Concern as Brady tax bill fix legislation lacks called-for fixes for US expats https://t.co/1Tcpa5izpy
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 29, 2018
Introduction – “Indifference being the worst form of abuse”
"Indifference and neglect often do much more damage than outright dislike." https://t.co/dxiMjWIltE via @BrainyQuote pic.twitter.com/wi3JS4WCGg
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 29, 2018
A quick summary of this post:
On November 26, 2018 the House Ways and Means Committee under the leadership of Chairman Brady announced a bi-partisan bill which contains a number of “Technical Fixes” to the December 22, 2017 Tax Cuts and Jobs Act. While specifically addressing the Sec. 965 transition tax, the bill contains neither mention nor relief for Americans Abroad who are at risk of having their retirement pensions confiscated by the U.S. Government. (While the transition tax may actually be beneficial for Homeland Americans, it is simply devastating for Americans abroad.)
In other words: The proposed legislation is NOT neutral. By specifically addressing the Sec. 965 transition tax and NOT providing relief for Americans abroad, it has exacerbated a difficult situation. My understanding is that many Americans abroad have requested filing extensions to December 15, 2018. The failure of this proposed bill to provide relief means that many Americans abroad with small businesses are in an untenable situation where compliance may well be impossible.
My analysis and discussion follows …
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Jack Russell kept inside it's yard by the "invisible dog fence" is exactly like an individual U.S. citizen who uses a CFC to attempt to carry on a business outside the USA under the new #GILTI regime. Q. What kind of dog are you? A. Ask your tax accountant https://t.co/BQb1RePQ3f
— U.S. Transition Tax – Subpart F and #GILTI (@USTransitionTax) January 29, 2018
2018 has been a difficult year for Americans living outside the United States who operate small businesses through corporations. The tax compliance community is still interpreting Section 965 of the Internal Revenue to require them to “turn over” a percentage of their assets to the U.S. government.
For those who don’t understand what the “transition tax” is:
My comment to the article on the @USTransitionTax that appeared in today's Financial Times https://t.co/zBdXxk8nGz. The actual article is here https://t.co/Ch99owa1Ri pic.twitter.com/Bt0Vems8t2
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) February 5, 2018
Okay, sorry the text in the above image is a little small. But, my point includes, that the “transition tax” is: (1) retroactive taxation (2) on income that was specifically NOT subject to U.S. taxation at the time that it was earned (3) without any triggering event whatsoever (4) that is an attempted tax grab before the host country can tax it (5) in a way that absolutely results in double taxation (6) that is in effect a confiscation of the “pensions” of Americans abroad. Yes, it’s true and NO U.S. TAX PROFESSIONAL HAS EVEN ATTEMPTED TO SUGGEST THAT POINTS 1 – 6 ARE FALSE.
The purpose or this post is to:
1. Review what has happened during the last year; and
2. Strongly encourage you to support Monte Silver (a U.S. tax lawyer based in Israel) in his organizing a lawsuit against U.S. Treasury for not having complied with various statutes in the implementation of this law. See Silvercolaw.com or contact Monte at ms@silvercolaw.com
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Should other nations be permitted to impose taxation on U.S. citizens or corporations?
At first blush, the question sounds absurd. Is there something about being a U.S. citizen that should exempt individuals from taxation in or by a another country? Some time ago, this question was explored in a discussion on a Facebook group. Interestingly, most participants thought the discussion was absurd and did not take it seriously. But truth can be stranger than fiction. When it comes to taxation there can be some benefits to being a U.S. citizen. In fact, in certain cases, U.S. citizenship can act as a “cloaking device” – a device that shields you from taxation in another country.
The two certainties are “death and taxes” …
It’s in the area of “death” where U.S. citizenship can be helpful. Sometimes it can be to your benefit to die as a U.S. citizen. Sometimes U.S. citizenship can be helpful when somebody dies leaving you part of their estate.
What follows are some categories where U.S. citizenship can protect you from taxation. These possibilities should be considered prior to renouncing U.S. citizenship.
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Beginnings …
A recent comment at the Isaac Brock Society includes:
It’s too bad I didn’t put my Canadian corporation in an S Corp before I knew I was a US taxpayer. I must have misplaced my crystal ball at the time. As I had when I sold my house in Canada.
What a clusterfu@k!
On November 15, 2018 I did a second interview (first interview October 16, 2018 here) with Monte Silver and his Sec. 965 advocacy. The video was featured on a post at CitizenshipTaxation.ca.
Orwell observed that Some individuals are more equal than others: "John Richardson @ExpatriationLaw and Monte Silver @MonteSilver1: The Sec. 965 @USTransitionTax & Sec. 951A #GILTI Taxes – Next steps" https://t.co/iAlB3Rs472 via @CitizenshipTax
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 17, 2018
If you have not watched the November 15 interview, I suggest that you begin by watching the video (click on the above tweet). The most significant part of the interview is where Sec. 965(I) is discussed. Interestingly Sec. 965(I) provides a transition tax exemption to individuals who are the shareholders of an “S Corp”. To understand the mechanism for the exemption, click on the link in the following tweet:
Good explanation of how the "Shareholders of S Corps can defer payment of the @USTransitionTax https://t.co/stbvc9cOWZ
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 18, 2018
This interesting exemption is available only to individuals who are shareholders of S corporations and not to other individuals. The interview also included some discussion of the fact that “S Corp” shareholders have the benefit of lobbying from a powerful lobbying association – S-Corp. The interview ended with Monte Silver describing the probability that the Sec. 965 transition tax issue is headed to the courts.
But, in the “Pay To Play Casino” that America has become:
"All animals are equal, but some animals are more equal…" https://t.co/vPJyQeuOlW via @BrainyQuote
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 17, 2018
Why are individuals who are the shareholders of an S corporation, which owns the shares of a CFC, more equal than those individual shareholders who own the shares of a CFC directly?
Let’s see …
Purpose of this post …
The purpose of this post is to explore the following issues/questions:
1. What exactly is an S Corporation?
2. How the requirements of an S Corporation reflect that that S Corps are the “small business corps” of America
3. How the S Corporation is taxed and why that taxation is consistent with the S Corporation as an entity for small business
4. An interesting history of the S Corporation
5. Why most Americans abroad are like most small business owners in America (and presumably should have similar tax treatment)
6. How the S-Corp association lobbying in DC has likely resulted in favourable “transition tax” treatment for S-Corps
7. The argument that – with respect to the “transition tax” that Americans abroad with small businesses should be treated the same way as shareholders of U.S. S-Corps
8. Should Americans abroad who don’t renounce U.S. citizenship consider using U.S. Corps to own and operate their businesses abroad?
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Prologue – October 16, 2018 – Monte Silver explains the “Transition Tax” in general …
For those who missed the first interview (October 16, 2018) with @MonteSilver1 about the @USTransitionTax here it is: https://t.co/3eZcZIci2u
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 17, 2018
Internal Revenue Code – Section 965(i) begins with …
https://www.law.cornell.edu/uscode/text/26/965
"All animals are equal, but some animals are more equal…" https://t.co/vPJyQeuOlW via @BrainyQuote
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 17, 2018
(i) Special rules for S corporation shareholders
(1) In general
In the case of any S corporation which is a United States shareholder of a deferred foreign income corporation, each shareholder of such S corporation may elect to defer payment of such shareholder’s net tax liability under this section with respect to such S corporation until the shareholder’s taxable year which includes the triggering event with respect to such liability. Any net tax liability payment of which is deferred under the preceding sentence shall be assessed on the return of tax as an addition to tax in the shareholder’s taxable year which includes such triggering event.
Only “some” individuals are subject to the Sec. 965 US “Transition Tax” – how “some individuals are more equal than others” …
When it comes to @USTransitionTax as Orwell would have said: "All individuals are equal, but some individuals are more equal than others" – those who own their corp through an "S corporation" get continued deferral and NOT subject to Sec. 965 confiscation https://t.co/XldUHlsLcT
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 17, 2018
The complete second interview with Monte Silver – The unfairness to Americans abroad is compounded…
The general message …
Our next webinar will provide you with a comprehensive overview of the US #ExitTax & all of its implications for US nationals looking to give up their passport. Starring @ExpatriationLaw & coming on Thursday, December 6 at 13:00 GMT. Hope you can make it! https://t.co/robcS2cFBq pic.twitter.com/9CZQaW0ZO3
— taxlinked.net (@Taxlinked) November 14, 2018
More details – hope to meet you online on December 6, 2018
Part 1 – Understanding the “Transition Tax” issue and what it means for Americans Abroad
As reported at Tax Connections:
Understanding the @USTransitionTax issue, what it means for #Americansabroad and why your support is needed NOW: "Letter To The Senate Finance Committee On The Effects Of The Transition Tax On Americans Abroad" https://t.co/PJVch4LqV7 via @taxconnections
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 13, 2018
Part 2 – The “Transition Tax” Battle continues …
As 2018 comes to a close, the “Retain or Renounce” discussion intensifies. American Citizens Abroad (ACA) writes that …
Excellent! @ACAVoice makes case for USA to stop imposing worldwide taxation on people with @taxresidency in other countries and do not live in the USA – #Americansabroad are on life support https://t.co/hJUuo0CBlF pic.twitter.com/rBimCprWky
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 2, 2018
The @citizide twitter account frames the question as follows …
In an #FBAR and #FATCA world #Americansabroad ask: “To retain or renounce US citizenship, whether tis better to live free ..” – #citizide explore this question
The hashtag #citizide has been established in the twittersphere …
The “Retain or Renounce” question is discussed by a wide range or professional advisers …
To hear the snippets of the discussion continue on …
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