The purpose of this post is three-fold:
1. To reinforce the importance of independent journalism
2. To provide a relevant and current example where independent journalism is clearly doing what traditional journalism cannot or will not do
3. To argue that the current behaviour of the United States has made it essential that countries cease sending FATCA data (about their own residents) to the United States
https://twitter.com/twitter/status/2026056963977560353
In October I published a post about the U.K. division of Fidelity cleansing itself of U.S. citizen customers. Since the beginning, it has been clear that FATCA has made U.S. citizen customers a problems for non-U.S. banks. Today I was informed that FATCA reporting to the IRS has begun to find its way to U.S. citizens directly. As the above post from X.com indicates, some individual U.S. citizens are receiving communications from the IRS. The communication notes the existence of the “foreign financial asset” and that the asset should have been reported.
Significantly the letter notes the bank where the unreported account was located. In this case the bank was “Bank Hapoalim B.M” which is apparently one of Israel’s largest banks.
Interestingly on April 30, 2020 Bank Hapoalim admitted to helping U.S. citizen customers hide assets and avoid U.S. taxation. This resulted in a deferred prosecution agreement and a penalty. (The Department Of Justice Press Release is available online.) A reading of the press release strongly suggests that customers of this bank may be presumed to be guilty by association.
This is interesting news.
Of course:
“To be FORMwarned Is To Be Forearmed!”
Prologue – What sled dogs and the Yukon teach us about the importance of trust
Many years ago I visited Whitehorse, Yukon. It is a truly magical place. To visit the Yukon is to feel that you are experiencing another planet. Amazingly, it’s easily accessible. During that visit I met a man who ran a “Sled Dog Tour” business. The dogs would run together – each dog doing its part. A sled dog racing team operates as a “well oiled” unit. Each dog – whether the lead dog or one of the dogs pulling from the middle – has a very specific and well understood role. Together the dogs worked together to create an outcome. That outcome far exceeded what any one dog could achieve individually. I asked the man running the business how it was that the dogs worked so well together. He answered that the effectiveness of the dogs as a unit was the result of one simple thing:
“Trust in each other”
He meant that individually the dogs trusted each other to work toward a common goal and each dog trusted that the other dogs would behave as they were expected to behave.
That’s obvious. But, sometimes the obvious can be difficult to see. If the dogs did not trust each other they could not operate as an effective unit. Absent trust, each dog would be left to only his own capabilities. With trust great things could be accomplished. (Political systems are organized around the question of what things are better left to individuals and which things are achieved better as a group. For example, should a country have a national health card system?)
What’s true of the effectiveness of “sled dogs” is true of the interaction of countries.
Trust isn’t everything! It’s the only thing!
It’s also true that the Yukon is an incredible place to visit!
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Seasons Greetings And A Celebration of 14 years of the Isaac Brock Society
The Isaac Brock Society officially began on December 10, 2011 with a post written by Pretros about the FBAR. Fourteen years letter the FBAR is still an issue for Americans abroad and fourteen years later the Isaac Brock Society continues on. I take this opportunity to thank some (perhaps not all) of the original founders of Brock who had the vision, courage, generosity and skills to create Brock. The site was created following the “OVDI Summer of 2011” and the fear and trauma that caused. The combination of the IRS, the tax compliance industry and the media were combining to deliver the message that a “U.S. birthplace” made one a target for retroactive taxation, forms and penalties. The message was made more powerful because of the alignment of the voices of the IRS, the tax compliance community and the media. The reality was that none of the three understood the situation of Americans abroad. Yet, it took some time for their ignorance to become clear. The Isaac Brock Society was conceived in the message to bring clarity, calm and understanding to the hysteria. The founders of Brock deserve special thanks and acknowledgementt. In that spirit I offer a special shout out to Petros, Calgary411, Pacifica and Deckard.
Those founders of Brock “dug the foundation” on which the Isaac Brock Society was built. Once that foundation was built, the contributors and commenters completed the “house of Brock” and generated the massive commentary. An example is this holiday post from 2019 which captures the essence of the Isaac Brock Society.
Two of the many lessons and observations from that period include:
1. The whole is often greater than the sum of the parts.
When working together individuals, groups and institutions can achieve more than if they work separately. The fear instilled by the IRS, tax compliance industry and media working together (although not a deliberate conspiracy) was far more effective when it came collectively.
2. “Trust isn’t everything. It’s the only thing.”
The 2011 OVDI program, the enforcement of FBAR, the rollout of FATCA and the enforcement of citizenship taxation was a horrible time for Americans abroad. It included a crisis of trust. No longer did Americans abroad trust the United States to be their friend and supporter. Many began to view the United States as a threat to their very existence.
The “OMG” (“Oh My God”) Moment and the erosion of trust …
In 2011 Americans abroad experienced their OMG (“Oh My God”) moment.
For many individual Americans abroad, the enforcement of FBAR, FATCA, citizenship taxation, etc. was the moment that they understood that they could not trust the United States to consider their interests. The United States of America – the country of their birth -became a threat to their lives
In 2025 the rest of the world experienced a collective OMG moment.
The OMG moment included the realization that the United States could not be trusted to maintain its relationship to other countries that had existed for 80 years. The United States reputation as a country that could be trusted came to an end. (Obviously no country is tied to another for eternity. That said the “expectation interest” developed in many relationship dictates that relationships should be ended with notice and concern for the impacts on the other party.)
As Charlie Munger said:
“… reputation and integrity are your most valuable assets and can be lost in a heartbeat.”
For Americans abroad the OMG moment included the terrifying realization that the U.S. government was a threat to the stability of their lives.
For other countries the OMG moment included the terrifying realization that a trusted friend could no longer be trusted.
Trust is a casualty of the OMG moment.
Happy Canada Day From The Isaac Brock Society – “On Guard For Thee” Since 2011 (and continuing)
The Isaac Brock Society was founded at the end of 2011 as a basic wordpress site . It quickly outgrew its wordpress.com roots and moved to its own platform. The original site includes a list of many of the participants in the early years. (See the bottom of the page here. (Later Helen Burggraf of American Expat Finance fame wrote an article about the founding of the Isaac Brock Society.)
Brock was a direct response to the “trauma” of the events in the summer and fall of 2011.
Specifically these events included:
Some Americans abroad were learning about the U.S. citizenship taxation regime for the very first time. Others (who had been filing U.S. tax returns) were learning that they had not been filing correctly or learned about the requirement to file various penalty-laden “information returns” (5471, 3520, etc.) for the first time.
Virtually ALL Americans abroad were learning that compliance with the laws meant that responsible financial and retirement planning for Americans abroad was at best difficult and at worst impossible.
U.S. citizenship – a benefit in the 20th century was (courtesy of U.S. citizenship taxation) – a disability in the 21st century.
To put it simply:
It was the “perfect storm”!
The Isaac Brock Society formed as a result of the “perfect storm”. It gradually evolved into the world’s leading site for research, advice, emotional support and community for Americans abroad. The comments to the posts are a “treasure trove” of information and analysis. From a sociological perspective, the Isaac Brock Society has provided an excellent historical account of America’s indifference (describing it as accurately as I can) to its citizens living outside the United States. A natural response to (1) the indifference to Americans abroad, coupled with (2) the punitive tax, reporting and penalty regime imposed on Americans abroad, is/was the renunciation of U.S. citizenship. Since 2011 many people have renounced U.S. citizenship and continue to renounce U.S. citizenship.
The responses of individual Americans abroad have been varied. Some have contributed to the struggle to end the effects of the U.S. extra-territorial tax regime and others have not. The contributions of individuals (not in their capacities as members of political parties) have included both:
These specific initiatives do NOT account for the number of individuals who in large and small ways have contributed to the opposition to U.S. citizenship taxation and FATCA.
Since it’s founding in 2011 the Isaac Brock Society has been there with and for Americans abroad. It has been an observer of all of these initiatives. It has provided comfort, counselling, education, research, advice and hope for Americans abroad. Although the Issac Brock Society is far greater than the sum of the original founders, it’s important to thank the founders for forming Brock. Special thanks should go the admin “Pacifica” who has undertaken the tremendous responsibility of keeping the site true to its roots and original purpose. It’s also important to recognize the incredible contributions of those who contributed to Brock, but have moved on. You know who you are. But particular thanks is owed to Patricia Moon, Stephen Kish and Carol (Calgary411) who made special contributions to Brock and related initiatives. Needless to say, the original founders of Brock, under the leadership of Petros, are responsible for digging the foundation.
My name is John Richardson. I have spent the last 15 years helping Americans abroad with the problems of being an “American abroad” (esspecially if you are a dual citizen and long term resident of another country).
My goal is to write periodic blog posts on and for the Isaac Brock Society site. I hope (in a small way) to add to all the fantastic information and advice that the Isaac Brock Society represents.
If you have a suggestion for a post please leave it as a comment.
My next post will discuss the “Trauma” that continues to be experienced by individuals living outside the United States when they are forced to deal with the U.S. tax system. (In fact, as recently as yesterday I spent two hours talking somebody “off the edge”.)
Till next time!
John Richardson
“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.
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
Hot off the press from GAO – important because it illustrates how this issue is viewed in the Homeland: "Foreign Asset Reporting: Actions Needed to Enhance Compliance Efforts, Eliminate Overlapping Requirements, and Mitigate Burdens on U.S. Persons Abroad" https://t.co/T0k4HKll0j
— U.S. Citizen Abroad (@USCitizenAbroad) April 1, 2019
Question:
The above tweet links to the a report from the Government Accountability office. It is extensive but generally interesting. A quick perusal reveals no evidence that the Government views FATCA and foreign asset reporting as tools to enforce worldwide taxation on people who live outside the United States. Yet, that is the purpose of FATCA and foreign asset reporting in general.
The “Fast Facts” page includes:
How does the government prevent tax dodgers from hiding income in offshore accounts?
A 2010 law requires Americans and foreign banks to report more information to IRS about Americans’ foreign assets. Implementing the law, however, has raised some concerns.
For example, close to 75% of taxpayers reporting foreign assets to IRS also reported them separately to Treasury—indicating potential unnecessary duplication.
Also, some Americans living abroad can’t get services from foreign banks that find the law too burdensome.
Our recommendations to Congress, Treasury, and other agencies address challenges related to foreign asset reporting.
The 2010 Foreign Account Tax Compliance Act, known as FATCA, created new reporting requirements for taxpayers with specified foreign asset
Reposted from the Renounce US Citizenship blog
This post was written in December 2014. It is being reposted in 2018 – the question is why
FATCA and the CRS (“Common Reporting Standard”) are mandatory information sharing schemes. They first define people in terms of their “tax residency” (each country defines who its tax residents are) and then shares people’s private information based on that “tax residency”. In other words (assuming you believe that there is a legitimate interest in privacy) both FATCA and the CRS should be viewed as “privacy overrides”.
Although the notion of privacy is dead in the United States (companies like Facebook and Google make a living off obtaining and using private information), the European GDPR suggests that privacy is valued by Europeans and that individuals should have some control over their data. In Europe the GDPR reflects a presumption that individual belongs to the individual. There is no such presumption in the United States. See:
31-year-old Austrian lawyer Max Schrems was the catalyst for new privacy protection regulations in Europe. He says your data belongs to you and you should have control over it. pic.twitter.com/OTV0reXDOg
— 60 Minutes (@60Minutes) November 12, 2018
Automatic exchange of tax information and data privacy
cross-posted from citizenshipsolutions.ca
Part F – A “U.S. citizen” cannot use a “tax treaty tie breaker” to break U.S. “tax residence”. How then does a “U.S. citizen” cease to be a “U.S. tax resident”?
Q. I am a U.S. citizen. I do not live in the United States. I live in Canada. I am a Canadian citizen. How do I stop being subject to the all of the FBAR and other reporting rules, tax rules (including PFIC), life restrictions and inability to effectively invest and plan for retirement imposed by the Internal Revenue Code?
A. You relinquish U.S. citizenship. Please note that a “renunciation” is one form of “relinquishment”. In general, the date of relinquishment of U.S. citizenship is more important than the form of relinquishment of U.S. citizenship. A Certificate of Loss of Nationality (“CLN”) may or may not (depending on the date of relinquishment) be necessary to cease to be subject to U.S. taxation.
Q. In simple terms, where do I get information about the process of renouncing U.S. citizenship?
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