The primary story is of a U.S. professor who pleaded guilty to an FBAR violation and was subjected to a 100 million FBAR penalty. Notably the “tax loss” was 10 million dollars and the FBAR penalty was 100 million dollars. It appears that Mr. FBAR is becoming an important tool in the arsenal used by the United States Treasury.
Archive for John Richardson
For Whom The IRS Form Tolls
I would not want the job that the IRS has to create forms given there are many “information reporting requirements” in the Internal Revenue Code. The IRS has the job (sometimes mandatory “shall” and sometimes permissive “may”) of having to create forms that reflect the intent of the Internal Revenue Code. The forms will not necessarily reflect how the IRS interprets the text and intent of the Code. Once created, the “forms” become a practical substitute for the Code. If you look through your tax return you will find “form” after “form” after “form” how the various provisions of the Internal Revenue Code are “given meaning” (if the meaning can be determined).
How The “Assistance In Collection” Provisions In The Canada-U.S. Tax Treaty Facilitates “U.S. Citizenship Based Taxation”
I commented on an article titled: “Why is the IRS Collecting Taxes for Denmark?” which appeared at the “Procedurally Speaking” blog. The article is about the “assistance in collection” provision which is found in 5 U.S. Tax Treaties (which include: Canada, Denmark, Sweden, France and the Netherlands). I am particularly interested in this because of a recent post at the Isaac Brock Society.
The “Exit Tax”: Dual US/Canada Citizen From Birth, No Canada Citizenship Today = No Exemption To US “Exit Tax”
Relinquishing US citizenship: South African Apartheid, the Accidental Taxpayer and the exit tax
The above references a “guest post” written by Dominic Ferszt of Cape Town South Africa. The post demonstrates how the “dual citizen from birth” exemption to the S. 877A “Exit Tax” relies on the citizenship laws of other nations. In some cases those laws of other nations are arbitrary and unjust. If these laws were U.S. laws, they might violate the equal protection and/or due process guarantees found in the United States constitution. For example, Mr. Ferszt describes how the “dual citizenship exemption” to the “Ext Tax” is dependent on South African “Apartheid Laws”. He describes a situation where a “black” U.S. citizen from birth is denied the benefits of the dual citizen exemption to the Exit Tax, which are available to a “white” dual citizen from birth. (During the “Apartheid Era” Blacks were not entitled to South African citizenship.)
America doesn’t really need skilled immigrants, or does it?
Clearly a potential immigrant to the U.S. with assets in the home or a third country would have to have a special kind of insanity to subject himself to this system with all the paperwork and potential for double-taxation. And it would do this person absolutely no good whatsoever to become a U.S. citizen since this would change nothing. On the contrary, being a citizen would actually make it worse – one might shed a Green Card relatively easily (if done before the immigrant acquired too many assets in the U.S. or abroad) but U.S. citizenship is forever unless one renounces.
The context: Form 8938 was created by the IRS to meet the reporting requirements mandated by Internal Revenue Code S. 6038D. S. 6038D was mandated by S. 511 of the HIRE Act.
An article from Stikeman Elliot includes the following:
For CRS purposes, the term ‘reportable person’ generally refers to a natural person or entity that is resident in a reportable jurisdiction (excluding Canada and the United States) under the tax laws of that jurisdiction, or an estate of an individual who was a resident of a reportable jurisdiction under the tax laws of that jurisdiction immediately before death, other than: (i) a corporation the stock of which is regularly traded on one or more established securities markets; (ii) any corporation that is a related entity of a corporation described in clause (i); (iii) a governmental entity; (iv) an international organization; (v) a central bank; or (vi) a financial institution. See definitional subsection ITA 270 (1).
I wrote a post on August 7, 2016 which discussed the August 5, 2016 decision of the United States Court of Appeals – District of Columbia Circuits in the Esher case. In this case, Justice Millet ruled that:
That extreme reading of the Totalization Agreement rests on nothing more than the Commissioner’s own say-so. It lacks any grounding in the Agreement’s text or in any principle governing the interpretation of international agreements. The tax court’s corresponding disregard of the Totalization Agreement’s textual direction concerning the role of French law in resolving undefined terms and in determining the content of the laws enumerated in Article 2(1)(b) was error and requires reversal.
Domestic Law, Foreign Law, or the Intent of the Treaty
On August 5, 2016 the United States Court of Appeals for the District of Columbia Circuits issued it’s decision in the Esher case.
This important case is: FRENCH TAXES US COURT REVERSAL 5 AUG 2016 (1)
On July 12, the U.S. Treasury released its 2016 Model Tax Treaty. I suspect that people will interpret this in terms of how it affects their individual tax situations. This gives a huge clue with respect to information exchange and how the U.S. views “double taxation,” citizenship-based taxation, and related issues.
The United States has many tax treaties with many nations. As a general principle the “savings clause” prevents Americans abroad from having the benefit of treaty provisions. That said, there are situations where a U.S. citizen abroad can benefit from the specific provisions of a specific treaty.