Tag Archives: Cook v. Tait

Cook v. Tait 42 – “The shot heard round the deck. We are free at last!” The CLN has arrived

This post is a reproduces a comment by Pilgrim 7 which appeared at the Isaac Brock Society. Because of its reference to Cook v. Tait, I thought it would be worth adding to the Cook v. Tait book of posts. This is the second comment by Pilgrim7 that I have turned into a separate post at this Renounce US citizenship blog.

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The comments of @submergingmkt James Henry appear to assume that the #CookvTait Principle of extra-territorial taxation is correct

My last post featured the comments of Apple CEO Tim Cook about the ongoing debate over whether U.S. companies should be punished for their strict compliance with the absolutely archaic, dysfunctional, overly complex tax laws of the United States of America. It has reached the point where it appears there are two classes of corporations that Homeland politicians and groups like the Tax Justice Network dislike:

Group 1 – U.S. Politicians dislike those U.S. companies who do comply with U.S. laws; and

Group 2 – U.S. Politicians dislike those U.S. companies who do NOT comply with U.S. laws.

These sentiments were recently expressed by James Henry of The Tax Justice Network who makes the point that:

The interview with Mr. Henry is fascinating. Mr. Henry is opposed to “territorial taxation” for Corporations. This suggests that he might be opposed to “residence based taxation” for individuals.

I would appreciate you commenting on what you think of Mr. Henry’s interview. What are the key points that he makes? What (if anything) does he say that is relevant to the RBT vs. CBT debate? Do you get the impression that Mr. Henry believes that U.S. companies are the property of the U.S. government?

By the way …

Here is Tim Cook’s testimony before the Levin Committee in 2013:

Cook v. Tait 27: The US Government uses the fact of “U.S. citizenship” to control #offshore banks

The above tweet references a post at the “Citizenship taxation Facebook Group“.

The post raises questions that include the following:

Can a Swiss bank be sanctioned because it fails to discriminate against U.S. citizens? Can the United States ensure that its citizens be subjected to discrimination because they are U.S. citizens? This is what is happening with FATCA and the the FATCA IGAs.

Should U.S. citizens be required to live in a world where, if they are outside the United States, they are permitted only the freedoms that the U.S. Government allows?

Interesting questions indeed.

The post about the “Non-prosecution agreement” entered into between the U.S. Department of Justice and thw Swiss Bank EKS. This was discussed on Jack Townsend’s blog as follows:

Mr. Townsend reports that:

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Cook v. Tait 24: The protection of political minorities in the political process

 

Introduction And Purpose:

This post is to “tie together” three comments/posts that discuss the problem of “political powerlessness” in the political process. This poses obvious problems in the area of “citizenship taxation”. It is important to note that what some refer to as “expatriate tax legislation” seems to always appear as a “revenue offset provision”. In other words, “Let’s put the cost on those whose votes don’t matter”. This point was made in one of the recent submissions to the Senate Finance Committee.

What should be the basis for the right to vote?

That said, maybe “Americans abroad” are lucky to be able to vote at all. There is NOTHING about citizenship per se (as the Canada experience suggests),  that guarantees a “right to vote” for those who live abroad. In fact a recent comment from  Lucy Stensland Laederich includes:

Both AARO and FAWCO have progress to their credit in terms of citizenship and election reforms – in each case, we followed the legislative path and worked with allies. It is true we do not have a history of “rocking the boat” but we do have one of sometimes major successes: when we inundated Washington with tea bags in the mid-Seventies (a campaign that started in AARO), we got the vote for overseas Americans!

The 1970s “Tea Bag” campaign is interesting. It should also give hope to those who think that change in Washington is impossible.

I strongly recommend reading the “AARO Account of how achieved in an increased capacity to vote“. It includes:

But opposition by the Justice Department continued, still led by Antonin Scalia, who had persuaded the Attorney General to oppose the President’s signature. The representative of the bipartisan committee, Gene Marans, decided to go over the head of the Justice Department. He asked Sen. Barry Goldwater to call the legal counsel of President Gerald Ford.

Senator Goldwater’s message to the White House was: “Listen you ___ fools! There are more Republicans in Paris than there are in Detroit! And Ford doesn’t want to be the first President to veto a voting rights bill since the Reconstruction.”

The bill was signed by the President on January 2, 1976. Direct political life had begun for Americans living overseas.

Note that Antonin Scalia was appointed to the Supreme Court of the United States. He continues to serve on the court today. Note that he wrote a dissenting decision in the May 18, 2015 U.S. Supreme Court decision described below. In other words, Justice Scalia appears to have opposed the rights of Americans abroad to vote, BUT upheld the right to Maryland to impose taxes on the “politically powerlessness”.

Part 1 – Discrete and Insular Minorities In The Political Process – Do Americans Abroad Have REAL Political Representation?

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Cook v. Tait 23: The evolution of citizenship, taxation and citizenship taxation

This post references the following two posts on the CitizenshipSolutions.ca site.

The post referenced in the above tweet discusses the evolution of U.S. tax law since 1924.

The post referenced in the above tweet discusses the evolution of U.S. citizenship law since 1924.

The discussion at Citizenship Solutions begins with:

As Charles Adams argued in his classic book, “For Good and Evil: The Impact of Taxes On The Course Of Civilization“, as go the taxing practices of a nation, so goes the nation. Given that taxes are a certainty, tax laws are a certainty, and those laws speak volumes about the “state of the nation” and the “values of the nation”. Tax laws evolve on an almost daily basis. The changes in tax laws reflect changes in societal values.

(See the videos of Mr. Adams which are referenced in the above tweet.)

In 1924, the Supreme Court of the United States, per Justice McKenna ruled in Cook v. Tait that U.S. “citizenship taxation” was constitutional. Since that time Cook v. Tait has been cited to justify the constitutionality, although not necessarily the propriety, of “citizenship taxation”. Note that “citizenship taxation” contains both the words “citizenship” and “taxation”. As a result, Justice McKenna’s decision along with the relevant statutes, may tell us a great deal about what “taxation” and “citizenship” meant in 1924.

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Principles of Treasury’s (reserve currency) War used by private plaintiffs – U.S. law determines who non-U.S. banks can do business with

Prologue a comnment to a blog post from 2014 …

Mr Jatras:

Thanks for a great article. You have used FATCA as a particularly egregious example of the propensity of the President to either ignore law or make law himself. The Obama presidency is one characterized by a rogue President who does what he wants, when he wants and to whom he wants.

One interesting example is the recent 10 billion dollar fine which he personally levied against the French Bank BNP. This is described in “The Economist” as follows:

“WHAT is the appropriate penalty for a firm that abets genocide? Roughly a year’s profit and the sacking of a dozen employees, the American authorities concluded this week. At any rate, that is the punishment meted out to BNP Paribas, a French bank that pleaded guilty to helping the Sudanese government sell oil, clearing proceeds through New York in violation of American sanctions. At the time government-backed militias in the region of Darfur were massacring civilians by the tens of thousands.”

What’s interesting that the bank was fined NOT as a result of a direct act of Congress, but as a fine levied as Executive Order 13622, by President Obama himself, found here:

Interestingly, the U.S. is claiming jurisdiction over the French Bank on the basis that the bank was using U.S. dollars.

To put it simply we have a situation where:

1. President Obama decides to impose a 10 billion fine on a French Bank; and

2. He claims jurisdiction over the bank on the basis that the bank was using U.S. dollars.

Leaving aside the troubling issue of Obama acting as though he is a “law unto himself”, it is obvious that the U.S. can no longer be trusted enough for the USD to be the main reserve currency. The erosion of the status of the USD is well under way.

The threat of FATCA sanctions levied at non-U.S. banks will exacerbate that trend.

Thanks again for a great article!

How the U.S. uses the dollar as to regulate foreign banks by “its very nature benefit U.S. citizens

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Cook v. Tait 16: Supreme Court’s Decision in Cook vs. Tait and Notification Requirement of Section 7701(a)(50)

This interesting post goes along well with my series of posts on Cook v. Tait found here:

https://renounceuscitizenship.wordpress.com/2014/03/28/cook-v-tait-14-its-not-citizenship-based-taxation-its-extraterritorial-taxation/

The author is arguing that even if U.S. citizenship-based taxation is constitutional (which is questionable), that the Cook v. Tait rationale could not justify citizenship-based taxation beyond the point where one ceases to be a citizen for immigration purposes.

The author writes:

The statute says ” . . . An individual shall not cease to be treated as a United States citizen before the date on which the individual’s citizenship is treated as relinquished under section 877A (g)(4). . .”

“How can the U.S. federal government continue to impose U.S. worldwide income taxation on former U.S. citizens because of the provisions under Section 7701(a)(50) and 877A (g)(4)?”

I am not convinced that the effects of S. 7701(a) 50 and 877a(g)4 do apply to those who expatriated prior to 2004. On this point see the interesting article by Michael Miller:

https://renounceuscitizenship.wordpress.com/2013/03/05/michael-miller-on-the-8774-exit-tax-applies-prospectively/

This issue was recently canvassed at the Isaac Brock Society as follows:

https://twitter.com/USCitizenAbroad/status/610632090019868672

Those interested in this issue are encouraged to read the perspectives of a variety of lawyers in the “Isaac Brock post”. I find it incredible that some (but not all)  “cross-border professionals” routinely interpret S. 877A(g) 4 in he way that is least advantageous to the taxpayer.
In any case, this is an interesting “Cook v. Tait” post.

Tax-Expatriation

The U.S. Supreme Court upheld as Constitutional the concept of citizenship based taxation in 1924 in Cook v. Tait.  In that case, the U.S. citizen resided permanently and was domiciled in Mexico City with his Mexican citizen wife.

In those years, the Revenue Act of 1921 imposed a top income tax rate of 8%.  The IRS made a demand against Mr. Cook to pay his tax.  Mr. Cook paid it and sued for refund of the US$1,193 paid.    That amount represents about Zwerner Notice of SettlementUS$16,893 in 2014 inflation adjusted dollars.  Neither amounts are significant in current actions taken by the IRS.

As a point of reference, Mr. Zwerner was alleged to owe US$3,630,119 (on an account with a maximum value during the years at issue of apparently no more than US$1.69M) and ultimately paid about US$ 1.75M (more than he even had in his account?) per the Notice of Settlement…

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