Tag Archives: 877A Exit Tax

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

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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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Elizabeth Warren’s “Ultra-Millionaire Tax Act of 2021”: Coming Soon To A Neighbour (and maybe a nonresident spouse) Near You

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The Contextual Background – Elizabeth Warren – January 28, 2021

Excerpts from a recent CNBC interview (see the following link for context) …

https://www.cnbc.com/2021/01/28/first-on-cnbc-cnbc-transcript-senator-elizabeth-warren-d-mass-speaks-with-cnbcs-closing-bell-today.html

WARREN: Based on fact, the wealthiest in this country are paying less in taxes than everyone else. Asking them to step up and pay a little more and you’re telling me that they would forfeit their American citizenship, or they had to do that and I’m just calling her bluff on that. I’m sorry that’s not going to happen.

WARREN: Look, they want to use American workers. They want to use American highways. They want to use American police forces. They want to use American infrastructure, but they just don’t want to help pay to support it. And that’s the trick, a wealth tax needs to be national because you can still get advantages, if you move from state to state. But the idea behind wealth tax is you have to pay it if you’re an American citizen. It doesn’t matter whether you live in Texas or California or even whether you move to Europe or South America. If you want to keep your American citizenship, you pay the wealth tax and it doesn’t matter where you put your assets. You can try to hide them in the Cayman Islands, you can try to put them up in Switzerland, but it doesn’t matter, you still pay the two-cent wealth tax. And here’s the nice thing about that, you know, a lot of the wealth is quite visible and easy to see, it’s right there in the stock market. A two-cent wealth tax changes this country fundamentally because it means we say as a nation, we are going to invest in the next generation. We’re going to invest in creating opportunity not just for a handful at the top, we’re going to create opportunity for all of our kids. That’s how we build a strong future in this country.

Prologue: For Whom The Tax Tolls – What Is An “Ultra” Millionaire?

One dictionary definition of “Ultra” includes:

ultra noun [C] (PERSON)

usually disapproving

a person who has extreme political or religious opinions, or opinions that are more extreme than others in the same political party, etc.:

Soon the ultras on the right of the party will resume their criticism of the prime minister.

On August 20, 2019 Forbes reported that Elizabeth Warren had a net worth of approximately 12 million USD. A large part of these assets are her pensions. But apparently her proposed wealth tax doesn’t apply (it’s unclear to what extent it would apply to pensions) to her. At a minimum, the proposal applies ONLY to “Ultra” millionaires (at least today).

Elizabeth Warren Introduces Wealth Tax – Version 1

On or about March 1, 2021, Senator Warren introduced her proposed “ULTRA-Millionaire Tax Act Of 2021”. Given that the threshold is $50 million USD, it appears that the Senator, although a millionaire, is not an “ULTRA” millionaire. There is nothing in the proposed act that suggests the plan is indexed to inflation. Even if the threshold is NOT lowered (which it will most certainly be), the inevitability of inflation will ensure that more and more people are ensnared by it. In the same way that the late Senator Kennedy referred to the 877A Exit Tax as the billionaire’s tax (when it applied to everyday people), over time, the wealth tax will become the millionaires’ tax that will be applied to (by the standards of today) thousandaires.

Now, I don’t believe that this is going to become law soon. But, all confiscatory taxation, starts as an idea that germinates, until enough politicians (who would not personally be impacted) are used to the idea and then it will become law. Tax laws have the potential to become law through either accident (a revenue offset measure which nobody reads) or by design (stated purpose of the legislation). This is exactly what happened with the S. 877A expatriation tax (a revenue offset provision).

Part A – The Evolution of Taxation From Taxation Of Income (Sharing Of Income) To Taxation On Wealth (Taking Of Assets)

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The United States imposes a separate and more punitive tax system on US dual citizens who live in their country of second citizenship

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Prologue

Do you recognise yourself?

You are unable to properly plan for your retirement. Many of you with retirement assets are having them confiscated (at this very moment) courtesy of the Sec. 965 transition tax. You are subjected to reporting requirements that presume you are a criminal. Yet your only crime was having been born in America (something you didn’t even choose) and attempting to live as a U.S. tax compliant American outside the United States. Your comments to my recent article at Tax Connections reflect and register your conviction that you should not be subjected to the extra-territorial application of the Internal Revenue Code – when you don’t live in the United States.

The Internal Revenue Code: You can’t leave home without it!

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Why is the United States imposing an “Exit Tax” on the Canadian pensions of Canadian citizens living in Canada?

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This post is based on (but is NOT identical to) a July 17, 2017 submission in response to Senator Hatch’s request for Feedback on Tax Reform

“Re the impact of the S. 877A “Exit Tax” on those “Americans living abroad” who relinquish U.S. citizenship:

Why is the United States imposing an “Exit Tax” on their “non-U.S. pensions” and “non-U.S. assets”? After all, these were earned or accumulated AFTER the person moved from the United States?”

Part A – Why certain aspects of the Exit should be repealed

In a global world it is common for people to establish residence outside the United States. Many who establish residence abroad either are or become citizens of other nations. Some who become citizens of other nations do NOT wish to be “dual citizens”. As a result, they “expatriate” – meaning they relinquish their U.S. citizenship. By relinquishing their U.S. citizenship they are cutting political ties to the United States. They are signalling that they do NOT wish the  opportunities, benefits and protection from/of the United States.

Yet Internal Revenue Code S. 877A imposes a separate tax on “expatriation”. The “expatriation tax” is discussed in a series of posts found here.

Specific examples of HOW the “Exit Tax Rules” effectively confiscate pensions earned outside the United States are here.

Assuming, “covered expatriate status” and NO “dual-citizen exemption to the Exit Tax“, the S. 877A “Exit Tax” rules operate to:

  1. Virtually “confiscate” non-U.S. pensions that were earned when the individual was NOT a  United States resident; and
  2. Allow for the retention of “U.S. pensions” which were earned while the individual WAS a resident of the United States.

(One would think that the result should be THE EXACT OPPOSITE!”)

Specific request: The S. 877A Exit Tax should be repealed. If the United States is to impose a tax on expatriation, the tax should not extend to “non-U.S. pensions” earned while the individual was NOT a U.S. resident. Furthermore, the tax should NOT extend to “non-U.S. assets” that were accumulated while the individual was NOT a U.S. resident.

But, that’s assuming that the United States should have ANY kind of “Exit Tax!”
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New instructions to book Canada appointments to relinquish or renounce US citizenship

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Click here if you want help with your renunciation of U.S. citizenship.
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Updates – February 2018:
I am available to assist you on a “consultation basis” (fee based). If you wish assistance please contact me by email or through the contact form..


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So, what’s new?
The 2017 “Tax Cuts and Jobs Act” failed to provide any relief for the “tax residents of other countries” that are subject to U.S. “worldwide taxation”. The United States continues to impose “worldwide taxation” on the “tax residents” of other countries (who do not live in the USA). There are some who believe that the situation is now worse. Specifically that the United States is now imposing a “transition tax” on the owners of Canadian Controlled Private Corporations. The demand to renounce U.S. citizenship continues to grow.I predict that number of renunciations will dramatically increase. Those Canada U.S. dual citizens who have NEXUS cards should read the following post which discusses the impact of renouncing U.S. citizenship on your existing NEXUS card.
Those who are NOT renouncing but are attempting to seek a “relinquishment” based on an earlier “expatriating act” will need to complete DS-4079 (and I strongly suggest get professional advice).
Those who want additional information about the lawful abandonment of lawful permanent resident status (Green Cards) should read here.
For those who want to  book appointments to relinquish or renounce U.S. citizenship in Canada:

  1. These new instructions have recently taken effect.
  2. In order to book an appointment you email: CanadaCLNInquiries@state.gov
  3. You will receive a reply that includes (see below)
  4. Note that you are not permitted to have an “attorney” with you at the appointment
  5. You must also complete the questionnaire which is here:

Questionnaire
(Canada seems to NOTcontinue require Form 4079 to RENOUNCE an issue that I have discussed here.) Form 4079 is used for RELINQUISHMENTS.
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