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“Canada is expected to defend the constitutional rights and freedoms of its citizens and not bargain them away or capitulate to threats from a foreign bully state.” say Plaintiffs Gwen and Kazia in 12/13/2018 Canada Federal Court FATCA submission — Plaintiffs go to court January 28, 2019 and will ask for your support, later, for the appeal costs

cross-posted from Brock

by Stephen Kish

…and Plaintiffs go on to say:

“The notion that a foreign state could indirectly cause the violation of a Charter right in circumstances where Canada could not do so directly simply cannot be accepted. This is a deeply illiberal proposition and it would undermine the principle of the rule of law which explicitly animates the Charter.”

UPDATE: FATCA IGA litigation in Canada Federal Court: The guts of our Plaintiffs’ (Gwen and Kazia) arguments and those of the Government we oppose (for simplicity, “Canada”) can now be found in four court documents submitted between October 3 and December 13, 2018 (see below for some excerpts). The Court submissions can be found on our ADCS website.

The trial, which fleshes out the written arguments in orals in Federal Court, will be held the week of January 28, 2019 (next month) in Vancouver. We hope that some of you will attend.

FUNDING WILL BE NEEDED FOR THE EXPECTED APPEAL: A trial decision will come at some indeterminate time later (June 2019?) and it can be expected that THERE WILL BE AN APPEAL NO MATTER WHO WINS.

However, our appeal will only happen if we are successful in seeking funds, again from our supporters, for the costs of the appeal (Canada has unlimited funds from taxpayers).

At present we do not intend to seek funds for the appeal costs until pronouncement of judgement.

The first filing deadline is 30 days after court decision, and then a series of new 30 day deadlines kick in, and we will need to scramble very quickly to obtain the necessary funds our legal team will need to pay for their costs.
Continue reading ““Canada is expected to defend the constitutional rights and freedoms of its citizens and not bargain them away or capitulate to threats from a foreign bully state.” say Plaintiffs Gwen and Kazia in 12/13/2018 Canada Federal Court FATCA submission — Plaintiffs go to court January 28, 2019 and will ask for your support, later, for the appeal costs”

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

cross-posted from citizenshipsolutions

Introduction – “Indifference being the worst form of abuse”

A quick summary of this post:

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

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

My analysis and discussion follows …

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

BILLS-115SAHR88-RCP115-85

The House Ways and Means Committee announced:

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

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

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

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

The bottom line is this:

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

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

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

First some additional background

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The question really is:

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

Bottom line …

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

As I have previously said:

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

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

John Richardson

Part 25 – Reflections on the “S Corporation” exemption to the Sec. 965 @USTransitionTax – Hat Tip to @SCorpAssn Part C

cross-posted from citizenshipsolutions

Part A is here

Part B is here

continued from Part B:

5. Why most Americans abroad are like most small business owners in America (and presumably should have similar tax treatment from a U.S. perspective)

It’s simple. The vast majority of Americans abroad who carry on business through Canadian Controlled Private Corporations (and similarly situated Americans living in other countries) are small business people. They are people who are simply trying to make a living. As described in a recent article from American Citizens Abroad:

“Treasury is not truly in touch with the reality of Americans abroad. Foreign corporations owned by Americans abroad exist in abundance. They are an everyday fact of life,” added Serrato.

ACA believes that it is fundamentally wrong for the Treasury Department to write regulations without knowing who is affected, and to what extent, as this goes against the fundamental requirements of the RFA.

The point is that small business people are the same inside the United States and outside the United States. The single most important characteristic is that from an economic perspective the corporation is a structure that is generally created to achieve limited liability or some other local benefit.

6. How the S-Corp association lobbying in DC has likely resulted in favourable “transition tax” treatment for S-Corps

I tip my hat to the S Corporation America. I have NO DOUBT that their lobbying and organization secured a “transition tax exemption” for S Corporations.

It is interesting to note that:

1. The individual shareholders of S Corporations were fully aware of the benefits of tax deferral by using the S Corporation as the shareholder of a CFC:

2. In its 2013 submission to the House Ways and Means Committee the S Corp association argued clearly and forcefully that the individual shareholders of S corporations should be exempt from the transition/repatriation tax:

(The same two arguments for why individual shareholders of S Corporations should have have been exempted from the transition/repatriation tax apply to ALL individuals including individuals living outside the United States.)

The complete S Corp Association submission to the Ways and Means Committee is here:

S_Corporation_Association_WG_Comment_2

7. The argument that – with respect to the “transition tax” that Americans abroad with small businesses should be treated the same way as shareholders of U.S. S-Corps

In the interview with Monte Silver we both agreed with the argument that:

(i) S Corporations are legally corporations but really business entities which are used by individuals who are operating small businesses. (the IRS requirements to qualify as an S Corporation reinforce this.) The S Corporation for practical purposes IS the individual.

(ii) Sec. 965(I) creates a transition tax exemption for S Corporations – and therefore is creating a transition tax exemption for individuals who have decided to create an S Corporation (but remain taxed as individuals).

(iii) If the principle is that individuals should be subject to the transition tax then creating an S Corporation should NOT justify a transition tax exemption for individuals.

(iv) If the principle is that individuals should be exempt from the transition tax then ALL individuals (including Americans abroad) should be exempt from the transition tax even if they are individuals who use an S Corporation.

(v) Individuals in general should be treated the same whether they form an S Corporation or not.

(vi) In conclusion: Since individuals who form S Corporations are exempt from the Sec. 965 transition tax then individuals who live outside of American and have small business corporations should be exempt from the Sec. 965 transition tax.

8. Should Americans abroad who don’t renounce U.S. citizenship consider using U.S. Corps to own and operate their businesses abroad?

Think of it! In order to protect themselves from the U.S. Government Americans abroad might consider (1) creating an S Corporation and then (2) creating a foreign corporation (local to the shareholder) to run his business. Sounds totally crazy! But, it might be worth considering for a simple reason:

Congress does not care about Americans abroad and does not care that it doesn’t care!

Congress does listen to the S Corporation Association of America!

Legislation in America (as Conrad Black once said) is: A pay to play casino.

Practically speaking, what should those Americans Abroad with neither representation nor lobbying do?

John Richardson

What if Meghan Markle’s child is born a U.S. citizen? Would the child have any immediate tax and information reporting requirements to the IRS?

-posted from Quora

J-bnnJohn Richardson
Toronto lawyer: FATCA U.S. tax + renunciation of citizenship
CitizenshipSolutions

John Richardson, Lawyer (1982-present)
Answered Mon
 

 
What if Meghan Markle’s child is born a U.S. citizen? Would the child have any immediate tax and information reporting requirements to the IRS?

I note that the question (1) assumes that Ms. Markle’s child is a U.S. citizen and (2) the question focuses on BOTH tax and reporting requirements.

Would Meghan Markle’s children be U.S. citizens?

The majority view is “YES” her children would automatically be U.S. citizens. My minority view is “NO” – they would have the right to be U.S. citizens but not the obligation to be U.S. citizens. I have previously explained my reasoning on Quora here:

John Richardson’s answer to Could Meghan Markle’s children apply for US citizenship?

But, assuming that her child will be born a U.S. citizen, then …

To be perfectly clear:

With the exception of gifts/bequests received from a “covered expatriate” the recipient of a gift is NOT required to pay tax on the value of the gift.

The recipient of a gift or bequest may be subject to penalty laden reporting requirements. These reporting requirements apply even though the value of the gift is NOT subject to tax.

Furthermore, this answer is really a “thought experiment” which explores the absurdity of certain aspects of the Internal Revenue Code apply to the lives of Americans abroad.

Here we go …

Tax Requirements …

The obligation to file a tax return would depend on the amount of taxable income the child received and whether that income met the thresholds for filing. It is unlikely (but not impossible) that the child could meet the income thresholds. For information on thresholds (which also depend on filing category) see:

Do I Need to File a Tax Return?

Reporting Requirements (which may exist independently of the obligation to file a tax return)…

The reporting requirements can exist independently of whether a tax return is required to be filed. It depends on whether there are sufficient facts to trigger the basic reporting requirements.

The child is a recipient of support from Harry

The child is probably going to live life as a normal baby and will be both supported and cared for by his/her parents. It is reasonable to assume that the child will receive financial support from the Harry (the father) who is (from a U.S. perspective) an “alien” or at least a foreign person.

Should the food, housing, medical care, toys, etc. received from Harry be considered to be a “gift” from a “foreign person”? If the answer is YES and the value of the support exceeds $100,000.00 USD then the child has a reporting obligation to the IRS (whether the child files a tax return or not). This is made very clear by Section 6039F of the Bible Of American Life – The Internal Revenue Code. It reads:

26 U.S. Code § 6039F – Notice of large gifts received from foreign persons
Continue reading “What if Meghan Markle’s child is born a U.S. citizen? Would the child have any immediate tax and information reporting requirements to the IRS?”

Part 25 – Reflections on the “S Corporation” exemption to the Sec. 965 @USTransitionTax – Hat Tip to @SCorpAssn (Part B)

cross-posted from citizenshipsolutions

Part A is here .

1. What exactly is an S Corporation?

An “S corporation” is a corporation which elects a specific kind of tax treatment under the Internal Revenue Code. It is NOT a type of corporation. Rather it is the “tax treatment” used by a corporation. (A corporation can be incorporated in any state.)

The following tweet referencing an excellent article from Wolters Kluwer explain this point.

The first thing to remember is that an S corporation is simply a for-profit corporation that elected to be taxed under Subchapter S of the Internal Revenue Code, making it a “pass-through” entity for tax purposes. It is incorporated under and governed by the same state corporation laws as a corporation that was not eligible for S corporation tax status or whose shareholders chose not to elect that status. Therefore, an S corporation has the same non-tax advantages as a regular corporation. (A regular corporation is also referred to as a C corporation when discussing its tax status because it is taxed under Subchapter C of the Internal Revenue Code).

Because an S Corporation is a corporation with a specific kind of tax treatment (the profits are passed through to the shareholders), one can say that an S Corporation is really a creation of the Internal Revenue Code (On The Third Day Congress Created The S Corporation).

2. How the requirements of an S Corporation reflect that that S Corps are the “small business corps” of America

Since the S Corporation is a creation of the Internal Revenue Code, we look to the Internal Revenue Code to learn the requirements to be an S Corporation. The S Corporation is defined in Internal Revenue Code Sec 1361.

Section 1361 includes:

(a) S corporation defined
(1) In general
For purposes of this title, the term “S corporation” means, with respect to any taxable year, a small business corporation for which an election under section 1362(a) is in effect for such year.

(2) C corporation
For purposes of this title, the term “C corporation” means, with respect to any taxable year, a corporation which is not an S corporation for such year.

(b) Small business corporation

(1) In general For purposes of this subchapter, the term “small business corporation” means a domestic corporation which is not an ineligible corporation and which does not—

(A) have more than 100 shareholders,
(B) have as a shareholder a person (other than an estate, a trust described in subsection (c)(2), or an organization described in subsection (c)(6)) who is not an individual,
(C) have a nonresident alien as a shareholder, and
(D) have more than 1 class of stock.

(Interestingly this sounds very much like the requirements to be a Canadian Controlled Private Corporation in Canada. Note also that most Canadian Controlled Private Corporations are “per se” corporations under the entity classification rules and cannot be treated as disregarded entities under U.S. tax law.)

It is clear that this does not and could not describe a large publicly traded corporation like Google or Apple. Notice also that S Corporation shareholders cannot include nonresident aliens.

An S Corporation is designed to provide the corporate benefits of limited liability coupled with the simplicity and tax benefits of being taxed as an individual.

3. How the S Corporation is taxed and why that taxation is consistent with the S Corporation as an entity for small business

To put it simply:

An S Corporation is a “pass through” entity. The profits (passive income excepted) of the corporation are taxed directly to the individual. This has the effects of:

– avoiding double corporate taxation (the profits are taxed only once instead of first at the corporate level and second at the individual level);

– making the S Corporation a bad vehicle for the accumulation of income for expansion, etc. (but the devil is always in the details)

From the IRS perspective:

This is very reasonable and reflects that an S Corporation is really more like an individual than an Apple or a Google. It is reflected by the following history of the S Corporation

4. An interesting history of the S Corporation

At S-Corp.org, the S Corporation Association of provides an interesting history of the origins and evolution of the S Corporation which includes:

The History and Challenges of America’s Dominant Business Structure

Before Congress created S corporations, entrepreneurs had two choices when starting a business. They could form a regular C corporation, enjoy liability protection, but face two layers of federal tax at the corporate and individual level. Or they could choose a partnership or sole proprietorship, enjoy a single layer of taxation at the individual level, but sacrifice the umbrella of liability protection.

Neither choice was optimal for small and family owned businesses. In 1946, the Department of Treasury suggested a third option – merging a single layer of federal tax with comprehensive liability protection.

A few years later, Republican President Dwight Eisenhower found himself under fire from the Democratic Congress for practicing “trickle-down economics” and favoring big corporate interests over the little guy.

At the same time, Republicans and Democrats were increasingly alarmed that too much economic power was being consolidated into the hands of a few wealthy, multinational corporations. This economic centralization was characterized by economists like John Kenneth Galbraith, who saw America’s economic future as a grand balance of power between Big Labor, Big Business, and Big Government. Private enterprise was viewed as a thing of the past.

In response to these concerns, Eisenhower embraced the Treasury proposal and recommended the creation of the small business corporation to Congress. In 1958, led by Democratic Finance Chairman Harry Byrd, Congress acted on Eisenhower’s recommendation, creating subchapter S of the tax code as part of a larger package of miscellaneous tax items. In exchange for enjoying a single layer of tax, entrepreneurs electing S corporation status agreed to the following limitations:

They were required to be a domestic enterprise; They were required to have a limited number of shareholders; They were limited by who those shareholders could be; and They could have just one class of stock.

You can continue and read more history here …

John Richardson

Part 25 – Reflections on the “S Corporation” exemption to the Sec. 965 @USTransitionTax – Hat Tip to @SCorpAssn (Part A)

cross-posted from citizenshipsolutions

This post is in 3 parts, published over 3 days.

Beginnings …

A recent comment at the Isaac Brock Society includes:

It’s too bad I didn’t put my Canadian corporation in an S Corp before I knew I was a US taxpayer. I must have misplaced my crystal ball at the time. As I had when I sold my house in Canada.

What a clusterfu@k!

On November 15, 2018 I did a second interview (first interview October 16, 2018 here) with Monte Silver and his Sec. 965 advocacy. The video was featured on a post at CitizenshipTaxation.ca.

If you have not watched the November 15 interview, I suggest that you begin by watching the video (click on the above tweet). The most significant part of the interview is where Sec. 965(I) is discussed. Interestingly Sec. 965(I) provides a transition tax exemption to individuals who are the shareholders of an “S Corp”. To understand the mechanism for the exemption, click on the link in the following tweet:

This interesting exemption is available only to individuals who are shareholders of S corporations and not to other individuals. The interview also included some discussion of the fact that “S Corp” shareholders have the benefit of lobbying from a powerful lobbying association – S-Corp. The interview ended with Monte Silver describing the probability that the Sec. 965 transition tax issue is headed to the courts.

But, in the “Pay To Play Casino” that America has become:

Why are individuals who are the shareholders of an S corporation, which owns the shares of a CFC, more equal than those individual shareholders who own the shares of a CFC directly?

Let’s see …

Purpose of this post …

The purpose of this post is to explore the following issues/questions:

1. What exactly is an S Corporation?

2. How the requirements of an S Corporation reflect that that S Corps are the “small business corps” of America

3. How the S Corporation is taxed and why that taxation is consistent with the S Corporation as an entity for small business

4. An interesting history of the S Corporation

5. Why most Americans abroad are like most small business owners in America (and presumably should have similar tax treatment)

6. How the S-Corp association lobbying in DC has likely resulted in favourable “transition tax” treatment for S-Corps

7. The argument that – with respect to the “transition tax” that Americans abroad with small businesses should be treated the same way as shareholders of U.S. S-Corps

8. Should Americans abroad who don’t renounce U.S. citizenship consider using U.S. Corps to own and operate their businesses abroad?

John Richardson

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

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

this section cross posted from Brock

A message from one Canadian resident …

When life is stranger than fiction …

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

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

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

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

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

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

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

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

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

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

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

Update from Monte Nov 14, 2018

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

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

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

Part 1 – from June 4 till the present

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

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

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

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

Part 2 – Next steps

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

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

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

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

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

Considering renouncing US citizenship? @Expatriationlaw information sessions Fall 2018

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

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

Bangalore, India – October 22

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

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

Auckland, New Zealand – October 31

Sydney, Australia – November 1

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

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

Dubai, UAE – November 4

Limassol, Cyprus – November 7
 

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

CANADIAN FATCA IGA LAWSUIT UPDATE: October 3, 2018 Plaintiffs’ Memorandum of Argument Has Been Submitted to Canada’s Federal Court

cross-posted from Brock.

by Stephen J. Kish

CANADIAN FATCA IGA LAWSUIT UPDATE
 
 
 
 
 
 
Here is the Memorandum of Argument of our Plaintiffs (Gwen and Kazia) for our FATCA IGA legislation lawsuit that was submitted on October 3, 2018 to Canada’s Federal Court. [Note that text is limited to 30 pages.]

The Memorandum can be found HERE.

The gist of our argument (page 12) is that the FATCA IGA legislation is inapplicable to Provincially regulated institutions and violates Sections 7, 8, and 15 of Canada’s Charter of Rights.

The word “sovereignty” is used many times in the document.

Some Excerpts:

— “Section 8 of the Charter states: Everyone has the right to be secure against unreasonable search or seizure…The Impugned Provisions authorize both a search and a seizure…The plaintiffs and other reasonable hypothetical individuals have a reasonable expectation of privacy in their Accountholder Information…Canada pleads that because the plaintiffs and other US Persons have pre-existing obligations to report certain information to the IRS under US law, their privacy interest in that information is minimal…Canada cannot demonstrate that the searches and seizures authorized by Impugned Provisions are reasonable because (a) they are warrantless and lack any judicial supervision of any kind, (b) it is impossible to test their reliability in achieving their objective, and (c) they almost certainly capture an inordinate number of individuals who have no US tax and reporting obligations…”

— “The state objective underlying the Impugned Provisions is to assist the United States in implementing FATCA and finding US tax evaders and cheats.57 This is not an important Canadian objective.”

— “Finally, the court should recognize a novel principle of fundamental justice that Canada will not deny its citizens the protection of Canadian sovereignty…the principle of non-intervention between states is a cornerstone of the international order and intrinsically connected to state sovereignty;88 it is undoubtedly considered by all Canadians to be fundamental to their notion of justice that Canada will not expose them to enforcement of another state’s laws…”

NEXT STEPS:

— Canada responds to our Memorandum of Argument by November 21, 2018.

— We reply to Canada by December 7, 2018.

— Trial is held in Vancouver beginning January 28, 2019