In the Moore MRT appeal the U.S. Supreme Court will consider whether “income” requires the actual receipt of income or whether “deemed income” meets the 16th Amendment test for income. Does the 16th Amendment require objective tests that must be satisfied before “income” can exist? The answer to this question will have profound implications for both the “U.S. citizen” residents of other countries and (2) the countries where they live. As previously discussed, if income does NOT have to be actually received, this opens the door for the U.S. tax the residents of other countries on income they have never received. Often the taxable event in the U.S. will take place before the taxable event in that other country.
Taxes that apply to property owners based on citizenship or immigration status
Absolutely understand how unjustly the US owners of Canadian properties feel. But, they must understand that this is what the US does to Canada ALL DAY EVERY DAY! pic.twitter.com/Sr6PSRiM2Y
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) February 17, 2023
Interestingly Canada’s Underused Property Tax, by its express terms applies based on “citizenship” and/or “immigration status”. Specifically, it applies to people who are neither citizens nor permanent residents of Canada. In the same way that the United States imposes taxes on people based on and only on the status of being a U.S. citizen or permanent resident of the United States (Green Card holder), Canada’s Underused Vacant Property Tax is based on NOT being a citizen or permanent resident of Canada. Significantly, certain provincial human rights codes (presumptively) prohibit discrimination based on citizenship. The first case decided by the Supreme Court of Canada (Andrews) interpreting S.15 of Canada’s Charter of Rights struck down a British Columbia statute requiring Canadian citizenship to practise law in British Columbia. In 1974 – In Re Griffiths – the U.S. Supreme Court struck down a similar Connecticut provision requiring U.S. citizenship to be admitted to the bar in Connecticut. In the United States, classifications based on citizenship/alienage are “suspect classifications” and presumptively unconstitutional. Canada’s laws and judicial decisions are generally hostile to classifications based on citizenship.
To be clear: classifications based on citizenship clearly attract judicial scrutiny! Continue reading →
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 24, 2022
The above tweet references a “human interest” story where US citizen children are denied benefits in their country of residence that are available to all people who are NOT US citizens.
The description includes:
New Zealand children born to parents’ who are citizens of the United States face a difficult KiwiSaver choice: Give up your US citizenship, or face a KiwiSaver tax compliance bill of $750 or more a year courtesy of the US taxman.
A petition has been started at Parliament asking MPs to change the KiwiSaver Act to allow people with KiwiSaver accounts facing the unreasonable demands from US tax authorities to close their KiwiSaver accounts.
The issue surfaced as a result of the plight of Auckland dual national Kira Bacal and her four New Zealand-born children, Harper, 13, Rowan, 10 and twins Malachi and Elias, 8.
It appears that the poor (New Zealand born) Bacal children are finding that the US (or at least US tax preparers in New Zealand) consider their KiwiSaver to be a possible vehicle for US tax evasion! Not only is the KiwiSaver a “trust”, but it’s a “foreign trust” which comes with all kinds of penalty laden reporting obligations and no tax advantages. An excellent analysis of the US tax implications of the New Zealand KiwiSaver is here. The story is somewhat comical in that one gets the feeling that the blame should be placed on New Zealand (and not the United States) for New Zealand’s failure to legislate special exceptions for US citizens living in New Zealand.
So what! They’re Americans and therefore they deserve it (you say)!
It's 2022 and time to revisit the issue the US taxation of the #TFSA: "Canada U.S. Tax Treaty: Why the 5th protocol of the Canada US Tax Treaty Clarifies that the TFSA is a pension within the meaning of the Canada U.S. Tax Treaty" https://t.co/1qVKlrz0Po via @expatriationlaw
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) March 10, 2022
Mr. LJ Eiben is a Financial Advisor at Raymond James.
The information in this podcast was obtained from sources RJA and believed to be reliable; however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views expressed are not necessarily those of Raymond James (USA) Ltd. Raymond James (USA) Ltd. (RJLU) advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered.
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— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) January 15, 2022
Or Whether A US citizen lives in (and is a tax resident of) Holland and is an airline pilot …
OMG imagine if @Ronald77171496 had known that he was a US citizen while he was flying planes across the Atlantic! Read this article which describes the nightmare imposed on "US citizen" airline pilots who have @taxresidency in other countries. (Applies to cruise ship people too!) https://t.co/gW8G30W9Vq
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) January 17, 2022
That US citizen, because and only because of the combination of US citizenship-based taxation coupled with living outside the United States, is likely to be subject to double taxation. The following discussion explains why.
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) January 21, 2022
Part A: Introduction – About Citizenship-based Taxation Part B: How the Internal Revenue Code is designed to mitigate the effects of double taxation in certain circumstances Part C: Determining what is “foreign source” income Part D: The problem of international waters … Part E: The effect of sourcing to the US income earned in international waters by dual tax residents Part F: Deducting “foreign taxes” paid – although income from international waters may not be foreign, it is still subject to the payment of “foreign taxes” Part G: Can a US citizen living abroad be saved by a tax treaty? Maybe if he/she lives in Canada**** Part H: Conclusion and the need for “Pure Residence-Based Taxation”
When I hear people say that the IRC 911 FEIE and/or the IRC 901 FTC rules mean that #Americansabroad don't pay taxes to the US, I am reminded of John F. Kennedy's 1962 Commencement speech at Yale where he said: https://t.co/N6sOOPL4vO
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 8, 2021
This is the fourth of a series of posts about international tax reform generally and how FATCA, CRS, citizenship-based taxation, GILTI, etc. work together.
The imposition of FATCA on other countries means that …
The United States has effectively expanded its tax base into other countries by claiming residents of other countries as US tax residents. This is a direct attack on and the erosion of the tax base of those other countries.
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) June 21, 2021
The rules of taxation should follow changes in society. The ordering of society should NOT be hampered by the rules of taxation!
As the world has become more digital, companies can carry on business from any location. Individuals have become more mobile. Multiple citizenships, factual residences and legal tax residencies are not unusual. It has become clear that the rules of international tax as reflected in tax treaties (as they apply to both corporations and individuals) are in need of reform.
The purpose of this post is to identify two specific areas where US tax treaties are rooted in the world as it was one hundred years ago and NOT as it is today.
First: The “Permanent Establishment” clause found in US and OECD tax treaties
Second: US Citizenship-based taxation which the US exports to other countries through the “saving clause” found in almost all US tax treaties
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) September 20, 2019
On March 18, 2010, President Obama signed FATCA (“Foreign Account Tax Compliance Act”) into law. FATCA was:
– a revenue offset provision to the HIRE Act
– a series of conforming amendments to the Internal Revenue Code that:
(a) imposed requirements on Foreign Banks (Internal Revenue Code Sections 1471 – 1474); and
(b) imposed reporting requirements on individuals (Internal Revenue Code 6038D). Those reporting requirements are expressed in Form 8938.
On September 17, 2019 Representative Maloney introduced H.R. 4362 – “Overseas Americans Financial Access Act” – which introduced changes to BOTH the FATCA requirements imposed on Foreign Banks and requirements imposed on Individuals.
This post discusses ONLY the aspect to the Maloney bill that “relaxes” the requirements on Foreign Banks. I have writen a separate post discussing how the Maloney bill would impact individuals.
(Those interested in learning more about FATCA may be interested in my “Little Red FATCA Book)“. The Maloney Bill is NOT The Same As SCE Previously Drafted! The Good News:
The Maloney bill appears to apply to ALL Americans abroad – without regard to whether they are compliant with their U.S. tax filing requirements. (A previous version of SCE applied ONLY to Americans abroad who were compliant with their U.S. tax filing requirements.) Interestingly, the Bill (like Internal Revenue Code 911) would NOT apply to “permanent residents (Green Card Holders) in exactly the same way. The Bad News:
The bill as drafted gives the banks the option to either continue to report on the depository accounts of Americans abroad or not. This is an option available to the bank. I (along with many others) suggest that banks will NOT be willing to engage with individuals with respect to whether they meet the requirements of the Maloney bill. The exact language of the bill includes:
(i) IN GENERAL.—Unless the foreign financial institution elects to not have this subparagraph apply, such term shall not include any depository account maintained by such financial institution if each holder of such account is—
The Maloney bill is too narrow in application
The bill as drafted applies ONLY to “depository accounts”. This means that the bill applies only to day-to-day bank accounts. It specifically does NOT apply to “custodial accounts”. This means that it excludes investment accounts, brokerage accounts, etc. Verdict: The Maloney bill is clearly far too narrow. There is no reason why the Maloney proposal should not extend to ALL accounts (depository, custodial or any other kind of account) held by an American living outside the United States.
The technical analysis (which will NOT be of interest to the average reader) follows. It consists of Part A to Part D. Thoughts and Suggestion
The Maloney bill is symbolic. It is not a serious attempt to alleviate the problems of Americans abroad. Representative Maloney should – as a Democrat – support Representative Holding’s “Tax Fairness For Americans Abroad Act of 2018”. Continue reading →