Category Archives: Issues regarding US persons abroad

In an article for the Vancouver Sun, Douglas Todd explores the ambiguities of life and self-identity for what he calls “Ameri-Canadians”.  I have long maintained that Canadians of American origin are Canada’s largely “invisible minority”.  Now, post-FATCA, we are being forced to reconsider not only our relationships with two different nation-states but also within our communities, our families and our very souls.  Todd covers an equally wide scope in his thought-provoking commentary:

Millions of Americans in Canada downplay links to Uncle Sam

With the Canadian government’s decision to comply in July with a Washington tax crackdown on “U.S. persons” around the world, many Ameri-Canadians are feeling rising anger, fear and even hatred toward their powerful country of origin.

That said, the self-identities of Americans in Canada have been more ambiguous than they tend to be for members of more visible immigrant groups, long before the U.S. began its notorious attempt to catch tax cheaters through the Foreign Account Tax Compliance Act, better known as FATCA. The U.S. is the only major country to tax based on citizenship, not residency.

Continue reading →

Chère communauté d’Isaac Brock,

Après un long délai causé par les difficultés de recrutement de bénévoles francophones au début de notre démarche, nous avons finalement notre site internet ADSC en français !

Je dois remercier les bénévoles qui ont gracieusement offert leur contribution : vin-de-table, Shadow Raider et, plus particulièrement, Living to Renounce, qui a apporté toutes les modifications finales suite au remaniement du site anglophone, et qui s’est assurée de l’exactitude de la traduction par un correcteur d’épreuves.

Si vous avez des questions ou commentaires à nous formuler en français, vous pouvez les publier ici et nous tenterons d’y répondre.

Nous espérons que ce site va permettre de mieux faire connaître l’enjeu au Québec et ailleurs au sein du Canada francophone.  Vous pouvez consulter le site ici :

ADSC Accueil

—————————————————————————-

Hello Brockers,

After a long delay, due to the difficulty of finding Francophone volunteers back when we started this endeavour, we finally have a French ADSC website! I must thank the volunteers who came forward: vin-de-table,  Shadow Raider and most especially Living to Renounce, who made all the final changes after the English website was rewritten and had a proofreader go over it afterwards for accuracy.

If you have questions or comments in french you can make them on this post and we will try to answer.

We hope that this site will now be able to make the issue better known in Quebec and the rest of Francophone Canada. Please check it out here:

ADSC Home

“TaxConnections” asks “Shall I Stay or Shall I Go?”

Besides first determining if you are indeed a U.S. citizen, some further self-analysis is necessary.   Anyone, and I mean anyone, should comprehend what is in store for “Americans Abroad” reading this and listening to John Richardson’s interview with CHQR News Talk 77, Dave Taylor, in Calgary, AB:

When it comes to FATCA, there are four kinds of *Americans Abroad*

…there are really four kinds of U.S. Taxable Persons abroad. Each one of them has his own set of problems.

…

They can be grouped as follows:

File U.S. tax returns?     U.S. tax compliant?  What is their problem?

Yes                                               Yes                    Inability to live normal life*

Yes                                               No                     Subject to penalties for mistakes**

No                                                Yes                    Don’t have any income***

No                                                No                    OMG moment is coming****

Dave Taylor got it and summarized:

It’s unbelievable that the US Government is going after people who in many cases, for decades, have not considered themselves to be Americans, American citizens, but indeed Canadian citizens, for money they don’t owe. It’s unbelievable the US Government has the audacity to think it has a claim on the assets of those people. It’s incomprehensible THAT THE HARPER GOVERNMENT IS PLAYING RIGHT ALONG. So we will watch this story because I think it’s a gross violation of rights and miscarriage of justice.

This analysis / summary of the absurdity and injustice for *US Persons Abroad* should be understandable to anyone who reads it or listens to the interview.

Whether *anyone* would include US Congresspersons whose job should be to understand and make reasonable effective change in legislation is debatable. Why is that?

An excellent new interview with John Richardson by Dave Taylor.  Recorded September 3, 2014 on CHQR News Talk 770.

Both John and Dave cover the basics of FATCA, the Canadian IGA, the legal challenge, the role of ADCS and much more.

 
Somewhere around right about now, three years ago, the worldwide U.S. person horror show began its gruesome run. This fright night still plays strong in pretty well any country outside the United States that you may happen to reside in.

Here are my nominations for the top three quotations so far, in chronological order. Notice that two of the three characters have already departed the scene.

 
FATCA has far-reaching extraterritorial implications. It would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians. … Canada is not a tax haven. People do not flock to Canada to avoid paying taxes.
—  Jim Flaherty  (then Canadian Minister of Finance)  16 Sept 2011

 
My message on this one is to sit tight. We are not unreasonable. We are not unsympathetic. We are not irresponsible.
—  David Jacobson  (then US Ambassador to Canada)  18 Oct 2011

 
Political signals from the United States show that expatriation and tax policies are likely to get harsher. … The cost of expatriation now is less than the expected future cost of expatriation. Better to take the medicine now rather than later. … Expect the same exit tax rules, but more of them, and worse. Expect more expatriations. … Get out while the getting is semi-good. Don’t wait for more time. More time means more laws.
—  Phil Hodgen  (still a tax lawyer)  5 June 2012
 

Feel free to propose other sourced contenders in comments to this posting.
 

From “JC”:

https://fatcalegalaction.com/ now live.

Attorney Bopp has issued a legal opinion on FATCA stating three constitutional claims, with strong legal merit, can be brought against the legal requirements imposed by the Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank Account Report (FBAR).

Yes FBAR!

According to James Bopp, Jr., “It is our preliminary opinion that the potentially meritorious claims are a violation of the treaty power, an 8th Amendment Excessive Fines Claim, and a 4th Amendment Search and Seizure Claim. . . . We believe that these 3 claims form the basis for a successful suit that would stop the damage that FATCA and FBAR have inflicted of U.S. citizens.”

The meat of the claim: Bopp FATCA Legal Opinion

At the start of the Legal Opinion, Mr. Bopp highlights Allison Christians’ arguments regarding the legal status of the FATCA IGAs signed by countries around the world.

The legal status of these IGAs is unclear and susceptible to challenge. They are not treaties under U.S. law because they have not be en submitted to the Senate for advice and consent pursuant to the Treaty Clause of the U.S. Constitution, Art. II, sec. 2, c l. 2. Nor ae they congressional-executive agreements because Congress has not authorized the Treasury Department to conclude the IGAs as part of the FATCA implementation effort. Instead, the Treasury Department appears to be treating the IGAs as treaty-based agreements, interpreting the information exchange provisions of existing tax treaties and tax information exchange agreements already in place with FATCA Partners. However, Allison Christians, a tax law expert and associate professor of tax law at McGill University in Montreal, argues that none of the IGAs are properly considered treaty-based agreements. Allison Christians, The Dubious Legal Pedigree of IGAs (And Why it Matters), Tax Notes International Vol. 69, No. 6 (Feb. 11, 2013).

…

To bring the subject of one of Eric’s posts back to the forefront, State Department to hike renunciation fees to US$2,350; says “no public benefit” in respecting human right to change nationality, I add another article, today, from the U.S. — Wall Street Journal, Laura Saunders, August 30th: U.S. Fee to Drop Citizenship Is Raised Fivefold. Commenting is open and comments have started.

Advocates for U.S. expatriates reacted angrily to news of the increase. “I’m so disappointed and insulted by the continuing punitive actions of the U.S. in trying to prevent persons and companies from leaving,”

Also from the U.S., which complements the articles on higher fees for renunciation, one from the U.S. Chamber of Commerce, highlighted this morning by badger: Exit Strategy: FATCA Tax Law Keeps Pushing Americans To Give Up Citizenship. Growth opportunity — the HIRE Act continues to give.

Here’s a hot tip for accountants and tax attorneys: now is a good time to develop specialized expertise in advising clients who may be seeking to expatriate from the United States. That demographic looks more and more like a real growth opportunity.

Some firms have already figured this out!

Further to suggestion by “JC” that this be posted here at Isaac Brock:

Update (undated) from American Citizens Abroad (ACA) – Why FATCA is bad for America

There is a lot of information here. This is Americans Abroad argument why FATCA is Bad. May we at IBS comment on it with an eye to strengthening the arguments put forward, then we may send it back to Americans Abroad?

While there is lots of information at IBS there are no master documents summarising all points. Here is where Americans Abroad have a summary.

One area where it could be strengthened is mention of the tax treaties. Australia is mentioned and says that not much extra tax would be owed. Point of Information: the US wants to tax the Australian pension fund called Superannuation. Also, if you have a share/shares and get Australian dividends – there is an Australian tax break on dividends – you would likely have U.S. tax liability. Also, the US wants to tax on “passive income.” So the closer to retirement the more passive income you may have, the greater your retirement funds, the greater the U.S. double tax exposure.

Note: As has been discussed here before, ACA does not seem to represent those who wish to expatriate from the USA. It is more an organization that represents those who want to remain “Americans” and perhaps someday return to the US to live. They have well outlined much that is bad for America and may welcome additional input from some of us.

Is this what CRA, Banks & Compliance Industries have not been Upfront about? IOW, "US Persons" in Canada "Screwed" http://t.co/Roy2tWwvLZ

— U.S. Expat Canada (@USExpatCanada) August 29, 2014

I just came across a rather disturbing bit of information that destroys any sense of security we’ve derived from the statements that “CRA will not collect taxes from anyone who was a Canadian at the time the tax was incurred.”

The author claims that Canadian Financial Institutions are not signed on to the Tax Treaty and that the IRS can take the information received from the CRA, contact the bank directly and ask the bank to collect penalties (not taxes and interest?) from the account holder and remit to IRS.

This doesn’t sound correct to me as the IGA may allow the banks to give info to CRA but I’m not aware that the IGA nullifies PIPEDA, which would still stand. If the argument is made that the “Treaty” trumps domestic law, and they can get away with applying that, we are in serious trouble. Allison’s arguments become very important and the government should have listened.

This position seems to depend upon a relationship between a Canadian bank that has branches in the US:

“IRS will go with a demand to collect penalties from the account holder’s information they have received from CRA to Canadian Banks operating in the USA, namely RBC, TD, HSBC etc. Once the USA branch of Canadian Banks gets the demand letter from IRS, they will forward it to respective Canadian Branch where the account holder has account with the banks. As far as bank operation goes, they will either collect and remit the penalties on behalf of IRS or freeze the account until the penalties are paid.

If Canadian banks don’t comply with IRS demand, any payment coming to them from the U.S. will be subject to 30% withholding tax on gross income. They will be also forced out of doing business in U.S. capital markets and markets that conclude contracts in U.S. dollars, 1.e. the commodity or petroleum market.

U.S. persons now must comply with USA tax laws, or risk the discovery by the CRA and IRS which can make their life miserable and wealth diminished.”

If this is truly the case, why haven’t the compliance community/politicians pointed this out? Is this a willful omission on their part? This information comes from a company in Vancouver “Cross Border Tax Service.”

Those of you in the legal community, please weigh in on whether a subsidiary branch of a Canadian bank in the US can force the Canadian parent company to collect/withhold. It sounds rather tenuous to me yet as we have seen in the last few days, they seem to be able to do whatever they want.

Here is the article.

.