Category Archives: Issues regarding US persons abroad

Important article which Helen Burggraf has written for John Richardson‘s website (posted with permission). Please note deadline for submissions is this Wednesday.

Those interested in contributing their thoughts to the State Department’s forum on the question of its proposed renunciation fee reduction may click here and follow the instructions.

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October 29, 2023 By Helen Burggraf – American Expat Financial News Journal

Advocates for fairer tax treatment of American expats by their government, including both the Republicans Overseas and Democrats Abroad, are urging such expats not to hesitate in posting comments on a U.S. State Department proposal to lower the fee currently charged those seeking to renounce their U.S. citizenships, the deadline for which expires in less than three days. 

However, many of those urging fellow expats to register their opinions regarding the renunciation fee, including both the Democrats Abroad (DA) and the Republicans Overseas, are suggesting that those commenting include a mention of the fact that there would be less need for people to renounce their citizenships if the U.S. government were to address the mostly tax-related problems that are driving them to do so.

The reason they’re ramping up their calls for expat action now is because they say this temporary comment submission facility represents a rare chance for expats to speak directly to strategists at one of the most important bureaus involved in U.S. tax policy decision-making – and because, as this article was being published on Sunday (Oct. 29), only 454 comments had been received, according to the page on the Federal Register that those invited to make comments are instructed to visit.

“Instead of penalizing Americans on their way out the door, the State Department should be asking itself why they’re leaving in the first place,” is how the DA Taxation Task Force (DATTF) put it, in an email to its members earlier this month. It reinforced this message with a follow-up email on Thursday.

While reducing the fee to renounce – or, as the State Department puts it, the fee for providing the necessary consular services required to process requests for each “Certificate of Loss of Nationality” or CLN) – to US$450 from US$2,350 was “at least an improvement” to the current situation, the DATTF went on, “the real tragedy is that so many Americans feel like they have to cut ties in the first place.

“Instead of nickel-and-diming Americans forced to renounce their citizenship to escape double-taxation, the State Department should push Congress to bring the US into line with the entire rest of the world in the way it taxes its expats.”

Thursday’s email added: “This is a great opportunity for your voice to be heard about the tax problems forcing Americans abroad to renounce their citizenship in the first place (aka the tax compliance nightmare suffered by Americans abroad)”; The Republicans Overseas echoed the Dems Abroad’s comments in its own message to its members, sent a few days ago, in stressing the opportunity to make the case for fixing the way American expats are taxed, rather than focusing on the renunciation fee itself.

John Richardson examines the concept of the “weaponisation of citizenship,” beginning with the 1920s Cook v. Tait decision through the present day. Posted with permission.

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Introduction And Purpose

The Weaponization Of US Citizenship – Two Methods

The history of US citizenship as documented in Amanda Frost’s “You Are NOT American”, is an epic story of the “weaponization of citizenship”. I highly recommend Professor Frost’s book – “You Are NOT American” to those interested in the evolution of US citizenship.

The focus of this blog has always been on citizenship, taxation and citizenship taxation. Although taxation has always been perceived as a necessary burden, citizenship has sometimes been a benefit and sometimes been a burden. James Dale Davidson, writing in “The Sovereign Individual”, expressed the view that in the 20th Century US citizenship was generally a benefit. In the 21st (digital) century US citizenship based taxation has transformed US citizenship into a burden. The numbers of people renouncing US citizenship are a testament to this new reality.

Method 1: Weaponization By Claiming The Individual Does NOT Meet The Requirements Of Citizenship

Regardless of the benefits or burdens of US citizenship, it is clear that the United States has a long history of “weaponizing US citizenship”. Professor Amanda Frost in her superb book “You Are NOT American” provides many examples of how the United States has used the concept and status of citizenship to either punish or reward individuals. Generally, Professor Frost describes a history where the use (or misuse) of America’s “nationality laws” has created hardships for people. Citizenship is a part of who people are. It’s part of their personal identity. Citizenship (presumptively) gives people a place or country they can call home. Citizenship (presumptively) gives people a place where they can live without fear of removal. Citizenship matters and the loss of citizenship can be a frightening and destabilizing event in the lives of an individual. It was not until 1967 that the United States Supreme Court in Afroyim ruled that US citizenship was conferred by the Constitution, belonged to the individual and could not (at least if born or naturalized in the US) be taken by the Government. (Of course that is of little comfort to those who can’t prove their US citizenship.)

Some official movement (finally) towards re-instatement of the pre-increase $450 CLN fee. Reported by John Richardson. (posted with permission).

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October 2, 2023 – Notice of Proposed Rule Change

Okay, it’s official. Here is a link to the proposed rule change which is necessary to reduce the renunciation fee from $2350 to $450. Officially, the fee is NOT a fee to expatriate. Rather it is a fee to issue the “Certificate Of Loss Of. Nationality”. also known as a CLN.

There is a 32 day comment period and I strongly suggest that you DO comment!

I encourage you to read the Notice in. its entirety. But, I note that it includes the following:

In the years since the fee was increased, members of the public have continued to raise concerns about the cost of the fee and the impact of the fee on their ability to renounce their citizenship. While there is no legal requirement for individuals to declare their motivation for renouncing U.S. citizenship, anecdotal evidence suggests that difficulties due at least in part to stricter financial reporting requirements imposed by the Foreign Account Tax Compliance Act (FATCA), Public Law 111–147, on foreign financial institutions with whom U.S. nationals have an account or accounts may well be a factor.

After significant deliberation, taking into account both the affected public’s concerns regarding the cost of the fee and the not insignificant anecdotal evidence regarding the difficulties many U.S. nationals residing abroad are encountering at least in part because of FATCA, the Department has made a policy decision to help alleviate at least the cost burden for those individuals who decide for whatever reason to request CLN services by returning to the below-cost fee of $450. Although the prior fee of $450 represents a fraction of the cost of providing CLN services, this change will better align the fee for CLN services with other fees for services provided to U.S. citizens abroad, including, for example, applications for a Consular Report of Birth Abroad, which all are set significantly below cost, even as the costs of providing these services have fluctuated over time.

If you go to the following link you can submit a comment (and even email this to a friend).

https://www.federalregister.gov/documents/2023/10/02/2023-21559/schedule-of-fees-for-consular-services-administrative-processing-of-request-for-certificate-of-loss

Here is a pdf version:

Federal Register Schedule of Fees for Consular Services-Administrative Processing of Request for Certificate of Loss of Nationality (CLN) Fee

SEAT (Stop Extraterritorial American Taxation) has announced that they and AARO (Association of Americans Resident Overseas) have filed a joint amicus brief in Moore v. United States, a US Supreme Court case which deals with the Transition Tax.  (Amicus curiae refers to an organisation or person that isn’t involved in the litigation, but has expertise in the subject matter and receives the Court’s permission to submit information and arguments in support of one of the parties.) Although the lawsuit involves US residents, this amicus brief explains why Moore is important for overseas Americans.

Reposted with permission from SEAT:

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Today SEAT and the Association of Americans Resident Overseas (AARO) joined to file an amicus curiae brief with the U.S. Supreme Court in relation to Charles G. Moore, et al. v. United States (Docket No. 22-800).

SEAT co-founder John Richardson has explained:

Moore [is] the most important case the U.S. Supreme Court has ever heard. The Court stands between the possibility of freedom and a society ruled completely [by the Internal Revenue Code].

SEAT co-founder Karen Alpert blogged about the problems of the “Mandatory Repatriation Tax” being challenged by Moore back when the Tax Cuts & Jobs Act (TCJA) was legislated:

In all of the hearings on [the TCJA], not one Representative or Senator mentioned anything about the applicability of this provision to corporations owned by tax-residents of other countries, for whom the idea of “repatriating” profits to the U.S. is not only absurd, but also a drain on the economy of the country they call home.

The case concerns Charles and Kathleen Moore, who live in Washington State. In 2006 they invested in 13% of an Indian corporation, KisanKraft, created to import, manufacture, and distribute affordable farming equipment in India. The Moores never realized earnings from the investment.

In 2017, the Moores discovered they owed nearly $15,000 in U.S. income tax based on the unrealized earnings of KisanKraft going back to 2006. Believing the “transition tax” (or “repatriation tax”) to be unconstitutional, the Moores took their case to court arguing that because the tax was imposed on accumulated foreign earnings, it was not a tax on income and is therefore unconstitutional under the 16th Amendment. In June 2022, the Ninth Circuit Court of Appeals affirmed the district court’s decision rejecting the challenge. In its decision, the court held that whether income is realized is not a determinative factor regarding the validity of the transition tax.

In June, 2023 the Supreme Court granted the Moores’ petition for a writ of certiorari – that is, the Court agreed to hear the Moores’ appeal. The Court is expected to hold arguments in the case in December, 2023.

The question posed in granting certiorari is “Whether the Sixteenth Amendment authorizes Congress to tax unrealized sums without apportionment among the states.”

SEAT’s and AARO’s joint amicus brief explains both why Moore is important for overseas Americans and additional grounds upon which the Court may rule in favor of the Moores.

For more information about Moore and its importance – in particular for overseas Americans – see Richardson’s in-depth discussion on his website Citizenship Solutions.

SEAT’s and AARO’s joint brief is available here:

I used to use two e-mail accounts for Brock matters.  Going forward, please e-mail me only at Pacifica@IsaacBrockSociety.ca  

Fabien Lehagre of l’Association des Américains accidentels has provided an update on the Belgian FATCA IGA case, which includes:

“The Belgian State has appealed the Belgian data protection authority (DPA) decision ordering the prohibition for the Belgian tax authority to process personal data of accidental Americans in the context of FATCA and to transfer the data to the IRS, the US tax authority. An introductory hearing took place at the Brussels Court of appeal yesterday [29 June 2023]. The Court of appeal decided to suspend the effects of the Belgian DPA decision.  . . . ”

Fabien notes that, “this prohibition . . . is now suspended by the Brussels Court of Appeal [pending the appeal decision].  The main reasons for doing so are to avoid the risk of damaging Belgium’s international reputation towards the United States and the diplomatic relationship with the United States as well as the difficulties for FIs who can no longer meet their FATCA obligations.”

Key Dates:

24 May 2023.  Decision.  Press Release. “The Belgian Data protection authority today declared unlawful, and decided to prohibit, the transfers of personal data of Belgian ‘Accidental Americans’ by the Belgian Federal Public Service Finance (FPS Finance) to the US tax authorities under the intergovernmental FATCA agreement.”

30 Jun 2023 From Fabien’s Update. “The Belgian financial institutions (FI) must, in principle, transfer FATCA relevant data to the Belgian tax authority for the fiscal year 2022. As the Belgian DPA prohibited the Belgian tax authority to process these data, this also means that the FIs cannot transfer the data to the Belgian tax authority as reception of these data by the latter also constitutes a form of prohibited processing.”

30 Sep 2023. “Belgian tax authority is supposed to transfer the data to the IRS.”

15 Nov 2023.  “Pleadings on the merits are scheduled for 15 November 2023.”

Several of us are getting together to celebrate Travis’ new CLN with dinner at The Keg, 75 York Street, Ottawa, on Tuesday, June 20^th, 6 pm.  Good food and drink and, important for us, it’s a good place for conversation, quiet and comfortable.  We’re currently expecting nine people.  All Brockers are welcome, whether local or visiting Ottawa from out-of-town.  On that latter note, we’re pleased that John Richardson of Toronto will be attending. 

Hope you can join us!   Please RSVP by leaving a comment or emailing pacifica.isaacbrocksociety@gmail.com