Category Archives: Issues regarding US persons abroad

US President James Madison Declared War on Canada two hundred years agao today and launched the War of 1812 Which Shaped Canada Forever.

Brigadier-General Isaac Brock heard the news while he was dining with American officers at Fort George. They finished the dinner in peace then withdrew to plan mutual destruction.

“My situation is most critical…Most of the people have lost all confidence.  I, however, speak loud and look big,” Brock wrote.

Today, we cannot lose confidence.  Just as Sir Isaac did 200 years ago, we must “speak loud and look big.” Together, we can win this war, too.

How would you react if your home country denied you the right to participate in the political process back home if you had been resident overseas for longer than 15 years?  Your home country does not overtly have citizenship-based taxation along the lines of the US, but refuses to let you go and claims that you will be tax-domiciled for your whole life, right up until your death.  Even if you change citizenship your home country would still considered you to be a domiciled tax resident and tax your estate accordingly, as if you had never left.

Sound familiar?  None of the above is hypothetical – The country that I am describing is the UK, and the above frustration is actually pushing some UK citizens to renounce their citizenship due to lack of representation and being made to feel like subjects and not citizens whilst overseas.  From a regional Iberian newspaper (in English):
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In the past day or so, it has been interesting to juxtapose the anxieties of first-time posters with the ongoing perceptions and ruminations and strategems of longer-term crew on the Brock.

On the one side: How can this be? I don’t want this! How can I simultaneously clear this up while not stumbling into radar that will take me out? Surely there must be some solution. Where does this circle begin? Is there any reasonable way out? This is such a mess — certainly someone will have to fix it! Maybe I can just wait for this to clear up? Or keep on hiding indefinitely?

On the other side: (1) This is election year in the United States, and maybe we can make the extraterritorial predicament an issue, and maybe Romney would be better than Obama. (2) FATCA is so overreaching and fantastic, and it just has to damage the US economy, and the rest of the world will have to realize that national sovereignty and human rights can’t take a back seat, and the incredible details mean that the project just has to fail. (3) Surely Canada will have to treat US persons just like everybody else, and it will help if we work hard to lobby this or that branch of officialdom. (4) This is a big important story suppressed by mainstream media, and sooner or later it has to break anyway, and we can advance the cause by commenting and corresponding in all possible directions.
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As reported by the Guardian here:

http://www.guardian.co.uk/business/2012/jun/15/us-property-attracts-foreign-buyers

A combination of the weak dollar and the collapse in the US housing market has resulted in US property starting to look more and more appealing to foreign buyers, the majority of whom apparently come from Canada, Mexico, China and the UK.  Four in ten homebuyers apparently want to live in the US full-time, whilst the others were purchasing holiday homes or time-shares.

I was surprised to see at the end of the article a mention that many buyers knew to stay out of the US for longer than 6 months each year “for tax reasons”, but do you think that they all really understand the implications of FATCA and the FBAR, especially the 40% of homebuyers looking to move to the US?

Also, my understanding of the “Substantial Presence Test” is that staying up to six months each year is much too long and could still trap most of these homebuyers into becoming “US persons”.  Here are the guidelines from the IRS’s own website:

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

1. 31 days during the current year, and
2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:

• All the days you were present in the current year, and
• 1/3 of the days you were present in the first year before the current year, and
• 1/6 of the days you were present in the second year before the current year.

If the above is met, then the person is considered to be “US resident for tax purposes”.  There are exemptions for foreign diplomatic staff, students, professional athletes and trainees temporarily in the US.  No exemption for holiday home-buyers.

How many people do you think are aware of this fact, not to mention the FBAR pitfalls that come attached to this?  Let us also not forget the new US government push to attract wealthy investors from overseas to purchase property in the US and be given a path to residency and citizenship, sponsored by no less than Schumer himself.  Conspiracy? Absolute indifference so long as money continues to flow towards the US?  Or maybe a bit of both of the above and total willful blindness to the damage that the US is doing to its image overseas and the goodwill that it is losing?

Canada continues to press for fair tax deal with United States, Finance Minister Jim Flaherty’s Letter to CARP Members

Minister of Finance Jim Flaherty responded to CARP’s request that he address some of the membership’s concerns with the following letter:

Canada and the United States are neighbours, allies and friends.  We share a common border and common values.  One of those values is fighting tax evasion and ensuring that everyone pays their fair share.

Recently, the U.S. government introduced legislation called the Foreign Account Tax Compliance Act (FATCA), which will require non-U.S. financial institutions to enter into an agreement with the IRS to identify their U.S. account holders and report their account information to the IRS.

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