Category: ADCT

Alliance for the Defeat of Citizenship Taxation (ADCT) seeks major donors to fund United States lawsuit in federal District Court

 

 

cross-posted from Brock by Stephen Kish

It is now likely that the new United States Tax “Reform” legislation will not help citizen-residents of other countries who are deemed to be “U.S. persons”.

Consequently, we at the Alliance for the Defeat of Citizenship Taxation (ADCT), a non-profit corporation, want to move quickly on a lawsuit in federal District Court in the United States.

Our lawsuit will focus on the core doctrine of “Citizenship Taxation” which serves as the basis for the extraterritorial reach of U.S. tax obligations as well as the annual financial reporting requirements imposed upon permanent residents and citizens of other countries.

The litigation will also seek to overturn other U.S. laws made applicable to persons who may have been born in the United States but have long since had little or no nexus to United States. In addition, the legal action would challenge the excessive costs and time delays imposed on those seeking to abandon U.S. citizenship.

The lawsuit will require plaintiffs who have suffered a distinct, not “speculative”, injury and funds to pay legal costs.

We estimate that legal costs will be U.S. $200,000 to take litigation through U.S. Court of Appeals.

We cannot finalize agreement with any law firm until we have received the necessary funding. We already have a legal opinion from Washington D.C. attorney Mr. Jim Butera (Jones Walker LLP), who has previously acted on our behalf, and once funds are received we will explore a contract with Mr. Butera.

At present we are not accepting any funds. Once the U.S. tax reform bill becomes law our preference is to obtain quickly the necessary funds from a small number of major donors (minimum, $U.S. 50,000).

If interested in the possibility of being a major donor, please contact Stephen Kish at information@cbtlawsuit.ca.

We all agree that asking “small” donors to fund this litigation is very unfair. However, should we receive no indication of interest from major donors by January 15, 2018 we will have no choice but to seek funding of any amount from donors of limited means.

John Richardson,
Carol Tapanila
Patricia Moon
Stephen Kish

Alliance for the Defeat of Citizenship Taxation (citizenshiptaxation.ca) 283 College Street, P.O. Box 67678 Toronto, Ontario, CANADA M5T 3M1

ADCS-ADSC & ADCT Letter to U.S. Congress

 

— In this press release we ask United States Congress to fix a problem in the present House/Senate tax bills that targets certain Canadian citizen/residents who own an incorporated business — and more broadly — to “stop imposing worldwide taxation on any Canadian resident”.

The press release is being sent in part to members of U.S. Congress and also to Canadian politicians who should be in the business of defending Canadian citizens from harm caused by a foreign state.

The focus of the press release is intentionally on “Canadians”. The word “American” is not mentioned. Our use in the text of the now-offensive term “U.S. person” (defined by the U.S. Internal Revenue Service) does not imply that U.S. person law applies to any Canadian resident or that any of these so-designated (by the U.S.) Canadians have ever consented to be U.S. persons.

*******
 

 
 
November 24, 2017
For Immediate Release

U.S. CONGRESS: DO NOT CONFISCATE OUR SMALL CANADIAN BUSINESSES AS PART OF YOUR TAX REFORM

Dear Congressperson,

On November 16, 2017 Rep George Holding, of the House Ways and Means Committee, in an exchange with Chairman Brady, urged that as part of tax reform that: The United States join the rest of the world by adopting “residence-based taxation”. This would END the U.S. current practice of imposing worldwide taxation on certain residents of other countries.
 
As U.S. law currently stands, many Canadian citizen/residents (who are deemed by the U.S. to be “U.S. Persons”) find themselves subject to U.S. taxation (ON THEIR CANADIAN INCOMES and CANADIAN ASSETS), even though they live in Canada and pay taxes to Canada.
The application of U.S. tax law into Canada – a principle enforced by FATCA – has profoundly negative consequences, some of which are intended and some of which are unintended.
 
This is a request that the wording of the United States “Tax Cuts and Job” bill be revised so as not to harm, even more, small Canadian businesses possibly included, we believe inadvertently, by your proposed tax reform legislation.
 
As your tax Senate and House tax reform bills are presently worded, Sec. 14103, for example in the Senate bill, might be interpreted to confiscate a significant percentage of the retained earnings of certain small “Canadian Controlled Private Corporations”. This is evidently part of broader legislation to implement “territorial taxation”, in order to enhance the competitiveness of publicly traded U.S. multinational corporations.
 
We believe that this section is intended to apply ONLY to the foreign subsidiaries of U.S. domestic corporations. However, a strict reading of the language of the bill suggests that this “transition tax” MIGHT also be paid by those who are deemed by your country to be “U.S. persons” living overseas who happen (as is common in Canada) to own an incorporated small business. The “minnows” swept up by your bill will then include small businesses such as a one-person incorporated medical doctor’s clinic, should the owner be designated by U.S. law to be a “U.S. person”.
 
We do not believe that this was your intention and ask that you fix the language of the bills accordingly. Surely you would agree that “territorial taxation” for U.S. multinational corporations does NOT mean that the United States should extend its taxable “territory” to Canadians who happen to own small Canadian Controlled Private Corporations!
 
As part of U.S. tax reform, we conclude by asking that the United States stop imposing worldwide taxation on any Canadian resident AND clarify that the “Tax Cuts and Jobs” Bill does NOT apply to Canadian residents who are shareholders of Canadian Controlled Private Corporations.
 
John Richardson
Carol Tapanila
Patricia Moon
Stephen Kish
 
On behalf of the
Alliance for the Defence of Canadian Sovereignty (www.adcs-adsc.ca ) Information@adcs-adsc.ca;
and
Alliance for the Defeat of Citizenship Taxation (citizenshiptaxation.ca)
 
Contact Mr. John Richardson at johnrichardson@citizenshipsolutions.ca
 
 

Time to Reach Out to Another Community for Support Regarding Tax Reform

 

For some time an idea has been considered by ADCT and the letter below is the result of that idea. We have yet to tap into another community who is in a unique position to possibly offer us help – the tax compliance community. There are plenty who have voiced their opposition to FATCA, who think CBT is an abomination, etc. So why not ask them to join us?

We will be sending this letter to a “known” group of professionals which may expand in the future. In the meantime, please consider asking your tax accountant, lawyer or advisor to consider it.

*******


 
 
From The Desk of John Richardson

October 18, 2017

Greetings:

Re: Tax Reform as an opportunity to end the U.S. practice of imposing direct taxation on people who live in other countries.

(If you do not have time to read, please go directly to the last page of this letter.)

I am writing to you personally, on behalf of the millions of “hard working” American citizens living outside the United States and on behalf of the “Alliance For The Defeat Of Citizenship-Based Taxation”. American citizens living outside the United States are “Ambassadors For American Values”.

You are receiving this letter because you have been identified as a person who assists Americans abroad with tax, retirement planning, investment counselling, basic financial planning or a combination of the above. You are well aware of the devastating impact that the current rules of “citizenship-based taxation” have on the lives of “every day people” who have chosen to live outside the United States.

As you are aware, the United States is engaged in a process of tax reform. The last major tax reform was in 1986 (how the world has changed). Tax Reform 2017 appears to be a continuation of the work done by the House Ways and Means Committee (2013) and the Senate Finance Committee (2015). A discussion of “International Tax Reform” has featured prominently in these discussions.

Most of the discussion of changes in “international taxation” has been about changes in the rules governing corporations. There is a growing consensus that the U.S. system of “worldwide taxation” is damaging to corporations. As a result, momentum has been building towards changing corporate taxation from “worldwide taxation” to some form of “territorial taxation”. What “territorial taxation” (subject to the specifics) means in broad terms is that:

U.S. corporations would NOT be subject to taxation on profits earned outside the United States.
 
 
 
Individual (DNA) U.S. citizens are ALSO currently subject to a system of “worldwide taxation”.

The effects of being subject to a system of “worldwide taxation” based ONLY on “citizenship” (all other countries impose taxation based on residence) are:

1. U.S. citizens living in other countries are subject to the Internal Revenue Code, as though they lived in the United States, even though they do NOT live in the United States.
2. U.S. citizens living in other countries are subject to taxation on their “worldwide income” which includes income earned in their country of residence.
3. U.S. citizens living in other countries, who own financial assets or have pension plans locally in those countries are required to treat those “local” assets as “foreign” for the purpose of “reporting” to the IRS. This creates the possibility of “every day people” being subjected to punitive taxation and reporting penalties for attempting to live an “every day lives”.

In practical terms this means that a U.S. citizen living in France (who is subject to full taxation in France), is ALSO subject to taxation on his/her French income by the United States. In addition, because that U.S. citizen living in France is subject to all of the rules of the Internal Revenue Code, that individual is also subject to a collection of “penalty laden” reporting requirements that make full U.S. tax compliance difficult and costly. The cost of U.S. tax compliance for U.S. citizens living in other countries must be considered in terms of both “Direct Costs” and “Opportunity Costs”.

“Direct Costs”: U.S. citizens living in other countries are likely to be subjected to punitive taxation on the normal instruments of financial planning because their vehicle for financial planning is (although local to them) foreign to the United States. In addition, the cost of tax return preparation (when competent help is available) is often very high.

“Opportunity Cost”: Compliance with the Internal Revenue Code means that U.S. citizens living in other countries will often NOT be able to benefit from the financial and retirement planning opportunities available to their neighbours who are NOT U.S. citizens. For example, Australia has a public Superannuation plan. It appears that U.S. tax laws would deprive U.S. citizens living in Australia from benefitting from this plan.
 
 
 
“Role of Tax Treaties”: It’s important to recognize that in many cases these problems are not alleviated by U.S. tax treaties. In fact the problems are exacerbated by U.S. tax treaties which contain a “savings clause” which “saves” the right of the United States to impose taxation on (U.S. citizen) residents of other countries, according to the rules of the Internal Revenue Code.

The time has come to end this “relic of the past” which began as a form of deliberate punishment during the Civil War (yes in the 1800s) and continues to be a punishment today.

Significantly, the definition of “U.S. citizen” includes people who have NO CONNECTION to the United States and are residents and citizens of other countries!!!

It’s not Taxation Without Representation it’s Taxation Without Connection

It’s also important to note that the rules of U.S. “citizenship-based taxation” apply to the “citizens and residents” of other countries, who just happen to also be U.S. citizens because they were born in the United States. In many cases, these people have no connection to the United States (sometimes not even knowing that they are considered to be U.S. citizens). In other words, the United States is currently imposing direct taxation on the foreign incomes of people who do NOT live in the United States!

Previous advocacy, comments and requests – from “U.S. tax compliant” Americans abroad

In 2013 a large number of the comments from individuals submitted to the House Ways and Means Committee came from Americans abroad who were trying to comply with U.S. tax requirements.

In 2015 a large number of the comments from individuals submitted to the Senate Finance Committee came from Americans abroad who were trying to comply with U.S. tax requirements.

These submissions and comments may be found at:

http://www.box.com/citizenshiptaxation

A collection of very specific comments from those personally affected have been collected in the 195 page “book” found here:

https://app.box.com/v/citizenshiptaxation/file/28745871102
 
 
 

A rare display of bi-partisan unity

In 2017 a number of organizations, from across the political spectrum, including Republicans Overseas, Democrats Abroad and American Citizens Abroad have requested a change from the rules that require U.S. citizens living outside the United States to pay U.S. tax on their income earned outside the United States. Although the specific proposals advanced by these groups vary in the details, they all request that:

U.S. citizens living outside the United States, who are therefore tax residents of another country, should NOT be subject to the rules of the Internal Revenue Code that apply to Homeland Americans.

No person should be treated as a “tax resident” of more than one country! The time has come to correct this injustice. U.S. tax laws should be amended so that the United States does not impose U.S. taxation on the:

Non-U.S. source income earned by people who do NOT live in the United States.
 
 
 
So, what am I requesting you to do?

I intend to send a simple request to the various committees working on tax reform, which simply focuses on the result sought with the following request:

“Please amend the Internal Revenue Code so that the United States no longer claims the right to impose U.S. taxation on non-U.S. source income which is earned by people who do NOT live in the United States. For example: The United States should not be imposing U.S. taxation on the French income earned by a resident of France.”

This petition is supported by the following professionals (lawyers, accountants, investment advisors, etc.) who work with non-residents who are subject to U.S. taxation on their foreign income.

This petition is supported by the following professionals:

John Richardson – lawyer

Your name – capacity

All other names – capacity

…

If you simply reply to this email with your name and capacity, I will add your name to the petition. It’s that simple.

Thank you for your consideration and assistance.

John Richardson

http://citizenshiptaxation.ca

citizenshiptaxation@gmail.com

A Little More About Treasury’s Disallowment of SCE


Great article by Helen Burggraf regarding Treasury’s denial of ACA’s SCE program.

Just a couple of thoughts………

US officials reportedly felt that the potential risk of expat Americans using their “same-country” bank accounts to avoid their US tax obligations was ultimately too great to be able to grant them such an exemption – in spite of the inconvenience this would result in, as it already has, for many of the estimated 8.7 million American expats across the globe.

The stupidity of this comment by Treasury officials is beyond belief. Americans abroad do not use “foreign” bank accounts as a way to avoid their U.S. tax obligations. They also are not “foreign” but their local bank down the street whereby they can cash their cheques, pay bills and so on. Obviously, accounts used in this manner are not at all the same as wealthy people living in the U.S. using foreign banks to avoid taxation. This has been stated so many times over the last five years and yet it is STILL not understood. The government continues to use this as a way to keep up several misconceptions as a way to justify FATCA:

Americans who live in the U.S use foreign banks to avoid taxation are wealthy
creates the idea that

Americans who use foreign banks to avoid taxation are wealthy
this does not equal

Americans who live outside the US are wealthy and use foreign banks to avoid taxation.

K.I.S.S., doh, it’s not rocket science to see the difference here!

The key difference, is residence. We all know 99% of all countries on this planet, base taxation upon residence.

” The regulations say nothing about the problem of lock-out. They fix only on the un-quantified and un-weighted risk that what must be a relatively small population of US taxpayers residing in a foreign country and banking at their local bank might evade US tax.
The regulations do not say whether, and, if so, to what extent, Treasury Department took into consideration the widely-admitted fact that FATCA continues to put the community of 8 million Americans overseas at risk of lock-out from access to financial accounts needed for the management of basic living expenses, [including] paying bills, paying rent [and] receiving paychecks.

The Treasury Department has very little statistical information on the diaspora. That is why they have to resort to the fishing expedition that #FATCA is. There have been so many reports, letter-writing campaigns and so on, trying to communicate the problems. So the story has been told. Yet we see no meaningful feedback from the government, indicating what percentage of money they have supposedly collected comes from Homelanders, non-resident citizens, etc. In fact, it is rather amazing that Treasury has not actually said anything different that what they have always implied: Americans living abroad are tax cheats and criminals.

While many of us do not endorse SCE, I think we all respect the efforts of any expat organization that tries to rectify this situation.
And while the future actions of the newly-elected Administration and Congress may offer some hope, we should stay focussed on the fact that many years of concerted effort have failed to solve the situation. Litigation remains a hugely valuable option and may be our best hope.