Category: GILTI

Part 27 – While addressing some Sec. 965 @USTransitionTax concerns, there is NO EVIDENT CONCERN from @WaysandMeansGOP ‏for the injustice inflicted on Americans abroad

cross-posted from citizenshipsolutions

Introduction – “Indifference being the worst form of abuse”

A quick summary of this post:

On November 26, 2018 the House Ways and Means Committee under the leadership of Chairman Brady announced a bi-partisan bill which contains a number of “Technical Fixes” to the December 22, 2017 Tax Cuts and Jobs Act. While specifically addressing the Sec. 965 transition tax, the bill contains neither mention nor relief for Americans Abroad who are at risk of having their retirement pensions confiscated by the U.S. Government. (While the transition tax may actually be beneficial for Homeland Americans, it is simply devastating for Americans abroad.)

In other words: The proposed legislation is NOT neutral. By specifically addressing the Sec. 965 transition tax and NOT providing relief for Americans abroad, it has exacerbated a difficult situation. My understanding is that many Americans abroad have requested filing extensions to December 15, 2018. The failure of this proposed bill to provide relief means that many Americans abroad with small businesses are in an impossible situation where compliance may well be impossible.

My analysis and discussion follows …

On November 26, 2018 Representative Kevin Brady announced a tax reform bill (presumably with the intent of getting it through the lame duck session). You will find the compete text – 297 pages – here.

BILLS-115SAHR88-RCP115-85

The House Ways and Means Committee announced:

Washington, D.C. – Today, House Ways and Means Committee Chairman Kevin Brady (R-TX) has released a tax and oversight package that includes the Retirement, Savings, and Other Tax Relief Act of 2018 and the Taxpayer First Act of 2018. This package includes retirement and other savings enhancements, legislation to redesign the Internal Revenue Service, and temporary tax relief for victims of the wildfires in California and for communities impacted by Hurricanes Florence and Michael and by storms and volcanoes in the Pacific. The package also addresses the tax extenders, and includes some time-sensitive technical corrections to H.R. 1, the Tax Cuts and Jobs Act.

Upon release of the package, Chairman Brady made the following statement:

“This broad, bipartisan package builds on the economic successes we continue to see throughout our country. The policy proposals in this package have support of Republicans and Democrats in both chambers. I look forward to swift action in the House to send these measures to the Senate.”

The proposed bill and modifications to the Sec. 965 U.S. Transition Tax

The bottom line is this:

1. The bill proposes to amend Section 965(h) to address certain concerns raised by Taxpayer Advocate.

2. The bill fails to consider the impact of the bill on the small business of Americans abroad.

In other words, there is NO CURRENT proposal to remedy either the problems of the “transition tax” or GILTI as they apply to Americans abroad! This is shocking and a complete disgrace. This leaves many Americans abroad in a position where they cannot continue to survive as U.S. citizens abroad.

First some additional background

I have written a series of posts about the Sec. 965 transition tax. On September 9, 2018 I wrote a post for the purpose of (1) describing whether intent matters in the interpretation of the Section 965 transition tax and (2) noting that Taxpayer Advocate had seemed to assume that “intent” did matter in the interpretation of the law (a novel concept indeed). (There is no evidence that the transition tax was ever intended to apply to the small businesses operated by Americans abroad.) That post included the following tweet:

The analysis from Taxpayer Advocate based on the argument of “unintended consequences” included:

In other words, the memo concluded that the full amount of the Section 965 liability becomes due immediately – not ratably over the eight-year period the law gives taxpayers the option to make payments. As a result, any “overpayment” of non-Section 965 liabilities over the 8-year period cannot be refunded or applied as estimated tax for a future period until the full Section 965 liability is paid in full.

As a practical matter, this interpretation sharply limits the value of Section 965(h), and in some cases, it may even render it meaningless. Large corporations frequently overpay their estimated taxes for a variety of reasons, including to minimize the risk they may become liable for underpayment interest. Some may even have “overpaid” by most or all of their Section 965 liability. According to the IRS’s interpretation, those corporations will not receive any of the benefits Congress provided by enacting Section 965(h).

It may be that the IRS’s interpretation is legally correct, and congressional tax-writers failed to consider the interaction of IRC 965(h) with existing provisions governing refunds and credits. Some in the private sector generally agree that the IRS cannot pay refunds after a return is filed and the tax has been assessed, but they have suggested that – before the liability is assessed – the IRS may at least pay the estimated tax refunds requested on Form 4466. I have requested the Office of Chief Counsel to take another look at the issue and consider alternative approaches. Where Congressional intent is clear, it is the job of administrative agencies to give effect to that intent to the extent feasible. In some cases, that may require adopting a plausible interpretation, even if it not the “best” interpretation.

Here is what happened: The “devil is in the details” (or in this case the lack of details)

On the one hand the proposed bill addresses the concern described by Taxpayer Advocate

To be very specific, the proposed bill includes the following Section 965 amendment that specifically addresses the concern expressed by Taxpayer Advocate. Here is the exact text found in Title V (Technical Corrections) on page 189:

(e) AMENDMENT RELATING TO SECTION 14103.—
2 Section 965(h) is amended by adding at the end the fol3 lowing new paragraphs:
4 ‘‘(7) EXCESS REMITTANCE OF INSTALLMENT
5 SUBJECT TO CREDIT OR REFUND.—
6 ‘‘(A) IN GENERAL.—In the case of a re7 quest to credit or refund any excess remittance
8 with respect to an installment under this sub9 section—
10 ‘‘(i) the Secretary, within the applica11 ble period of limitations, may credit the
12 amount of any excess remittance, without
13 interest, against any liability in respect of
14 an internal revenue tax on the part of the
15 person who made the excess remittance
16 and may refund the excess remittance,
17 without interest, to such person in the
18 same manner as if it were an overpayment
19 of tax for purposes of section 6402, and
20 ‘‘(ii) the first sentence of section 6403
21 shall not apply with respect to such install22 ment.
23 ‘‘(B) EXCESS REMITTANCE.—For purposes
24 of this paragraph, the term ‘excess remittance’
VerDate Mar 15 2010 19:06 Nov 26, 2018 Jkt 000000 PO 00000 Frm 00189 Fmt 6652 Sfmt 6201 C:\USERS\SJPROBST\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX_10
November 26, 2018 (7:06 p.m.)
G:\M\15\BRADTX\BRADTX_108.XML
g:\VHLC\112618\112618.162.xml (708722|9)
190
1 means a payment, including an estimated in2 come tax payment, that exceeds the sum of—
3 ‘‘(i) the net income tax liability de4 scribed under section 965(h)(6)(A)(ii), plus
5 ‘‘(ii) the sum of all installments for
6 which the payment due date under this
7 subsection has passed.
8 ‘‘(8) INSTALLMENTS NOT TO PREVENT ADJUST9 MENT OF OVERPAYMENT OF ESTIMATED INCOME
10 TAX BY CORPORATION.—In the case of any tax due
11 as an installment under this subsection, the tax in12 stallment shall not be taken into account as a tax
13 for purposes of section 6425(c)(1)(A) until the date
14 on which the tax installment is due.’’.
15 (f) EFFECTIVE DATES.—Except as otherwise pro16 vided in this section, the amendments made by this section
17 shall take effect as if included in the provision of Public
18 Law 115-97 to which they relate.

On the other hand – after all the lobbying laying out the impact on Americans abroad

While addressing certain aspects of the Sec. 965 transition tax, there is NO mention of the small business owned by Americans abroad and TOTAL INDIFFERENCE to their plight!

In the “Pay To Play Casino” that is Washington, DC: Lobbying isn’t everything, it’s the only thing!

Taxpayer Advocate: The proposed change to the application of the transition tax rules was likely the result of “lobbying” (absolutely proper) by Taxpayer Advocate.

S Corp Association: The Sec. 965 exemption for S Corporations was the result of lobbying by the S Corp association. That said, there is no reason to believe that the S Corp lobbying should have been construed to be an exemption for ONLY individuals who owned their CFCs through S Corps (rather than owning them directly as individuals). The reasonable position of the S-Corp Association is that:

Surely the same reasoning would apply to ALL individuals (including those living outside the United States). Perhaps the S-Corp association should create a division to advocate for the interests of Americans abroad, who like individuals in the United States, also run small businesses. This would help give individuals who are Americans abroad a voice in Washington.

As it currently stands, Americans abroad simply do not have full time lobbyists and are therefore irrelevant to the legislative process.

Should you retain U.S. citizenship if your concerns cannot be heard?

The question really is:

Do you want to be in a situation where a “far off land” can make laws that affect you when they neither know about you or care about you?

Bottom line …

http://www.citizenshipsolutions.ca/2018/05/05/part-11-responding-to-the-sec-965-transition-tax-letter-to-the-senate-finance-discussing-the-effects-of-the-transition-tax-on-americans-abroad/

As I have previously said:

The problem is NOT that Congress doesn’t care about Americans Abroad. The problem is that they con’t care that they don’t care!

The only remedy is with the courts and I strongly suggest that you support the transition tax lawsuit being organized by Monte Silver.

John Richardson

John Richardson and Monte Silver: The Sec. 965 Transition Tax & Sec. 951A GILTI Taxes – Next steps

The US wants to “raise funds” by imposing taxation on the undistributed earnings of Canadian Controlled Private Corporations. Lawyer Monte Silver needs to “raise funds” to stop them. You can help!

this section cross posted from Brock

A message from one Canadian resident …

When life is stranger than fiction …

It’s true! As far as the U.S. Congress is concerned:

1. A U.S. resident (the type the actually lives in the United States) is free to run a business incorporated in the United States and NOT be subject to the U.S. Transition Tax and GILTI rules; but

2. Certain Canadian residents (the type that actually lives in Canada that the USA claims to be a U.S. citizen) is NOT free to run a business incorporated in Canada without being subject to the U.S. Transition Tax and GILTI rules.

In other words, the United States of America (that great Citadel of Freedom of Justice) is in effect imposing a separate and more punitive tax system on Canadian residents than on U.S. residents.

In Canada, Canadian Controlled Private Corporations play the social role of being private pension plans.

Bottom line is this: The United States is (via the Transition Tax) attempting to confiscate the pensions of Canadian residents as explained in this recent article at Tax Connections:

Elizabeth Thompson of CBC has written a series of articles about this outrage:

U.S. Extra-territorial taxation is a direct attack on Canada’s Sovereignty …

This may not affect you personally but it is an attack on Canada. I suggest that this is an important cause and I suggest that consider donating to it! Thanks to Monte Silver for taking this initiative!

Support Canadian Sovereignty! Donate to Monte Silver’s “Transition Tax Fundraiser!”

***************

Update from Monte Nov 14, 2018

Below is a summary of the advocacy effort since June 2018, and a description of the road ahead. For the first time since we began this advocacy, donations are required to enable us to proceed. I am also making myself available until December 15 to assist on Transition tax matters, in exchange for donation to the cause.

This email impacts Americans who have interests in non-U.S. corporations. Unless our tax advocacy is successful,

1. Many American small businesses have until December 15 to file their 2017 U.S. tax return with the Transition tax attachments.
2. Many American small businesses have paid some Transition tax and will pay more in the coming 8 years.
3. A huge number of American small businesses must comply with GILTI every year from 2018 onward.
The first part of this email discusses developments since June till today. The second part focuses on next steps.

Part 1 – from June 4 till the present

On June 4, due to our efforts, the Treasury granted small businesses with less than $1M in transition tax liability a one year extension to make the first payment of the tax. Since that time my focus has been to secure small businesses – both U.S. and foreign based – permanent relief from the two taxes. As set forth below, the attempt to resolve the exposure of American small businesses (abroad and in the US) to the Transition tax and GILTI by friendly dialogue appears to have fallen on deaf ears.

Congress-facing activity: In June 2018 I met with senior staff of 37 members of the Senate Finance Committee and House Ways and Means, and engaged in extensive follow up. One Senator’s office was kind enough to produce a draft bill to exempt small businesses from the Transition tax. However, that office made clear that there was no support for the relief among any members of the Senate Finance Committee he talked to. In my opinion, Congress will not grant small businesses any relief from these taxes, even in the lame duck session.

Treasury-facing activity: In August 2018, Treasury issued proposed regulations for the Transition tax. In October 2018, Treasury issued proposed regulations for the GILTI tax. After investing hundreds of hours reviewing these proposed regulations, researching various procedural laws and talking to relevant US legal experts, I conclude as follows: in issuing these proposed regulations, Treasury seriously violated at least 3 federal procedural laws – (i) the Regulatory Flexibility Act (RFA), which expressly gives Treasury the authority to exempt small businesses from the Transition & GILTI taxes; (ii) the American Procedure Act (APA) and the Paperwork Reduction Act (PRA). These violations give small businesses the specific authority to sue Treasury in a relatively expedited proceeding, and the courts have the specific power under these laws to provide small businesses effective relief.

Since August, I have repeatedly sent Treasury Secretary Mnuchin and senior officials at Treasury/IRS and other agencies well-thought-out analysis citing clear-cut Congressional reports, legislative history and case law all supporting my claims. I asked that a compromise be reached in order to put this matter to rest. But Treasury simply ignored my analysis, or at best simply concluded without any explanation that these laws did not apply to the proposed regulations, At this point, and based on written and oral feedback from senior government officials, I have concluded that Treasury will not grant small businesses any exemption in the proposed regs.

Part 2 – Next steps

There are five options, which can all take place in parallel. The first four involve me helping individual small businesses lawfully avoid Transition/GILTI taxes. The fifth option, which will seriously enhance options 2-4, involves suing the Treasury for violating three federal laws and getting the court to give us relief.

1. Very small businesses with little Transition tax liability that have yet to file 2017 returns: Until now, on a pro-bono basis I have helped many people who needed to file their Transition tax returns but did not know how to do so. I will continue to do so until December 15, in exchange for an agreeable donation to the cause.
2. Larger businesses with above average Transition tax liability that have yet to file 2017 returns: Based on my analysis of the law and facts, as confirmed by experts, I can issue a legal opinion that reasonably supports the position that the taxpayer has no obligation to file any Transition tax filing on or before December 15, 2018, or make any Transition tax payments in the future.*
3. Larger businesses that have already filed 2017 returns and made Transition tax payments. Here, I can issue a legal opinion that reasonably supports the position that (i) the taxpayer has no obligation to pay any more Transition tax payments, (ii) the taxpayer can amend its 2017 return without the Transition tax filings, or (ii) allows the taxpayer to file for a refund of Transition taxes paid. *
4. All businesses with GILTI filing obligations and tax liability from 2018 moving forward. Same as options 1-3 with regard to GILTI filing obligations and tax liability *
5. Litigation. A lawsuit against Treasury/IRS to get the court to provide small businesses relief from these two taxes. I have every intention to immediately file this lawsuit and aggressively fight this in court. Independent legal experts and I strongly believe we will win, otherwise I wouldn’t even consider this option. And the laws provide for a relatively expedited legal proceedings. I have identified a highly experienced DC-based boutique law firm which has done battle with Treasury and won. The firm likes the case. ITS ALL ABOUT THE DONATIONS. Costs of litigation can be kept low by me doing part of the work at reduced rates (yet no longer completely pro-bono given the time involved).

* As to options 2-4 – please contact me for details. Such an opinion must be discussed in detail before any decision is made, and will be impacted by the final regs which will be out shortly. In any case, portion of the fees generated from these three options will help fund litigation is sufficient donations are generated.

As to option 5, litigation, this will not happen unless you generously donate to the cause. Donations can be made via
(i) www.gofundme.com/small-businesses-for-tax-fairness
(ii) Paypal at montetal2@yahoo.com, or
(iii) via a wire to a bank account.
All donations will be kept confidential. Furthermore, if you wish to be named as a party to this litigation, let me know.

Together we have achieved two wins from Treasury and brought broad awareness to our cause. I have every intention of continuing the battle and winning. Together (and only together) we can do it.
Monte

Considering renouncing US citizenship? @Expatriationlaw information sessions Fall 2018

A series of information sessions (some formal presentations and some informal discussions); for information concerning the content of the programs please see here.

John Richardson is a Toronto citizenship lawyer, the co-chairman of the Alliance for the Defence of Canadian Sovereignty as well as the Alliance for the Defeat of Citizenship Taxation. He is a member of the ACA Taxation Advisory Panel. He holds the degrees of B.A., LL.B., and J.D. He is a member of the Massachusetts, New York and Ontario bars. His law practice focuses on “Solving the problems of U.S. citizenship” including relinquishing and the “Exit Tax”. He gives programs for expats (and Green Card holders) all across Canada and Europe. He writes extensively at citizenshipsolutions.ca.

Bangalore, India – October 22

Brisbane, Australia – October 25
with Karen Alpert
THU, OCT 25 AT 7 PM UTC+10
Information session – Brisbane
12 Payne St, Auchenflower QLD 4066, Australia
MAP

Karen Alpert founded the website Let’s Fix the Australia/US Tax Treaty and its associated Facebook group. The purpose of the group is to lobby and educate the Australian government regarding the impact of extraterritorial US laws on Australian citizens and residents and the cost to Australia of surrendering its sovereignty in these matters. Karen has a Ph.D. (UQ, Finance) and lectures in Finance at the University of Queensland.

Auckland, New Zealand – October 31

Sydney, Australia – November 1

Thursday, November 1
7:00 – 9:00 p.m.
The Rex Centre – Baroda Room
58A Macleay Street
Entrance near Baroda Street
Potts Point NSW 2011
MAP
Cost: Free, but preregistration is required for all sessions except the October 25 session in Brisbane (where you can just appear)
Registration: please send an email to: citizenshipsessions at citizenshipsolutions.ca or nobledreamer16 at gmail.com

  • Kings Cross train station is within walking distance.
  • Bus route 311 stops on Macleay Street, near Orwell Street.
  • Bus routes 323, 324, 325, 326 and 327 stop on Bayswater Road, near Darlinghurst Road.
  • Limited on-street parking.
  • Kings Cross parking station is nearby.

Dubai, UAE – November 4

Limassol, Cyprus – November 7
 

 
Information presented is NOT intended or offered as legal or accounting advice specific to your situation.
 
 

Repatriation Tax/GILTI – Negotiate for an Exemption?


(click on the picture for a clearer image)

A Letter from Monte Silver

Americans against the Repatriation/GILTI taxes – within striking distance of winning and you can help! And what to do with the October 15 filing deadline?

Hi Fellow Americans,

On August 1, 2018, the Treasury issued proposed regulations that interpret the Repatriation tax law – a 250 page very complicated document. I discovered that in issuing the document, Treasury seriously violated numerous Federal laws and procedures. This gives us tremendous leverage in negotiating for an exemption from the Repatriation & GILTI laws. It is not unreasonable to expect that this battle may be won by December 15, 2018. As you many have an October 15, 2018 filing deadline, I attach a relevant portion of an IRS publication stating that you may be able to extend the filing date until December 15, 2018. I suggest that you discuss this with your US CPA specialist to see if this applies to you.

What can you do to help win the battle? Easy! We need impacted Americans abroad and in the US to send in a few short paragraphs (as outlined below) – by October 7! See below for instructions. If you or people you know are impacted by these laws, lets take care of business!

The same text is available at www.americansabroadfortaxfairness.org

We are within reach. Lets do it.

Monte

*******

Instructions

  1. Do not include any identifying information about you or your business. Do not even say whether you live in the U.S. or abroad.
  2. You need to customize the letter where marked in red!!!
  3. Do not discuss anything but the Repatriation tax, and 962 if relevant for you.
  4. Submitting your comment: You can submit directly at www.regulations.gov/comment?D=IRS-2018-0019-0001. This Federal site does not require you to identify yourself.
  5. If you want to remain 100% anonymous, send the comment to me and I will submit it in an anonymous batch with others. To see other comments, including my own, click “Open Docket Folder” on the above link.

*******

Template comment

*******

Subject: Comment on the proposed 965/962 rules

To the US Treasury:

I am a U.S. Person with an interest in a small business. As a result of the Repatriation tax, and now these Proposed Rules, 2018 has, and the foreseeable future will continue to be, a nightmare for me, my business and my family.

I am unable to understand the 250-page document at all. My comment is only limited to two issues:

(i)The 5-hour estimate you state that it will take me to comply with this proposed rule in totally unrealistic, and
(ii)The Repatriation tax and this proposed regulation have and will continue to devastate my small business.

Issue 1: Countless hours I have spent and still have to spend trying to deal with the Repatriation tax.

PUT YOUR OWN EXPERIENCE HERE. In one or two paragraphs, detail all the time you have had to spend on the Repatriation tax. Include everything, from initially reading about the tax and talking to friends, to contacting your US and non-CPA CPA, to doing more research on what the tax is and means to you, how to comply, contacting your Congresspeople to complain and demand action, , to gathering documents and tax information, to joining groups and forums to discuss this matter and learn what to do. If your current CPA is not sufficiently knowledgeable about this tax and you had to speak to other tax professionals and pay then, state that. Put an estimate as to the number of hours you have spent on the Repatriation tax and what you have no idea how many hours it will take for you to understand the comply with the 250 page proposed regulations

Issue 2: How the Repatriation tax has devastated my small business.

PUT YOUR OWN EXPERIENCE HERE. In one or two paragraphs, state things like:

  • how the cost of compliance is so significant that it will threaten the existence of your business. The cost can be
  • (i) money – paying tax professionals, taking money needed for the business out of the business to pay the tax.
  • (ii) Time wasted on this and how that impacts your business. Add that this cost does not include the cost of future compliance for the proposed regulations which you cannot even begin to estimate
  • how you are unable to compete with non-us businesses as they do not have to comply
  • how you do not have the money needed to pay the tax and will need to take out loans, liquidate an asset, or take out pension money at a huge penalty
  • Taking money out of the company to pay this tax is harmful to the growth of your business
  • if you are making the 8-year payment plan or the 962 election, this rule will impact you for years to come
  • you have no idea whether the proposed rules mean that you have to amend returns, which will double the cost of compliance and headache.
  • as a result of the significant impact on business, you or others you know have debated whether to simply refuse to comply and become a tax evader
  • Non-Americans do not want to co-found businesses or have you as an investor, given the headache of Repatriation/GILTI taxes involved.

Based on the above, I respectfully request that Americans with small businesses be exempt from the 965 tax.

Respectfully,

Your Name