Category Archives: Uncategorized

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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FinCEN Changes FBAR Deadline Again AND AGAIN

Republished with permission. This post was written by Helen Burggraf and originally appeared on October 16, 2020 on the American Expat Financial News Journal website.

Another Update October 19, 2020 – The Filing Deadline Is Now October 31, 2020

And back to the original post …

The U.S. Financial Crimes Enforcement Network has quietly removed from its website its surprise announcement, posted just two days ago, that the final deadline for Foreign Bank Account Report (FBAR) filings had been moved to Dec. 31, from Oct. 15 (yesterday).

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Treasury exempts applicable “tax-favored foreign trusts” from the Form 3520 (and therefore Form 3520A) requirement

Introduction – A small step for forms, one giant leap for “formkind”

It’s true. Many Americans abroad may no longer be required to file Form 3520 and Form 3520A to report their lives abroad! Early indications appear that many Americans will (assuming their retirement vehicle does qualify as a trust) not be required to report on Form 3520. This new initiative from Treasury a positive step in the right direction.

I have long thought that Treasury could solve many of the problems experienced by Americans abroad. Here is a wonderful example of Treasury taking the initiative to clarify the obvious:

Americans abroad do NOT use non-U.S. pension plans and non-U.S. tax-advantaged investing accounts to evade U.S. taxes. Hence, there is NO reason for the Form 3520 reporting requirement. This is an example of the tax compliance industry sitting down with Treasury, explaining a problem and getting a resolution. I suggest (and hope) that the same can be done for PFIC (Form 8621), Small Business Corporations (Form 5471) and other penalty-laden forms.

Yes, this announcement from Treasury in the form of RP 20-17 is a great achievement. Although it certainly doesn’t solve all the problems, it’s:

A small step for forms, one giant leap for “formkind”

The background to this problem – It starts in 1996 (same year as the beginning of the Exit Tax)…

Since 1996 Internal Revenue Code 6048 has required extensive reporting of almost any interaction with a foreign trust. Treasury has required that the reporting take place on Forms 3520 and 3520A. The forms are complex and subject to the draconian penalty regime described in Internal Revenue Code Section 6677. In order for an entity to be a foreign trust, it must be a trust. A “trust” for IRS purposes is defined by the Treasury Regulations as:

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Part 33 – US residents bring suit alleging that the Section 965 US Transition Tax is Unconstitutional

A lawsuit alleging that the Section 965 transition tax is unconstitutional affords the opportunity to write Part 33 in my series of posts about the U.S. Transition Tax.

Part 22 of this series included a discussion of a paper by Sean P. McElroy which argued that the Section 965 repatriation tax was unconstitutional for the following reasons explained in the abstract:

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The 2019 IRS "expatriation" compliance campaign: Getting ahead of the fear mongering

On July 19, 2019 the IRS announced six new compliance initiatives.
Of particular interest to U.S. citizens and permanent residents (Green Card holders) is what is described as:

Expatriation
U.S. citizens and long-term residents (lawful permanent residents in eight out of the last 15 taxable years) who expatriated on or after June 17, 2008, may not have met their filing requirements or tax obligations. The Internal Revenue Service will address noncompliance through a variety of treatment streams, including outreach, soft letters, and examination.

What is expatriation?
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Letting go and moving on: So long @JayNoonez and thanks for your efforts over the years

Introduction:
https://twitter.com/millionsofmoth1/status/1152476890260598784
When it comes to Americans abroad, a community is the same as a village.


Which is why it saddens me to read …


Please remember that …


Thanks to @JayNoonez for his contributions over the years! He should be recognized as an “Unsung Hero Of Life“.
John Richardson – Follow me on Twitter @Expatriationlaw

Part 8 of series: Former ACA Tax Director Jackie Bugnion recalls the 2014 Kirsch Schneider debate on "citizenship-based taxation"

Before moving to the post, if you believe that Americans abroad are being treated unjustly by the United States Government: Join me on May 17, 2019 for a discussion of U.S. “citizenship-based taxation” as follows:


You are invited to submit your questions in advance. In fact, PLEASE submit questions. This is an opportunity to engage with Homelanders in general and the U.S. tax compliance community in particular.
Thanks to Professor Zelinsky for his willingness to engage in this discussion. Thanks to Kat Jennings of Tax Connections for hosting this discussion. Thanks to Professor William Byrnes for his willingness to moderate this discussion.
Tax Connections has published a large number of posts that I have written over the years (yes, hard to believe it has been years). As you may know I oppose FATCA, U.S. citizenship-based taxation and the use of FATCA to impose U.S. taxation on tax residents of other countries.
Tax Connections has also published a number of posts written by Professor Zelinsky (who apparently takes a contrary view).
This is the eigth of a series of post I have written as a run up to the May 17, 2019 Tax Connections discussion about U.S. citizenship-based taxation. You can read the previous posts here.
Introducing Jackie Bugnion …
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