PREP Podcaster - ”Success Favours The PREPared Mind”

US Supreme Court Denies Toth FBAR Cert Petition Refusing To Decide Whether Penalties Violate ”Excessive Fines Clause” Of 8th Amendment

January 24, 2023 - Participants Include:

Virginia La Torre Jecker - @VLJeker

John Richardson - @Expatriationlaw

On January 23, 2023 the Supreme Court of the United States denied Ms. Toth's petition to hear her case. The court was invited to hear arguments on whether the assessment of a two million FBAR penalty on a four million dollar bank account balance violated the "Excessive Fines Clause" found in  the Eighth Amendment.

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Eighth Amendment  Cruel and Unusual Punishment

• Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.

   

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Justice Gorsuch wrote a dissent in which he described the facts and issues. The dissent which is found here, included:

 

"In the 1930s, Monica Toth’s father fled his home in Germany to escape the swell of violent antisemitism. Eventually, he found his way to South America, where he made a new life with his young family and went on to enjoy a successful business career in Buenos Aires. But perhaps owing to his early formative experiences, Ms. Toth’s father always kept a reserve of funds in a Swiss bank account. Shortly before his death, he gave Ms. Toth several million dollars, also in a Swiss bank account. He encouraged his daughter to keep the money there—just in case.

Ms. Toth, now in her eighties and an American citizen, followed her father’s advice. For several years, however, she failed to report her foreign bank account to the federal government as the law requires. 31 U. S. C. §5314. Ms. Toth insists this was an innocent mistake. She says she did not know of the reporting obligation. And when she learned of it, she says, she completed the necessary disclosures. The Internal Revenue Service saw things differently.

Pursuant to §5321, the agency charged Ms. Toth with willfully violating §5314’s reporting requirement and assessed a civil penalty of $2.1 million—half of the balance of Ms. Toth’s account—plus another $1 million in late fees and interest.

Initially, Ms. Toth sought to represent herself in proceedings challenging the IRS’s assessment, but that did not go well. Later, Ms. Toth engaged counsel who argued that the IRS’s assessment violated the Excessive Fines Clause of the Eighth Amendment. But the First Circuit rejected this line of defense. It held that the Constitution’s protection against excessive fines did not apply to Ms. Toth’s case because the IRS’s assessment against her was “not tied to any criminal sanction” and served a “remedial” purpose. 33 F. 4th 1, 16, 17–19 (2022).

This decision is difficult to reconcile with our precedents. We have recognized that the Excessive Fines Clause “traces its venerable lineage” to Magna Carta and the English Bill of Rights. Timbs v. Indiana, 586 U. S. ___, ___–___ (2019) (slip op., at 4–5). We have held that “[p]rotection against excessive punitive economic sanctions” is “‘fundamental’” and “‘deeply rooted in this Nation’s history and tradition.’” Id., at ___ (slip op., at 7). And all that would mean little if
the government could evade constitutional scrutiny under the Clause’s terms by the simple expedient of fixing a “civil” label on the fines it imposes and declining to pursue any related “criminal” case. Far from permitting that kind of maneuver, this Court has warned the Constitution guards against it. See Austin v. United States, 509 U. S. 602, 610 (1993) (“[T]he question is not, as the United States would have it, whether [a monetary penalty] is civil or criminal, but rather whether it is punishment.”); see also Giaccio v. Pennsylvania, 382 U. S. 399, 402 (1966); Sessions v. Dimaya, 584 U. S. ___, ___ (2018) (GORSUCH, J., concurring in part and concurring in judgment) (slip op., at 10).

Nor is a statutory penalty beneath constitutional notice because it serves a “remedial” purpose. Really, the notion of “nonpunitive penalties” is “a contradiction in terms.” United States v. Bajakajian, 524 U. S. 321, 346 (1998) (Kennedy, J., dissenting). Just take this case. The government did not calculate Ms. Toth’s penalty with reference to any losses or expenses it had incurred. The government imposed its penalty to punish her and, in that way, deter others. Even supposing, however, that Ms. Toth’s penalty bore  both punitive and compensatory purposes, it would still merit constitutional review. Under our cases a fine that serves even “in part to punish” is subject to analysis under the Excessive Fines Clause. Austin, 509 U. S., at 610 (emphasis added). Ms. Toth and her amici identify still more reasons to worry about the First Circuit’s decision. They say it clashes with the approach many other courts have taken in similar cases. Pet. for Cert. 18–25 (collecting cases). They observe that it incentivizes governments to impose exorbitant civil penalties as a means of raising revenue. Id., at 25–30. And they contend that it is difficult to square with the original understanding of the Eighth Amendment. Brief for Professor Beth A. Colgan as Amicus Curiae on Pet. for Cert. 4–13. For all these reasons, taking up this case would have been well worth our time. As things stand, one can only hope that other lower courts will not repeat its mistakes."

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Four Attitudes Of Americans Abroad Toward US Citizen Tax: Ending, Ignoring, Escaping Or Improving

January 20, 2023 - Participants Include:

 

Keith Redmond - @Keith__Remond

John Richardson - @ExpatriationLaw

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This informal discussion was the result of two separate (but contextually related) discussions on social media discussing US citizenship taxation.

First - Keith Redmond's American Expatriates Facebook group. The discussion thread is here:

https://www.facebook.com/groups/AmericanExpatriates/posts/2370830776416314/

Note this thread is discussed until approximately the 30:35 mark.

Second - Discussion on Twitter 

https://twitter.com/RonSteenblik/status/1614669507590496259

Note this thread is discussed from approximately the 30:35 mark until the end.

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Interestingly both discussions illuminated the fact that those subject to the US extra-territorial tax regime are clearly impacted in different ways. These differences make it very difficult to unite Americans abroad in a common goal of ending US citizenship taxation.

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".

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Why should the US entertain a transition from citizenship taxation to residence taxation when Americans abroad are NOT united in the goal of ending citizenship tax?

To put it simply:

Americans abroad have divided and conquered each other!

 

 

 

 

 

Why Tax Reform For Americans Abroad Is Reminiscent Of The Movie Groundhog Day

January 18, 2023 - Participants Include:

Virginia La Torre Jeker - @VLJeker

John Richardson - @Expatriationlaw

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In the move "Groundhog Day" Bill Murray awakens every day to a day that was the same as the previous day.

The 2022 Taxpayer Advocate Report to Congress was released in early 2023. It contains a section about the problems facing Americans abroad.

As noted by Virginia La Torre Jeker, the same problems are identified as continuing from year to year with no change!

Everybody agrees that there is a problem. Yet there has been little (or no) progress to relieve the problems (other than encouraging people to renounce US citizenship).

 

Dr. Don Young Discusses: Jordan Peterson And The Ontario College Of Psychologists of Ontario

January 7, 2023 - Participants include:

Dr. Donald Young - Toronto Psychologist

John  Richardson - @Expatriationlaw

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As has recently been widely reported in the press, the College of Psychologists of Ontario (CPO) has disciplined a member, Dr Jordan Peterson, for public comments he has made in regard to a variety of topics. Dr. Peterson is a Professor Emeritus at the University of Toronto Psychology Department and was previously at Harvard. He has authored three books and hundreds of academic articles. He has over 1.8 million subscribers to his YouTube channel and over 6.5 million views. Of note, none of his comments were made in the context of his clinical work as a psychologist. The implications of the CPO's actions have frightening implications for all professionals in Ontario who work under the auspices of their regulatory bodies.

 

The basis of the complaint and Dr. Peterson's response is detailed in the following two newspaper articles.

https://nationalpost.com/news/canada/read-jordan-petersons-tweets-that-prompted-complaints-to-psychologists-college

 

 

https://calgaryherald.com/news/provincial/read-the-court-filing-by-jordan-peterson-against-the-college-of-psychologists-of-ontario/wcm/beef4b34-0906-4361-a14a-574ba11ddbd0

 

Today we are joined by Dr. Donald Young, a clinical psychologist with 40 years of experience, who will discuss how health professionals are regulated in Ontario, some specifics about the CPO and Dr Peterson's legal response to the allegations.

 

Notice 2023-11: A Significant Escalation of FATCA Enforcement On Foreign Banks and Americans Abroad

January 6, 2023 - Participants Include:

Keith Redmond @Keith__Redmond

John Richardson - @Expatriationlaw

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On December 30, 2022 US Treasury issued Notice 2023-11. The purpose of the Notice included a provision that allowed foreign banks to avoid a designation of "significant non-compliance" with the FATCA IGAs. This "temporary stay of execution" is available ONLY in return for heightened FATCA enforcement on both US citizens and the banks.

I have written the following two posts on this topic:

https://citizenshipsolutions.ca/2023/01/04/part-1-notice-2023-11-the-carrot-the-stick-and-heightened-fatca-enforcement-on-overseas-americans/

https://citizenshipsolutions.ca/2023/01/04/part-2-notice-2023-11-non-us-banks-may-be-forced-to-sever-ties-with-us-citizen-clients-because-of-fatca/

 

Joining me today is Keith Redmond where we discuss:

- what Notice 2023-11 really means

- What Americans abroad need to understand

- What options may be available for Americans abroad

"All Roads Lead To Renunciation!"

 

There Are Two Kinds Of People Who Need A Second Citizenship: The Rich And The Poor

December 30, 2022 - Participants Include:

 

Hon. Philippe A. May - @EC_Holdings

John Richardson - @Expatriationlaw

In my final podcast of 2022 I had the opportunity to explore the issues of second citizenships and residents with Mr. Philippe A. May of EC Holdings which is a second citizenship advisory in Singapore.

We discussed the "Who", "What", "Where" and "When" of both second citizenship and residency programs. Mr. May shared his expertise and thoughts and the opportunities in general with a special emphasis on the South American countries of Uruguay and Paraguay. The opportunities in South America will come as a surprise to some.

 

 

Financial Planning For Americans Abroad In Israel with Aaron Katsman

December 28, 2022 - Participants include:

Aaron Katsman - Lighthouse Capital - @AaronKatsman

John Richardson - @Expatriationlaw

 

Thanks to Aaron for a great review of the basics of financial planning.

You will be amazed at the effects of buying three cups of coffee a week rather than saving the money!

 

 

Ms. Molyneux Meets Mr. FBAR On Fifth Avenue In New York

December 21, 2022 - Participants include:

Anthony Parent - @IRSMedic

Keith Redmond - @Keith__Redmond

John Richardson - @ExpatriationLaw

Another interesting FBAR case (lawsuit filed on December 16, 2022) ... The FBAR penalties assessed exceed the value of the accounts (by a lot). What is going on here?

The "Complaint" (below) suggests that Ms. Molyneux was assessed FBAR penalties for a period of time when she was living in the US. The "Complaint" further suggests that Ms. Molyneux is currently living outside the US.

To learn the facts, read the government's "complaint" below.

 

 

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United States v. Molyneux, No. 22-cv-10654

DAMIAN WILLIAMS
United States Attorney for the
Southern District of New York
By: TOMOKO ONOZAWA
Assistant United States Attorney


UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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UNITED STATES OF AMERICA, :
:
Plaintiff, : 22 Civ. 10654
:
v. : COMPLAINT
:
PILAR MOLYNEUX, :
:
Defendant. :
-----------------------------------------------------------------x
Plaintiff the United States of America (the “United States”), by its attorney, Damian Williams, United States Attorney for the Southern District of New York, brings this action to collect the outstanding unpaid civil penalties assessed against defendant Pilar Molyneux (“Molyneux”) for her willful failure to report her financial interest in foreign bank accounts in calendar years 2014 and 2015, as required by 31 U.S.C. § 5314 and its implementing regulations,
and alleges upon information and belief as follows:

JURISDICTION AND VENUE

1. The United States brings this suit under 31 U.S.C. §§ 3711(g)(4)(C) and
5321(b)(2), at the direction of the Attorney General of the United States and at the request of, and with the authorization of, the Commissioner of the Internal Revenue Service (“IRS”), a delegate of the Secretary of the Treasury of the United States.

2. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§ 1331, 1345, and 1355 because it arises under a federal statute and the United States is the plaintiff.

3. Venue is proper in this district under 28 U.S.C. § 1391(c)(3) because Molyneux, a United States citizen, currently resides in France and may be sued in any judicial district. Venue may also be proper in this district under 28 U.S.C. § 1395(a) because the acts or omissions giving rise to Molyneux’s liabilities occurred in this district.

THE PARTIES

4. Plaintiff is the United States of America.

5. Defendant Pilar Molyneux is a citizen of the United States and Chile, and on
information and belief, currently resides in Paris, France, and conducts business at J.P. Molyneux Studio, with an office located at 4 Rue Chapon, 75003 Paris, France.

REGULATORY BACKGROUND

6. The Secretary of the Treasury is authorized by statute to require United States persons to report certain transactions with foreign financial agencies. See 31 U.S.C. § 5314. Under the statute’s implementing regulations, “[e]ach United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship” to the Department of the Treasury for each year in which such relationship exists. 31 C.F.R. § 1010.350(a).

7. To fulfill this requirement, a United States person is required file a “Report of Foreign Bank and Financial Accounts . . . or any successor form,” commonly known as an “FBAR,” by June 30 “of each calendar year with respect to foreign financial accounts exceeding $10,000 maintained during the previous calendar year.” 31 C.F.R. §§ 1010.350(a), 1010.306(c).

8. Civil penalties may be assessed on taxpayers for willful failure to comply with the reporting requirements of § 5314. 31 U.S.C. § 5321(a)(5). For calendar year 2014, the maximum penalty for willful violations involving the failure to report the existence of a foreign financial account, was the greater of $100,000 or 50% of the balance in the account at the time of the violation. Id. § 5321(a)(5)(C)(i). For calendar year 2015, the maximum penalty for willful
violations was the greater of $134,806 or 50% of the balance in the account at the time of the violation. Id.; 31 C.F.R. § 1010.821(b).

9. Penalties under 31 U.S.C. § 5321(a)(5)(C) are subject to interest and further
penalties pursuant to 31 U.S.C. § 3717.

FACTUAL BACKGROUND

10. Molyneux was a U.S. person during calendar years 2014 and 2015 and resided within the United States or was otherwise subject to the jurisdiction of the United States.

11. On information and belief, Molyneux maintained a residence in Manhattan at all times relevant to the complaint.

12. During at least calendar years 2014 and 2015, Molyneux was familiar with the FBAR filing requirements because she had previously timely filed an FBAR for calendar year 2013. In addition, in 2014, Molyneux filed delinquent FBARs for calendar years 2005 through 2012. Also in 2014, JP Molyneux Studio, an entity in which Molyneux held an ownership interest, timely filed an FBAR for calendar year 2013.

A. Banque Neuflize Personal Bank Accounts

13. From at least January 2014 through at least December 2015, Molyneux had signature authority over two accounts at Banque Neuflize in France, bearing account numbers

XXXXXXX0001 and XXXXXXX0002 (hereinafter, the “Banque Neuflize Personal Accounts”).

14. The mailing address of the financial institution in which the Banque Neuflize Personal Accounts were held was 3 Avenue Hoche, Paris, Ile-de-France, 75008, France.

15. The Banque Neuflize Personal Accounts were bank, securities, or other financial accounts in a foreign country.

B. Molyneux’s FBAR Reporting Obligations for Calendar Year 2014

16. During calendar year 2014, the Banque Neuflize Personal Accounts had a maximum aggregate balance of $29,310.

17. The aggregate balance of the Banque Neuflize Personal Accounts exceeded $10,000 during the 2014 calendar year.

18. Molyneux failed to file an FBAR with regard to the 2014 calendar year on or before June 30, 2015.

19. By failing to file an FBAR for calendar year 2014, Molyneux willfully violated the reporting requirements of Section 5314.

C. Molyneux’s FBAR Reporting Obligations for Calendar Year 2015

20. During calendar year 2015, the Banque Neuflize Personal Accounts had a
maximum aggregate balance of $64,736.

21. The aggregate balance of the Banque Neuflize Personal Accounts exceeded $10,000 during the 2014 calendar year.

22. Molyneux failed to file an FBAR with regard to the 2015 calendar year on or before June 30, 2016.

Pursuant to Federal Rule of Civil Procedure 5.2(a)(4), all but the last four digits of the financial account numbers herein are redacted.

23. By failing to file an FBAR for calendar year 2015, Molyneux willfully violated the reporting requirements of Section 5314.

D. Assessment of Civil Penalties

24. On March 4, 2020, a delegate of the Secretary of the Treasury sent Molyneux a notice to her business address in the United States, 750 Lexington Avenue, 5th Floor, New York, New York 10022. The notice proposed civil penalties totaling $400,000 (the “FBAR Penalties”) against Molyneux for her willful failures to comply with the FBAR filing requirements for calendar years 2014 and 2015.

25. Specifically, the notice proposed penalties in the amount of $200,000 ($100,000 per account) for Molyneux’s willful failure to file an FBAR for calendar year 2014, and $200,000 for Molyneux’s willful failure to file an FBAR for calendar year 2015.

26. On March 4, 2020, the IRS also sent Molyneux an IRS Form 13449, entitled “Agreement to Assessment and Collection of Penalties Under 31 USC 5321(a)(5) and 5321(a)(6)” to 750 Lexington Avenue, 5th Floor, New York, New York 10022. Above the signature line, the Form 13449 stated: “I consent to the immediate assessment and collection of the penalty amount specified above,” and listed $400,000 as the total proposed penalty.

27. On April 15, 2020, Molyneux acknowledged her liability for the assessed
penalties by signing the Form 13449 and returning it to the IRS via facsimile on April 17, 2020. The form listed her address as 750 Lexington Avenue, 5th Floor, New York, New York 10022.

28. On December 21, 2020, in accordance with 31 U.S.C. § 5321(a)(5)(C)(i) and consistent with the Form 13449 executed by Molyneux, a delegate of the Secretary of the Treasury assessed FBAR Penalties totaling $400,000 against Molyneux for her willful failures to comply with the FBAR filing requirements for calendar years 2014 and 2015.

29. On December 21, 2020, a delegate of the Secretary of the Treasury sent
Molyneux a notice of the assessment of the FBAR Penalties and a demand for payment to 750 Lexington Avenue, 5th Floor, New York, New York 10022.

30. On January 13, 2021, the notice of assessment was returned to the IRS by the United States Postal Service as undeliverable.

31. On February 17, 2021, the IRS mailed a copy of the notice of assessment to
Molyneux at JP Molyneux Studio’s address in Paris. To date, no portion of the FBAR assessments against Molyneux for calendar years 2014 or 2015 have been paid.

32. Since the date on which the IRS assessed the FBAR Penalties, interest and
additional penalties have accrued, and continue to accrue, including interest and a late penalty charge. 31 U.S.C. § 3717(a)-(c), (e)-(f); 31 C.F.R. § 901.9(b)(3), (d).

CLAIM FOR RELIEF

Judgment for Civil Penalties, 31 U.S.C. § 5321(a)(5)

33. The allegations in paragraphs 1 through 32 are repeated and realleged as though set forth fully therein.

34. By this action, the United States seeks to collect the FBAR Penalties assessed against Molyneux by the IRS on December 21, 2020, plus interest and additional penalties which continue to accrue as provided by law.

35. Molyneux owes the United States $400,000, consisting of the $200,000 FBAR Penalty assessed for calendar year 2014 and the $200,000 FBAR Penalty assessed for calendar year 2015, plus associated penalties and interest pursuant to 31 U.S.C. § 3717, which continue to accrue.

36. The United States may bring suit to recover the FBAR Penalties assessed under 31 U.S.C. § 5321(a) at any time before the end of the two-year period beginning on the date the penalty was assessed. 31 U.S.C. § 5321(b)(2)(A).

37. This civil action to collect the FBAR Penalties, and the associated penalties and interest, is timely under 31 U.S.C. § 5321(b)(2), because it is filed within two years of December 21, 2020, the date when the FBAR Penalties were assessed.

RELIEF REQUESTED

WHEREFORE, Plaintiff the United States of America respectfully requests that the Court enter judgment:

(a) awarding the United States the amount of Molyneux’s assessed FBAR Penalties totaling $400,000.00, plus any interest and/or additional penalties as allowed by law from December 21, 2020, to the date of payment; and
(b) granting the United States its costs incurred in connection with this action, along with such further relief as the Court may deem just and proper.

Dated: New York, New York
December 16, 2022
DAMIAN WILLIAMS
United States Attorney for the
Southern District of New York
Attorney for Plaintiff United States of
America
By: /s/ Tomoko Onozawa
TOMOKO ONOZAWA

Assistant United States Attorney

What If You Want To Plan For Your Financial Future, But Simply Don’t Know Where To Begin?

December 19, 2022 - Participants include:

Nancy Grouni - ObjectiveFinancialPartners.com

John Richardson - @ExpatriationLaw

The days of a defined benefit pension are long gone. All people must take responsibility for their financial futures. Yet, many aren't aware of this obligation. Of those who are aware, "many people don't even know where to start". Ms. Grouni provides "oversight" and acts as a quarterback to oversee all "the moving parts."

As always, US citizenship is a complicating factor.

As a person who gives advice on a fee-based basis, Nancy Grouni is not "one in a million" but is one of approximately 150 people serving the population of Canada. 

You will enjoy this podcast!

 

 

 

 

US Croatia Proposed Tax Treaty Gives The US Taxing Rights Over Renounced US Citizens

December 18, 2022 - Participants include:

Tim Smyth - @Tpsmyth01

John Richardson - @Expatriationlaw

 

This spells trouble!!

 

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The text of the treaty document can be found at: https://home.treasury.gov/system/files/131/Treaty-Croatia-12-7-2022.pdf

Treaty-Croatia-12-7-2022

Of particular note in Treasury’s announcement is:

“The Treasury Department is pleased to conclude this new tax treaty with Croatia. It is the first comprehensive tax treaty that the United States has signed in over ten years and reflects our current tax treaty policies and is a milestone in the Treasury’s efforts to expand the U.S. tax treaty network. We appreciate the collaboration Croatia showed throughout the negotiations,” said Lily Batchelder, Assistant Secretary (Tax Policy).

The new tax treaty closely follows the U.S. Model income tax treaty.

Treasury’s announcement focuses on the mutually beneficial aspects of the US Croatia tax treaty. Notably Treasury’s announcement fails to comment on the inclusion of the enhanced “saving clause” which is identical to the following provisions in the US Croatia tax treaty.

4. Except to the extent provided in paragraph 5 of this Article, this Convention shall not affect the taxation by a Contracting State of its residents (as determined under Article 4 (Resident)) and its citizens. Notwithstanding the other provisions of this Convention, a former citizen or former long-term resident of a Contracting State may be taxed in accordance with the laws of that Contracting State.

5. The provisions of paragraph 4 of this Article shall not affect:
a) the benefits conferred by a Contracting State under paragraph 3 of Article 7 (Business Profits), paragraph 2 of Article 9 (Associated Enterprises), paragraph 7 of Article 13 (Gains), subparagraph (b) of paragraph 1, paragraphs 2, 3 and 6 of Article 17 (Pensions, Social Security, Annuities, Alimony and Child Support), paragraph 3 of Article 18 (Contributions to Pension Funds), and Articles 23 (Relief From Double Taxation), 24 (Non-Discrimination) and 25 (Mutual Agreement Procedure); and
b) the benefits conferred by a Contracting State under paragraph 1 of Article 18 (Contributions to Pension Funds), and Articles 19 (Government Service), 20 (Students and Trainees) and 27 (Members of Diplomatic Missions and Consular Posts), upon individuals who are neither citizens of, nor have been admitted for permanent residence in, that Contracting State.

This represents a significant expansion of the “saving clause” to allow the US to impose US taxation NOT only on its” residents (as determined under Article 4 (Resident)) and its citizens” but also on “a former citizen or former long-term resident” which may are permitted to be subjected to any relevant future provisions of the Internal Revenue Code.

From the perspective of Croatia, the “saving clause” found in Paragraph 4 of Article 1 means:

4. Except to the extent provided in paragraph 5 of this Article, this Treaty shall not affect the taxation by the United States of its residents (as determined under Article 4 (Resident)) and residents of Croatia who happen to be US citizens. Notwithstanding the other provisions of this Convention, a former US citizen or former long-term US Green Card holder who is a resident of Croatia may be taxed by the United States according to the Internal Revenue Code.