There’s no question with renunciation (Immigration and Nationalities Act, s. 349(a)(5)). You are relinquishing your citizenship and notifying the US government of it at the same time, and that’s the date your US citizenship ends.
But what if you relinquished your citizenship by a different method of INS, s. 349(a), such as taking citizenship in another country with the intent to relinquish your US citizenship (349(a)(1))?
The State Department is clear. No matter when you notify the US govt of your relinquishment, once your CLN application is approved, your US citizenship ended on the date you actually relinquished it (that is the date your performed the relinquishing act, eg. naturalised as a citizen of another country — this date is indicated as your expatriation date on the the CLN.)
The IRS, however, according to s. 877A(g)(4) of the US Tax Code, considers the date of your relinquishment for IRS purposes is not the date of your actual relinquishment but the date you notified the US government of it (your consulate meeting). This was not the case prior to 2004, however [the relevant section was 7701(n) in 2004 and it was replaced by 877A in 2008].
So, what if you relinquished your US citizenship long ago, but only recently learned of US law and policy changes which make it important to be able to prove you are not a US citizen, and wish to obtain Certificate of Loss of Nationality (a document you probably never even heard of before)? What if the current law regarding IRS and citizenship termination did not exist at the time you relinquished? Logic leads one to the conclusion that laws passed after a person ceases to be a citizen are irrelevant. The IRS has never made a definitive statement on this issue, however their instructions for the 8854 (expatriation tax form) are only directed at people with expatriation dates “after June 3, 2004.”
Tax lawyers Michael J. Miller and Ellen Brody have just published an excellent article on this matter, Expats Live in Fear of the Malevolant Time Machine, in which they point out the legal, as well as common sense, absurdity of a retroactive application position. It’s very clear reading with useful references to legislation and case law as well.
Tag Archives: IRS
Canada will protect citizens from zombies
Canada promises to protect its citizens from US zombies – but no mention of protecting us from the US government.
Yesterday, in the House of Commons, Pat Martin, MP from the NDP party, asked if the Minister of Foreign Affairs is working with his American counterparts to develop an international strategy so that a zombie invasion does not turn into a zombie apocalypse.
John Baird’s response was “I want to assure this member and all Canadians that I am dedicated to ensuring that this never happens. I want to say categorically to this member and through him to all Canadians that under the leadership of this Prime Minister, Canada will never become a safe haven for zombies ever.”
Great – good to know, I for one, feel so much safer.
Now, how about addressing the more pressing issue of protecting Canadians from the invasion of the US government into our lives? Continue reading Canada will protect citizens from zombies
Jack Townsend Post about Hale Sheppard Article for Canadians with Unreported Canadian Retirement Plans
FATCA IGA A Bad Deal
We’ve known all along reciprocity is not really reciprocity. Not only that, but FATCA IGAs Are A Bad Deal For Partner Countries.
While vendors are cheering themselves on and salivating at the opportunity 
to make big money off our nightmare, Jim Jatras says “it isn’t clear that FATCA itself is doing as well.”
Why? Because the U.S. Treasury Department’s ability to enforce FATCA directly, on each and every FFI on the planet is highly questionable.
Getting IGAs signed isn’t proceeding like U.S. Treasury thought it would. Plus, faux reciprocity in Model 1 is in trouble.
Even according to an IRS manager, ““clearly existing U.S. rules don’t require U.S. financial institutions to provide the exact same information that a foreign institution has to under FATCA.”
Mr. Jatras does an excellent assessment of that:
Some have been critical of Mr. Setzer for having the bad manners to speak something like the truth out where it could be reported to those not familiar with the imbalance codified in the IGAs. But putting aside questions of indiscretion and the vague characterization of a timeframe for “full reciprocity” – something that clearly isn’t going to happen anytime soon, and probably not ever – it’s nice to have confirmed officially what most people familiar with the details prefer to obscure.
In his article, Mr. Jatras also points out many ways US has to unilaterally change or escape from an IGA after it is signed.
Moreover, an IGA provides no protection at all for one additional, simple reason: they are written on sand.
American Bankers Association have also now joined the fray
“There is no indication or evidence suggesting that the Treasury conducted the required due diligence for entering into such an automatic exchange relationship” with Mexico.
Mr. Jatras further says:
As a bad deal for all concerned, the IGAs should also be seen as a “weak link” for undermining FATCA and working for its repeal before its worst features go into effect.
Foreign governments need to stop helping to save FATCA from its own fatal flaws by signing IGAs that cannot provide promised protection for cherished institutions. Instead, they should tell Treasury in clear and principled terms that they will not allow their domestic firms to comply with FATCA, and that they’re prepared to respond with WTO and other remedies if IRS tries to apply sanctions.
Finally, firms faced with wasting untold millions of dollars to comply with FATCA need to stop pressing their governments to sign IGAs and instead help get rid of it by supporting the repeal campaign in the United States.
We need to keep up the pressure on our own governments and financial institutions.
Green Party of Canada Issues Statement On FATCA
Elizabeth May and Erich Jacoby-Hawkins have now issued a Green Party of Canada Statement on FATCA. (IRS Tax Collection: Evasion of the US or Invasion of Canada?)
Green Party Leader Ms. May says:
“Clearly, any person with earnings or part-time residence in the US should file tax returns and pay US taxes in keeping with current bilateral agreements. However, our government must stand up for Canadian citizens who are neither working under nor representing any burden to the US governmental system”
Green Party Revenue Critic Mr. Jacoby Hawkins (who was the only representative of any of the parties at FATCA Forum) says:
“It would be a clear violation of our Charter of Rights and Freedoms to have Canadian banks, under the direction of the IRS, violate the privacy rights of some Canadian citizens or residents based on their current or former ties to another country, namely the United States.”
I hope the government is prepared to listen to the Green Party’s position on this:
We must not permit Canadian financial institutions to comply with FATCA in violation of our own privacy laws, and if the US attempts to enforce FATCA against them, we must vigorously respond and seek legal remedy as is our right.
If the US feels the existing Canada-United States Convention with Respect to Taxes is not working, they should provide specific details and suggestions on how to improve it through legislative amendment without sacrificing the rights of Canadians to foreign interests.
Of course, the Green Party only has one seat in Parliament. That is Ms. May’s. She herself was born in US, moved to Canada (Nova Scotia) as a teen and has been a Canadian citizen since 1978. Her seat is for a BC riding, Saanich-Gulf Islands.
Ms. May, like many of us, believed she relinquished her US citizenship permanently and irrevocably when she became a citizen as a young woman. I believe she is also like most of us in that she does not have a CLN.
I hope this statement may result in Finance Minister Jim Flaherty and other parties breaking their months-long silence on FATCA to assure Canadians that their fundamental rights will be protected.
FATCA Final Regulations Are Out
Final FATCA Regulations are now out. Thanks to Tim for the heads-up.
I haven’t read them yet (544 pages), but I wanted to post them as quickly as I could.
Is This Fair? 3200% FBAR Penalty
“Does this seem fair?” asks tax attorney Anthony E. Parent.
In Another FBAR Penalty Victory for IRS and DOJ, Mr. Parent writes of the “shocking” case where “the Department of Justice strong-armed an elderly widow into accepting a plea deal that included an FBAR penalty equal to 3200% of the total tax evaded.”
Mr. Parent gives information from DOJ:
Mary Estelle Curran of Palm Beach, Fla., pleaded guilty today in the U.S. District Court for the Southern District of Florida to filing false tax returns for tax years 2006 and 2007, the Justice Department and Internal Revenue Service, Criminal Investigation (IRS-CI) announced….According to the plea agreement, Curran’s conduct caused a tax loss to the government of approximately $667,716…Curran has agreed to pay a civil penalty in the amount of 50 percent of the high balance of the accounts, which is $21,666,929. Continue reading Is This Fair? 3200% FBAR Penalty
Toxic Tax Act (FATCA) Is In Trouble
Here might be a ray of hope for us.
Nigel Green says FATCA, America’s New Toxic Tax Act, Is In Trouble.
Mr. Green gives two reasons for believing FATCA is “running out of steam.”
Firstly, the US Treasury Department has again failed to meet its own end-of-year deadline to publish the FATCA rules, one of the key steps in its implementation. This is the second time that the Treasury Department has missed such a deadline – the first one came and went in September 2012.
Secondly, to date, only the UK, Denmark, Ireland and Mexico, plus a handful of British Crown Dependencies, have signed FATCA’s required Intergovernmental Agreement (IGA). The Treasury Department had hoped to finalise IGAs with many others, including Canada, France, Germany, Italy, Japan, Spain, and Switzerland before the end of 2012. It failed on that too.
Mr. Green does expect IGAs to be signed and regulations to be released. Yet, he remains optimistic:
But there’s no getting away from the fact that the campaign to introduce FATCA appears to be floundering.
As most of you know, Mr. Green also had a thread last week, FATCA Good Or Bad: You Decide. Some familiar names and a few new ones are in the comments. All “decided” FATCA is bad. If only these were the real decision-makers!
Let’s keep up the pressure as FATCA flounders.
Taxpayer Advocate Report Is Out
IRS 2012 Taxpayer Advocate Report is out. It’s not flattering to IRS.
Perhaps the nicest thing Nina Olsen has to say is the most apparent:
The most serious problem facing taxpayers – and the IRS – is the complexity of the Internal Revenue Code (the “tax code”).
Mind you, she seems to be talking about taxpayers in US with that statement. The report does not even touch on FATCA or citizenship-based taxation, which was disappointing.
The complexity of the IRS Tax Code within US is nothing compared to the complexity for those outside the US–including for those of us who don’t even consider ourselves to be “US persons.” Continue reading Taxpayer Advocate Report Is Out
Appeasement Doesn't Work
World War II showed us that a policy of appeasement simply encourages bullies to further excess. Why, then, are so many countries intent on a policy of appeasement regarding a foreign country’s laws, namely FATCA?
Canada didn’t pursue a policy of appeasement in 1812 – we just kicked the butt of the United States right out of our country. Perhaps the reason for that was territorial – the US was invading Canada’s physical territory, which alarmed and angered both the government and Canada’s citizens. If the US invaded Canada physically today, to gain access to our fresh water, our oil, our vast kilometres of forest and resources, not only would Canada fight back, but the US would be censured the world over. However, unfortunately for us, two hundred years later, the US has learned an important lesson – economic pressure can win where brute force cannot. Continue reading Appeasement Doesn't Work