PREP Podcaster - ”Success Favours The PREPared Mind”

US Treasury publishes list suggesting record numbers relinquishing US citizenship in 2020 - but what can be inferred from the list?

February 9, 2021 - Participants Include:

Dr. Karen Alpert - @FixTheTaxTreaty

Tim Smyth - @Tpsmyth01

John Richardson - @Expatriationlaw

Internal Revenue Code 6039G requires US Treasury to publish the names of US citizens who relinquish US citizenship. Some refer to the list as the "Name and Shame" list, while others call it the "Liberty List".

6039G in relevant part includes:

"Notwithstanding any other provision of law, not later than 30 days after the close of each calendar quarter, the Secretary shall publish in the Federal Register the name of each individual losing United States citizenship (within the meaning of section 877(a) or 877A) with respect to whom the Secretary receives information under the preceding sentence during such quarter."

Surprisingly there is wide disagreement about:

- exactly which individuals are required to be named on the list (all relinquishers, "covered expatriates" only, Green Card holders?)

- the accuracy of the list (how well does it correlate with the actual numbers of relinquishers)

- the reasons individuals relinquish US citizenship (political or to escape the US tax an/or regulatory net)

In this podcast we discuss: What does the list purport to represent and how accurate is the list?

 

The Tax Treaty Saving Clause - 2021 Edition: How the USA exports @CitizenshipTax throughout the world

February 9, 2021 - Participants Include:

Dr. Karen Alpert - @FixTheTaxTreaty

Tim Smyth - @Tpsmyth01

John Richardson - @Expatriationlaw

All US tax treaties include a "saving clause". With respect to individual US citizens, the effect of the "saving clause" is to:

1. First, guarantee that US citizens abroad who are dual tax residents will be subject to double taxation; and

2. Second, relax that double taxation in certain specific areas.

For example, Article XXIX of the Canada US Tax Treaty includes:

"2. Except as provided in paragraph 3, nothing in the Convention shall be construed as preventing a Contracting State from taxing its residents (as determined under Article IV (Residence)) and, in the case of the United States, its citizens (including a former citizen whose loss of citizenship had as one of its principal purposes the avoidance of tax, but only for a period of ten years following such loss) and companies electing to be treated as domestic corporations, as if there were no convention between the United States and Canada with respect to taxes on income and on capital.

3. The provisions of paragraph 2 shall not affect the obligations undertaken by a Contracting State:

• (a) under paragraphs 3 and 4 of Article IX (Related Persons), paragraphs 6 and 7 of Article XIII (Gains), paragraphs 1, 3, 4, 5, 6(b) and 7 of Article XVIII (Pensions and Annuities), paragraph 5 of Article XXIX (Miscellaneous Rules), paragraphs 1, 5 and 6 of Article XXIX B (Taxes Imposed by Reason of Death), paragraphs 2, 3, 4 and 7 of Article XXIX B (Taxes Imposed by Reason of Death) as applied to the estates of persons other than former citizens referred to in paragraph 2 of this Article, paragraphs 3 and 5 of Article XXX (Entry into Force), and Articles XIX (Government Service), XXI (Exempt Organizations), XXIV (Elimination of Double Taxation), XXV (Non-Discrimination) and XXVI (Mutual Agreement Procedure);
• (b) under Article XX (Students), toward individuals who are neither citizens of, nor have immigrant status in, that State."

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As citizenship and taxation have changed the "mission creep" of the "saving clause" has expanded. We suspect that treaty partner countries are only beginning to realize that the United States is using the "saving clause" to impose US worldwide taxation on the citizens and residents of other countries.

 

After all, US citizenship-based taxation is a system where the US imposes worldwide taxation, on non-US source income, according to US tax rules, on the tax residents of other countries.

 

Those wishing to understand more about the "saving clause" are invited to read the following three part series of posts written by Dr. Karen Alpert.

 

http://fixthetaxtreaty.org/2017/01/12/explaining-the-saving-clause-i/

http://fixthetaxtreaty.org/2017/01/19/explaining-the-saving-clause-ii/

http://fixthetaxtreaty.org/2017/01/29/explaining-the-saving-clause-iii/

 

Members of @SEATNow_org: American Extraterritorial Taxation Affects Different Groups in Different Ways - Learn How

January 20, 2021 - Participants Include:

 

John Richardson - @Expatriationlaw

Dr. Karen Alpert - @FixTheTaxTreaty

Dr. Laura Snyder - @TAPInternation

Suzanne Herman - @SuzanneHerman1

Keith Redmond - @Keith__Redmond

The core mission of SEAT is to "Stop Extraterritorial American Taxation". 

Extraterritorial American taxation is system that imposes worldwide taxation, on the non-US income of people who live in other countries. That said, there are different groups impacted.

These groups include:

American expatriates - short term Americans abroad who are returning to the USA and engage in financial planning in the US system. 

American emigrants - people who moved permanently from the United States and engage in financial planning in tax system of the country of residence (example Canada). 

Accidental Americans - people who moved from the United States as small children and not think of themselves as US citizens. Their financial planning revolves ONLY around their country of residence.

American Retirees abroad - people who have moved abroad to retire and live off U.S. source income (example Social Security). They are likely to file ONLY U.S. tax returns.

Additional victims of Extraterritorial Taxation include:

The sovereign countries where U.S. citizens reside; and

Homeland Americans who are effectively prevented from leaving the United States and living a normal life outside the United States.

Why it's important to distinguish the various groups impacted

US citizenship-based taxation AKA (the US imposition of US worldwide taxation on the tax residents of other countries) is a problem bigger than any one individual or one specific group. Different provisions of the Internal Revenue Code affect different groups differently.

Those varying and disparate effects have made it hard to unify the various groups of Americans abroad in the fight to end US citizenship-based taxation.

This podcast discusses the reason for this and provides examples.

 

 

 

The Tax Treaty Saving Clause: How it works to export US worldwide taxation offshore to other countries

January 13, 2019 - Participants Include:

 

John Richardson - @Expatriationlaw

 

Tim Smyth - @Tpsmyth01

 

My last podcast featured a discussion with David Lesperance where we discussed how tax treaties impact the global mobility decision. That podcast included some discussion about the "saving clause".

 

This is an excerpt from a 2019 podcast which features an interesting discussion of the standard tax treaty "saving clause". This podcast was extracted from  a longer discussion about  Representative Holding's 2018 Tax Fairness For Americans Abroad act.

The "saving clause" is a standard feature of U.S. tax treaties which denies US citizen individuals the benefit of U.S. tax treaties except in very limited and specific circumstances. Notably, the "saving clause" prevents  US citizens from using tax treaties to sever tax residency with the United States. Green Card holders ARE (although it may trigger the S. 877A Expatriation Tax) use the tax treaty tie break  provisions to sever tax residency with the United States.

Interestingly: US citizenship-based taxation could be ended by simply either:

1. Eliminating the saving clause from the Standard US tax treaty; and/or

2. Including some kind of "citizenship-based  tie breaker" that could be used by dual citizens.

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To better understand the saving clause see the following three blog posts ...

 

Why U.S. citizens cannot use a tax treaty tie break to sever tax residency:

 

http://citizenshipsolutions.ca/2016/05/26/savings-clause-in-us-tax-treaties-guarantees-us-right-of-taxation-on-residents-and-citizens-of-other-nations/

 

A bit of commentary on this issue - particularly the saving clause - in relation to the 2016 Model Tax Treaty:

 

http://citizenshipsolutions.ca/2016/07/13/analyze-the-new-2016-us-treasury-model-tax-treaty-what-does-it-mean-for-your-country/

 

Why Green Card holders can use a tax treaty tie break to sever tax residency (see the very last part) - but note that NOT all treaties are the same with respect to Green Card Holders (compare for example the treaties that the US has with Canada and the UK).

 

http://citizenshipsolutions.ca/2018/07/30/non-citizenship-has-its-privileges-an-overlooked-reason-why-a-green-card-holder-may-not-want-to-become-a-u-s-citizen/

 

Mobility Consultant David Lesperance - How tax treaties impact the global mobility decision

January 17, 2021 - Participants include:

 

John Richardson

 

David Lesperance

 

In the world of global mobility, there is great emphasis immigration and emmigration. There are many reasons why people seek second citizenships or residences. That said, every change in mobility may (or may not) create a change in tax residence. Changes in tax residency often have profound changes on wealth and opportunities. All countries have domestic tax rules. But, often these tax rules are modified by bilateral tax treaties between counties. Tax treaties impact tax residency, the amount of tax paid, information exchange and gradually more and more enforcement. In this episode, David Lesperance and John Richardson various ways these tax treaties can impact lives (including the future of the "Revenue Rule").

 

(See also my next podcast which focuses specifically on the saving clause of the standard US tax treaty.)

 

 

 

 

Members of @SEATNOW_org: Understanding US @Citizenshiptax and why ending #FATCA will have no effect on US tax policies

January 20, 2021 - Participants Include:

 

John Richardson - @Expatriationlaw

Dr. Karen Alpert - @FixTheTaxTreaty

Dr. Laura Snyder - @TAPInternation

Suzanne Herman - @SuzanneHerman1

Keith Redmond - @Keith__Redmond

The core mission of SEAT is to "Stop Extraterritorial American Taxation". 

Extraterritorial American taxation is system that imposes worldwide taxation, on the non-US income of people who live outside the United States in other countries. US taxation of nonresidents is the reason for FATCA.

But:

1. Ending FATCA will NOT "Stop Extraterritorial American Taxation"; but

2. Ending "Extraterritorial American Taxation" will end the rationale for FATCA.

 

This podcast includes a discussion of (1) what Extraterritorial Americans taxation is and how it impacts people who live in other countries.

The message: individuals impacted by "Extraterritorial American Taxation" must understand that the "original sin" is "Extraterritorial American Taxation". Those impacted by these unjust and immoral U.S. tax policies must understand that this is a problem that is bigger than one individual. Things that do not affect you today could affect you tomorrow. Extraterritorial American Taxation must end.

 

"If we don't hang together, we will hang separately!"

 

Mobility Consultant David Lesperance: Canada as a destination of choice (some even think it's a tax haven)

January 3, 2021 - Participants include:

 

John Richardson

 

David Lesperance

 

Canada is a Westminster democracy. The Canadian constitution includes a "Peace, Order and Good Government Clause". It is a stable place to live, a stable place to invest and (probably) a stable place to retain your wealth.

It's no surprise that Canada continues to be a top choice for immigration.

My second podcast with David Lesperance discusses some of the additional reasons why many would be well advised to consider residence or a second residence in Canada.

 

 

 

Mobility Consultant David Lesperance: Why Second citizenship and residence options are insurance in an unsettled world

January 3, 2021 - Participants Include:

John Richardson

David Lesperance

2020 was a difficult year for many and an unsettling year for all. It reinforced the dependencies people have on stability and predictability. It also reinforced the need for flexibility and "back up" plans.

In my first podcast of 2021 I discussed these issues  with mobility consultant David Lesperance of "Lesperance Associates".

David is the author of "Flight Of The Golden Geese" which explains the dependency that governments have on the tax revenues extracted from the few and why those few are incentivized to to seek alternative residences and citizenships. 

Retired UK Lawyer Describes How US Citizenship Taxation Impacts His Family AND The Sovereignty Of The UK And Other Countries

January 3, 2021 - Participants Include:

 

John Richardson - @ExpatriationLaw

Peter - A Retired London, UK Based Lawyer

This podcast features the experiences and perceptions of a person who is NOT and never was a U.S. citizen. But, approximately 40 years ago he married a U.S. citizen and had U.S. citizen children.

The discovery of U.S. citizenship tax rules led the family down a path of discovery where they gradually understood the principles of: U.S. citizenship, U.S. citizenship-based taxation and how the U.S. exports citizenship-based taxation to other countries.

The podcast includes a discussion of how the toxic mix of citizenship and U.S. taxation impacts individuals AND how it undermines the fiscal policies  of other nations (in this case the UK).

Of particular interest is a discussion of how the evolution of the law of U.S. citizenship (harder to lose) and U.S. taxation (infinitely more complex) has exacerbated the problem.

Ultimately, the problem is not FATCA. The problem is not citizenship. The problem is not even the rules of U.S. taxation.

The problem is that:

The United States is imposing worldwide taxation, on people who are tax residents of other countries and do NOT live in the United States.

This discussion is valuable for individuals with U.S. citizenship who are attempting to live productive and normal lives outside the United States.

The discussion is also valuable for those government policy makers who value the sovereignty of their countries and wish to end the U.S. creeping encroachment on the sovereignty of their countries. The discussion reminds me of a post that I write in 2015 describing how FATCA and U.S. tax rules burden Canada's sovereignty.

Ultimately all U.S. citizen members of the family renounced their U.S. citizenship.

Listening to this podcast explains why, for Americans abroad,  ...

"All Roads Lead To Renunciation!"

 

 

 

 

 

 

 

 

A California Plan To Chase Away The Rich, Then Keep On Stalking Them - Hank Adler

December 29, 2020 - Participants Include:

 

Hank Adler - Chapman University

John Richardson - @ExpatriationLaw

 

On December 18, 2020 Mr. Adler's article appeared on the Wall Street Journal began with:

"California’s Legislature is considering a wealth tax on residents, part-year residents, and any person who spends more than 60 days inside the state’s borders in a single year. Even those who move out of state would continue to be subject to the tax for a decade—a provision that calls to mind the Eagles’ famous “Hotel California” lyric: “You can check out any time you like, but you can never leave.”

 

You can read the complete article here ...

https://www.wsj.com/articles/a-california-plan-to-chase-away-the-rich-then-keep-stalking-them-11608331448?reflink=desktopwebshare_twitter

 

I am pleased to have interviewed Mr. Adler - a man with a wealth of experience in taxation and tax policy. If we sever the title of the Wall Street Journal article into two parts we see that:

1. On the one hand, California has a  - Plan To Chase Away The Rich - California tax policies are driving people away; and

2. On the the other hand California wants to  - Keep On Stalking Them -  California's proposed wealth tax purports to tax them on for ten years on their worldwide assets, which includes assets that have no connection to California and were acquired AFTER the individual moved from California.

This has many similarities to Exit taxes in general and the IRS Section 877A Expatriation Tax in particular.

By the way, those Canadians who winter in California and have sufficient assets would be subject to this proposed wealth tax!