Tag: FATCA Lawsuit

Taxation of #AmericansAbroad in the 21st Century: “Country of birth” Taxation vs. “Country of Residence” Taxation- Part I

 

cross-posted from citizenshipsolutions by John Richardson

Update January 2018: This post has been updated with some new links and discussion.

Prologue – The “Story Of The Century

Since July 1, 2014, the United States via threats threats of the FATCA Sanction, has begun a “world wide hunt” for people born in the United States
(or are otherwise deemed to be “U.S. tax subjects”). A compilation of my posts describing the mechanics, effects and costs of FATCA and the FATCA IGAs is available in “The Little Red FATCA Book“. FATCA has spawned litigation against both the U.S. and Canadian Governments. A discussion of the “Alliance For The Defense Of Canadian Sovereignty” FATCA lawsuit against the Government of Canada is available here. Some thoughts on the “U.S. FATCA Legal Action” lawsuit against the U.S. Government are here. Both lawsuits have been vigorously defended by the respective Governments. The U.S. lawsuit may have reached the end of its viability (lack of standing and various procedural issues). The Canadian lawsuit continues.

With respect to those “Born In The USA”, the U.S. legal “claim of tax jurisdiction” is two-fold:

1. Those born in the United States (unless they have relinquished U.S. citizenship” for both tax and nationality purposes) are U.S. citizens.

2. Citizens of the United States are subject to the provisions of the Internal Revenue Code regardless of where they live in the world. The Internal Revenue Code (“IRC”) includes but is not limited to the obligation to pay taxes according to U.S. tax rules. The “IRC” also includes a wide range of “penalty laden reporting requirements“. The “IRC” also strongly discourages (through penalties and sanctions) participation in non-U.S. pension plans, non-U.S. investments (including non-U.S. mutual funds), the use of “non-U.S. business corporations” and (incredibly) non-U.S. spouses. (Even the divorce of a U.S. citizen and non-citizen is likely to be significantly more expensive.) As a result, the “extra-territorial application of the “IRC”) has the effect of exercising U.S. “control” over the lives of it’s citizens who do NOT live in the United States. Therefore, it is clear that the “extra-territorial” application of the “IRC” both (1) imposes the full force of the “IRC” on the resident/citizens of other countries and (2) has the effect of imposing the U.S. cultural values mandated in the “IRC” on those other countries. One can identify a list of the “10 Commandments” which are imposed on Americans abroad in an FBAR and FATCA world.

(Note that with the exception of U.S. citizens and “permanent residents”, as per Internal Revenue Code Sec. 7701(b), an actual physical connection to the United States is required to establish U.S. tax residency.)

As the article referenced in the above tweet makes clear, many people “claimed” by the United States as “tax residents”have never had any connection to the United States except that they were born there. The article includes:

Awad Al-Zahrani, whose son has US citizenship, said he would give it up.

“My son got the passport since he was born there while I was studying in the country back in 2000. At the time, the Saudi embassy had told me that it would not be a problem for him to hold two passports. Now that we have to pay taxes, though, we’ll be giving the US passport up.”

Abdulrahman Al-Habib, head of journalism studies at KAU, argues that Saudis who were born in the US should be exempt from paying taxes.

“We should establish a unified center to help Saudis clear their former tax registers,” he said.

US Consul-General Todd Holmstorm,however, confirmed that US citizens should pay income tax and called on their international counterparts to help them eliminate tax evasion.

“The tax law is designed to combat evasion through increasing transparency in the financials of US taxpayers,” he said.

Mr. Holmstorm’s bio indicates that his career has had a Canadian connection in Ottawa, Canada. His comments in the above article imply that he believes that those (1) born in the U.S. who (2) do not live in the U.S. and (3) do not pay taxes to the U.S. are guilty of “tax evasion”. Strong language indeed. Yet, these are his words which clearly reflect the attitude and policy of the U.S. Government.

 
 

Anti #FATCA BRIC nations building political clout and alliance

 

We all spend tons of time wondering what individual effort might bring down FATCA. Will the Congress come to its senses and pass the Meadows/Rand bills to repeal FATCA? Will Nigel Green & Jim Jatras achieve a lobbying miracle? Could it be possible that the Appellate Court will come up with a different finding than Judge Rose in the “Bopp” case? Or will the Canadians be successful in striking down their IGA with other countries deciding they will do the same? Will the Treasury Secretary indicate that #AmericansAbroad are exempt from FATCA? Or somehow Treasury changes its mind and allows for Same Country Exception?

To the best of my recollection, when the post below was published NONE of the actions mentioned above had started. If somebody had predicted any of them (never mind all of them), I expect we would have thought they were nuts. It has seemed so overwhelming and so hopeless from the start. Yet we fought back from the very beginning, starting simply at first; researching information and making decisions on our own terms, being unwilling to just follow blindly what we were told by the IRS, the compliance community and so on. Little by little groups began planning how to approach their ideas of taking the battle to the next level. Everyone should be proud that so much has been done under such dire circumstances, the expat grassroots movement is alive & well!

Of course, there are always other currents flowing alongside all that is happening and usually the best results are the ones that are not planned per sé but come about as the interplay of all the factors as they work themselves out. Clearly, one of the most powerful would be the demise of the U.S. as the world’s biggest bully, police officer and holder of the most powerful reserve currency. Of course many Western business/financial leaders dismiss this idea as pure folly. “Impossible“ they say. However, look at the bank collapses of 2008. Would financial officers not have reacted the same, “Impossible” ?

Did we not react the same when we first started out? Impossible ?

There is reason to believe the BRICS nations might well succeed at creating a system that can bypass what the U.S. currently “owns”; the USD as the world standard reserve currency.

This will be the first of a few posts regarding BRICS. We truly may be witnessing the fall of the American Empire and the rise of a new ruling entity.

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Originally posted on the RenounceUSCitizenship blog March 24, 2013

 

Earlier this year I wrote that “Peaceful resistance to FATCA will result in a new financial order“. An article by Geoffrey York of the Globe and Mail suggests this may be starting to happen.

The article is well worth reading.  Note the following commentary and excerpts:

Continue reading “Anti #FATCA BRIC nations building political clout and alliance”

Solving U.S. Citizenship Problems-with special guest Andrew Grossman Montreal Monday December 5, 2016

A very special meeting for “U.S. Born People” or those who are otherwise “U.S. Persons” !(Naturalized U.S. citizens or Green Card holders)

Joining John Richardson will be Andrew Grossman

Discussing the “hot topic” of U.S. citizenship (including its liabilities in a FATCA and FBAR world)

In addition to focusing on the problems faced by those who agree they are U.S. citizens (to be a citizen or not to be a citizen …), this seminar will include consideration of …

     

  • Why the US cannot automatically restore your citizenship without your consent

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  • The advantages of not making use of benefits of U.S. citizenship

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  • Why the U.S. cannot force those born abroad to accept U.S. citizenship

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  • Dominant Nationality & FATCA

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  • About the revenue rule: How is it affected by the Canada U.S. Tax Treaty? Is the Revenue Rule on the way out?

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  • Can the IRS place a lien on my assets even though I live in Canada?

The idea for this meeting grew out of Andy’s participation on a post at the Isaac Brock Society (Andy05).

“If anyone wants to follow up on issues I have raised, I will be in Montréal Dec. 1-3 & 5-6 and in Stanstead QC Dec. 3-5 and would be glad to meet for coffee and exchange views. I do not seek and scarcely ever accept clients but like to exchange views as an academic lawyer with a view to nationality law, cross-border tax and conflict of laws. French or English ok.”
Continue reading “Solving U.S. Citizenship Problems-with special guest Andrew Grossman Montreal Monday December 5, 2016”

Republicans Overseas July 5, 2016 Appeal of U.S. FATCA Lawsuit Dismissal

 
 

cross-posted from: Isaac Brock Society

by Stephen J. Kish

The Plaintiffs (of which I am one of seven) of the Republicans Overseas United States FATCA lawsuit, filed, on July 5, 2016 in U.S. Sixth Circuit Court of Appeals, a “Brief” arguing that the U.S. District Court erred in dismissing the FATCA lawsuit.

We are suing: United States Department of the Treasury, United States Internal Revenue Service, and United States Financial Crimes Enforcement Network. SEE THE BRIEF.

“The district court held that no Plaintiff has standing for any of the eight counts (Dismissal Order, RE 42), even with added plaintiffs and facts in the proposed Amended Complaint (RE 32-1).”

“Preliminarily, note that while the Government asserts interests in fighting tax evasion, money laundering, and terrorism, Plaintiffs are ordinary people abroad seeking freedom from serious harms from challenged provisions and IGAs. Plaintiffs are not alone. An extensive, careful survey,[from Democrats Abroad…]”

“The Government has other, successful tools to catch scofflaws without the unconstitutional, intrusive, bulk-data-collection approach of the challenged provisions and IGAs that so harm ordinary Americans.”

“Taxpayer information was recently stolen from the IRS itself because the IRS has not prevented hacking of its own systems and theft of taxpayer information.”

“Thus, people do have a reasonable expectation of privacy from the U.S. and foreign governments in their bank accounts under the situations at issue here. They reasonably do not expect the bulk, blanket reporting of information under challenged provisions and IGAs, including to foreign governments, without any hint of wrongdoing and without judicial oversight, the lack of which makes such searches “per se unreasonable.”18 So Plaintiffs have a cognizable privacy interest.”

“…Plaintiffs rely on no third-party standing, though they provide information about relevant third parties to demonstrate how FATCA negatively affects their lives and relationships. Rather, they rely on their own interests, especially the constitutionally protected interest in not disclosing information they do not want to disclose.”

“The district court said that because Plaintiffs harms, particularly problems in getting banking services for essential everyday-living accounts,20 are not fairly traceable to government action, Plaintiffs lack standing to challenge provisions motivating FFIs not to provide services to Americans abroad….So the argument is not that, e.g., the IRS persuaded some bank to deny services to Plaintiffs Crawford or Kuettel, but that FFIs don’t accept Americans’ accounts because of FATCA/IGA burdens. Where a provision/agreement harms a person by causing FFIs to deny services (or by disrupting marital joint accounts or the ability to open an account in a minor’s name), that harm is fairly traceable to the government responsible for the provision/agreement.”

“The law on causation for standing recognizes such indirect harm. For example, Plaintiffs affected by FATCA/IGAs have standing for the reasons stated regarding Count 1 because the FFI Passthrough Penalty is designed to punish noncompliance by account holders. And Plaintiffs would like to be noncompliant because they are burdened by FATCA/IGAs, which they believe are unconstitutional, but cannot be recalcitrant because of the Passthrough Penalty.”

“Furthermore, Plaintiffs alleged that they reasonably fear that they will be subject to the Willfulness Penalty for willful failure to file FBARs, indicating that they are filing FBARs. The FBAR report is a trap for the unprepared, uninformed, unwary, imposing this excessive penalty on those who know of the report but for some reason fail to get it done.”

“Moreover, Plaintiffs’ harms will be redressed by requested relief as to this Count. See Part I.C. Any notion that they must await a penalty or enforcement action is erroneous because one need not await enforcement to challenge unconstitutional provisions/agreements. And Plaintiffs would not file FBAR reports—and so become subject to this penalty—but for the challenged provision. So Plaintiffs have standing for Count 6…”