December 22 2016 Update on Canadian FATCA IGA lawsuit — Moving closer to the Charter-Constitutional trial

cross-posted from isaacbrocksociety.ca

This is a new update with some timelines from the Canadian Federal Court showing what has to be done before we know the Charter-Constitutional trial date (taking place next year). In part, there will be motions and responses related to differences of opinions as to what documents and information have to be provided prior to trial:

Order dated 22-DEC-2016 rendered by Roger Lafrenière, Esq., Prothonotary Matter considered with personal appearance

The Court’s decision is with regard to Case Management Conference [recently held by the parties to move the litigation forward]

Result:

Court Orders:

1. D [The Defendants — Attorney General and Revenue Minister] are granted leave to s/f [serve/file] their motion in writing for production of documents and particulars.

2. P [The Plaintiffs — Kazia, Ginny, and Gwen] shall s/f their responding motion record within 28 days from the date of service of the D motion referred to in paragraph 1 above

3. P are granted leave to bring their motion for summary trial [the Charter-Constitutional trial]. P are dispensed from s/f a motion record at this stage and shall instead s/f a notice of motion and contemporaneously serve their affidavit evidence [e.g. testimonies from our Witnesses and Expert Witnesses].

4. The timeline for the D to file a response to the P motion for summary trial is suspended until further order

5. Any further affs, docs, or particulars, and anything else req’d by any order resulting from the D’s motion referred to in para 1 above shall be produced by the Ps to the Ds within 30 days of such order

6. The parties shall make best efforts to schedule the Ds examinations for discovery of the Ps within 45 days of satisfaction of the requirements, if any, described in para 5 above

7. The parties shall requisition a CMC [Case Management Conference] as soon as possible following completion of the steps set out in para 5 and 6 above in order to, among other things: A) fix a timetable for completion of the steps leading to the hearing of the P motion for summary trial; and B) schedule the hearing of the P motion for summary trial.

Filed on 22-DEC-2016 copies sent to parties”

Sorry again for the slow pace.

— I noticed on Brock a recent comment that “Brock is populated with anonymouses who toe the curb.” but confirm that our Witnesses (as well as our Plaintiffs) have all been willing to “out themselves” publicly — and that their names will be disclosed in the affidavits.

Stephen Kish

Continue reading “December 22 2016 Update on Canadian FATCA IGA lawsuit — Moving closer to the Charter-Constitutional trial”

ADCT Will Retain James J. Butera for CBT LawSuit

The Alliance for the Defeat of Citizenship Taxation will retain James J. Butera in the lawsuit against the United States regarding citizenship-based taxation.

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In a related matter, on September 8, 2014, our sister organization, the Alliance for the Defence of Canadian Sovereigntyhired Washington-based attorney James Butera of Jones Alkers LLP to advocate specifically for “Accidental Americans” – “those who are not U.S. citizens in any normal sense of the word” but who meet the technical, administrative definition of “U.S. person” but who have lived all their lives in Canada and feel no real connection to the United States.

“Growing numbers of Canadians dispute the right of the United States to impose U.S. citizenship on them without their express consent,” Mr. Butera says.

from The Alliance for the Defence of Canadian Sovereignty website:

WASHINGTON D.C. ATTORNEY Mr. Jim Butera of Jones Walker LLP files a submission on behalf of the Alliance to the United States Department of State pointing out that the renunciation fee increase from US$450 to US$2,350 violates the Expatriate Act of 1868 and the U.S. Administrative Procedure Act and must be immediately suspended. Read Mr. Butera’s able submission and our press release in English and in French.

Mr. Butera has a J.D. from Georgetown University Law Centre and was admitted to the Bar of the District of Columbia in 1973. His areas of specialty are Banking & Financial Services and Government Relations & Legislative Advocacy. He has argued cases in the U.S. Court of Federal Claims,U.S. District Court for the District of Columbia, U.S. Court of Appeals, Federal Circuit and the U.S. Supreme Court.

Mr. Butera entered law school at Georgetown University Law Center after serving as Captain in the United States Marine Corps. He served two combat tours in Vietnam as a Lieutenant. His decorations include the Bronze Star Medal, the Purple Heart, a Navy Commendation and two Presidential Unit Citations. He has published law review articles on a variety of topics, and was a contributing author to Jaws of Victory, an analysis of presidential politics published by Little, Brown & Co.

After graduating with his juris doctor degree, he began his law and government relations career on the staff of the American Bankers Association. From 1974 to 1989, he handled federal government matters for the National Council of Savings Institutions, a major Washington-based national trade association. During his tenure at that association, Mr. Butera directed its government affairs program and served as the organization’s Executive Vice President. Mr. Butera served on a federally-appointed financial institutions Advisory Council in 1987 and 1988. In 1988, he was among the industry experts selected to prepare The American Agenda, under the direction of former Presidents Carter and Ford, to identify the major banking issues facing the incoming Administration.

Mr. Butera has been at the forefront of another FATCA-related case since 2013; the Florida and Texas Bankers Associations filed suit in order to prevent releasing private banking information of their clients. Please see:

Complaint
Decision
An appeal to re-hear the case was denied.

The Cato Institute has some interesting observations about the case; along with the National Federation of Independent Business has filed an amicus brief in support of Supreme Court review.

The Florida and Texas Bankers Associations are trying to challenge this regulation, but are being frustrated by interpretative jiggery-pokery that prevents their serious legal arguments from even being heard. While the federal district court allowed this lawsuit to proceed, the U.S. Court of Appeals for the D.C. Circuit reversed course and held that the associations couldn’t challenge the regulation because, under the Anti-Injunction Act (AIA), one can’t challenge a tax until the government has attempted to enforce the allegedly improper law and collect the attendant tax.

And from Bloomberg BNA we have:

To be sure, we haven’t heard the end of either of these debates. But the debates should be allowed to play out in the courts.

On June 2, 2016, the SCOTUS wil review the decisions and consider whether they will hear the case.

Mr. Butera is clearly suited to best represent our interests and we look forward to moving ahead on this issue.

2017 Residence Based Taxation Request To Chairman Hatch

cross-posted from TaxConnections Blog

SPECIAL REQUEST – PLEASE GO TO TAX CONNECTIONS & COMMENT THERE

THE SITE IS WIDELY READ BY TAX PROFESSIONALS AND WE SHOULD LET THEM KNOW WHAT WE THINK ABOUT THIS


by John Richardson
It’s tax reform season and Senator Orrin Hatch wants to hear from you (again).

As reported on the Isaac Brock Society and other digital resources for those impacted by U.S. taxes, you have until July 17, 2017 to tell Senator Hatch what you think needs to be changed in the Internal Revenue Code. After great deliberation, it occurred to me that people who either are (or are accused of being) U.S. citizens or Green Card holders living outside the United States, might want the USA to stop taxing them. After all, they already pay taxes to the countries where they reside. This is your opportunity to “Let your voices be heard” (well maybe).

Speaking of “tax reform”: Introducing Jackie Bugion

Jackie Bugnion is a U.S. citizen who has lived in Switzerland for many years. She has been a tireless advocate for “residence based taxation”. She worked with “American Citizens Abroad” for many years and has recently retired. She was recently honoured with the Eugene Abrams award by ACA – an event that was the subject of a post at the Isaac Brock Society – that described her many achievements (over a long career).

Jackie has returned with her 2017 submission to Senator Hatch.

Jacqueline Bugnion
Submission to Chairman Hatch’s request for tax reform proposals
Adopt residence-based taxation (RBT) for Americans resident overseas
The Senate Finance Committee and the House Ways and Means Committee have both cited the need to review the way that the United States taxes its citizens and green card holders who reside overseas. The current policy known as citizenship-based taxation (CBT) is increasingly called into question as it taxes Americans on their worldwide income irrespective of their residence, domestic or overseas. I am an American citizen who has resided overseas for 52 years, as my husband is a foreigner. I have personally observed the devastating consequences of CBT on Americans abroad and strongly urge Congress to adopt residence-based taxation (RBT).

What is RBT? Under RBT, the U.S. would tax its citizens and green card holders who reside abroad the same way that the U.S. currently taxes non-resident aliens, i.e. through taxation of U.S.-source income only. FDAP (Fixed, Determinable, Annual, Periodic) income would be taxed largely through withholding at source by the paying agent. Effectively connected U.S.-source earned income would be reported on Form 1040NR and taxed under U.S. income tax rules. Foreign-source income would not be taxable.

RBT would apply to all bona-fide overseas residents. RBT would be immediate and automatic, but would not be open to residents of Puerto Rico or to military and diplomatic personnel stationed abroad. As an obvious anti-abuse measure, RBT would not be available to residents of designated tax havens. RBT would not be compulsory; Americans abroad for a short period of time, such as academics on sabbatical, may opt to stay under CBT.

The rules for RBT are already in place as they apply to foreigners with U.S.-source income. Withholding taxes on FDAP U.S.-source income would lead to automatic, efficient tax collection. In fact, withholding tax at source would in certain circumstances shift taxation from foreign countries to the U.S.

Shifting from CBT to RBT would be close to tax revenue neutral. Analysis of the IRS 2555 statistics, relating to the foreign earned income exclusion reported by overseas Americans, shows that a significant share of wages and salaries of the highest income groups is U.S.-source, and hence would continue to be taxed by the U.S. under RBT. The top 1% income group account for more than 50% of all taxes paid. In addition, the U.S. today under CBT renounces most claim on tax liability on foreign earned income, by allowing foreign tax credits and the foreign earned income exclusion. These two factors and few minor ones, lead to a neutral tax revenue situation. Any possible difference between CBT and RBT would be utterly insignificant in the U.S. budget – less than 0.001% – so small that it could swing either way.

IRS enforcement costs under the current international tax system are disproportionate to revenue. The international tax forms create burdensome filing costs for taxpayers and create heavy administrative costs for the IRS; this is terribly inefficient when the vast majority of overseas taxpayers owe no U.S. tax.

Tax collected currently under CBT, other than that linked to U.S.-source income, comes from unacceptable instances of double taxation. Incompatibilities between the U.S. tax code and foreign tax systems lead to double taxation. The outrage of Boris Johnson, at the time Mayor of London, when the U.S. taxed the capital gain on the sale of his U.K. home illustrates this issue very well. There are numerous examples of differences between U.S. and foreign tax systems which penalize Americans abroad. To cite just a few:

IRS does not recognize foreign pension funds and therefore taxes all contributions; it treats income generated over the years as coming from a PFIC fund, guaranteeing a negative return.
U.S. legislates double taxation in the cases of the NIIT and the Additional Medicare Tax since neither allow foreign tax credits. This is particularly cynical since these taxes aim to finance U.S. medical care; Americans abroad pay into their foreign health programs and are excluded from the Affordable Care Act.
Some countries have a wealth tax on all net assets instead of a capital gains tax on securities investments. The U.S. taxes the capital gains, but does not allow foreign tax credits against this income.
Definitions of what is an income tax and what is a social security tax varies enormously from country to country, with onerous tax consequences for U.S. citizens abroad.
All OECD countries, except the U.S., have replaced sales taxes by VAT, which can range up to 20% of the price of goods and services purchased. The U.S. does not recognize VAT paid as compensation for the U.S. tax liability, even though it does accept deduction of U.S. state sales tax.
Entrepreneurs in countries without a totalization agreement are subject to double contributions to social security, in the foreign country and in the U.S.
Beyond the immediate issue of taxation, moving from CBT to RBT would have major advantages for Americans abroad, at essentially no cost or lost revenue to the U.S.:

CBT tax law and related FATCA asset and revenue reporting requirements amount to a bank lockout for Americans abroad. FATCA reporting rules imposed by the U.S. on foreign financial institutions, accompanied by draconian penalties for non-compliance, strongly discourage foreign banks from accepting American citizens as clients. In addition, the U.S. Patriot Act know-your-client requirements have effectively cut off Americans abroad from access to U.S. financial institutions. It is difficult to function without a bank account in today’s world.
FBAR and Form 8938 reporting requirements shut off employment and investment opportunities for Americans abroad. The FBAR requirement to report bank accounts with only signature authority eliminates jobs in financial positions. Foreign employers refuse to have their accounts reported to the United States, and such reporting is illegal in many countries. Form 8938 requires foreign companies in which an American holds 10% ownership to report this ownership to the IRS. This measure has shut out entrepreneurial and partnership opportunities for Americans overseas.
Consequently, the number of renunciations of U.S. citizenship is skyrocketing from a few hundred in 2008 to well over 5,000 in 2016. And this is just the tip of the iceberg. The blatant discrimination and unfair treatment of Americans abroad at the hand of their own government has created massive anger and frustration in the overseas community of more than 8 million Americans. The financial burden of compliance is far in excess of reporting requirements for U.S. residents and easily runs into the thousands of dollars, which is all the more ludicrous when the vast majority have no U.S. tax liability.

Adopting RBT meets three of the four tax reform objectives cited by Senator Hatch.

First, it provides relief to middle-class individuals and corrects major unfairness.
Second, it removes impediments and disincentives for savings and investments.
Third, it makes Americans abroad and therefore the United States more competitive in the global economy while preserving the tax base.
I thank you for your attention to the above.

Sincerely yours,

Jacqueline Bugnion

July 8, 2017

If You Want Your Country to Treat You as Her Own, Stop Telling Her You are “American”

The following two comments appeared on a post at Isaac Brock “Refreshing: @SophieintVeld calls EU answer to plight of #AccidentalAmericans “bullshit”

Perhaps one of the difficulties countries experience, that of “standing up to the United States” could be mitigated if citizens and residents of those countries stopped calling themselves “Americans.” Certainly if one does NOT believe him/herself to be American, one would not describe oneself as such. Why allow American law define one’s nationality particularly when doing so allows the U.S.to supersede the laws of the country one resides in?

*******

by USCitizenAbroad

cross posted comments from the Isaac Brock Society

Watched the video a second time today. The time has come to RETIRE the term “Accidental American”. The tern suggests that the petitioner “JR” and others like him are “Americans” of any kind at all. He is NOT an American of any kind and neither is a single person who was born in the USA, left the USA as a child, and has never held himself out as a U.S. citizen. He is a “carbon life form” who is simply being claimed by the United States as U.S. property. Nothing more and nothing less.

What FATCA is about is:

FATCA is about the United States unlawfully laying claim to the citizen/residents of other nations as “tax slaves” and as “weapons”, to attack the economies of other nations, by extending its tax base into other nations. The simple “FATCA Of The Matter” is that, for the U.S. to claim that a citizen and resident of another nation, is a U.S. citizen (against that person’s will), has evolved into an “Act of War” against that nation – what the petitioner calls the “weaponization of nationality”. For the USA to call a citizen/resident of another nation a U.S. citizen is to say to that nation:

That “carbon life form” is our property and we will use our property as a way to extract rents from your economy. (If you use OUR property you must pay us rent.)

It seems to me that countries around the world must do the following:

1. Protect their own citizens from the United States. It’s quite simple really. They should simply say:

So, sorry but “JR” is a resident of our nation and a citizen of our nation. The USA is free to call him anything they want when he is in the USA, but when he is in our nation he is to be treated as a citizen of our nation and accorded all the rights to which citizens of our nation are afforded. We do understand that Americans do NOT have rights (because this is necessary to preserve their American freedoms), but in our nation our citizens have rights and they have equal rights. For example: As Prime Minister Justin Trudeau of Canada has said – “A Canadian is a Canadian is a Canadian“ (Of course Justin means only “certain Canadians” are really Canadians, but I digress ….)

We (nations of the world) have no opinion, with respect to those Americans, who are in our country, but are not citizens of our nation (the “Homelanders Abroad” type). But our citizens have the full rights of citizenship when in our nation.

We will NOT allow them to be treated as your “property”, when they are living as citizens on “our property!”

We know, that for Americans, the concept of human “rights” is “very deep”, but trust us, “human rights” can exist.

Countries simply cannot allow the United States to claim their citizens as U.S. citizens!

Bottom line: Under no circumstances can the USA be permitted to claim the citizens of other nations (residing in those nations) as U.S. citizens when they are resident in our country.

2. If these European (and other) countries are NOT willing to defend the rights of THEIR citizens, then they should simply agree, that they are nothing but U.S. property and deport (return) them to the United States.

The battle cry should become:

“Defend or deport”.

*****

Adding to the previous comment:

There is a continual focus on:

“Are you or have you ever been a U.S. citizen?”

That’s fine, but the focus needs to change to:

“Who may determine the citizenship of an individual? How is that citizenship to be determined? Under what circumstances can a citizen and resident of country A, be claimed as a citizen of country B”

To date, the world has deferred to U.S. law to answer the question of whether someone is a “U.S. citizen”. I believe that is the wrong question. It leads to absurd results and it allows U.S. lawyers to effectively impose unwanted U.S. citizenship on people with no U.S. connection. The question is whether Country A has to accept a citizenship claim by Country B with respect to a citizen/resident of country A.

(The idea that the USA can impose citizenship on a person born outside the USA is laughable. Yet, U.S. lawyers swear it is true. To say that the USA can impose U.S. citizenship on a person born outside the USA is to say that the USA can use any person of USC parents as a weapon against the economy of another nation.)

The narrow question in a new FATCA world should be:

Can a second country decide the citizenship of a person who is a citizen/resident of a another country? Interestingly the United States is, in certain circumstances, willing to apply its own legal standards, to determine whether someone is or is not a citizen of another country.

See:

In addition, although not determinative of the question, the following information from the State Department is interesting:

Dual Nationality

Section 101(a)(22) of the Immigration and Nationality Act (INA) states that “the term ‘national of the United States’ means (A) a citizen of the United States, or (B) a person who, though not a citizen of the United States, owes permanent allegiance to the United States.” Therefore, U.S. citizens are also U.S. nationals. Non-citizen nationality status refers only individuals who were born either in American Samoa or on Swains Island to parents who are not citizens of the United States. The concept of dual nationality means that a person is a national of two countries at the same time. Each country has its own nationality laws based on its own policy. Persons may have dual nationality by automatic operation of different laws rather than by choice. For example, a child born in a foreign country to U.S. national parents may be both a U.S. national and a national of the country of birth.

A U.S. national may acquire foreign nationality by marriage, or a person naturalized as a U.S. national may not lose the nationality of the country of birth. U.S. law does not mention dual nationality or require a person to choose one nationality or another. Also, a person who is automatically granted another nationality does not risk losing U.S. nationality. However, a person who acquires a foreign nationality by applying for it may lose U.S. nationality. In order to lose U.S. nationality, the law requires that the person must apply for the foreign nationality voluntarily, by free choice, and with the intention to give up U.S. nationality.

Intent can be shown by the person’s statements or conduct. The U.S. Government recognizes that dual nationality exists but does not encourage it as a matter of policy because of the problems it may cause. Claims of other countries on dual national U.S. nationals may conflict with U.S. law, and dual nationality may limit U.S. Government efforts to assist nationals abroad. The country where a dual national is located generally has a stronger claim to that person’s allegiance.

However, dual nationals owe allegiance to both the United States and the foreign country. They are required to obey the laws of both countries. Either country has the right to enforce its laws, particularly if the person later travels there. Most U.S. nationals, including dual nationals, must use a U.S. passport to enter and leave the United States. Dual nationals may also be required by the foreign country to use its passport to enter and leave that country. Use of the foreign passport does not endanger U.S. nationality. Most countries permit a person to renounce or otherwise lose nationality.

Information on losing foreign nationality can be obtained from the foreign country’s embassy and consulates in the United States. Americans can renounce U.S. nationality in the proper form at U.S. embassies and consulates abroad.

Call for Information Regarding Lack of U.S. Reciprocity #FATCA

I’ve received a request from our fellow expats-in-peril Association des Américains Accidentels to search for documents to help them in their litigation.

As of this week, we have hired a lawyer to get a legal opinion re: FATCA.

One of the angle we are pursuing is non reciprocity. Under the French Constitution (article 55) a treaty which is not reciprocal becomes null and void, as simple as that. We are presently looking for all documents written par the IRS/Treasury to US Senators or any other documents emanating from the US Treasury which point to the fact that the US has no intention of making FATCA reciprocal.

We are now in full gear and our aim is to make FATCA null in void in France and perhaps at the European level too. (it is another avenue we are exploring too)

In advance many many thanks,

Eric and Fabien

I have already sent them the letter from Mark Mazur (then Assistant Secretary of Treasury for Tax Policy) to Senator Rand Paul dated Oct 10, 2012.

Please help their legal challenge: Let’s Unite to Defeat FATCA

 

When government turns predator

 

This was the very first post at the Isaac Brock Society, published there on December 10, 2011 by the founder of Brock, Petros. At the time, there was outright terror in the expat community. Horror stories from the 2009 OVDP were coming out. Threats from Shulman (then IRS Commissioner), the media and primarily, the tax compliance industry were non-stop. Confusion and fear reigned and it was like being in a perpetual OMG moment……….

Over 5 years later there is little to suggest much has changed. It would take a major shift, such as passing tax reform that included a switch to RBT for me to even consider the U.S. government has anything less than outright malice for Americans living outside the country. The year is half-over and health care reform is still the focus. There will be no hope for change in 2018 due to the midterm elections.

There have been a few minor concessions-Streamlined was improved and offers foreign filers penalty-free filing as long as there is “reasonable cause.” However, we now have passport revocation for unpaid taxes of $50k and over; extended OVDP with the in-lieu of penalty of 27.5% of the highest aggregate value of OVDP assets (50% if the foreign financial institution is already under investigation by the IRS); attempts to pass the EXPATRIOT ACT; adjustment resulting in increase of FBAR penalties to reflect inflation (without similar treatment for the $10k threshold); two years of FATCA reporting have taken place; threats that the Streamlined Program will be discontinued; collection agencies are coming after us, the list goes on and on.

Though this comment will provoke the compliance community, one thing apparent now, is the IRS seems to have no real way to collect unless one comes forward. And we can see those who have done so, are the ones hurt the most. It is obvious that the majority of expatriates are NOT filing (out of a total of 9 million, approximately 1 million are). There are situations where some can remain hidden, depending to a point on one’s risk-tolerance. Outward resistance remains; the Canadian IGA suit is moving toward the second trial; the Bopp suit will be refiled; ADCT is on hold until we see whether there is RBT or not. And the Accidental Americans in France have begun their fight to bring forth litigation there and/or in the EU courts.

At any rate, I have always considered the post below to be a sort of rallying cry, a call to wake up to the fact that the U.S. government is indeed a predator to be dealt with…..

UPDATE

This recent comment of Andrew over at Brock says it all:

This entire story is and continues to be sickening. I too am so grateful to have renounced several years ago and to have been able to completely extricate myself from this web of nightmares. Sadly, friends and business contacts haven’t been so lucky and many of them are now embroiled in protracted legal cases, with demands that they pay millions, even though they, in two cases, have never lived in the United States and were total “accidentals” one having spent twelve days there after birth and never returned, the other only five days! Still, the corrupt system has gone after them both and they are fighting it as hard as they can. One thing both of them have said is that thy won’t pay anything, no matter what the threats. One, who has business interests in no less than sixteen countries will cut off all activity with the U.S. and stop all investment from his associates into the U.S. arm of their business.
If I didn’t witness all of this for myself I wouldn’t believe that it could be possible, but then, look at the U.S. today and the state of how it is governed. Who could believe that is possible? The best advice, stay away from that place and advise others to do the same.

*******
When Government Turns Predator by Petros

Honest US citizens are being turned into prey by the IRS, the victims a hunt for tax evaders. It is the natural, if lamentable, product of the urge to power our Founders warned us against.

More than two centuries ago, George Washington stated:

Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.

Over the years, General Washington’s prescience has been demonstrated as government usurped and abused power. The myth that government serves the people should be shattered by now. Increasingly, government behaves as the master, not as the intended servant.

Oppression abounds, but nowhere is the raw abuse of power and coercion more possible and evident than in the Internal Revenue Service. They are the most dangerous member of the government gang. Now they have another tool to bully and expropriate wealth from innocents — US citizens living abroad.

Early in his presidency, Barack Obama pledged to add 800 new IRS agents to punish tax evaders with overseas accounts. In an effort, presumably designed to curtail and punish tax evasion on the part of wealthy Americans, legislation aimed at criminals now threatens the income and savings of the law-abiding.

Background

The Bank Secrecy Act became law in 1970 and implemented the Foreign Bank Accounts Report (FBAR) to monitor money laundering. The FBAR law required that US persons owning or having signing authority over foreign bank accounts report this information to the US Treasury Department. It was not much enforced for the obvious reason that a criminal does not willingly divulge incriminating information. During the first three decades of FBAR, there was widespread ignorance and disregard for the law.

In 2003, the Treasury Department handed over enforcement to the IRS. In 2004 non-willful non-compliance increased to a $10,000 fine per account per annum. Willful non-compliance allows criminal charges, a prison sentence, and fines of $100,000 or 50% of bank account’s contents, whichever is more (see Shepherd, p. 10).

The IRS has implemented two Voluntary Disclosure Programs I (2009) and II (2011), in which they waive criminal charges provided that all back taxes and penalties have been paid, along with an FBAR penalty of 20% (in 2009) or 25% (in 2011) of the account’s highest balance over the last six years. The penalty is lower (12.5%) for balances under $75,000. Persons who were unknowingly US citizens face a 5% penalty (see FAQ 52).

In 2010, Congress passed FATCA (Foreign Account Tax Compliance Act) which forces foreign banks to report on American clients, even if doing so would violate the banking and privacy laws of their country. Implementation of FACTA will be coerced by withholding 30% of US income from banks not in compliance.

The arrogance and brutality of the legislation is apparent. The penalties are severe and disproportionate. Economic blackmail of foreign banks is disgraceful. All of these actions will have repercussions, probably not intended.

US Citizens Abroad

US citizens living abroad must open a foreign bank account because commerce is done in the local currency. All who do are potentially in violation of the FBAR law. Most were unaware of the FBAR requirements; but now that the IRS has rattled its FBAR saber, taxpayers abroad are in a quandary.

Wealthier citizens spend thousands of dollars on accountants and tax lawyers to try to put themselves into compliance with the least financial damage. The average citizen not in compliance has limited options. His choices include:

  1. Do Nothing The IRS doesn’t know about you, so continuing to keep a low profile and ignore the law might be the best route. This option may become impossible once FACTA comes into force.
  2. File FBAR Forms IRS FAQ 17 of the 2011 Voluntary Disclosure Program states that filers who have complied with all taxes and filing requirements except FBAR should not enter the program but simply file the delinquent forms by August 31, 2011 with a letter of explanation. They promise that no penalties will apply to such persons. But given the severe threats of punishment issued to anyone failing to comply, many wonder whether the IRS will accept the excuse of ignorance of the FBAR requirement.
  3. Enter 2011 Voluntary Disclosure Program: Some US citizens who entered the 2009 Voluntary Disclosure Program and were otherwise in compliance with US tax laws, found that the IRS intended to apply to them the full 20% penalty (see, e.g., hereand here).
  4. Renounce Citizenship Many US citizens living overseas have lives fully integrated into their new country. They comply with the local tax laws and often possess dual citizenship. Compliance with US tax laws and FBAR are a nuisance and liability that they may be able to live without.

Renunciation of citizenship is not riskless. Such a decision will set citizens free from future liability, but may subject them to IRS penalties for prior non-compliance. In addition, for covered expatriates, those having two million in assets or $145,000 in average annual tax liability over the last five years, an exit tax is also required.

To appreciate the uncertainty and duress faced by US citizens living abroad, a couple of hypothetical situations are useful. International tax lawyer Phil Hodgen partly inspired the following hypothetical cases:

Hypothetical Case 1: Jim lives in a foreign country and has dutifully filed a US income tax return each year, but was unaware of FBAR filing retirements. Jim operates eight accounts: four retirement accounts (which he reported on his annual tax returns), two trading accounts, a checking account and a high interest savings account. The highest balance in these accounts is $1,000,000 over the last six years. His current balance is $800,000 after the market dip.

Jim doesn’t know what to do. After great worry, he enters the Voluntary Disclosure Program. The IRS assesses Jim a $250,000 FBAR penalty. In order to pay the penalty, Jim must withdraw funds from his retirement accounts forcing an additional tax liability of $100,000 on the income. Jim is no longer able to retire because his $800,000 has been reduced to $450,000, solely as a result of IRS capriciousness.

Hypothetical case 2: Nancy is a teacher and mother of three, married to a citizen of the foreign country where she has lived for fifteen years. She dutifully filed her taxes in the US, but never knew about FBAR. A friend entered the Voluntary Disclosure Program and was assessed $14,000. She contemplates the renunciation of American citizen, because her foreign husband owns a successful business and Nancy is a signer on business accounts. She fears exposing her husband’s business to the IRS and also fears that upon her death, the IRS will seek its pound of flesh from her estate. She renounces citizenship, though it breaks her heart.

Abuse Of the Law

FBAR was initially a harmless and little known embarrassment for the United States. It began as an ineffective attempt to stop money laundering. Like so many other laws (RICO, Homeland Security, etc.), it began with what some believed noble purposes, only to morph into a tyranny imposed upon law-abiding citizens. It is now a tool capable of arbitrary and oppressive expropriation of the wealth of millions of US citizens living abroad.

An insolvent government is a dangerous government. It is akin to a wounded and cornered animal. When conditions become really difficult, it is likely to do anything to survive. Arbitrariness in the interpretation of any law is dangerous to freedom, but especially so when government’s primary concern is survival rather than justice.

There are many reasons to be critical of FBAR. The following two will illustrate:

  1. Excessive fines: Ayn Rand said “The severity of the punishment must match the gravity of the crime.” This basic principle of human rights, enshrined in the Eighth Amendment, forbids excessive fines. It is immoral for the IRS to intimidate innocent citizens. Any law so uncertain that it could result in a loss of 50% of your wealth, depending upon the whims of the IRS, is not a law. It is government-sanctioned extortion.
  2. Guilt Presumed: The Fourth Amendment protects (or was supposed to) citizens against arbitrary fishing expeditions by government. Probable cause is required. The FBAR requirements circumvent this Fourth Amendment right, in effect saying: “You will volunteer to open the door to your house and let us look inside. If you don’t, we will fine and/or imprison you.” The IRS demands bank information based on a presumption of guilt even though holding funds in a foreign bank account is no crime.

Unintended Consequences

The term unintended consequences, a convenient euphemism for stupid policy or law, is appropriate. Some of the foreseeable outcomes are the following:

  1. An avalanche of US persons will renounce their citizenship. In July 2010, the State Department implemented a $450 fee for making a renunciation before a consular officer, presumably to exact additional income and possibly (highly unlikely) deter some from making the decision.
  2. Foreign banks and investors may decide doing business with the US is not worth the trouble of compliance with FACTA, particularly as the US economy collapses and the global economy shifts to the East.
  3. US Citizens abroad already find it challenging to open bank accounts both in US and in their countries of residence. This annoyance makes it more difficult for American companies and their employees to engage in foreign missions, business and trade.
  4. US citizens are already shunned from positions in foreign companies which do not want their banking details revealed to the United States Treasury Department.

Conclusion

The Bank Secrecy Act, passed in 1970, is an example of law designed for one purpose being expanded to be used against innocent citizens. Regardless of its good intentions, it is now a tyranny used to extort wealth from otherwise legal, law-abiding US citizens living abroad.

It represents a classic case of how government usurps freedom. What level of morality must government have to think they are entitled to shake-down hard-working citizens?

Monty Pelerin has never lived abroad or had a foreign bank account. He has friends who do and hopes that exposing this State plunder will cause it to cease in this and other parts of our lives.

NB: The preceding article appeared first at the American Thinker on April 5, 2011, then at Monty Pelerin’s World. Monty Pelerin is a retired economist who writes under a pen name. In March, I approached Monty asking if he would publish under his pen name an article on FBAR. He agreed and then we co-wrote the article and he kindly gave me no credit because I feared the long arm of the IRS. Then, Monty submitted it to the American Thinker. Now that I am out in the open with my IRS concerns, I’ve decided I can reproduce it here. So I want to thank Monty for his extraordinary help when nearly no one in the mainstream media or even conservative blogs were talking about this injustice which the IRS has afflicted upon millions of Americans – Petros

U.S. “culture of penalty” and inflation: First, inflation used to first increase the size of #FBAR penalty base and then increase the size of actual penalties

cross-posted from citizenshipsolutions blog
written by John Richardson

Introduction: Penalty as a part of American Culture

The above tweet links to a wide range of examples of America’s culture of penalty.

The purpose of this post is to explore how inflation results in the facilitation of enhanced penalty collection in America today.

What is inflation?

In its simplest terms:

“Inflation is defined as a sustained increase in the general
level of prices for goods and services in a county, and is measured as
an annual percentage change. Under conditions of inflation, the prices
of things rise over time. Put differently, as inflation rises, every
dollar you own buys a smaller percentage of a good or service. When
prices rise, and alternatively when the value of money falls you have
inflation.”

Source: Adam Hayes, CFA

(Note his use of the words “goods and services“. Are
FBAR penalties and the S. 877A Exit Tax consumer goods or
government services
?)

Inflation can either be helpful or can be hurtful. Some benefit from
inflation and others are hurt by inflation. At a minimum, inflation will
always erode the value of cash.

Effect of inflation on owners/lenders of cash: When it
comes to cash inflation will hurt the owners/lenders of cash. This is
because inflation will erode the value of cash.

Effect of inflation on borrowers of cash: Inflation
will help he borrowers of cash. This is because inflation erodes the
value of the cash that must be repaid.
Continue reading “U.S. “culture of penalty” and inflation: First, inflation used to first increase the size of #FBAR penalty base and then increase the size of actual penalties”

FBAR In The Homeland: The Willful FBAR Penalty Requires Proof

 

Published by Tax Connections Blog 21 Jun 2017 Posted in FBAR
Written by John Richardson
 

This is one more in a series of posts discussing the FBAR rules. The FBAR rules were born in 1970, laid virtually dormant until the 2000s and then were then unleashed in their full “ferocity” on U.S. persons.

Mr. FBAR has not visited Canada, but he has visited Canadian citizens
 

Readers of this blog (particularly those in Canada) may recall that I have previously written about the adventure of Mr. Jeffrey P. Pomerantz, currently of Vancouver, Canada, with Mr. FBAR. At that point—March 2017—it was clear that the U.S. Department of Justice planned to sue Mr. Pomerantz to collect the FBAR penalties to which it felt entitled. It is worth noting that FBAR penalties are assessed under the Bank Secrecy Act (Title 31 of U.S. laws) which is different from the Internal Revenue Code (Title 26 of U.S. laws.) In order to collect FBAR penalties, the U.S. Government must sue, and sue it did. The purpose of this post is to tell the story of what happened when the U.S. Government sued Mr. Pomerantz in U.S. District Court in Seattle.

But, before we begin our story, this post is more about “Civil Procedure” than it is about Mr. FBAR……………here

#FEARBar (“Foreign Email Account Report”) update – All indications lead to reporting #offshore email accounts

Cross posted from the Renounce U.S. Citizenship blog.

The above tweet references a post written four years ago in June of 2013. The post predicted that at some point the United States would require disclosure (in addition to FATCA (Form 8938) and FBAR (FinCen 114) and other forms) the email accounts used by Americans abroad.


That post concluded with my prediction:

The purpose of FBAR and FATCA is to …

Provide the U.S. with information that is outside of its jurisdiction. In other words, the U.S. has no legal right to the information. Therefore, by threatening “life altering” penalties, the U.S. forces its citizens to provide this information to the U.S. government.

If the contents of bank accounts is important, then the contents of an email account would be even more valuable.

You heard it here first:

The next information return that the U.S. will require is the:

Foreign Email Account Report” – FEARBar for short!

Congress will (like FATCA) unknowingly pass the general legislation (slipped in as part of a Hiring Act) and authorize the IRS to specify the contents of the return. What an Orwellian World!

FEARBar coming to an information return near you!

Continue reading “#FEARBar (“Foreign Email Account Report”) update – All indications lead to reporting #offshore email accounts”

The Biggest Threat to America Does NOT Lie Outside its Borders

 

 

The biggest threat to America does NOT lie outside its borders. The biggest threat to America is the Internal Revenue Code and its absurd rules governing international taxation (the taxation of U.S. citizens and U.S. corporations on revenue generated outside the United States). The bottom line is that the Internal Revenue Code has (not is) destroyed the ability of U.S. citizens and corporations to compete outside the United States.
by John Richardson
 
This is because of the peculiarly U.S. practice of:

1. Who the USA taxes: Taxing all U.S. citizens who live in other countries and pay taxes to those other countries (every heard of double taxation?) Why is the USA attempting to impose taxes on the residents of other nations?

2. What income are they taxed on: Using a system of “worldwide taxation” (meaning that the USA imposes taxation on income earned in other nations).

Time out for a second –
(1) this means that the USA taxes U.S. citizens who DO NOT even live in the USA on income NOT ASSOCIATED with the USA!
(2) U.S. corporations who have the gall to attempt to do business outside the USA are subject to taxation on those profits
(when corporations based in other countries are not – Hello!!! Talk about giving a competitive advantage to non-U.S. companies)

3. How (what are the U.S. tax rules that apply to U.S. citizens abroad?) are citizens a taxed on this “foreign income”. Answer according to U.S. tax rules that as though the income was earned in America. Because, Americans abroad live their lives outside the USA (committing “personal finance abroad”) they are subject to the punitive U.S. tax rules that apply to anything “foreign” (including the penalty laden reporting requirements. This results in U.S. citizens abroad being technically being subject to higher U.S. taxation than Homeland Americans! (Things like the foreign tax credits are designed to mitigate the actual U.S. tax owed.)

Bottom line: The Internal Revenue Code has (not is) completely destroyed the ability of U.S. citizens and corporations to exist and profit outside the United States. Perhaps some people think that this is okay. But, most will realize in a global world that this is a bad bad bad thing.

Therefore (coming back to tax reform) the USA needs to do the following:

1. Stop attempting to impose taxation on the residents of other nations (that just happen to be U.S. citizens). Stop the U.S. practice of “citizenship-based taxation” and move to a system of “residence/territorial based taxation”.

2. Stop discriminating against its own corporations by imposing taxation on their economic activity outside the United States. America: STOP punishing your own corporations! They are run by Americans. Their shareholders are Americans. Why does the Internal Revenue Code hate them so much?

The discussion of the “border adjustment tax” in this article is a bit of a red herring. It is irrelevant to the fundamental tax reform that is actually needed.

But, for the record (if it matters):

The border adjustment tax is just a way to punish imports to the USA. It will simply make imports more expensive to every day people. There has been an ongoing debate about this idea for months.

What we KNOW about a border adjustment tax: It will raise the cost of imports to the USA

What we DON’T KNOW about the Border Adjustment Tax: Whether somehow the decrease in demand for imports (because they are now more expensive) will somehow result in adjustments to exchange rates that will somehow result in price adjustments.

Furthermore, the border adjustment tax would (likely ) violate international trade agreements.

Yes, it’s time to get with the “tax reform program”. It’s time for the USA to

(1) STOP attempting to tax economic activity that is unrelated to the USA (move to territorial taxation) and
(2) stop attempting to impose taxation on the residents of other nations (stop citizenship based taxation).

There are reasons why individuals are renouncing U.S. citizenship and U.S. corporations are inverting.

Will these changes to the system of “international taxation” happen? Maybe and maybe not. Was it Winston Churchill who said:

You can always count on Americans to do the right thing – after they’ve tried everything else.”