— Citizenship Lawyer (@ExpatriationLaw) July 18, 2016
“Even in retirement Jackie Bugion writes the best arguments against citizenship taxation ever“. Other references to Ms. Bugnion’s work are here.
In this new post published on May 30, 2016 at Tax Analysts, Ms. Bugnion collaborates with U.S. tax lawyer Paula N. Singer to explain the problems experienced by Americans abroad who have pensions in their country of residence.
This new article explains:
1. The problem – how U.S. tax laws destroy the value of the “foreign pension” as a “pension” at all
2. The treatment of non-U.S. pensions under various U.S. tax treaties (underscoring now tax treaties are very different)
3. The proposal – how the Internal Revenue Code can be simply amended to fix this simple but painful problem.
Below you will find the PDF of this must read article. Please note that this article appears on CitizenshipSolutions.ca under the following conditions:
Permission is for this one use and is contingent on properly crediting the article to the respective authors and to Tax Analysts as the original publisher. Using the PDF attached above covers proper attribution. Any other requests would need to be addressed separately.
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 …
— Citizenship Lawyer (@ExpatriationLaw) July 7, 2016
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?
US State Departement position on "dual nationality/citizenship" https://t.co/VeCAUWiCou – owes allegiance to both countries
— Citizenship Lawyer (@ExpatriationLaw) July 16, 2016
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.
Britain's new foreign minister avoided paying his U.S. taxes for years https://t.co/T34cgebJVG – But, he has never lived in the USA!
— Citizenship Lawyer (@ExpatriationLaw) July 16, 2016
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”.
— Citizenship Lawyer (@ExpatriationLaw) July 16, 2016
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 …
Are you “Coming To America” by entering the U.S. tax system as an American Abroad?
The “How To Come Into U.S. Tax Compliance” book for Americans abroad
John Richardson, LL.B, J.D.
I have contributed to establishing the new “Citizenship Taxation” site. As part of launching that site, I have written a series of posts providing relevant information (in a broad sense) about how Americans abroad, who did not know about their U.S. tax obligations, can come into U.S. tax compliance.
Sooner or later, it’s likely that many people will receive a FATCA letter. In your panic, you should be careful. There are a number of things Americans abroad should consider before consulting a lawyer or tax professional.
This series of posts developed from my “Educational Outreach” program for Americans abroad. It is an effort to respond in a practical way to the questions that people have.
The chapters of “Coming Into Compliance Book” are:
Chapter 2 – “But wait, I can’t renounce U.S. citizenship if I’m not a U.S. citizen. How do I know if I am a U.S. citizen?”
Chapter 3 – “No matter what, I must come into U.S. tax compliance – Coming into U.S. tax compliance for those who have NOT been filing U.S. taxes”
Chapter4 – “Oh no, I have attempted U.S. tax compliance by filing tax returns. I have just learned that I have made mistakes. How do I fix those mistakes?”
Chapter 5 – “I don’t want to renounce U.S. citizenship. How to live outside the United States as a U.S. tax compliant person”
Chapter 6 – “I do want to renounce U.S. citizenship. This is too much for me. How the U.S. “Exit Tax” rules might apply to me if I renounce”
Chapter 7 – “I really wish I could do retirement planning like a “normal” person. But, I’m an American abroad. I hear I can’t invest in mutual funds in my country of residence. The problem of Americans Abroad and non-U.S. mutual funds explained.
Chapter 8 – “We all have to live somewhere. Five issues – “The problem of Americans Abroad and non-U.S. real estate explained”
The “Coming Into Compliance Book” is designed to provide an overview of how to bring some sanity to your life.
Coming to America
You may remember the old Eddie Murphy movie about “Coming To America”.
— Citizenship Lawyer (@ExpatriationLaw) July 1, 2015
Welcome to the confusing and high stakes rules for U.S. taxation and Americans abroad.
The United States has the most complex, confusing, most penalty ridden and most difficult anti-deferral regime in the world. McGill Professor Allison Christians has noted that Americans abroad are both:
“deemed to be permanently resident in the United States for tax compliance and financial reporting purposes” …
“subject to the most complex aspects of the U.S. tax code regardless of any activity in the United States, and facing extraordinary compliance costs and disclosure risks even for nil returns”
Although Americans abroad are deemed to be resident in the United States, their assets are treated as “offshore”. In addition Americans abroad are subject to taxation in their country of residence.
All of this means that:
1. Americans abroad are subject to the worst and most punitive aspects of the U.S. tax system (there is no Homelander who is treated as badly as an American abroad); and
2. Denied most benefits of the tax systems of their country of residence.
To put it simply, Americans abroad get the worst of all possible tax systems.
The most horrific aspects of the U.S. tax system are saved for Americans abroad. Prepare to be shocked. As one commenter at the Isaac Brock Society site recently said:
"So I totally agree with all of you who decided to renounce. I would have probably done the same in your situation." http://t.co/GO7fzZYknK
— Citizenship Lawyer (@ExpatriationLaw) July 1, 2015
— Citizenship Lawyer (@ExpatriationLaw) November 27, 2014
When: Sunday November 30, 2014
Time: 6:30 p.m. – 8:30 p.m.
Where: University of Toronto – Carr Hall – 100 St. Joseph St – Toronto, Ontario
Cost: $20 or $40 for a family of four
I am delighted to have Phil participate in this session! This is a great opportunity for all attendees.
Update – December 8, 2014:
Here is a description of the session with Phil Hodgen written by an antendee.
— Citizenship Lawyer (@ExpatriationLaw) November 12, 2014
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”
— Citizenship Lawyer (@ExpatriationLaw) October 19, 2014
FATCA Hunt Begins
“FATCA Hunt” – the hunt for U.S. persons (whatever that is) began on July 1, 2014 which is “Canada Day”. Although both the definition of “U.S. person” (and whether one meets the definition) is not always clear, the search has begun. The level of FATCA awareness has begun. Some organizations are actively warning people that “U.S. Personness” matters. (The purpose of the warning is presumably to encourage people to “come clean“ and deal with their U.S. tax situations.) In some cases, there is no particular warning – just a letter indicating that they are suspected to be a “U.S. person”. Often one must prove to the institution sending the letter that one is not a U.S. person.
A Canadian wealth management company for doctors asks: "Are you a U.S. person?" http://t.co/ipc4Xn3Gs5 If so, consult a lawyer!
— Citizenship Lawyer (@ExpatriationLaw) October 22, 2014
The above tweet references a notice from a Canadian Wealth management firm for doctors after warning that they are required to (and will) report all U.S. persons to the IRS (via the CRA) state:
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?
The Sovereign Citizen: Denaturalization and the Origins of the American Republic http://t.co/O2jRlnIedP
— Citizenship Lawyer (@ExpatriationLaw) September 27, 2014
I have discovered a fascinating book by Professor Patrick Weil titled:
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
— Citizenship Lawyer (@ExpatriationLaw) September 4, 2014
With commentary on the FATCA blogs:
— ADCSovereignty (@ADCSovereignty) September 4, 2014