Liberty and justice for all United States persons abroad

The Isaac Brock Society

Tag Archives: Immigrants

Irony-“Because it’s the Law” – For once, not applied to non-willful expats but a Citizenship Lawyer

Posted on by Posted in Ethics, Law & Morality 38 Comments

UPDATE – Nov 9, 2018 https://www.canlii.org/en/on/onlst/doc/2017/2017onlsth164/2017onlsth164.html

LAW SOCIETY TRIBUNAL

HEARING DIVISION
Citation: Law Society of Upper Canada v. Lesperance, 2017 ONLSTH 164

Date: August 3, 2017

Tribunal File No.: 17H-025

BETWEEN:

The Law Society of Upper Canada

Applicant

– and –

David Sylvio Lesperance

Respondent

Heard: May 17, 2017, in Toronto, Ontario

Summary:

LESPERANCE – lnterlocutory Suspensions – Based on the evidence: there appeared to have been a misappropriation or mishandling of a substantial amount of a client’s money; the Lawyer was not co-operating with the Society’s investigation; he was no longer in Canada, having left sometime in 2015; the Lawyer had not complied with the Society’s requirement that he disclose his current contact information; and the current location of the Lawyer’s law practice was unknown to the Society – The Lawyer’s licence was suspended on an interlocutory basis.

While this particular post is not about a tax-compliance professional per sé, it IS about a person with whom many of us have had interactions and from whom we have been assured we WILL BE CAUGHT in one way or another. Given that, I find it extremely ironic to come across what follows in this post. How many of you who have paid a retainer or left any other type of funds when using a lawyer, ever worry about that person absconding with it?
Continue reading →

Perils & Pitfalls of Being a Green Card Holder

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

gary clueit
I am posting this comment of Gary Clueit that appeared on the Robert Wood article couple of days ago. Over the past few months, we have “met” Gary on FB, Twitter etc. Especially the Wednesday Tweet Rally- A group that just keeps on giving!!

by Gary Clueit
 
 
 
The article provides a good, if brief, overview of the perils and pitfalls of being a green card holder. The reality is somewhat bleaker.

As a long-term green card holder with no way to escape “covered expatriate” status should I decide the leave the US, I must point out a few of the other insidious side effects of being the holder of a residence permit.

If a green card holder were to decide to leave and relinquish his or her green card, here are some the issues they face in a bit more detail:
 
Determining the $2M net worth threshold does not cover any assets that the person might have had before ever moving to the US or assets received after taking up residence due to bequests from relatives that have never set foot in the US. The net worth amount signed into law in 2004 and was, I believe, related to the estate tax, despite being less than half the amount of the estate tax (which is indexed whereas the expatriation exit tax threshold is not). Anyone who has diligently saved for retirement and owned houses in San Francisco, Seattle or other major cities over the past dozen or so years can quite easily reach the $2M threshold. It does not make you “rich” by any stretch of the imagination. The non-indexed $2M figure simply appears to be a punitive amount designed to punish anyone for daring to want to leave the US.

 
Even after paying the exit tax on the “deemed sale” of everything you own worldwide, you will have to pay actual capital gains when you do actually sell since no tax treaty provides a credit for a deemed sale of anything. Outright double taxation. For example, if I own a house in Toronto and sell under normal conditions, I will pay capital gains tax on any profit in Canada. When filing my US tax return I will get a credit for the tax paid to Canada resulting in a single tax bite. However, if I own the Toronto property on the day of expatriation, the US taxes me on any paper profit. Since I have not actually sold the property, there is nothing to declare to Canada’s Revenue Agency (CRA) at that time. When I do eventually sell, CRA will then tax the actual profit, but there is no ability to get a credit from the IRS since expatriation is a terminating event.

 
After departure and payment of the exit tax, every penny of any bequest or gift you make to someone resident in the US (e.g. a child, grandchild or friend, even if they are not US citizens) is then further taxed at a flat 40%. Because this tax is imposed on the recipient, there is no opportunity to offset estate, wealth or inheritance taxes that might be imposed on the estate of the deceased person by another country even when there is a treaty in effect. Here is where it gets really interesting: assume your net worth is $2.5M on the date of expatriation, you pay the exit tax. Let us also assume that your wealth increases to $250M AFTER you leave the US due to hard work and good luck. If your heirs live in the US (again, whether citizens or not) and you leave all that wealth to them, the entire $250M estate will be taxable to them at 40% regardless of the fact that 99% of your wealth at the time of death was created outside the US and after you had ceased to be a resident. By what stretch of any imagination is this fair or equitable on either the expatriate or their US resident heirs?

 
Most foreign tax treaties contain tie-breaker clauses to prevent double taxation of those living abroad. However, if a green card holder is living overseas (on assignment, for example) and elects to use a tax treaty benefit to avoid double taxation, that in itself is considered an expatriating act.

I will point out that most of the above situations also apply to US citizens who decide to give up their citizenship, as well as to Accidental Americans who are compulsory citizens simply by being born in the US but who may never have lived, been educated in or worked in the country. The fundamental difference between the citizen and green card holder is that a citizen can only lose their citizenship through the proactive step of filing Form DS-4079. This might at least provide some ability to time events to minimize the tax consequences. A green card holder can voluntarily relinquish their card too. However, a green card holder may be denied re-entry into the US simply by staying out of the country for more than 1 year. Even a re-entry permit, applied for before leaving, is only valid for 2 years and is not be renewable. As a result, a 2 year and 1 month overseas assignment for a green card holder can result in refusal to enter upon return. You then have the alien(!) situation where you are not allowed to reside in the US by action of Customs and Border Protection, but are still considered a US resident by the IRS and still subject to FBAR, FATCA, PFIC, CFC filing requirements and taxation on your worldwide assets. Or at least until you explicitly relinquish the green card or the IRS finds out you are no longer living in the US at which point it becomes an involuntary expatriation and immediately invokes the expatriation regime and tax based on the date you were denied entry back into the US. Why is the ability to time any expatriation important? Take the case of your primary residence. If you plan to expatriate, you make sure you sell your house before that event to ensure that up to $250K profit is not taxable. If you are involuntarily expatriated for any reason, there is no tax break because you have not actually sold the house. The paper profit from the deemed sale will be added to your taxable base subject to the exit tax. When you do sell in the future, you may well be subject to tax on that profit from your new country of residence.
Even while a green card holder resides in the US, they are subject to discrimination. Besides never being allowed to vote (not really an issue since presumably one never desired to be a citizen), they are still expected to pay taxes on worldwide income (not really an issue either since almost every OECD country taxes worldwide income now). The real problems arise in estate planning:

Continue reading →

Half a million ex-immigrants who emigrated from the U.S. since 2005 did not properly cancel their green cards?

Posted on by Posted in Issues regarding US persons abroad 15 Comments

Statistics on emigration of legal permanent residents
2005 2006 2007 2008 2009 2010 2011 2012 Total
 
Green card holders actually leaving the United States
DHS estimate
of LPR
emigration,
1980 to
year start		 2,690,000 2,860,000 3,040,000 3,230,000 3,420,000 3,590,000 3,820,000 4,010,000
Net increase
during year		 170,000 180,000 190,000 190,000 170,000 230,000 190,000 — 1,320,000
 
Green card holders abroad whom the IRS no longer considers U.S. Persons
USCIS:
I-407 filers		 14,843 13,091 16,938 17,445 16,191 19,545 17,267 — 115,320
Others losing
U.S. Person
status		 c. 15,000 per year?
Fewer than four thousand Form 8833 filers
Around ten thousand ex-LPR deportees		 ~105,000

 

As Patrick Martin, Phil Hodgen, and others have pointed out, if you previously immigrated to the U.S. as a legal permanent resident (LPR, “green card holder”), the IRS considers you a U.S. Person for tax and asset-reporting purposes even if you’ve left the country. Per 26 USC § 7701(b)(6), the only way this changes is if you either take a treaty-based return position that you are a resident of another country, or get a determination from USCIS or a court that your LPR status is gone. You usually do the former by filing IRS Form 8833. You usually get the latter by filing USCIS Form I-407 or by being deported.

Absent that, you remain a “U.S. Person” even if your green card expires or you’ve been out of the country so long that it’s clear you’ve abandoned your residence in the United States. In other words, you are a resident of the U.S. for tax purposes, but not for residence purposes. How many people are stuck in this tax limbo? The Department of Homeland Security estimates that more than 1.3 million LPRs moved out of the U.S. from 2005 to 2012. Generously speaking, perhaps six hundred thousand took action during that period to retain their green cards by applying for re-entry permits from USCIS (whether or not they knew about the tax consequences of keeping their LPR status). Another 115,000 actually filed Form I-407 to cancel their green cards; there appear to be a similar number of Form 8833 filers and deportees.

That leaves possibly as many as half a million emigrants who no longer have any right of residence in the U.S. but remain subject to that country’s worldwide “citizenship-based taxation” net.

Continue reading →

Citizenship, How Much Will it Cost? Is it Worth it?

Posted on by Posted in Issues regarding US persons abroad 5 Comments

Today I have heard of two stories regarding citizenship which lie outside the normal naturalization process (at least in terms of establishing permanent residence first, for a specified number of years, etc). Both involve a type of selling if you will. The first is a deal between two governments with the people gaining only marginal status and benefits (which they already should be entitled to). The second is more like a straightforward business deal between individuals and business, brokered through a government.

Peter Spiros, at at Opinio Juris says:

Citizenship for sale schemes have become an increasingly common phenomenon as the rich from non-Western states look to upgrade their travel privileges. The likes of Malta, Cyprus, and St. Kitts have had some success selling citizenship to plutocrats from Russia, China and other non-visa waiver countries. The revenues supply a nice fiscal bump at low marginal cost to these small states. The price is fairly steep (more than a million Euros in the case of Schengen-advantaged Malta) but the number of buyers has been relatively small. That’s cash-for-passports on a retail basis. We now have reports of the first wholesale purchase.

(Interesting that he does not mention the sale of those citizenships are also to those wishing to escape from tax evasion prosecution).

The “wholesale purchase” is a deal between the governments of Kuwait and the Comoros Islands (off the African coast). More than 100,000 Kuwait residents are legally stateless, and the country refuses to recognize them as its own, saying they entered the country illegally.

Comoros will issue passports in exchange for direct Kuwaiti investment into the building of schools and charities. With Comoros citizenship (though remaining in Kuwait), the illegal status will end allowing for some health and education benefits. I am not quite sure just what it is the Kuwait government actually gains from this agreement. It sounds like the benefits to its “resident aliens” will be minimal.

Atossa Araxia Abrahamian, a name early Brockers will recognize, has also weighed in on the plight of the Bidoon.

The Comoros-Gulf alliance presents a new model for governments trying to deal with stateless people in their countries without giving them the rights that come with full political and civic membership.

The citizenship could also put them at risk of deportation. While stateless people are difficult for countries to get rid of — their lack of documentation actually protects them from being sent away — foreign citizens can be kicked out at a moment’s notice. Jarrah said Kuwait did not have plans to deport the Bidoon wholesale, but that those who commit certain crimes could be liable for deportation.

International rights groups have also lambasted the scheme. The Islamic Human Rights Commission called Kuwait’s strategy “an affront to human dignity and justice” and “a cynical ploy to relieve itself of its own obligations to the Bidoon.

 
On the other end of the spectrum one finds the U.S. EB-5 investor program. Created in the 1990’s, it was intended to stimulate the economy through the creation of jobs via foreign investment. In return for putting up the funds, immigrants receive visas to live in the U.S.
Continue reading →

How many immigrants renounce their prior citizenships after naturalising in the U.S.?

Posted on by Posted in Issues regarding US persons abroad 10 Comments

“I hereby declare, on oath, that I absolutely and entirely renounce and abjure all allegiance and fidelity to any foreign prince, potentate, state, or sovereignty of whom or which I have heretofore been a subject or citizen.” That’s the end of the story, right?

Not really. U.S. law does not apply in the other 190-odd countries and territories on the planet; other legal systems have no obligation to take notice of an oath to U.S. authorities unless their own laws tell them to. And the U.S. government, in practice, does not care if resident U.S. citizens hold other citizenships. (It cares very much whether non-resident citizens hold other citizenships, and demonises it as a method of evading taxes, but that’s another story entirely.) However, some countries of origin do care: their nationality laws prohibit dual citizenship, and require emigrants to report when they have acquired another citizenship so that the loss of their original citizenship can be formalised and recorded. Up until the 1980s, the U.S. also prohibited emigrants who naturalised elsewhere from retaining U.S. citizenship.

What’s the rate of compliance with these single-citizenship laws? Not very high; perhaps half at most, judging from Japanese and South Korean data. In a minority of cases, failure to report your new citizenship to the government of your country of origin may indeed represent an attempt to game the system. However, in most cases, it’s simply due to benign neglect: you are no longer under the jurisdiction of the “old country”, and have no future intention of exercising any rights there, so you don’t bother with the rules of their system. And of course, civilised countries do not presume guilt in such cases, nor impose life-altering fines on emigrants for failure to comply with obscure paperwork.

Continue reading →

Breaking story: U.S. immigration lawyer actually understands how and why people renounce U.S. citizenship

Posted on by Posted in Issues regarding US persons abroad 8 Comments

Many of us emigrants here at the Isaac Brock Society have a rather low opinion of U.S. immigration lawyers. Whether it’s mainland China’s one-trick-pony visa consultants who push their wealthy clients into getting utterly unnecessary EB-5 green cards, birth tourism promoters who forget to mention to their decidedly more middle-class clients how much trouble they will have enrolling their American baby in schools in their home countries, clueless Floridians who can’t possibly understand why someone who lived in Canada for four decades wouldn’t want a U.S. passport, or racist San Buenaventura nutters on Yahoo! Answers who go around claiming that oil sheikhs would pay a million dollars for a U.S. passport, this species of attorney often combines greed, jingoism, and complete ignorance of local laws in their clients’ countries of citizenship or U.S. tax laws relating to immigration and citizenship status.

So it’s fortunate to see there are at least some exceptions; let us give credit where credit is due. In an article in India Abroad magazine entitled “Pitfalls of renouncing citizenship”, immigration lawyer Tahmina Watson of Watson Immigration Law in Seattle gives a surprisingly fair and accurate overview of the heated topic of renunciation of citizenship, stemming from a situation that one of her clients faced.

Continue reading →

A man who renounced U.S. citizenship in 2004 to protest the occupation of Iraq

Posted on by Posted in Issues regarding US persons abroad 6 Comments

I thought a translation of this old article would make an appropriate post for the tenth anniversary of the invasion of Iraq: singer-songwriter Lo Ta-yu, a naturalised U.S. citizen, renounced his U.S. citizenship in 2004 to protest a Congressional resolution calling on Taiwan to deploy troops in support of the U.S. occupation of Iraq. In contrast to the tiresome mainstream media portrayal of renunciants as “wealthy businesspeople fleeing the country”, Lo is a far more typical example of the type of person who gives up citizenship: someone who emigrated from U.S. to pursue opportunities elsewhere, and only many years later decided that he needed to take a clear stand to protest the U.S. government’s arrogant interference in the country where he chose to live.

Continue reading →

Getting a U.S. residence visa after giving up citizenship

Posted on by Posted in Issues regarding US persons abroad 93 Comments

Most of us here have little interest in going back to live in the U.S., but others who are considering giving up U.S. citizenship may be worried about whether they’ll be able to get back into the country in case their career takes them there in the future, or to care for aging relatives, or for any number of other reasons, either temporarily or permanently.

Though there are some cases which may show evidence of the USCIS trying to retaliate against renunciants when it comes to visas and treatment at the border, there are also many examples of ex-citizens both low-profile and high-profile who have managed to return to live in U.S., among them naturalised Japanese citizen Arudou Debito (the former David Aldwinckle, now an affiliate scholar at the East-West Center in Honolulu), Taiwan constitutional court judge Chen Be-yue (who renounced in 1996 and then got a green card in 2008 through her U.S.-born daughter, though she wisely cancelled it again the following year), and Fred Alger (who came back on an H-1B visa to rebuild Alger Asset Management after all its employees were killed in the WTC attacks).

A recent article in the Korea Times, a Korean diaspora newspaper published in North America, gives us many more examples of Korean Americans who gave up their U.S. citizenship to try their hand at politics in South Korea, then returned to the U.S. when things didn’t work out. I’ve translated it below.

Continue reading →

Children of immigrants to America denounce children of immigrants to Canada as tax “loophole” abusers

Posted on by Posted in Issues regarding US persons abroad 32 Comments

The Government Printing Office has finally published the 284 pages of the Congressional Progressive Caucus’ bill we discussed earlier this month. For those who don’t recall, this bill includes provisions, as the CPC put it, to “Close Exclusion of Foreign-Earned Income Loophole”. I won’t bother quoting this bill at length since there’s nothing surprising in its the contents (aside from the hilariously non sequitur title: “Smarter Approach to Nuclear Expenditures Act”), but the list of sponsors is rather interesting in one regard: a third of them are children or grandchildren of immigrants.

Continue reading →

Foreign asset reporting before FBAR and FATCA: “loyalty questionnaires” for World War II Japanese American internees

Posted on by Posted in Issues regarding US persons abroad 11 Comments

Field workers and WCCA sign Seventy-one years ago today, Franklin Roosevelt signed Executive Order 9066, paving the way for the internment — without due process of law, nor the consent of the legislature — of 120,000 people of Japanese descent.

Most of us are familiar only with modern-day attempts to get Americans to report non-US accounts and investments: the controlled foreign corporation laws of the 1960s, followed by the Bank Secrecy Act of 1970, and today’s FATCA. But three decades before TD F 90-22.1 and seven decades before Form 8938, there was WRA 126, “Application for Leave Clearance”, which had to be filed by any Japanese American seeking to leave a War Relocation Authority internment camp. This form is most famous for its questions about swearing allegiance to the United States, serving in the U.S. military, and foreswearing allegiance to Japan — earning it the “loyalty questionnaire” nickname, but it also asked about more prosaic matters:

15. Foreign travel (give dates, where, how, for whom, with whom, and reasons therefore).

22. Give details of any foreign investments.
(a) Accounts in foreign banks. Amount. Bank. Date account opened.
(b) Investments in foreign companies. Amount. Company. Date acquired. Contents.

Continue reading →