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Archive for John Richardson

A Simple Regulatory Fix For FATCA Problems Of Dual Citizens From Birth

JOHN RICHARDSON - Dual Citizenship From Birth

Prologue

It is clear that the US extraterritorial tax regime, which imposes taxation on the non-US source income of US citizens living outside the United States, is an outrageous violation of the sovereignty of other nations. It is also an extreme injustice inflicted on US citizens living outside the United States. The US has successfully exported the extraterritorial tax regime to the world through a combination of (1) The US Internal Revenue Code (2) the FATCA IGAs (hunting down US citizens) and (3) the saving clause in US tax treaties (Country X agrees that the US can impose tax on any individual who has been identified as a US citizen and is tax resident of Country X). To understand the interplay between (1), (2) and (3) above see the following article I wrote for the American Expat Finance News Journal.

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Business Entity Definitions Discriminate Against Canadian Controlled Private Corporations – Treasury 26 CFR § 301.7701-2

Business Entity Definitions Discriminate Against Canadian Controlled Private Corporations

Synopsis:

The 2017 965 Transition Tax confiscated the pensions of a large numbers of Canadian residents. The ongoing GILTI rules have made it very difficult for small business corporations to be used for their intended purposes in Canada.

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United States Tax Treaties Should Reflect The 21st Century And Not The World Of 100 Years Ago

JOHN RICHARDSON

Prologue

The rules of taxation should follow changes in society. The ordering of society should NOT be hampered by the rules of taxation!

As the world has become more digital, companies can carry on business from any location. Individuals have become more mobile. Multiple citizenships, factual residences and legal tax residencies are not unusual. It has become clear that the rules of international tax as reflected in tax treaties (as they apply to both corporations and individuals) are in need of reform.

The purpose of this post is to identify two specific areas where US tax treaties are rooted in the world as it was one hundred years ago and NOT as it is today.

First: The “Permanent Establishment” clause found in US and OECD tax treaties

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Why “All Roads Lead To Renunciation” For Americans Abroad

Why "All Roads Lead To Renunciation" For Americans Abroad

The United States imposes a separate and more punitive tax regime on US citizens who live outside the United States than on those who live inside the United States. For those who live permanently outside the United States, the effects are such that they are forced to renounce their US citizenship in order to survive.

To be clear Americans abroad are subject to US taxation. They do pay US taxes.

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Toward A Definition Of Residence-Based Taxation For Americans Abroad

Toward A Definition Of Residence-Based Taxation For Americans Abroad

Introduction

The discussion of tax reform for Americans abroad is increasing in intensity. Whether through amendments to the Internal Revenue Code or a “Regulatory Fix To Citizenship-based Taxation“, Americans abroad are in desperate need of change. The US tax system as it impacts Americans abroad is forcing renunciations of US citizenship.

The language in the discussion for change reflects a desire (on the part of individuals and organizations) to move from the US system of “citizenship-based taxation” to a system of “residence-based taxation”. Various individuals and groups describe the goal using the language of “residence-based taxation” AKA RBT. It would be a mistake to assume that RBT means the same thing to different people. The purpose of this post is to describe definitions of RBT and and how those definitions may be defined for different individuals or groups.

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The United States Imposes A Separate And Much More Punitive Tax On U.S. Citizens Who Are Residents Of Other Countries

John Richardson April 10

(One Of The Top Blog Posts We Are Reposting Today)

On February 28, 2019 TaxConnections kindly posted my first post comparing the way that 19th Century Britain and 21st Century America Treated Its Citizens/Subjects. The post received a great deal of interest resulting in more than 120 comments (largely reflecting the frustration of Americans abroad and accidental Americans).

The purpose of that post focused largely on citizenship and the fact that the United States imposes worldwide taxation on U.S. citizens who are tax residents of other countries and do NOT live in the United States. What that post did NOT do was to focus on HOW the Internal Revenue Code applies to U.S. citizens who do NOT live in the United States.

The Bottom Line Is:

The United States is in effect imposing a separate and more punitive tax system on its citizens abroad. Strange but true. The purpose of this post is to explain how that works and to provide specific examples.

Prologue

Do you recognize yourself?

You are unable to properly plan for your retirement. Many of you with retirement assets are having them confiscated (at this very moment) courtesy of the Sec. 965 transition tax. You are subjected to reporting requirements that presume you are a criminal. Yet your only crime was having been born in America (something you didn’t even choose) and attempting to live as a U.S. tax compliant American outside the United States. Your comments to my recent TaxConnections Post reflect and register your conviction that you should not be subjected to the extra-territorial application of the Internal Revenue Code – when you don’t live in the United States.

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Ten Commandments For U.S. Citizens Living Outside U.S.

Ten Commandments For U.S. Citizens Living Outside The United States

Why are people relinquishing their U.S. citizenship?

The reason that Americans abroad are renouncing U.S. citizenship is because those who wish to obey the laws governing “U.S. citizens living outside the United States” will have to live according to the following 10 Commandments which are found in the Internal Revenue Code which is the Bible of All American citizens (note that these commandments in effect apply only to Americans Abroad).

The “Bible of the American” is based on two basic principles:

Principle 1: The “Bible of the American” hates anything that is foreign. In fact, if the word “Foreign” appears in the “Bible”, the word “penalty” (generally starting at $10,000) is sure to follow.

Principle 2: The “Bible” is designed to punish all forms of “tax deferral” that are not “Homelander Permitted (think IRA) Tax Deferral”.

Now, from these two great principles, we will develop the “Ten Commandments” of living a clean American life outside the United States.

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How To Fix The Proposed GILTI Changes

How To Fix GILTI Changes

Introduction On April 14, 2021 Tax Notes published my post “To Punish 100 GILTI Corporations Is To Punish Millions More Individuals“. The purpose of that post was to describe the harm that President Biden’s proposed changes to GILTI would inflict on individual shareholders of CFCS generally and on expat entrepreneurs in particular. I proposed two possible solutions: 1. Exempting individuals from the Subpart F regime; or 2. Exempting individuals who would qualify for the 911 Foreign Earned Income Exclusion from the Subpart F regime. This post, written by Dr. Karen Alpert of SEAT, proposes a third way to both have reform to the GILTI rules and NOT inflict unnecessary harm on individuals. What follows is Dr. Alpert’s post as it appeared on the SEAT site. https://twitter.com/ExpatriationLaw/status/1384502158092128261

How To Fix The Proposed GILTI Changes – Dr. Karen Alpert

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To Punish 100 GILTI Corporations Is To Punish Millions More Individuals

John Richardson - To punish 100 GILTI Corporations is to punish millions more individuals

Introduction: As Goes Tax Reform For US Multinationals, So Escalates The Harm To Individual Americans Abroad

The Problem: The proposed changes in International Tax (mostly in relation to corporations) will affect numerically more individuals than corporations. The effects on Americans abroad, who run small businesses outside the United States, will be absolutely devastating.

Two Solutions: Suggestions for how to protect individuals (including Americans abroad) would be to make changes to the Subpart F regime – GILTI, etc. There are at least two ways this change can be achieved:

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Mr. FBAR: Rule Of Law vs. Rule By Law

FBAR LAWS

Introduction: Looking For Mr. FBAR – Outside Looking In Rather Than Inside Looking Out

FBAR cases are newsworthy. For the last decade blogs and legal journals have been populated by some of the most important FBAR questions of the day.

These questions (most of which are unresolved) include:

– What does willfulness mean in the context of the failure to file an FBAR? What if an individual incorrectly answers the FBAR question on Schedule B?

– What accounts are required to be reported? Gambling accounts? Crypto currency accounts? Gift card balances?

– What does “reasonable cause” mean and when can reasonable cause apply?

– and most recently: Can the Government impose a separate penalty on each unreported account or can only one penalty be reported based on the requirement of one FBAR form?

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The $50,000 FATCA Question: Are Accounts Less Than $50,000 USD Reportable Under The US Canada IGA?

The $50,000 FATCA Question: Are Accounts Less Than $50,000 USD Reportable Under The US Canada IGA?

Part I – What does the $50,000 threshold for FATCA reporting mean in practice?

This post is focused ONLY on accounts held by (1) individuals who (2) are “US Persons” within the meaning of the FATCA IGA who (3) have been identified as “US Persons” and who (4) have been unable to “self-certify” that they are not “US Persons”. There are tens of thousands of US citizens in Canada and other countries that carry on normal banking activities with their “USness” undetected. Their accounts are not being forwarded to the USA.

This post is NOT intended to apply to entity accounts or any other kind of account.

The Context …

As a result of the FATCA IGA, Canadian financial institutions are required to report any accounts owned by “US Persons” to the Canada Revenue Agency. The definitions section of the IGA stipulates that the definition of “US Person” is determined by the US Internal Revenue Code. Therefore, all countries who have signed FATCA IGAs have allowed the United States to define any of their citizens or residents as “US Persons” now and in the future. (I wonder whether this is a reason why China has not signed a FATCA IGA.)

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The Warren “Ultra-Millionaire Tax Act of 2021”

The Warren "Ultra-Millionaire Tax Act of 2021"

The Contextual Background – Elizabeth Warren – January 28, 2021

Excerpts from a recent CNBC interview (see the following link for context) …

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