Category Archives: American expatriates

Afroyim v. Rusk – A New Perspective: Do The Specific Rules Of US Citizenship Taxation Result In The Forcible Destruction Of US citizenship?

Prologue

The United States of America is the ONLY country in the world that both:

1. Confers citizenship by birth inside the country; AND

2. Imposes worldwide taxation and regulation based on citizenship.

Therefore, it is reasonable to conclude that:

US citizenship is the world’s only true “taxation-based citizenship”.

Afroyim – Should extending constitutional status to US citizenship be understood as a new gift or exacerbating an old curse?

US Citizenship Stripping Before 1967 – The Significance Of Afroyim

The US government was stripping US citizens of their citizenship if they committed various “expatriating” acts. This was codified in statutes that mandated that certain kinds of conduct would result in the loss of US citizenship. At various times the expatriating conduct included (but was not limited to): naturalizing as a citizen of another country, voting in a foreign election, serving in the armed forces of a foreign country and even marrying a non-citizen.

US Citizenship Stripping After 1967 – Afroyim

The 1967 US Supreme Court decision in Afroyim clarified that Congress lacked the power to strip US citizens (who were born or naturalized in the United States) of their citizenship. The Afroyim ruling clarified that:

1. US citizenship belonged to the citizen and could be lost by the citizen only if the citizen voluntarily relinquished US citizenship by voluntarily committing an expatriating act with the intention of relinquishing US citizenship; and

2. Congress cannot enact laws or engage in practices that result in the forcible destruction of citizenship.

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Extradition Is One Way That Changes In Another Country’s Tax Laws May Change Your Tax Relationship With The US

Prologue

As long as the US continues to employ citizenship taxation any changes in US tax law will continue to have unintended consequences on Americans abroad. In March of 2022 I outlined how some of the tax changes proposed in the 2023 Biden Green book would impact US citizens who live outside the United States. As important as US tax changes are, Americans abroad must be aware of how changes in the laws of their country of residence may also impact their “tax relationship” with the United States.

The purpose of this post is provide five simple examples. Some of the examples are based on Canada’s tax laws and others are of a more general nature.

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John Richardson – Information Session – London, UK – Thursday Oct. 13/22 – 19:00 – 21:00

Attention!! Date, time and location updated!! – Thursday Oct. 13/22 – 19:30 – 21:30 – New location! See here.

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John Richardson – Information Session – London, UK – Thursday Oct. 13/22 – 19:00

What: John Richardson informal information and discussion session for those impacted by US extraterritorial overreach

When: Thursday October 13, 2022 – 19:00 – 21:00

Where: Pret A Manger – Directly Across From Russell Square Tube (careful to choose the correct Pret)
40 Bernard Street, London, WC1N 1LE
https://www.pret.co.uk/en-GB/shop-finder/l/london/40-bernard-street/284

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Buying Their Freedom: Toward A More Efficient Process Of US Citizenship Renunciation

Buying Their Freedom – A More Efficient Renunciation Process – The “Readers Digest” Version Of This Post …

The effects of US citizenship taxation enforced by FATCA are causing great distress to the US citizens who reside in and are tax residents of other countries. They are being constructively forced to renounce US citizenship because of (1) the out of pocket costs of US tax compliance (2) the possibility of double taxation (3) the US taxation of things that are not taxable in their country of residence (4) the “opportunity cost” of their inability to engage in financial and retirement planning and in some cases (5) the threat or reality of bank/financial account closures. In addition, these circumstances are unfair to their countries of residence who are forced to deal with a group of people who are more likely to require “social assistance” in their retirement years. US citizenship is a problem for US citizens who attempt to live outside the United States and for the countries where they live.

Although many people are constructively forced to renounce US citizenship, the US has made renunciation very difficult from both a cost and availability perspective.

The purpose of this post is to suggest that the process of renouncing US citizenship should be facilitated in the US citizen’s country of residence by that government. Renunciation could be achieved more quickly, at lower cost and (under my proposal) partially subsidized by the government of residence (which would justify this as “buying back their citizens” from any US claim of taxation or other regulatory burdens). I believe that this proposal would benefit the individual US citizen, the US citizen’s country of residence and the United States itself. The following post describes how this can be achieved under the existing US laws.

As President Obama once said:

“The circumstances of one’s birth should not determine the outcome of one’s life.”

This post is composed of the following parts:

Part A – Introduction
Part B – The US Government And The Oppression OF Americans Abroad
Part C – The Legal Framework Of Renunciation
Part D – The Logistics – How The New Renunciation Process Would Work
Part E – Reviewing The Benefits Of The New Renunciation Process
Part F – The Revised Renunciation Fee
Part G – Democratizing Renunciation – Making It Available To All – A Financing Proposal
Part H – Sadly this could all be be prevented if the United States were to end citizenship taxation and adopt the world standard of residence taxation. But, …
Part I – Conclusion – “All Roads Lead To Renunciation”

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Thinking About Financial And Life Planning For US Citizens Living Outside The United States

Introduction

This week I am giving a (short) presentation on this topic. I created some slides that are designed to provide the categories for discussion. I thought I would share the slides in this blog post.

John Richardson – Follow me on Twitter @Expatrationlaw

H.R. 5800 – To establish a commission to study how Federal laws and policies (except US Citizenship Taxation) affect United States citizens living in foreign countries

The Readers Digest Version

Yes, this post is a bit long. If you don’t want to read it, here is the “Readers Digest” version in the form of a tweet:

Now, on to the explanation …

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Moving To Mexico From Canada Or The USA

There is definitely at trend toward moving abroad for retirement or other reasons …

I came across this very interesting answer on Quora. There are many people in both the United States and Canada who are looking for a “kinder and gentler nation”. In a Post-Covid world more and more people are realizing that they are not tied to any particular place.

I came across this very interesting answer on Quora. There are many people in both the United States and Canada who are looking for a “kinder and gentler nation”. In a Post-Covid world more and more people are realizing that they are not tied to any particular place.

John Richardson – Follow me on Twitter @Expatriationlaw

US Citizens And Divorce: It’s More Complicated For Americans Abroad

Prologue – Divorce And US Citizens Abroad

Panel session – US Expat Tax Conference from Deborah Hicks on Vimeo.

Purpose Of This Post …

Divorce is difficult, traumatic and potentially very costly. What follows are links to three posts – written by David Ellis, CPA – which originally appeared at Tax Connections ins 2022. The point is that US citizens abroad are subject to BOTH US tax rules and the rules in their country of residence. The problem is exacerbated when a US citizen is married to a noncitizen.

The following three posts provide an excellent summary and analysis of how the Internal Revenue Code impacts US citizens living inside the United States or abroad …

Dividing Property In Divorce Tax Traps – Part 1

Dividing Property In Divorce Tax Traps – Part 2

Dividing Property In Divorce Tax Traps – Part 3

Dividing Property In Divorce Tax Traps – Part 4

Dividing Property In Divorce Tax Traps – Part 5

Dividing Property In Divorce Tax Traps – Part 6

Dividing Property In Divorce Tax Traps – Part 7

Dividing Property In Divorce Tax Traps – Part 8

Dividing Property In Divorce Tax Traps – Part 9

Dividing Property In Divorce Tax Traps – Part 10

Dividing Property In Divorce Tax Traps – Part 11

Dividing Property In Divorce Tax Traps – Part 12

Dividing Property In Divorce Tax Traps – Part 13

John Richardson – Follow me on Twitter @Expatriationlaw

The Road To Tax Reform For Americans Abroad: Part 2 – Citizenship Taxation And The Seven Deadly Sins

Introduction

Life is full of rude awakenings. More and more people are experiencing their OMG moment …

This is Part 2 of the series. In Part 1, I identified that it is essential that individuals (and governments) unite to bring an end to the US tradition of “citizenship taxation”. “Citizenship taxation” – what a phrase. The words are not descriptive of anything. It clearly has something to do with some form of taxation. The inclusion of the word “citizenship” makes it sound almost patriotic. But maybe, not. Maybe it’s just part of what means to be a citizen. Since only the United States has citizenship taxation, perhaps taxation is what it means to be a US citizen. If so, then perhaps US citizenship should be called “taxation based citizenship”. The concept of citizenship means different things in different countries. Is this a statement that the essence and the meaning of US citizenship is taxation and only taxation?

Citizenship Taxation – Theory vs. Reality

A supporter of citizenship taxation is someone who THINKS about “citizenship taxation”. An opponent of citizenship taxation is anybody who has tried to LIVE under citizenship taxation.

https://www.citizenshiptaxation.ca

I guarantee you that there is not a single supporter of US citizenship taxation who actually understands it!

Toward An Understanding: Citizenship Taxation And The Seven Deadly Sins

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The Road To Tax Reform For Americans Abroad: Part 1 – The Problem Is The System And Not The Party

Introduction – The First Of A Series Of Short Posts

My name is John Richardson. I am a Toronto, Canada based lawyer. I am also a founding member of “SEAT” (“Stop Extraterritorial American Taxation”). I am an advocate for reforming the US laws which apply to US citizens who live outside the United States as permanent residents of other countries. The problems experienced by Americans abroad are at the “boiling point” and something must be done. This post is motivated by the following twitter thread which reveals the pain, desperation, anger and divisiveness experienced by Americans abroad:

This is the first of a series of short posts in which I will share my thoughts and suggestions for how to proceed. I welcome your comments both here and on twitter where I am @Expatriationlaw.

Blind Partisanship Is Not Productive

I want to state at the outset that I am an independent and am not a member of any political party. I have been and continue to be supportive of independent candidates in Canada (and anywhere else). I state this because during this series of posts, I will express sentiments that are critical of political parties. When I criticize the Democrats it’s not because I am a Republican. It’s because the Democrats are deserving of criticism (or vice-versa). Healthy democracies are dependent on accurate observations and objective analysis. Excessive partisanship is simply an excuse for reasoned analysis.

The Difficulty Of Living As A US Citizen Outside The United States

First, if you are a “retiree living abroad” where all of your income is US sourced this post is NOT for you. You are filing the same US tax return while “retiring abroad” that you would if you were living in the USA. You are probably filing tax returns ONLY in the USA. Therefore, the US citizenship tax regime does not impact you in the same way. This post is for those who live permanently outside the United States and your income sources, assets and retirement planning are associated with the tax systems of other countries (foreign to the United States).

Second, As permanent residents of other countries, US citizens are treated as BOTH tax residents of the United States and tax residents of the countries where they live. In other words, they are subject to the full force of two (often incompatible) tax systems. Think of it. US citizens living outside the United States are subject to the tax systems of two countries at the same time. Leaving aside the anxiety this induces, the time that it takes to comply, the heightened threats of penalties and the outrageous costs of compliance (think tax accountants and lawyers), this puts Americans abroad in a position where:

1. They are subjected to a tax system that is more punitive than the tax system imposed on US residents

2. They are often subject to double taxation (the foreign tax credit rules and the Foreign Earned Income Exclusion do not prevent many forms of double taxation)

3. The US tax rules prevent them from engaging in the normal financial planning and retirement opportunities (Canadian TFSA and UK ISAs are not tax free for US citizens)

4. In many countries, because and only because of their US citizenship they are prevented from maintaining the normal financial accounts they need to live in a normal way (this is the direct result of the 2010 Obama FATCA law)

The cumulative weight of these problems is that US citizens living outside the United States are being constructively forced to renounce their US citizenship in order to survive. But, it gets worse. Since June 16, 2008 certain Americans abroad who renounce US citizenship (“covered expatriates“) are forced to pay a special expatriation tax on their non-US assets to achieve this goal. (You can find a video of my discussing US citizenship renunciation here.)

Americans abroad are NOT renouncing because they don’t want to be Americans. They are renouncing because the US tax and regulatory regime is forcing them out of their US citizenship!

It’s The System Not The Parties

Regardless of which political party is in power, tax laws will continue to change.

As long as the United States employs citizenship-based taxation, changes in US tax laws will continue to have dramatic (sometimes intended and sometimes unintended) effects on Americans abroad. These negative effects and outcomes will continue regardless of which political party is in power.

For example:

The 2017 TCJA became law under the Republicans. The effects on Americans abroad were horrible. (Examples include: Transition Tax, GILTI, those using the “Married Filing Separately” category were required to file with zero income)

The 2010 FATCA law was enacted under the Democrats. The effects on Americans abroad were horrible. (Examples include: Form 8938, FATCA bank account closures, etc.)

Therefore, it is a mistake to bicker over which political party has done more or less damage to Americans abroad. As long as citizenship-based taxation continues and tax laws continue to evolve, whatever political party is in power will – by changing tax laws – continue to damage the lives and finances of Americans abroad.

Individual American Abroad Must Unite To Get This System Of Law Changed

Conclusion for today: The problem is the system! It’s not the political parties.

You have the right to vote. The question is not which party to vote for. The question is how can you most effectively use your vote to end US citizenship-based taxation and encourage FATCA repeal.

To be continued …

John Richardson – Follow me on Twitter @Expatriationlaw