Category Archives: FATCA

Did Mr. #FBAR really pay a surprise visit to Canada?

The FBAR Chronicles continue …

First, A Public Service Announcement – Mr. FBAR Get’s A New Filing Due Date

 

This is one more of my posts about Mr. FBAR. Mr. FBAR is a mean, nasty vicious thug who has no place in any civilized society.

Thomas Jefferson once said:

Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.

My thoughts are that:

Were it left to me to decide whether we should have FBAR without outlaws, or outlaws without FBAR, I should not hesitate a moment to prefer the latter.

Unfortunately, Mr. FBAR has become the new symbol of American citizenship. Furthermore, Mr. FBAR disproportionately affects the local bank accounts of Americans abroad – becoming (in effect) a form of “domestic terrorism” against U.S. citizens living outside the United States.

Mr. FBAR As Applied To The Canada U.S. Dual Citizen …

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US Taxation of the Australian Superannuation? – No, #DontMessWithTheSuper!

I recently engaged in a discussion with people who are worried that they might be “U.S. Persons” living in Australia. Their primary concern (and understandably so) is the possible U.S. taxation of their Australian Superannuations. For many, the “Super” is considered to be their most important retirement planning asset.

In a FATCA world, where  possible “USness” is now an issue, one must consider whether U.S. tax laws, effectively disable a group of Australians from effective retirement planning. But, hey! Even Americans should have the right to plan for retirement? Shouldn’t they?

There have been a number of recent articles attempting to understand the possible U.S. taxability of the Australian Super. I don’t know whether this is good or bad.

Most of these articles (what would you expect?) attempt to analyze the issue from the perspective of U.S. law – specifically the Internal Revenue Code. Rightly or wrongly, this approach assumes that the USA has the right to impose taxation on the retirement plans created by other nations. I don’t believe that this should be assumed!

In any event, what follows is a presentation that I created to discuss this issue. It is NOT intended to be a legal analysis. (If you want trouble, call up a lawyer!) It is intended to be a “contextual” and “common sense” analysis. Sooner or later, all laws (if they are to survive) must move towards “common sense”.

My message to residents of Australia is this:

Your Superannuation is far too important to be left in the hands of the tax professionals!

You will find “my thoughts” by clicking on the following:

The Australia Superannuation For Dummies

Feel free to leave “your thoughts” as comments to this post.

John Richardson

Around the world in 192 pages: Experiences of #Americansabroad in an #FBAR and #FATCA world

Here it is:

richardsonkishcommentsamericansabroadapril152015internationaltax-2

This is one of seven parts of the Richardson Kish submissions to the Senate Finance Committee in April of 2015. I thank Patricia Moon for her unbelievable effort in putting this document together!

And speaking of Americans abroad in an FBAR and FATCA world, you might like to read:

The message is:

When In Rome, Live As A Homelander

#YouCantMakeThisUp!

John Richardson

 

Is Form 8938 required by “Green Card Holders” who are nonresidents by “treaty tie breaker”? – Any exemption is the result of “IRS grace”

Summary:

The context: Form 8938 was created by the IRS to meet the reporting requirements mandated by Internal Revenue Code S. 6038D. S. 6038D was mandated by S. 511 of the HIRE Act.

On March 18, 2010 President Obama signed the HIRE Act into law. The HIRE Act had two targets. The first target was the Foreign Financial Institutions that were willing to do business with U.S. citizens. The second target was Americans citizens who attempted to do business with any “non-U.S. bank or other financial institution.

The first target – Foreign Financial Institutions: The HIRE Act introduced Chapter 4 of Subtitle A – AKA FATCA – into the Internal Revenue Code. Pursuant to Chapter 4 Foreign Financial Institutions are threatened with a 30% sanction for failing to “Review, Identify and Report” those who the U.S. claims as “U.S. persons“. The Canadian FATCA lawsuit, launched by the Alliance For The Defence of Canadian Sovereignty, is related to the reporting requirements imposed on the banks.

The second target – American citizens attempting to use Foreign Financial Institutions outside the United States: The second group is composed of “individuals” who are required to disclose information to the IRS. The HIRE Act imposed extraordinary reporting requirements on Americans abroad. The most visible – Form 8938 – is an intrusive form that is aimed at targeting “individuals”. The term “individuals” means every human life form on the planet.  The U.S. based “FATCA Legal Action” lawsuit (which was condemned by Democrats abroad), is a lawsuit that is primarily intended to attack the requirements imposed on individual Americans abroad.

Internal Revenue Code Section 6038D and “Foreign Asset Disclosure”

A previous post discussed the interaction among: the Internal Revenue Code, tax treaty tie breaker rules and whether a Green Card Holder is a U.S. resident for FATCA purposes. This post is to discuss the form 8938 requirement and how it applies to Green Card Holders (resident aliens) who are deemed by treaty to be “nonresidents” under a treaty “Tie Breaker” rule.

The statute – Internal Revenue Code Section 6038D – gives the “Secretary” (meaning IRS) the right to create specific exemptions. “Nonresident aliens” is one group that the IRS is allowed to specifically exempt from the form 8938 requirement. Green Card Holders are statutory “resident aliens” under S. 7701(b) of the Internal Revenue Code. Yet, in some cases “Green Card Holders” can be treated as “nonresident aliens” pursuant to a tax treaty.

What is a “Treaty Tie Breaker” rule?

It’s possible for a person to be treated as a “tax resident” of two countries. In this case a Tax Treaty can be used to determine in which country the person is a “tax resident”. For example Section 2 of Article IV of the Canada U.S. Tax Treaty says:

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

(a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him; if he has a permanent home available to him in both States or in neither State, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);

(b) if the Contracting State in which he has his centre of vital interests cannot be determined, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;

(c) if he has an habitual abode in both States or in neither State, he shall be deemed to be a resident of the Contracting State of which he is a citizen; and

(d) if he is a citizen of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

(Note that the “Treaty Tie Breaker” rules are available to “Green Card” holders. The treaty “savings clause” prevents U.S. citizens from being treated solely as a resident of Canada.)

So, what do the IRS regulations say?

On December 29, 2014 the IRS removed the temporary regulations (which are described here) and issued final Form 8938 reporting rules. The final regulations, which took effect on December 29, 2014 (making them applicable for years 2014 and onward), make it clear that Green Card Holders, who pursuant to a treaty tie-breaker provision, are treated as “nonresidents” (nonresident aliens) are NOT required to file Form 8938.

Specifically, the IRS confirms that:

1. Dual resident taxpayers

A comment recommended an exemption from the section 6038D reporting requirements be included for an individual who is a dual resident taxpayer and who, pursuant to a provision of a treaty that provides for resolution of conflicting claims of residence by the United States and the treaty partner, claims to be treated as a resident of the treaty partner. In such a case, a dual resident taxpayer may claim a treaty benefit as a resident of the treaty partner and will be taxed as a nonresident for U.S. tax purposes for the taxable year (or portion of the taxable year) that the individual is treated as a nonresident. The final rule adopts this recommendation for a dual resident taxpayer who determines his or her U.S. tax liability as if he or she were a nonresident alien and claims a treaty benefit as a nonresident of the United States as provided in § 301.7701(b)–7 by timely filing a Form 1040NR, “Nonresident Alien Income Tax Return,” (or such other appropriate form under that section) and attaching a Form 8833, “Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b).” The Treasury Department and the IRS have concluded that reporting under section 6038D is closely associated with the determination of an individual’s income tax liability. Because the taxpayer’s filing of a Form 8833 with his or her Form 1040NR (or other appropriate form) will permit the IRS to identify individuals in this category and take follow-up tax enforcement actions when considered appropriate, reporting on Form 8938, “Statement of Specified Foreign Financial Assets,” is not essential to effective IRS tax enforcement efforts relating to this category of U.S. residents.

Why this makes sense …

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Why Boris Johnson must relinquish US citizenship on the occasion of his appointment as British Foreign Minister

A recent post (July 7, 2016) on this blog began with:

Prologue – U.S. citizens are “subjects” to U.S. law wherever they may be in the world …

Yes, it’s true. In 1932 (eight years after the Supreme Court decision in Cook v. Tait), Justice Hughes of the U.S. Supreme Court, in the case of Blackmer v. United States ruled that:

While it appears that the petitioner removed his residence to France in the year 1924, it is undisputed that he was, and continued to be, a citizen of the United States. He continued to owe allegiance to the United States. By virtue of the obligations of citizenship, the United States retained its authority over him, and he was bound by its laws made applicable to him in a foreign country. Thus, although resident abroad, the petitioner remained subject to the taxing power of the United States. Cook v. Tait, 265 U.S. 47, 54 , 56 S., 44 S. Ct. 444. For disobedience to its laws through conduct abroad, he was subject to punishment in the courts of the United States. United States v. Bow- [284 U.S. 421, 437] man, 260 U.S. 94, 102 , 43 S. Ct. 39. With respect to such an exercise of authority, there is no question of international law,2 but solely of the purport of the municipal law which establishes the duties of the citizen in relation to his own government. 3 While the legislation of the Congress, unless the contrary intent appears, is construed to apply only within the territorial jurisdiction of the United States, the question of its application, so far as citizens of the United States in foreign countries are concerned, is one of construction, not of legislative power. American Banana Co. v. United Fruit Co., 213 U.S. 347, 357 , 29 S. Ct. 511, 16 Ann. Cas. 1047; United States v. Bowman, supra; Robertson v. Labor Board, 268 U.S. 619, 622 , 45 S. Ct. 621. Nor can it be doubted that the United States possesses the power inherent in sovereignty to require the return to this country of a citizen, resident elsewhere, whenever the public interest requires it, and to penalize him in case of refusal. Compare Bartue and the Duchess of Suffolk’s Case, 2 Dyer’s Rep. 176b, 73 Eng. Rep. 388; Knowles v. Luce, Moore 109, 72 Eng. Rep. 473.4 What in England was the prerogative of the sov- [284 U.S. 421, 438] ereign in this respect pertains under our constitutional system to the national authority which may be exercised by the Congress by virtue of the legislative power to prescribe the duties of the citizens of the United States. It is also beyond controversy that one of the duties which the citizen owes to his government is to support the administration of justice by attending its courts and giving his testimony whenever he is properly summoned. Blair v. United States, 250 U.S. 273, 281 , 39 S. St. Ct. 468. And the Congress may provide for the performance of this duty and prescribe penalties for disobedience.

It’s that simple. If you are a U.S. citizen, some would argue that you are the property of the U.S.government.

On the other hand (and this will be the subject of another post), the Supreme Court decisions in Cook v. Tait and Blackmer v. The United States were decided in an era where there was no U.S. recognition of dual citizenship. It is reasonable to argue that these decisions have no applicability in the modern world.

There will be those who will say: Come on! Get real! The United States would never rely on these old court decisions. Well, they still do cite Cook v. Tait. Mr. FBAR lay dormant until it was resurrected by the Obama administration as the “FBAR Fundraiser“.

Dual Citizenship: What is the “effect” of a U.S. citizen also holding the citizenship of another nation?

The State Department description includes:

However, dual nationals owe allegiance to both the United States and the foreign country. They are required to obey the laws of both countries. Either country has the right to enforce its laws, particularly if the person later travels there. Most U.S. nationals, including dual nationals, must use a U.S. passport to enter and leave the United States. Dual nationals may also be required by the foreign country to use its passport to enter and leave that country. Use of the foreign passport does not endanger U.S. nationality. Most countries permit a person to renounce or otherwise lose nationality.

The life and times of Boris Johnson – A United States taxpayer by birth

Assumptions about Mr. Johnson’s citizenship …

I am assuming that he became both a U.S. and U.K. citizen by birth. I also assume that he remains both a U.S. and a U.K. citizen.

A U.S. Centric Perspective: As a U.S. citizen, Mr. Johnson is defined primarily in terms of taxation. On the occasion of Mr. Johnson’s recent appointment as the U.K. Foreign Minister, the Washington Times published the following article.

The article referenced in the above tweet provides an interesting summary of the Mr. Johnson’s adventures with the U.S. tax system. The article demonstrates how U.S. “place of birth” taxation is used to extract capital from other nations and transfer that capital to the U.S. Treasury. (As always the comments are of great interest.)

A non-U.S. Centric Perspective: Mr. Johnson is a “poster boy” for the problems of the U.S. “place of birth taxation” (AKA “taxation-based citizenship”). Mr. Johnson’s “IRS Problems” resulted in raising the profile and awareness of U.S. tax policies. A particularly interesting article was written by Jackie Bugnion and Roland Crim of “American Citizens Abroad”.

At a minimum, Mr. Johnson is subject to IRS jurisdiction, IRS reporting requirements, IRS threats and penalties and IRS assessments.

Boris Johnson has now been named the U.K. Foreign Minister …

How does his United States citizenship impact on this situation? Is it possible for him to be both a U.S. citizen and the British foreign minister? The “logical answer” is “Yes he can”. That said, having a U.S. citizen as the U.K. foreign minister raises many questions.

These questions include:

1. What effect (if any) does Mr. Johnson’s acceptance of this position have on his retention of United States citizenship as a matter of U.S. law?

2. If his acceptance of the position were a “relinquishing act” (under U.S. law) would Mr. Johnson be subject to the United States S. 877A Exit Tax?

3. Assuming that Mr. Johnson were to retain “dual” U.S./U.K. citizenship, how would his “divided loyalties” impact on this ability to serve as the British foreign minister?

4. Assuming that Mr. Johnson were to retain “dual” U.S./U.K. citizenship, how does the fact that the IRS has the jurisdiction to threaten him with fines and penalties impact the situation? What about the reporting requirements?

5. Should Boris Johnson formally relinquish his U.S. citizenship in order to avoid the conflict of interest that would arise because of divided loyalties?

Each question will be considered separately. Here we go …

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The ownership and use of the “U.S. Person” (which includes a “citizen”) as an instrument of foreign policy

Welcome and a bit of an introduction

This post turned out to be longer and cover more topics than I originally intended. The problem with discussing the problems experienced by Americans abroad is that there are many “moving parts”. I have broken SOME of the “moving parts” into, well six parts and a “prologue”.

In addition, as the title suggests, the original intention of the post was to discuss how the U.S. Government uses its citizens as “instruments of foreign policy”. The obvious question is: how can they possibly do this? Doesn’t U.S. law end at U.S. borders? How can the United States impose law on the rest of the world. The answer to that question raises other issues (which are discussed in the other parts of this post).

I guess I need a new title for the post.

I would also like to say that I am hopeful that there will be change. That said, change is possible ONLY (regardless of intention) if all of the issues are understood individually and how they interact.

Prologue – U.S. citizens are “subjects” to U.S. law wherever they may be in the world

Part I – The U.S. “Giveth” and the U.S. “Taketh” – How the U.S. uses “citizenship” as a weapon against individuals

Part II – U.S. Citizens living abroad – “Life in the penalty box”

Part III – I’m a “Toxic American”, but it’s not my fault – How U.S. regulation makes “U.S. citizens undesirables in other nations

Part IV – The use of U.S. citizens as instruments of foreign policy

Part V – Why Americans abroad are renouncing U.S. citizenship

Part VI – The injustice of the S. 877A “Exit Tax” as applied to Americans abroad

___________________________________________________________________________________

Prologue – U.S. citizens are “subjects” to U.S. law wherever they may be in the world …

Yes, it’s true. In 1932 (eight years after the Supreme Court decision in Cook v. Tait), Justice Hughes of the U.S. Supreme Court, in the case of Blackmer v. United States ruled that:

While it appears that the petitioner removed his residence to France in the year 1924, it is undisputed that he was, and continued to be, a citizen of the United States. He continued to owe allegiance to the United States. By virtue of the obligations of citizenship, the United States retained its authority over him, and he was bound by its laws made applicable to him in a foreign country. Thus, although resident abroad, the petitioner remained subject to the taxing power of the United States. Cook v. Tait, 265 U.S. 47, 54 , 56 S., 44 S. Ct. 444. For disobedience to its laws through conduct abroad, he was subject to punishment in the courts of the United States. United States v. Bow- [284 U.S. 421, 437] man, 260 U.S. 94, 102 , 43 S. Ct. 39. With respect to such an exercise of authority, there is no question of international law,2 but solely of the purport of the municipal law which establishes the duties of the citizen in relation to his own government. 3 While the legislation of the Congress, unless the contrary intent appears, is construed to apply only within the territorial jurisdiction of the United States, the question of its application, so far as citizens of the United States in foreign countries are concerned, is one of construction, not of legislative power. American Banana Co. v. United Fruit Co., 213 U.S. 347, 357 , 29 S. Ct. 511, 16 Ann. Cas. 1047; United States v. Bowman, supra; Robertson v. Labor Board, 268 U.S. 619, 622 , 45 S. Ct. 621. Nor can it be doubted that the United States possesses the power inherent in sovereignty to require the return to this country of a citizen, resident elsewhere, whenever the public interest requires it, and to penalize him in case of refusal. Compare Bartue and the Duchess of Suffolk’s Case, 2 Dyer’s Rep. 176b, 73 Eng. Rep. 388; Knowles v. Luce, Moore 109, 72 Eng. Rep. 473.4 What in England was the prerogative of the sov- [284 U.S. 421, 438] ereign in this respect pertains under our constitutional system to the national authority which may be exercised by the Congress by virtue of the legislative power to prescribe the duties of the citizens of the United States. It is also beyond controversy that one of the duties which the citizen owes to his government is to support the administration of justice by attending its courts and giving his testimony whenever he is properly summoned. Blair v. United States, 250 U.S. 273, 281 , 39 S. St. Ct. 468. And the Congress may provide for the performance of this duty and prescribe penalties for disobedience.

It’s that simple. If you are a U.S. citizen, some would argue that you are the property of the U.S.government.

On the other hand (and this will be the subject of another post), the Supreme Court decisions in Cook v. Tait and Blackmer v. The United States were decided in an era where there was no U.S. recognition of dual citizenship. It is reasonable to argue that these decisions have no applicability in the modern world.

There will be those who will say: Come on! Get real! The United States would never rely on these old court decisions. Well, they still do cite Cook v. Tait. Mr. FBAR lay dormant until it was resurrected by the Obama administration as the “FBAR Fundraiser“.

Part I – The U.S. “Giveth” and the U.S. “Taketh” – How the U.S. uses “citizenship” as a weapon against individuals …

The U.S. Taketh: Draft Resistors in Canada in the 60s and 70s – The use of  stripping people of “citizenship” as a mechanism to control the people

I my recent post: “Muhammad Ali, draft resistors, loss of US citizenship, the “Rumble In The Jungle” and a trip down memory lane“, I wrote:

During the last few years I have met many former Americans who came to Canada to escape service in the Viet Nam war. Their circumstances vary greatly. This was clearly a tumultuous time and difficult time. Many of them have commented that it has similarities to the circumstances of today. In both the 70s and present day, certain Americans abroad and former Americans abroad, feel uneasy and unsure about their U.S. citizenship. It’s also interesting how in both cases the United States is using “citizenship” as a mechanism to exercise control over individuals who do not live in the United States. In the 70s the United States was punishing people by stripping them of their citizenship. In 2016 the United States is punishing people by imposing citizenship on them. Either way, it’s clear that “citizenship” (and a U.S. place of birth) is a powerful weapon to be used against people to achieve governmental objectives.

The U.S. Giveth: “Accidental Americans” in Canada and throughout the world – The imposition of “U.S. citizenship” as a way to raise tax revenue

There is no one definition of “accidental American”. The group includes primarily those who were born in the United States (often with no memory of having lived there) and have spent all their lives in other nations. I have previously written about the horrible situation of “accidental Americans” in Stanstead, Quebec. Many Stanstead residents were born in Vermont because it was the closer hospital.

The problems of “accidental Americans” worldwide, are well described (on an ongoing basis) by Jude Ryan in his Facebook “Hunger Strike to President Obama”.

The problems experienced by “Accidental Americans” are that at the present time:

– they (in many cases) did not even know they were considered to be U.S. citizens

– if they did know they were U.S. citizens they did not know about the uniquely American practice of “taxation-based citizenship

– they are deemed to be U.S. citizens and are therefore subject to U.S. regulations

– they don’t reside in the United States AND are citizens of other nations

– they are being identified by FATCA and in some cases are having banking problems

– they can’t afford the financial costs of the tax compliance to formally renounce U.S. citizenship

– they can’t afford the $2350 fee to renounce U.S. citizenship

– they live in a state of terror and uncertainty (many don’t believe this or laugh it off)

In short, the forced imposition of U.S. citizenship (or at least the CURRENT unavailability of an easy out) is destroying their lives.

I highly recommend the following presentation by McGill Law Professor Allison Christians in which she puts the problems of “accidental Americans” in perspective.

 

Part II – U.S. Citizens living abroad – “Life in the penalty box”

I do NOT want to devote a major part of this post to this issue. The bottom line is this:

U.S. citizens living abroad are subject to ALL provisions of the Internal Revenue Code (and other U.S. laws – see below). The effect of this is to:

– subject them to double taxation on their incomes (the tax preparers and accountants who claim this is NOT true are dead wrong)

– deem all of their non-U.S. assets as “foreign” triggering numerous penalty provisions

– make it very difficult (in some cases impossible) for them to engage in normal financial planning – this is a “Buy American” provision

– make divorce (if they are married to a non-U.S. citizen potentially much more costly) – this a “Marry American” provision

– report the details of virtually all of their “non-U.S. activities” and investments to the IRS under threats of draconian penalties (this is what makes interaction with Americans “toxic” – see below)

In short, Americans abroad are NOT permitted to fully integrate into the societies where they live (and are often citizens). For more details on this see:

Part III – I’m a “Toxic American”, but it’s not my fault – How U.S. regulation makes “U.S. citizens undesirables in other nations …

U.S. citizenship-taxation, enforced by FATCA, does have an impact on the economies of other nations. There is evidence that this will negatively affect the job and career prospects of Americans abroad. “Citizenship-taxation” is increasingly affecting the way that nations and the citizens of other nations interact with “U.S. citizens”. Because of the “immutable characteristic” of a “U.S place of birth”, many U.S. citizens living outside the United States (assuming they are allowed to have a bank account in a FATCA world) have become undesirable as business partners.

See the following two accounts of discrimination against U.S. citizens abroad

Good points that highlight, yet again, the absurdity and detachment of the U.S. political system from 9 million of their citizens now living in an ever globalized and ever more competitive world. The U.S. political class and presidential candidates disinterest in this ever-growing and important group of citizens only speaks to the total stupidity, general ignorance, global unawareness, profound provincialism and confirms a totally dysfunctional and archaic system that is today the United States. A country that attacks and harms its diaspora and through its laws has succeeded in turning its own citizens into international pariahs with international banks, in international business partnerships, in marriage and in the general perception outside of the U.S.

I recently met with three start-ups at a fair in Germany, two from the UK and one from Sweden. In my work as a headhunter they were hiring me to find them some talented people for their growing and successful startups. In all three cases, and each in separate meetings with me, the startups told me that they did not want any Americans or Europeans with U.S. Green cards or passports. They were all wisely warned by their banks and financial advisors not to bring any U.S. Persons into their business. Two of them knew the reasons and the risk that any American presence would bring to the business. The other one learned the hard way. They had an American investor who got them into his FATCA mess, reporting his holdings and his American tax consultant demanding the business’s bank details and the personal details of the owners. They returned his investment, threw him out and agreed never again to get involved with any U.S. persons in their business. This is now widely known and even if FATCA and all of the other reporting requirements for Americans would be eliminated, the damage is already done. The perception out there is to avoid hiring any Americans and also avoiding their investments. They are too much trouble and their government is an intrusive bully that thinks it can control the entire world. That spirit is so foreign to the young brilliant startup minds out there today. The U.S. has become a has-been and definitely not seen as a cool place anymore.

The world has moved on and the U.S. politicians and presidential candidates still haven’t realized that the world has changed since their anachronistic citizenship based tax system dating from the Civil War. Truly, a nation of idiots.

As a former U.S. citizen, who renounced just in order to survive, as my four non-U.S. business partners gave me an ultimatum, either get rid of your U.S. citizenship, which was contaminating our totally German business and subjecting our company’s accounts to U.S. Treasury and IRS scrutiny, or you must sell your shares and leave. This all started upon the advice of our German bank, who said that they wouldn’t deal with our accounts if there was any American/’U.S. Person’ involvement? Not to mention the personal impact on my mortgage, on my bank closing all of my investment accounts and everything else that every reader here knows all too well.

What amazes me most, and also amazes all of my personal and professional friends, all of them non U.S. persons, is how obedient and conforming the organizations supposedly representing the interests of U.S. citizens abroad are. With all that has happened, and especially now, subsequent to the Senate Finance Committee’s “report” on tax reform, paying nothing but contemptuous lip service to the plight of US citizens abroad, it should be more than obvious that U.S. Citizens abroad are of absolutely no relevance for lawmakers and legislators in Washington. Yet, the attitude of all of the organizations supposedly looking out for and fighting for the rights of US citizens abroad has been to follow a very respectful path of presenting the case for change, as if they were dealing with a fair democratic system, that respects equal representation and justice. They look ridiculous, all of them! When I read that Democrats Abroad have been trying to push the “bandage” fix of ‘Same Country Exception’ for more than four years, with no result, I say that this is absolutely pathetic. When I see American Citizens Abroad sending endless delegations to Washington, year after year, and even opening an office there, only to see the interests of overseas Americans relegated to a footnote, with no action proposed n the recent Senate Financial Committee report, I would think that they should be embarrassed and ashamed, as they should be. It has taken the group Republicans Overseas over one year to formulate an intended lawsuit, which has been postponed endless times, with a “promise” to file it next week, I say that they too have not approached this in the right way. Too much damage has been done in the interim.

What astonishes all of my “foreign” friends is how passive, obedient and fearful U.S. people are of their government, especially when confronted with such outright injustice, literal extortion and destruction of their financial wellbeing and that of their families and business partners. Even the ever law abiding Germans wouldn’t put up with any of this and they would probably, en masse, as one lawyer friend told me, simply refuse to cooperate with any of this Byzantine filing of forms and endless intrusions into their privacy and that of their families and business partners. They would collectively refuse and file class action suits against the authorities behind these injustices worthy of a fascist totalitarian regime. Perhaps the Germans understand better than the Americans what this sort of thing leads to, when a society becomes so beaten down, so subservient, so fearful of authority that it complies with the most horrific and undemocratic “laws” and is unable to unite and simply say NO, collectively. Until Americans fight to recover some form of democracy and fairness, the ravages of FATCA will be but one in a coming litany of similar such abuses. To continue believing that they are dealing with democratic institutions and that reason and fairness will prevail is nothing but a naive attitude that will lead them nowhere, as we can now see with the recent Senate Finance Committee report.

How by defining you as a “U.S. Person” (which includes a “U.S. citizen”) you will be used to facilitate U.S. foreign policy …

Part IV – The use of U.S. citizens as instruments of foreign policy

To leave the USA one needs a passport and when it comes to having a U.S. passport …

No passport shall be granted or issued to or verified for any other persons than those owing allegiance, whether citizens or not, to the United States.

“U.S. citizen” vs. “U.S. Person” – What is the difference?

All U.S. citizens are U.S. persons, but not all U.S. persons are U.S. citizens

My impression is that:

– the term “U.S. citizen” is a term that is used to describe one as a person who has rights or membership, benefits and some responsibilities to the United States

– the term “U.S. Person” is a a broader term that “U.S. citizen”. It is defined differently in different pieces of legislation. The class of “U.S. Persons” is broader than the class of “U.S. citizens”. The class of “U.S. Persons” often includes “Green Card holders”, perhaps “U.S. Nationals”, etc. For example, S. 7701(a)(30) of the Internal Revenue Code defines “U.S. Persons” as “citizens or residents”.

The term “U.S. Person” appears to be used in a context that imposes prohibitions and sanctions directly on the “U.S. Person” and/or is used to imply “U.S. ownership and control” over the person. Often this “ownership or control” is exercised in the context of U.S. interaction with “foreign nations”. When used in the context of interaction with “foreign nations”, the “U.S. Person” is often used as an instrument of foreign policy.

There is no one definition of “U.S Person” …

Restrictions on U.S. currency going to Cuba …

When it comes to “Corrupt Foreign Practices”, “U.S. citizens” are “domestic concerns” …

It has become clear that United States enforces its extra-territorial law by pressuring other governments, organizations and entities (under threats of sanction) to do “U.S. dirty work for the U.S.”.

Some examples include:

– the use of the OECD to enforce the U.S. Corrupt Foreign Practices Act

– the FATCA IGAs to impose U.S. taxation on the citizens and residents of other nations

– as per Juan Zarate in “Treasury’s War” the “blacklisting of foreign banks”

The OECD employs “full-time lawyers” whose mission is to enforce the U.S. Corrupt Foreign Practices Act worldwide!

Bobby, you may be a national hero, but don’t even consider playing chess in Serbia …

Restrictions on “U.S. Persons” under FATCA and the FATCA IGAs …

When it comes to FATCA, the definition of “U.S. Person” is broad …

Part V – Why Americans abroad are renouncing U.S. citizenship …

Put it this way:

Ireland recently opened a museum honoring the achievements of Ireland’s diaspora.

The United States continues to control the lives of U.S. citizens living outside the United States. “When in Rome, Live As A Homelander“.

The United States continues to cause other nations to discriminate against U.S. citizens who leave the United States.

The United States continues to use U.S. citizens as instruments of foreign policy.

The United States continues to threaten it’s diaspora (citizens abroad) with penalties and sanctions

It’s no surprise that renunciations of U.S. citizenship are growing! They will continue!

Part VI – The injustice of the S. 877A “Exit Tax” as applied to Americans abroad

For many Americans abroad to renounce U.S. citizenship they will be required to pay an Exit Tax. Those who are “covered expatriates” will be required to pay an “Exit Tax” that is based on the value of their non-U.S. assets, their non-U.S. pensions and possibly more. A detailed explanation is NOT the purpose of this post. For information on the S. 877A Exit Tax, I refer you to:

In closing …

Let us not look back in anger, nor forward in fear, but around us in awareness

John Richardson

Dual citizenship, the lack of definition of “citizen” in the “Savings Clause” of U.S. Tax Treaties and why these are important

 

Introduction …

This is a “follow up” to my first post about the “Savings Clause” in the Canada U.S. Tax Treaty. The purpose of that first post was to demonstrate that pursuant to the “Savings Clause”, the Government of Canada has agreed to allow the United States to impose direct taxation on some Canadian citizens who are resident in Canada. The post generated a fascinating discussion about the “Savings Clause” and was widely discussed at the Isaac Brock Society. A subsequent post at the Isaac Brock Society provided greater detail about exactly how, and in what respects, the Government of Canada has agreed that the United States can impose direct U.S. taxation on some Canadian citizens and residents. One obvious conclusion from this discussion is reflected in the comment that:

Next time someone tells me that the tax treaty relieves double taxation, I’ll tell them that it causes it. We have RDSP’s and RESP’s to prove it.

I absolutely agree. Although there are a few specific areas where the Tax Treaty mitigates against double taxation, for the most part, because of the Savings Clause, the U.S. Canada Tax Treaty, does NOT prevent double taxation. By ensuring U.S. taxation of Canadian residents and citizens, the U.S. Canada Tax Treaty guarantees double taxation!

It’s a myth that the tax treaty prevents double taxation. As John F. Kennedy said in his commencement address at Yale University on June 11, 1962:

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“Savings clause” in US Tax Treaties guarantees US right of taxation on residents and citizens of other nations

Introduction …

It is commonly believed that U.S. Tax Treaties are for the purpose of preventing “double taxation”. In general, US Tax Treaties do NOT prevent double taxation with respect to Americans abroad. For Americans abroad, double taxation is mitigated (but not prevented) by through Internal Revenue Code S. 901 (foreign tax credits) and Internal Revenue Code S. 911 (Foreign Earned Income Exclusion).

U.S. Tax Treaties include a “savings clause” (found in different sections of different treaties) that:

1. Guarantee the right of the United States to impose taxation on its citizens who are residing in other nations; and

2. Guarantee the right of the United States to impose taxation on its citizens as though the treaty didn’t exist.

Note that these “U.S. citizens” may (and in many cases are) citizens of their country of residence.

Those countries that have signed FATCA IGAs have effectively agreed to assist the United States in imposing taxation on their own citizens and residents. This will allow the United States to legally transfer capital out of the signatory country to the United States Treasury (for better use).

May 2016 – Elazar Cole and the “Savings Clause” …

On May 16, 2010, the U.S. Tax Court in the decision of – Elazar M. Cole v. Commissioner of Internal Revenue, T.C. Summary Opinion 2016-22 (May 2016) – confirmed the principle that a U.S. citizen cannot (as a general principle) use the Tax Treaty to prevent U.S. taxation.

The decision is here:
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Part 17: What God Hath Wrought – The #FATCA Inquisition (Review, Identify and Report on “U.S. Persons”) – Retirement accounts are exempt from FATCA reporting in all cases

First, Canadian Retirement Accounts are “deemed to be compliant under S. 1471 and S. 1472 of the Internal Revenue Code

The Canada U.S. FATCA IGA …

FATCA-eng

IGA Article IV describes the “Specific Treatment of Canadian Retirement Plans” as follows:

3. Specific Treatment of Canadian Retirement Plans. The United States shall treat as deemed-compliant FFIs or exempt beneficial owners, as appropriate, for purposes of sections 1471 and 1472 of the U.S. Internal Revenue Code, Canadian retirement plans identified in Annex II. For this purpose, a Canadian retirement plan includes an Entity established or located in, and regulated by, Canada, or a predetermined contractual or legal arrangement, operated to provide pension or retirement benefits or earn income for providing such benefits under the laws of Canada and regulated with respect to contributions, distributions, reporting, sponsorship, and taxation.

Second, because Canadian Retirement Accounts are NOT “financial accounts” as per Annex II of the IGA, they are NOT “reportable accounts” under the definitions section of Article I of the IGA

IGA Article I (definitions) includes …
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