Liberty and justice for all United States persons abroad

The Isaac Brock Society

Category Archives: Issues regarding US persons abroad

U.S. State Department rejected two visa applications in 2016 based on Reed Amendment

Posted on by Posted in Issues regarding US persons abroad 23 Comments

As I just noticed, last week the State Department released one of the final missing pieces of their Report of the Visa Office for Fiscal Year 2016: Table XX, “Immigrant and Nonimmigrant Visa Ineligibilities (by Grounds for Refusal Under the Immigration and Nationality Act)”.

This latest update reveals that two out of the tens of thousands of people who have renounced citizenship since 1996 were denied U.S. non-immigrant visas last year under 8 USC § 1182(a)(10)(E) (colloquially known as the Reed Amendment) because they had renounced U.S. citizenship for the purpose of avoiding taxation by the United States. One was later able to overcome the finding of inadmissibility.

This is the first time the State Department have formally admitted to denying visas on that basis. However, for decades they have been denying visas to about a half-dozen ex-citizens or ex-green card holders per year whom they believe left or stayed outside the U.S. to avoid the draft.

The State Department acting on their own cannot legally find you inadmissible under the Reed Amendment, and the Foreign Affairs Manual warns consular officers against doing so. They need a determination of inadmissibility from the Department of Homeland Security. DHS have said they can only make such determinations if ex-citizens “affirmatively admit to renouncing their U.S. citizenship for the purpose of avoiding U.S. taxation” — the IRS cannot offer DHS any assistance, due to provisions protecting the confidentiality of tax returns, and State can only tell DHS what the renunciant tells State.

DHS revealed all these difficulties in a November 2015 report, which both myself and Patricia Moon have previously discussed. It is not clear whether the two individuals denied visas by State last year were the same two individuals mentioned in that 2015 report (to whom DHS had previously denied entry), though I suspect that may be the case.

In short, don’t tell DHS or State the obvious truth about why you want to stop being a U.S. citizen, and they — unlike the IRS — officially won’t treat you any worse than they treat other non-citizens. (Unofficially, there do seem to be a few reports of consular officers getting angry that anyone would dare apostatise from the American civic religion, and then using an outlandish finding of 8 USC § 1184(b) “failure to overcome presumption of immigrant intent” as an excuse to deny a visa.)

The FATCA Master Plan Revealed

Posted on by Posted in Issues regarding US persons abroad 96 Comments

Global News has the following report:

U.S. sues Vancouver dual citizen for over $1M for not reporting accounts

This is big news. And it reveals and confirms my prediction of what FATCA would be used for:  To go after the bank accounts of “US persons” living in foreign countries by using FBAR fines and FATCA information. I called it the Master Plan.

A few observations on this article:

(1) Clearly this lawsuit should help the ADSC lawsuit. Here is a case of real hazard that failure to protect Canadians from IRS intrusiveness will result in.

(2) This case is not based on tax owed, and so this is purely an FBAR matter. But IRS code has no jurisdiction in this matter.

(3) The article doesn’t say where the lawsuit is taking place, but then says that the papers were deposited in Seattle in Federal court.

(4) The fine of $100,000 or 50% of account is wrong: Or did it go up from $10,000?

(5) President Donald Trump has made no difference in the persecution of so-called “Americans abroad”.

(6) This is a Canadian living in Canada. He is therefore an innocent person being sued by the government of the USA, for small money. I.e., he is a minnow, and what Nina Olsen has called a benign actor.

(7) The lawsuit shows that QI provisions are not sufficent for the USA government to seize Canadian accounts in Canada.

(8) The Justice Department is not suing this person in Canadian court. But perhaps that will come next.

See also:

U.S. government suing Canadian resident for $1.1M over bank form

Eight Citizenships

Posted on by Posted in Issues regarding US persons abroad 3 Comments

 
Here’s a fun story about a former U.S. citizen who early on ditched the U.S. millstone around his neck and then went on a shopping spree to acquire an extensive set of trophy citizenships.

Insider insights from Canadian immigration lawyer David Lesperance also include some account of a few other interesting cases, notably that of

 

Xiao Jianhua, the Chinese-Canadian-Antiguan billionaire who on January 27 was whisked away from the luxury Four Seasons apartments in Hong Kong and over the border.

 

Full story at https://www.biv.com/article/2017/3/curious-case-canadian-eight-citizenships/.
 

U.S. consulate in Netherlands ignorant of 9 FAM 202.1-2 regarding visa issuance to person with possible claim to U.S. citizenship?

Posted on by Posted in Issues regarding US persons abroad 43 Comments

We’ve previously discussed the rising trend of of American emigrants choosing not to register their non-U.S.-born children as U.S. citizens. Children who don’t get registered and don’t hold a passport from a Visa Waiver Program country have to apply for a visa in order to visit their relatives in the United States.

Along those lines, over at Wikipedia’s Reference Desk an American in the Netherlands recently asked for advice about getting a U.S. visa for his daughter. His daughter is a Russian citizen & passport-holder and has Dutch permanent residence. However, he reports that he’s encountering some resistance from his local U.S. consulate:

I’ve been advised that someone (in this case a child, my daughter) who ‘has a claim to US citizenship’ – in this case because I am in fact an American citizen – is therefore ‘not eligible for visa to visit the US’. So I’m looking for some reference to what rules or law that might be? My daughter has a Russian passport, permanent Dutch residence, and we don’t plan to apply for American citizenship for her – in fact we’re in the process of obtaining Dutch citizenship for her, me and her mother. Can someone help me find a reference or rule or law that would explain why, if you could be an American citizen, but aren’t one, you would be denied the possibility of a visa. Thanks if you can help with a concrete reference or link. I’ve been googling but its an unusual circumstance.

He went on to clarify:

My advice was in fact the US Embassy. They received my daughter’s visa application, and sent me the message I quoted from above. My daughter is not a US citizen, and there isn’t a plan to be one. I’m trying to find good info with references to prepare for negotiating with the Embassy. I wouldn’t think that they can impose US citizenship on her. Thanks anyone who can point me to hard information.

The State Department’s own Foreign Affairs Manual in fact clarifies that the child can apply for a visitor visa rather than being forced into making a Consular Report of Birth Abroad. Specifically, 9 FAM 202.1-2(a), formerly 9 FAM 40.2 Note 1, says:

a. Processing Visa Applications for Aliens Who May Have a Claim to U.S. Citizenship:

(1) Nonimmigrant Visa Applicants: You may not issue a visa to an individual who has been determined to be a U.S. citizen. However, if a nonimmigrant visa applicant with a possible claim to U.S. citizenship is unable or unwilling to delay travel until he or she has been able to obtain documents to establish that status, as determined by the post’s citizenship and passport officer, you may presume that the applicant is an “alien” pursuing a nonimmigrant visa application. If you find the presumed alien eligible to receive the visa then you may issue the visa.

This subsection was last modified in November 2015. After the jump I discuss the history of updates to 9 FAM 202.1-2.

Continue reading →

When Law Becomes a Substitute for Morality

Posted on by Posted in Ethics, Issues regarding US persons abroad, Law & Morality 37 Comments

As many Brockers have stated, they don’t do FB; one thing that has happened over the last year is the ADCT site has built connections with many of the expat FB groups and/or pages. My comments about “A Blast From the Past” applies to something happening over there (not here). For whatever reason, it seems they do not come to Brock and so miss out on a lot of the great stuff that is available here.

That said, after reading this when it went up, I thought the original post was just too good not to repost. And given it is now nearly 4 years old, there’s a good chance newer Brockers have never come across it.

*******
from the ADCT blogsite
March 7, 2017

Today I’ve decided that I would like to go back and reblog some of the best expat posts from the last five years. For lack of a better title, I am going to call it the “A Blast From the Past Series.” This week I am going to focus on the disconnect between law and morality.

Every now and then I realize that people are still coming into awareness and that they do not realize a lot of what has gone on; how long some of us have been involved in this and most importantly, why some of us are so vehemently resistant and unyielding when it comes to evaluating the U.S. government, the tax compliance industry and so on. I guess some of us are afraid that this long period of lassitude may give a false sense of “safety.”

Without resorting to outright fearmongering, there are a number of things that may not happen (tax reform) or that will change (discontinuation of the Streamlined Program) etc. Our main reason for being involved in this from the very beginning, was to get the word out, to do our own research/take responsibility for educating ourselves and others about this hideous situation. I think it is important for people to understand how this situation has played out since the beginning……..

One of the worst aspects of everything happening today is the growing lack of morality in the world. I mean this in the “big” sense of the word; something which is on the mind of every human being as we watch America turn from being an open and welcoming society into one moving toward closed borders, over-the-top surveillance, etc. Today the Secy of Homeland Security literally said he was considering separating (illegal) parents from their (American-born) children. Unbelievably cruel and totally unnecessary. And the reinstatement of the “travel ban” which has been tweaked a bit but cannot possibly be seen for anything except what is clearly is – a move to keep Muslims out of America.

What does this have to do with us? Everything. Because when you see your government behaving like this, you are forced to evaluate two things:

1) Can YOU trust them?
2) Is there any reason to reject them/protect yourself given the unusual situation expats find themselves in?
Continue reading →

This #FATCA post by Dan Mitchell of CATO deserves special attention

Posted on by Posted in Issues regarding US persons abroad 26 Comments

You will find the article on his blog here. Mr. Mitchell’s blog is well read, highly respected and includes well written posts that “cry out” for intelligent comments.

Is President Donald Trump leading to renunciations of United States citizenship?

Posted on by Posted in Issues regarding US persons abroad 92 Comments

The current media narrative is anti-Trump 24-7. He is bad. And of course all those celebrities and other people are waiting in line to flee the country and renounce their citizenship. So I was contacted by a reporter of a well-known news network who is writing an article on people who are renouncing their USA citizenship because of Donald Trump. He asked me:

  1. If there has been an increase of traffic to isaabrocksociety.ca since the November election.
  2. If anyone had contacted us with questions about renouncing directly linked to Trump.

Here is my response:

There has been no uptick in traffic to our website, and no one anti-Trump has contacted me in my function at Isaac Brock.  I do not predict an uptick in renunciations over Trump. People are renouncing for practical reasons. Anti-Trumpism is fanatical, but Trump has not so far caused real problems for American citizens. FATCA, citizenship taxation, the Obama enforcement of FBAR, CBT and FATCA, and the compliance condors have created real problems for so-called “Americans” abroad–especially those of us who are little older and more established financially. Trump just seems to make some American citizens really angry but has not yet substantially harmed them (at least I do not know of concrete examples).

I had one person contact me on behalf of someone who owns property here in Canada, wanting to know the tax implications of moving to Canada and how one might transfer bank assets.  This person was not asking about renunciation of citizenship–just the tax implications of moving to Canada (and how to move assets). She did not know I run the Isaac Brock Society. I know her from Facebook for other reasons.

I see that one of the problems with the shrill anti-Trump narrative in the mainstream press and social media is that the wrongs done against expats have been completely ignored. When I talk about the wrongs that Obama did, I am scorned.

Trump may eventually reverse FATCA, but I do not hold out hope. Nevertheless, in the current persecution of expats Trump only continues the demonic policies of his predecessor.

Here is a reminder of why Peter Dunn relinquished his USA citizenship:

What do you Think of the Penalties in These Three Cases of Unreported FBARs ?

Posted on by Posted in Issues regarding US persons abroad 31 Comments

Ty Warner

Ty Warner
Ty Warner, founder/owner of the Beanie Babies line, was sentenced in July 2015 for tax evasion.The panel of three U.S. District Court judges gave him 2 years of probation and 500 hours of community service. The sentencing guidelines ranged from 46 months up to a maximum of 57 months. He agreed to pay back taxes and interest of $16 million as well as a $53.5 million penalty (the full FBAR penalty of 50% of the balance of the highest account-$107,000,000). According to Melissa Harris (author of this article that appeared in the Chicago Tribune, July 15, 2015) Warner’s sentence was “a punishment that reduces evading millions in taxes to a speeding ticket,” and that the sentence “flies in the face of both reason and justice”.

Warner had an estimated net worth of $2.5 billion, and was the 209th richest American.   According to Janet Novak of Forbes:

He admitted that around Jan. 31, 1996, he flew to Zurich and deposited about $80 million at UBS AG, instructing that no account statements be sent to him in the U.S., and that he kept the account secret until November 2007. During that period he failed to report at least $24.4 million in interest income on the account to the Internal Revenue Service, evading at least $5.6 million in taxes. He also failed to file with the Treasury the required annual “FBAR” report on his foreign accounts

What beggars belief is that Mr. Warner never provided any explanation for:

  • why he opened the account
  • the origin of the funds
  • audits of his books & records show the funds did not come from his company
  • his personal domestic accounts showed no signs of the origin of the funds

In fact the evidence suggested that the funds may have been pre-tax payments of some sort. To this day, the extent of his willful tax evasion is in reality, unknown.

So why did Mr. Warner get off so lightly? Was it because his lawyer Mark Matthews used the Olenicoff Defense?
Was it because his creation, the Beanie Babies line of stuffed toys, was just too cute for anyone to believe he was guilty of such evasion?

Peter Henning a Wayne State University Law School Professor and co-author of ‘Securities Crimes ”said in an interview, “I don’t want to say anything goes,….Clearly you can’t consider race or wealth. But you are looking at character. That is something judges can take into account. The question is how much should it weigh into the decision?”

This is where Mr. Warner hit the jackpot. He received 70 letters of support from friends, employees and recipients of his charity, actions which had nothing to do with the charges and only someone with money could do.

U.S. District Judge Charles Kocoras (of the panel) based his sentence on:

…..a reading of 70 letters, Kocoras found that “Mr. Warner’s private acts of kindness, generosity and benevolence” were “overwhelming,” with many occurring before he was under investigation and, in Kocoras’ words, motivated by “the purest of intentions.” Most were done “quietly and privately.” The judge concluded: “Never have I had a defendant in any case — white-collar crime or otherwise — demonstrate the level of humanity and concern for the welfare of others as has Mr. Warner.”

So a man guilty of many years of tax evasion, who did not even account for the origin of the account nor any records of it, received an incredibly light sentence based upon support from his family, friends and beneficiaries of his kindness. Where is the law here?
 

Continue reading →

In four years, about 1% of diaspora non-filers chose to come into compliance through Streamlined: IRS

Posted on by Posted in Issues regarding US persons abroad 81 Comments

On Thursday, the IRS released their “Dirty Dozen Tax Scams” for 2017, among which they listed “unreported offshore accounts”. They go into more detail in IR-2017-35:

Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 55,800 disclosures and the IRS has collected more than $9.9 billion from this initiative alone.

In addition, another 48,000 taxpayers have made use of separate streamlined procedures to correct prior non-willful omissions and meet their federal tax obligations, paying approximately $450 million in taxes, interest and penalties. The IRS conducted thousands of offshore-related civil audits that resulted in the payment of tens of millions of dollars in unpaid taxes. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

Works of the U.S. government are not objects of copyright, which is a boon for stenographers who mislabel themselves as “journalists”: they can just cut-and-paste the U.S. government’s viewpoint on the issues into their magazines without thinking about it, or attempting any analysis.

Anyway, US$450 million is an average of about US$9,400 per Streamlined participant. Not as big as the $13,000 per head they extracted from minnows with two-digit annual tax deficiencies under the 2009 OVDP, but still a sizeable sum from the perspective of the individual.

I’m sure there’s some poor deluded souls in the IRS and the Joint Committee on Taxation staff who are salivating at the thought of getting nine grand per head out of the rest of the millions of diaspora non-filers too — that might help them turn those mythical FATCA revenue estimates into reality. If that’s their aim, however, then forty-eight thousand over four years is a rather slow start.

Continue reading →

Poll: Is it common for #Americansabroad to have a higher U.S. income tax bill than a comparably situated Homelander?

Posted on by Posted in Issues regarding US persons abroad, Tax Treaties 21 Comments

Reblogged from the Renounce U.S. Citizenship blog.

Imagine the following two people:

We are comparing “Homelander Ted” to “Expat Benedict Arnold”.

Assume that “Homelander Ted” lives and works in the Homeland and purchases in ONLY U.S. dollars. He would not consider using any other currency.

Assume the Expat Benedict Arnold” (having escaped from the Homeland) lives and works in Canada and purchases in ONLY Canadian dollars. He would NOT consider using any other currency.

Assume that each of “Homelander Ted” and “Expat Benedict Arnold” own a home in their respective countries of residence, have employment income, engage in personal finance which includes retirement planning. “Homelander Ted” commits “personal finance” ONLY in the Homeland. “Expat Benedict Arnold” commits “personal finance abroad”.

Assume that “Homelander Ted” and “Expat Benedict Arnold” have financial situations that are comparable in their respective countries of residence.

To be specific both of them:

1. Have a principal residence in that they have owned for more than two years and that was sold on November 30 of the year. Assume further that there was NO capital gain measured in local currency. Assume that the sale included a discharge of an existing mortgage and that interest was paid on the mortgage up to the November 30 sale. Assume further that they each carry a “casualty” insurance policy on the property.

2. Have employment income and have pensions provided under the terms of their respective employment contracts.

3. Have and use mutual funds as a retirement planning vehicle.

4. Have a 401(k) plan in the USA and an RRSP in Canada.

5. Have spouses and must consider whether to use the “married filing separately” or the “married” filing category. “Expat Benedict Arnold” is married to an “alien”.

6. Give their respective spouses a gift of $500,000 on January 1 of the year.

 

U.S. Tax owing – versus TAX MITIGATION PROVISIONS

Assume further that each of “Homelander Ted” and “Expat Benedict Arnold” each prepare a U.S. tax return. Imagine that the Internal Revenue Code does NOT have (TAX MITIGATION PROVISIONS) either the Foreign Earned Income Exclusion (Internal Revenue Code S. 911) or the Foreign Tax Credits (Internal Revenue Code 901). Imagine further that there is no U.S. Tax Treaty that mitigates tax payable to the USA under these circumstances.

The question is how much tax “Expat Benedict Arnold” would be required to pay the U.S. Government if there were no TAX MITIGATION provisions.

How likely is that without the TAX MITIGATION PROVISIONS that the “Expat Benedict Arnold” would be required to pay HIGHER U.S. taxes than “Homelander Ted”. In other words:

Does the Internal Revenue Code:

First, impose higher taxes on “Expat Benedict Arnold” for the crime of committing “personal finance abroad“?

Second, mitigate those higher taxes through one of the TAX MITIGATION PROVISIONS described above?

Are U.S. Taxes (not including foreign taxes) actually higher for Americans abroad than for Homelanders?

Please consider the questions (without considering tax paid by “Expat Benedict Arnold” to Canada) in the following poll:

How does the U.S. tax bill of an American Abroad compare to the U.S. tax bill of a comparably situated Homelander?
(polls)