Does he not understand that U.S. citizenship taxation and FATCA penalize Americans based on an “accident of birth”?
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Tag Archives: citizenship taxation
Part 5 – Fidelity U.K. – Cleansing The Firm Of “Suspected” U.S. Citizens And The Problems They Bring
For those who want ONLY the “Readers Digest” version of this post …
This is a long but important post. For some the post will be too long to read and digest. The post is about Fidelity. Those of a certain age will associate Fidelity with legendary fund manager Peter Lynch author of “One Up On Wall Street“.
There is an international trend of financial firms avoiding U.S. citizens. This post is specifically about Fidelity UK (1) refusing to accept U.S. citizens as clients and (2) proactively ridding their client base of those who they know are U.S. citizens or have reason to believe “may be” U.S. citizens!
I recently became aware of the following letter sent by Fidelity U.K. to certain undesirables …
Unconfirmed USP Sell To Cash Letter
Some of you may be satisfied to read the letter.
For those interested in the general context and discussion, here is the complete post …
________________________________________________________________________
Part A – Introduction and context
This is Part 5 in a series of posts that I began writing in 2023. See the Appendix for links to all of the previous posts. The context of this series of posts is that FATCA IGAs require “foreign financial institutions” to provide the U.S. Social Security numbers of their U.S. citizen customers. This is a problem because:
1. The banks cannot provide to the IRS what they sometimes don’t have.
2. Many Americans abroad do NOT have a Social Security number to provide.
3. Many former U.S. citizens have relinquished U.S. citizenship without necessarily having a Certificate of Loss of Nationality (“CLN”).
A Simple And Unilateral Fix For Citizenship Taxation – Richardson, Snyder and Alpert – Join Us On October 8, 2025
A Simple Tax Treaty Fix To Citizenship Taxation
The problem of citizenship taxation for Americans abroad is acute. Many people agree that citizenship taxation must end. Citizenship taxation is a combination of the U.S. Internal Revenue Code (imposing punitive taxation on non-U.S. assets and income streams), Regulations (the Internal Revenue Code gives Treasury broad regulatory authority) and tax treaties (the treaty “saving clause” denies U.S. citizens most of the benefits of the tax treaties. Unsurprisingly, various remedies have been proposed.
Legislative Fix (a change to the Internal Revenue Code):
Examples of proposals that are legislative fixes include the 2018 Holding bill and the 2024 LaHood bill. Significantly, neither bill ends citizenship as a sufficient condition for U.S. tax residency.
Regulatory Fix (mitigating the problems of citizenship taxation by regulation):
In 2020, Dr. Laura Snyder, Dr. Karen Alpert and John Richardson published “A Simple Regulatory Fix For Citizenship Taxation”. In this paper we demonstrated how Treasury through its regulatory authority could change the impact of the U.S. (domestic) Internal Revenue Code on on Americans abroad.
A Tax Treaty Fix To Citizenship Taxation:
In 2025, Dr. Laura Snyder, Dr. Karen Alpert and John Richardson published “A Simple and Unilateral Treaty Fix for Citizenship Taxation”. Both the paper and discussion is available at the SEAT site. Notably, this approach changes neither U.S. domestic law nor regulations. Rather, it simply argues that U.S. Treasury could refrain from exercising its rights under the “saving clause” found in U.S. tax treaties. The “saving clause” gives the United States the right (but not the obligation) to impose U.S. taxation on U.S. citizens abroad as though the treaty did not exist. Notably, this prevents U.S. citizens from using “tax treaty residency tie break” provisions to elect to be treated as tax residents of ONLY their country of residence. Incredibly, Green Card holders ARE permitted to (effectively) “opt in” to residence-based taxation.
The SEAT argument is that:
The United States could end the double taxation of Americans abroad simply by electing to NOT exercise its rights under the “saving clause”. This would allow President Trump to fulfill his pledge to end the “double taxation” of Americans abroad by NOT invoking the “saving clause”.
The argument is explained here:
Join us for discussion on October 8, 2025 – Two opportunities
1. Wednesday October 8, 2025 Youtube – 7:30 am Eastern (Toronto and New York) time
2. Wednesday October 8, 2025 – X. Spaces – 10:00 am Eastern (Toronto and New York) time
Slides for both presentations …
This is important! Hope you can make one or both of the discussions.
John Richardson – Follow me on X.com/@ExpatriationLaw
Sacred Trust: Counseling Americans Abroad Through The Trauma Of A FATCA World
Introduction:
Much of living as a U.S. citizen abroad is learning to cope with a life of trauma. Posts discussing the trauma are here here, here and here. For Americans abroad, preparing to file a U.S. tax return is a form of trauma.
The U.S. extra-territorial tax, form and penalty regime reminds Americans that they are:
“Subject to certain penalties, for uncertain conduct!
Those who do not file tax returns worry about the consequences of not filing.
Those who do file tax returns worry about the consequences of filing.
Thinking about the issue of trauma, I was reminded of a presentation that I did in 2015 in London, UK. It was titled:
Sacred Trust: Counselling Clients Through The Trauma Of “U.S. Citizenship Abroad” In A FATCAesque World”
(The audience was a group of U.S. tax professionals. I am not sure that they really understood the message. But, the presentation was a welcome diversion from the usual technical tax talk.)
I had forgotten about the presentation, but was reminded of it today. Looking at the slides, I think I agree with everything I said in 2015. If anything, it has gotten worse!
Here is the presentation:
A PDF version is here:
AI Generated Podcast generated from the 2015 presentation
John Richardson – Follow me on X.com @ExpatriationLaw
Tax Law Professors Mason and Dagan: “Reconsidering Citizenship Taxation”
Introduction and purpose
In 2010 few people even knew what citizenship taxation was. It is now 2025. Awareness of the existence of citizenship taxation has expanded. An understanding of WHAT citizenship taxation actually is (it’s the the U.S. applying its worldwide tax, reporting and penalty regime on non-U.S. source income received by nonresidents) and how it impacts the lives of Americans abroad is still not understood. The nature of citizenship taxation is more fully explored in the following post:
The Road To Tax Reform For Americans Abroad: Part 2 – What Is US Citizenship Taxation?
How tax academics view citizenship taxation
Although, there have been articles about citizenship taxation written by various academics, few if any, have included a description of how U.S. citizenship taxation results in the U.S. imposing a more punitive form of taxation on Americans abroad. Of course, one must have actually experienced the reality (as opposed to the theory) of citizenship taxation to understand it.
To put it another way:
Generally, academics view citizenship taxation purely from the perspective of a U.S. tax return and a U.S. citizen living outside the United States. There is no consideration of how living as a tax resident of another country impacts U.S. tax filing.
Generally, U.S. citizens living outside the United States view citizenship taxation from the perspective of building a live outside the United States (that includes taxation) with the U.S. tax imposed on that life.
These are TOTALLY different perspectives!
Part 3: The Hurd Bill – H.R. 4501 May Not Be Motivated By The Problems Of U.S. Citizenship Taxation And Americans Abroad
Commentators may be misreading the motivation for H.R.4501
It’s human nature to view and interpret the world based on our own experiences. Therefore, many Americans abroad (and their advocacy groups) interpreted the Hurd bill H.R.4501 as a sign that Congressman Hurd recognized the problems of citizenship taxation. This may not have been true. I now believe that H.R.4501 may have been an attempt to exempt one specific American citizen from U.S. taxation.
This is my third post commenting on Congressman Hurd’s H.R.4501. The first two posts are here and here:
Part 1: Colorado Congressman Jeff Hurd Recognizes Problems Of U.S. Citizenship Taxation
Part 1: Colorado Congressman Jeff Hurd Recognizes Problems Of U.S. Citizenship Taxation
Part A – Introducing H.R. 4501
H.R.4501 – To protect the citizenship of, and provide tax-exempt status to, any American elected as the Supreme Pontiff of the Roman Catholic Church.
https://www.congress.gov/bill/119th-congress/house-bill/4501
Here is the text of the bill. It’s amazingly clear. It’s amazingly honest. It states that Subtitle A of the Internal Revenue Code will not apply to Pope Leo. It is certainly one of the most honest and clear carve outs I have ever seen. (Interestingly it would NOT exempt Pope Leo from subtitle F which contains the international information return reporting requirements.)
Let’s break H.R.4501 down:
H.R.4501 – To protect the citizenship of, and provide tax-exempt status to, any American elected as the Supreme Pontiff of the Roman Catholic Church.
H.R.4501 – To 1. protect the citizenship of (U.S. citizens abroad are being forced to renounce U.S. citizenship because of citizenship taxation) , and 2. provide tax-exempt status to (end U.S. citizenship tax jurisdiction over), any 3. American (U.S. citizen and possibly resident) 4. elected as the Supreme Pontiff of the Roman Catholic Church (appears to condition the benefit based on religion – 14th Amendment issue?).
At present there is no more information on the government site.
Part B – The tax exemption directly implicates the issue of citizenship taxation
The Internal Revenue Code (see section 1) clearly states that U.S. citizens are subject to taxation on their worldwide income. Therefore, for Pope Leo to NOT be considered a U.S. tax resident either:
1. The Internal Revenue Code would require some kind of amendment. The amendment might be a move to “residence-based taxation” or a special carve out for Pope Leo. (An example of a special carve out might be: “Individual” does not include a U.S. citizen Pope”); or
2. It could be incorporated into “A Simple Regulatory Fix For Citizenship Taxation“.
The point is that NO MATTER how this would be achieved it WILL require a rethinking of “citizenship taxation”. It will also require ensuring (if this is even possible that the amendment meet constitutional standards).
Part C – The statement of Congressman Hurd
H.R.4501 was introduced by Congressman Jeff Hurd from Colorado. The wikipedia article describes Hurd as being Catholic (presumably explaining his interest in this issue).
Interestingly, Congressman Hurd’s wife (by her own admission) was born in Czechoslovakia and may be a Czech citizen. If so, this might mean that Congressman Hurd’s five children are (by birth or naturalization) dual U.S./Czech citizens.
Further commentary about the possibility of U.S./Slovokia dual citizenship is here and here.
A press release describing H.R.4501 on his site states:
Rep. Hurd Introduces Holy Sovereignty Protection Act to Safeguard Citizenship for American Popes
July 18, 2025
Press ReleaseWASHINGTON, D.C. — Today, Congressman Jeff Hurd (CO-03) introduced the Holy Sovereignty Protection Act (H.R. 4501), legislation to protect the U.S. citizenship of any American elected to serve as the Supreme Pontiff of the Roman Catholic Church. The bill prohibits the revocation of citizenship during a papal tenure and exempts the individual from U.S. tax obligations while serving as pope, recognizing his unique role as both a religious leader and head of state.
“The election of Pope Leo XIV marks a historic moment not only for the Catholic Church but for America,” said Rep. Hurd. “This legislation ensures that any American who answers the call to lead more than a billion Catholics worldwide can do so without risking his citizenship or facing unnecessary tax burdens. This legislation recognizes the extraordinary nature of the papacy—a role at the intersection of faith, leadership, and global responsibility.”
Significantly, the press release acknowledges Congressman Hurd’s belief and understanding that:
– certain activities can trigger the involuntary relinquishment of U.S. citizenship (not the case since the 1967 decision in Afroyim v. Rusk); and
– the problematic nature of U.S. citizenship taxation (specifically the imposition of U.S. worldwide taxation on U.S. citizens living outside the United States).
Part D – Why H.R.4501 is helpful to Americans abroad and the fight for residence-based taxation
The introduction of H.R. 4501 is a clear recognition that citizenship-based taxation presents unnecessary problems (and burdens) for Americans abroad. Although Congressman Hurd does NOT suggest that Americans abroad are renouncing their citizenship because of the U.S. extra-territorial regime, the quest to “Save The Pope” is a clear recognition of the problems caused by the exiting regime.
Given that H.R.4501 appears to provide a benefit based solely on affiliation with a specific religion, I suspect that it is dead on arrival. That said, it can (and should) be used to raise the question of why ANY U.S. citizen living outside the United States should be subject to the U.S. worldwide/extra-territorial taxation regime.
Specifically, H.R.4501 is support for both President Trump’s pledge to end the double taxation of Americans abroad and the LaHood bill which was introduced in December of 2018. I suggest that it be interpreted in this spirit.
Part E – What Americans abroad and their champions should do
This is simple. As a Catholic Congressman Hurd has an interest in maintaining the viability of a U.S. citizen Pope. As a father Congressman Hurd has an interesting in enhancing the life opportunities of his children to ensure that their life opportunities are not dampened by U.S. citizenship taxation.
I would reach out to Congressman Hurd and enlist his aid in supporting the ending of the double taxation of Americans abroad!
John Richardson – Follow me on X.com @ExpatriationLaw
Appendix
Here is a July 30, 2025 “X Spaces” discussion about the Hurd bill:
A #GILTI Carveout For INDIVIDUAL CFC Shareholders Of Certain Virgin Islands Corps
Introduction and purpose:
The Big Beautiful Bill (“BBB”) Contains many surprises. Yesterday, I wrote a first post about a section of the BBB that addressed the application of the GILTI rules.
GILTI, Americans Abroad And SEC. 111110 Of The Big Beautiful Bill: The Good, The Bad And The Ugly
That post was largely based on an interesting expose in the Washington Post. This called attention to the fact that a provision in the BBB appears to provide a GILTI carveout to a U.S. C Corp. That expose failed to mention that the same section of the BBB also created an ongoing carveout for individual shareholders of Virgin Islands CFCs that appear to be “service oriented” businesses. So that the implications of this are clear, I will put it this way:
The BBB creates an opportunity for “United States Shareholders” of Controlled Foreign Corporations who are INDIVIDUALS – regardless of where they live in the world – to avoid the GILTI tax on certain kinds of income. Interestingly, U.S. citizens living abroad are still required to pay GILTI on the service oriented CFCs in their country of residence. There comes a certain point (we are well past it) where there should be an acknowledgement (even from the tax compliance community) that the U.S. tax system is deserving of nothing more than scorn and ridicule. It’s quite obvious that the “service businesses” owned by U.S. citizens abroad are exactly the same kinds of businesses that are based in the Virgin Islands and owned by U.S. residents.
Unpacking the proposed legislation
“(i) Qualified virgin islands services income.–The term `qualified Virgin Islands services income’ means any gross income which satisfies all of the following requirements:
“(I) Such gross income is compensation for labor or personal services performed in the Virgin
Islands by a corporation formed under the laws of the Virgin Islands.
“(II) Such gross income is attributable to services performed from within the Virgin Islands by
individuals for the benefit of such corporation.
“(III) Such gross income is effectively connected with the conduct of a trade or business within the Virgin Islands.
“(ii) Specified united states shareholder.–The term `specified United States shareholder’ means any United States shareholder which is–
“(I) an individual, trust, or estate, or
“(II) a closely held C corporation (as defined in section 469(j)(1)) if such corporation acquired its direct or indirect equity interest in the foreign corporation which derived the qualified Virgin Islands services income before December 31, 2023.
“(iii) Regulations.–The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out this subparagraph and subparagraph (A)(i)(VI), including regulations or other guidance to prevent the abuse of such subparagraphs.”.
What does this mean? What would be an example of a CFC that would qualify?
Let’s break this down. Imagine a tax preparation firm owned by a resident of the State of New York. Let’s imagine that he incorporates a Virgin Islands Corporation. The U.S. resident is the sole shareholder. The Virgin Islands Corporation is clearly a CFC. The purpose of the corporation is to provide tax preparation services for Americans abroad. He names the business “Virgin Islands Tax Prep”.
He then visits the Virgin Islands for the purpose of hiring and training individuals who are residents of the Virgin Islands. He trains them in the art of U.S. tax return preparation (including GILTI), forms and penalty abatement. They are being trained for the purpose of being employed by “Virgin Islands Tax Prep”.
The business is a spectacular success. Let’s consider whether “Virgin Islands Tax Prep” qualifies for the GILTI carveout.
Again, here are the rules:
“(i) Qualified virgin islands services income.–The term `qualified Virgin Islands services income’ means any gross income which satisfies all of the following requirements:
“(I) Such gross income is compensation for labor or personal services performed in the Virgin
Islands by a corporation formed under the laws of the Virgin Islands.JR Commentary: Clearly “Virgin Islands Tax Prep” is formed under the laws of the Virgin Islands. The gross income of the company is solely payment for the labor and personal services required to file U.S. Expat Tax Returns.
“(II) Such gross income is attributable to services performed from within the Virgin Islands by
individuals for the benefit of such corporation.JR Commentary: The whole purpose of going to the Virgin Islands to hire and train tax preparation employees is to prepare tax returns in the Virgin Islands for the benefit of “Virgin Islands Tax Prep”.
“(III) Such gross income is effectively connected with the conduct of a trade or business within the Virgin Islands.
JR Commentary: Obviously the gross income is compensation for services performed by a Virgin Islands company from inside the Virgin Islands.
Notice also that competitors of “Virgin Islands Tax Prep” in any other part of the world will pay the GILTI tax.
Now, close your eyes and substitute for “Virgin Islands Tax Prep” any other kind of service business. Also, reflect on the fact that Americans broad will pay GILTI tax on CFC service income in their country of residence. But, U.S. residents can avoid the GILTI tax by incorporating a company in the Virgin Islands.
My point:
The services businesses of CFCs located ANYWHERE should be exempt from GILTI!
Why is the Virgin Islands the only “Possession” that receives this benefit?
John Richardson – Follow me on X.com @Expatriationlaw
Exit Taxes As A Barrier To Emigration And The Need For An International Treaty To Create Uniformity And Certainty Surrounding Emigration
Exit Taxes As A Barrier To Emigration And The Need For An International Treaty To Create Uniformity And Certainty Surrounding Emigration
This blog post was written for a presentation at the MigrationConference.net on June 12, 2025. Here are the slides that will be used:
A PDF version is here:
Here is a recording of John’s brief presentation at the conference on June 12, 2025:
A more comprehensive blog post follows.
Outline:
Part A – Introduction
Part B – Emigration historically burdened by “exit taxes” (The Nazis and Soviets)
Part C – Modern Exit Taxes And First World Democracies (Canada, the United States, etc.)
Part D – A Tax Treaty Solution That Protects BOTH The Right Of Emigration And the Desire Of Governments To Tax Individuals On Gains Accruing While Living In The Country
Appendix – Human Rights Documents
Toward An Argument That US Citizenship Taxation Violates International Law
Introduction – Why FATCA Litigation Fails …
(Well, most of the time!)*
In September of 2024, I wrote a blog post about FATCA litigation.
Q. Why Does FATCA Litigation Fail? A. Because, It Focuses On The Symptom And Not The Cause
That post was discussed on an IRS Medic podcast here:
In that post, I suggested that FATCA litigation fails because it has to date focused on certain results of FATCA (privacy breaches, discrimination, etc.) No FATCA litigation (to date) has focused on the reality that U.S. “citizenship taxation” is the reason for FATCA and therefore the cause of all the FATCA related problems. The effect of FATCA and the FATCA IGAs is to enforce U.S. citizenship taxation on the world (including and PRIMARILY on individuals who are tax residents of other countries). A principal purpose of FATCA is to export U.S. tax laws into other countries. By signing the FATCA IGAs, these countries agree to assist the United States in identifying which of their country’s residents (and often citizens) are also U.S. citizens and should therefore be subject to U.S taxation. Put another way: the purpose of the FATCA IGAs is to expand the U.S. tax base into other countries.
For background on the issue of the United States claiming the residents of other countries as U.S. tax residents see:
The conclusion of the September 2024 post was that:
Future FATCA litigation should focus on whether it is a violation of international law for the United States to impose citizenship taxation (the reason for FATCA) on the residents of other countries (who suffer the effects of FATCA).
The purpose of this post is to continue the analysis and to explore the specific question:
Is U.S. citizenship taxation – the process of claiming nonresidents as U.S. tax residents – a violation of international law?
Is it a violation of international law for the United States to:
1. Claim the residents of other countries as U.S. tax residents; and
2. Impose U.S. taxation on the non-U.S. source income of those individuals who do NOT live in the United States?
(I am introducing and developing the argument cannot impose U.S. citizenship taxation on the tax residents of OTHER countries. The United States, has of course the sovereign right, to impose citizenship taxation on U.S. residents.)
If U.S. citizenship taxation, as applied to the residents of OTHER countries, conflicts with the norms of international law, then the foundation for FATCA (as applied to non-U.S. residents) crumbles. In theory, this would provide courts and tribunals a justification for refusing to apply FATCA obligations in relation to individuals who are tax residents of other countries and are not residents of the United States. In addition, it might cause countries to give careful consideration to the effects of the “saving clause” which is part of all U.S. tax treaties.
It is my hope that this post will analyze this question by identifying and outlining “some” of the relevant issues. Perhaps, this post will “begin’ a discussion about this important issue. Should U.S. citizens, because and only because of their citizenship, become “dual tax residents” simply by moving from the United States?
For each issue I will suggest an answer and provide a backup source(s) for further inquiry.
Suggested conclusion:
This post is a “thought experiment”. I believe that a credible argument can be developed that U.S. citizenship taxation – as applied to those who are tax residents of other countries – is a violation of CIL (“Customary International Law”). What follows are the “individual components” of the argument, along with commentary on each. The individual components are organized in the following outline:
Outline
Part A – Some Theoretical Concepts
1. What is US citizenship taxation? U.S. citizenship taxation defined
2. What is meant by international law?
Part B – Tax Residency And International Law
3. Is the concept of “tax residency” generally subject to the rules of international law?
4. Concepts of tax residency as expressed through tax treaties including treaty tie breakers
Part C – Can The Method Of Taxation Violate Individual Rights As Expressed In Human Rights Documents?
5. Professor William Thomas Worster – Taxation and Human Rights
6. Barriers To Emigration Under International Law
Part D – U.S. Citizenship Taxation And the Tax Sovereignty Of Other Nations
7. U.S. Citizenship Taxation As A Method To Siphon Capital From Other Nations
8. The Common Law Revenue Rule As An Expression Of Tax and Territorial Sovereignty
Part E – U.S. Tax Treaties And The “Saving Clause” – Contracting Out Of The Principles Of International Law?
9. Taxation Perspective: Is the “saving clause” an agreed upon override to the “revenue rule” and other international norms?
10. Information Perspective: Can FATCA information extraction generally be used to refuse to provide information about a country’s tax residents?
11. Enforcement Perspective: Should exemptions from cooperation on enforcement of tax debts extend to the disclosure of FATCA information? The cases of Canada, Netherlands, France, Sweden …
Part F – Possible Conclusions …
For those who don’t want to read the rest:
The purpose of this post has been to develop a general theory of why U.S. citizenship taxation – to the extent that it claims the tax residents of other countries as U.S. tax residents – is a violation of international law. Theory aside, there is no other country in the world that uses an attribute (citizenship), that is often an immutable characteristic (place of birth), that bears no presumptive relevance to a physical or economic connection to a country, as a sufficient condition for tax residency. In so doing, the United States is defining tax residency in terms of the “circumstances of birth”, rather than the “circumstances of life”. The only effect is to claim the residents of other countries as tax residents of the United States (even when they are residents and often citizens of those other countries).
It is respectfully submitted that, for these reasons, that citizenship taxation is a violation of CIL (“Customary International Law” and should NOT be tolerated by the international community.
In developing my argument, I have included links to previous posts. The linked posts are NOT part of this post, but are supplied for further reading on each topic.