Category Archives: Issues regarding US persons abroad

FATCA and extra-territorial taxation

Generally the question of whether one is a “U.S. person” (citizen, Green Card Holder, resident, substantial presence test) is determined under U.S. law. FATCA has the effect of enforcing the taxation of “U.S. persons” who reside outside the U.S. By changing the definition of “U.S.
person”, the U.S. can increase the number of “U.S. persons” residing in other countries. FATCA – by identifying “U.S. persons” – is the enforcer of extra-territorial taxation. The combined effect of “U.S. person” taxation and FATCA is that the U.S. can increase or decrease its tax base in other countries. If more people are deemed to be U.S. persons the tax base will increase. The FATCA rules make clear that the U.S. and only the U.S. will define what is a “U.S. account” (held by a “U.S. person”).

Interestingly the IRS has offices outside the U.S. (London, Frankfurt, Paris and Beijing). As FATCA becomes fully operational, one wonders whether the IRS will establish more “Local Office(s) Internationally”. FATCA is likely to make the IRS a “U.S. export”.

The U.S. is gradually expanding the number and kinds of people that it deems to be taxable “U.S. persons”. Leaving aside the question of “citizens”, it’s important to realize that U.S. “residents” (which can include people who do NOT reside in the U.S.) are taxable “U.S.persons”.
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Continued from Part III

Solution

This article was written in response to a request for a step-by-step explanation of FATCA that would help Americans understand what it is all about. I would like to conclude with an illustration similar to the one with which I began. If you were born in California but moved to Massachusetts in your 20s and lived there the rest of your life should you have to pay state taxes to California until the day you die? If you lived in Denver at one time and then moved to Atlanta should you have to keep paying municipal taxes to Denver for the rest of your life? Your answer to both questions, I’m sure, would be a resounding, “No! That’s ridiculous!” Of course it’s ridiculous and so is having to pay taxes to a country in which you no longer live. Continue reading →

This new post very well illustrates a lot that is in John Richardson’s presentation posted HERE.

Despite the good works of those at this site and others, I remain gravely concerned. Yesterday I attempted to inform my colleagues at a school we teach at in Japan of the situation we are all in by telling them about the experiences of a friend of mine. I prefaced the “discussion” with an email compilation if this friend’s emails to me on the subject. Following these, I have added my email to him telling him of the reaction I received.

Before that, however, it may be best to let you know a little about who I am. I am an American citizen who has lived most of my adult life in Japan. My spouse and our toddler are Japanese. I became aware of this problem around two years ago when applying for a new passport. There were statements on the application that I knew to be illegal. Searching into that issue lead me to your website and, well, you’ve been there, you know the rest.

This is today’s summarization, asking for input, corrections, etc. from other readers here. He says “Tear it apart.”:

Here is a summary I came up with from memory. My notes are unavailable to me while on the trains and subways of Tokyo, when I have time post.

Tear it apart! Any inaccuracies correct. I need this as spot on as possible. Continue reading →

Continued from Part II

Who Does FATCA Affect?

The short answer is: just about everybody. At the top of the list are those who carry U.S. indicia and who live outside of the United States. In Canada these are estimated to represent approximately 3% of the Canadian population. Add to that their spouses and family members with whom they share accounts and a much larger figure is indicated (perhaps, as has been suggested by some, as great as 12%.) Publicity about FATCA has served to educate not only “overseas US Persons” about CBT (citizenship-based taxation) and FBAR (Foreign Bank Account Report) but also those who employ them or otherwise associate with them. US Persons are being asked to vacate positions with signing authority. Some couples are reconsidering marriage plans and getting divorced due to the understandable unwillingness of non-US spouses to have their personal and financial information shared with the government of a foreign country. Banks, particularly in Europe, are refusing services, including such basics as mortgage renewals, to “US Person” customers. The list of abuses is lengthy and I refer you to the reference links that I provide in Part IV. Continue reading →

This post comes from Anne Frank. I agree with the contents and thank Anne Frank for taking the time to organize these thoughts.

Practical Solutions Needed

In my view, the election has created a small opening NOW to pursue a pragmatic solution that will resolve MOST but not all of the injustice that FATCA and CBT generally have wreaked upon US Persons outside the United States and their families. What is needed is (i) a VERY SIMPLE and SUCCINCT summary of why this is an injustice that can be grasped by any voter in a coffee shop with the attention span of a four year old; (ii) a SIMPLE and CLEAN proposal to make the problem go away; and (iii) a Congressman or woman with the courage to take it on.

There is an opening in my view because a) the Republicans control both houses; b) the Republicans have apparently embraced repeal of FATCA and CBT as bad policies; c) Democrats Abroad at least have recognized most of the injustices US law perpetrates upon its diaspora and can be expected to endorse at least limited action to address the worst of it if not outright repeal of FATCA; and d) a Congress which has a double majority has some hope of getting a bill passed which – if consistent with principles the Democrats have at least paid lip service to – the President might not veto. FATCA may be bad law, but it sells politically because it targets “FATCAT” tax evaders. We need to let them solve that problem in their own time and in their own way providing they stop with the collateral damage! We all know Congress will have only a short honeymoon period where it has any hope of getting things done, so the best hope of getting something passed is early and not late in the lifetime of the new Congress. The pending Canadian litigation will serve to keep some level of political attention and heat on the issue (I don’t overestimate that factor in the US of course!).

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This is one of my all-time favourite posts. The many links form the basis of a lot of what was learned in the early days of Brock; not just from our own research and interaction but as shared with and by other blogs such as renounceuscitizenship. One of the strengths of our little expat community then and now, was no one tried to claim credit for anything, it was all combined in one big pool of information and grew. This distinguishes us from some of the older, more established groups. We have been able to accomplish a lot over the last three years and yet, there’s still a long road ahead.

Some of the comments on the blog date from the very first week of Brock. It is hard to describe how that time was different than now; there was little-to-no media coverage, mass hysteria about FBAR (FUBAR), renunciation was not yet common…..

If you are fairly new to Brock, please take the time to read through the posts that are linked. They are full of information, reflection, analysis and should someday, form the basis of a book. And please do the poll! It picks up where it left off; at 688 votes.

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“The United States is the only developed country in the world that subjects its nonresident citizens to complex, ongoing, multiple, and frequently meaningless financial forms and reportbacks. Recent new enforcement initiatives threaten to exacerbate the already onerous burdens imposed by longstanding American exceptionalism. The resulting current situation is fraught with uncertainty, inconsistency, and anxiety.”

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#FATCA in 9 minutes http://t.co/GcdyLi16Va

— Patricia Moon (@nobledreamer16) November 5, 2014

Please notice there is a donate button on the top right hand side once the pointer contacts the “play” button.

Please share and Tweet widely!

Continued from Part I

The Crash of 2008 and the 2010 Hiring Incentives to Restore Employment (HIRE) Act

In 2008 the world endured the most disastrous economic event since the great depression. It was largely caused by foolish banking practices (subprime mortgage lending resulting in the collapse of the real estate market, etc.) in the United States. At the same time America had an influx of veterans returning from service in Iraq and Afghanistan and many were ending up unemployed and homeless. In response to this crisis, in 2010 President Obama signed into law the “Hiring Incentives to Restore Employment (HIRE) Act” which, on its surface, appeared to be a necessary and humanitarian piece of legislation. However, within its pages, and largely unnoticed, unread or ill-considered by Congress, was a section relating to the matter of how the provisions of HIRE were going to be paid for. This section was, and is, called:

The Foreign Account Tax Compliance Act (FATCA)

FATCA was inspired by the US government’s “takedown” of the Swiss bank “UBS” and was supposed to enable the US government to recoup money it was losing to overseas tax havens. However, in addition to catching big fish living in the US who have actually hidden money offshore, by virtue of CBT (citizenship-based taxation) it has trawled in all “Americans” of every ilk who are just normal, middle class folk living their lives in countries outside the United States. Continue reading →

I had the most interesting comment to my post that pointed out that OVDP is a money-laundering program in which the IRS takes a piece of the action (e.g., Walter White puts meth money into a foreign account and launders it through OVDP):

Yeah, it’s an amusing story; but so far-fetched, I don’t see where the humor connects with reality. Far from being “so right on”; …transferring 600’000 cash offshore, letting it sit for a while, then entering the OVDI is so impossible and far-fetched these days, that one might as well have included aliens in the story too.
Sorry, Forrest Grumpy

I really like this comment because it expresses my own doubts about what I wrote. It seems very far-fetched indeed.

Nevertheless, I’ve been personally oppressed by the policies of the Treasury Department. I’d never committed a felony until about four years ago, but now I fear to return to the country of my birth because the Bank Secrecy Act has become an instrument to extort money from me and other innocents. This oppression has opened my eyes. But still I doubt. Would government officials dispense with truth, justice and equitable application of the law? Is that really far-fetched? What is in it for them?

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