FATCA Repeal Update: The action to take right now!

From Global Advocate for the American Overseas, Keith Redmond is this important message:

ATTENTION AMERICANS OVERSEAS!

There is a SERIOUS bi-partisan push for an updated FATCA hearing to address the sharing of personal financial data and the lock-out of Americans overseas from foreign financial institutions (i.e. their local banks).

As a result of Suzanne Iclef Herman’s hard work and tenacity in establishing and cultivating a relationship with her Congressman and his staff, we have succeeded in building bi-partisan momentum in an updated FATCA hearing. Suzanne requested to Congressman Posey’s office that I get involved in order to have as many Americans overseas as possible contact their respective Congressmen/Congresswomen.

The attached letter has been sent to Members of Congress (MOC) in a bi-partisan effort to have the House Ways & Means Committee hold another FATCA hearing. In conjunction with the request, MOCs have been sent a letter (in the same aforementioned attachment) which each MOC can send to House Ways & Means Committee showing their support for another hearing. Americans overseas are asked to write their Congressmen/Congresswomen to sign the letter.

Therefore, I am requesting that you contact your Congressman/Congresswoman via e-mail and/or fax AND FOLLOW-UP WITH A TELEPHONE CALL.

I have attached the THREE STEPS to be taken in order to contact your representative via e-mail as well as the link to find your representative’s fax number. Please follow the instructions.

Continue reading FATCA Repeal Update: The action to take right now!

Legislative History Reveals FATCA Had Nothing To Do With Collecting Tax Revenue From U.S. Persons With Foreign Accounts Evading Taxes (Part I)

reprinted with permission from Tax Connections

Prior to the enactment of FATCA, Congress and the Executive were in possession of concrete-evidence revealing FATCA would fail to collect any meaningful amount of tax-revenue from U.S. persons evading tax through offshore financial center holdings. Congress should have halted enactment of HIRE – if in fact, FATCA’s purpose was to collect tax-revenue from offshore tax evasion by U.S. persons.

The United States Congress used estimates from the Joint Committee on Taxation (JCT) as the foundation for supporting the Foreign Account Tax Compliance Act (FATCA), contained in the Hiring Incentives to Restore Employment Act (HIRE).

HIRE was a tax expenditure designed to encourage U.S. small business to hire new employees. HIRE included two tax expenditures of note: a payroll tax exemption to employers and a one-thousand dollar tax credit for employers hiring employees between February of 2010 and January of 2011. [1] FATCA was included in HIRE because the tax revenue collected from FATCA was supposed to offset the tax expenditures authorized by HIRE. [2] The tax revenue FATCA was said to be targeting was from U.S. persons with foreign bank accounts who were evading tax.

In July of 2008, and around the time of the UBS scandal and the Global Financial Crisis the U.S. Senate Permanent Subcommittee on Investigations held a hearing and issued a report entitled “Tax Haven Banks and U.S. Tax Compliance”. [3] The underlying justification for FATCA as a substantial revenue raiser rested on a single statement found in a footnote in the 2008 hearing report: “Each year, the United States loses an estimated $100B in tax revenue due to offshore tax abuses.” [4] In a 2009 follow-up report, the Ways and Means’ Subcommittee on Select Revenue Measures held a hearing entitled: Banking Secrecy Practices and Wealthy Americans. During this hearing, the Senate increased the U.S. tax revenue loss-estimate by 50 percent stating: “Contributing to the annual tax gap are offshore tax schemes responsible for lost tax revenues totaling an estimated $150B each year.” [5] The estimates entered into the record during these hearings measured the offshore tax gap, or the amount of tax revenue[6] that would be collected if offshore tax evasion by U.S. persons holding foreign bank accounts was ended. One month, before HIRE was signed into law by President Obama, new evidence revealed the offshore tax gap was nowhere near as large as previously thought.

On February 23, 2010, the JCT released a report estimating that FATCA would instead, only collect $8.7B over ten-years or $870M per year; a huge difference from last-year’s estimate of $150B per year.[7] Assuming this latest estimate was accurate, the 2008 and 2009 estimates were drastically overinflated – to the tune of over $149B annually! At that point, a reasonable person puts on the breaks and asks questions. At the very least Congress should have engaged in some due diligence to determine why there was such a huge discrepancy. After all, there was plenty of time remaining on the legislative clock,[8] and the report invalidated the policy justification for FATCA. Instead, Congress and President Obama steamrolled FATCA into law in less-than a month after the JCT estimate – almost like, they wanted to hurry to get it in, before someone caught wind that the FATCA had nothing to do with closing the fictitious $150B offshore tax gap, because there was really no tax revenue outstanding. (Part I….To Be Continued)

*******

[1] The Hiring Incentives to Restore Employment (HIRE) Act of 2010 (Pub.L. 111–147, 124 Stat. 71, enacted March 18, 2010, H.R. 2847).

[2] HIRE was originally a $150B dollar incentive package, but the package was reduced to $15B before enactment. It would be interesting to take a look at the timing of the reduction in the HIRE economic incentive package (from $150B to $15B), and compare it with the JCT’s February 23rd estimate, to determine if the reduction in the spending package was a result of learning FATCA would not collect any meaningful amount of tax revenue from offshore accounts, because there was none to collect.

[3] Tax Haven Banks and U.S. Taxpayer Compliance, Senate Permanent Subcomm. on Investigations, Comm. on Homeland Security and Governmental Affairs, 110th Cong. (2008).

[4] Ibid.

[5] Banking Secrecy Practices and Wealthy Americans, Senate Ways and Means Subcomm. on Select Revenue Measures, 111th Cong. (2009). Emphasis added.

[6] In the U.S., we have a 1099 system, where banks are forced to report interest and dividends. Unless there is some income from the account, it follows that there can be no income tax due from that account. The way to determine whether there is income from an account is to require the accountholder’s financial institution to report on the income from the account.

[7] The 2010 JCT report estimate of $8.7B in offshore tax evasion tax-revenue to be collected over ten-years or $870M per year (median average). It should be noted that the report breaks down the estimate by year. Therefore the median average is not the best number to use in every case. Individual calculations based on empirical data from a particular year proving the current validity of the report will incorporate the amounts listed on the report for each relevant year in question to preserve the integrity of the proposition for which the calculation was intended to support.

[8] The House Ways & Means Committee held the Hearing on Banking Secrecy Practices and Wealthy American Taxpayers on March 31st, 2009. The House passed the original version of HIRE on June 18th, 2009. The JCTs estimate was released on February 23rd, 2010. HIRE passed the Senate the following day on February 24th, 2010 (with amendment). The House followed by adding an amendment on March 4th, 2010 (with amendment) which was approved by the Senate on March 17th, 2010. March 18th, 2010, President Obama signed HIRE into law, and thereby FATCA into law as well. Therefore, there was a full month from the time the JCT report was issued, and the day President Obama signed HIRE (containing FATCA) into law. (Part I….To Be Continued)

U.S., U.K., Canada, Australia and Netherlands form international tax enforcement group

According to an article by Michael Cohn in Accounting Today, a multi-lateral tax enforcement group has been formed. TThe Joint Chiefs of Global Tax Enforcement (or J5 for short), intend to “collaborate in fighting international and transnational tax crimes and money laundering.”

Membership of the J5 includes the heads of tax crime and senior officials from Internal Revenue Service Criminal Investigation (IRS CI), Her Majesty’s Revenue & Customs (HMRC) in the U.K., the Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), and the Dutch Fiscal Information and Investigation Service (FIOD).

Leaders of the group met Thursday in Montreal to formulate their plans. The J5 plans to work together to gather and share information and intelligence, as well as conduct operations and build capacity for tax crime enforcement officials. Areas of focus include cybercrime and cryptocurrency, data analytics, and enablers and facilitators of tax crimes. The alliance will concentrate on building international enforcement capacity, as well as enhancing operational capability by piloting new approaches and conducting joint operations, to bring perpetrators who enable and facilitate offshore tax crime to justice

While it sounds like the planned operations will be aimed at bigger fish, what will be interesting to see is how Canada and the Netherlands proceed. Both countries have Mutual Collection Assistance provisions in their tax treaties with the U.S. (as do France, Sweden and Denmark) that indicate they will not collect from their own citizens if they were citizens when the tax was incurred. And of course, in the case of Canada, no collection of FBAR penalties. Unless I misunderstand, it sounds like the J5 intend to move into enforcement, which sounds like collection to me.

It appears that in addition to provisions in any number of DTA’s, we now have several “information exchange” programs/policies/statutes such as Foreign Account Tax Compliance Act (#FATCA) , the Common Reporting Standard (#)CRS and the OECD’s CONVENTION ON MUTUAL ADMINISTRATIVE ASSISTANCE IN TAX MATTERS . It is difficult enough to read ONE treaty and comprehend what is covered. How is one to evaluate ALL of the aspects that are touched upon by these different programs?

Up to now the one principle that protected one from extraterritorial collection was the revenue rule. A
paper I came across years ago (dated 2004) by Professor Vern Krishna was already predicting the fall of the “revenue rule.” This paper was written a few months after the U.S. passed the American Jobs Creation Act, (see page 154 from link) while removing the issue of intent* to avoid paying tax when renouncing, also created the notion of “tax citizenship.” When relinquishing or renouncing, the requirements of notifying the State Department and filing information with the IRS were added to the process. Four years away from the H.E.A.R.T. Act (the Exit Tax 877A) and 6 years from
H.I.R.E. Act ( FATCA).

In tax law, absent special enforcement treaties, sovereign countries do not enforce the revenue laws
of other countries (the “revenue rule”).

To overcome this rule, many countries negotiate bilateral treaties for information disclosure and
mutual enforcement assistance to counter tax evasion.

In theory, the common law revenue rule reflects the principle that a country has exclusive
sovereignty over its tax policy. However, Lord Mansfield’s rule has limited scope in a world of
increasing regulatory supervision and information exchange between countries on money
laundering and terrorism financing.

The traditional rule that a country will not enforce the revenue laws of another country
and that no country is under an obligation to disclose financial information to foreign governments is very much on its way to extinction.

What do you think? Will all these actions eventually result in a system where there are no privacy laws concerning one’s finances, every bloody dime one earns will be owed to someone as tax?

*****

*removed the intent issue of renouncing for tax purposes by establishing 3 tests (income, asset, certification of tax compliance for 5 years on form 8854) to determine

March 22, 2018 Canadian FATCA IGA Litigation in Federal Court Update: New Timetable

Canadian FATCA IGA litigation

UPDATE March 22, 2018

The attorneys for our side (our side are Plaintiffs Gwen and Kazia, the Alliance for the Defence of Canadian Sovereignty — the “client”, and our supporters) and the attorneys for Mr. Justin Trudeau’s Government have just agreed on the timing for the next steps of our Canadian FATCA IGA lawsuit in Canada’s Federal Court.

It is always possible that the Court might change some of the dates but here is the new timetable:

— Defence [the Government] evidence, except one expert report, filed April 16, 2018;

— Last defence expert report filed April 30, 2018;

— Notice of any objections to expert reports provided by June 15, 2018;

— CMC to discuss scheduling of any applications to strike all or portions of affidavits in

— Cross-examinations completed by July 31, 2018;

Plaintiffs argument served and filed by September 28, 2018;

— Defence argument served and filed by November 16, 2018;

— Plaintiffs’ reply served and filed by December 7, 2018;

Hearing the week of January 28, 2019, subject to the Court’s availability.

The key update is the hope/expectation that the Federal Court hearing will take place in January 2019.

Since the beginning of our lawsuit, many, many Canadian citizens (we have not been provided with the numbers) have been rounded up and turned over by Canada CRA to the United States IRS.

Yes, I know that our litigation has been moving at a glacial pace. Sorry…

FOI CHALLENGE – Calling all MODEL 1 IGA COUNTRIES

 


Over at FixTheTaxTreaty! we wanted to know how much FATCA data was
being sent from Australia to the IRS, so we submitted a Freedom of Information request to the Australian Tax Office.
We found that the numbers were much higher than we had expected. As much as 6%(!) of the non-retirement financial assets of Australian households and businesses was reported to the IRS for 2016, along with A$ billions in interest and dividend income.

by Karen Alpert

FATCA requires Australian financial institutions (very broadly defined) to report account holder details as well as account balance, dividends, interest and other income paid, and gross proceeds from sale or redemption to the ATO for transmittal to the IRS. It is evident from the graphs below that the amount of data going to the IRS has exploded since the initial data transfer of 2014 data (transferred 30 Sept 2015).

Once we had the data, we wrote a blog post and sent out a media release . The story has been picked up by the Sydney Morning Herald .Increased visibility of the sheer volume of data and exposure of local assets to US taxation can only help gain sympathy and support in the countries where we live. With this visibility, we can start to move the conversation to the costs and benefits of FATCA, and a discussion of how to protect the sovereignty of our home countries.

Clearly the IRS must be drowning in data. We would like to get a better idea of the global scale of this data dump. So, we’re challenging the rest of the world to try the same thing. If you live in a country with a Model 1 IGA (where the data goes to your country’s tax authority for transmission to the IRS), submit your local equivalent of a FOI request. Let us know in the comments at Fix The Tax Treaty when you submit your request and when you receive a response. If the response is not easy to analyse, we can help, just email us admin at fixthetaxtreaty dot org.

Taxation of #AmericansAbroad in the 21st Century: “Country of birth” Taxation vs. “Country of Residence” Taxation- Part I

 

cross-posted from citizenshipsolutions by John Richardson

Update January 2018: This post has been updated with some new links and discussion.

Prologue – The “Story Of The Century

Since July 1, 2014, the United States via threats threats of the FATCA Sanction, has begun a “world wide hunt” for people born in the United States
(or are otherwise deemed to be “U.S. tax subjects”). A compilation of my posts describing the mechanics, effects and costs of FATCA and the FATCA IGAs is available in “The Little Red FATCA Book“. FATCA has spawned litigation against both the U.S. and Canadian Governments. A discussion of the “Alliance For The Defense Of Canadian Sovereignty” FATCA lawsuit against the Government of Canada is available here. Some thoughts on the “U.S. FATCA Legal Action” lawsuit against the U.S. Government are here. Both lawsuits have been vigorously defended by the respective Governments. The U.S. lawsuit may have reached the end of its viability (lack of standing and various procedural issues). The Canadian lawsuit continues.

With respect to those “Born In The USA”, the U.S. legal “claim of tax jurisdiction” is two-fold:

1. Those born in the United States (unless they have relinquished U.S. citizenship” for both tax and nationality purposes) are U.S. citizens.

2. Citizens of the United States are subject to the provisions of the Internal Revenue Code regardless of where they live in the world. The Internal Revenue Code (“IRC”) includes but is not limited to the obligation to pay taxes according to U.S. tax rules. The “IRC” also includes a wide range of “penalty laden reporting requirements“. The “IRC” also strongly discourages (through penalties and sanctions) participation in non-U.S. pension plans, non-U.S. investments (including non-U.S. mutual funds), the use of “non-U.S. business corporations” and (incredibly) non-U.S. spouses. (Even the divorce of a U.S. citizen and non-citizen is likely to be significantly more expensive.) As a result, the “extra-territorial application of the “IRC”) has the effect of exercising U.S. “control” over the lives of it’s citizens who do NOT live in the United States. Therefore, it is clear that the “extra-territorial” application of the “IRC” both (1) imposes the full force of the “IRC” on the resident/citizens of other countries and (2) has the effect of imposing the U.S. cultural values mandated in the “IRC” on those other countries. One can identify a list of the “10 Commandments” which are imposed on Americans abroad in an FBAR and FATCA world.

(Note that with the exception of U.S. citizens and “permanent residents”, as per Internal Revenue Code Sec. 7701(b), an actual physical connection to the United States is required to establish U.S. tax residency.)

As the article referenced in the above tweet makes clear, many people “claimed” by the United States as “tax residents”have never had any connection to the United States except that they were born there. The article includes:

Awad Al-Zahrani, whose son has US citizenship, said he would give it up.

“My son got the passport since he was born there while I was studying in the country back in 2000. At the time, the Saudi embassy had told me that it would not be a problem for him to hold two passports. Now that we have to pay taxes, though, we’ll be giving the US passport up.”

Abdulrahman Al-Habib, head of journalism studies at KAU, argues that Saudis who were born in the US should be exempt from paying taxes.

“We should establish a unified center to help Saudis clear their former tax registers,” he said.

US Consul-General Todd Holmstorm,however, confirmed that US citizens should pay income tax and called on their international counterparts to help them eliminate tax evasion.

“The tax law is designed to combat evasion through increasing transparency in the financials of US taxpayers,” he said.

Mr. Holmstorm’s bio indicates that his career has had a Canadian connection in Ottawa, Canada. His comments in the above article imply that he believes that those (1) born in the U.S. who (2) do not live in the U.S. and (3) do not pay taxes to the U.S. are guilty of “tax evasion”. Strong language indeed. Yet, these are his words which clearly reflect the attitude and policy of the U.S. Government.

 
 

Treasury Department Responds, so to speak, to Rep Bill Posey’s #FATCA letter

 
Rep Bill Posey

Last September, due to the efforts of Suzanne Herman,
Representative Bill Posey (R-FL) sent an
excellent letter to Treasury Secretary Mnuchin,
asking him to deal with #FATCA.

 
 
This post included the text of the letter and some 60+ comments from Brockers. What Rep. Posey received is a stark contrast to the expectation expressed in this comment:

Bubblebustin says
October 16, 2017 at 2:12 pm

@plaxy

According to RO on its FB page:

“At Republicans Overseas’ request, RNC Co-Chairman Bob Paduchik personally delivered Rep. Mark Meadows’ and Sen. Rand Paul’s joint letter on the Foreign Account Tax Compliance Act to Treasury Secretary Steven Mnuchin’s office. Secretary Mnuchin is fully aware that 9 million overseas Americans have been suffering under FATCA tyranny.

As a result, FATCA is included in the 2nd Report to the President on Identifying and Reducing Tax Regulatory Burdens by the Treasury (https://www.treasury.gov/press-center/press-releases/Documents/2018-03004_Tax_EO_report.pdf).

In the report to the President recommending actions to eliminate or mitigate burdens imposed on taxpayers by eight specific tax regulations, the Treasury indicated that it is considering possible reforms of regulations issued pursuant to FATCA. Thank you Co-Chairman Bob-Paduchick.

This is the response Rep. Posey received from the Treasury Department:
 
 
clean letterhead  treasury
 
November 8, 2017

The Honorable Bill Posey
U.S. House of Representatives Washington, DC 20515

Dear Representative Posey:

Thank you for your letter regarding the Foreign Account Tax Compliance Act (FATCA). As you are aware, Congress passed FATCA legislation in 2010 to strengthen the integrity of the U.S. voluntary tax compliance system and to combat the use of foreign financial accounts and foreign entities to facilitate tax evasion. FATCA provides the IRS with information about U.S. taxpayers’ use of foreign financial accounts and certain higher-risk foreign entities, so that these foreign accounts and investments are subject to disclosure to the IRS, similar to the disclosures for accounts and investments held or made inside the United States that the IRS already receives.
Continue reading Treasury Department Responds, so to speak, to Rep Bill Posey’s #FATCA letter

I am an American citizen -do I have to pay taxes for life? How do I get rid of American citizenship?

 
cross posted from Quora
 

If I have an American citizenship, am I stuck paying taxes to them for life unless I get rid of the citizenship? How do you get rid of the citizenship?
 


by John Richardson
 

U.S. Citizens are subject to extreme regulation wherever they live in the world…
 


 
U.S. AKA American citizenship is very different from all other citizenships in the world. It is a difficult citizenship to maintain if you do NOT actually live in the United States. The reason is that the United States is the only (I am not counting Eritrea) country that requires ALL if its citizens to abide by the rules in the Internal Revenue Code, regardless of where they live in the world. I note that some of the answers to this question confirm that U.S. citizens are subject to U.S. taxation whether they live in the United States or not. Although U.S. citizens are subject to U.S. taxation regardless of where they live in the world, the requirements in the Internal Revenue Code are about much more than taxation. Here are some ways that the Internal Revenue Code imposes requirements that are not specifically about taxation:

  1. The requirements of the Internal Revenue Code also include a very large number of “penalty laden” reporting requirements. (A U.S. citizen resident in Canada was recently fined $120,000 by the IRS for failing to disclose that he was running a small consulting business through a Canadian corporation.) Furthermore, although this requirement is found in the Bank Secrecy Act and not the Internal Revenue Code, U.S. citizens living outside the United States are required to report their “local” bank accounts (including those shared by a non-U.S. spouse) to the Financial Crimes Division of U.S. Treasury (FinCEN).
  2. The rules of the a “foreign” mutual fund and subject to punitive (in some cases the gains could be taxed at rates approaching 100% of the gains).
  3. The rules of the Internal Revenue Code treat “non-U.S. citizen” spouses differently from U.S. citizen spouses. Although not specifically stated the effects of this differential treatment appears to assume that a spouse who is NOT a U.S. citizen exists only at best as an opportunity for money to leave the U.S. financial system and at worst a form of tax evasion.

I could go on, but you get the point. The Internal Revenue is NOT only about taxation. It is about enforcing life and investment choices (and ultimately U.S. cultural values) that do NOT recognize that U.S. citizens living in other countries also have tax obligations to those other countries. The effect of (1) being subject to the restrictions imposed by the Internal Revenue Code and (2) being subject to taxation in their country of residence.
 
How is U.S. citizenship obtained …

One can become a U.S. citizen by either “birth” (either born in the USA or in certain cases born to a U.S. citizen outside the United States) or by “naturalization” (a choice made after birth). Most countries do NOT confer citizenship simply by virtue of birth in the country.

Interestingly, the United States is the ONLY country that both:

Imposes citizenship because one was born in the United States; and
Imposes a comprehensive tax code based on citizenship.

Therefore, those born in the United States are required to obey ALL the rules of the Internal Revenue Code (whether based directly on taxation or reporting …) for life.
 
 
In a Global World, there are many U.S. citizens who are citizen/residents of other countries …

The big problem is that under the guise of “citizenship-based taxation” the United States is imposing full taxation (and the requirements of the Internal Revenue Code) on people who are citizens and tax paying residents of other countries. Think of it! For more discussion of this issues see:

Why is the United States imposing full U.S. taxation on the Canadian incomes of Canadian citizens living in Canada?
 
 
But, there are actually two kinds of U.S. citizenship and ALL U.S. citizens are “dual citizens” …

The first kind of U.S. citizenship is citizenship for the purposes of nationality. This is the what most people understand citizenship to be. This is what is meant when one enters a country with a passport. U.S. citizenship for nationality purposes gives one the right to “enter the United States”, to live in the United States, to vote in the United States, etc.

The second type of U.S. citizenship (first created in 2004) is citizenship for the purposes of the Internal Revenue Code. Let’s call this “tax citizenship” which means that you are considered to be subject to regulation and taxation by the Internal Revenue Code. Significantly one can cease to be a U.S. citizen for the purposes of “nationality” (no right to live and work in the United States), but still be a U.S. citizen “tax citizen” meaning that you are still subject to the requirements of the Internal Revenue Code. (This is a very difficult situation to be in. Incidentally Green Card holders have exactly the same kind of problem. They can lose their right to live in the USA but still be subject to the rules in the Internal Revenue Code.)
 
 
Relinquishing both kinds of U.S. citizenship – breaking the bonds of nationality and the requirements of the Internal Revenue Code …

Since June 16, 2008 (there was a different set of rules prior to that date) a “Certificate of Loss of Nationality” (“CLN”) is required to cease to be both a U.S. citizen for the purposes of “nationality” and for the purposes of “taxation”. A CLN is acquired by either formally renouncing U.S. citizenship or by applying to the State Department for a (“CLN”) based on another kind of relinquishing act. Here is a blog post that I wrote about that describes the issue in a general way:

Renunciation is one form of relinquishment – It’s not the form of relinquishment, but the time of relinquishment
 
 
Are U.S. citizens renouncing U.S. citizenship to avoid the payment of U.S. taxes?


 
In my experience no. Because of various tax mitigation rules (foreign tax credits and foreign earned income exclusion) many U.S. citizens abroad do NOT owe U.S. taxes. In fact very few of the people who I assist with renunciation owe U.S. taxes. Therefore, the notion that people renounce U.S. citizenship to avoid U.S. taxes is a a myth. As Ted Sorenson wrote for President Kennedy:

“For the great enemy of truth is very often not the lie–deliberate, contrived and dishonest–but the myth–persistent, persuasive, and unrealistic.”

People do renounce U.S. citizenship to escape the regulatory aspects of the Internal Revenue Code that make it very difficult to live productive lives outside the United States
 
 
Caution!!! Caution!! – Since June 16, 2008 relinquishing U.S. citizenship may subject you to the draconian Exit Tax rules found in S. 877A of the Internal Revenue Code!!!

Anybody contemplating relinquishing U.S. citizenship needs to be cautious. You need to understand what the possible U.S tax implications of renlinquishing/renouncing U.S. citizenship would be FOR YOU with YOUR SPECIFIC tax and FINANCIAL PROFILE. This is NOT a “one size fits all” kind of exercise. To learn how the S. 877A Exit Tax rules work see:

Renouncing US citizenship? How the S. 877A “Exit Tax” may apply to your Canadian assets – 25 Parts
 
 
Do you have to be compliant with the requirements of the Internal Revenue Code to relinquish/renounce U.S. citizenship?

The answer is NO YOU DO NOT! But, a failure to be compliant with the rules in the Internal Revenue Code for each of the five years prior to renouncing/relinquishing would make you subject to the S. 877A Exit Tax rules.
 
 
In closing …

As you might have guessed, I spend a significant part of my professional life helping people terminate their relationship to the United States (both citizens and Green Card holders). I have written this detailed answer to correct a lot of the incorrect information found in various sources. That said:

Under NO circumstances should this answer construed to be legal advice or any other kind of advice. Furthermore, laws are subject to change and you should NOT assume that the information I have given is even correct. You should NOT relay on this answer and absolutely should seek a competent advisor who will help you understand your situation and come to an appropriate decision for you.
 
Further information:

Citizenship Counselling For U.S. Citizens in Canada and Abroad
 
*****
 
About the Author John Richardson

John Richardson
Toronto citizenship lawyer: FATCA U.S. tax + renunciation of citizenship
Lawyer 1982-present
B.A., LL.B., J.D. (Of the bars of Ontario, New York and Massachusetts)
Co-chair of the Alliance for the Defence of Canadian Sovereignty and the

Support the Paul Amendment to Repeal FATCA!

 

repealFATCA

This Is an Urgent Campaign to Repeal FATCA ALERT!

Support the Paul Amendment to Repeal FATCA!
 
 
 

November 29, 2017

This week the Senate version of the tax reform bill will come to the Senate
floor. The Campaign to Repeal FATCA has learned that Senator Rand Paul
(R-Kentucky) plans to offer as a floor amendment his bill S. 869 to repeal
the so-called “Foreign Account Tax Compliance Act (FATCA).

The Campaign to Repeal FATCA is asking everyone immediately to contact your
Senators with this simple message:

“Support the Paul Amendment to Repeal FATCA!”

You can find the contact information for your state’s two Senators
here. Given the partisan divide
in the Senate, it is especially important to contact Republican Senators. If
your state has one from each party, contact the Republican first!

Here is a suggested draft message you can use via the email contact. (NOTE:
If you are contacting a Democratic Senator, please delete the sentence in
red referring to the Platform.):

Dear Senator [Name]:

As your constituent, I strongly urge you to support the floor amendment to
be offered by Senator Rand Paul to repeal the so-called Foreign Account Tax
Compliance Act, or FATCA. Despite the claims of its sponsors when it was
passed in 2010, FATCA is a failure in its supposed aim to recover offshore
tax assets hidden by “fat cats.” Instead, it has imposed massive costs on
middle class Americans, violated Americans’ privacy without probable cause,
and led to a huge increase in U.S. citizenship renunciations. The 2016 GOP
Platform called for the repeal of this wrongheaded Obama-era law – and the
Republican Party should keep its promises! Please support the Paul Amendment
to repeal FATCA!

[Name, location]

In addition, if you represent an organization, please issue a statement in
support of the Paul Amendment to repeal FATCA and send it to Senate offices
and distribute via social media.

Time is of the essence. Thank you for your help at this critical moment!

Nigel Green and Jim Jatras

Co-Leaders, Campaign to Repeal FATCA

www.RepealFATCA.com

Further information points on why FATCA must be repealed follow:

The GOP called for repeal in its 2016 Platform. “The Foreign Account Tax
Compliance Act (FATCA) and the Foreign Bank and Asset Reporting Requirements
result in government’s warrantless seizure of personal financial information
without reasonable suspicion or probable cause. Americans overseas should
enjoy the same rights as Americans residing in the United States, whose
private financial information is not subject to disclosure to the government
except as to interest earned. The requirement for all banks around the world
to provide detailed information to the IRS about American account holders
outside the United States has resulted in banks refusing service to them.
Thus, FATCA not only allows ‘unreasonable search and seizures’ but also
threatens the ability of overseas Americans to lead normal lives. We call
for its repeal and for a change to residency-based taxation for U.S.
citizens overseas.”

FATCA fails in its stated purpose of recovering tax revenues. On enactment
in 2010, FATCA was scored as raising about $800M per year. According to
Texas A&M law professor William Byrnes, actual recoveries are closer to
$100-200M per year and falling. FATCA will soon cost more than it brings in.

FATCA is an indiscriminate violation of privacy. FATCA data reporting
requires no probable cause or even suspicion. Unlike domestic 1099s and W2s,
no taxable event is required. Compliance burdens fall disproportionately
upon people of moderate means, few of whom are engaged in evasion or owe any
tax. Foreign banks’ denying services to Americans leads to increased U.S
citizenship renunciations.

FATCA is costly. Estimates of global compliance spending rely on aggregation
of per-institution costs: millions for each small bank, hundreds of millions
for a big one. One projection puts cumulative cost at $58 to $170 billion.
This is an order of magnitude greater than any recoveries from FATCA.

FATCA relies on Obama-era Executive overreach. Because of other countries’
privacy laws, FATCA is unenforceable without so-called “intergovernmental
agreements” (IGAs) invented by Tim Geithner’s Treasury Department. The IGAs
are not authorized by statute or submitted to the U.S. Senate as treaties.

FATCA threatens our domestic financial industry. Reciprocal “Model 1” IGAs
promise “reciprocity” from U.S. domestic banks. This threatens massive
FATCA-like costs on U.S. banks and consumers.

Keeping FATCA on the books risks future harm. The OECD, which for years has
sought to extinguish personal financial privacy and create a worldwide
financial data fishbowl, has praised the IGAs as a “catalyst” to that end.
If FATCA remains on the books, the next Democrat Administration and Congress
may press reciprocity on domestic American financial firms to create a
global FATCA – or “GATCA.” This is the opposite of what the GOP Platform
promised.

Transparency is when citizens monitor government.

When government monitors citizens, that’s tyranny.

Will Territorial Taxation Solve All the Problems of #AmericansAbroad?

 


 
Tomorrow’s the big day! Will there be something for us in tomorrow’s Ways & Means Committee bill? Lots of hints suggest something is there. Most seem to expect a shift to territorial taxation for individuals. That’s a great start! There are still likely to be lots of issues remaining and this comment from the Isaac Brock Society lays it out.

This is not meant to be negative in any way. However, to expect that suddenly ALL of our issues will simply disappear is extremely unlikely. Better to have a reasonable expectation to offset disappointment! But, who knows? Tomorrow will tell….
 

USCitizenAbroad says
November 1, 2017 at 9:26 am

Fred (B)

I’m sorry, but anything that truly makes life easier for US persons abroad is fine by me. I have been skeptical of TTFI, and dream of true simple RBT. But frankly, at this point, if the US says what you do abroad stays abroad, I’ll take it.

I wonder if TTFI would do away with FBARs. After all, if they don’t need to look at your income abroad, they don’t need to look at your accounts abroad. Well, I know that’s not true — they want to make sure people aren’t spiriting funds abroad to hide them there.

Fred (IMHO) they will NEVER get rid of FBAR. The FBAR statute in its purest form requires any person who enters the USA on business to report his/her foreign bank accounts. The original purpose of FBAR was not primarily about taxation. Treasury has considered getting rid of FBAR for Americans abroad and declined to do so. Recent events make it clear that FBAR is an effective tool of intimidation … Mr. FBAR embodies what it means to be an American.

A move to “territorial taxation” (what income is subject to U.S. taxation) has nothing to do with (1) the definition of “tax resident” (what persons are subject to the U.S. tax system) and (2) the FBAR requirements found in Title 31.

It follows from this that a move to “territorial taxation” (absent further legislative change) would in no way affect:

– FBAR rules
– the FATCA IGAs (which are based on the U.S. definition of “tax resident”)
– Chapter 4 of the IRC (Sections 1471 – 1474 which are FATCA)
– the requirement to file a tax return and other information returns
– the draconian “Exit Tax” rules
– gift tax rules
– estate tax rules (unless the estate tax is abolished)

and much more.

ONLY a move to RBT can affect the above …

Of course a move to “territorial taxation” is helpful to Americans abroad. But, (without additional changes) it is only a beginning.

What a move to “territorial taxation” would probably achieve is, that foreign source income would not be subject to U.S. taxation. I would think (but wouldn’t count on) that territorial taxation would lead to the elimination of certain information return requirements: 8938 and 8621 (which have already been eliminated for Green Card holders who make a treaty election).

But, these are just some thoughts. Who knows what the final product will look like? It’s possible to move to “territorial taxation” for individuals and retain A LOT of the pain for Americans abroad. On the other hand, a lot of the pain could be removed.

Neither RO nor ACA has proposed the elimination of CBT. The RO proposal makes CBT more tolerable for Americans abroad. The ACA proposal reinforces CBT, but allows a “buy out” for specified individuals (and is ultimately better for those who can take advantage of it).

DA has yet to make a specific proposal. But, in the DA worldview, CBT is essential to ensure that a small group of people don’t escape paying their “fair share”. For this reason, DA does NOT really support RBT – time for the loyal Democrats to stop drinking the “Kool Aid”.

The ONLY proposals for RBT are found in the some of the individual submissions to House Ways and Means (2013) and Senate Finance (2015).

But on the other hand: We don’t know what the proposed legislation will look like. It could incorporate various suggestions from various proposals and could actually be RBT. But, given the fact that there has been no organized support of RBT, I think this is unlikely.

I read somewhere (or did I just dream it) that:

“All roads lead to renunciation!”