Category Archives: American expatriates

To punish 100 #GILTI Corporations is to punish millions more individuals

Introduction: As Goes Tax Reform For US Multinationals, So Escalates The Harm To Individual Americans Abroad

The Problem: The proposed changes in International Tax (mostly in relation to corporations) will affect numerically more individuals than corporations. The effects on Americans abroad, who run small businesses outside the United States, will be absolutely devastating.

Two Solutions: Suggestions for how to protect individuals (including Americans abroad) would be to make changes to the Subpart F regime – GILTI, etc. There are at least two ways this change can be achieved:

1. To NOT apply Subpart F to INDIVIDUALS who are shareholders of CFCs.

2. If Subpart F is to apply to individual shareholders of CFCs, it should NOT apply to those individual Americans abroad who meet the residence requirements to use the S. 911 Foreign Earned Income Exclusion. (I.e. people who are almost certainly tax residents of other countries.)

March 25, 2021 – The Senate Finance Committee Held A Hearing Described As:

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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

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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Could The November 3, 2020 US Election Be Decided By Canadian Residents With US/CDN Dual Citizenship?

Introduction

A recent opinion piece published at CBC included:

I have been walking around these days asking myself with only half a smile whether there is some morphed version of the Canadian national anthem which declares: “True expatriate love in all thy sons and daughters command.”

I am doing this because I have been regularly experiencing what you might call expatriate shaming.

There’s been a push — no, make that a shove — to recruit Americans living in Canada who are eligible to vote in the Nov. 3 presidential election to become part of the electoral process. Knowing I was born in the U.S., my friends, neighbours and relatives will ask with a semi-desperate twinge in their voices: “Have you registered to vote in the U.S. election?” And when I say I am registered but I do not plan to vote, they get very angry.

Given what has been going on under President Donald Trump, they exclaim, how can I even think about not making a difference by casting a presidential ballot? (By the way, no one assumes that an expat could possibly vote for Trump, which is interesting.)

https://www.cbc.ca/news/opinion/opinion-expats-canada-presidential-election-vote-1.5750417

The VoteFromAbroad.org Push To Get “US Citizens” (Whoever They May Be) Living In Canada To Vote

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Good discussion on renouncing US citizenship AKA #citizide: The good, the bad and the ugly

This is one of the better interviews regarding US citizenship renunciation, covering a wide range of important issues.

Does the US provide #Americansabroad any benefits? Shouldn’t US #expats who find US @taxationabroad onerous just renounce their US citizenshp?

On May 30, 2020 the following question appeared on Quora and prompted some interesting answers and discussion:

As a defender of American “freedom”, how do you justify the fact that US citizens have to pay taxes to the US even if they live and work abroad (even if they have never been to the US but got their citizenship through their parents)?

I along with others attempted to answer the question. Here is my answer.

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Some of the most interesting analysis comes from the comments to the answers. See the following answer and comment. I have turned David Johnstone’s comment into a post.

One of the answers to the question included the suggestion that:

If someone lives and works abroad as an American citizen, he or she must be enjoying SOME benefits or they would logically renounce their US citizenship instead of paying US taxes. That would be a good solution for anyone facing this question. Just go!

David Johnstone responds to this answer with the following comment:

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Seeking short social media – twitter and facebook posts – explaining why @citizenshiptax and #FATCA are wrong

On June 3, 2020 I plan to do a podcast with Anthony Scaramucci of Skybridge Capital and SALT Conference fame. The June 3 podcast has its roots in the following @Scaramucci tweet which was the subject of discussion at the Isaac Brock Society.

Mr. Scaramucci’s tweet generated a great deal of discussion. If you click on the tweet, you will see, what some of the responses were.

A third party individual has arranged for me to do a podcast with Mr. Scaramucci. This will take place on June 3. In order to provide background information for “citizenship taxation”, FATCA and how they impact Americans abroad, I would ask that you reply to the following tweet. It is your opportunity to contribute to the conversation.

Feel free to leave a comment to this post. I will ensure that it finds its way into the twitter thread.

John Richardson – Follow me on Twitter @Expatriationlaw

Podcast – US Citizenship: Retain or Renounce – Streamlined, Relief Procedures For Former Citizens

(Interesting discussion in the above twitter feed.)

On April 30, 2020 I hosted a discussion with Karen Alpert, Laura Snyder, David Johnstone and Keith Redmond. The discussion touched on a variety of subjects of interest to Americans abroad and Accidental Americans.

The discussion included a segment on the September 2019 IRS Relief Procedures For Former citizens and how they compare to Streamlined compliance.

Bottom Line: It’s complicated. People are different. Different solutions for different people. But, for many:

“All Roads Lead To Renunciation”.

Americans abroad and relief under the CARES Act: How do they get it and how much do they get

The context

Many countries including Canada and the United States have offered monetary relief to help their residents during these difficult times. (In addition to monetary relief, as Virginia La Torre Jeker as reported here and here: the United States has relaxed the deadline for filing 2019 tax returns. Canada has made similar allowances.)

Interestingly, with respect to access to monetary relief:

Canada’s “CERB Benefit” approach appears to be to simply get cash into the hands of affected people. The benefits may or may not be taxable. But, filing a tax return is not a prerequisite to receipt of benefits.

The U.S. “CARES Act” approach appears to use the tax system as the mechanism for delivery of benefits. Early indications suggest that (at least for Americans abroad) filing tax U.S. tax returns will be a necessary condition for the receipt of benefits. Could benefits really be conditional on filing tax returns, when there are so many people who do not meet the threshold for filing U.S. tax returns?

It appears to be much easier to access the relief in Canada than to access the relief in the United States. Additionally, Canadians do NOT need a lawyer or accountant to understand the program. But, that’s an issue for another day …
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Exercising broad regulatory authority, US Treasury has clarified the meaning of “resident” for #FBAR Purposes

Introduction – Looking For Mr. FBAR

What’s new?

I haven’t written a post about Mr. FBAR for quite some time. But, a post about the recent Boyd case at Tax Connections, by Darlene Hart got me thinking about FBAR again. For those interested – where the IRS successfully argued that it was appropriate to impose penalties on each individual account – here is the case:

HBe

And for a hint at the commentary:

Those who know little about Mr. FBAR might find this introduction to FBAR – although written in 2012 – helpful. Incidentally, it’s pretty obvious that Russia’s Foreign Bank account reporting laws were based on an admiration of Treasury’s success with the FBAR rules.

The purpose of this post

The purpose of this post is to explain:

1. The Congressional FBAR statute – Title 31 Section 5314 – which delegates to Treasury the responsibility of determining ALL aspects of FBAR administration including:

– who is subject to FBAR reporting

– the financial thresholds that trigger reporting

2. It is NOT the Congressional FBAR statute that defines the absurdly low $10,000 threshold for reporting. Rather it is Treasury. Although FBAR penalties are now indexed to inflation, the FBAR reporting threshold remains at $10,000. To put it simply: through inflation, Treasury has found a way to increase both the number of FBAR violations and the penalties associated with those violations. (There is a reason it’s called “The FBAR Fundraiser”).

3. It is not Congress that imposes the FBAR requirement on Americans abroad. It is Treasury. In fact, Treasury has recognized that they it has the right to exempt Americans abroad from the FBAR requirements, but has refused to do so. To be specific, Treasury’s 20111 statement found on page 10327 (middle column) was without explanation:

With respect to the comments raised by United States persons living abroad, FinCEN does not believe that an exemption is appropriate simply because a United States person chooses to live outside of the United States.

Treasury offered no reason for this decision.

Commentary on this decision at the Isaac Brock Society may be read here.

4. Treasury has by regulation “tinkered” with the meaning of “resident” over the years. I note that in 2012 (as explained by Phil Hodgen and others) the meaning of “resident” was not defined by statute. Rather, it is through Treasury regulations, that the word “resident” is given meaning. By 2017 Treasury had adopted the statutory meaning of resident used in the Internal Revenue Code (Section 7701(b)). (By expanding the definition of “United States” to include possessions and territories, it appears that Treasury has expanded the penalty base to include U.S. “Nationals”.) The FBAR statute is found in Title 31. The Internal Revenue Code is Title 26. There is neither a requirement nor a reason why Treasury should have used the definition of “resident” in Title 26 as the the meaning of “resident” in Section 5314 of Title 31. There are many different ways of defining “resident”. For example, for U.S. Estate and Gift Tax purposes, “residency” is defined in terms of domicile …

My point is this

Individuals and groups attempting to achieve justice for Americans abroad, Accidental Americans, Green Card Holders and all “U.S. Persons” would be advised to focus their efforts on U.S. Treasury. Yes, the lobbying of Congress should continue. But, meaningful change can be achieved without Congress even being aware of it. U.S. Treasury has the authority and ability to fix the FBAR related penalty and reporting injustices imposed on Americans abroad. But, FBAR is just the beginning. Almost all of the problems of Americans abroad can be fixed by Treasury.

This is the first of a series of posts in which I will explain how Treasury can solve almost all of the problems inflicted by the U.S. Government on Americans abroad.

John Richardson – Follow me on Twitter @Expatriationlaw

Appendix – For those who want to better understand the technicalities: Let me explain you …

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Recently Released Survey Report Dispels Myth of the Wealthy American Abroad and Demonstrates Why Middle Class Americans Abroad Are Forced To Renounce US Citizenship

This blog post features the research of Laura Snyder. It is (I believe) the single and most comprehensive study of (1) the U.S. legislation that is understood to apply to Americans abroad and (2) the disastrous impact this legislation has on them. To put it simply, Congress is forcing Americans Abroad to renounce their U.S. citizenship.

The bottom line is that for Amerians Abroad:

“All Roads Lead To Renunciation!”

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And now over to Laura Snyder with thanks.
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