Tag Archives: ACA

Why is the United States imposing full U.S. taxation on the Canadian incomes of Canadian citizens living in Canada?

This is post is “based on” (not identical to)  one of two submissions that I submitted in response to Senator Hatch’s request for submissions regarding tax reform.

__________________________________________________________

Why is the United States imposing full U.S. taxation on the Canadian incomes of Canadian citizens living in Canada?

The Internal Revenue Code mandates that ALL “individuals” , EXCEPT “non-resident aliens”, are subject to full taxation, on their WORLDWIDE income, under the Internal Revenue Code. The word “individuals” includes U.S. citizens regardless of where they live and regardless of whether they are citizens and residents of other countries where they also pay tax. This means that, by its plain terms, the United States imposes full taxation on the citizens and residents of other nations, because they are also (according to U.S. definitions) U.S. citizens. The United States is the only country in the world that has a definition of “tax residency that mandates full taxation based ONLY on citizenship.

How “U.S. citizenship” and U.S. “taxation” interact

Principle 1: The United States is one of the few countries in the world that confers citizenship based SOLELY on birth on its soil.

Principle 2: The United States is the ONLY country in the world that imposes full taxation ON THE WORLD INCOME of its citizens, REGARDLESS OF WHERE THE U.S. CITIZEN LIVES IN THE WORLD.

Bottom line: The United States is the ONLY country in the world that imposes full taxation, on WORLDWIDE income, based ONLY on the “place of birth”!

A practical example: A person whose only connection to the United States is that he was born in the United States, who lives in Canada (and may have never lived in the United States and whose only income is earned in Canada), is required to pay U.S. tax on that income. This resident of Canada is treated AS THOUGH HE WAS A U.S. RESIDENT. NOTE ALSO THAT THIS INDIVIDUAL IS REQUIRED TO PAY TAX TO CANADA! He is subject to “double taxation”. (This “double taxation” is only partially mitigated through “foreign tax credits”, tax treaties and the “foreign earned income exclusion”.)

Therefore: What academics and government officials refer to as “citizenship-based taxation” (they really don’t understand its practical effects) is PRIMARILY  “place of birth taxation” and therefore a convenient way to impose U.S. taxation on the citizens and residents of other countries. As a blog devoted to “citizenship taxation” (noting the difference between the theory and reality) points out:

“A supporter of citizenship taxation is someone who THINKS about “citizenship taxation”. An opponent of citizenship taxation is anybody who has tried to LIVE under citizenship taxation.”

How did this happen? It certainly didn’t start this way!

The evolution of “U.S. citizenship”

The result of legislative change and various U.S. Supreme Court decisions (primarily Afroyim ) has meant that “U.S. citizenship” is far easier to obtain and far harder to lose. 

Furthermore, as people become more and more mobile, it is not unusual for somebody to have been “Born In The USA” but live outside the USA. Global mobility is now the rule, rather than the exception.

The evolution of U.S. taxation and the Internal Revenue Code

The Internal Revenue Code has become more and more complex and impacts more and more activities of daily life. Because “U.S. citizens” (even though they are citizen/residents of other countries) are subject to U.S. taxation, they have been tremendously impacted by the “creeping complexity” of the Internal Revenue Code (which applies equally to ALL Americans wherever they may live).

This “creeping complexity” has evolved slowly through the years. The problems have been exacerbated because Congress does NOT consider that when amending the Internal Revenue Code they are impacting the lives of tax paying residents of other nations (who happen to be U.S. citizens). Congress is “indifferent” to the plight of Americans abroad (indifference being one of the worst forms of abuse).

Through the years, slowly and consistently …

The evolution of the Internal Revenue Code combined with ease of retaining U.S. citizenship has built a “fiscal prison” (legislative brick by legislative brick), in which  to keep the tax paying residents of “OTHER NATIONS”, who just happen to have been born in the United States.

Tax Reform 2017

The United States is “making noises” about “tax reform”. Senator Orrin Hatch requested submissions from “steak stake holders” on what should be included in tax reform. He has clearly received (as did the Ways and Means Committee in 2013 and the Senate Finance Committee in 2015) many suggestions advocating the repeal of “citizenship-based taxation”.

As noted at a site compiling the submissions of those affected by U.S. extra-territorial taxation:
Continue reading

Whether through regulation or legislation #FATCA Same Country Exemption won’t work

In the beginning there was Facebook …

and from a second Facebook group:

 

Introduction: If you were to REPEAL FATCA

A previous post discussing the what exactly is meant by FATCA and the Mark Meadows “Repeal FATCA” bill, described:

FATCA is the collective effect of a number of specific amendments to the Internal Revenue Code which are designed to target both (1) Foreign Financial Institutions and (2) Those “U.S. Persons” who are their customers.

1. There are “Three Faces To FATCA” which include:

– Face 1: Legislation targeting Foreign Financial Institutions (Internal Revenue Code Chapter 4)

– Face 2: The FATCA IGAs (which for practical purposes have replaced Chapter 4)

– Face 3: Legislation targeting individuals (primarily Americans abroad who commit “Personal Finance Abroad – While Living Abroad” – Internal Revenue Code 6038D which mandates Form 8938)

2. The amendments to the Internal Revenue Code that would be necessary to reverse the sections of the Internal Revenue that created FATCA.

Legislative FATCA vs. Regulatory FATCA

The sections of the Internal Revenue Code that comprise “FATCA” are surprisingly few.

FATCA Face 1: Internal Revenue Code S. 1474(f) gives Treasury broad authority to make “FATCA regulations”.
Continue reading

Even in “retirement” Jackie Bugnion writes the best arguments against citizenship taxation ever

This article originally appeared on the Alliance For The Defence Of Canadian Sovereignty blog.

Introducing Jackie Bugnion …

Jackie Bugnion has published a superb article describing the problems of U.S. citizenship taxation and why the United States must move to residence based taxation. Before, describing her article, for those who don’t know …

On May 7, 2015 I received notification that Jackie Bugnion had submitted her resignation to the Board of ACA “American Citizens Abroad“. I read the notification with a combination of sadness and total appreciation for the incredible efforts that Jackie has made in advocating for the rights of Americans Abroad. Jackie was largely responsible for organizing the “Citizenship Taxation Conference” (featuring the debate between Michael Kirsch and Bernard Schneider) that took place in Toronto on May 2, 2014. Some of you may have had the privilege of meeting her there. It’s unlikely that she could be replaced by any one individual.
Continue reading

Excellent @JackieBugnion and Roland Crim article on Boris Johnson @MayorOfLondon and plight of #Americansabroad

IMG_5225-300x225

Charles Cullen, Bernard Schneider, David Kuenzi, Jim Yager, Jackie Bugnion (left to right)

Charles Cullen, Bernard Schneider, David Kuenzi, Jim Yager, Jackie Bugnion (left to right)

 

Just received this article in written by Jackie Bugnion and Roland Crim pdf format. Jackie was in Toronto on May 2, 2014 for the ACA Conference on the Taxation of Americans Abroad. (The conference was a great success leading to many things including David Kuenzi’s New York Time’s Op-Ed explaining that the application of the FATCA rules to Americans abroad is absurd. You will find a report on the Conference here.)

The article is an exceptionally clear statement of the problems facing Americans who choose to live outside the United States. The problem is that by moving form the United States and by being subject to the U.S. tax system that are:

1. At an extreme disadvantage when it comes to retirement planning; and

2. When it comes to U.S. taxation abroad – getting the worst of both worlds.

Here is the article:

Bugnion-Crim

“Changes in the US Tax Laws: How they impact US Citizens in the UK” @ACAVoice Event

 

The following event organized by ACA may be of interest to a “world-wide” audience. It is modestly priced and available by webinar.

“Changes in the US Tax Laws: How they impact US Citizens in the UK”
Continue reading