“UPDATE: FATCA: Citizenship-Based Taxation, Foreign Asset Reporting Requirements and American Citizens Abroad” is a comprehensive article in the New York University Law Journal on the evolution and current situation of FATCA/CBT/citizenship by international lawyer and retired US Foreign Service Officer Andrew Grossman. It’s well organised, both very detailed and easily readable for the layperson, with plenty of links throughout for those seeking further information on the various aspects. It’s an update of his article which was posted here around five years ago.
Category Archives: Issues regarding US persons abroad
Ottawa Brock Pub Night – Tuesday 5 December
As the holiday season approaches, we’re getting together for dinner and drinks on Tuesday, December 5th, 6 pm, at The Lieutenant’s Pump pub, 361 Elgin Street (two blocks North of Gladstone). Good food and drink and, important for us, it’s a good place for conversation, quiet early in the week and comfortable. Street parking, and also accessible by OCTranspo routes 5 and 14.
We’re currently expecting 8 people. Hope you can join us! Please rsvp by leaving a comment or e-mail me at pacifica@isaacbrocksociety.ca
Note: You might see a crowd when you arrive. But no worries — Senators fans gather at this pub to get a bus that leaves for the hockey game at 6 pm. Once they leave, it’s quiet.
American expats urged to comment on State Dept fee reduction plan by 1st Nov deadline
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.
*************************************
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.
Cook v. Tait: More About The Meaning Of Citizenship Than About The Scope Of Taxation
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.
***************
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.)
Official Notice Of Proposed Rule Change: To Lower The Cost Of The CLN Issued Upon Renouncing US Citizenship From $2350 To $450
Some official movement (finally) towards re-instatement of the pre-increase $450 CLN fee. Reported by John Richardson. (posted with permission).
***************
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).
Here is a pdf version:
SEAT and AARO Join to File Amicus Brief in Moore
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:
*****************************
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:
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:
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:
Contact Info Update
I used to use two e-mail accounts for Brock matters. Going forward, please e-mail me only at Pacifica@IsaacBrockSociety.ca
The Six Faces Of The 965 Transition Tax – The Ugliest Face Applies To Americans Abroad
John Richardson discusses how six categories (some winners, some losers) are affected by the s. 965 Transition Tax and how the biggest loser of all is US citizens living outside the US who are tax resident of another country, in particular:
“ . . . . a US citizen living outside the United States will be subject to “double taxation” when dividends are paid to the shareholder. This is because:
1. The 965 transition tax is a U.S. levy on “deemed (without a realization event) income” and no realization event in the other country which would trigger tax; and
2. A non-US tax payable in the country of residence when there is an actual distribution/realization event.
Because the U.S. tax and the foreign tax liabilities are not triggered at the same time there is no opportunity to use the U.S. transition tax paid as a tax credit against the foreign tax paid. The likely result is double taxation. . . . .”
As for background on this tax, John has noted elsewhere that “the 965 transition tax was a one time retroactive tax (going back to profits accrued since 1986) on earnings that were not subject to taxation at the time that they were earned. . . .But, (as usual) little thought was given to the fact that some CFCs were owned by individuals. No thought was given to the fact that many Americans living outside the United States had small business corporations in their country of residence.”
***********
Part I: Introduction – What Is The Transition Tax?
“Tell me who you are. Then I’ll tell you how the law applies to you!” I’ll also tell you whether you are a “winner” or a “loser” under this law.
At the end of 2017, Congress was enacting the TCJA. A major purpose of the TCJA was to lower U.S. corporate tax rates from 35% to 21%. This was a huge benefit to U.S. multinationals. One Congressional concern was how to find additional tax revenue in order to compensate the Treasury Department for the reduction in tax revenue which would result in lower receipts from corporations. Congress needed to find some additional tax revenue. They found this additional tax revenue by creating “new income” from the past and taxing that newly created income in the present. In fact, Congress said:
Significantly, Congress didn’t create any real income. No taxpayer actually received any income to pay tax on. The income created by Congress was not “real income”. Rather it was “deemed income”. But, this “deemed income” was intended to appear on tax returns. Real tax was payable on this “deemed” income.
Such, is the beginning of the story of the IRC 965 Transition Tax. The Transition Tax was a benefit to U.S. multinationals and destroyed the lives of individual U.S. citizens living outside the United States who organized their businesses, lives and retirement planning (as did their neighbours) through small business corporations.
This post identifies different groups impacted by the Transition Tax and the “winners” and “losers”.
Stop Extraterritorial American Taxation (SEAT) Encourages Submissions to US House Ways and Means Committee — Deadline, Wednesday, 2 August!
On 19 July 2023 the Ways & Means Tax Subcommittee held a hearing entitled “Biden’s Global Tax Surrender Harms American Workers and Our Economy.” Stop Extraterritorial American Taxation (SEAT) notes that this hearing presents an opportunity to give the House Committee on Ways & Means your feedback on both (1) specifically, the hypocrisy of their position regarding unfair taxes, and/or (2) more generally, the impact of nationality-based U.S. extraterritorial tax policies on the lives of Americans who live outside of the United States.
Send to: WMSubmission@mail.house.gov.
SEAT notes that submission guidelines are at http://waysandmeans.house.gov/wp-content/uploads/2023/07/ADVISORY_Tax-Subcommittee-July-19-2023.pdf and points out the following:
Please ATTACH your submission as a Microsoft Word document.
All submissions and supplementary materials must be submitted in a single document via email, provided in Word format and must not exceed a total of 10 pages. Please indicate the title of the hearing as the subject line in your submission. […] The name, […] address, [and] telephone numbers of [the person making the submission] must be included in the body of the email. Please exclude any personal identifiable information in the attached submission.
SEAT has submitted a statement to the Committee and encourages you to provide your own personal statement.
July 13, 2023: Supreme Court of Canada Rejects Leave to Appeal Application for Canadian FATCA IGA Legislation Lawsuit
On August 11, 2014 Plaintiffs Ginny Hillis and Gwen Deegan filed a Claim in Federal Court of Canada arguing that the U.S. FATCA law imposed on Canada violated the Charter of Rights and Freedoms of Canadians. We lost in Federal Court and later in the Federal Court of Appeal.
On January 10, 2023 our Appellant, Gwen, filed a “leave to appeal” request in the Supreme Court of Canada asking the Court to accept her application to hear the appeal. In argument Gwen asked Court to consider both Charter sections 8 and 1. Section 8 protects against “unreasonable” searches or seizures and section 1 protects rights and freedoms subject to reasonable limits.
Today, on July 13, 2023 the Supreme Court of Canada decided not to hear the appeal, thus exhausting our last opportunity to appeal in the Canadian courts.
Given the Supreme Court decision, the Alliance for the Defence of Canadian Sovereignty (ADCS) has decided to abandon its efforts to end the Canadian legislation enabling the U.S. FATCA law — and will dissolve our non-profit corporation.
The ADCS Board thanks many for past support which made this lawsuit possible: the brave plaintiffs and appellants Gwen, Ginny, and Kazia, the Isaac Brock Society, and the hundreds of people who, since 2014, contributed financially and in other cases their encouragement that this legal challenge was necessary.
Thank you all for your support,
Alliance for the Defence of Canadian Sovereignty