F.A.T.C.A. and finding U.S. tax evaders and cheats, a purpose that cannot be described as pressing and substantial for the Canadian government or Canadian residents. However, at the same time that Canada was negotiating its I.G.A. with the U.S. government, the O.E.C.D. was involved in developing and implementing a common standard for the automatic multilateral exchange of financial account information along the lines of the I.G.A. Hence, the Implementation Act could not be said to be out of line with global expectations of financial privacy.

Finally, the argument that the Implementation Agreement resulted in discrimination based on citizenship and national origin were misplaced. The Federal Court held that a classification based on national origin is a form of discrimination only where it perpetuates ongoing disadvantages or prejudice. That is not the case where compliance with laws of a country of citizenship are in issue.

The Charter does not require Canada to assist persons resident in this country in avoiding their obligations under duly-enacted laws of another democratic state, nor does it require this country to shelter those living in Canada from the reach of foreign laws. Indeed, as was noted earlier, insulating persons resident in this country from their obligations under duly-enacted laws of another democratic state is not a value that section 15 of the Charter was designed to foster.

Overall, the arguments raised by the plaintiffs paled in comparison to benefits that are derived by the banking industry in Canada. The I.G.A. was necessary for Canadian financial institutions to be deemed compliant with the requirements of F.A.T.C.A. and simplified the related data gathering obligations. In sum, the Implementation Act allowed Canadian financial institutions to avoid 30% withholding taxes on the receipt of capital payments on loans to U.S. residents and simplified the information gathering that would otherwise have been required under F.A.T.C.A.

(The author appears to imagine the the purpose of the Charter of Rights is to protect the banks.)

Notice that the “U.S. Centric” tone to the article which underscores why the FATCA lawsuits (both here and in the UK) must continue!