Liberty and justice for all United States persons abroad

The Isaac Brock Society

Category Archives: Issues regarding US persons abroad

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/

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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Ottawa Brock Lunch – Saturday 26 May

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We’ll be getting together for lunch Saturday, 26 May 2018, at 1:00 pm at Montana’s BBQ Restaurant, 1711 Merivale Road (closest major cross-street Viewmount), Nepean.  Plenty of free parking on site, also accessible by city bus.

We’re currently expecting 10 people — hope you can come, too!   Please rsvp by posting a comment here or e-mail me at pacifica at isaacbrocksociety dot ca

1,100 names in late-as-usual IRS list of certain ex-citizens

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The Quarterly Publication of Individuals Who Have Chosen to Expatriate for Q1 2018 has just been placed on public inspection for printing in Tuesday’s Federal Register, eight days later than required by 26 USC § 6039G(d). This is the seventh quarter in a row in which the IRS has been late with the list.

This quarter’s IRS expat honour roll has the names of 1,100 people who gave up US citizenship, by my count. (Andrew Mitchel counted 1,099. My initial count was 1,102, because I accidentally counted two very long names as four entries.) Meanwhile, the number of records in the “renounced US citizenship” category of the FBI’s National Instant Criminal Background Check System (NICS) increased by precisely 1,100 during the first three months of the year, from 42,693 to 43,793. (The FBI added another 341 records in April, bringing the total to 44,134.)

The IRS list is known to be incomplete. It’s supposed to be much larger than the NICS list, not exactly the same size, let alone smaller. Per regulations, NICS only contains people who terminated their US citizenship by swearing an oath of renunciation at a US embassy or consulate. In contrast, the IRS’ list is supposed to have the names of all people who obtained Certificates of Loss of Nationality from the State Department, either by swearing an oath of renunciation or by reporting any other relinquishing act specified in 8 USC § 1481(a). The preamble of the IRS list even misleadingly implies that it includes some of the tens of thousands of people who give up their green cards every year.

Demonstrating the point, this quarter’s IRS list still failed to include some public figures who gave up US citizenship more than a year ago, including Japanese legislator Kimi Onoda and Ghanaian Deputy Minister of Finance Charles Adu Boahen. However, Homelanders and their chieftains don’t care about that. They’re dissatisfied with NICS instead, so there’s some provisions in the new spending bill imposing penalties on heads of upstream agencies, including the State Department, if they fail to certify semi-annually that they’re providing NICS with all the records they should be. More about that below.

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Brock project: Advice on how to explain the effects of the @USTransitionTax through a question in the House of Commons

Posted on by Posted in Canadian Government, Issues regarding US persons abroad, Law & Morality, Non Resident Taxation 46 Comments

This Brock comment which just appeared is deserving of its own post and your specific attention, thoughts and assistance.

But first, …

This has been a very interesting week for Canadians who are possibly impacted by the U.S. Transition Tax. We have the interview of the Hermans which appeared on the National.

We have articles by Elizabeth Thompson. I expect that Ms. Thompson’s articles led to the the following editorial in the Halifax Chronicle:

A second article from CBC indicated that Murray Rankin* (a 2014 ally in the fight to stop the FATCA IGA, had referenced the “transition tax” in the House of Commons.

It appears that there is momentum growing in the “campaign for awareness”.

Moving on: How can we better frame the message? How can the right question(s) be used to educate?

It would be helpful for Brock readers and commenters to consider, when conveying the message:

1. What are the most important aspect(s) of the transition tax to convey?

2. What should be the language used to convey those ideas?

Beginning with the following Brock comment …

CAB asks for the assistance of Brockers as follows:

“URGENT I have been in contact with my local MP (conservative) and he is willing to submit a Question for Question Period regarding the Transition Tax. What I need to do is put together some background information and the actual wording of the question we want to have asked. There is no guarantee that it will be selected but it is certainly a shot. My understanding is that if not selected for this weeks question period then it can sit in the queue and be picked up at a later date.

My first kick at the can in composing a question — ” Mr. Speaker, The United States as part of their tax reform has recently passed a new law aimed at bringing home the profits of money off shored in large multi-national corporations. While it is laudable to repatriate these earnings back to the US homeland the application of this law makes no distinction between the large American corporations and those small Canadian corporations owned by Canadian citizens permanently resident in Canada but also hold a secondary US citizenship. These Canadian corporations owned by doctors, restaurateurs and small mom and pop shops are not Google and Apple . These corporations hold the retirement savings of Canadian citizens; the retained earnings of Canadian entrepreneurs ear marked to grow and expand their business. Application of this tax will effectively bankrupt Canadian businesses and wipeout the pension plans of our Canadian citizens. It is a violation of the Canada -US tax treaty as the US has created a fictional tax event retroactive to 1986 where the first right of taxation has been usurped by the US. First installment of this tax is due June 15 2018 .

Will the government of Canada commit to negotiating with US treasury to exempt Canadian corporations from the disastrous effect of this tax? Will the government use the the Canada US tax treaty to protect our sovereignty and tax base against this raid by the US government? The Finance Minister has committed to studying the effects of this extraterritorial law. But time is of the essence. Will the government provide direction to our citizens prior to June 15 2018 when the first installment is due.
Those affected are first and foremost Canadian citizens ,resident in Canada , and deserve the protection of the Canadian government.”

Looking for your feedback – want to make sure I set the right tone and get the right question asked that will help us the most. Also any suggestions as to what I can include in the package that I need to send would be helpful.

Keep our fingers crossed”

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*For those who were not following this in 2014, you will see that MP Murray Rankin played a prominent role in opposition to the FATCA IGA. See here: