PREP Podcaster - ”Success Favours The PREPared Mind”

The US Supreme Court FBAR Decision in Bittner: The Morning After

March 1, 2023 - Participants include:

 

Virginia La Torre Jeker - @VLJeker

 

John Richardson - @Expatriationlaw

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It's a clear win for Mr. Bittner and a warm congratulations to him!!

 

What the Supreme Court decision means on a longer term basis is less clear. Virginia and discuss the possibilities in this "Morning After" podcast.

 

 

U.S. District Court: Green Card Holders May Be Able To Rely On Tax ”Treaty Escape Hatch” To Avoid Mr. FBAR

February 23, 2023 - Participants include:

 

Virginia La Torre Jeker - @VLJeker

John Richardson - @Expatriationlaw

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The Significance Of The Aroeste FBAR case:

This decision from the District Court provides support for the principle that individuals who are nonresidents under the terms of a U.S. tax treaty may NOT (in certain circumstances) be required to file an FBAR.

Factual background:

Mr. Aroeste was a Green Card holder who was assessed with approximately three million dollars in tax and information return penalties. The bulk of the three million was for the failure to file information returns (including Mr. FBAR).

One Of The Legal Issues:

On February 13, 2023 in the case of "Aroeste v. U.S., No. 22-cv-682-AJB-KSC", in the United States District Court for the Southern District Of California, the Hon. Karen Crawford addressed the following question:

 

1. How is Alberto Aroeste’s status under the United States – Mexico tax treaty germane to the issue of whether Mr. Aroeste was required to file the FBAR reports at issue in this case?

 

She concluded that:

"(5) Therefore, any person allowed to permanently reside in the United States by virtue of US immigration laws must file an FBAR unless that person is entitled to be treated as a resident of a foreign country under a tax treaty."

The complete chain of reasoning is as follows:

The upshot of this statutory and regulatory framework applicable to this action, in which tax treaties provide a potential escape hatch that excuses certain “United States persons” from filing FBARs, can be expressed as a 5-step process:

(1) Under 26 U.S.C. § 7701(b)(6), anyone allowed to permanently reside within the United States by virtue of US immigration laws is a “lawful permanent resident” for tax purposes unless an applicable tax treaty allows that person to be treated as a resident of a foreign country for tax purposes only;

(2) Under 26 U.S.C. § 7701(b)(1)(A)(i), any “lawful permanent resident” is a “resident alien”;

(3) Under 31 C.F.R. § 1010.350(b)(2), any “resident alien” is a “resident of the United States”;

(4) Under 31 C.F.R. § 1010.350(b), Any “resident of the United States” is a “United States person” required to file an FBAR;

(5) Therefore, any person allowed to permanently reside in the United States by virtue of US immigration laws must file an FBAR unless that person is entitled to be treated as a resident of a foreign country under a tax treaty

I will write a more extensive blog post about this in the next few days.

 

 

 

Canada’s Underused Housing Tax Unites US And Canadian Residents In Opposition To Citizenship Tax

February 18, 2023 - Participants Include:

Tim Smyth - @Tpsmyth01

John Richardson - @Expatriationlaw

Suggesting A Joint Rally Of U.S. And Canadian Residents Who Oppose All Forms Of Citizenship Taxation

When - The Date of President Biden's visit to Canada

Where - Outside the Parliament Building

For More information stay tuned!

 

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What is Canada's Underused Citizenship-based Property Tax?

Canadian Government Summary Of Canada’s Underused Housing Tax Law:
https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/underused-housing-tax.html

The Text Of Canada’s Underused Housing Tax Law:
https://laws-lois.justice.gc.ca/eng/acts/U-0.5/FullText.html

The Actual Tax Return – Form UHT-2900 – Due April 30
uht-2900-22e

 

Thoughts On Canada's Citizenship-based Underused Property Tax

 

Interestingly Canada’s Underused Property Tax, by its express terms applies based on “citizenship” and/or “immigration status”. Specifically, it applies to people who are neither citizens nor permanent residents of Canada. In the same way that the United States imposes taxes on people based on and only on the status of being a U.S. citizen or permanent resident of the United States (Green Card holder), Canada’s Underused Vacant Property Tax is based on NOT being a citizen or permanent resident of Canada. Significantly, certain provincial human rights codes (presumptively) prohibit discrimination based on citizenship. The first case decided by the Supreme Court of Canada (Andrews) interpreting S.15 of Canada’s Charter of Rights struck down a British Columbia statute requiring Canadian citizenship to practise law in British Columbia. In 1974 – In Re Griffiths – the U.S. Supreme Court struck down a similar Connecticut provision requiring U.S. citizenship to be admitted to the bar in Connecticut. In the United States, classifications based on citizenship/alienage are “suspect classifications” and presumptively unconstitutional. Canada’s laws and judicial decisions are generally hostile to classifications based on citizenship.

Enter Congressman Brian Higgins - Objecting To Canada's Citizenship-based Property Tax

Congressman Higgins represents voters in Upstate New York. Apparently a number of his constituents own property in Canada. Interestingly, the Congressman has NOT voiced any objections to Toronto’s vacant home tax. His objections are aimed at Canada’s Underused Property Tax. He frames his objection in various ways. His objection appears to be based principally on the fact that the Canadian tax targets individuals who are neither Canadian citizens nor permanent residents of Canada. As reported by American Expat Finance, he began registering his objection to the Canadian tax at least as early as 2021. U.S. citizens subject to the tax are required to file the return and pay the tax (1% of the value of the property) by April 30, 2023. As a result, the Congressman’s objections have in recent days become more public and more urgent. On February 15, 2023 he issued a press release which included:

Congressman Says New Tax is Both Offensive & a Violation of Binational Agreements

Congressman Brian Higgins (NY-26) is calling on the Biden Administration to address Canada’s Underused Housing Tax in upcoming discussions with the Government of Canada. The new 1% tax on “vacant or underused housing” owned by non-resident, non-Canadians is hitting Americans, many of whom have contributed to Canada’s economy and owned cottages in Canada and for generations, especially hard.

In a letter to U.S. Secretary of State Antony Blinken, Rep. Higgins writes, “At a time when encouraging cross-border travel and economic activity should be prioritized as both countries recover from the COVID-19 pandemic, this is an unnecessary burden and bad faith action by the Government of Canada, which violates the United States-Mexico-Canada Agreement (USMCA) as well as longstanding tax treaties. In your upcoming conversations with the Government of Canada, I request that objecting to this tax is a high priority.”

Rep. Higgins has heard from over 200 U.S. residents upset about the new tax, including over 165 who completed an online survey and dozens more who called and wrote to his office. Of the survey respondents, over 80% live in Western New York, about 10% live in Florida and others live across the U.S. including the states of South Carolina, Ohio, Virginia, Georgia, Pennsylvania, California, and Colorado. The majority own property in Fort Erie, Crystal Beach, Port Colborne, and Ridgeway in the province of Ontario. Many have been property owners in Canada for decades, with 42% of respondents having property in Canada for between 20 and 49 years, and 28% having their Canadian property for over 50 years.

In addition to the cost associated with the tax, many have expressed to Congressman Higgins frustration with the lack of information, clarity, and notification of the tax by the Government of Canada. The tax forms are due in Canada April 30th, but owners must first file to receive a tax identifier number. Failure to pay the tax comes with a minimum penalty of $5,000.

Higgins has objected to the Underused Housing Tax since it was first proposed in the Government of Canada’s Budget 2021, voicing opposition with the United States Trade Representative, the U.S. Department of the Treasury, and Canada’s Ambassador to the United States.

President Biden has announced plans to visit Canada for meetings with Prime Minister Trudeau and their Administrations in March.

Congressman Higgins serves on the House of Representatives Ways and Means Committee, which oversees U.S. Tax policy, and the Ways and Means Subcommittee on Trade, which has oversight of trade agreements like the USMCA. Higgins’ Western New York district, which includes the cities of Buffalo and Niagara Falls, borders southern Ontario. Higgins is co-chair of the Canada-U.S. Interparliamentary Group and the Northern Border Caucus.

 

 

How The US Is Incentivizing Americans Abroad To Renounce US Citizenship

February 7, 2023 - Participants include:

 

Anthony Parent - @IRS_Medic

Keith Redmond - @Keith__Redmond

John Richardson - @Expatriationlaw

 

Americans Abroad exhibit a shocking apathy toward U.S. Citizenship Tax!

Although the primary focus of this discussion is the "apathy" that Americans Abroad exhibit when it comes to ending citizenship taxation, beginning at the 10:50 mark and ending at the 13:50 mark, I explain how:

The United States is clearly incentivizing Americans abroad to renounce U.S. citizenship!!

 

 

If We Don’t Hang Together, We Will Hang Separately - How Americans Abroad Divide Themselves

February 1, 2023 - Participants include:

Anthony Parent - @IRS_Medic

Keith Redmond - @Keith__Redmond

John Richardson - @ExpatriationLaw

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A continuing discussion of how different groups of Americans abroad work against each other to "Divide And Conquer" themselves. 

Those groups include ...

Generally, those subject the US extra-territorial tax regime fall into one of the following four groups. Each group is characterized by a dominant goal (although there is some overlap):

Ending Citizenship Taxation - This group which is symbolized by SEAT is focussed on ending US citizenship taxation. This means that citizenship is never relevant for the purposes of taxation.

Ignoring Citizenship Taxation - It is clear that there are any individuals who approach the problem of citizenship taxation by simply ignoring it. It is clear that many people who are subject to the citizenship tax regime are simply not "in the US tax system". Typically these are people who have no economic centre of gravity in the United States and have no plans of living in the United States.

Escaping Citizenship Taxation - Members of this group are concerned with solving their specific problem. For example, they would want the Taxation of capital gains on principal residence, PFIC, CFC or Foreign Trust rules changed. Once that issue is solved they believe their problems are solved.

Improving Citizenship Taxation - These individuals are NOT concerned with ending citizenship taxation as a general principle. They are concerned with reforming citizenship taxation in a way that reduces the kinds of non-US source income that is taxable by the United States. But, US citizens abroad would remain US tax residents. An example fo this would be the "Beyer Bill".

 

 

Paying Tax On Income Never Received: The Moores, The 965 Transition Tax, Foreign Corps and Subpart F

February 3, 2022 - Participants include:

Virginia La Torre Jeker - @VLJeker

John Richardson - @Expatriationlaw

 

Introduction - Describing The Issue

The 2017 TCJA contained a provision found in IRC 965 which required the certain US shareholders of foreign corporations to include their share of the corporation's profits as income on the shareholder's tax returns.

Significantly:

1. The income subject to taxation was never actually received by the individual shareholders; and

2. The income required to be included, represented the income of the corporation from 1986 to 2017 (31 years worth of income at once).

Commentators have appeared to assume that this retroactive tax affected only multi-nationals. The truth is that it impacted many individual shareholders (including individual Americans abroad). For many Americans abroad their corporations were their pension/retirement plans. The 965 Transition Tax effectively confiscated their retirement plans and in some cases forced the liquidation of their corporations in order to be able to pay the tax. Of all the indignities and unfairness inflicted on Americans abroad, this was probably the worst.

Lawsuit From Abroad - Silver

U.S. tax lawyer Monte Silver deserves credit for launching a lawsuit against the Treasury Department which based largely on the procedural aspects of how the Transition Tax was inflicted on  Americans abroad. The Silver lawsuit(s) did not challenge the constitutionality of the Transition Tax per se. The Silver lawsuits challenge was from the perspective of US citizens, living outside the United States, carrying on a business through a corporation that was local to them, but foreign to the United States. I have written about the Silver lawsuit here.

Lawsuit From Inside The USA - Moore

A lawsuit challenging the constitutionality of the Transition Tax was launched from inside the United States (from the perspective of a U.S. resident being a shareholder of a Controlled Foreign Corporation). I have previously written about the lawsuit here.

Issues raised in the Moore Case:

The issues raised in the Moore case include (but are not limited to):

- whether the 965 Transition Tax was "retroactive" and therefore violates the due process clause (The District Court ruled that it was a retroactive tax but that it didn't violate the due process clause.)

- whether the 965 Transition Tax was a disguised "wealth tax" (Neither the District Court nor the 9th Circuit viewed that Transition Tax as a wealth tax.)

- whether to be taxable as "income" the income must have been actually received - remember that the individual shareholder is being taxed on more than 30 years of income never received. (Significantly both the District Court and the 9th Circuit ruled that there is no constitutional requirement that one actually receive income in order to be taxed as having received income!) 

The Moore's then requested that the 9th Circuit rehear the case. That request was denied. However, four Justices of the 9th Circuit issued a powerful dissent arguing that in order to be taxed on income, one must actually receive income!

Subsequently commentary in the Wall Street Journal here and here has argued that it is appropriate for this issue to be considered by the Supreme Court of the United States. Interestingly, this commentary makes no reference to the fact that this is a problem that has been experienced by Americans abroad for decades!

 

The three actual court decisions are here:

District Court - November 19, 2020 - Motion For Summary Judgment For Government Granted

9th Circuit - June 7, 2022 - District Court Decision Affirmed

9th Circuit - November 2022 - Denial Of Rehearing With Strong Dissent

 

Virginia La Torre Jeker - Coming To The Aid Of Americans Abroad

"The 9th Circuit case of Moore v US may get some traction for examining all of Subpart F, GILTI as unconstitutional "wealth taxes". Personally, I do not think it will get far, but what I found most interesting is that the authors of the WSJ op ed have ignored this issue for decades and only look at it now in light of the TCJA "transition tax" . They are concerned with Americans stateside being hit with similar taxes on domestic corporations. Yet, Americans owning foreign corporations abroad have been paying such tax for decades... "without selling their stock or receiving a dividend" they are "deemed to have received 'income'". Per the authors this "upends a bedrock principle of taxation, which is that to create taxable income, there must be a transaction, or 'realization'.” That’s what distinguishes an income tax from a tax on property or wealth. ... The op ed states:

"Much hangs on the future of this case. If Moore is allowed to stand, Congress would have a green light to tax every U.S. investor in a domestic corporation in the same way." https://taxprof.typepad.com/taxprof_blog/2023/01/wsj-op-ed-the-ninth-circuit-upholds-a-wealth-tax.html #taxes #tax #international"

https://www.linkedin.com/feed/update/urn:li:activity:7027219762225065984/  

 

 

Redefining US Citizenship Tax: Taxation Based On Circumstances Of Birth Instead Of Circumstances Of Life (applied to people who don’t live in the USA)

February 1, 2023 - Participants include:

Anthony Parent - @IRS_Medic

Keith Redmond - @Keith__Redomond

John Richardson - @Expatriationlaw

This short podcast is based on the following two recent posts:

Toward A Definition Of Citizenship Taxation

Bottom line: The only contextual meaning that citizenship tax can have is the US imposing tax on people who do NOT live in the United States on income earned outside the United States.

Should tax residency Be Based On The “Circumstances Of Your Birth” Or The “Circumstances Of Your Life”?

Bottom line: The reality is that "citizenship taxation" is really taxation based on "circumstances of birth" rather than "circumstances of life".

Combining the lessons of these two posts, we can reasonably conclude that US "citizenship taxation" means that:

Because of the circumstances of birth, the United States claims the right to impose taxation on income earned by people who don't live in the U.S., on income not earned in the U.S.

 

 

FBAR Penalties - US v. Molyneux - The Next Opportunity To Argue The Excessive Fines Clause

January 30, 2023 - Participants include:

Virginia La Torre Jeker - @VLJeker

John Richardson - @Expatriationlaw

 

In December of 2022 the Department Of Justice sued Ms. Molynuex to recover FBAR penalties.

Significantly:

- it appears the penalties were assessed in relation to an account that she had "signing authority" over but no beneficial interest (it wasn't her account)

- the penalties assessed were more than 400% of the maximum value of the accounts

This may be a good case to accept Justice Gorsuch's invitation from the Toth case to argue that that "civil FBAR penalties" are indeed limited by the "Excessive Fines Clause" of the eighth amendment of the constitution.

 

 

 

@MiAzhikwan - The Importance Of Truth - The Second Lesson

January 23, 2023 - Participants include:

Janine Seymour - @MiAzhikwan

 

John Richardson - @Expatriationlaw

 

The Role Of "Truth" In Enabling Forgiveness and Love.  - The Third Lesson

MiAzhikwan is a lawyer, LL.M., independent candidate and a member of the Bear Clan near Kenora, Ontario in Treaty Three Territory.

 

This is my fourth podcast with MiAzhikwan.

The first was during her run as an independent candidate in the May 2022 Ontario election:

https://independentcandidates.substack.com/p/meet-janine-seymour-aka-miazhikwan#details

The second was on September 5, 2022 and explored the teaching of forgiveness:

https://independentcandidates.substack.com/p/miazhikwan-choosing-forgiveness-the#details

The third was on September 27, 2022 and explored the teaching and meaning of love:

https://independentcandidates.substack.com/p/miazhikwan-the-importance-of-love#details

 

This fourth podcast was recorded on January 23, 2023 and explores the importance of role of truth:

https://independentcandidates.substack.com/p/miazhikwan-the-importance-of-truth#details

 

 

 

H.R. 25 - ”The Fair Tax” - Will Be Voted On In The House - Taxation Is Too Important To Be Left To The Political Parties

January 24, 2023 - Participants Include:

 

Jim Bennet - Fair Tax - @FairTaxOfficial

 

John Richardson - @Expatriationlaw

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On January 10, 2023 the "Fair Tax" - H.R. 25 was introduced into the House. The has provided a long overdue opportunity to rethink what taxation is for, how it should work and how it should be enforced. It's important that individuals do NOT rely on their Republican or Democrat representatives to explain the "Fair Tax". Taxation is too important to be left to the political parties.

Tax reform is about serving the interests of the American people and NOT the American political parties.

Taxation is NOT and should never be a partisan issue!

Some background ...

 

On March 27, 2022 I hosted Jim Bennet of "Fair Tax" and learned about the "Fair Tax Proposal".  On April 13, 2022, Jim Bennet returned as a guest and was joined by Steve Hayes and Joe Howard. The April 13, 2022 podcast can be heard here. On June 4, 2022 I hosted Steve Hayes 

Mr. Hayes and Mr. Bennet are the primary movers and creators of H.R. 25 "The Fair Tax Act of 2021" which can be viewed here.

So, what is the "Fair Tax" movement?

At the risk of oversimplification, H.R. 25 proposes to replace Subtitle A (Income Tax), Subtitle B (Estate and Gift Tax) and Subtitle C (Employment Tax) of Title 26 (The Internal Revenue Code)  with one comprehensive consumption tax.

If enacted the "Fair Tax" would create a U.S. tax system that:

-  was a territorial (tax imposed on activity in the US only) based on a consumption tax (tax imposed on consumption and not income)

- allowed certain low income people to apply for tax abatements

- made the U.S. a more attractive location for foreign investment and business activities

- ended the tax filing requirement for individual taxpayers (and therefore ended the "Regulatory Oppression" experienced by individuals in general and Americans abroad in particular)

- ending the relevance of "tax residency" because taxation would be based on spending only

- solved the problems of citizenship tax as experienced by US emigrants and accidental Americans

The adoption of the "Fair Tax" would result in a major change in US society. As the great tax historian Charles W. Adams taught:

As goes taxation, so goes civilization!

I strongly suggest that Americans abroad support the "Fair Tax" movement!