Category Archives: Green Card

Pre-immigration planning, living as a permanent resident of the United States and abandoning the Green Card.

Aroeste v. United States – November 2023

Introduction – Aroeste v. United States

Who you are is different from what you must do! Filing a 1040 instead of a 1040NR will NOT convert a treaty nonresident into a U.S. resident for tax purposes!!

Warning!! Warning!! Warning!!

Green Card holders who are “long term residents” and who file as “treaty non-residents” may be deemed to have expatriated and will be subjected to the exit tax rules to determine whether they are “covered expatriates”. Do NOT ever file as a treaty nonresident without proper advice.

(This does NOT seem to have been explored in the Aroeste case.)
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The summary of Aroeste is found in the conclusion …

IV. CONCLUSION

Based on the foregoing, the Court DENIES the Government’s motion for summary judgment and GRANTS IN PART AND DENIES IN PART Aroeste’s motion for summary judgment.

Specifically, the Court finds Aroeste is a United States person, but ceased to be treated as a lawful permanent resident of the United States because he commenced to be treated as a resident of Mexico under the Treaty, did not waive the benefits of such Treaty, and notified the Secretary of the commencement of such treatment. Thus, Aroeste is not subject to FBAR penalties. The Government must discharge Aroeste’s liability for penalties still outstanding for the non-filing of a FBAR for the years 2012 and 2013 pursuant to 31 U.S.C. § 5321, totaling $21,851.76, and must refund Aroeste’s payment of $3,004.

The Court further finds Aroeste untimely notified the Secretary of the commencement of treatment as a resident of Mexico, and thus is subject to penalties pursuant to I.R.C. § 6712(a) equal to $1,000 per failure to timely report his Treaty position, totaling $2,000 for 2012 and 2013. The Government may proceed accordingly in this later regard.

The Court ORDERS the Clerk of Court to CLOSE THIS CASE.

The purpose of this post is to compile both the Aroeste decision and the relevant provisions of the statutes, regulations and treaty in one place for easier reference.

In January of 2024 the U.S. Government announced that it would appeal the decision in Aroeste.

At present (subject to appeal) the Aroeste case stands for these principles:

1. A Green Card holder who is treated as a nonresident of a tax treaty who gives “notice to the Secretary” is NOT a “U.S. Person” for the purposes of the FBAR regulation 1010.350 and is NOT required to file an FBAR.

2. Notice can be given to the government retrospectively. In 2016 Mr. Aroeste notified the government that he was a treaty nonresident pursuant to 7701(b)(6) and the provisions of the U.S. Mexico Tax Treaty.

3. Filing the wrong kind of tax return. (1040 instead of 1040NR) does NOT waive the treaty benefits!

4. Notice 2009-85 may not be valid because of a failure to meet the APA requirements for notice and comment.

Al link to the Aroeste decision is here …

Aroeste-v-United-States-Order-Nov-2023

Part A – The FBAR Statute – 31 U.S.C. 5314

31 U.S. Code § 5314 – Records and reports on foreign financial agency transactions
(a) Considering the need to avoid impeding or controlling the export or import of monetary instruments and the need to avoid burdening unreasonably a person making a transaction with a foreign financial agency, the Secretary of the Treasury shall require a resident or citizen of the United States or a person in, and doing business in, the United States, to keep records, file reports, or keep records and file reports, when the resident, citizen, or person makes a transaction or maintains a relation for any person with a foreign financial agency. The records and reports shall contain the following information in the way and to the extent the Secretary prescribes:

(1) the identity and address of participants in a transaction or relationship.
(2) the legal capacity in which a participant is acting.
(3) the identity of real parties in interest.
(4) a description of the transaction.

(b) The Secretary may prescribe—
(1) a reasonable classification of persons subject to or exempt from a requirement under this section or a regulation under this section;
(2) a foreign country to which a requirement or a regulation under this section applies if the Secretary decides applying the requirement or regulation to all foreign countries is unnecessary or undesirable;
(3) the magnitude of transactions subject to a requirement or a regulation under this section;
(4) the kind of transaction subject to or exempt from a requirement or a regulation under this section; and
(5) other matters the Secretary considers necessary to carry out this section or a regulation under this section.

(c) A person shall be required to disclose a record required to be kept under this section or under a regulation under this section only as required by law.

(Pub. L. 97–258, Sept. 13, 1982, 96 Stat. 997.)

Regulations under 1010.350 – Who is a U.S. person?

https://www.law.cornell.edu/cfr/text/31/1010.350

Part B – The FBAR Regulation

Regulations under 1010.350 – Who is a U.S. person?

https://www.law.cornell.edu/cfr/text/31/1010.350

31 CFR § 1010.350 – Reports of foreign financial accounts

§ 1010.350 Reports of foreign financial accounts.

(a) In general. Each United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship to the Commissioner of Internal Revenue for each year in which such relationship exists and shall provide such information as shall be specified in a reporting form prescribed under 31 U.S.C. 5314 to be filed by such persons. The form prescribed under section 5314 is the Report of Foreign Bank and Financial Accounts (TD–F 90–22.1), or any successor form. See paragraphs (g)(1) and (g)(2) of this section for a special rule for persons with a financial interest in 25 or more accounts, or signature or other authority over 25 or more accounts.
(b) United States person. For purposes of this section, the term “United States person” means—
(1) A citizen of the United States;
(2) A resident of the United States. A resident of the United States is an individual who is a resident alien under 26 U.S.C. 7701(b) and the regulations thereunder but using the definition of “United States” provided in 31 CFR 1010.100(hhh) rather than the definition of “United States” in 26 CFR 301.7701(b)–1(c)(2)(ii); and

Part C – IRC 7701(b)(6)

6) Lawful permanent resident For purposes of this subsection, an individual is a lawful permanent resident of the United States at any time if—
(A) such individual has the status of having been lawfully accorded the privilege of residing permanently in the United States as an immigrant in accordance with the immigration laws, and
(B) such status has not been revoked (and has not been administratively or judicially determined to have been abandoned).
An individual shall cease to be treated as a lawful permanent resident of the United States if such individual commences to be treated as a resident of a foreign country under the provisions of a tax treaty between the United States and the foreign country, does not waive the benefits of such treaty applicable to residents of the foreign country, and notifies the Secretary of the commencement of such treatment.
https://www.law.cornell.edu/uscode/text/26/7701

Part D – IRC 7701(b)(6) Treasury Regulations

See the Appendix below.

https://www.law.cornell.edu/cfr/text/26/301.7701(b)-7

Part E – The U.S. Mexico Tax Treaty

ARTICLE 4
Residence
1. For the purposes of this Convention, the term “resident of a Contracting State” means any person
who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature. However, this term does not include any person who is liable to tax in that State in respect only of income from sources in that State.
2. Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his residence shall be determined as follows:
a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (center of vital interests);
b) if the State in which he has his center of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;
c) if he has an habitual abode in both States or in neither of them, he shall be deemed to
be a resident of the State of which he is a national;
d) in any other case, the competent authorities of the Contracting States shall settle the
question by mutual agreement.

https://www.irs.gov/pub/irs-trty/mexico.pdf

John Richardson – Follow me on Twitter @Expatrationlaw

Appendix – 26 CFR § 301.7701(b)-7 – Coordination with income tax treaties.

§ 301.7701(b)-7 Coordination with income tax treaties.

(a) Consistency requirement—(1) Application. The application of this section shall be limited to an alien individual who is a dual resident taxpayer pursuant to a provision of a treaty that provides for resolution of conflicting claims of residence by the United States and its treaty partner. A “dual resident taxpayer” is an individual who is considered a resident of the United States pursuant to the internal laws of the United States and also a resident of a treaty country pursuant to the treaty partner’s internal laws. If the alien individual determines that he or she is a resident of the foreign country for treaty purposes, and the alien individual claims a treaty benefit (as a nonresident of the United States) so as to reduce the individual’s United States income tax liability with respect to any item of income covered by an applicable tax convention during a taxable year in which the individual was considered a dual resident taxpayer, then that individual shall be treated as a nonresident alien of the United States for purposes of computing that individual’s United States income tax liability under the provisions of the Internal Revenue Code and the regulations thereunder (including the withholding provisions of section 1441 and the regulations under that section in cases in which the dual resident taxpayer is the recipient of income subject to withholding) with respect to that portion of the taxable year the individual was considered a dual resident taxpayer.
(2) Computation of tax liability. If an alien individual is a dual resident taxpayer, then the rules on residency provided in the convention shall apply for purposes of determining the individual’s residence for all purposes of that treaty.
(3) Other Code purposes. Generally, for purposes of the Internal Revenue Code other than the computation of the individual’s United States income tax liability, the individual shall be treated as a United States resident. Therefore, for example, the individual shall be treated as a United States resident for purposes of determining whether a foreign corporation is a controlled foreign corporation under section 957 or whether a foreign corporation is a foreign personal holding company under section 552. In addition, the application of paragraph (a)(2) of this section does not affect the determination of the individual’s residency time periods under § 301.7701(b)–4.
(4) Special rules for S corporations. [Reserved]
(b) Filing requirements. An alien individual described in paragraph (a) of this section who determines his or her U.S. tax liability as if he or she were a nonresident alien shall make a return on Form 1040NR on or before the date prescribed by law (including extensions) for making an income tax return as a nonresident. The individual shall prepare a return and compute his or her tax liability as a nonresident alien. The individual shall attach a statement (in the form required in paragraph (c) of this section) to the Form 1040NR. The Form 1040NR and the attached statement, shall be filed with the Internal Revenue Service Center, Philadelphia, PA 19255. The filing of a Form 1040NR by an individual described in paragraph (a) of this section may affect the determination by the Immigration and Naturalization Service as to whether the individual qualifies to maintain a residency permit.
(c) Contents of statement—(1) In general—(i) Returns due after December 15, 1997. The statement filed by an individual described in paragraph (a)(1) of this section, for a return relating to a taxable year for which the due date (without extensions) is after December 15, 1997, must be in the form of a fully completed Form 8833 (Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)) or appropriate successor form. See section 6114 and § 301.6114–1 for rules relating to other treaty-based return positions taken by the same taxpayer.
(ii) Earlier returns. For returns relating to taxable years for which the due date for filing returns (without extensions) is on or before December 15, 1997, the statement filed by the individual described in paragraph (a)(1) of this section must contain the information in accordance with paragraph (c)(1) of this section in effect prior to December 15, 1997 (see § 301.7701(b)–7(c)(1) as contained in 26 CFR part 301, revised April 1, 1997).
(2) Controlled foreign corporation shareholders. If the taxpayer who claims a treaty benefit as a nonresident of the United States is a United States shareholder in a controlled foreign corporation (CFC), as defined in section 957 or section 953(c), and there are no other United States shareholders in that CFC, then for purposes of paragraph (c)(1) of this section, the approximate amount of subpart F income (as defined in section 952) that would have been included in the taxpayer’s income may be determined based on the audited foreign financial statements of the CFC.
(3) S corporation shareholders. [Reserved]
(d) Relationship to section 6114(a) treaty-based return positions. The statement required by paragraph (b) of this section will be considered disclosure for purposes of section 6114 and § 301.6114–1(a), but only if the statement is in the form required by paragraph (c) of this section. If the taxpayer fails to file the statement required by paragraph (b) of this section on or before the date prescribed in paragraph (b) of this section, the taxpayer will be subject to the penalties imposed by section 6712. See section 6712 and § 301.6712–1.
(e) Examples. The following examples illustrate the application of this section:

Example 1.

B, an alien individual, is a resident of foreign country X, under X’s internal law. Country X is a party to an income tax convention with the United States. B is also a resident of the United States under the Internal Revenue Code. B is considered to be a resident of country X under the convention. The convention does not specifically deal with characterization of foreign corporations as controlled foreign corporations or the taxability of United States shareholders on inclusions of subpart F income, but it provides, in an “Other Income” article similar to Article 21 of the 1981 draft of the United States Model Income Tax Convention (U.S. Model), that items of income of a resident of country X that are not specifically dealt with in the convention shall be taxable only in country X. B owns 80% of the one class of stock of foreign corporation R. The remaining 20% is owned by C, a United States citizen who is unrelated to B. In 1985, corporation R’s only income is interest that is foreign personal holding company income under § 1.954A-2 of this chapter. Because the United States-X income tax convention does not deal with characterization of foreign corporations as controlled foreign corporations, United States internal income tax law applies. Therefore, B and C are United States shareholders within the meaning of § 1.951–1(g) of this chapter, corporation R is a controlled foreign corporation within the meaning of § 1.957–1 of this chapter, and corporation R’s income is included in C’s income as subpart F income under § 1.951–1 of this chapter. B may avoid current taxation on his share of the subpart F inclusion by filing as a nonresident (i.e., by following the procedure in § 301.7701(b)–7(b)).

Example 2.

The facts are the same as in Example 1, except that B also earns United States source dividend income. The United States-X income tax convention provides that the rate of United States tax on United States source dividends paid to residents of country X shall not exceed 15 percent of the gross amount of the dividends. B’s United States tax liability with respect to the dividends would be smaller if he were treated as a resident alien, subject to tax on a net basis (i.e., after the allowance of deductions) than if he were treated as a nonresident alien. If, however, B chooses to file as a nonresident in order to claim treaty benefits with respect to his share of R’s subpart F income, his overall United States tax liability, including the portion attributable to the dividends, must be determined as if he were a nonresident alien.

Example 3.

C, a married alien individual with three children, is a resident of foreign country Y, under Y’s internal law. Country Y is a party to an income tax convention with the United States. C is also a resident of the United States under the Internal Revenue Code. C is considered to be a resident of country Y under the convention. The convention specifically covers, among other items of income, personal services income, dividends and interest. C is sent by her country Y employer to work in the United States from January 1, 1985 until December 31, 1985. During 1985, C also earns United States source dividends and interest and incurs mortgage interest expenses on her personal residence. The United States-Y treaty provides that remuneration for personal services performed in the United States by a country Y resident is exempt from United States tax if, among other things, the individual performing such services is present in the United States for a period that is not in excess of 183 days. The treaty provides that the rate of United States tax on United States source dividends paid to residents of Y shall not exceed 15 percent of the gross amount of the dividends and it exempts residents of Y from United States tax on United States source interest. In filing her 1985 tax return, C may choose to file either as a resident alien without claiming any treaty benefits or as a nonresident alien if she desires to claim any treaty benefit. C files as a nonresident (i.e. by following the procedure described in § 301.7701(b)–7(b)). Because C does not satisfy the requirements of the United States-Y treaty with regard to exempting personal services income from United States tax, C will be taxed on her personal services income at graduated rates under section 1 of the Code pursuant to section 871(b) of the Code. She will not be entitled to deduct her mortgage interest expenses or to claim more than one personal exemption because she is taxed as a nonresident alien under the Code by virtue of her decision to claim treaty benefits, and section 873 of the Code denies nonresidents the deduction for personal residence mortgage interest expense and generally limits them to only one personal exemption. C will be subject to a tax of 15 percent of the gross amount of her dividend income under section 871(a) of the Code as modified by the treaty, and she will be exempt from tax on her interest income. C is not entitled to file a joint return with her spouse even if he is a resident alien under the Code for 1985.

Example 4.

The facts are the same as in Example 3, except that C does not choose to claim treaty benefits with respect to any items of income covered by the treaty (i.e., she files as a resident). Therefore, she is taxed as a resident under the Code and pays tax at graduated rates on her personal services income, dividends, and interest. In addition, she is entitled to deduct her mortgage interest expenses and to take personal exemptions for her spouse and three children. C will be entitled to file a joint return with her spouse if he is a resident alien for 1985 or, if he is a nonresident alien, C and her spouse may elect to file a joint return pursuant to section 6013.
[T.D. 8411, 57 FR 15251, Apr. 27, 1992; 57 FR 28612, June 26, 1992, as amended by T.D. 8733, 62 FR 53387, Oct. 14, 1997]

US Citizens Abroad – Discussion: Sunday January 21, 2024 – 13:00 – Prague Czech Republic (and London, UK – Jan. 17 – 18:30)

U.S. Citizens and Green Card Holders Abroad!!

Update – … London, UK too

I will be in London on Wednesday January 17, 2024. Since I am already there, I am happy to connect with London residents who wish to discuss all things related to surviving as a U.S. citizen living outside the USA. The session is:

When: Wednesday January 17, 2024 – 18:00 – 20:00

Where: Pret A Manger 18:00 – The Sutton Arms – first floor wine room – 6 Carthusian Street, London – EC1M 6EB

Registration for the London session: Please send me an email to: citizenshipsolutions@protonmail.com

Just tell me me your name and indicate that you wish to attend.

Read on to learn what these events/discussions are about.

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Prague – Sunday January 21, 2024 – Livestream or attend live in Prague

Read on …

An appropriate New Year message …

Are you …

frustrated with the U.S. policy of citizenship taxation?

disappointed with the progress in achieving a change in the law?

fed up with being asked for your vote with no candidates representing your interests?

– finding it difficult to understand what it means to be in compliance?

– finding you cannot afford U.S. tax compliance?

forced to plead GILTI for running a small business?

experiencing further FATCA related problems?

wondering if/when the USA will join the rest of the world by adopting residence taxation?

– concerned that this may impact your non-citizen spouse and family?

– worried about how to plan for retirement?

– worried about estate planning?

– considering renunciation of U.S. citizenship?

These topics and more …

Don’t miss this opportunity to engage in discussion with people who live with the constant of anxiety of being a U.S. citizen living outside the United States. (Green Card holders are welcome too …)

Speaker: John RichardsonToronto based expatriation lawyer, co-founder of SEAT, blogger at CitizenshipSolutions.ca, Commentator on X.com/ExpatriationLaw

When: Sunday January 21, 2024 – 13:00

Where: Brix bar & Hostel, Rohacova 132/15, Prague 3 Žižkov

Cost: 200CZK – includes lunch

Registration:

In order to register please email:

g.smith@brixhostel.com

We look forward to a great (nonpartisan) discussion!

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

Introduction

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!

Continue reading

Some US Citizens And Green Card Holders Resident In Belgium Are Excluded From Benefits Under The Tax Treaty Available To US Citizen Residents

Prologue

I was recently alerted to a provision in the US Belgium Tax Treaty (a similar but not identical provision also appears in the US UK Tax Treaty – which I have explored in this earlier post.). Normally all US Citizens and Green Card holders are defined as “US Residents” under US tax treaties. The US Belgium Tax Treaty (and the US Uk Tax Treaty) contain an interesting exception to the general principle that US citizens and Green Card holders are “US Residents” under the Tax Treaty. Think of it as a “residency carve out”. The purpose of this post is to describe this “carve out” and explore the (some) practical implications of what this means. Interestingly it is one more example of how the US tax treatment of Americans abroad depends on their country of residence.

Just when you think the US tax treatment of Americans abroad couldn’t be worse, the US never ceases to amaze. Seriously, this is the tax treaty version of “Shock and Awe”! It demonstrates that any general discussion about tax treaties is, well just “general”. One must always understand the specific provisions of the specific treaty. Before, anybody gets overly upset, no need to worry. Even those US citizens who do get the benefits of the US Belgium tax treaty don’t (because of the “saving clause”) get much. Nevertheless, the US Belgium Tax Treaty affords a good opportunity to read tax treaties carefully. It also provides a good reminder that the “saving clause” excludes US citizens from most benefits of the tax treaty (even when US citizens meet the residency requirements of the treaty). Finally, this analysis reinforces how carefully tax treaties must be read. Does a provision talk about “citizens”, “nationals”, “residents” …?

The Readers Digest Version Of This Post

US citizens and Green Card holders are US tax residents wherever they live in the world. Most US tax treaties define citizens and Green Card holders as US tax residents. Yet, there are some treaties that “may” not define “US Persons Abroad” as “residents of the United States”. The treaties that “may not” define Green Card holders and citizens as “residents of the United States” include Belgium and the UK. It appears that Green Card holders are the biggest losers. That said, the Belgium and UK tax treaties demonstrate that “US Persons Abroad” may receive fewer tax treaty benefits than resident Americans. Significantly this means that there are certain US tax treaties that actually discriminate against US citizens and Green Card Holders who live outside the United States without a residential nexus to the United States.

Although perhaps enacted without considering the impact on “US Persons Abroad”, this demonstrates (yet again) how attempts to curb certain abuses create negative consequences for Americans abroad because and only because of citizenship taxation. We have seen these consequences in conjunction with the 877A Exit tax rules, the PFIC rules, Subpart F, the Transition Tax, GILTI and now “treaty shopping”.

Surely, this is one more example of the clear principle that US citizens abroad are subjected to a more punitive tax system than resident Americans.

It is absolutely essential that the United States end citizenship taxation and transition to residency based taxation that completely severs US citizenship from US tax residency..

For those who want to better understand this …

Continue reading

Those Who Renounced US Citizenship Or Abandoned Green Cards NOT Eligible For Biden Pardon

Synopsis

Introduction

On October 6, 2022 President Biden pardoned certain individuals (prospectively and retrospectively) for the simple possession of marijuana (whatever that means). The full text of the pardon is here.

A Proclamation on Granting Pardon for the Offense of Simple Possession of Marijuana

Acting pursuant to the grant of authority in Article II, Section 2, of the Constitution of the United States, I, Joseph R. Biden Jr., do hereby grant a full, complete, and unconditional pardon to (1) all current United States citizens and lawful permanent residents who committed the offense of simple possession of marijuana in violation of the Controlled Substances Act, as currently codified at 21 U.S.C. 844 and as previously codified elsewhere in the United States Code, or in violation of D.C. Code 48–904.01(d)(1), on or before the date of this proclamation, regardless of whether they have been charged with or prosecuted for this offense on or before the date of this proclamation; and (2) all current United States citizens and lawful permanent residents who have been convicted of the offense of simple possession of marijuana in violation of the Controlled Substances Act, as currently codified at 21 U.S.C. 844 and as previously codified elsewhere in the United States Code, or in violation of D.C. Code 48–904.01(d)(1); which pardon shall restore to them full political, civil, and other rights.

My intent by this proclamation is to pardon only the offense of simple possession of marijuana in violation of Federal law or in violation of D.C. Code 48–904.01(d)(1), and not any other offenses related to marijuana or other controlled substances. No language herein shall be construed to pardon any person for any other offense, including possession of other controlled substances, whether committed prior, subsequent, or contemporaneous to the pardoned offense of simple possession of marijuana. This pardon does not apply to individuals who were non-citizens not lawfully present in the United States at the time of their offense.

Pursuant to this proclamation, the Attorney General, acting through the Pardon Attorney, shall administer and effectuate the issuance of certificates of pardon to eligible applicants who have been charged or convicted for the offense of simple possession of marijuana in violation of the Controlled Substances Act, as currently codified at 21 U.S.C. 844 and as previously codified elsewhere in the United States Code, or in violation of D.C. Code 48–904.01(d)(1). The Attorney General, acting through the Pardon Attorney, is directed to develop and announce application procedures for certificates of pardon and to begin accepting applications in accordance with such procedures as soon as reasonably practicable. The Attorney General, acting through the Pardon Attorney, shall review all properly submitted applications and shall issue certificates of pardon to eligible applicants in due course.

IN WITNESS WHEREOF, I have hereunto set my hand this sixth day of October, in the year of our Lord two thousand twenty-two, and of the Independence of the United States of America the two hundred and forty-seventh.

JOSEPH R. BIDEN JR.

The Winners

Notably the pardon is available ONLY to those who are “current United States citizens and lawful permanent residents”. Clearly a former US citizen who is not a Green Card holder would NOT be eligible.

The Losers

The pardon is NOT AVAILABLE to:

– former US citizens who relinquished their US citizenship

– possibly (depending on interpretation) former lawful permanent residents who abandoned their Green Card

– US Nationals who are NOT US citizens

– non-citizens currently lawfully present in the United Staes under a visa who are NOT current Green Card holders

– current US citizens or lawful permanent residents who were NOT “lawfully present in the United States at the time of their offense” (think undocumented aliens)

And to be very clear

Regardless of current status, if one was not legally present in the United States at the time of offense then one is NOT eligible for the pardon. (Think undocumented aliens at the time of the offense.)

Why should the “status” of the person matter when offering this pardon?

An excellent twitter thread from David Bier discusses this issue …

It’s very clear that in 2022 no person should be convicted of a criminal offense for the mere possession of marijuana. The pardon is offered in recognition of that sentiment. Possession of marijuana is simply not conduct which should be deemed to be a criminal offense. Since the conduct should NOT be deemed a criminal offense, why should the pardon be restricted to those who are:

current United States citizens and lawful permanent residents

The ONLY possible explanation is that ONLY “current United States citizens and lawful permanent residents” are deserving of fair treatment. Who cares about the rest of them?

Let’s put it this way:

Assuming possession of marijuana should not be a crime, it’s still okay to punish those who are NOT “current United States citizens and lawful permanent residents”.

The pardon should apply prospectively and retrospectively to ANY individual who violates this unreasonable law. Why condition the pardon on status?

John Richardson – Follow me on Twitter @Expatriationlaw

Considering renouncing US citizenship? Interesting discussion with Buffalo lawyer @JoeGrasmick

In 2018 I had a discussion with Buffalo Immigration Lawyer Joe Grasmick about a number of issues including renouncing US citizenship. The discussion was videoed as part of my “Retain Or Renounce” series. It was a very interesting and balanced discussion. (We also discussed some of the dos and don’ts of Green Card abandonment.)

I wanted to share Joe’s LinkedIn post today (December 31, 2021). His post reinforces the reality that (although Americans abroad are clearly suffering from the tax and regulatory regime) US citizenship does have value.

I completely agree with Joe that the consequences of renouncing US citizenship (notwithstanding the problems) should be fully understood and appreciated.

Continue reading

Recent economic upheaval creates expatriation opportunities for “US Persons” living abroad

This post was motivated by a thread on Reddit …

At the end of this post, I have included the Reddit thread. (Note that I am trying to develop a “RenounceUSCitizenship” thread on Reddit – you will find it here.)

As you know the US Section 877A Expatriation Tax applies to U.S. citizens and “Long Term Residents”. A “Long Term Resident” is an individual who has had a Green Card (as defined by the rules in Internal Revenue Code Section 7701(b)(6) for at least eight of the fifteen years prior to expatriation). This has become a serious problem for Green Card holders who simply move from the United States and and don’t take formal steps to sever their U.S. tax residency. (They must either file the I-407 or use a tax treaty tie breaker election to expatriate. Otherwise they may be in a situation where they have no right to live in the United States (having lost the immigration status) but are taxable on their worldwide income (still being tax citizens).

That said, whether you are a U.S. citizen wishing to renounce U.S. citizenship or a Long Term Resident wishing to sever U.S. tax residency, you do NOT want to be a “covered expatriate“. Generally, (unless one is subject to two exceptions – dual citizen from birth or expatriation between 18 and 181/2 – that are beyond the scope of this post), one is treated as a “covered expatriate” if one meets any one of these three tests:

1. Net worth of 2 million USD or more (which this post will focus on)

2. Average U.S. tax liability of more than approximately $165,000 USD over the five years prior to expatriation

3. Failure to certify U.S. tax compliance for the five years prior to expatriation.

The COVID-19 Panic – Falling asset values – more favourable exchange rates -2 million USD net worth test

The last couple of weeks have changed and continue to change our world. We are experiencing human misery on an unprecedented and global scale. This includes physical illness, fear of illness and social distancing. I live in a large city and I am beginning to see less variety in the food available. Self-employed people are seeing disruptions to their revenue streams, etc. I don’t want to keep listing examples. But it is very bad. On the economic front, we are seeing unprecedented and incalculable damage to the world economy. This includes (but is not limited to) falling asset values – how is your stock portfolio doing? We see currencies that are weakening relative to the U.S. dollar. (This means that a higher Canadian or Australian dollar net worth would equal 2 million USD.) As I write this post I just received a message, from someone advising me that the shares in a certain cruise ship stock, have fallen from $136 to $22. (My advice would be: Don’t spend money on the cruise. Instead buy the shares in the company.)

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Individuals, Treasury, The State Department And IRC 6039G: Who has to report what when an individual renounces US citizenship?

Renunciation of U.S. Citizenship triggers a “Reporting Frenzy”!

It’s simply unbelievable. The renunciation of U.S. citizenship triggers more reporting obligations on the part of individuals and government agencies than anything else. More than birth. More than death. More than marriage. More than bankruptcy. More than conviction of a crime (probably). It’s unbelievable.

The purpose of this post is to “slice and dice” what those reporting obligations are.

Let’s Go On A Magical Reporting Tour

https://www.law.cornell.edu/uscode/text/26/6039G

The rules governing information reporting when one relinquishes U.S. citizenship are found in Internal Revenue Code 6039G. They impose reporting obligations on “some” individual relinquishers (“covered expatriates”), the State Department whenever a Certificate of Loss Of Nationality has been issued and on U.S. Treasury. (I will comment separately on the situation of Green Card holders at the end of this post.) Most of this is summarized in the following two tweets. But, because this is so confused, I am going to take the time to parse the statute.

It’s all in Internal Revenue Code – 6039G Note that Section 6039G is found in Subtitle F which is the – “Procedure and Administration” – part of the Internal Revenue Code. In other words, it deals only with information reporting. It does NOT impose taxation. Interestingly, Section 6039G imposes reporting requirements on individuals, the State Department, U.S. Treasury (and in the case of Green Card holders) the Immigration authorities.

That pretty much sums it up. For those who want to understand the analysis …

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IRS Relief Procedures For Former Citizens Update – Relief For Former Green Card Holders Coming!

Introduction

On December 17, 2019 Gary Carter published a post on Tax Connections, which outlined the “Options Available For U.S. Taxpayers With Undisclosed Foreign Financial Assets“. It contained an excellent overview and analysis which included a discussion of the IRS definition of “non-willfulness” under the Streamlined Program. In commenting on the definiton of “non-willful” he noted that:

The IRS definition of non-willful covers a lot of territory. Negligence, for example, includes “any failure to make a reasonable attempt to comply with the provisions of the Code” (IRC Sec. 6662(c)) or “to exercise ordinary and reasonable care in the preparation of a tax return” (Reg. Sec. 1.6662-3(b)(1)). Further, “negligence is a lack of due care in failing to do what a reasonable and ordinarily prudent person would have done under the particular circumstances.” (Kelly, Paul J., (1970) TC Memo 1970-250). The court also stated that a person may be guilty of negligence even though he is not guilty of bad faith. So the fact that you ignored the FBAR filing requirements for many years, and failed to report your foreign income, might be negligent behavior, but it’s probably not willful. That means you likely qualify for one of the new streamlined procedures. On the other hand, if you loaded piles of cash into a suitcase and lugged it over to Switzerland to conceal it from the IRS, you don’t qualify, because that is willful conduct. If you believe your behavior may have been willful under these guidelines, consult with an attorney before submitting returns through one of the streamlined procedures. We work with attorneys who are experts in this field and we would be happy to provide a referral, free of charge or obligation.

Notably, the definition of “non-willfulness” for the Streamlined Program is the same as the definition for the new “IRS Relief For Former Citizens Program”.

Part A – IRS Relief For Former Citizens Who Relinquished U.S. Citizenship After March 18, 2010 (the date FATCA became law)

The program was announced on September 6, 2019.

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Presumptions, tax residency and presumptions of tax residency: Nonresident alien status in a FATCA world

Introduction – All The World Is A Multiple Choice Test
Q.1 – A tax resident of the United States is taxable on his worldwide income. According to the Internal Revenue Code of the United States, which one of the following is NOT a tax resident of the United States of America?
(A) A Congresswoman “Born In The USA”, head of her household, who does not and has never had a U.S. Passport
(B) An unmarried Green Card Holder who has never filed an FBAR who lives in El Paso Texas
(C) A fifty year old U.S. citizen who is divorced has never set foot in the United States, doesn’t have a U.S. Social Security Number and lives in and pays full taxes in Germany
(D) A citizen of only Canada who lives four months a year in Florida with his U.S. citizen wife, in a house he owns where he parks a car he owns with Florida license plates
(E) A citizen of Grenada who lives full time in the USA with an E1 visa operating a fast food franchise
For help in finding the answer see …
https://www.law.cornell.edu/uscode/text/26/1
https://www.law.cornell.edu/uscode/text/26/2
Q. 2 – A tax resident of Canada is taxable on his worldwide income. According to the Income Tax Act Of Canada, which one of the following is a tax resident of Canada?
(A) A Canadian citizen who lives in the United States but has no business, family, social or residential ties to Canada
(B) An individual with a house and family living in Toronto who works and lives in the banking industry in the Middle East
(C) A Massachusetts resident with a summer home in Ontario, Canada in which he visits 180 days every year
(D) An individual who is a legal permanent resident of Canada but actually lives in Hong Kong
(E) A rich Canadian who buys permanent residency in Portugal and uses a tax treaty tie breaker provision to deem himself to be a tax resident of Portugal
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