Passport Revocation: The new weapon in the US war on Americans abroad

passport revoke
 
 
 
 
 
 
 
cross-posted from Citizenship Solutions

by John Richardson

Circa 2015:

The logical progression continues …

I just got off the phone with someone who has just received a letter from the IRS stating that:

1. He had a “seriously delinquent” tax debt; and

2. That notice of the “seriously delinquent” tax debt was being forwarded to the State Department.

(In 2016 I did a presentation on this topic just a few months after the law came into force. You may view the presentation here.)

It is clear that the letters from the IRS have started to go out. The purpose of this post is to explain in simple terms what this means for Americans abroad.

To put it simply:

1. If you have received the notice and you do NOT have a current U.S. passport then:

The State Department cannot issue you a passport.

2. If you have received the notice and you DO have a current U.S. passport then:

The State Department may revoke your passport but is not required to revoke your passport.

For most Americans abroad (who certainly have a valid U.S. passport unless they are dual citizens) receipt of the letter does NOT mean that they will lose their existing U.S. passport.

Like all aspects of living as a U.S. citizen abroad, this issue will be governed by both the IRS and by the State Department.

It began with Sec. 3201 of the FAST Act (which naturally is a revenue offset provision and one of the final gifts from the Obama administration) …

Like most of life as a U.S. citizen, it all starts with the IRS …

Internal Revenue Code Sec. 7345 provides the mechanism to certify the “seriously delinquent tax debt” and then forward notice of the debt to the State Department. The relevant language is:

If the Secretary receives certification by the Commissioner of Internal Revenue that an individual has a seriously delinquent tax debt, the Secretary shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport pursuant to section 32101 of the FAST Act.

You can read how the IRS interprets this provision here:

https://www.irs.gov/businesses/small-businesses-self-employed/revocation-or-denial-of-passport-in-case-of-certain-unpaid-taxes

Once the State Department receives the “certification” it will respond with “denial, revocation, or limitation” …

According to the State Department:

Passports and Seriously Delinquent Tax Debt If you have been certified to the Department of State by the Secretary of the Treasury as having a seriously delinquent tax debt, you cannot be issued a U.S. passport and your current U.S. passport may be revoked.

If you are overseas you may be eligible for a limited passport good for direct return to the United States.

We would suggest that if you have seriously delinquent tax debt, you contact the IRS to resolve your debt before applying for a passport. If you do not resolve your tax issues before applying for a passport, your application will be delayed or denied.

If you have seriously delinquent tax debt and have already applied for a new U.S. passport, we cannot issue a new passport to you until you have resolved your tax issues with the Internal Revenue Service (IRS).

For more information on seriously delinquent tax debt, see Revocation or Denial of Passport in Case of Certain Unpaid Taxes on the Internal Revenue Service (IRS) website.

So, where in the legislation and regulations does all this come from?

Denial: Denial is mandatory when one applies for renewal or for a new passport.

https://www.law.cornell.edu/cfr/text/22/51.60

§ 51.60 Denial and restriction of passports.
(a) The Department may not issue a passport, except a passport for direct return to the United States, in any case in which the Department determines or is informed by competent authority that:

(3) The applicant is certified by the Secretary of the Treasury as having a seriously delinquent tax debt as described in 26 U.S.C. 7345.

Revocation: Revocation is permitted but is not mandatory

https://www.law.cornell.edu/cfr/text/22/51.62

§ 51.62 Revocation or limitation of passports.
(a) The Department may revoke or limit a passport when

(1) The bearer of the passport may be denied a passport under 22 CFR 51.60 or 51.61; or 51.28; or any other provision contained in this part; or,

It is not clear when the State Department would revoke an existing passport. I am not sure what incentive the State Department has to revoke an existing passport (just because of a tax debt).

My thoughts on this …

1. The $50,000 “tax debt” includes interest and penalties. It’s easy for an American abroad to exceed this simply through “form transgressions”.

2. The people most threatened by this are those who do not have a second passport. Get yourself a second passport.

The days of living as a U.S. citizen outside the United States are clearly numbered.

Interested in learning about Substitute Tax Returns for non-filers? If this is not enough excitement, see …

John Richardson

Interview with Solomon Yue & John Richardson in London UK Sept 2018

Live Interview with Solomon Yue – Tweet Your Questions, Ideas in Advance!

http://www.thatchannel.com that channel graphic for interview
 
 
 
 
 

Update on UK Accidental Americans

uk accidental logo

Back in June we were asked to do a post on the formation of several new Accidental American groups. There seemed to be some confusion as to whether these were “real” groups or just new attempts without substance. Today, while doing something completely different, I came across the UK Accidental Americans group and want to make sure this is posted so as many in the UK as possible, will become aware of the work they are doing there.

The FaceBook Page is here. Please check out the Page and “like” it as well as inviting other friends to do the same.

The FaceBook Group is here. This is a closed group. You must ask to join and answer two questions first.

Further, this article was posted on our Media and Blog Articles Open for Comment page but I only noticed one comment. I want to make sure it is seen on a larger scale. There were also some other similar articles:

“Accidental Americans” must be protected from draconian US tax system

Labour MEPs: Time to give accidental Americans their independence from US tax authorities

And last but not least, our colleague Fabien Lehagre has once again managed to get media and government attention on the plight of French Accidentals Macron Backs Accidental Americans . Truly outstanding effort and results – great stuff Fabien!

If anyone knows anything further concerning the new Accidental American groups in Ireland Italy or Poland could you please update us with a comment or ask one of our admins to do it for you? Thanks.

Two Programs with Solomon Yue in Toronto August 12 & August 16, 2018

In addition the meeting mentioned below, we would like to have a second, more informal program for expats and their families and friends. This format would be a more intimate question and answer which will be focused on individuals subject to the CBT regime. This would take place on Sunday, August 12, from 2:00 – 4:00 pm on the U of T campus. We need a confirmed number of individuals before booking a room. If you are interested, please email nobledreamer16 at gmail dot com Cost: $20
 
AMChamCanada logoDO_NOT_DELETE_AmCham_Canada_generic_event_image
 
 
 
 
 
 
 
 

A LIGHT AT THE END OF THE TUNNEL OR ANOTHER ONCOMING TRAIN: THE POSSIBLE END OF U.S. CITIZENSHIP-BASED TAXATION

If you are an American citizen residing and doing business in Canada, you bear the pain of the heavy tax burden endured by all U.S. citizens due to the fact that the U.S. is the only major country that imposes worldwide taxation on its citizens no matter whether they live in the U.S. or in another country. In addition, the U.S. imposes significant penalty laden reporting requirements on U.S. citizens living in Canada and abroad.

Change is a possibility.

Did you know that there is a possibility that the U.S. Congress may introduce, debate and vote upon a bill that may ease this worldwide taxation burden on U.S. citizens living and working in Canada? This bill would enact ‘Territorial Taxation for Individuals (TTFI)’. It is a tax cut for 9 million overseas Americans by ending double taxation.
 
Solomon Yue headshot(1)Solomon Yue, CEO of Republicans Overseas has been involved with drafting the TTFI bill. Mr. Yue, who is currently working with AmChams throughout the world, will present publicly shareable information about the TTFI bill, and discuss its progress as it journeys through the legislative process. He will be encouraging AmCham Canada to lend its support in the global effort to encourage Congress to move forward with this legislation.
 

Elena Hanson headshot 2(1) Elena Hanson, Managing Director of Hanson Crossborder Tax Inc. and a member of Democrats Abroad. Elena will be speaking on the logistics and burden of U.S. tax filing obligations as an American in Canada.
 

John Richardson headshot(1) John Richardson, a Toronto Lawyer of Citizenship Solutions, will also be joining Elena and Solomon to speak on the lost opportunity cost of being a dual U.S.-Canadian tax filer: Canadian residents who are subject to the U.S. tax system do not have the same financial planning and other opportunities that non-U.S. citizens have..
 
 
Date: Thursday, August 16, 2018

Time: 6:15pm to 9:00pm

Place: St. Michael’s College, Alumni Hall, Room 400; 121 St. Joseph Street, Toronto (paid parking near building; nearest subway station is Museum) MAP

Cost: $20 +tax (AmCham members); $35 +tax (non-members).

Pre-registration is required. Registrations due August 13.
Register

Info: AmCham Toronto TTFI Event
 

Be on the Lookout! Bubblebustin to be on CBC The National- on the #TransitionTax

Update from BB / Bubblebustin

Those in Canada who are potentially affected by the Transition/Repatriation Tax (or not but care about Canada’s sovereignty) need to contact their government representatives and Ministers. As suggested by our MP’s office, start with:

Your Member of Parliament, and

Minister of Foreign Affairs,
chrystia.freeland@parl.gc.ca,
House of Commons
Ottawa, Ontario
K1A 0A6
Telephone: 613-992-5234
Fax: 613-996-9607

Minister of International Trade of Canada
Francois-Philippe.Champagne@parl.gc.ca
House of Commons
Ottawa, Ontario
K1A 0A6
Telephone: 613-995-4895
Fax: 613-996-6883

Minister of National Revenue
Diane.Lebouthillier@parl.gc.ca
House of Commons
Ottawa, Ontario
K1A 0A6

Minister of Finance
bill.morneau@canada.ca
The Honourable William Francis Morneau
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario K1A 0G5
House of Commons
Parliament Buildings
Ottawa, Ontario K1A 0A6
Send a message to the Minister

Daniel Lauzon was quoted in the CBCNational News segment.
Daniel Lauzon works as Dir. Communications for Finance Canada.
Daniel can be reached at 613-369-5696

Should you PM me or post here with the efforts you’ve made, I would like to take them to the reporters with the CBC covering this story in developing the government action (or inaction) side of the story. The press needs to know how Canadians are getting treated by our government and maybe the additional coverage will cause the government to take action.
 

UPDATE: Here is a direct link to the segment.

Trump’s tax reform affects Canadian residents The National
 
 
cbc the nationalThis aired on Monday, April 30. CBC News-The National Interview with Evan Dyerevan dyer

Outstanding new resource on FATCA, CBT, etc. by Andrew Grossman

A new resource on all the issues faced by expats, #AmericansAbroad, #AccidentalAmericans, #US persons, et al:

andy g
FATCA: Citizenship-Based Taxation,
Foreign Asset Reporting Requirements and
American Citizens Abroad

 
 
By Andrew Grossman

I don’t think there is anything else which is so extensive or thorough. This is brilliant research and gives reference to many, many court cases. Definitely a resource we are fortunate to have. (Brock SWAT to compliance community: “Watch out!”)

Thank you Andrew Grossman!

It is permanently located on the sidebar at Brock under the Important Information box – Introductory and Essential Material on CBT, FATCA, Citizenship Issues.

Here is the link to the Brock page.
Here
is the original.

If you want to be a Shareholder in our Canadian Business then you must Renounce U.S. Citizenship

Americans are experiencing discrimination in banking but also, as shareholders

cross-posted from citizenship solutions

    by John Richardson

The unified message from all should be that: The United States should stop imposing “worldwide taxation” on people who have “tax residency” in other countries and do NOT live in the United States! This is a message that all advocates of tax reform can support. As recently explained in a post from “ACA”, the mechanism (RBT vs TTFI) used to achieve this change is less important.

It is no secret that Congressman George Holding is working on a proposal to end the U.S. practice of imposing “worldwide taxation” on those who have “tax residency” in other countries. If successful, this would be a positive change for the United States, U.S. citizens who choose to live outside the United States and the residents of other countries. None of these should be burdened by the extra-territorial application of U.S. tax laws!

The specific content of the Holding proposal is certainly evolving. Regardless of the final content, Karen Alpert, Greg Swanson and I have proposed three core principles against which a final proposal should be measured. (We are not suggesting that these are the only principles.) These principles are found in Karen’s timely post where she discusses a “Residence Based Taxation Proposal

The three proposed principle are:

1. American citizenship should not disadvantage a citizen living outside the US relative to expatriates from other nations.

2. We believe that freedom of movement is a basic human right. We also believe that freedom of movement and international trade go hand-in-hand. Governments should never impose laws, taxation, regulations, or other limitations on their citizens that hampers the freedom of movement of those citizens.

3. US citizens currently living outside the US who have arranged their financial affairs to be compliant with current US law should not be disadvantaged. Similarly, those non-residents who were unaware that they needed to arrange their financial affairs in accordance with US law should not have their savings confiscated just because they have foreign investments that are taxed punitively by the US relative to similar domestic US investments.

The practical reality of “Being American” and living in another country

Principle 1: One practical analysis – American citizenship should not disadvantage a citizen living outside the US relative to expatriates from other nations.

It is one thing for a country to restrict certain opportunities to citizens of that country. For example, many countries restrict voting and certain employment opportunities to citizens. But, most countries do NOT discriminate among various groups of “non-citizens”. Significantly, U.S. law has created huge incentives for Americans to be discriminated against as both matters of law and matters of practice.

Some examples:

Discrimination against Americans prescribed by law – Think FATCA:

Pursuant to FATCA and the FATCA IGAs imposed on the world, many countries have changed their laws to specifically discriminate against U.S. citizens in the area of financial services generally and banking in particular. It is well known and documented (nothwithstanding Robert Stack’s “It’s a myth claim”) that U.S. citizenship is now a reason for the denial of “banking privileges”.

Discrimination against Americans because of the dangers of business involvement with Americans – In the last year I have helped several Canadians renounce U.S. citizenship so that they were free to participate in various Canadian business opportunites

The simple FATCA of the matter is that many who understand that U.S. citizens are ruled by the Internal Revenue Code, will NOT allow U.S. citizens to become shareholders of smaller businesses. It’s quite simple really:

Sorry, but we can’t have you as a shareholder in our business if you are a U.S. citizen. Therefore, if you want to participate in this business opportunity you cannot be a U.S. citizen!

Those who will NOT allow U.S. citizens to become shareholders in their companies are absolutely right to do so. By way of example, consider the new U.S. Transition Tax. The whole point of the Sec. 965 “U.S. Transition Tax” is to confiscate part of the retained earnings of NON-U.S. companies! (Yes, you read correctly!) In a general sense, the “confiscation” reflects the percentage of U.S. ownership. The greater the percentage of U.S. ownership, the greater the confiscation. The less the U.S. ownership, the less confiscation. If ZERO U.S. ownership then ZERO confiscation! Do you get it?

If you were running a small business outside the United States, would you want a situation where the citizenship of some of your shareholders, could be used as an excuse to confiscate the retained earnings of the company?

The point is a simple one.

The way that the United States imposes taxes on residents of other countries, necessitates that “informed people” limit their interaction with Americans.

Sad but true.

Because of the “Internal Revenue Code”, Americans are just not like citizens of the rest of the world. Best, to stay away from them.

Conclusion: The current “U.S. system of imposing “worldwide taxation” on those who have “tax residency” in other countries means that Americans will be discriminated against. It’s a fact. The the discrimination is caused by the Internal Revenue Code of the United States!

John Richardson