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

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

If U.S. Citizenship isn’t Slavery, Then Why Can’t You Just Delete It?

 
 

negative eneregy just deleteComment reposted from Isaac Brock Society
 

USCitizenAbroad says
April 18, 2017 at 1:54 pm
 

Leaving aside the specifics, the ACA proposal reflects:

A commitment to taxation-based citizenship; and

A commitment to FATCA.

 

Like the SCE (“Same Country Exemption”) proposal before, it is a proposing a “carve/buy out” for a select group of U.S. citizens who have demonstrated their loyalty to the Homeland by paying taxes and filing forms. For those, and those alone, they will be offered the privilege of “buying their freedom” in the same way that some slaves in another century were offered that privilege.

The ACA proposal is extremely vicious, very honest in one respect and very dishonest in another respect.

The Viciousness Of The ACA Proposal:

The sole beneficiaries are those who are U.S. tax compliant. For the vast majority of these deemed to be “U.S. Property/Slaves” it is too late for them to enter into the U.S. tax system. I have seen it said that:

Seven out of eight Americans recommend noncompliance!”

This means that the maximum percentage of people this could benefit (if they can afford the financial cost) would be 1/8 or 12.5%. In other words, the proposal is of very limited value to “American Citizens Abroad”.

The Honesty Of The ACA Proposal:

In at least one respect, the ACA proposal is the most honest proposal out there. It is the only proposal that is predicated on the correct assumption that U.S. citizenship is a modern day form of slavery. And why not? Slavery has played an important role the whole history of America. Some will scoff at the assumption that U.S. citizenship is a form of slavery. But, hey if it’s not a form of slavery, then why are people not free to leave it?

The Dishonesty Of The ACA Proposal:

Once again, ACA considers U.S. citizens to be ONLY Homelanders and what I would refer to as “Homelanders Abroad”. It does not acknowledge the existence of “accidental Americans”, and long term dual citizens who are permanent residents of other nations and do NOT consider themselves to be Americans in any relevant sense.

In any case, the proposal is so complicated that I doubt it will go anywhere.

Just in case, anybody has missed the main point of this:

Renounce and Rejoice! – It’s the only option CURRENTLY available to you.

  1. Feedback on ACA RBT Proposal (1)
  2. Residency-Based_Taxation_Baseline_Approach_Feb._7_2017
  3. Residency-Based_Taxation_ACA_Proposal_Side-By-Side_Comparison_161201_Final
  4. ACA’s Residency-Based Taxation – RBT- Proposal
  5. ACA Advances on Residency-Based Taxation

 

JACKIE BUGNION RECEIVES AWARD FOR EXCEPTIONAL SERVICE TO AMERICANS ABROAD

ACA confers Eugene Abrams Citizenship Award for 2017 on Jackie Bugnion

THE EUGENE ABRAMS CITIZENSHIP AWARD 2017 WINNER

Jackie Bugnion

excerpts from the ACA site:

American Citizens Abroad, Inc. (ACA, Inc.) is proud to confer its Eugene Abrams Award for 2017 on Jackie Bugnion.

The Abrams Award, named for Eugene B. Abrams, ACA Executive Director from 1992-1994, honors Americans abroad who have contributed outstanding volunteer service to their community. This year, it is being presented to an American abroad who has been of invaluable service to the overseas American community around the world.

Mrs. Bugnion served on the ACA Board and Executive Committee for 12 years, from 2003 to 2015, and she was the driving force behind the development of Residency-Based Taxation (RBT), writing detailed RBT proposals, visiting lawmakers and giving speeches on several different continents. She was instrumental in creating relationships with key legislators and the tax writing committees on Capitol Hill, and she wrote policy papers which helped establish ACA as the premier thought-leader on issues affecting the community of Americans living and working overseas.
…….ACA and ACAGF owe a great debt of gratitude to Mrs. Bugnion for her years of service to the organization. She always had excellent insight into the problems facing Americans overseas and worked tirelessly to find practical solutions to these problems. Jackie’s dedication and commitment to the cause of Americans overseas and her committed focus to the issues of overseas taxation and compliancy issues helped bring RBT to the forefront of discussions in Washington.

The following are a set of videos, interviews and reports that demonstrate how clearly Jackie understands the problems of Americans abroad and her no-nonsense approach to fixing them.

CFA SOCIETY SWITZERLAND SPONSORS DEBATE – FATCA, THE WORLDWIDE END OF BANK SECRECY? JUNE 25-26, 2012 GENEVA & ZURICH

The CFA Society, Switzerland sponsored debates on June 25 & 26, 2012 in Geneva & Zurich. Of particular interest is listening to the architect of FATCA, J. Richard (Dick) Harvey, Jr. For a fine review of this by Wellington (a Brocker who attended the debate in Zurich) please see callousness of Mr Harvey & the U.S. government .


full debate – 2 hours

 
ACA DIRECTOR JACKIE BUGNION TALKS ABOUT #FATCA WITH JENNIFER CORDINGLEY OF DUKASCOPY TV – NOVEMBER 15, 2012

This short interview with Jennifer Cordingley of Dukascopy is very concise and you won’t find a better one anywhere. This is the one to convince your family and friends-no hysterics or complaining, just, “this is what it is” (and “oh by the way, its terrible“).

There is no direct representation in Congress or in the Administration for Americans residing overseas in Washington D.C., yet U.S. law seriously impacts the lives of Americans overseas through rules related to transmission of citizenship to children born overseas, through specific penalizing measures related to Social Security payments, and, in particular, through its unique citizenship-based taxation whereby the United States continues to impose its tax regime on Americans living outside of the country, even though they pay taxes where they reside. Most recently, in 2010, Congress passed the FATCA legislation (Foreign Account Tax Compliance Act), which makes it very difficult for Americans abroad to maintain bank accounts in the country where they live.

 

5 minutes
 

ACA DIRECTOR JACKIE BUGNION TALKS ABOUT OVERSEAS AMERICAN WEEK ON DUKASCOPY TV – MARCH 6, 2013

Jackie is in the studio with Dukascopy TV journalist Natalie MacDonald to discuss Overseas American Week (OAW). In addition to describing the purpose of OAW, she outlines major issues for expats; tax, banking-(specifically, inability to obtain U.S. accounts while having a foreign address due to the Patriot Act), citizenship and voting. She also delves into the lack of representation due to low percentages of concentration in districts, with the only additional support of the Americans Abroad Caucus headed by Rep. Christine Maloney. The attempt (HR 597) to set up a presidential, bi-partisan committee to address all of these issues is mentioned. As well as the fact that as of the video (March 2013), there has not been a study done concerning overseas issues, in over 35 years. In that time-frame, the issues have become far more complex. She also points out problems with Social Security & WEP and Medicare; as well as the fact that if arrested overseas, Americans do not have the protections of the Vienna Convention; no right to legal counsel, etc, in spite of the fact that the U.S. signed the Convention.
 

8 minutes
 

JACKIE BUGNION SUBMISSION TO INTERNATIONAL TAX REFORM WORKING GROUP (W&M) APRIL 10, 2013

Jackie Bugnion writes the best arguments against citizenship-taxation ever

ACA DIRECTOR JACKIE BUGNION TALKS ABOUT UPDATES ON RESIDENCE-BASED TAXATION (RBT) ON DUKASCOPY TV (JULY 2013)

This interview with Monica Gibson (Dukascoy) focuses on RBT highlights; if adopted, RBT would produce more revenue than the current CBT system; it would reduce costs to the IRS and would be better for US business by increasing competitiveness abroad. The fact that a US employee costs two times the cost of hiring a foreigner hurts the U.S. in this global economy and she asks “who better is there to represent the interests of American than Americans themselves”?
The possibility of tax reform is mentioned due to the Ways and Means request for submissions. ACA’s report as well as a very supportive report from JCT as well as the SFC paper,
INTERNATIONAL COMPETITIVENESS -Senate Finance Committee Staff Tax Reform Options for Discussion
all point to a strong case for RBT.

In this video Jackie speaks passionately about the fact that lives are being destroyed; that “destroyed” is not too strong a word to use. She in fact claims that the situation is “very dramatic.” It is amazing that persons like herself, Nina Olson etc are incredibly clear about this and someone like Mr. Stack claims that such aspects/effects of FATCA are “myths.”
 

7 minutes

 

JACKIE BUGNION SPEAKS ABOUT THE FOREIGN EARNED INCOME EXCLUSION WITH BENJAMIN JONES ON DUKASCOPY TV JAN 9 2014

Here Jackie discusses what the FEIE really is (a “fix” for CBT) and tries to clear up common, stubborn misconceptions (i.e., that Americans abroad get a “tax break”). The FEIE is “low-hanging fruit” and always in jeopardy. Making the case for FEIE is simple; without it, anyone in a low tax country will be severely affected and those in high-tax countries (where 80-90% of Americans abroad live) will simply switch to the FTC. She discusses what happened when the FEIE was repealed due to The Tax Reform Act of 1976. Tens of thousands of Americans in the Middle East, particularly in engineering and the oil fields, received tax bills that were higher than the income they made. Consequently they came home, businesses were lost and the export markets were lost. Though the legislation was repealed retroactively, the damage had been done. This was discussed often by Roger Conklin most effectively in his submission to the Ways & Means Committee .For the first time in nearly 100 years, the trade balance turned negative. The reality is that the low-tax people would leave and enter the unemployment rolls in the U.S. and the U.S. would not receive an extra penny from the high-tax people. Jackie mentions an ACA paper The 911 Mirage .
Another complication has developed due to the Net Investment Income Tax (funds for the Affordable Care Act aka “Obamacare”). Here one has to ask whether this was a deliberate act of Congress to punish Americans abroad. This 3.8% tax on passive income is a Chapter 2 tax (from the Internal Revenue Code) rather than a Chapter 1 tax. Chapter 2 taxes are ineligible for the FTC. This is clearly sheer discrimination that Homelanders do not face. Also, those who are self-employed are required to remit 0.9% of their income for Social Security; may sound minuscule but represents an actual 6% rise in social security taxes. There is a reference made to the new expansion of ACA into the United States as the ACA Global Foundation.
 


12 min

 
ACA’s TAXATION OF AMERICANS ABROAD IN THE 21ST CENTURY:CITIZENSHIP-BASED TAXATION VS RESIDENCE-BASED TAXATION
TORONTO ONTARIO CANADA MAY 2 2014

We were lucky to meet Jackie at ACA’s Taxation of Americans Abroad in the 21st Century:
Citizenship-Based Taxation vs. Residence-Based Taxation
held in Toronto on May 2, 2014. The Isaac Brock Society posted live comments from Brockers present during the meeting. Dr.Stephen J. Kish was academic host for the meeting and John Richardson was the moderator for the debate.
She was delightful to work with and I am glad I had the chance to meet her. A video was made of the actual debate between Prof. Michael S. Kirsch & Dr. Bernard Schneider, “Citizenship-Based Taxation vs. Residence-Based Taxation
video is 2 hours
 
TAX ANALYSTS PUBLISHES “CONCERNS ABOUT THE TAXATION OF AMERICANS RESIDENT ABROAD” by JACKIE BUGNION AUG 24, 2015

“Permission is contingent on properly crediting the article to the author and to Tax Analysts as the original publisher. Using the PDF attached above covers proper attribution.”

“Concerns About the Taxation of Americans Resident Abroad” This article is a “must-read.” You will not find a clearer or better description anywhere.
 
 
RADIO INTERVIEW WITH GOLDSTEIN ON GELT – ALL YOU NEED TO KNOW ABOUT EXPAT TAXES, WITH JACKIE BUGNION SEP 13 2015


14 minutes

JACKIE BUGNION RETIRES FROM ACA – SPRING 2015

John Richardson comments on his reaction to the news that Jackie was retiring:

On May 7, 2015 I received notification that Jackie Bugnion had submitted her resignation to the Board of ACA “American Citizens Abroad“. I read the notification with a combination of sadness and total appreciation for the incredible efforts that Jackie has made in advocating for the rights of Americans Abroad. Jackie was largely responsible for organizing the “Citizenship Taxation Conference” (featuring the debate between Michael Kirsch and Bernard Schneider) that took place in Toronto on May 2, 2014. Some of you may have had the privilege of meeting her there. It’s unlikely that she could be replaced by any one individual.

In my humble opinion Jackie has done more than any single individual in both:

  • Helping Americans Abroad in day-to-day practical ways; and
  • Leading the broader educational initiative which I believe will lead to the United States transitioning from CBT to RBT.

Jackie’s reflection:

While the task is far from over, I am pleased to know that ACA has managed to get RBT on the table of tax reform. As you know the Senate Finance Committee has taken a positive stand on this. The number of public submissions on tax reform to the Senate Finance Committee in April 2015 showed significant input from Americans abroad. There were 350 submissions to the “international” group compared to 450 for the “personal” group. When related to the interested populations – 7 million vs 250 million, this demonstrates a major input from overseas. Congress is sensitive to this level of participation.

 
Last but not least, some quotes from those who have worked with Jackie, all appreciative of her long service to Americans abroad via ACA. Some of us perhaps, have not really been around long enough (i.e., we were just Americans living in our new countries, completely oblivious to all this…….) to truly appreciate all that people such as Andy Sundberg, (boy, was he ever handsome), Roger Conklin (a very kind soul) and now Jackie have done for us. The best thing we can do is learn from their examples; of putting our all into getting this situation reconciled so our kids and grandkids will not have to deal with this………..

Jackie is a real worker. There are projects that require a big effort and a great deal of attention to detail, and Jackie would commit big blocks of time to working on something and making it a success. This was true of the Residency-Based Taxation project and the Canadian conference a few years ago. Things don’t happen by themselves. Jackie made things happen, and I was always amazed and appreciative.

— Charles Bruce, Chairman, American Citizens Abroad Global Foundation

Jackie has a brilliant mind and an incredible command of detail, and I’ve been present in meetings where she blew away legislators with her detailed knowledge of the issues. Her proposals were always incredibly well researched and totally pragmatic. ACA would not be where we are today without Jackie’s expertise.

— Anne Hornung-Soukup, Director, American Citizens Abroad Global Foundation

Jackie selflessly invested in developing the deep subject knowledge needed to propose improvements that now benefit millions of people she will never meet. She embodies the altruism upon which the United States was founded.

— Roland Crim, Director, American Citizens Abroad, Inc.

Jackie:

Your work for “American Citizens Abroad”, as an organization, has been tireless, relentless, purposeful and generous. Your contribution to ACA’s many achievements has been extraordinary. Your influence will continue long after your retirement. But, that’s on the ACA organizational level.

For individual Americans abroad, your contributions have far exceeded your many accomplishments on the ACA level. Your greatest contributions have not been what you have done. Rather your greatest contribution has been who you are as in individual.

As an individual you have represented the finest of American values: a generosity of spirit, a beacon of hope and a consistent and stable compassion.

To put it simply, you have cared. It’s who you are.

On behalf of all American citizens living outside the United States, I thank you.

—-John Richardson, Toronto, Canada

The ACA RBT Proposal is a “carve out” within CBT

 


 
This post is based upon a comment made at the Isaac Brock Society concerning American Citizens Abroad’s new (Febrary 2017) proposal on replacing citizenship-based taxation with residency-based taxation.

See the bottom of the post for information on how you can join the discussion.
 
carve out
 
USCitizenAbroad says:

The ACA proposal is painful to read. But, it is an opportunity to dialogue with ACA and others who are engaged in the process of tax reform and its application to Americans abroad. I wonder if a separate site/Facebook group or something could be dedicated to the specific issue of “Tax Reform and Americans Abroad”. But, anyway …

The specifics of the proposal are a diversion from what I believe is the real issue. The real issue is the assumptions that ACA (and to be fair) the vast majority of Americans abroad bring to the table.

ACA proceeds from the operating assumption that American citizens are nothing but slaves to the U.S. Government and the IRS. ACA has absolutely bowed down to the United States of America and acknowledged the absolute servitude of Americans to Congress and the IRS. ACA has done this NOTWITHSTANDING THE FACT that most Americans abroad do not (and apparently will not) file U.S. taxes, FBAR and the other components that have stripped Americans of their liberties. (Donald Trump would probably say that those who do not file are “smart”. Why? Because the rules of U.S. style CBT are so punitive that in most cases it is safer to not file at all. Well, assuming you can even understand what is asked of you.)

Because ACA begins by accepting the principle of slavery, they then begin by asking for a “carve out” for certain slaves. These are slaves who have been particularly good and compliant slaves. The principle of “carve out for exceptional slaves” was last seen in the FATCA same country exemption proposal.

Understand the following two points:

1. FATCA SCE was a proposal that was absolutely in support of FATCA, but asked for an exemption for ONLY those Americans abroad who could demonstrate compliance with their tax slavery.

2. The current proposal (RBT not) ABSOLUTELY ACCEPTS CBT AS THE OPERATING PRINCIPLE, but asks for an exemption for those who have been particularly compliant with CBT. Because of the emphasis on “compliance, compliance, compliance” there is NO relief for Accidental Americans (and similarly situated people). The proposal makes NO mention of dual citizens and to what extent dual citizenship should play a role. As the Titanic is going down, ACA is proposes to save “tax compliant” (the good slaves) Americans from going down.

To be clear (as the “Change you can believe in” guy used to say):

This is NOT a proposal for residence-based taxation. This is a proposal for “taxation-based citizenship” with an exemption for certain groups of people. Therefore, under NO CIRCUMSTANCES should this be referred to as an RBT proposal. This is a proposal to worship at the altar of taxation-based citizenship, but exempt the “high priests” from the burdens.

That said, as a practical matter, if you can fit yourself into the one of “taxation-based citizenship” exemptions, it does provide benefits. But, as @Eric notes, this proposal will institutionalize “taxation-based citizenship”.

More, on the specifics later.

FURTHER INFORMATION ON THE ACA PROPOSAL AND DISCUSSION:

The document is here
 
Discussions are happening at Brock and
at the ACA Facebook page
https://www.facebook.com/americancitizensabroad/posts/10154429235779072
 
ACA is soliciting everyone’s questions and comments and ADCT encourages ALL expatriates, their families and friends (especially if living in the Homeland) to read the proposal and to provide feedback

info@americansabroad.org and/or

here

Now’s the Time – Here’s What They Promised – Let’s Hold Them to It

UPDATE SUNDAY NOVEMBER 13, 2016

REINCE PRIEBUS CHOSEN TO BE PE TRUMP’S CHIEF OF STAFF

EXCERPTS:

WASHINGTON — President-elect Donald J. Trump on Sunday chose Reince Priebus, the chairman of the Republican National Committee and a loyal campaign adviser, to be his White House chief of staff, turning to a Washington insider whose friendship with the House speaker, Paul D. Ryan, could help secure early legislative victories.

But as chief of staff, Mr. Priebus will be the one who has several hundred White House staff members reporting to him. He will be the primary gatekeeper for Mr. Trump and the person most responsible for steering the president’s agenda through Congress. That role will be especially critical for Mr. Trump, who has never served in government and has few connections to important political figures.

As Mr. Trump denounced the Republican primary process as rigged and, on occasion, threatened to quit the party and run on his own, Mr. Priebus remained neutral. And when Mr. Trump secured the nomination, Mr. Priebus stood by his side.

Mr. Priebus worked with Mr. Trump on the nuts and bolts of presidential politics, trying to smooth his rough edges and staying in close contact as a bare-bones campaign prepared to go up against the Clinton machine.


PRESS RELEASE
VIA MR. PRIEBUS JULY 2015

RNC PR NO FATCA

**********

I found myself wondering just what it is expats will want to focus on now, that the Republicans have the Presidency, and control of the House and the Senate. As Stephen Kish pointed out, this could change in two years (well, really just a bit more than a year as once the campaiging for the interim elections in 2018 start, we will likely have lost our chance to get this done quickly. What we do in the next year is critical to dumping FATCA and CBT.

I started thinking about what they promised and have gone through the Platform. I am going to list the main things I found that relate to our issues; if anyone finds more, please post. I also have two documents that focus specifically on FATCA and RBT as well as the link to Republicans Overseas Resolutions posted long ago on their FB site. It would be helpful if others want to isolate points and phrases to focus on in communications to the Republicans.

People may. may not want to coordinate efforts but I assume there will be letters written, emails sent and so on. You may remember that Congressman Mark Meadows (R NC) introduced H.R. 5935 seeking to have an oversight hearing on FATCA repeal. Once we know the date of the hearings and who will sit on the committee, we would start there I presume. And then follow the movement of what occurs……Calls for witnesses were posted on the Isaac Brock Society indicating interested parties should contact Keith Redmond by email at FATCA_Testimonials@outlook.com

*****

THE REPUBLICAN PLATFORM
excerpts from sections related to our issues

RESTORING THE AMERICAN DREAM

Fair and Simple Taxes for Growth p 1

The current tax code is rightly the object of both anger and mockery. Its length is exceeded only by its complexity. We must start anew. That will be an enormous undertaking and, if it is to succeed, it must command the attention and approval of the American people………….. We will welcome all to this enterprise — to discuss, debate, challenge, and amend — so that together we can restore economic growth for the American people and, even more important, renew their faith in the future

NB:This is their promise to listen.
 
Our Tax Principles p 2
To ensure that past abuses will not be repeated, we assert these fundamental principles. We oppose retroactive taxation. We condemn attempts by activist judges at any level of government to seize the power of the purse from the people’s elected representatives by ordering higher taxes. We oppose tax policies that deliberately divide Americans or promote class warfare.

NB:This would deal with the bizarre idea that 877A is retroactive.
 
To guard against hypertaxation of the American people in any restructuring of the federal tax system, any value added tax or national sales tax must be tied to the simultaneous repeal of the Sixteenth Amendment, which established the federal income tax.

NB:This would eliminate the whole need for filing in terms of taxes as value added or national sales tax will not affect Americans abroad in any significant way.
 
A Competitive America p 2
American businesses now face the world’s highest corporate tax rates. That’s like putting lead shoes on your cross-country team. It reduces companies’ ability to compete overseas, encourages them to move abroad, lessens their investment, cripples job creation here at home, lowers American wages, and fosters the avoidance of tax liability — without actually increasing tax revenues. A more damaging policy is hard to imagine.

NB:Please see an excellent paper by Roger Conklin which outlines how CBT directly affects Trade.(via The Revenue Act of 1962 & The Tax Reform Act of 1976; the U.S. has never recorded a trade surplus since 1975).

 

We endorse the recommendation of the National Commission on Fiscal Responsibility and Reform, as well as the current Administration’s Export Council, to switch to a territorial system of taxation so that profits earned and taxed abroad may be repatriated for job-creating investment here at home. We believe American companies should be headquartered in America. We should reduce barriers to accomplishing that goal. A Winning Trade Policy International trade is crucial for all sectors of America’s economy. Massive trade deficits are not. We envision a worldwide multilateral agreement among nations committed to the principles of open markets, what has been called a “Reagan Economic Zone,” in which free trade will truly be fair trade for all concerned.

NB:Trade is important to Trump. He needs to know how CBT affects it. If they offer territorial taxation to corporations,they can offer RBT to Americans abroad.
 
A REBIRTH OF CONSTITUTIONAL GOVERNMENT

The Fourth Amendment: Liberty and Privacy p 13

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.

NB: This needs no comment. Other than it might be pointed out that many of the accounts reported on FBAR and 8938, are registered government plans. Some even include government grants which are taxed. The idea that these can be used for money laundering or terrorism is simply absurd.
 

GOVERNMENT REFORM

Reforming the Treaty System p 26

We intend to restore the treaty system specified by the Constitution: The president negotiates agreements, submits them to the Senate, with ratification requiring two-thirds of the senators present and voting. This was good enough for George Washington but is too restrictive for the current chief executive, who presumes to bind this country to bilateral and multilateral agreements of his devising. His media admirers portray his personal commitments — whether on climate change, Iranian weapons, or other matters — as done deals. They are not, and a new Republican executive will work with the Congress to re-establish constitutional order in America’s foreign relations. All international executive agreements and political arrangements entered into by the current Administration must be deemed null and void as mere expressions of the current president’s preferences. Those which are in the national interest but would traditionally have been made by treaty must be abrogated, renegotiated as treaties, and transmitted to the Senate for its advice and consent as required by the Constitution. The United States will withdraw from all agreements and arrangements failing those standards.

NB: Bye bye IGAs

Please see Professor Allison Christians excellent paper The Dubious Legal Pedigree of IGAs (and Why it Matters)

 
Internal Revenue Service p 27

We also support making the federal tax code so simple and easy to understand that the IRS becomes obsolete and can be abolished.

NB: Bye bye OVDP, Streamlined, threats of penalties etc
 
************

Here are three more direct sources of the Republican positions. I will probably do the same with these as above. But the more the merrier!

Resolution Supporting Residence Based Taxation

Resolution toRepeal the Foreign AccountTaxCompliance Act

A proposed RNC Resolution titled — Resolution to Repeal the Foreign Account Tax Compliance Act (FATCA) compiled by Republicans Overseas.