Tag Archives: FATCA

Part 1: #FATCA is: Maloney "Overseas Americans Financial Access Act" is the wrong answer to the right question

Introduction and purpose …


On March 18, 2010, President Obama signed FATCA (“Foreign Account Tax Compliance Act”) into law. FATCA was:
– a revenue offset provision to the HIRE Act
– a series of conforming amendments to the Internal Revenue Code that:
(a) imposed requirements on Foreign Banks (Internal Revenue Code Sections 1471 – 1474); and
(b) imposed reporting requirements on individuals (Internal Revenue Code 6038D). Those reporting requirements are expressed in Form 8938.
On September 17, 2019 Representative Maloney introduced H.R. 4362 – “Overseas Americans Financial Access Act” – which introduced changes to BOTH the FATCA requirements imposed on Foreign Banks and requirements imposed on Individuals.
This post discusses ONLY the aspect to the Maloney bill that “relaxes” the requirements on Foreign Banks. I have writen a separate post discussing how the Maloney bill would impact individuals.
(Those interested in learning more about FATCA may be interested in my “Little Red FATCA Book)“.
The Maloney Bill is NOT The Same As SCE Previously Drafted!
The Good News:
The Maloney bill appears to apply to ALL Americans abroad – without regard to whether they are compliant with their U.S. tax filing requirements. (A previous version of SCE applied ONLY to Americans abroad who were compliant with their U.S. tax filing requirements.) Interestingly, the Bill (like Internal Revenue Code 911) would NOT apply to “permanent residents (Green Card Holders) in exactly the same way.
The Bad News:
The bill as drafted gives the banks the option to either continue to report on the depository accounts of Americans abroad or not. This is an option available to the bank. I (along with many others) suggest that banks will NOT be willing to engage with individuals with respect to whether they meet the requirements of the Maloney bill. The exact language of the bill includes:

(i) IN GENERAL.—Unless the foreign financial institution elects to not have this subparagraph apply, such term shall not include any depository account maintained by such financial institution if each holder of such account is—

The Maloney bill is too narrow in application
The bill as drafted applies ONLY to “depository accounts”. This means that the bill applies only to day-to-day bank accounts. It specifically does NOT apply to “custodial accounts”. This means that it excludes investment accounts, brokerage accounts, etc.
Verdict: The Maloney bill is clearly far too narrow. There is no reason why the Maloney proposal should not extend to ALL accounts (depository, custodial or any other kind of account) held by an American living outside the United States.
The technical analysis (which will NOT be of interest to the average reader) follows. It consists of Part A to Part D.
Thoughts and Suggestion
The Maloney bill is symbolic. It is not a serious attempt to alleviate the problems of Americans abroad. Representative Maloney should – as a Democrat – support Representative Holding’s “Tax Fairness For Americans Abroad Act of 2018”.
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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

Breaking Down The Revenue Rule: Proposed US Japan Tax Treaty enhances ability of US to enforce taxation on #Americansabroad in Japan

Prologue – Tax Enforcement And The Revenue Rule

The common law revenue rule was designed so that one country will not enforce tax debts owed to another country. There is general agreement that the “revenue rule” is gradually disappearing. Specifically, the United States has negotiated tax treaties with at least five countries (Canada, Denmark, France, Sweden and the Netherlands) which abrogate the revenue rule. To learn more about the Revenue Rule, see the “Appendix” below.

I have previously suggested how the “assistance in collection provisions” facilitate U.S. citizenship-based taxation. My 2016 comment on “assistance in collection provisions” suggested that U.S. citizenship-based taxation gives the United States strong incentives to end the revenue rule. Specifically …

My point is this:

The “assistance in collection” mechanism in these five treaties can and will be used to allow the United States to enforce direct taxation on those who are “tax residents” of other nations AND on the economies of those other nations.

Given the U.S. practice of “citizenship-based taxation” I can’t understand why any country would enter into an “assistance in collection” treaty with the United States. Interestingly the Canada U.S. Tax Treaty does create an exemption for those who were Canadian citizens at the time tax debt arose. The Denmark U.S. Tax Treaty has a similar provision exempting citizens of Denmark.
Conclusion: It is quite clear that tax treaties which include “assistance in collection provisions” (abrogating the Revenue Rule) are overwhelmingly to the benefit of the United States. Only the United States (and the nation of Eritrea) impose taxation based on citizenship (and therefore impose taxation on the residents of other nations). These five treaties allow the United States to extend its tax base into the economies of other nations.

Present Day – June 25, 2019

The following tax treaty protocols were approved by the Senate Foreign Relations Committee:
The Protocol Amending the Convention between the United States of America and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and its Protocol, signed at Madrid on February 22, 1990 (Treaty Doc. 113-4).

The Protocol Amending the Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income, signed at Washington on October 2, 1996, signed on September 23, 2009, at Washington, as corrected by an exchange of notes effected November 16, 2010 and a related agreement effected by an exchange of notes on September 23, 2009 (Treaty Doc. 112-1).
The Protocol Amending the Convention between the Government of the United States of America and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and a related agreement entered into by an exchange of notes (together the “proposed Protocol”), both signed on January 24, 2013, at Washington, together with correcting notes exchanged March 9 and March 29, 2013 (Treaty Doc. 114-1).

The Protocol Amending the Convention between the Government of the United States of America and the Government of the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, signed on May 20, 2009, at Luxembourg (the “proposed Protocol”) and a related agreement effected by the exchange of notes also signed on May 20, 2009 (Treaty Doc. 111-8).

Each of these four treaty protocols has updated information exchange and/or collection provisions. The proposal in the treaty with Japan is most interesting and most worrying.

The Japan protocol includes a provision for assistance in collection that is somewhat more expansive than is contained in similar treaties (Canada, Sweden, Denmark, France and Netherlands). Japan does NOT normally allow dual citizenship. Therefore the collection provision in ARTICLE 27 the collection provision could possibly be used as a mechanism to force Japan to enforce U.S. taxation on U.S. citizens who are resident in Japan!!

Time will tell.

The new ARTICLES 26 and 27 of the U.S. Japan Tax Treaty (if approved by the Senate) will be:
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Part 14 in series: The Emotional Toll of US Non-Resident Taxation and Banking Policies – “Maybe that’s the Only Way Out”

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).
You will find Part 1 to Part 11 of this series of posts here.
Laura Snyder discusses the “emotional toll of U.S. non-resident taxation and banking policies
Laura Snyder has written (in addition to her original four posts) a series of five posts describing and exploring “The Emotional Toll of US Non-Resident Taxation and Banking Policies. Part 10 of this series (comments of Nando Breiter) was a prologue to Ms. Snyder’s five posts.
Now over to Laura …
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Part 12 in series: The Emotional Toll of US Non-Resident Taxation and Banking Policies – “I Love the US but Feel Betrayed”

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).
You will find Part 1 to Part 11 of this series of posts here.
Laura Snyder discusses the “emotional toll of U.S. non-resident taxation and banking policies
Laura Snyder has written (in addition to her original four posts) a series of five posts describing and exploring “The Emotional Toll of US Non-Resident Taxation and Banking Policies. Part 10 of this series (comments of Nando Breiter) was a prologue to Ms. Snyder’s five posts.
Now over to Laura …
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Part 10 of series: The Psychological Torment Of Americans Who Live Outside The United States

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).

You will find Part 1 to Part 9 of this series of posts here.
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I began this “Citizenship Solutions blog” in 2014. The blog included a page (not very visible) called:
“Emotional counselling for those threatened by the FATCA Roundup”

The comments (occasional as they may be) are significant. The comments include a “ping back” to a discussion of great interest which took place at the Isaac Brock Society.
Laura Snyder has written (in addition to her original four posts) a series of five posts describing and exploring “The Emotional Toll of US Non-Resident Taxation and Banking Policies”. This post is a prologue to Ms. Snyder’s five posts.

Before returning to Laura, Nando Breiter will introduce us to “some” of the psychological and emotional aspects of trying to survive as an American abroad in an FBAR and FATCA world.
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Part 5 of series: What does U.S. "citizenship-based taxation" actually mean and to whom does it actually apply?

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 fifth of a series of posts that reflect views and experiences of Americans abroad who are experiencing the reality of actually living as an American abroad in an FBAR and FATCA world. (The first post is here.) The second post is here. The third post is here. The fourth post is here. I think it’s important to hear from people who are actually impacted by this and who have the courage to speak out. The “reality on the ground” is quite different from the theory.
I hope that this series of posts will give you ideas for questions and concerns that you would like to have addressed in the May 17, 2019 Tax Connections – Citizenship Taxation discussion.
Laura Snyder has graciously contributed the first four posts of this series. In her series of four posts, she has outlined the origins and requirements of U.S. citizenship-based taxation.


Ms. Snyder grew up in the United States and moved to Europe as an adult. The tone and pain reflected in her writing suggests that she truly identifies as being a citizen of the United States.
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The United States imposes a separate and more punitive tax system on US dual citizens who live in their country of second citizenship

Prologue

Do you recognise yourself?

You are unable to properly plan for your retirement. Many of you with retirement assets are having them confiscated (at this very moment) courtesy of the Sec. 965 transition tax. You are subjected to reporting requirements that presume you are a criminal. Yet your only crime was having been born in America (something you didn’t even choose) and attempting to live as a U.S. tax compliant American outside the United States. Your comments to my recent article at Tax Connections reflect and register your conviction that you should not be subjected to the extra-territorial application of the Internal Revenue Code – when you don’t live in the United States.

The Internal Revenue Code: You can’t leave home without it!

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Under the Starry Flag by @SalyerLucy shows how the history of citizenship struggles repeat themselves: The USA of the 21st Century is like Britain in the 19th Century

Under the Starry Flag – exploring the historical context of the 1867 Expatriation Act


In 2018 Professor Lucy Salyer of the University of New Hampshire published “Under the Starry Flag” – a book largely about the 1868 Expatriation Act. The book describes a period in American history where Britain treated its “subjects” as having perpetual loyalty to the British Crown. To put it simply: One could NOT emigrate to America and expatriate. No matter what one did, those who were born British Subjects were destined to die British Subjects.
The above tweet links to an interview of Professor Lucy Salyer conducted on February 9, 2019. The interview is about Professor Salyer’s new book “Under the Starry Flag”. It is a fascinating (brilliantly researched) work. The publisher describes the book as:

The riveting story of forty Irish Americans who set off to fight for Irish independence, only to be arrested by Queen Victoria’s authorities and accused of treason: a tale of idealism and justice with profound implications for future conceptions of citizenship and immigration.
In 1867 forty Irish American freedom fighters, outfitted with guns and ammunition, sailed to Ireland to join the effort to end British rule. Yet they never got a chance to fight. British authorities arrested them for treason as soon as they landed, sparking an international conflict that dragged the United States and Britain to the brink of war. Under the Starry Flag recounts this gripping legal saga, a prelude to today’s immigration battles.
The Fenians, as the freedom fighters were called, claimed American citizenship. British authorities disagreed, insisting that naturalized Irish Americans remained British subjects. Following in the wake of the Civil War, the Fenian crisis dramatized anew the idea of citizenship as an inalienable right, as natural as freedom of speech and religion. The captivating trial of these men illustrated the stakes of extending those rights to arrivals from far-flung lands. The case of the Fenians, Lucy E. Salyer shows, led to landmark treaties and laws acknowledging the right of exit. The U.S. Congress passed the Expatriation Act of 1868, which guarantees the right to renounce one’s citizenship, in the same month it granted citizenship to former American slaves.
The small ruckus created by these impassioned Irish Americans provoked a human rights revolution that is not, even now, fully realized. Placing Reconstruction-era debates over citizenship within a global context, Under the Starry Flag raises important questions about citizenship and immigration.

In the 19th Century Britain regarded its subjects as subjects for life. Many Americans abroad will appreciate how the book applies to their lives in the 21st century. To put it simply: Americans abroad are treated as primarily Americans citizens – even though they are often citizens and residents of other countries. The FATCA IGAs are the most obvious example of this reality. (Shades of the British – History does have a way of repeating itself.) Renunciation is desirable, difficult, expensive (and for those who are in the U.S. tax system – inevitable). For many Americans abroad:

All Roads Lead To Renunciation.”

Furthermore, dual citizens (for example the accidental Americans in France) are beginning to request that their countries of citizenship/residence intervene and assist their citizens in breaking ties with the United States. History does repeat itself.
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