PREP Podcaster - ”Success Favours The PREPared Mind”

Mr. FBAR And The Future Of US Citizenship Abroad - Greg Smith Reflects On 25 Years Of Living Overseas

March 11, 2023 - Participants include:

 

Gregory Smith - @BlogNDog

 

John Richardson - @Expatriationlaw

 

_________________________________________________

 

Greg Smith has lived outside the United States for most of his life. He has lived in six U.S. states and 19 different countries. He is presently in Prague where (along with other things) he runs a Hostel for visitors to Prague.

He was previously on the ACA Board.

In this podcast, Greg a wide range of thoughts and perceptions about his 25+ years of living under the tyranny of Mr. FBAR and the U.S. extra-territorial tax, reporting and penalty regime.

 

This podcast was arranged because of the following Twitter exchange on March 11/23 about the Bittner case:

 

@Expatriationlaw

The real story is that this #FBAR issue even had to be resolved by the Supreme Court. Think of it: The IRS is levying life altering penalties based on violations of a statute that is so unclear that even the Supreme Court couldn’t agree on what was intended! “The American Way”

 

@BlogNDog replies with:

 

This has long been my take on this issue - what is it that makes the IRS feel compelled to fight all the way to the Supreme Court in pursuit of the most extreme possible interpretation of the law? There may be some ambiguity about what the laws says, but there is no question>>

 

>>that the IRS has the discretionary authority to not impose the highest penalty available. Let the question about whether they *could* impose a higher penalty if they chose to remain unanswered

 

The full discussion is on Twitter at:

 

https://twitter.com/ExpatriationLaw/status/1634539926036332547

 

 

Thinking About How Americans Abroad Can Make The Best Use Of Their Right To Vote In US Elections

March 10, 2023 - Participants include:

 

Keith Redmond - @Keith__Redmond

John Richardson - @Expatriationlaw

________________________________________________

 

The issue is NOT who should get your vote, but rather how to make the best use of your right to vote. At present ONLY the Democrats have a presence outside the United States and are asking for your vote.

 

Your right to vote can be used in a variety of different ways which include:

- Voting for either the Republicans or Democrats

- Vote for a small party or third party candidate

- Not vote and ignore the process

- Not vote and explain to the established Parties that you refuse to "Vote For The Party", because (as an American Abroad) the Party won't vote for you!

 

 

If You Think The Cost Of Education Is High, Try The Cost Of Not Having That Education

March 10, 2023 - Participants include:

 

Keith Redmond - @Keith__Redmond

John Richardson - @Expatriationlaw

__________________________________________-

For Americans abroad having their "Oh My God Moment" the question is NOT the execution of the plan. The question is what should the plan be!

 

It's important to RESPOND and NOT to REACT!

Of perhaps view it this way:

‘LET US NOT LOOK BACK IN ANGER, NOR FORWARD IN FEAR, BUT AROUND IN AWARENESS.’ (JAMES THURBER)

 

Time To Retire The Term ”Citizenship Taxation”: Better To Call It Taxation Based On Circumstances Of Birth

March 3, 2023 - Participants include:

 

Keith Redmond - @Keith__Redmond

 

John Richardson - @Expatriationlaw

 

In this podcast we discuss:

 

The United States defines "tax residence" in terms of the "circumstances of birth" rather than the "circumstances of life: and

Why it's important to get the support of other countries in ending the U.S. extra-territorial tax regime!

 

This discussion is based largely on the following three posts:

 

https://citizenshipsolutions.ca/2023/01/08/toward-a-definition-of-us-citizenship-taxation/

 

https://citizenshipsolutions.ca/2023/01/26/should-tax-residency-be-based-on-the-circumstances-of-your-birth-or-the-circumstances-of-your-life/

 

https://citizenshipsolutions.ca/2023/03/01/the-issue-is-not-citizenshiptax-the-issue-is-whether-the-us-can-claim-the-tax-residents-of-other-countries-as-us-tax-residents/

 

 

 

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

March 1, 2023 - Participants include:

 

Virginia La Torre Jeker - @VLJeker

 

John Richardson - @Expatriationlaw

_______________________________________

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

_________________________________________

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!

 

_______________________________________________________

 

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

___________________________________________

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/