NO Evidence of Intent to apply the “”Transition Tax” to Small Business Corporations of #AmericansAbroad

 

It appears that we are very likely at a breaking point in this intolerable situation faced by expatriates as regards U.S. application of citizenship-based taxation. Tax reform does not happen often. It is critical that relief for expats occur in the current legislation. Many of us simply will not be around in 30 years for the next shift. It will be completely unacceptable if there is no transition (at the very least) to territorial taxation for individuals. Some people may be forced at this point to renounce if only to put a stop on future tax liability. Some will not choose to become compliant simply because it is expensive, they have no ties to the U.S., no intent to go there, etc.

In addition, there is a very dangerous aspect (the “transition tax”) that appears in both the House and Senate bills; it is arguable that it does NOT apply to small corporations owned by US citizens residing outside the United States. The biggest danger here, is that it may remain unclear. We have seen what has happened in a number of situations when this is the case. Some examples are:

1) People who relinquished citizenship decades ago (and who do not have a CLN) have been told they are still U.S citizens. Not by the State Department, not even by the IRS. And not even by the banks per sé. It is the position of many members of the tax compliance community. This is completely unacceptable and no expat should accept such a conclusion without investigating the citizenship aspects of the situation.

2) Accidentals have been told the same thing; they are Americans and must become tax compliant. Again, not directly by the US government (as in “coming after them) but by members of the tax compliance community. This is also unacceptable and no one should become compliant without a complete examination of whether it is in his/her best interests (or not).

3) People who did NOT belong in the OVDP/OVDI programs were put there by tax professionals with hideous and tragic results. The law says one has to file, nowhere does the law say one had to enter one of those programs. If anybody should have known that, it would be the tax compliance community.

4)The IRS has not given a ruling on whether or not 877A is to be applied retroactively. This is another area where tax compliance professionals have decided it is the law. This is definitely NOT in the best interest of anyone renouncing their citizenship and most definitely should not be applied to anyone who renounced/relinquished before it became law.

5)One of the most egregious and limiting situations involves owning foreign mutual funds. There is nothing to support the practice of treating non-US mutual funds as PFICs. Again, guess who insists on this treatment?

All of the above points are as unacceptable as is a lack of change for Americans abroad in tax reform. We have had enough.
 
THIS HAS TO STOP
 
We, as a community, have to make a conscious decision that what they say does not apply to us, is not in our best interests. The application of U.S. law outside of its borders is highly questionable, and should not override the laws of the countries we are residents of. (The IGAs do not represent approval/acceptance of US policy; they are merely proof of what happens when the US threatens to destroy the economies of other nations). “It’s U.S. law.” This is always the argument used to justify application of these ridiculous actions, often with absurd results. Penalties, FATCA “outing” us, application of the Reed Amendment (or worse, the ExPatriot Act if it ever passes)- all can be quite frightening if applied as the tax community claims. Yet there is nothing to suggest that these things are realities. The only people who have been harmed by these things are the ones who are/or tried to comply.

It is time to resist not only the idea that U.S. law should run our lives but also, that the tax community should determine what courses of action we should take. We need to be consistent in our message on this, on FB, in tweets, blogs etc. No more. No more. No more…………

**********

Shortly before the House of Representatives released the Markup for H.R. 1 a Canadian tax lawyer Max Reed authored an article (also here ) claiming that:

New punitive rules that apply to US citizens who own a business. Currently, most US citizens who own a Canadian corporation that is an active business don’t pay tax on the company’s profits until they take the money out. The House plan changes this. It imposes a new, very complicated, set of rules on US citizens that own the majority of a foreign corporation. The proposal would tax the US citizen owner personally on 50% of the entire income of the Canadian corporation that is above the amount set by an extremely complex formula. At best, this will make the compliance requirements for US citizens that own a business extremely complicated and expensive. At worst, this will cause double tax exposure for US citizens who own a Canadian business on 50% of the profits of that business.
Imposition of a 12% one-time tax on deferred profits. Under the new rules, the US corporate tax system is transitioning to a territorial model. As part of this transition, the new rules impose a one-time 12% tax on income that was deferred in a foreign corporation. Although perhaps unintentional, since US citizens will not benefit from a territorial model, the new rules impose a 12% tax on any cash that has been deferred since 1986. Take a simple example to illustrate the enormity of the problem. A US citizen doctor moved to Canada in 1987. She has been deferring income from personal tax in her medical corporation and investing it. Now, 12% of the total deferred income since 1986 would be subject to a one-time tax in the US. That may be a significant US tax bill.
It is unclear what, if anything, will be enacted. However, US citizens in Canada – particularly those that own a business – should pay close attention as their tax situation could get significantly worse. Renouncing US citizenship may become an increasingly attractive option.

There has been much discussion of whether or not this is going to happen (assuming a tax reform bill containing these measures actually is passed).
A very good argument for why this should NOT apply to #AmericansAbroad is
here.

The following comment appeared today on Brock. It reiterates the position that the “transition tax” cannot be viewed as applying to Americans abroad who own small corporations. We can expect that tax professionals are going to claim it does. Start now to learn why it doesn’t make sense and why no one should listen to the notion they owe a tax to the US based upon this new “tax reform.”
 
USCitizenAbroad
November 14, 2017 at 7:16 pm
 
@ Patricia Moon

With respect to the discussion of whether there is a tax on the retained earnings of Canadian Controlled Private Corporations:

First, pick this discussion of the changes to the territorial tax system for corporations at the 35 minute mark here:

https://www.finance.senate.gov/hearings/continuation-of-the-open-executive-session-to-consider-an-original-bill-entitled-the-tax-cuts-and-jobs-act

There is NO evidence of any intention to apply the “transition tax” to anything other than large corporations and certainly not to small business corporations owned by Americans abroad.

Second, an interesting summary was published by the Toronto law firm Oslers which talks about U.S. tax reform and makes NO reference to a possible tax on the retained earnings of CCPCs.

TaxAuthorities/US Tax Reform for Busy Canadians

Note no mention that this could affect CCPCs owned by Canadians:

” Foreign minimum tax – Current taxation of “Foreign high returns”:

Under this provision, a U.S. parent corporation would be subject to
current U.S. taxation (at the new 20% rate) on 50% of its controlled
foreign corporations’ (CFCs’) “high returns.” Tax would be required
to be paid on these imputed income streams regardless of whether the
corresponding earnings were actually distributed to the U.S. parent.
“Foreign high returns” are the excess of the CFC’s net income over a
baseline return (7% plus the federal short-term rate) on the CFC’s
adjusted tax bases in depreciable tangible property, reduced by
interest expense included in the CFC’s net income. “Foreign high
returns” would be defined to exclude certain types of income (including
“effectively connected income,” income from the disposition of
commodities produced or extracted by the taxpayer, and income subject
to tax at an effective rate of at least 18%). This provision, which
cuts against the theory of a “pure” territorial tax system, was
designed to counterbalance incentives that may otherwise linger for
U.S. companies to locate high return generating assets/activities (like
intangible property) in offshore locations.”

My feeling is that regardless of the language that this was not intended to apply to Americans abroad.

What should be done:

The danger is that the compliance community will make the law by interpreting this to apply beyond its obvious intention. The obvious solution is to NOT use the services of any tax firm who interprets the law as applying to CCPCs. After all, it was the compliance firms who created the notion that Canadian mutual funds are PFICs.

Testimony: Green Card Holder Victim Of FATCA After Failing To Return Expired Card

cross posted from Tax Connections

Original Statement on April 9, 2015

Submission to the United States Senate Finance Committee
International Tax

To anyone who doesn’t really understand the fear and frustration of FATCA and the insanity of the US tax system:
 
I am not and never have been American. I don’t live in the USA and I have no financial connections to the USA.

However, many years ago I got a green card when I married an American. We lived in the so-called, Land of the “Free”, until we decided to move permanently to my home country to care for my elderly parents.

A year or so after my return to my home country my green card expired, became null and void, but I didn’t know I was supposed to return it to USCIS along with an I-407 form. (Green cards don’t come with a set of disposal instructions.) Years later when I found out about this I searched for days to find that old green card and then I sent it away. It was received (according to the mail trace) but never officially acknowledged and there were no replies to my follow-up inquiries.

This left me trapped in a perpetual state of deemed US “personhood” which comes with onerous US tax filing and now highly intrusive FATCA reporting too. The threatened penalties for not filing FBAR (FinCEN114) forms are staggering. They would exceed my life savings (mostly a modest inheritance from my non-American parents). If I lose my life savings to the IRS I could end up on welfare and that would not be fair to taxpayers here in my home country.

What did I take from the USA when I left? I took savings of less than $5K and a gain of less than $75K from the sale of the house we built with our own labour and paid for entirely from the savings I brought with me from my home country (no mortgage on that house). All of this was reported to the IRS and taxed appropriately.

What do I get from the USA? Absolutely nothing – NO right to return to the USA to live or work; NO US Social Security because I have never had US income; NO rescue by US marines in a disaster; NO US vote; NO representation in the US Congress; and since I haven’t visited the USA in almost 20 years (and never will again), NO benefit from the USA’s infrastructure. I do not want any of those things anyway.

What do I want from the USA? I want to be left alone so that I can lead a normal life without the stigma of being called a “US person for tax purposes” (and ONLY tax purposes).

What’s the biggest irony of my whole situation? Well, my husband is no longer American since he recently relinquished his US citizenship. He now has a priceless piece of paper called a CLN (Certificate of Loss of Nationality) which means he can open and retain bank accounts here with no intrusive FATCA reporting.

Meanwhile I, who never was American, will have to live with uncertainty for the rest of my life. If my bank finds out about my past connection and failed disconnection to the USA, it will report me and my accounts to my country’s tax agency which will forward that information to the IRS. And then … well I shudder to think.

Some Americans may hate me for saying this but I have no love or respect for what the USA is doing with its irrational citizenship-based tax system and now its FATCA overreach. These same Americans might even laugh and gloat about how I became trapped as a “US person for tax purposes” but at least my husband, an upstanding citizen, has escaped the clutches of the USA. He did so with no regrets and when his CLN finally arrived he felt nothing but relief. I and my country are proud and pleased to have him. His warm and welcoming citizenship ceremony here in my, now OUR, country was one of the best days of both of our lives.

Neither of us is “un-American” but we are “non-American” and we cannot fathom why the USA will not graciously let its people go.

Anonymous

After Five Decades of Abuse, Enough is Enough!

 
cross-posted from Brock
Posted on February 12, 2012 by Just Me
 
Forget about the notion that CBT has been with us since the Civil War. Forget about the absurd conclusion of Cook v Tait. The real beginning of our story started 55 years ago on October 16, 1962. This was the beginning of the U.S. government’s campaign of punishment for Americans who dare to live abroad.

Many people have often said that the only way to get the U.S. to understand our situation is to focus not on harms, or fairness, or Constitutionality. Doing that just fuels the clichés and “alternative facts” about all the fatcats abroad, cheating on taxes. Instead, as Roger Conklin tried to do, the Congress, new Treasury Secretary Mnuchin and POTUS should realize that these policies have resulted in a trade deficit for 55 years.

Finally, it merits at least some mention that fifty years ago, before these extra fiscal and financial reporting burdens were put on the shoulders of overseas Americans, and while they were still fully able to compete with the citizens of other countries in the same foreign markets, the United States had enjoyed more than sixty-seven years of unbroken trade surpluses with the rest of the world. During the subsequent decade, after this new toxic tax burden was imposed on those living and working abroad, the U.S. foreign trade position began to weaken, as many had predicted, and a trade deficit appeared for the first time in the 20th Century in 1971. As the tax burden on overseas Americans became increasingly heavy and increasingly incomprehensible, these deficits soon became a permanent fixture of U.S. trade performance, and we are now in our 36th straight deficit year with the cumulative amount of these trade deficits now exceeding $8 trillion.

It is not very obvious so far that the current Administration in Washington , despite the enthralling campaign promises that were made in 2008, has any serious interest in leveling the worldwide playing field for trade. The results for the first eleven months of 2011 already show an impressive deficit for this most recent year of more than $500 billion, which is the worst trade performance of the last three years, and this deficit still grows each and every day at a rate in excess of $1.5 billion. The aggregate trade performance for the first three years of the current administration is now a negative $1.4 trillion! (Update: Year over year, the trade gap for 2011 was up 11.6% to $558 billion.)

This history of the sad and incomprehensibly self-destructive behavior of the United States during the past 50 years, which is unique among all of the major trading nations of the world today, is well worth reading and contemplating.

As has been stated many times before, major world powers don’t always decline due to destruction coming from outside. They sometimes infect themselves with terminal obsessions from within that, alas, seem to then become incurable. This doesn’t have to happen this time to Uncle Sam, but to avoid it something rather urgent needs to be done before it becomes too late.

This is something our oft-criticized fellow expats at ACA understood and have fought for decades. Andy Sundberg is the author of the report which comprises the main portion of this post. Read the entire report and decide if all coming to this situation in the last five years understand the history of this problem better or are entitled to criticize other actions in hindsight. In a recent private email group discussion, a story that came out might offer a useful perspective:

A teacher once told me he was curious why geese always flew in a “V.” So he looked it up and found that the one in the front led until he no longer could and he moved to the back being replaced by the next and so on. In that way they reached their destination.

So no matter whether you come from ACA 50 years ago, or DA, or RO, or AARO, FAWCO, Brock 5 years ago or American Expatriates 3 years ago, we are all trying to get tax reform in order to right this situation once and for all. Each has a part to play in this unfortunate situation. This is much more in keeping with this post’s resolution:
 
So Let Us Now All Rise Up, Join Together to Throw off These Shackles, and Take Appropriate Action to Prepare for a Much More Positive Future for All of Us, our Heirs and for Our Country.
 
 

“ENOUGH IS ENOUGH”

AFTER FIVE DECADES OF ABUSE

IT’S TIME FOR A CHANGE

  

THIS COMING OCTOBER WE WILL MOURN

THE 50TH ANNIVERSARY

OF THE DEATH OF

A LEVEL PLAYING FIELD

FOR OVERSEAS AMERICANS

AND NOW IT’S TIME TO GET IT BACK

 

Reproduced by permission of Andy Sundberg, Fellow and Secretary, the Overseas American Academy , Geneva , Switzerland , 16 January 2012. Continue reading “After Five Decades of Abuse, Enough is Enough!”

Why is the United States imposing an “Exit Tax” on the Canadian pensions of Canadian citizens living in Canada?

cross-posted from citizenshipsolutions


by John Richardson

This post is based on (but is NOT identical to) a July 17, 2017 submission in response to Senator Hatch’s request for Feedback on Tax Reform

“Re the impact of the S. 877A “Exit Tax” on those “Americans living abroad” who relinquish U.S. citizenship:

Why is the United States imposing an “Exit Tax” on their “non-U.S. pensions” and “non-U.S. assets”? After all, these were earned or accumulated AFTER the person moved from the United States?”

Part A – Why certain aspects of the Exit Tax should be repealed

In a global world it is common for people to establish residence outside the United States. Many who establish residence abroad either are or become citizens of other nations. Some who become citizens of other nations do NOT wish to be “dual citizens”. As a result, they “expatriate” – meaning they relinquish their U.S. citizenship. By relinquishing their U.S. citizenship they are cutting political ties to the United States. They are signalling that they do NOT wish the opportunities, benefits and protection from/of the United States.

Yet Internal Revenue Code S. 877A imposes a separate tax on “expatriation”. The “expatriation tax” is discussed in a series of posts found here.

Specific examples of HOW the “Exit Tax Rules” effectively confiscate pensions earned outside the United States are here.

Assuming, “covered expatriate status” and NO “dual-citizen exemption to the Exit Tax“, the S. 877A “Exit Tax” rules operate to:

  1. Virtually “confiscate” non-U.S. pensions that were earned
    when the individual was NOT a United States resident; and
  2. Allow for the retention of “U.S. pensions” which were earned
    while the individual WAS a resident of the United States.

(One would think that the result should be THE EXACT OPPOSITE!”)

Specific request: The S. 877A Exit Tax should be repealed. If the United States is to impose a tax on expatriation, the tax should not extend to “non-U.S. pensions” earned while the individual was NOT a U.S. resident. Furthermore, the tax should NOT extend to “non-U.S. assets” that were accumulated while the individual was NOT a U.S. resident.

But, that’s assuming that the United States should have ANY kind of “Exit Tax!”

Continue reading “Why is the United States imposing an “Exit Tax” on the Canadian pensions of Canadian citizens living in Canada?”

Topsnik 2 : Green Card Expatriation And The Exit Tax

 

reposted from Tax Connections Blog

Written by John Richardson | Posted in International

John Richardson
 
 

Introduction – Introducing Gerd Topsnik

“This case will be seen as the first of an (eventual) series of cases that determine how the definition of long term resident applies to Green Card holders. The case makes clear that if one does NOT meet the treaty definition of resident in the second country, that one cannot use that treaty to defeat the long term resident test. A subsequent case is sure to expand on this issue. Otherwise, the case confirms that the S. 877A Exit Tax rules are alive and well and that the 5 year certification test must be met to avoid non-covered status.”

Topsnik may or may not be a bad guy. But even “bad guys” are entitled to have the law properly applied to their facts. It would be very interesting to know how the court would have responded if Topsnik had been paying tax (a nice taxpayer) in Germany as a German resident.

This is part of a series of posts on: (1) tax residency, (2) the use of treaty tiebreakers when an individual is a tax resident of more than one jurisdiction and (3) how to use treaty tiebreakers to end tax residency in an undesirable tax jurisdiction.

This is the second of the two Topsnik posts. Topsnik 1 focused on the tax residence of Green Card Holders.

This post – Topsnik 2 – focuses on the expatriation of Green Card Holders and under what circumstances and in what manner they may be subjected to the S. 877A Exit Tax. The text of Topsnik 2 is here:

TopsnikOpinion2016

The Teachings of Topsnik 2

Green Card Holders ARE U.S. tax residents

Once again, the case confirms that one does NOT abandon the Green Card simply by moving from the United States. The Green must be either taken away by the Government, abandoned by the Green Card Holder, or be the result of a treaty election.

Tax Residence: The case confirms that the U.S. Germany Tax Treaty (as is true of all other treaties) requires that one be a tax resident, as defined by the treaty, to get any benefits of a treaty.

These benefits of being a tax resident of Germany (as defined by the treaty) potentially INCLUDE:

the right to be treated as a tax resident of Germany as well as being treated as tax resident of the United States
the right to use the tax treaty tie breaker (assuming that he is a tax resident of both countries) to make him ONLY a tax resident of Germany
the right to have the years that he is a tax resident of Germany NOT count toward determining whether he is a long term resident of the United States (Internal Revenue Code 877(e)(2)
Topsnik was not a tax resident of Germany as defined by the U.S. Germany tax treaty.

Applicability of the S. 877A Exit Tax:

Abandoning the Green Card by filing the I-407 is an expatriating act. Because, Topsnik was NOT a tax resident of Germany as defined by the tax treaty, he could NOT argue that he was NOT a long term resident (within the meaning of Internal Revenue Code 877(e)(2). As a result, Mr. Topsnik’s (1) expatriating by abandoning his Green Card, coupled with (2) the fact that he was a long term resident, meant that he could prevent the S. 877A Exit Tax ONLY if he was NOT a covered expatriate.

The failure to certify 5 years of tax compliance is a sufficient condition for being a covered expatriate:

Subparagraph (C) provides that a person is a covered expatriate if such individual fails to certify under penalty of perjury that he has met the requirements of this title for the 5 preceding taxable years or fails to submit such evidence of such compliance as the Secretary may require.

Notice 2009-85, sec. 8, 2009-45 I.R.B. at 611, explains that for purposes of certifying tax compliance for the five years before expatriation pursuant to section 877(a)(2)(C):

– 21 All U.S. citizens who relinquish their U.S. citizenship and all longterm residents who cease to be lawful permanent residents of the United States (within the meaning of section 7701(b)(6)) must file Form 8854 in order to certify, under penalties of perjury, that they have been in compliance with all federal tax laws during the five years preceding the year of expatriation. Individuals who fail to make such certification will be treated as covered expatriates within the meaning of section 877A(g)

Because Mr. Topsnik was a covered expatriate he was subject to the S. 877A Exit Tax:

All of the property that he owned on his date of expatriation was deemed to have been sold on the day before his expatriation. This resulted in an Exit Tax payable to the IRS.

IRS Notice 2009-85 is NOT a regulation and is therefore NOT binding:

Section 877A(i) provides that the Secretary shall prescribe regulations as may be necessary and appropriate to carry out the purposes of the section. Such regulations have not been yet been provided. Instead, the IRS has promulgated guidance regarding this section in Notice 2009-85, 2009-45 I.R.B. 598. We are not bound by Notice 2009-85, supra, see Compaq Computer Corp. v. Commissioner, 113 T.C. 363, 372 (1999), but it is an official statement of the Commissioner position and we may let it persuade us, see Nationalist Movement v. Commissioner, 102 T.C. 558, 583 (1994), 37 F.3d 216 (5th Cir.1994).

Summary

The 2016 Topsnik decision reminds us tax residence in both countries (as defined by the treaty) is necessary to invoke treaty tiebreaker rules. In addition, in order to avoid covered expatriate status (making one subject to the S. 877A Exit Tax) one must file Form 8854 certifying 5 years of tax compliance

Furthermore the case reminds us that the S. 877A Exit Tax is real, alive, well and brutal confiscatory.

In four years, about 1% of diaspora non-filers chose to come into compliance through Streamlined: IRS

This is cross-posted from Brock. The author, Eric is a long-time writer there who composes excellent analytical posts, particularly concerning the inaccurate numbers of expatriations.

There was a discussion today that made me think of putting this particular post up. This post clearly demonstrates that in spite of all the scares – the FBAR Fundraiser aka OVDP 2009, & the FAQ 35 Bait & Switch, OVDI 2011, OVDP 2012, , OVDP 2014 the FATCA Hunt; the endless clamoring of condors, the media and folks like Shulman and Koskinen going on about The Reed Amendment, the Expatriot Act, “Quiet” Disclosures, 877A is retroactive and last but not least, if you don’t have a CLN you haven’t lost your US citizenship – none of it has made a particularly huge dent on non-compliance of Americans abroad. It is literally making me physically ill to reference all this – a vicious cycle of fines, penalties, interest, scaremongering, & whatever else can be thought of to persecute those who are simply presumed to be guilty i.e., Americans abroad. There can be no doubt whatsoever, that this is intentional. Even with the more-or-less guarantee of no penalties via Streamlined, only a very small number are choosing to become compliant. There are likely many reasons; people have begun to see what the IRS can/cannot do in terms of collection (or even detection); people are no longer willing to enter the U.S., etc. I like to think that some of our efforts to help educate people outside the bubble of American exceptionalism, U.S. Law über alles etc has contributed to opeople making up their minds based upon reason rather than reaction. If I had thought I could avoid filing/renouncing perhaps I would have chosen that too. Yet, large numbers of people remain who were literally destroyed by this shameless persecution and there will be more people who will ruin their lives out of ignorance based upon the falsehood that filing is in their best interests. It is for them that we need to continue…….

Sora Fon The tragedy of “self assessment”, self-enforcement and draconian penalties created to enforce honesty while leaving loopholes for those with influence and wealth. It is all I can do to tell the many indigent US Persons abroad I see, who could never face enforcement or confrontation abroad by an IRS interested only in collections, that (apologies to FDR) the only thing they have to fear is fear itself.

TM Yes and should one publicly caution anyone about coming into the system, there is an immediate swooping of threatening condors always quick to claim one doesn’t know what one is speaking about, what a terrible person you are to advise breaking the law, they will find everybody and blah blah blah.

Sora Fon Just saw this quote which I have to repeat: “A nation of sheep will beget a government of wolves.” — Edward R. Murrow

TM Agreed. It is why we MUST NOT remain silent.

Some of you may be aware of the nonsense Keith Redmond has endured by emphasizing on Twitter that if one is not in the tax system, it may be best not to enter it.
Excerpted from a post on Brock:

I was very surprised to see some of the Tweets on Twitter when Keith Redmond tried to warn Accidentals not to put themselves into the US tax system. It is interesting that without any proof as to the ability of IRS able to collect via QI, he presumes it and treats Keith in a manner I found inappropriate and unprofessional. I believe the point of contention was to prove that actual Accidental Americans had been “outed” due to QI. This was not provided, nor has it been since that time. There were others that ganged up in more “attacks” that I will not put up here. Brock/Wed Rally Tweeps will remember this extremely unpleasant incident.

If there is no repeal of #FATCA and a move to RBT, it will be clear that resistance will become more and more prevalent. I personally would love to see massive, visible civil disobedience. At the very least, the government can count on seeing the low numbers discussed in the post below.
*************************
Posted on February 18, 2017

On Thursday, the IRS released their “Dirty Dozen Tax Scams” for 2017, among which they listed “unreported offshore accounts”. They go into more detail in IR-2017-35:

Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 55,800 disclosures and the IRS has collected more than $9.9 billion from this initiative alone.

In addition, another 48,000 taxpayers have made use of separate streamlined procedures to correct prior non-willful omissions and meet their federal tax obligations, paying approximately $450 million in taxes, interest and penalties. The IRS conducted thousands of offshore-related civil audits that resulted in the payment of tens of millions of dollars in unpaid taxes. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

Works of the U.S. government are not objects of copyright, which is a boon for stenographers who mislabel themselves as “journalists”: they can just cut-and-paste the U.S. government’s viewpoint on the issues into their magazines without thinking about it, or attempting any analysis.

Anyway, US$450 million is an average of about US$9,400 per Streamlined participant. Not as big as the $13,000 per head they extracted from minnows with two-digit annual tax deficiencies under the 2009 OVDP, but still a sizeable sum from the perspective of the individual.

I’m sure there’s some poor deluded souls in the IRS and the Joint Committee on Taxation staff who are salivating at the thought of getting nine grand per head out of the rest of the millions of diaspora non-filers too — that might help them turn those mythical FATCA revenue estimates into reality. If that’s their aim, however, then forty-eight thousand over four years is a rather slow start.

Continue reading “In four years, about 1% of diaspora non-filers chose to come into compliance through Streamlined: IRS”

#IRS abuse of Americans Abroad – The greater the effort! The greater the punishment!

This post is from the RenouceUScitizenship blog.

serenity

 God, grant me the serenity to accept the things I cannot change,
The courage to change the things I can,
And wisdom to know the difference.

We are now more than two years into the Obama/Geithner/Shulman/IRS assault on U.S. Citizens Abroad. It is commonly accepted that the origin of the assault has been – what can now be understood to be – a clear, deliberate, and conscious decision of the Obama administration. That decision is  to equate the day-to-day bank accounts of U.S. citizens abroad with the offshore accounts used by Homelander tax cheats. It’s no longer possible to believe the administration and the IRS are unaware of what they have done. There are  signs that the IRS is slowly trying to change the  rules, change the policies, and change the enforcement. That said, one gets the feeling that the IRS is motivated by considerations of “processing efficiency” and not by considerations of “fairness and justice”.

Two important aspects of the problem are:

1. All bank accounts outside the United States are considered to be “sacred instruments” of tax evasion. Not even the IRS is stupid enough to believe this. Therefore, it’s clear that the IRS is at least threatening (how do you like your freedom now?) to use the day-to-day bank accounts of  U.S. citizens abroad as an  “FBAR Fundraiser“. The IRS is using the  retirements plans of U.S. citizens in their country of residence, to levy fines for failure to file Form 3520. The IRS is using the fact that middle class U.S. citizens invest in mutual funds to subject them to impossible compliance costs and more threats of penalties. This has been documented by Taxpayer Advocate and ignored by the IRS.  We know this. What is different is that in 2011, there was a sense that this “must be some kind of mistake”. It must be “some kind of misunderstanding”. Only a fool would believe that today. The only sane way to view this today is as follows:

The Obama administration is deliberately using penalties and threats of penalties to confiscate the assets of U.S. citizens abroad. Don’t believe it? What’s Form 8938? This is not about taxation. It is about confiscation. But you know that. But, this is not the purpose of this post.

2. The purpose of this post is to explore an aspect of  this that has not been adequately discussed. In the same way that it is a mistake to treat all “non-U.S. banks accounts” the same. It is a mistake to think that the impact of all of this is the same on all. In fact, the people who are the hardest hit  are those U.S. citizens abroad who have tried the hardest.

Group 1 – Those Who Have Been In The U.S. Tax System

This group has  been filing their U.S. tax returns, to the best of their abilities. They are in the system. They are now “low hanging fruit”.  The fact that they have been filing all these years means that they are likely very financially responsible, very aware, very law abiding people. That’s the good news. The bad news is that they are also people who by vritue of having tried to save for retirement have assets that the U.S. wants to confiscate. Obviously this includes the PFIC mutual fund problem.

The problem of owning mutual funds is two-fold:

First, mutual funds are not subject to rules of taxation. They are subject to rules of confiscation.

Second, that in order for the IRS to confiscate them, one must first comply with all kinds of reporting requirements that are impossible to understand and are far too expensive for the average person.

Here is a historical analogy to the IRS treatment of U.S. citizens abroad who have mutual funds:

Jesus was forced to carry his own cross (paying the cross-border professionals to complete the forms) to his crucifixion (the confiscation rules will take it all).

Now, I know that at this moment, at least some readers are howling at the last sentence.  Really! What that tells me is that you:

A. Have not tried to be U.S. tax compliant;

B. Have not tried to use mutual funds to invest for retirement;

C. Probably do NOT feel strongly that one should be tax compliant;

D. Probably are far enough enough away from retirement age so that you can make up the losses.

Just try living this reality!

The people most hurt by this are the people who have tried the hardest to comply with the law. I remind you that it was not until OVDP started in 2009 that the IRS enough knew now to deal with mutual funds and not until 2010 that the ruling came from an IRS counsel (that the cross-border professionals are using to deem mutual funds as vehicles of confiscation).

Group 2 – Those Who Tried To Fix Any Past Compliance Problems

It has become increasingly clear that those who entered OVDP or OVDI were simply suckered. After the vicious and frightening propaganda of the summer of 2011, many people were terrorized into entering OVDI. The lawyers were there to usher them in. They are now locked into the program (although there is some indication that some will be moved to “Streamlined Compliance”). Those who waited appear to have better compliance options.

Of course, by December 2011, the IRS had issued the infamous FS which made it clear that, one didn’t need a formal program of voluntary disclosure. Of course, that didn’t stop the IRS, with full knowledge that minnow were being terrorized into the program,  from resurrecting (another Biblical analogy) the corrupt OVDP program in 2012.

My point is a simple one: those who tried to become compliant by entering the OVDP programs have been the hardest hit. The main reason has nothing to do with taxes. It has nothing to do with compliance. It is the fact that many of them have heard nothing from the IRS. Reminds of the Steven Miller (a cousin of his perhaps) song:

Those who entered OVDI have been living in fear and anxiety since entering the program. What have they heard from the IRS? In many cases, nothing.

IRS Bait and Switch Tactics in OVDP and OVDI

One would think the terms of the OVDP programs were abusive enough. But, the IRS didn’t stop there. In 2009 the IRS changed the terms of the program after people had entered the programIn 2013 the IRS kicked a group of people out of the program after accepting them into the program. It is now certain that:

Any lawyer who advises a client to enter the OVDP program should be disbarred!

The only benefit to the OVDP program was certainty of result and now that certainty has been forever compromised. As a letter from the New York State Bar suggests, who could possibly trust the IRS? The trust issue was recently highlighted by former IRS lawyer Steven Mopsick on this blog. (See also the Mopsick Trilogy – a series of posts about OVDP and its impact on U.S. citizens abroad and Green Card Holders.)

So, what’s a law abiding person who believes he is supposed to be tax compliant supposed to do?

I am writing this post in response to a series of comments at the Isaac Brock Society. The post was about PFICs and it generated a number of comments. The interesting comment stream starts here. We are confronted with a situation of a frightened, confused U.S. citizen abroad, who really wants to be tax compliant, did his best to save for retirement, like the IRS knew nothing about the perils of mutual funds, and must now choose between:

A. Financial ruin – all his money must to to the IRS and compliance costs

B. Non-compliance – but having to live as a “tax cheat”

The problem is that this is exactly the situation of many U.S. citizens abroad who have have lived commendable responsible lives. It is worth noting that neither the IRS nor the U.S. government has ever AND TO THIS DAY DOES NOT make any real effort to educate U.S. citizens about their tax responsibilities! The IRS defines “education” as “threats or penalties”. I feel for the children of Douglas Shulman and Steve Miller (if they have any).

I am going to reproduce this comment stream and invite suggestions on how what people like this should do.

  1. @USCitizenAbroad, @Kalc, @Bubblebustin

    “What would you expect a U.S. person with many years of fillings in the system to do?”

    That is exactly the issue. This whole PFIC thing makes me SO ANGRY and FRUSTRATED!
    I don’t see ANY good answer for such persons. No matter what option you look at it spells financial disaster, especially for people who are at or near retirement age. They cannot afford
    to lose all of the money they have invested over many years just to now become “compliant” (i.e.pay big bucks to have some accountant fill dozens of 8621s, pay back taxes, interest, and penalties and more taxes and interest after they sell the PFICs) and they do not have any other regular source of revenue to replace such a loss.

    “If you are a Canadian citizen without US assets, you are protected. Don’t tell your FI if you happen to have been born in the US. Don’t have more than 1 million in one account.”

    It’s not so simple. If you’ve had a long term relationship with your financial advisor, he likely may already know that you are a USC. Many mutual fund portfolios contain a mixture of US and non- US assets, so you likely may have some in your portfolio already. What should you do? Sell them and then what?
    How do you deal with them on the following year’s tax return? FATCA kicks in way below having 1 million in one account.

    “I do NOT believe that the Government of Canada understands this problem in its entirety. Would you be willing to collect these comments (including the one about the interaction between PFICs and SubPart F),”

    I agree totally. If the government of Canada DID understand all the implications and what a horrendous financial burden this will create for U S persons in Canada, when their financial institutions turn over the data about their TFSAs, RESPs, PFICs, and other investments via FATCA, I think they would not be so ready to sign an IGA. Those persons will be financial bankrupted if the IRS gets their data and goes after them. And when these people are left bankrupted, it will be the Canadian government that will have
    to help support them because we all know that the US government won’t do anything for USCs abroad.

    So, please, please do everything that you can to inform them (Kevin Schoom and others) of what are all the implications if they go down the FATCA compliance path. I think this PFIC problem has certainly not been given enough visibility with our government. It is incredulous to me that the IRS could make a policy change in 2010 about Canadian mutual funds without a formal regulation and then apply it retroactively. This is just WRONG and the Canadian govenment needs to stand up for us and fight this.

    Sorry for the rant, but this issue makes me crazy. Reading what USCitizenAbroad suggested as the only solution for the most financially responsible citizens today just makes me feel more depressed about an already depressing situation. Yes, it does help to be able to talk about it here with others but the reality that is looming in the near future if FATCA kicks in as planned is just too awful.

  2. @Albatross

    Here are the solutions:

    Solutions From The Government of Canada

    Any IGA would exempt from its application lawful residents of Canada regardless of their citizenship. Put it another way, the U.S. can’t both have FATCA and citizenship-based taxation. Is this possible? Not unless this issue is really understood which is not.

    Solutions From U.S. Persons Abroad – Take Charge Yourself

    You and I agree that the ones with the biggest problems are the ones who are entrenched in the system. Their options are:

    1. Do not sell their PFICs. The problems kick in when they are sold. Continue to treat the distributions the way you have always treated them on your tax return. Repeat: It’s the sale that triggers the very worst of the problems.

    2. The time has come to recognize that you will never be able to be U.S. tax compliant. Just not possible unless you pay the staggering costs of compliance and all the fines associated with trying to plan for retirement. I would stay away from the lawyers who will scare you to death. Just keep living your life. Don’t do anything that will trigger taxable events. The advice that most accountants and lawyers give is: sell your PFICs. For those who have had them for the long term, that is the worst possible advice. You do NOT sell them. You hold them and simply pay tax on the distributions the way you always have. That’s the best case scenario. Include the income on your taxes.

    3. RRSPs – This may be the exception to my suggestion for holding the PFICs. Assuming that because they are in an RRSP that the sale inside the RRSP is NOT a taxable event, then perhaps you get rid of those (but get competent advice for taking that step).

    4. Don’t listen to the F_____ cross border professionals. Most of them have really not thought this through plus they have trouble separating their interest from your interest.

    5. If all else fails, hide behind the treaty.

    6. Become a Canadian citizen if you are not already. Then start lobbying the Cdn government to pass law saying that all naturalized Canadian citizens were Canadian citizens from birth. This will protect their own tax base and their citizens from the U.S. exit tax.

    7. Just accept that the US considers you to be a criminal. Hell, people live like that all the time. Of course, you should stay out of the U.S. You might even learn to like it. Dress the part. Pick up the language. Learn to talk that way. It might be fun for you. You might get the respect that you think you are lacking. Pick a criminal to model yourself on – say Barack Obama.

    8. If none of these work, and you have Supart F income, then, well you know my suggestion.

    Curious what you think of those suggestions?

  3. @USCitizenAbroad

    For those entrenched in the system, surely renouncing is still a better option than continuing to have to deal with this BS year after year. At least that frees you from the ongoing obligation. Yes, I accept that it may leave issues from the past and may not be a great idea for those that have a need or desire to set foot in the US in the future.

    Yes, there is still an issue with the 8854 compliance, but there is still a choice on how to play that game, depending on the circumstances and risk tolerance.

  4. @USCitizenAbroad,
    Thanks for your comments on my posting. Here are my thoughts on your suggestions. I’ve included a
    few questions I have on some points you raised.

    Solutions from the Government of Canada
    Yes, I agree that this would be a great solution, but I don’t believe they do understand it.

    Solutions From U.S. Persons Abroad – Take Charge Yourself
    1. Yes, I agree that it makes no sense to sell the PFICs as that will trigger a nightmare.

    2. Yes, the lawyers and accountants that I’ve talked to have all said to sell ALL the PFICs, but of course they don’t have to worry about paying the costs associated with doing so. I concur that there is thus NO
    way to ever be tax compliant in this scenario, unless of course the tax code changes.

    “You hold them and simply pay tax on the distributions the way you always have. That’s the best case scenario. Include the income on your taxes.”
    QUESTION: So I infer from your suggestion that one should not bother with now filing 8621′s and the
    complicated calculation of “income” derived from them, but just continue to include the actual interest or
    dividends or capital gains distributions you receive from the mutual funds on your tax return. Is that what you are suggesting? As soon as you look at filing 8621s for each mutual fund you are talking BIG bucks
    to have an accountant prepare it and these forms are way too complex for the average taxpayer to attempt.
    QUESTION: What happens when FATCA kicks in and the FFI or CRA turns over the details of these funds to the IRS? Won’t they then identify them as PFICs and come screaming for all they back taxes, 8621 forms, etc? Is that where your suggestion 5 comes in?

    3. Don’t know about the RRSPs. This would require more research. For now these are not as
    important since the tax is deferred by 8891.

    4. Agreed.

    5. “If all else fails, hide behind the treaty” Not sure just how one can hide behind the treaty. Can you
    clarify what you mean here?

    6. Definitely a Canadian citizen. Ideas how we can get the Canadian government to pass such a law?

    7. Yes, definitely safer to stay out of the US. Not really a big hardship on that point for many of us.

    8. I didn’t really understand the Subpart F business completely but sure hope it doesn’t apply. I’d hate to think that that would be the only solution.

    I’d be interested in your further comments and answers to my questions above. Your comments are always very informative. I appreciate having the means to exchange thoughts with people like you who do understand this complex and horrendous issue.

    It is clear that this person is in a situation where he completely compromises his financial security by allowing the cross-border professionals and the IRS to confiscate his assets or he must live with the knowledge that the U.S. considers him to be a “tax cheat”, somebody who is worthy of a “FATCA Hunt” or possibly a Whistle Blower’s Retirement Plan.

    It is impossible to live with either scenario.

    The first scenario subjects one to a total rape and having to live with the consequences the rest of your life.

    The second scenario, if not dealt with properly, has the potential to change your own “self image”. On this point though I would say:

    To be considered a criminal by the U.S. government is like being called ugly by a frog. To be a criminal is to have a certain moral stature. In the U.S. there is no correlation between law and morality – in fact, law has become a substitute for morality.

    At a minimum, leaving aside the financial issues, the emotional stress and damage is more than a person who was financially responsible can bear. So, those U.S. citizens abroad who are nearing their retirement years and have most of their wealth in mutual funds must choose one of two options. Tax compliance is possible only in a logical sense. In a practical sense, for many U.S. citizens abroad, tax compliance is not possible.  This is perfectly understandable when issues of “taxation” are confused with “confiscation”.

    The current U.S. Canada Tax Treaty, as I understand it, does NOT require Canada to assist the U.S. in the collection of taxes on Canadian residents, if the person was a Canadian citizen at the time the “debt” arose. This is information  of possible relevance. It doesn’t mean you don’t owe the money. It just means Canada won’t help the U.S. collect it. I presume that that those renouncing U.S. citizenship would be able to use the treaty to shield them from possible Exit Tax Enforcement. But, to use the treaty is to live with another layer of worry!

    The best solution is always to renounce. At this point the only reason to NOT renounce is because you think the U.S. will move to Residence Based Taxation.  Who knows? Tax reform is on the agenda. U.S. citizens abroad made a number of excellent submissions to the Ways and Means Committee. I don’t know about you. But, there are NO circumstances under which I would want to be a U.S. citizen.

    I am writing this post at time when:

    1. Canada is considering a FATCA IGA with the U.S. I hope Canada understands what it will do to one million Canadians by turning them over to the IRS.

    2. Generalized IRS abuse of taxpayers is under way in Washington. It is possible that this post has relevance to that issue.

    3. Congress is considering moving to Residence Based Taxation. That would solve ALL of these problems.

    In closing, to all U.S. citizens abroad who worked so hard to save for your retirement …

    God, grant me the serenity to accept the things I cannot change,
    The courage to change the things I can,
    And wisdom to know the difference.

    This is for real. You must accept that the U.S. government is not what you thought it was. It has made a conscious decision to attack you, your families and your assets.

    Courage is the willingness to proceed in the face of fear. In this case it requires you to face up to a decision with no good outcome. You must choose between being destitute or being tax compliant. “American  exeptionalism” means you cannot have both.

    Wisdom means finding a way to move beyond this frightening chapter in your life. Look at it this way: there are parts of the world where people have never experienced life without U.S. tyranny. The good news is that you do NOT live in the United States.

    On that note, I will conclude with a thought from Winston Churchill. His wife did not approve of his drinking. One night he came home and she said:

    Winston, you are drunk.

    Winston thought about it a minute and said:

    Yes, I am drunk. But you are ugly and tomorrow I will be sober.

    Put it this way, you can renounce your U.S. citizenship. Every day, for the rest of their lives, Homelanders will wake up in the Homeland!

All the Side Effects of being a “covered expatriate” Green Card Holder

 

reposted from CitizenshipTaxation FB Group
 

Gary Clueit:

As a long-term GC holder with no way to escape “covered expatriate” status, the article doesn’t really cover all the insidious side-effects. For example, determining the $2M net worth threshold does not cover any assets you might have had before moving to the US, or assets due to bequests from relatives that have never set foot in the US. Even after paying the exit tax on the “deemed sale” of everything you own worldwide, you will have to pay actual capital gains when you do actually sell. And every penny of any bequest or gift you make to someone resident in the US (i.e. a child or grandchild, even if they are not US citizens) is then further taxed at 40% (that they have to pay) with no limit. So, for example, if your net worth is $2.5M on the date of expatriation (i.e. covered expat), you pay the exit tax. Say your wealth increases to $250M AFTER you leave the US – if your heirs live in the US (again, whether citizens or not) and you leave that wealth to them, the entire $250M estate will be taxable to them at 40% regardless of the fact that 99% of your wealth at the time of death was created outside the US.
Even if GC holders decide to stay in the US, they are perpetually screwed. Besides never being allowed to vote (not really an issue since one never desired to be a citizen), though they are still expected to pay taxes on worldwide income. The worst comes at death:
US citizen spouses can transfer or gift an unlimited amount between each other. If you are the spouse of a GC holder the maximum transfer is $149,000 annually.
Upon death, a citizen can leave an unlimited amount to their spouse. If your spouse is a GC holder, the max is just over $5M. If you spouse is a nonresident alien, the maximum is $60,000. Amounts above that are subject to 40% estate tax.
There is also the possibility of being caught up in double estate tax issues when you die.
This is the ultimate in taxation without representation – one of the founding principles behind the creation of the US. Tea parties were held!

When Law Becomes a Substitute for Morality & Causes Cruel & Unneccesary Harm

 

if you cant trust

 
Another comment deserving its own post

USCitizenAbroad says
March 13, 2017 at 7:08 am
@Karen and all

Thank you for collecting and posting these stories.

Our Stories

I would like to offer some general observations (of which Shaun is one of many examples) and suggest some lessons which are largely based on Shaun’s story in particular.

Shaun’s Story

It seems to me that the lesson(s) from Shaun’s story are simple. So, let’s summarize them:

1. Those Australians who have entered the U.S. tax system need to renounce as quickly as possible (hopefully before they are “covered expatriates”) and probably even if they are “covered expatriates”.

Anybody who doesn’t get this does not understand the U.S. tax system. (Not that anybody understands the system.)

2. Because of the prevalence of Superannuation in Australian society, those who are NOT in U.S. tax compliance should not be too quick to enter the U.S. tax system (better clarification on the tax status of one’s particular Superannuation – they are NOT all the same) – is needed.

3. Under NO circumstances should anybody in Australia engage the services of a U.S. based CPA or lawyer. The simple reality is that these “specific life forms” (1) Don’t give care about you in the least (2) don’t understand your local tax system (3) subconsciously believe that you are a “tax cheat” (because all Americans are) and (4) are required to view the world entirely through the “perverted prism” of the Internal Revenue Code (which presumes that anything that is “Not U.S” (not one of “us”) exists ONLY for the purpose of defrauding the U.S. Treasury.

Remember that when it comes to the Internal Revenue Code and Americans abroad:

– Americans abroad are deemed to actually live inside the USA; and

– the assets of Americans abroad are deemed to be foreign (even though they are really local to the individual)

4. It is painfully obvious that Shaun would have been far better off if he had NEVER entered the U.S. tax system. This is hindsight. He could never have understood where this was going. Truth is that things have changed a great deal over his 30 years in Australia. But, Shaun has provided a great lesson to Australian citizens and residents who are NOT in the system.

The lesson is this:

For Americans abroad in general, but for Australians in particular (think Super), the consequences of entering the U.S. tax system lead to far worse results than the consequences of NOT entering it. It’s pretty simple. Shaun lost the following:

– his retirement
– his health
– his happiness (you can be sure that he carries with him anger and resentment)
– he has probably become a very negative person
– if he has an Australian spouse (or still has one) it is likely that this has impacted his family in a big way

Shaun is unique. Although it doesn’t specifically say that he has filed U.S. taxes for 30 years, it is clear that he has filed U.S. taxes for many many years. Poor Shaun. He filed because filing “is the law”. Yes, it’s the law. Shaun probably thought that there was some connection between law and morality or law and “doing the right thing”.

There is no connection between law and morality. Filing U.S. taxes is “obeying the law” and obeying unjust and immoral laws. A great American writer (by the name of Thoreau) wrote a book (considered to be subversive in the land of the free) on this topic. It’s called “Civil Disobedience”. Read it sometime. (He discusses the relationships among: laws, unjust laws and compliance with unjust laws.)

Clearly Shaun (and others who have exhibited this kind of “life time” compliance while living outside the USA) are “model citizens”. Yet they have been proven to have been “model fools”. Through compliance with these laws, they have destroyed their lives.

The U.S. tax system, enforced by the tax professionals (who usually don’t know what they are doing anyway) is such that:

It’s far more punitive to be in the U.S. tax system than not be in it. There are a number of reasons for this, but we see how Shaun loses his life savings by trying to comply (doing the “right thing”).

Believe, me Shaun has lost a lot more than his money. Year ago I wrote a couple of posts based on theme that:

“It’s not what they take from you, it’s what they leave you with”.

Collective psychotherapy – U.S. citizens outside U.S. – Not what they take from you, it’s what they leave you with

followed by:

The agony of U.S. citizenship for U.S. citizens living outside the U.S.

Take particular note of the comments (including one from MarkPineTree who was Dr. Marcio Pinheiro whose anxiety over Mr. FBAR made the last few years of his life a “living hell”). See a tribute to him at:

http://isaacbrocksociety.ca/2015/08/18/another-brock-warrior-down-in-memory-of-marcio-v-pinheiro/

Finally, this story is a sad, sad reminder that those who have been most hurt by the predatory and immoral practice of U.S. “place of birth taxation” are the ones who tried hardest to comply.

The Tax Compliance Industry might say:

“Resistance is futile!!!!”

Those who have tried hard to comply will say:

“Compliance is impossible”

Put it this way:

“It’s very clear that “compliance is impossible”. But, it’s not clear that “resistance is futile”. The proof is rather simple:

Seven out of eight Americans abroad recommend non-compliance and every one of them is in a better state than our friend Shaun!

Burning Down Barns is not Wrong Because it is illegal; it is illegal Because it is Wrong

 

Burning Down Barns is not Wrong Because it is illegal; it is illegal Because it is Wrong

 


 

Every #Americanabroad (along with his/her “alien” family) understands all too well the reality of the betrayal perpetrated by the U.S. government in the fight against “tax evasion.” To have it then furthered by the country of residence changing the law in order to allow it is a further betrayal. One does not feel betrayal unless one has been wronged.
 
The government would have one think that it is walking the moral high road, taking upon itself the noble fight of searching out those who rob everyone else because they are not “paying their fair share.” Isn’t it just and right to do so? On the surface it would apppear it is but the problem becomes twofold. First, it has to be devised well-enough to actually produce the results it seeks to achieve and second, while doing so, certain rules of fairness about how the attempt is applied are required. Every kid on a playground learns this and readily understands when the rules are broken.
 

It is easy enough to see that the FATCA hunt has huge “design problems.” First off, the U.S. indicia are all items that suggest one lives in the Homeland. There is nothing to “weed out” those who aren’t American but don’t have CLN’s (and that doesn’t mean you are an American). Banks turning in people below the thresholds is truly wasteful as those people are so unlikely to owe tax. The crowning glory however, is that there is no simple way for the IRS to get money from people outside the country unless they willingly send it. I cannot think of any aspect of FATCA that would suggest it is well devised.
 
kids fightingTwo groups of kids are on the playground. The more agressive kids’ part of the playground is on their side of a line dividing the space. The other kids have their space on the other side of the line. One of the bullies comes up to the edge and says somebody on the other side really is one of them and tries to forcefully pull them over. There is no reason other than the bully wants something that isn’t his. What would happen? The other side would probably try to prevent the exchange, even if they are smaller and unlikely to win the fight. But everybody knows who started it and which side of the line the kid really belongs on. Then an adult shows up and all kinds of nonsense starts being spewed to try and muddle the issue because admitting wrong is not going to happen.
 
There is no way that an Accidental American belongs on the “American” side of the line no matter how much the U.S. whines and bellows it is so.
There is no way that anyone who chose to leave for education, marriage or employment and is living in another country in tune with the laws there, can be seen to “belong” to the U.S.
 
What are they going to do? A sort of reverse of what may happen soon in the U.S.? Where they kick out “illegal” adults and purposely separate them from their (American) children? Have everybody shipped back? They probably ARE mean enough but the fact is, that costs money. Lots of it.
 
The 14th Amendment, the 16th Amendment, Cook v Tait and all of it, belongs to those people who are on the U.S. side of the line. All the “laws” and arguments about polity and old case law just muddles the real issue. The fact of life is:
 
Everybody else has a right to be on their side of the line.
 
So everytime a condor hits you with that “It’s U.S. law” or “Until it’s changed it has to be obeyed” don’t allow them to drag you into arguing. It’s just plain dumb and so are they for thinking they can fool (or shame) you with such stupid arguments.
 
*****

Brock founder Peter Dunn/Petros says it quite eloquently. Re-blogged from the Isaac Brock Society March 31, 2015

We are living a crisis of morality in which leaders have difficulty distinguishing between what is right and wrong. Today, political leaders facing a legal obstacle to their agenda believe that all they have to do is change the law. So if the government stealing from people is illegal, all that one needs to do is change the law and call it “civil forfeiture“, and suddenly it becomes morally acceptable.

I recall reading a few years back a National Post article that brought up the question of lawmaking and morality came up.  Fortunately, Mark Steyn, cites the money quote from George Jonas:

Back in the Trudeaupian golden age, you may recall, the great man’s barnstorming transformation of Canada was momentarily halted by a storm about barns. It emerged that some overzealous officers of the Royal Canadian Mounted Police had burned down barns belonging to Quebec separatists. The press was briefly exercised over this, but M. Trudeau gave one of his famous shrugs and airily remarked that, if people were so upset by the Mounties burning down barns illegally, perhaps he’d make the burning of barns by the Mounties legal. As the great George Jonas commented:

“It seemed not to occur to him that it isn’t wrong to burn down barns because it’s illegal, but it’s illegal to burn down barns because it’s wrong. Like other statist politicians, Mr. Trudeau seemed to think his ability to set out for his country what is legal and illegal also entitled him to set out for his citizens what is right and wrong. He either didn’t see, or resented, that right and wrong are only reflected by the laws, not determined by them.

The Honourable Stephen Harper, Prime Minister of Canada, is a moral embarrassment. Before he forced the FATCA IGA into law, it was illegal for the government of Canada, based on national origin discrimination, to give the financial information of Canadian citizens to a foreign government. But it is still wrong to do so, and it doesn’t matter how many laws Harper forces through Parliament, it will remain wrong.