Tag Archives: CBT

Exactly why does the US Government hate #Americansabroad so much? (Homelanders too)

Once upon at time, there appeared a comment that was so good that it deserved a post of its own (from Russell) …

Good points that highlight, yet again, the absurdity and detachment of the U.S. political system from 9 million of their citizens now living in an ever globalized and ever more competitive world. The U.S. political class and presidential candidates disinterest in this ever-growing and important group of citizens only speaks to the total stupidity, general ignorance, global unawareness, profound provincialism and confirms a totally dysfunctional and archaic system that is today the United States. A country that attacks and harms its diaspora and through its laws has succeeded in turning its own citizens into international pariahs with international banks, in international business partnerships, in marriage and in the general perception outside of the U.S.

I recently met with three start-ups at a fair in Germany, two from the UK and one from Sweden. In my work as a headhunter they were hiring me to find them some talented people for their growing and successful startups. In all three cases, and each in separate meetings with me, the startups told me that they did not want any Americans or Europeans with U.S. Green cards or passports. They were all wisely warned by their banks and financial advisors not to bring any U.S. Persons into their business. Two of them knew the reasons and the risk that any American presence would bring to the business. The other one learned the hard way. They had an American investor who got them into his FATCA mess, reporting his holdings and his American tax consultant demanding the business’s bank details and the personal details of the owners. They returned his investment, threw him out and agreed never again to get involved with any U.S. persons in their business. This is now widely known and even if FATCA and all of the other reporting requirements for Americans would be eliminated, the damage is already done. The perception out there is to avoid hiring any Americans and also avoiding their investments. They are too much trouble and their government is an intrusive bully that thinks it can control the entire world. That spirit is so foreign to the young brilliant startup minds out there today. The U.S. has become a has-been and definitely not seen as a cool place anymore.

The world has moved on and the U.S. politicians and presidential candidates still haven’t realized that the world has changed since their anachronistic citizenship based tax system dating from the Civil War. Truly, a nation of idiots.

I wonder what Russell really thinks.

Cook v. Tait 20: Bernard Schneider: “The End of Taxation Without End: A New Tax Regime for US Expatriates”

I was glad to see that Bernard Schneider’s paper was referred to at one of the Facebook groups frequented by Americans Abroad. Dr. Schneider’s was summarized as follows:

This paper was specifically mentioned by the SFC about two years ago after they received a round of submissions on tax reform (just like the current round). The SFC also mentioned an interest in Canada’s model of Residency Based Taxation.

In his paper, Schneider introduces the Cook vs. Tait (benefits justification) which is the current legal basis for CBT on page 4.

On page 6 Schneider identifies 5 types of expats (short-term, long-term, accidental, citizens by descent and unaware citizens by descent).

On page 52 Schneider begins an in depth discussion (for several pages) about the lack of “benefits” expats receive from the USG. He tears the Cook vs Tait “benefits” argument to pieces where he concludes with, “Thus only short-term expatriates and U.S. government employees and military personnel can be said to have, as a group, the nexus to the United States that justifies including them in the U.S. tax net.”

On page 73 Schneider writes, “In most cases, renunciation is driven not by a desire to escape taxation unjustly, but by the unjust imposition of taxation. U.S. taxation of long-term expatriates and accidental, nominal, and unaware citizens is unjustified; they should not have to renounce their U.S. citizenship in order to escape U.S. tax and reporting burdens….. More fundamentally, the use of citizenship as a jurisdictional basis for taxation of nonresidents is unsound because it distorts and devalues citizenship. Worldwide taxation of, and the ever-increasing compliance burden on, nonresident U.S. citizens constitute a real and increasing citizenship penalty. As the cost of U.S. citizenship rises, and the perceived benefits decrease, many are likely to see the U.S. passport as a passport of inconvenience.”

Schneider’s paper is long, but well worth the read. It provides the tools for overturning Cook vs Tait.


Would renouncing US citizenship but retaining US nationality be a solution to CBT?


Shadow Raider says

Due to the extreme difficulty in having a decent discussion about CBT with Congress, I decided to start a plan B. I’m not abandoning the RBT proposal, but I see that it’s going to take a long time, so I came up with an alternative that may work in the meantime. I’ll explain it below.

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The IRS and Canadians – A view from the Homeland – CBT is only minor surgery!

Have you heard?

@WhiteKat and calgary411, I can’t understand what they are talking about, and I can’t see how it could possibly be rational for the IRS to expect that an ordinary person living in Canada, with a Canadian mutual fund should have to study US tax law and accounting in order to ‘comply’. That in addition to their antics with delaying any clarifications, and refusing to provide definitive opinions, rulings, etc.

So, with this issue, and for our TFSAs, we are/were forced to jump through hoops that assume for safety sake that they are US taxable, pay professionals to fill out the lengthy and incomprehensible forms, assess US tax on ourselves, and eat up the balances of our Canadian earned and locally held savings so that we end up with less than we started with.

The punitive treatment of Canadian mutual funds apparently came about because of complaints by US banks who did not want the competition for investment and US accountholder dollars by Canadian banks and products. The TFSA and RESP and RDSP ‘foreign trust’ BS is because the US is paranoid, and works from the base assumption that everyone outside the US is a criminal already, and if not, we are all criminals in waiting. So their solution is to deny us any real ways to save or prosper which are offered in our home country of tax residence.

The same thing happened with Canadian RRSPs, it is just that many of us who didn’t even know about US CBT and FBAR etc. missed the convoluted and tortured history of the US treatment and sudden decision of the IRS to treat them retroactively as ‘taxable foreign trusts’, and then after a period of public outcry, prescribed the 8891 and annual treaty election in order to recognize them as non-taxable or tax deferred – but only if the election was made annually.

It’s very hard to understand the injustice of U.S. citizenship-based taxation unless you have lived it. What follows are two tweets that reference articles written by a top U.S. based tax lawyer. They are written with surgical precision.

I once heard it said that:

“The only minor surgery is surgery that happens to somebody else!”

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