Tag Archives: IRC S. 7701(a)(50)(B)

A Simple Regulatory Fix For The FATCA problems of dual citizens from birth

Prologue

It is clear that the US extraterritorial tax regime, which imposes taxation on the non-US source income of US citizens living outside the United States, is an outrageous violation of the sovereignty of other nations. It is also an extreme injustice inflicted on US citizens living outside the United States. The US has successfully exported the extraterritorial tax regime to the world through a combination of (1) The US Internal Revenue Code (2) the FATCA IGAs (hunting down US citizens) and (3) the saving clause in US tax treaties (Country X agrees that the US can impose tax on any individual who has been identified as a US citizen and is tax resident of Country X). To understand the interplay between (1), (2) and (3) above see the following article I wrote for the American Expat Finance News Journal.

The three groups most visibly impacted by the US Extraterritorial tax regime (in different ways) and its enforcement outside the United States include:

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Could The 2015 Obama budget proposal for "dual citizens" have been implemented without Congressional approval?

Note: This post was originally written in 2015. Parts of this post have been updated in January of 2021. (The original post is here.) The changes reflect the evolution of my thinking. I now believe that Treasury could (or could have) accomplished much of this proposal through Treasury regulations.

Part 1 – The Obama 2015 Budget Proposal – Change you can believe in?

This was the subject of significant discussion at the Isaac Brock Society. It was also the subject of an insightful blog post by U.S. Tax Lawyer Virginia La Torre Jeker.

It is possible that (at long last) the U.S. government is beginning to recognize that there is a difference between “technical citizenship” and a voluntary U.S. connection indicative of “substantive citizenship” that might (but is not required to) justify taxation of U.S. citizens abroad in the 21st century.

The relevant provision (page 282) includes:

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