Author Archives: Admin

“Dual citizenship affords unique opportunities for cross-border tax evasion” claims report issued by @SenateFinance

As described by AARO (“Association of American Residents Overseas”) in an April 7, 2023 blog post:

On March 29 the Senate Finance Committee Democratic staff issued a report titled “Credit Suisse’s Role in U.S. Tax Evasion Schemes of its investigation of Credit Suisse’s compliance with a 2014 plea agreement with the Department of Justice involving the bank’s participation in a conspiracy to hide offshore accounts from the IRS.

Per Committee chair Senator Ron Wyden’s (D-OR) press release, the report details Credit Suisse’s role in a “potentially criminal tax conspiracy” involving accounts of a U.S. based family that were closed 10 years ago, recycles the Clinton/Bush era tax evasion case by U.S. businessman Dan Horsky, and discusses large undeclared accounts belonging to 23 ultra-high net worth U.S. citizens.

We are surprised that such a large and well-resourced committee working for two years was unable to unearth so little misconduct at a mega-bank that has now collapsed due to mis-management. Most outrageously, the report states that “Dual citizenship affords unique opportunities for cross-border tax evasion,” which gives the impression that ordinary Americans living abroad are prone to criminal tax evasion.

AARO has a meeting scheduled with Senator Wyden’s office in May during our annual Overseas Americans Week, during which we will express our extreme dissatisfaction with this characterization. We will let you know if there are any developments.

AARO deserves thanks and credit from all Americans overseas for publicly pushing back on the report created and published by the Democrat led Senate Finance Committee. The report is outrageous, a waste of public funds and appears to be a “back handed attempt” to justify the hiring of more IRS agents and increasing/justifying the imposition of FBAR penalties. The report is NOT (contrary to media reports) really about Credit Suisse. The report uses Credit Suisse as a “prop” to remind the people of America, that there are some people in America (it all took place ten years ago), who deliberately attempt to evade the payment of U.S. tax. The modus operandi includes moving their money to financial institutions and entities outside the United States. Yes, it’s true. Of course, as an added benefit the Senate Finance Committee gets to demonize Swiss banks (in general) and Credit Suisse (in particular). But make no mistake. The Senate Finance report is NOT about Swiss banks. It’s an advertisement to justify the hiring of more IRS agents funded by the Inflation Reduction Act, to legitimize the imposition of more FBAR penalties and to suggest that Republicans are (somehow) soft on tax evasion.

Why this report is dangerous for U.S. citizens generally and for Americans abroad specifically

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2023 Conference: Oppressive Nationality Attribution And The Weaponization Of Citizenship




Just by accident I discovered a recent conference discussing (among other things) the wrongful attribution of nationality and the weaponization of citizenship generally. I haven’t had the time to read all of this. At a bare minimum this does discuss issues that may have applicability of the plight of Americans abroad.

Questions may include:

1. Does the difficulty in renouncing U.S. citizenship constitute the wrongful attribution of citizenship?

2. Does the United States use of “citizenship” to claim the residents of other countries as U.S. “tax residents” constitute the “weaponization of citizenship”?

3. Does the United States use of citizenship to drain capital from the tax base of other countries constitute the weaponization of citizenship (U.S.) against other countries?

In this context I am reminded of the peition (which originated with the Isaac Brock Society) to the UN Human Rights Commission arguing that the US rules of “citizenship taxation” violate various international human rights laws.

Here are the articles …

I would be interested in any and all comments on this topic.

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Biden 2024 Green Book: Message To Non-US Citizens – Time To Retire That “Sailing Permit” Law


Once upon at time (well back in the last century) I knew a person who – along with three other people – shared the rental of a house. The agreement was that they would split the rent equally and that they would split the utilities equally. The agreement also stated that on the last day of each month the group would meet and each contribute their 1/4 share of the utilities owing. The agreement further stated that in the event that any person did not pay his share of the utilities in cash that his property could be used (fair market value assessment) to pay his share. One week prior to the last day of the month one of the four realized that he would not have the money to pay his share of the utilities. As a result, two days before the last day of the month, that individual:

1. Removed all of his belongings; and

2. Moved out of the house.

The legend was that the remaining three had to pay his share of the utilities and his property remained intact. By moving out and removing his property he was able to avoid paying a debt that he owed to the group.

Unsurprisingly the Internal Revenue Code contains provisions to prevent individuals from leaving the United States or removing property from the United States to defeat the payment of tax debts. This is of particular concern to the United States if the individual is an “alien”. The requirement to obtain a “sailing permit” to leave the United States is neither well known nor enforced. That said, the “sailing permit” (even with the existence of “withholding taxes”) remains the law!

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Biden 2024 Green Book: Message To Accidental Americans – Either comply or renounce!

Part I – Summary of post:

The proposals for Americans abroad include:

1. A provision to (and presumption of) heighten enforcement of the 877A exit tax through changes in the Internal Revenue Code

2. A possible “carve out” from the 877A exit tax for certain Americans abroad with limited ties to the United States (under rules prescribed by the Treasury Secretary)

3. NO RELIEF whatsoever from U.S. citizenship taxation and the way that the rules apply to Americans abroad. This assumes a continuation of U.S. citizenship taxation with no evidence of change.

In other words: Either comply or renounce!

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@RepBrianHiggins Begins Formal Challenge Of Canada’s Underused Housing Tax


Are Buffalo Cottage Owners Exempt From Canada’s Underused Housing Tax?

It’s Official – Congressman Higgins Begins Formal Claim That Canada’s Underused Housing Tax Violates the USMCA Free Trade Agreement

Mar 7, 2023
Press Release
Congressman Says Tax 1% Property Tax Violates Standing Trade Agreements

Congressman Brian Higgins (NY-26) is asking United States Trade Representative Katherine Tai to open formal consultations with the Government of Canada to explore if the Underused Housing Tax is inconsistent with the United States-Mexico-Canada Agreement (USMCA).

In a letter to Ambassador Tai, Rep. Higgins writes, “The United States and Canada have a longstanding, cooperative, and mutually beneficial relationship. Western New York and Southern Ontario exemplify this unique bond. The UHT’s impact on Americans who own property in Canada, however, threatens our binational community and appears to be inconsistent with the USMCA.”

One of the principles of the USMCA is the requirement that all parties not discriminate against each other or provide preferential treatment solely to domestic companies or citizens, including with respect to internal taxation. Canada’s Underused Housing Tax does not apply equally to Canadian and U.S. citizens and therefore may violate these principles. The USMCA stipulates parties can request consultations with another party when trade agreement disputes arise.

Canada recently imposed a 1% tax on “vacant or underused housing” owned by non-resident, non-Canadians. The intent was to target foreign investment speculation negatively impacting affordable housing in Canada, but it is impacting good-faith, longtime cottage owners who have maintained and enjoyed living among their Canadian neighbors for years.

Higgins began sounding the alarm about the Underused Housing Tax since it was first proposed in the Government of Canada’s Budget 2021. Most recently, Higgins asked the U.S. Secretary of State to object to the Underused Housing Tax in conversations with the Government of Canada.

Outreach from frustrated U.S. residents has increased in recent weeks as the April 30th tax form deadline approaches in Canada. Congressman Brian Higgins has heard from hundreds of U.S. residents negatively impacted by the Underused Housing Tax, including over 320 property owners who completed an online survey.

Congressman Higgins is a member of the House of Representatives Ways and Means Subcommittee on Trade and serves as Co-Chair of the Northern Border Caucus and the Canada – U.S. Interparliamentary Group. His Western New York district, which includes the Cities of Niagara Falls and Buffalo, borders southern Ontario. 

The Opportunity – Perhaps All Forms Of Citizenship Violate The Canada US Mexico Free Trade Agreement?

This is an opportunity to bring all issues of citizenship tax to the attention of those responsible for interpreting the free trade agreement.

PFIC anyone?


John Richardson – Follow me on Twitter @Expatriationlaw

The Issue Is Not @CitizenshipTax. The Issue Is Whether The US Can Claim The Tax Residents Of Other Countries As US Tax Residents!

Introduction – The United States has the “sovereign right” to define who are its “tax residents, but …”


There is presently heightened advocacy directed toward the goal of influencing the United States to take action to end (what is described as) U.S. citizenship taxation. Notably this goal is for the purpose of influencing the United States to take action.

Perhaps it would be equally useful to define a separate goal of:

Not allowing the United States to claim the residents of other countries as U.S. tax residents!

Notably this goal would be to engage the governments of other countries!

Ideally both Americans abroad and their countries of residence should seek to stop the United States from reaching into those other countries and claiming the residents of those countries as U.S. tax residents!

In FATCA related discussions it has been common for Government Officials to claim that the United States has the sole right to determine who are its tax residents. Although true, this cannot mean that the United States (or any country) has the right to claim the residents of another country as its tax residents. (The debate is illuminated here and here.)

(Interestingly when the European PETI delegation visited Washington in July of 2022 they made it clear that they did NOT question the right of the United States to define European residents as U.S. tax residents. Rather, they just wanted to find a way to make it easier for European residents to be permitted to have access to bank accounts in the European countries where they live.)

It is appropriate for other countries to accept that the United States has the right (like any country) to define who are U.S. tax residents. It is completely inappropriate for Europeans to accept that the United States has the right to treat European tax residents (who actually live and work in Europe) as U.S. tax residents. By protecting European residents from the United States, European countries would be acting in a manner that is consistent with the OECD tax treaty which anticipates situations of “dual tax residency”. In circumstances of dual tax residency, the model OECD tax treaty (Article 4) provides that the treaty “tie break” will be used to assign tax residency to the country that correlates with the “circumstances of life”. (See page 111 in the document linked to in the previous sentence.) Interestingly, citizenship which absent naturalization, is based on “circumstances of birth” is considered to be the least important criterion under the treaty “tie break”rules.

The treaty tie break rules presumptively assign tax residency based on the “circumstances of life” and not on the “circumstances of birth“.

The bottom line is that, it’s time for the world to simply say:

Of course the United States can define who are its tax residents. But, the United States will NOT be permitted to treat the tax residents of our country (who actually live in our country) to be treated by the U.S. as though they are the tax property of the United States! That is the simple message that must be conveyed!!

Let’s now analyze how the United States goes about claiming the residents of other countries as U.S. taxable property. It’s explained by Mr. Paolo Gentoloni as follows …

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#FBAR Decision: Bittner Wins! Non-willful Civil Penalty Restricted Based On The One Form And Not On Each Account

On November 2, 2022 the Supreme Court of the United States heard arguments in the Bittner FBAR case. I have previously written about this case here and here. An audio of the oral argument at the Supreme Court (along with commentary) is here. On February 28, 2023 the Court issued it’s ruling.

The issue was whether:

In assessing non-willful civil FBAR penalties the government is restricted to imposing one penalty for failing to file an accurate FBAR form or may the government impose a separate penalty for each mistake related to each account. In other words, is the penalty based on the failure to file a correct form or is a separate penalty allowed for each mistake in relation to the form?

Interestingly and notably the Gorsuch majority decision specifically notes that the period in which the FBAR penalties were assessed were for years that Mr. Bittner was living in Romania. There is no acknowledgment of this in the Barrett dissent!! In addition, Ms. Boyd (of 9th Circuit fame) was also assessed penalties for the years she was living in the UK! To be clear: this decision is very relevant for Americans abroad!!

The court’s decision
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Renunciation/Relinquishment, The US Exit Tax And The Confiscatory Case Of NON-U.S. Pensions (U.S. Pensions Avoid This!)

Part I – Prologue – A Tweet Worth A Thousand Posts

For a “Readers Digest” version of the post that is to follow, simply click on the link in the above tweet!

To see examples of the deemed income inclusions and the U.S. tax owing click on the links to Appendices, B, C and D below.


Outline And Structure

This post is for the purpose of alerting Americans abroad and their advisors to a particularly difficult and unjust aspect of renouncing U.S. citizenship. The punitive treatment of the non-U.S. pension is a reason for many Americans abroad to consider renunciation earlier (when they are not “covered expatriates”) rather than later (when they may be subject to the confiscatory rules applied to “covered expatriates”).

Part I – Introduction – The General Message
Part II: Renunciation/Relinquishment and the confiscatory case of the “ineligible” (non-U.S.) pension … A Deeper Dive
Part III: Renunciation/Relinquishment and the retention of the “eligible” (U.S.) pension … A Deeper Dive
Part IV – Conclusion
Appendix A – How Internal Revenue Code Sections 877A and 877 Lead To The Confiscation Of The Non-U.S. Pension
Appendix B – Dual Status tax return with a 1 million USD income inclusion on the day before expatriation
Appendix C – Dual Status tax return with a 1 million USD income inclusion on the day before expatriation with a $100,000 tax credit carry forward
Appendix D – Dual Status tax return with (1) a full actual distribution of the pension in Canada on the day before expatriation (generating a foreign tax credit in the current year)


Part I – Introduction – The General Message

The warning! Some Americans abroad who renounce U.S. citizenship can expect to have punitive taxation imposed on the value of their non-US pensions. This is a tax imposed by a “deemed distribution” (not actual) of the the pension. Because there was no “actual distribution” those affected will need to find another source of funds to pay the tax. Significantly, the tax does NOT apply to U.S. pensions. Those renouncing who have U.S. based pensions may NEVER be taxed on the value of those pensions.

Once an individual’s net worth reaches 2 million USD, that individual is generally subject to this tax. This means that renunciation may become very costly. Americans abroad with non-US pensions and their advisors should be aware of (and plan around) this problem.

In this post I am joined by CPA Olivier Wagner who has generously provided excerpts from mock U.S. tax returns which demonstrate how confiscatory the U.S. Exit Tax rules are when applied to non-U.S. pensions (and therefore to Americans abroad). You will find his returns in Appendixes B, C and D at the end of this post.

The mock tax returns show that a U.S. citizen living outside the United States who:

– is a “covered expatriate”

– has a non-U.S. pension with a present value that includes a taxable amount of $1,000,000 USD

will be subject to an immediate tax of $344,963 triggered by renunciation of U.S. citizenship.

Because this tax is NOT imposed on those with U.S. based pensions, this tax applies disproportionately to Americans abroad, who earned their pensions while living outside the United Sates.

Of course, if he had renounced before reaching the 2 million USD net worth mark, he could possibly renounce and pay no exit tax on the value of his pension. Financial planners and other advisors take note!!

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Like Canada’s Underused Housing Tax, U.S. Estate Taxation Depends On Citizenship Of The Owner

Taxation based on source vs. taxation based on residence – More commentary on the Canada Underused Housing Tax

Suzanne Herman has got it right!

There is no doubt that Canada’s “Underused Housing Tax” is triggered by citizenship. There is no doubt that Canada’s Underused Housing Tax is unfair to Americans who own second homes and cottages in Canada. There is no doubt that Canada’s “Underused Housing Tax” in its application to noncitizen and nonresidents is similar to the U.S. Estate Regime*. (They both impose taxation on the noncitizen/nonresident owners of property located in their countries.) There is no doubt that while complaining about Canada’s “Underused Housing Tax” that Congressman Higgins should be apologizing for the way the U.S. Estate Tax treats nonresident/noncitizen owners. They are both taxes triggered by (n0n) citizenship and are based on property located in their respective jurisdictions.

Taxation of nonresidents triggered by the ownership of local property is different from U.S. taxation of non-US source income received by persons who don’t live in the United States

That said, there is no moral equivalence between Canada’s Underused Housing Tax based on property located IN CANADA and the U.S. taxation of INCOME received OUTSIDE THE United States by a person who does not live in the United States. The United States is using “citizenship” as a pretext to claim that people who are tax residents of other countries (including Canada) are U.S. tax residents.

It is an assumption of international taxation that every country has the right to define who are its “tax residents”. On the other hand, no country has the right to (1) claim that the tax residents of other countries are also their tax residents and (2) disable those “claimed” tax residents from using a treaty tie break provision to avoid the claim of tax residence! (The “saving clause” included in all U.S. tax treaties prevents U.S. citizens from using a treaty residence tax break provision to assign allocate residence to solely their country of actual residence.)

In FATCA related discussions it has been common for Government Officials to claim that the United States has the sole right to determine who are its tax residents. Although true, this cannot mean that the United States (or any country) has the right to claim the residents of another country as its tax residents. (The debate is illuminated here and here.)

It’s about American exceptionalism

The international standard for definitions of tax residence is “residence”. Residence is a term that is correlated with the “circumstances of one’s life”. The United States (in addition to “residence”) claims tax residence based on “citizenship” (which is mostly based on the “circumstances of one’s birth”). To put it simply U.S. tax residence is primarily defined in terms of the “circumstances of birth” rather than the “circumstances of life”.

In the 21st Century there is almost NO correlation between citizenship and residence.

At first blush, one might say:

Both Canada and the United States are taxing based on citizenship. They are both equally wrong. Nothing could be further from the truth.

Suzanne Herman’s tweet explains the difference. As her tweet makes clear the Canadian tax is based on property that is located in Canada. It is a tax based on citizenship because of property located in Canada. Although the tax is based on the citizenship of the owner, Canada is NOT claiming that U.S. residents are “tax residents of Canada” for all purposes. The Canadian tax, although based on citizenship, is a tax based on the ownership of property located in Canada.

On the other hand, the United States is imposing full taxation on certain Canadian residents because and only because the U.S claims them as U.S citizens. The claim is that because they were “Born In The USA” that they are U.S. tax residents for ALL purposes. They are subject to U.S. taxation on ALL of their income received outside the United States. They are subject to reporting on all their assets LOCATED OUTSIDE THE UNITED STATES. This is because and only because they are U.S. citizens.

To put it simply: The U.S. is using citizenship (the circumstances of their birth) to claim that residents of other countries are U.S. tax residents for ALL purposes!

A U.S. resident can avoid the Canadian tax by simply selling the property located in Canada.

A Canadian resident subject to the U.S. citizenship tax can avoid the tax only through relinquishment of U.S. citizenship or death (and that may not be enough).

Bottom line: Canada is imposing a tax based on the citizenship of the owner of property located in Canada. This is different from the U.S. imposing taxation on income earned outside the United States and received by a Canadian resident who has U.S. citizenship. The Canadian tax is based on the location of property in Canada. The U.S. tax is based on the citizenship of the person who is actually living in Canada.

The United States is using citizenship as the basis to claim the tax residents of other countries as U.S. tax residents.

The question becomes:

Should the United States be permitted to use citizenship to effectively claim the tax residents of other countries as U.S. tax residents? Should the rest of the world tolerate this blatant assault on their sovereignty and erosion of their tax base? Should the world sign tax treaties with the U.S. that entrench this principle (via the “saving clause”) in their tax treaties with the United States? Should U.S. citizens be the only people in the world who disabled because of their citizenship from being able to become treaty nonresidents?

Although all forms of taxation based on citizenship are wrong. There is no moral equivalence between Canada’s tax based on property located in Canada and the U.S. tax based on claiming Canadian residents as U.S. tax residents.

John Richardson – Follow me on Twitter at @VacantHomeTax


*Appendix – The U.S. Estate Tax System Is Similar To Canada’s Underused Housing Tax

When it comes to the ownership of U.S. situs assets:

– a U.S. citizen is subject to an 11 million dollar lifetime estate tax exemption

– a noncitizen, who is NOT domiciled in the U.S. is subject to taxation on all U.S. situs assets in excess of $60,000 USD.

Although not the specific topic of this post I highly recommend the article by Omer Harel about the application of the U.S. Estate Tax to nonresident aliens. The article includes:

The U.S. estate tax imposed on NRAs today is an inefficient tax without serious policy justifications and it distorts behavior in ways that the estate tax imposed on residents does not. Also, this tax decreases the attractiveness of investments in the U.S. from the NRAs’ perspective as it forces NRAs to invest in U.S.-situated assets using a foreign corporation. This insulates them from estate tax exposure and subjects them to additional costs and higher taxes that the U.S. Treasury does not necessarily benefit from. The fairness arguments that were presented to support the retention of the NRA estate tax are not persuasive as NRAs owe much lower ‘‘debt’’ to the U.S. government than residents and, unlike residents, are sometimes unable to fully benefit from the step-up in basis. Further, after the Obama tax reform — which basically repealed the estate tax for almost all residents in 2011-2012 — the current regime has become extremely discriminatory and might in some instances violate U.S. income tax treaties.

Now that the U.S. (in particular the real estate industry) needs foreign investments more than ever, it is the right time to rethink this tax and repeal it or drastically modify it so that it will not deter foreign investors.

Bottom line: The United States is already doing exactly what Canada does in it’s Underused Housing Tax! Nobody seems to complaint about it! But, everybody should complain about it. Like Canada’s Underused Housing Tax, the U.S. Estate tax regime is simply a system of asset confiscation based on citizenship! Perhaps, Congressman Higgins should raise this issue with the U.S. Government?