Month: April 2017

Updates April 23, 2017!!

First, here is the link to the live feed of the FATCA hearing on April 26, 2017:

[youtube http://www.youtube.com/watch?v=R-jEkPxudpQ?controls=0&w=720&h=405]

Second the Democrats have selected Carl Levin Protege, Professor Elise Bean, as their witness in support of FATCA. Professor Bean is an interesting choice given that the focus of the hearing, in its plain terms is:

REVIEWING THE UNINTENDED CONSEQUENCES OF THE FOREIGN ACCOUNT TAX COMPLIANCE ACT

It seems to me that Professor Bean might be a much better witness if the hearing were for the purpose of:

CELEBRATING THE INTENDED CONSEQUENCES OF THE FOREIGN ACCOUNT TAX COMPLIANCE ACT

To glean some insight into the perspective of Professor Bean, read the account of her March 30 meeting in Washington with PANA committee of the European Parliament. In explaining the superiority of the U.S. approach to penalties and enforcement she noted:

Bean agreed with MEPs that the US is in a more advanced position than the EU when it comes to penalties and enforcement.

“On improving enforcement, there are three things you can do in the EU,” she said. “The first is to increase your fines – your fines at the moment are a fraction of what the banks are earning. Secondly, you should require that the company or bank admits liability. This opens the door for class action lawsuits. Thirdly, make sure that the fines are not tax-deductible. Taxpayers end up paying more than big banks when the fines are tax-deductible.

“In the US, we also use monitors on compliance. We have a monitor who will monitor the institution for a period of two years to ensure that the required changes are actually made. Make the banks pay for their own monitoring.”

Bean also informed the European delegation that there will be tax justice demonstrations taking place in Washington and 60 cities across the US on April 15. The protests will demand Trump releases his tax returns but will also call for ending deferral of corporate taxes and for action on shell companies, she said.

Professor Bean is a colleague of Professor Linda Beale of Wayne State Law School. Professor – through her own writings – is NOT sympathetic to problems of taxation-based citizenship and Americans abroad. She has distinguished herself as one who fundamentally believes that everybody with an undisclosed “offshore bank account” is (to use her words) a “scofflaw“. The professor, as well as a professor of tax law, is apparently also an expert in investing and diversification of assets as evidence by the following gem:

Now, there are at least two interesting things about the Romney’s stashing $3 million in a very low yield Swiss bank account.

1) There are better things to do with money. Even if you don’t mind a low return, you could hold that money in the US–helps the US economy more than in a Swiss bank, and is easily available without the transaction costs of getting it out of your secret Swiss bank account. Why would the Romney’s have a Swiss bank account with a very low yield? The Romney spokesperson says “diversification” but that doesn’t hold water. Makes one wonder where this money came from and certainly why it ended up in a Swiss bank.

________________________________________________________________________

And now back to our originally schedule broadcast …cross-posted from the Isaac Brock Society Those @Demsabroad reiterate their support of #FATCA! Tune in April 26/17 to see how!

Q. What do Ronald Reagan and Heidi have in common?

A. They both became disillusioned with the Democratic Party

When questioned about this, Mr. Reagan noted (referring to the period in his life when he was a Democrat) that:

1. He thought many foolish things in those days; and

2. In any case, he had not really left the Democratic Party. Rather the party had left him.
Heidi writes

“Speaking of which my personal politics are being completely turned on their head, and I am in danger of turning into a former Democrat even before I turn into a former American. Because even though most of what the Republicans stand for makes me shake my head, the only ones who have caused me harm personally are the Democrats.”

This is also the road I have travelled, from a liberal minded, east coast, physician to a renounced EX American who would rather see anyone in the White house rather than the likes of the Clinton democratic mindset.

But honestly , does it matter what the social policies of the US are anymore? We don’t live there, our concerns should be just about their fiscal policies and the effects on US citizens abroad.

I am no longer an American . My concerns now are for my own country and their policies. If you are settled abroad in your other citizenship, then does it matter if you have second thoughts about being ‘their form” of an American Democrat? You can still be a Democratic socialist or whatever in your resident country. Let America go, it is an abusive partner in your life. Hoping for it to change doesn’t work

And now, an advertisement from Democrats Abroad …

The @DemsAbroad say: "When injustice becomes law, then resistance becomes a duty". Yet #StepFordWives "suck and blow" by supporting #FATCA! pic.twitter.com/JCQuPCyy8y

— U.S. Citizen Abroad (@USCitizenAbroad) April 21, 2017

Sad but true. The Democrats Abroad AKA The Stepford Wives have once again conveyed the message (reminding me of a Democrat president):

“Let every Expat know, whether he wishes us well or ill, that Democrats shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and the success of FATCA and Taxation-based citizenship.

When it comes to supporting Democratic Party Central: Democrats Abroad are like The Stepford Wives https://t.co/sbaEVmBsP8 – it's a #FATCA

— U.S. Citizen Abroad (@USCitizenAbroad) April 21, 2017

Yup, #YouCantMakeThisUp

For years and years the Democrats have made it clear that they fully support FATCA and taxation-based citizenship. One would think that they would keep their sentiments quiet. Yet, once again they broadcasted their hatred of Americans abroad to the world.

It reminds me a bit of a teacher I once had who reminded me that:

“Sometimes it’s better to keep your mouth shut and let people think you are ignorant than to open your mouth and remove all doubt.”

Yet, that’s what those “Stepford Wives” have done yet again. Brace yourself, after publicly condemning the Bopp/Republicans Overseas FATCA lawsuit, after failing to directly call for a move to “residence-based taxation” in it’s submission to the Senate Finance Committee, after arguing for FATCA Same Country Exemption (which would benefit only tax compliant Homelanders Abroad and support a U.S. FATCA attack on their own countries of residence), on the eve of the April 26/17 FATCA hearings in Washington, DC, they have once again confirmed their total and absolute hatred of Americans abroad and their support of FATCA.

Here it is, straight from the Donkey’s mouth :

In light of the annual IRS deadline, we’ve been receiving a lot of questions about DA’s advocacy on filing issues for overseas Americans. Why not support Rand Paul’s proposal to eliminate FATCA entirely?

From our late 2016 FATCA FAQs:

Republicans say they want to repeal FATCA. Why won’t Democrats Abroad join their campaign to repeal FATCA?

Democrats Abroad supports policy that cracks down on illegal tax avoidance. When some taxpayers break the law by hiding assessable earnings from the IRS in offshore accounts it increases the burden for the rest of us. For many decades those with access to elite financial structures and schemes have been using offshore accounts in bank/tax secrecy jurisdictions to become even richer. Nations throughout the world have determined to bring this practice to an end and Democrats Abroad believes that is a good thing. Democrats Abroad supports the policy initiative behind FATCA. We also think FATCA can be fixed to remove the unintended adverse impacts it has on law-abiding Americans abroad.

In January 2014 the Republican National Committee (RNC) passed a resolution calling for the repeal of FATCA. While the resolution made it look like repealing FATCA would be Republican Party policy, the Republican-controlled House of Representatives did not introduce a bill calling for FATCA to be repealed in all of 2014. A bill calling for the repeal of parts of FATCA was reintroduced in the Senate by Senator Rand Paul in March 2015. It has one co-sponsor and a 1% chance of being enacted.

The RNC and Republicans Overseas, the organization formed in 2013 by members of the RNC to cultivate the overseas vote for Republicans, has been very open about their strategy of exploiting the anger and upset around FATCA to raise money and build support for Republican candidates amongst Americans living abroad.

Republicans Overseas has admitted that it sees FATCA as a political tactic for activating a ground game to attract overseas voters. If FATCA had been repealed by Congress before 2016, the Republicans would lose this wedge issue in the 2016 campaign. Republicans ran in the 2014 midterm elections on a pledge to repeal FATCA as soon as they won control of the Senate. They
have had control of both houses for two years but a repeal bill to mirror Sen Paul’s bill has not as yet been introduced in the House. And why would it? The GOP can use the promise of a FATCA repeal to take into its campaigns for Congress and the White House. We understand that FATCA hearings may be planned for the months leading up to election day – an opportunity to make the case for repeal. We are putting ourselves forward for inclusion on the witness list for a House hearing on FATCA should one be scheduled for this year.

There is a global context for this question as well. By 2017 FATCA will have been in place for more than three years and be well entrenched in the compliance practices of international banks and brokerage houses. In addition, in 2017 the “global FATCA” will start to come online with the commencement of financial account reporting by at least 80 countries under the OECD Common Reporting Standards. By that time international financial account transparency and disclosure will be a given and the global crackdown on illegal tax avoidance will be very difficult for Republicans to arrest.

Is this for real? Rather than defend their FATCA Attack On Americans Abroad, they are attacking those Republicans who support FATCA repeal. Yes, yes, bring it on!!

Don’t forget that the Obama Treasury (you know the “Change You Can Believe In” – Hopey Changey Guy”) refused to to accept Same Country Exemption confirming its attack on Americans abroad.

Now, back to the April 26, 2017 FATCA hearings in Washington, DC (resulting from the FATCA repeal legislation proposed by Congressman Mark Meadows and Senator Rand Paul ). Although these were not organized by the Democrats, they apparently will have witnesses in attendance who will defend FATCA. This is good, because instead of attacking and condemning the Republicans, they will (presumably) be forced to explain why FATCA is so desirable. Rumour is that there will be a way to witness this spectacle live online!! Yes live online!!

Check back and the link to the link to the proceedings where there will be a hearing into FATCA (including the harm done to Americans abroad). This spectacle should NOT be missed. You will see that those who oppose FATCA (a broad range of people) and those who support FATCA (the Democrats) providing evidence and discussion.

But, the FATCA hearings aside …

Democrats Abroad is here to stay and here to continue one of the core missions of the Democratic Party, which is to destroy Americans abroad. And the lesson from this is:

You keep your friends close and your enemies closer, that's why I intend to join @Demsabroad (… https://t.co/toVg1LHISj via @@USExpatCanada

— U.S. Citizen Abroad (@USCitizenAbroad) April 21, 2017

Nov./5/09 – FATCA Hearing pg. 13- Treasury confirms that FATCA is specifically intended to include #Americansabroad https://t.co/xwswNkDF6d pic.twitter.com/7X3gqPa2dY

— Citizenship Lawyer (@ExpatriationLaw) April 15, 2017

The purpose of this post is, as put forth by Tim:

This is a copy of the transcript of the one and only hearing on FATCA in the US Congress many years ago. I once had a copy of this years ago and lost it. I feel there is important information in this that will help the ADCS legal challenge against the government of Canada.

We would like to hear what sections of the testimony (including the non-witness, written testimony) you feel may have some impact on our Charter Challenge. I have tried to make this a little more readable; i.e., the original document is 154 pages, a lot of it in very small print. I have separated where possible, individual letters. It is a lot to take in and I hope this is helpful.

NB: Member names that are bolded/italicized still sit on the Ways & Means Committee

GPO PDF file

U.S. Government Printing Office Washington
Foreign Bank Account Reporting and Tax Compliance Hearing
Before the Subcommittee on Select Revenue Measures of the Committee on Ways and Means
U.S. House of Representatives

One Hundred Eleventh Congress First Session
November 5, 2009

Committee on Ways & Means
Charles B. Rangel, New York, Chairman
Fortney Pete Stark, California
Sander M. Levin, Michigan
Jim McDermott, Washington
John Lewis, Georgia
Richard E. Neal, Massachusetts
John S. Tanner, Tennessee
Xavier Becerra, California
Lloyd Doggett, Texas
Earl Pomeroy, North Dakota
Mike Thompson, California
John B. Larson, Connecticut
Earl Blumenauer, Oregon
Ron Kind, Wisconsin
Bill Pascrell, Jr., New Jersey
Shelley Berkley, Nevada
Joseph Crowley, New York
Chris Van Hollen, Maryland
Kendrick B. Meek, Florida
Allyson Y. Schwartz, Pennsylvania
Artur Davis, Alabama
Danny K. Davis, Illinois
Bob Etheridge, North Carolina
Linda T. Sanchez,
Brian Higgins, New York
John A. Yarmuth, Kentucky
Dave Camp, Michigan
Wally Herger, California
Sam Johnson, Texas
Kevin Brady, Texas
Paul Ryan, Wisconsin
Eric Cantor, Virginia
John Linder, Georgia
Devin Nunes, California
Patrick J. Tiberi, Ohio
Ginny Brown–Waite, Florida
Geoff Davis, Kentucky
David G. Reichert, Washington
Charles W. Boustany, Jr., Louisiana
Dean Heller, Nevada
Peter J. Roskam, Illinois
Janice Mays, Chief Counsel and Staff Director
Jon Traub, Minority Staff Director

Subcommittee on Select Revenue Measures

Richard E. Neal, Massachusetts, Chairman
Mike Thompson, California
John B. Larson, Connecticut
Allyson Y. Schwartz, Pennsylvania
Earl Blumenauer, Oregon
Joseph Crowley, New York
Kendrick B. Meek, Florida
Brian Higgins, New York
John A. Yarmuth, Kentucky
Patrick J. Tiberi, Ohio, Ranking Member
John Linder, Georgia
Dean Heller, Nevada
Peter J. Roskam, Illinois
Geoff Davis, Kentucky

The subcommittee met, pursuant to notice, at 10:05 a.m., in Room B–318, Rayburn House Office Building, the Honorable Richard E. Neal [chairman of the subcommittee] presiding.

FOCUS OF THE HEARING:
The hearing will focus on non-compliance by U.S. taxpayers with foreign bank accounts,
rules regarding foreign trusts with U.S. beneficiaries, and certain U.S. dividend
equivalent payments to foreign persons to avoid U.S. taxes. The hearing will
also focus on recently introduced legislation, HR 3933, the Foreign Account Tax
Compliance Act of 2009.

BACKGROUND:
According to the most recent tax year data available (2003), more than $293 billion
in U.S. source income was sent to individuals and businesses residing abroad.
The United States imposes withholding taxes when U.S. source investment earnings
are paid to a foreign person. Those withholding taxes were largely designed to collect
tax on income earned in the United States even though the income is earned
by a foreign person not subject to the jurisdiction of our laws. Those withholding
taxes also play a role in preventing non-compliance by U.S. persons holding investment
assets in accounts overseas.
The Internal Revenue Service (IRS) has established the Qualified Intermediary
(QI) program that authorizes foreign financial institutions to collect withholding
taxes on behalf of the U.S. government. The program was implemented to improve
compliance for tax withholding and reporting on U.S. source income that flows offshore
through foreign financial institutions. The recent UBS case revealed problems
with the QI program that permitted tax evasion by U.S. persons. Further, even with
jurisdictions in which the United States has a tax treaty, effective information exchange
used by tax enforcement agencies may sometimes be undermined by local
laws providing for banking secrecy that conflict with U.S. law.
In March of this year, this Subcommittee held a hearing on bank secrecy and tax
evasion at which the Commissioner of the Internal Revenue Service testified (Ways
and Means Committee Hearing Print, Serial 111-12, Hearing on Banking Secrecy
Practices and Wealthy American Taxpayers). In May, the President released a fiscal
2010 budget proposal including a number of new requirements on taxpayers with
foreign bank accounts and foreign financial institutions holding those accounts. Last
week, Representative Charles B. Rangel filed HR 3933, the Foreign Account Tax
Compliance Act of 2009 containing, among other proposals, many of the proposals
from the Administration’s budget, including a mandatory 30 percent withholding on
payments to foreign financial institutions unless they disclose information to the
IRS on accounts owned by U.S. individuals or close the accounts, and a requirement
on individuals and entities to report offshore accounts with values of $50,000 or
more on their tax returns (see Joint Committee on Taxation Technical Explanation,
JCX-42-09).
Continue reading “FOREIGN BANK ACCOUNT REPORTING AND TAX COMPLIANCE HEARING NOVEMBER 5, 2009”

cross-posted from the citizenshipsolutions blog

The Internal Revenue Code of the United States requires two things:

1. The calculation of taxes; and

2. The reporting of information.

The Internal Revenue Code of the United States is based on three basic principles:

1. A dislike of all things “foreign”. (If you see the word “foreign” a penalty is sure to follow.)

2. A hatred of all forms of non-U.S. “tax deferral”

3. An attempt to stop the “leakage” of “U.S. taxable assets” from the U.S. tax base. (Examples include the U.S. tax treatment of the “alien spouse”and the U.S. S. 877A “Exit Tax” that may be payable when one makes the decision to renounce U.S. citizenship).

“Forms” AKA “information returns” are for the purpose of forcing disclosure of information relevant to “foreignness”, “deferral” and “leakage”.

Forms required by #Americansabroad 101 – The Explanation https://t.co/DfKxaklJfh via @ExpatriationLaw – "Report early and report often!"

— Citizenship Lawyer (@ExpatriationLaw) April 11, 2017

The above tweet references an earlier post describing many of the “forms” required to be filed by Americans abroad. The post also describes the significant penalties which can be potentially imposed for failure to file the forms.

For Americans abroad the information reporting requirements are extensive, burdensome and penalty laden. Normally (but not in all cases) the “forms” are filed as part of the tax return (1040 or 1040NR).

NEVER FORGET MR. FBAR – THE NEW SYMBOL OF U.S. CITIZENSHIP – AND THE POTENTIAL FBAR PENALTIES FOR FAILURE TO FILE THE FBAR! THOSE WHO HAVE FAILED TO FILE MR. FBAR SHOULD BE CAUTIOUS ABOUT HOW THEY “FIX THE FBAR PROBLEM“.

(Interestingly, Mr. FBAR has been used as a model for Russia which now has (for lack of a better term) the Russian FBAR.)

Many people do NOT understand that they may be required to file “information returns”, even though they may NOT meet the income thresholds to file a tax return!

Forms that may be required whether a “tax return” is required or not

Form 8621 – This form must be filed if an American living abroad owns more than the U.S. dollar equivalent of $25,000 of non-U.S. mutual funds. In order to discourage American citizens from investing their money in non-U.S. mutual funds, Congress imposes severe penalties for purchasing non-U.S. mutual funds. This includes the situation of a U.S. citizen living in Canada, who buys Canadian funds for retirement planning. Yes, sometimes “truth is stranger than fiction”. From a U.S. perspective, Canadian mutual funds are “Passive Foreign Investment Companies” or PFICs.

Information about Form 8621 is here. I strongly suggest that you read the PFIC regulations which make it clear that IRS Form 8621 is required, whether you have to file a tax return or not!

(d)Time and manner for filing. A United States person required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to a PFIC must attach the form to its Federal income tax return (or information return, if applicable) for the taxable year to which the filing obligation relates on or before the due date (including extensions) for the filing of the return, or must separately file the form in accordance with the instructions for the form when the United States person is not required to file a Federal income tax return (or information return, if applicable) for the taxable year. In the case of any failure to report information that is required to be reported pursuant to section 1298(f) and these regulations, the time for assessment of tax will be extended pursuant to section 6501(c)(8).

The requirement to file Form 8621 irrespective of whether one is required to file a tax return is reinforced in the instructions for Form 8621 which remind Americans abroad that:

When and Where To File

Attach Form 8621 to the shareholder’s tax return (or, if applicable, partnership or exempt organization return) and file both by the due date, including extensions, of the return at the Internal Revenue Service Center where the tax return is required to be filed.

If you are not required to file an income tax return or other return for the tax year, file Form 8621 directly with the Internal Revenue Service Center, Ogden, UT 84201-0201.

Who could have known …

There are financial advisors who suggest that Americans abroad should NEVER own mutual funds that are local to them! In the Donald Trump era, one should “Buy American!” and NEVER “Commit personal finance abroad!”*

Form 5471 – This form is required in many circumstances where a “U.S. Person” has an interest in a “foreign” (non-U.S.) corporation. The Specific reporting requirements are found in Internal Revenue Code Sections 6038 and 6046. (Pay special attention to the 6038 regulations.) In general, the reporting requirements are for the purpose of identifying “U.S. Persons” who:

– own at least 10 percent of a “non-U.S.” “controlled corporation”; which

– is earning certain kinds (including passive) of income; that

– is not subject to direct taxation by the U.S. Government.

The goal is to attribute the income of the “non-U.S. corporation” directly to the individual U.S. shareholder. This is referred to as the “Subpart F Income Regime” which begins with Internal Revenue Code Section 951.

The reporting requirements exist irrespective of whether one is otherwise required to file a U.S. tax return. (One might be required to file an income tax return (1040 or 1040NR) for the sole purpose of filing Form 5471.)

Are you the owner of a “foreign” corporation? Watch out for the attribution rules (you are deemed to own the shares) and for the possibility of “indirect ownership” (you own something that owns the corporation) …

Just a “heads up”. Watch out for the “attribution rules” in Internal Revenue Code S. 318. You may own more shares of that “foreign corporation” than you think you own!

A form required ONLY if you are otherwise required to file a tax return – Form 8938

Form 8938 is a key component of the FATCA legislation. It is mandated by Internal Revenue Code section 6038D. You are NOT required to file Form 8398 unless you are otherwise required to file a tax return. As of the date of the writing of this post (warning!! warning!! warning!!) the IRS explains that:

If you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold.

Reporting early – When a Form may have to be filed before the tax return is due – Form 3520A

Form 3520A is the information return required for a “foreign trust”. Forms 3520 and 3520A appear to be required whether a tax return is otherwise required. Interestingly, Form 3520A is required by March 15 of each year (before the due date of the tax return!).

Form 3520 is a key component of the collection of International Information returns.

Who could have known?

How to avoid the forms …

It’s easy. Americans abroad can avoid the necessity of filing these forms (and potential penalties for failure to file these forms) by simply avoiding all the activities that the forms are required to reveal. Simply avoid committing any “form” (no pun intended) of “personal finance abroad”.

Perhaps that is the true purpose of the “forms”.

When in Rome, live as a homelander! To learn how, simply click here.

John Richardson

reblogged from Allison Christians’ Tax, Society & Culture with permission

"The Offshore Tax Enforcement Dragnet" – how adversely affects immigrants, #Americansabroad #AccidentalAmericans https://t.co/7rqEzYYpqy

— Patricia Moon (@nobledreamer16) April 1, 2017

Shu Yi Oei (Tulane) has posted an important new paper on U.S. offshore tax enforcement, of interest. Here is the abstract:

Taxpayers who hide assets abroad to evade taxes present a serious enforcement challenge for the United States. In response, the U.S. has developed a family of initiatives that punish and rehabilitate non-compliant taxpayers, raise revenues, and require widespread reporting of offshore financial information. Yet, while these initiatives help catch willful tax cheats, they have also adversely affected immigrants, Americans living abroad, and “accidental Americans.”
This Article critiques the United States’ offshore tax enforcement initiatives, arguing that the U.S. has prioritized two problematic policy commitments in designing enforcement at the expense of competing considerations: First, the U.S. has attempted to equalize enforcement against taxpayers with solely domestic holdings and those with harder-to-detect offshore holdings by imposing harsher reporting requirements and penalties on the latter. But in doing so, it has failed to appropriately distinguish among differently situated taxpayers with offshore holdings. Second, the U.S. has focused on revenue and enforcement, ignoring the significant compliance costs and social harms that its initiatives create.
The confluence of these two policy commitments risks creating high costs for the wrong taxpayers. While offshore tax enforcement may have been designed to catch high¬-net-worth tax cheats, it may instead impose disproportionate burdens on those immigrants and expatriates who have less ability to complain, comply, or “substitute out” of the law’s grasp. This Article argues that the U.S. should redesign its enforcement approach to minimize these risks and suggests reforms to this end.

The paper provides a thorough review of the panoply of offshore enforcement programs and mechanisms and documents the harms of their dragnet approach, especially on the most vulnerable and least likely targets. A significant contribution to the literature.