Monthly Archives: February 2016

The S. 877A “Dual Citizen” exemption: MUST certify tax compliance for the five years prior to relinquishment

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Introduction:
This is the 7th of seven posts analyzing the “dual citizen exemption” to the S. 877A Exit Tax which is found in S. 877A(g)(1)(B) of the Internal Revenue Code. Please remember that the “dual citizen exemption” is available ONLY to those who meet the “five year tax compliance test”.
1. What is the S. 877A(g)(1)(B) “dual citizen exemption” and why does it encourage those “born dual citizens” to not renounce U.S. citizenship?
2. The history of Canada’s citizenship laws: Did the 1947 Canada Citizenship Act affirm citizenship or “strip” citizenship and create @LostCanadians?
3. The S. 877A “dual citizen” exemption – I was born before the first ever Canada Citizenship Act? Could I have been “born a Canadian citizen”?
4. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act – Am I still a Canadian or did I lose Canadian citizenship? (The “Sins Of The Father”)
5. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act and the requirements to be “born Canadian”
6. “The S. 877A “Dual Citizen” exemption: I was born a dual citizen! Am I still “taxed as a resident” of Canada?”
7. The S. 877A “Dual Citizen” exemption: “MUST certify tax compliance for the five years prior to relinquishment”
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To begin: Any person who cannot meet the “tax compliance test” found in section 877(a)(2)(C) of the Internal Revenue Code will be a “covered expatriate”!
As a reminder, of what makes somebody a “covered expatriate”:
S. 877A(g) of the Internal Revenue Code includes:

(g) Definitions and special rules relating to expatriation For purposes of this section—
(1) Covered expatriate
(A) In general
The term “covered expatriate” means an expatriate who meets the requirements of subparagraph (A), (B), or (C) of section 877(a)(2).
(B) Exceptions An individual shall not be treated as meeting the requirements of subparagraph (A) or (B) of section 877(a)(2) if—
(i) the individual—
(I) became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country, and
(II) has been a resident of the United States (as defined in section 7701(b)(1)(A)(ii)) for not more than 10 taxable years during the 15-taxable year period ending with the taxable year during which the expatriation date occurs,

Notice that the “dual citizen exemption” operates so that the individual does NOT become a “covered expatriate” if he meets the tests of “subparagraph (A) or (B) of section 877(a)(2)” (the income test or the asset test). The “dual citizen exemption” does NOT absolve the individual from meeting the “tax compliance test” found in section 877(a)(2)(C) of the Internal Revenue Code, which reads as follows:
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The S. 877A "Dual Citizen" exemption: The 1947 Canada Citizenship Act – Am I still a Canadian or did I lose Canadian citizenship?

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Introduction:
This is the 4th of seven posts analyzing the “dual citizen exemption” to the S. 877A Exit Tax which is found in S. 877A(g)(1)(B) of the Internal Revenue Code. Please remember that the “dual citizen exemption” is available ONLY to those who meet the “five year tax compliance test”.
1. What is the S. 877A(g)(1)(B) “dual citizen exemption” and why does it encourage those “born dual citizens” to not renounce U.S. citizenship?
2. The history of Canada’s citizenship laws: Did the 1947 Canada Citizenship Act affirm citizenship or “strip” citizenship and create @LostCanadians?
3. The S. 877A “dual citizen” exemption – I was born before the first ever Canada Citizenship Act? Could I have been “born a Canadian citizen”?
4. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act – Am I still a Canadian or did I lose Canadian citizenship? (The “Sins Of The Father”)
5. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act and the requirements to be “born Canadian”
6. “The S. 877A “Dual Citizen” exemption: I was born a dual citizen! Am I still “taxed as a resident” of Canada?”
7. The S. 877A “Dual Citizen” exemption: “MUST certify tax compliance for the five years prior to relinquishment”
Was I a “Canadian Citizen” at birth and/or Am I still a Canadian Citizen?
The 1947 Canada Citizenship Act and loss of Canadian Citizenship
Canada Citizenship Act 1947
Pursuant to S. 16 and S. 18  of the Canada Citizenship Act, one could lose Canadian Citizenship if your “responsible parent” became naturalized as a citizen of another country.
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The S. 877A "Dual Citizen" exemption: The 1947 Canada Citizenship Act and being "born Canadian"

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Introduction:
This is the 5th of seven posts analyzing the “dual citizen exemption” to the S. 877A Exit Tax which is found in S. 877A(g)(1)(B) of the Internal Revenue Code. Please remember that the “dual citizen exemption” is available ONLY to those who meet the “five year tax compliance test”.
1. What is the S. 877A(g)(1)(B) “dual citizen exemption” and why does it encourage those “born dual citizens” to not renounce U.S. citizenship?
2. The history of Canada’s citizenship laws: Did the 1947 Canada Citizenship Act affirm citizenship or “strip” citizenship and create @LostCanadians?
3. The S. 877A “dual citizen” exemption – I was born before the first ever Canada Citizenship Act? Could I have been “born a Canadian citizen”?
4. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act – Am I still a Canadian or did I lose Canadian citizenship? (The “Sins Of The Father”)
5. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act and the requirements to be “born Canadian”
6. “The S. 877A “Dual Citizen” exemption: I was born a dual citizen! Am I still “taxed as a resident” of Canada?”
7. The S. 877A “Dual Citizen” exemption: “MUST certify tax compliance for the five years prior to relinquishment”
 
Bubblebustin, comments at the Isaac Brock Society:

Being a non-resident US citizen is never about making good decisions for one self – it’s about making the least-worst ones. The fact that I will never be subjected to the US exit tax as long as I remain US tax compliant may reduce the urgency to renounce, but also gives me one other thing to consider when making those least-worst decisions.
Interesting that Canada amended its Citizenship Act in 2009 to allow more people to claim Canadian citizenship partially in response to the Canadian border baby passport crisis in 2007:
http://www.cbc.ca/news/canada/manitoba/border-babies-face-fight-for-canadian-citizenship-1.656376
…and the same year the HEART Act became effective.
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The S. 877A "Dual Citizen" exemption: Am I still "taxed as a resident" of Canada?

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Introduction:
This is the 6th of seven posts analyzing the “dual citizen exemption” to the S. 877A Exit Tax which is found in S. 877A(g)(1)(B) of the Internal Revenue Code. Please remember that the “dual citizen exemption” is available ONLY to those who meet the “five year tax compliance test”.
1. What is the S. 877A(g)(1)(B) “dual citizen exemption” and why does it encourage those “born dual citizens” to not renounce U.S. citizenship?
2. The history of Canada’s citizenship laws: Did the 1947 Canada Citizenship Act affirm citizenship or “strip” citizenship and create @LostCanadians?
3. The S. 877A “dual citizen” exemption – I was born before the first ever Canada Citizenship Act? Could I have been “born a Canadian citizen”?
4. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act – Am I still a Canadian or did I lose Canadian citizenship? (The “Sins Of The Father”)
5. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act and the requirements to be “born Canadian”
6. “The S. 877A “Dual Citizen” exemption: I was born a dual citizen! Am I still “taxed as a resident” of Canada?”
7. The S. 877A “Dual Citizen” exemption: “MUST certify tax compliance for the five years prior to relinquishment”
 


In order to use your “dual citizen from birth” as a defense to being a “covered expatriate” and therefore subject to the S. 877A “Exit Tax”, you must (as both a Canadian and U.S. citizen from birth”) be subject to taxation as a Canadian resident. What does this mean? Are you actually required to live in Canada?
What are the rules for determining whether one is “taxed as a resident of Canada”?
This could be considered from each of a “U.S.” and a “Canadian” perspective.
“Resident in Canada” for tax purposes – from a Canadian Perspective


 
Living in Canada would be a “sufficient condition” for being subject to taxation as a Canadian resident (all Canadian residents pay tax).
Living in Canada may not be a “necessary condition” for being subject to taxation as a Canadian resident.
In other words, one could be treated as a “tax resident of Canada” without actually living in Canada. It seems clear that this is an issue that is decided on a “case by case” basis. That said, incredibly:
There are situations where one would want to be subject to taxation as a Canadian resident.
Here is information from the Canadian Revenue Agency (current as of the date of this post WHICH IS SUBJECT TO  CHANGE).
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The S. 877A "dual citizen" exemption – Born before 1947, Could I have been "born a Canadian citizen"?

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Introduction:
This is the 3rd of seven posts analyzing the “dual citizen exemption” to the S. 877A Exit Tax which is found in S. 877A(g)(1)(B) of the Internal Revenue Code. Please remember that the “dual citizen exemption” is available ONLY to those who meet the “five year tax compliance test”.
1. What is the S. 877A(g)(1)(B) “dual citizen exemption” and why does it encourage those “born dual citizens” to not renounce U.S. citizenship?
2. The history of Canada’s citizenship laws: Did the 1947 Canada Citizenship Act affirm citizenship or “strip” citizenship and create @LostCanadians?
3. The S. 877A “dual citizen” exemption – I was born before the first ever Canada Citizenship Act? Could I have been “born a Canadian citizen”?
4. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act – Am I still a Canadian or did I lose Canadian citizenship? (The “Sins Of The Father”)
5. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act and the requirements to be “born Canadian”
6. “The S. 877A “Dual Citizen” exemption: I was born a dual citizen! Am I still “taxed as a resident” of Canada?”
7. The S. 877A “Dual Citizen” exemption: “MUST certify tax compliance for the five years prior to relinquishment”


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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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Why the S. 877A(g)(1)(B) "dual citizen exemption" encourages dual citizens from birth to remain US citizens and others (except @SenTedCruz) to renounce

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Introduction – The S. 877A(g)(b)(B) “born a dual citizen” defense to being a “covered expatriate”
The “dual citizen” exemption to the S. 877A “Exit Tax” rules is not well understood. It is also not as simple (who could have known) as it initially appears. The focus of this discussion will be on being born both a Canadian citizen and a U.S. citizen. Although the post is “Canada centric” (hey, I am a lawyer in Canada), it will help anybody hoping to benefit from this wonderful “defense”. For the benefit of those born before February 15, 1977 (the date of the second Canada Citizenship Act), I am required to explore some of the history and difficulties of the the 1947 Canada Citizenship Act. This will lead me into a discussion of the “Lost Canadians” citizenship issue – pioneered by Don Chapman.
This is the 1st of seven posts analyzing the “dual citizen exemption” to the S. 877A Exit Tax which is found in S. 877A(g)(1)(B) of the Internal Revenue Code. Please remember that the “dual citizen exemption” is available ONLY to those who meet the “five year tax compliance test”.
1. What is the S. 877A(g)(1)(B) “dual citizen exemption” and why does it encourage those “born dual citizens” to not renounce U.S. citizenship?
2. The history of Canada’s citizenship laws: Did the 1947 Canada Citizenship Act affirm citizenship or “strip” citizenship and create @LostCanadians?
3. The S. 877A “dual citizen” exemption – I was born before the first ever Canada Citizenship Act? Could I have been “born a Canadian citizen”?
4. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act – Am I still a Canadian or did I lose Canadian citizenship? (The “Sins Of The Father”)
5. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act and the requirements to be “born Canadian”
6. “The S. 877A “Dual Citizen” exemption: I was born a dual citizen! Am I still “taxed as a resident” of Canada?”
7. The S. 877A “Dual Citizen” exemption: “MUST certify tax compliance for the five years prior to relinquishment”
Here, we go, Post number 1 …


U.S. Senator Ted Cruz and London Mayor Boris Johnson are “high profile” examples of people who have the “unwanted citizenship” of the countries of their birth. Each of them has found the citizenship of the country of his birth to be inconvenient.
Ted Cruz was born in 1971 in Canada. He was therefore born a Canadian citizen. He claims to have been born to a U.S. citizen mother and was therefore a U.S. citizen by birth. (Whether he qualifies as a “natural born citizen” is a different question.) As a Canadian citizen he had the right (prior to renouncing Canadian citizenship) to live in Canada. Had Mr. Cruz, moved back to Canada, he could have avoided the U.S. S. 877A Exit Tax. Incredible but true. It will be interesting to see whether Mr. Cruz regrets renouncing his Canadian citizenship. As you will see, by renouncing Canadian citizenship, Mr. Cruz surrendered his right to avoid the United States S. 877A Exit Tax.
Here is why …
The S. 877A Exit Tax rules in the Internal Revenue Code, are the most punitive in relation to U.S. citizens living outside the United States (AKA Americans abroad). To put it simply, with respect to Americans abroad, the S. 877A Exit Tax rules:
– operate to confiscate assets that are located in other nations; and
– operate to confiscate assets that were acquired by U.S. citizens after they moved from the United States.
There is not and has never been an “Exit Tax” anywhere else that operates in this way. The application of the S. 877A Exit Tax to assets located in other nations, is both an example of “American Exceptionalism” at its finest and a strong deterrent to exercising the right of expatriation granted in the “Expatriation Act of 1868“.
But, the “Exit Tax” applies ONLY to “Covered Expatriates” and “dual citizens from birth” can avoid being “Covered Expatriates” …
As has been previously discussed, the Exit Tax applies ONLY to “covered expatriates“. There are two statutory defenses to becoming a “covered expatriate”. This post is to discuss the “dual citizen from birth” defense to being treated as a “covered expatriate”. I have discovered that this defense is NOT as well known or understood as it should be.
The statute granting the “dual citizen from birth” defense to “Covered Expatriate” status reads as follows:
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Even in “retirement” Jackie Bugnion writes the best arguments against citizenship taxation ever

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This article originally appeared on the Alliance For The Defence Of Canadian Sovereignty blog.

Introducing Jackie Bugnion …

Jackie Bugnion has published a superb article describing the problems of U.S. citizenship taxation and why the United States must move to residence based taxation. Before, describing her article, for those who don’t know …
On May 7, 2015 I received notification that Jackie Bugnion had submitted her resignation to the Board of ACA “American Citizens Abroad“. I read the notification with a combination of sadness and total appreciation for the incredible efforts that Jackie has made in advocating for the rights of Americans Abroad. Jackie was largely responsible for organizing the “Citizenship Taxation Conference” (featuring the debate between Michael Kirsch and Bernard Schneider) that took place in Toronto on May 2, 2014. Some of you may have had the privilege of meeting her there. It’s unlikely that she could be replaced by any one individual.
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Did the 1947 Canada Citizenship Act affirm citizenship or "strip" citizenship and create @LostCanadians?

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Introduction:
This is the 2nd of seven posts analyzing the “dual citizen exemption” to the S. 877A Exit Tax which is found in S. 877A(g)(1)(B) of the Internal Revenue Code. Please remember that the “dual citizen exemption” is available ONLY to those who meet the “five year tax compliance test”.
1. What is the S. 877A(g)(1)(B) “dual citizen exemption” and why does it encourage those “born dual citizens” to not renounce U.S. citizenship?
2. The history of Canada’s citizenship laws: Did the 1947 Canada Citizenship Act affirm citizenship or “strip” citizenship and create @LostCanadians?
3. The S. 877A “dual citizen” exemption – I was born before the first ever Canada Citizenship Act? Could I have been “born a Canadian citizen”?
4. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act – Am I still a Canadian or did I lose Canadian citizenship? (The “Sins Of The Father”)
5. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act and the requirements to be “born Canadian”
6. “The S. 877A “Dual Citizen” exemption: I was born a dual citizen! Am I still “taxed as a resident” of Canada?”
7. The S. 877A “Dual Citizen” exemption: “MUST certify tax compliance for the five years prior to relinquishment”


Last Friday I was in Ottawa. I walked into a bookstore and saw the book: “The Lost Canadians” by Don Chapman.
lostcanadians
It is a fascinating book. Once again, see how important citizenship is. Citizenship is “invisible” until your citizenship or lack thereof creates problems in your life. Don Chapman’s book “The Lost Canadians” is a history of the problems caused by Canada’s first citizenship act – the 1947 Canada Citizenship Act. Many (but not all) of the problems were caused by  situations where, according to the 1947 Canada Citizenship Act:

  1. According to S. 16 of the 1947 Canada Citizenship Act, a minor would lose his/her Canadian citizenship if the responsible parent became a citizen of another nation and in so doing lost her/her Canadian citizenship; and
  2. According to S. 5 of the 1947 Canada Citizenship Act, a person born in wedlock outside of Canada to a father who was NOT a Canadian citizen and a mother who WAS a Canadian citizen never acquired Canadian citizenship by birth. (Note that in the Benner case the Supreme Court of Canada ruled that this distinction violated S. 15 of the Canadian Charter Of Rights And Freedoms.) This injustice, which meant that those born in the U.S. did NOT acquire dual citizenship at birth (think of the definition of “covered expatriate” of the S. 877A “Exit Tax” rules),  was “fixed in the 2009 changes to the Canada Citizenship Act.
  3. According to S. 6 of the Canada Citizenship Act, some Canadians born outside of Canada had to reside in Canada on their 24th birthday. The failure to meet this residency requirement meant that they “lost” their Canadian citizenship.

These injustices were the reason for the 2009 changes to the Canada Citizenship Act.


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