— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) March 5, 2021
Leads to the obvious question of …
Could @gabriel_zucman comment on how much of the revenue generated from the Warren Wealth tax would be based on non-US assets owned by individuals (who although US citizens) have @taxresidency in other countries with no connection to the USA. Is this theft from other countries? https://t.co/qAwHtIQ2UG
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) March 17, 2021
The fact is that Senator Warren is proposing to impose her wealth tax on property located outside the United States, purchased by individuals who live outside the United States, who have no connection to the United States other than (perhaps) the circumstance of having been born in the United States. Yup, it’s true.
On March 18, 2021, FATCA will turn on 11. The Senator’s proposed wealth tax explicitly states that FATCA is to be used to enforce this tax! Finally an (il)legitimate use for FATCA.
In the 18th Century Adam Smith wrote “The Wealth Of Nations”. In the 21st Century Senator Warren is proposing to impose a wealth tax on “The Wealth Of OTHER Nations”.
Discussion And Analysis
This is the second of what I expect to be a multi-part series on Senator Warren’s proposed wealth tax of 2021. As the above tweet makes clear, the practical utility of the tax depends on US citizenship-based taxation (to whom it applies) and FATCA (how are non-US assets located). In my first post, I referenced Senator Warren’s statement that:
On June 25, 2020 Dr. Karen Alpert and I did a series of podcasts where we discussed how renunciation will affect your interaction with the US tax system. The key point is that you will still be taxable by the United States on US source income. What does that mean? Under what circumstances could renunciation of US citizenship actually increase your US tax liability?
Should other nations be permitted to impose taxation on U.S. citizens or corporations?
At first blush, the question sounds absurd. Is there something about being a U.S. citizen that should exempt individuals from taxation in or by a another country? Some time ago, this question was explored in a discussion on a Facebook group. Interestingly, most participants thought the discussion was absurd and did not take it seriously. But truth can be stranger than fiction. When it comes to taxation there can be some benefits to being a U.S. citizen. In fact, in certain cases, U.S. citizenship can act as a “cloaking device” – a device that shields you from taxation in another country.
The two certainties are “death and taxes” …
It’s in the area of “death” where U.S. citizenship can be helpful. Sometimes it can be to your benefit to die as a U.S. citizen. Sometimes U.S. citizenship can be helpful when somebody dies leaving you part of their estate.
What follows are some categories where U.S. citizenship can protect you from taxation. These possibilities should be considered prior to renouncing U.S. citizenship. Continue reading →
Introduction – Two kinds of tax systems – Two kinds of “tax residency”
Title 26, the Internal Revenue Code of the United States is composed of twelve subtitles. Subtitle A deals with “Income Taxes”. Subtitle B deals with “Estate and Gift Taxes” AKA the “transfer tax regime”. The two subtitles are administered separately. They also have different definitions of “tax residence”. Continue reading →
What is domicile? About domicile …
Domicile is an old “common law” concept. Domicile is NOT the same as “residency” (although it might include residency). Domicile is NOT the same as “citizenship” (although one could be a citizen of the country where one is domiciled). Domicile is a concept that refers to one’s permanent home and point of reference. Different jurisdictions might have differing definitions of domicile. It is also a concept that is relevant for a variety of purposes. Why might domicile matter?
Learning about domicile …
Much has been written about domicile. Here is a fantastic article written on domicile that was presented in 2011 at an ABA convention. It doesn’t get better than this: domicile ABA Meeting 2011 Let me offer 5 key points from this article:
Domicile as the definition of “tax residency” for U.S. Estate and Gift tax purposes How do we know that “residence” for Estate and Gift Tax purposes means “domicile”?
The answer is found in the Treasury Regulations – Specifically Reg. 25.2501-1(b) which defines “residency” for Estate and Gift Tax purposes as follows:
(b)Resident. A resident is an individual who has his domicile in the United States at the time of the gift. For this purpose the United States includes the States and the District of Columbia. The term also includes the Territories of Alaska and Hawaii prior to admission as a State. See section 7701(a)(9). All other individuals are nonresidents. A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of moving therefrom. Residence without the requisite intention to remain indefinitely will not constitute domicile, nor will intention to change domicile effect such a change unless accompanied by actual removal.
Please note that different jurisdictions may define “domicile” differently. Conclusion …
“Domicile” is largely a “subjective” concept that is proven by “objective” evidence.
Domicile matters! John Richardson