Monthly Archives: September 2014

Weil – Sovereign Citizen: Denaturalization and the Origins of the American Republic

The Question:

As governments around the world threaten to strip people of their citizenship, one must ask:

Under what circumstances (if any) can a country “strip” a citizen of his or her citizenship?

I have discovered a fascinating book by Professor Patrick Weil titled:

“The Sovereign Citizen: Denaturalization and the Origins of the American Republic”

A description of the book includes:

Present-day Americans feel secure in their citizenship: they are free to speak up for any cause, oppose their government, marry a person of any background, and live where they choose-at home or abroad. Denaturalization and denationalization are more often associated with twentieth-century authoritarian regimes. But there was a time when American-born and naturalized foreign-born individuals in the United States could be deprived of their citizenship and its associated rights. Patrick Weil examines the twentieth-century legal procedures, causes, and enforcement of denaturalization to illuminate an important but neglected dimension of Americans’ understanding of sovereignty and federal authority: a citizen is defined, in part, by the parameters that could be used to revoke that same citizenship.

The Sovereign Citizen begins with the Naturalization Act of 1906, which was intended to prevent realization of citizenship through fraudulent or illegal means. Denaturalization-a process provided for by one clause of the act-became the main instrument for the transfer of naturalization authority from states and local courts to the federal government. Alongside the federalization of naturalization, a conditionality of citizenship emerged: for the first half of the twentieth century, naturalized individuals could be stripped of their citizenship not only for fraud but also for affiliations with activities or organizations that were perceived as un-American. (Emma Goldman’s case was the first and perhaps best-known denaturalization on political grounds, in 1909.) By midcentury the Supreme Court was fiercely debating cases and challenged the constitutionality of denaturalization and denationalization. This internal battle lasted almost thirty years. The Warren Court’s eventual decision to uphold the sovereignty of the citizen-not the state-secures our national order to this day. Weil’s account of this transformation, and the political battles fought by its advocates and critics, reshapes our understanding of American citizenship.

Based on the interviews below, it is clear that this is an interesting, well-researched and valuable contribution to the discussion of the relationship between the citizen and the state. I’m sold and will purchase the book.

Of interest to Americans abroad is Chapter 6 which is titled:

Chapter 6: In the Largest Numbers: The Penalty of Living Abroad

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If (U.S. Person) then (Mr. #FBAR Ms. #PFIC and Uncle #FATCA) = Few investment and financial planning opportunities).

Deborah Hicks International – U.S. Expat Tax Conference – November 13, 14/2014 Toronto.

US expat tax and finance conference Toronto 2014 leaflet

This conference is similar to one that has take place in London, U.K. It is designed for tax and investment professionals who deal clients who are U.S. persons.

It is described as:

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Reagan: #FATCA “Facts are stubborn things” – Kennedy: “Opposite of the truth is the myth”

The U.S. Treasury has been working overtime to:

1. Persuade the world’s sovereign countries to cede their sovereignty to and “Pledge FATCA obedience” to the U.S.

2. “Make the world believe” that Treasury has been and will continue to be successful.

In order to achieve this, Treasury has created what I call “the pretend IGA”. A “pretend IGA” is where a country has NOT signed an IGA, but it is anticipated (presumably by Treasury) that an IGA will be signed. That is to say, that an IGA is a “done deal”.

The tax compliance complex has (for the most part) joined the Treasury Chorus to sing to the tune of:

It’s a small (FATCA) world after all“.

The problem is that neither Treasury nor the FATCA Compliance Complex deal in facts. They deal in “myths”.

Facts are stubborn things

An interesting post appears on U.S. tax lawyer Virginia La Torre Jeker‘s blog which considers the “FATCA of the matter”.
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#FATCA: Where citizenships collide – Turning #Americansabroad over to the IRS and Foreign Governments

I was recently attempting to explain FATCA, FBAR and U.S. taxation practices to a friend. After deciding that I was NOT fabricating a story, she remarked:

“It’s unjust! It’s inhumane! I didn’t choose where I was born!”

(Fortunately she was not born in the U.S.).

The truth is that issues of FATCA, FBAR and citizenship-based taxation are more “citizenship problems” than tax problems.

Incompatible tax systems create problems for people subject to both tax systems.

Incompatible citizenship laws create problems for people who have dual citizenship.

U.S. tax lawyer, Virginia La Torre Jeker has just published a fascinating post where she describes the problems of “incompatibility of citizenship”. Ms. Jeker describes the problems where a country:

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For those born in the U.S. – Circumstances of your birth affect the outcome of your life and retirement

 

This Global News video shows the sad story of of a Canadian who was subject to U.S. taxes. What is not clear in the video is the reason for the tax. It appears that this was a result of the U.S. Estate tax. Therefore, In infer that her late husband must have been a U.S. citizen.

Whatever the reason, this story is one more example of the pain and unfairness that takes place when U.S. citizens attempt to live outside the United States.

 

When it comes to #FATCA there are four kinds of #Americansabroad

Reflecting on my day I realized that there are really four kinds of U.S. Taxable Persons abroad. Each one of them has his own set of problems. Interestingly, my day included discussions with a member of each group.

They can be grouped as follows:

File U.S. tax returns?     U.S. tax compliant?  What is their problem?

Yes                                               Yes                    Inability to live normal life*

Yes                                               No                     Subject to penalties for mistakes**

No                                                Yes                    Don’t have any income***

No                                                No                    OMG moment is coming****

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Taxation of #Americansabroad: @Thunfinancial Wall Street Journal Op-Ed follows article from @SaundersWSJ

The above tweet references an Op-Ed by Thun Financial’s David Kuenzi which recently appeared in the Wall Street Journal. This is a nicely done article which adds reinforcement to the excellent journalism by the Wall Street Journal’s Laura Saunders and Liam Pleven which appeared in the Wall Street Journal on June 18, 2014 and (discussing the new IRS Streamlined procedures) on  June 19, 2014. 

(The new Streamline Procedures were discussed by various “stakeholders” extensively:

The OVDP and  Streamlined Historians – Perspectives  of various Americans Abroad:

– at the Isaac Brock Society here and here

– by American Citizens abroad here

The second citizenship advocates:

– by Mark Nestmann here

The accounting firms:

– from Frank Hirth (U.K. based) here

The “What is non-willfull” group  here:

– by Stephen Mopsick here and earlier here

– by Patrick Martin here

– more by Patrick Martin here

– by Jack Townsend here

– by Robert Steinberg (particularly good analysis) here

The “Technicians” AKA “who is streamlined intended for” here:

– by Moodys here

– by Virgina La Torre Jeker here

– by Jack Townsend here

– by Robert Steinberg here)

Those who recognize that citizens of certain countries may have a second level of “home country specific issues” (Iran):

– by Virginia La Torre Jeker here

The Logistics – How to manage Streamlined “conFORMity”:

– by Virginia La Torre Jeker here

Interestingly both Mr. Kuenzi (as a presenter) and Ms. Saunders (as a journalist) attended the recent conference on U.S. Citizenship-based taxation conference which was held at the University of Toronto on May 2, 2014. The Toronto citizenship-based taxation Conference was a great success. Those interested can read: Thoughts and reflections on the Toronto Conference on the taxation of Americans abroad in the 21st century.

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