Mexico City – September 2023 – A reminder that citizenship matters
Last month I attended an Immigration Conference in Mexico City. It was organized by Buffalo immigration lawyer Joe Grasmick and focussed on the USMCA, CUSMA (formerly called the NAFTA Free Trade Immigration Visa- TN Visa). The conference highlighted the opportunities available to citizens of Canada, Mexico and the USA to live in any one of these three countries performing certain professional services for which they are qualified.
In a nutshell the “Free Trade Immigration” visa is an opportunity for:
1. Citizens of the United States, Canada and/or Mexico who have the status of being certain kinds of professionals (who they are and their professional qualfications); to accept
2. Certain kinds of employment (what will they actually be doing).
The devil is certainly in the details. Immigration under the “Free Trade Professional” category has its own nuances. It is certainly more difficult than it appears (and is described).
The conference was a “sobering” reminder that “citizenship matters”!
Those interested in the details of Chapter 16 of The Free Trade Agreement (which creates the “Free Trade Professional”) see here …
A more “user friendly” version of the agreement is available from the State Department here.
Joe performed a great service to the legal community by organizing this conference. (I have included a (2018) discussion I had with Joe about U.S. citizenship generally as Appendix A to this post.)
Notably, those who renounce U.S. citizenship and are either Mexican or Canadian citizens are still eligible for the Chapter 16 opportunity
Thus, Chapter 16 creates an opportunity for former U.S. citizens who are citizens of Canada and/or Mexico (meaning that for “Free Trade Professionals” it provides an opportunity to live and work in the United States).
Of course, the “Free Trade Professional” visa is NOT the only opportunity for Canadian residents to immigrate to the United States. For other opportunities see this post by U.S. Immigration lawyer Robert Webber who describes opportunities for both Canadian citizens and permanent residents of Canada.
To put it simply: citizenship matters!
But, time out (for a message from your sponsor): Be careful of the tax implications of spending (regardless of motivation) too much time in the USA!!
All dating sites should include the text of the IRC 7701(b) "substantial presence" test for US @taxresidency, an introduction to Mr. #FBAR and penalties, a list of all foreign asset reporting requirements and penalties. Love comes and goes. Taxes, penalties and forms are forever!
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) September 30, 2023
Now “cross border dating” is different from being a “Free Trade Professional”. That said, “Free Trade Professionals” would become U.S. tax residents under the Substantial Presence test and become subject to U.S. tax, form, penalty and reporting requirements (a circumstance that some immigration lawyers either don’t understand or ignore). This is an extremely important and overlooked reality! Canadian citizens who move to the United States as Free Trade Professionals will almost certainly have Canadian assets and financial accounts. They are likely to have Canadian tax deferred investment accounts (RRSP and/or TFSA). They may own Canadian mutual funds (AKA PFICs). They may be the sole shareholders of Canadian Controlled Private Corporations. They may own Canadian principal residences. They may received inheritances from Canadian relatives. All of these “ordinary” life circumstances create extraordinary tax and reporting obligations under U.S. tax laws. Income streams and assets that are “foreign” to the United States (including Canada) generate specific U.S. tax obligations.
(Those wishing to learn more about the U.S. foreign asset reporting rules (and how serious they are) may appreciate these discussions – found in Appendix B – with Frost Law’s Eli Noff. These discussions focus on “foreign asset reporting” and how to correct deficiencies.)
In other words:
Canadians who move to the United States as Free Trade Professionals may (because of their ownership of non-US assets) create the same problems that Americans abroad live with every day. Free Trade Professionals (like Americans abroad) will be subject to the penalty laden U.S. information reporting requirements described here.
In addition, Canadian citizens who sever tax residency from Canada will be subject to Canada’s “Departure Tax” rules.
Clearly, the tax aspects of becoming a “Free Trade Professional” require awareness, consideration and planning.
The conference did get me thinking …
First, it was a reminder that citizenship has value. Citizenship should not be easily or cavalierly renounced. CUSMA and USMCA “Free Trade Professionals” are NOT the only mobility programs that are dependent on citizenship! This does not mean that people should avoid renunciation. It is an acknowledgement that renouncing U.S. (or any other) citizenship is giving up something that has value. When renouncing citizenship one must always ask:
“What citizenship am I left with?”
On the other hand (as you know) U.S. citizenship is difficult to maintain if one lives outside the United States. Even the State Department has recently acknowledged the difficulty in their recent announcement about the renunciation fee decrease. I am NOT arguing for retaining U.S. citizenship. I am acknowledging that U.S. citizenship (if it weren’t tied to the U.S. regulatory regime) does (like any other citizenship) have value. That said, I am not aware of any other citizenship where renunciation affords immediate and permanent benefits. It is very sad. But, it does confirm that U.S. citizenship (regardless of value) is mostly about regulation/taxation. (U.S. citizens who have never lived outside the United States as tax residents of another country cannot and will never understand this.)
Thinking back to the Immigration Conference … I suspect there were few people in the conference who was consciously aware of the tremendous problems and disabilities experienced by U.S. citizens living outside the United States. I suspect that few were aware of the potentially devastating effects that becoming a U.S. tax resident (under the Free Trade Agreement) could have on the lives of Mexican and Canadian citizens. But, that’s because my focus in on expatriation (getting people out of the United States). My focus is not on immigration (getting people in to the United States).
Second, I was struck by (a reminder) of the consequences of NOT playing by the (immigration) rules (meaning the consequences of being in the United States or Canada without immigration status). Compliance with immigration laws (regardless of country) is necessary to have many legal protections afforded by law. (You need to be able to call the police!) In addition, compliance with the immigration laws will minimize the chances of being subjected tot the here.”
To put it simply: Illegal migrants are exploited, exploited and exploited!
In the United States, (as documented by Francine Lipman), undocumented aliens (contrary to popular perception), are abused by the U.S. tax system in ways that legal residents are not. (Some years ago I reached out to Professor Lipman because of the similarity between the U.S. taxation of Americans abroad and the taxation of undocumented immigrants.)
So, legal immigration does matter!! Citizenship does matter!
Bottom line: it was a great conference (congratulations to Joe Grasmick for pulling this together!) I am glad that I attended. Looking forward to Part 2 in Ottawa!
The morning after the conference I boarded my flight out of Mexico City. I rarely watch movies on planes. This time was different. I watched the classic movie “Casablanca”.
In my next post I will describe why a focus on citizenship caused me to understand “Casablanca” in a completely different way.
Yes, art imitates life or maybe life imitates art.
Appendix A – A Discussion With Buffalo Immigration Lawyer Joe Grasmick
Appendix B – Foreign Asset Reporting Requirements – Look Before You Leap – A conversation between Eli Noff and John Richardson