Source: http://isaacbrocksociety.ca/author/quant18/
Timestamp: 2019-04-25 22:23:55+00:00

Document:
The Quarterly Publication of Individuals Who Have Chosen to Expatriate for Q1 2018 has just been placed on public inspection for printing in Tuesday’s Federal Register, eight days later than required by 26 USC § 6039G(d). This is the seventh quarter in a row in which the IRS has been late with the list.
The IRS list is known to be incomplete. It’s supposed to be much larger than the NICS list, not exactly the same size, let alone smaller. Per regulations, NICS only contains people who terminated their US citizenship by swearing an oath of renunciation at a US embassy or consulate. In contrast, the IRS’ list is supposed to have the names of all people who obtained Certificates of Loss of Nationality from the State Department, either by swearing an oath of renunciation or by reporting any other relinquishing act specified in 8 USC § 1481(a). The preamble of the IRS list even misleadingly implies that it includes some of the tens of thousands of people who give up their green cards every year.
Demonstrating the point, this quarter’s IRS list still failed to include some public figures who gave up US citizenship more than a year ago, including Japanese legislator Kimi Onoda and Ghanaian Deputy Minister of Finance Charles Adu Boahen. However, Homelanders and their chieftains don’t care about that. They’re dissatisfied with NICS instead, so there’s some provisions in the new spending bill imposing penalties on heads of upstream agencies, including the State Department, if they fail to certify semi-annually that they’re providing NICS with all the records they should be. More about that below.
No time for a detailed analysis, but the Quarterly Publication of Individuals Who Have Chosen to Expatriate for Q4 2017 has just been placed on public inspection for printing in Friday’s Federal Register, ten days later than required by law.
I count 685 names in this list, bringing the total of “published expatriates” for 2017 to 5,133 individuals. In contrast, NICS added 1,017 people to the “Renounced U.S. Citizenship” category from October to December of last year, and another 353 in January. This quarter’s Federal Register list still does not include some public figures known to have given up US citizenship more than a year ago, including Japanese legislator Kimi Onoda and Ghanaian Deputy Minister of Finance Charles Adu Boahen.
Fundamentally, nothing much has changed. After all the broken promises about how tax reform would save us, it just turned out to be another bonanza for accountants and lawyers. The IRS still can’t publish a simple list of names in a timely fashion. Trump and Tillerson’s underlings continue to spout the same insulting excuses as Obama and Kerry’s underlings did for the $2,350 rip-off.
People who can’t hide from this whole mess continue to face absurd wait times for appointments and CLNs (made worse by ongoing chaos in the State Department), while those who are able to hide have even stronger reasons to keep on hiding.
TaxProf Blog informs us that National Taxpayer Advocate Nina Olson’s 2017 Annual Report to Congress has just been released. The latest report contains similar criticisms of diaspora abuse and suggestions for improvement which the IRS & Congress ignored last year and every previous year since 2012 2011. Criticisms of FATCA and mailing delays have been condensed and toned down since last year. Criticisms of passport revocation have been expanded. That stuff is more or less business as usual; see below the fold for details.
1. Form name and penalty growth not in original; any errors in those columns are my own.
2. Original does not list continuation penalties under 26 USC § 6677 or 6679 for year 2013.
3. “Comparable categories” excludes continuation penalties under 26 USC § 6677 or 6679 for year 2016. Total revenue in 2016 including those penalties was $767,920,155.
The actual recommendations in the new section are uninspiring. Ms. Olson doesn’t comment on the growth in penalties, nor inquire as to the reasons behind it. Nor does she suggest reversing the massive hikes in statutory level of those “offshore” penalties over the past two decades, which have left members of the diaspora in fear of bankruptcy for foot-faults on paperwork about local assets (while Homelanders with similarly-situated local assets face penalties proportionate to actual tax, or even no penalties at all because no equivalent paperwork exists for them). She only asks Congress to give the IRS consistent authority to waive penalties for reasonable failures to file — right now, they can waive “continuation” penalties for some forms but not others. All well and good, except they’re barely using the penalty abatement authority they have anyway.
The Quarterly Publication of Individuals Who Have Chosen to Expatriate for Q3 2017 has just been placed on public inspection for publication in Thursday’s Federal Register, three days later than required by law. By my count, this list contains the names of 1,376 people who renounced or otherwise relinquished US citizenship under any paragraph of 8 USC § 1481(a), as compared to 1,004 people who renounced US citizenship (under 1481(a)(5) only) added to the FBI’s National Instant Criminal Background Check System (NICS) in July, August, and September.
Following Q3 & Q4 2016, this is only the second time since 2011 that we’ve had two quarters in a row of Federal Register numbers being significantly higher than NICS numbers, the way they should be every quarter. Even then, the Federal Register list is far from complete: contrary to some media reports, it’s basically impossible that the list includes people who give up their green cards, and no one has ever identified a single green card abandoner in the list, despite the message at the top claiming that “long-term residents, as defined in section 877(e)(2), are treated as if they were citizens of the United States who lost citizenship”.
The people named in this list probably completed the State Department’s painfully slow and expensive formalities to apply for a Certificate of Loss of Nationality around mid-year at the latest, but that’s just a guess. I can confirm that one name in this quarter’s list belongs to a man known to have relinquished in April 2016 or earlier. For the US government, that’s positively speedy — last quarter’s list had relinquishers from 2013 and 2014.
As always, after the jump you can find discussion of recent media reports about relinquishers, as well as a table of past NICS and Federal Register statistics.
Apologies for not posting in a while. The Quarterly Publication of Individuals Who Have Chosen to Expatriate for Q2 2017 has just been placed on public inspection for publication in Thursday’s Federal Register, four days later than required by law.
By my count, this list contains the names of 1,759 people who renounced or relinquished US citizenship under any paragraph of 8 USC § 1481(a), as compared to 1,185 renunciants (under 1481(a)(5) only) added to NICS in April, May, and June (update, 4 August 2017: and another 329 in July). The number of names in the Federal Register continues to show an upward trend, with the four-quarter moving average rising by 48% from 1,026 a year ago to 1,517 as of this quarter.
Homeland pundits continue to misunderstand what’s driving these numbers: witness this Orlando Sentinel op-ed, which tries to blame the Q4 2016 spike on Trump’s election and other issues which are of great interest to Homelanders but are hardly the centre of attention for citizens of other countries who have lived abroad most of their lives. In fact, it wasn’t until this quarter’s list that we finally started seeing names of people who verifiably gave up US citizenship since Trump’s win — for example Chris Hart, who became a citizen of Japan sometime around March, and whose name shows up at page 15 of the public inspection PDF. However, this quarter’s list also contains names from other Certificates of Loss of Nationality which took as long as four years to finish working their way through the system.
On Twitter, Andrew Grossman mentioned Housden v. Commissioner, 63 T.C.M. 2063 (1992). Mr. Housden, a partner of famous Canadian architecture firm WZMH, got a loan from the Royal Bank of Canada. He later moved to the U.S. to operate a WZMH subsidiary, and made some payments on the loan from 1980 until 1983 — meaning that RBC earned interest income “from sources within the United States” within the meaning of 26 USC § 871(a)(1).
The U.S. Tax Court ruled that when an individual resident of the United States has borrowed money from a non-U.S. bank, the individual is supposed to be the withholding agent for the 30% tax on interest income earned by the bank under § 871(a). So Housden had to pay that 30% out of his own pocket and try on his own to get it back from RBC. The only relief for Housden was that he didn’t get hit with penalties for underpayment or failure to file required forms, since two famous nests of compliance condors — first Deloitte, later the now-defunct Laventhol & Horwath — failed to warn him about his withholding obligations until he was already being audited.
Brockers with local mortgages or credit cards are probably about to panic upon reading this. Fortunately, the IRS suggested in 1992 regulations that an individual interest payor should probably only be considered a “resident of the United States” if the individual meets the substantial presence test (SPT), regardless of citizenship. As Phil Hodgen pointed out two years ago, the IRS confirmed this view in (non-precedential) Chief Counsel Advice in 2012. So if you have lived in another country for your entire adult life, IRS lawyers do not seem to think they can reasonably interpret § 871 or its regulations to grab 30% of all your mortgage payments.
In other words, this is a tiny island of residence-based sanity in the citizenship-based “Internal” Revenue Code — well, almost. Nothing involving the U.S. tax system can ever be as simple as it sounds.
The Quarterly Publication of Individuals Who Have Chosen to Expatriate for Q1 2017 has just been placed on public inspection for printing in Wednesday’s Federal Register, ten days later than required by law. This quarter’s list contains 1,313 “published expatriates”, in contrast to the FBI’s NICS gun control database which counted 1,484 renunciants for the first three months of the year (and another 460 in April).
NICS only includes people who renounce citizenship under 8 USC § 1481(a)(5). In other words, it is supposed to cover a smaller population than the Federal Register list, which includes § 1481(a)(1) – (4) relinquishers as well. So it’s clear that not all ex-citizens get their names published in the Federal Register, though there seems to be neither rhyme nor reason behind that long-standing phenomenon — (a)(5) renunciants & (a)(1) relinquishers, rich & poor, covered & uncovered expatriates, and filers & non-filers of 8854 alike are among both the published and the unpublished.
All we can say for sure is that either the State Department is not forwarding some CLNs to the IRS, or the IRS is not publishing the names from all the CLNs they receive. (Given that State should be forwarding CLNs to both the FBI and the IRS, and the FBI clearly have been receiving CLNs, I’d guess that the problems are the IRS’ fault.) It’s clearer why tens of thousands of people who abandon their green cards each year don’t show up in the list either: USCIS isn’t providing the IRS with the information they need about those folks, as we’ve discussed in more detail previously.
We still can’t tell whether the U.S. election results are having any effect on the numbers, because it’s not clear when the people named in this quarter’s list actually went and paid that $2,350 to the U.S. government — I’m not having much luck matching the names in this quarter’s list to media reports. One person in this quarter’s list is known to have relinquished in June 2016, but I can’t find any others who have previously spoken with the media about giving up U.S. citizenship. If you know the date anyone in this quarter’s list (whether yourself or a public figure) had their final appointment at the consulate, please leave a comment.
(iii) exceed the statutory authority of the Internal Revenue Service.
Unfortunately for beleaguered U.S. Persons abroad, that time frame does not include the original FATCA regulations released in 2014, and the scope does not include past refusals to use clear statutory authority to issue new regulations to excuse us from incomprehensible “offshore” information forms with obscene fines.
For foreigners investing in the U.S. it’s better news: the Trump/Mnuchin review might repeal the Form 5472 filing requirement for single-foreign-member LLCs (proposed on 10 May 2016, 81 FR 28784; finalised on 13 December 2016, 81 FR 89849). That requirement was widely seen as a tiny, halting step towards imposing genuine FATCA reciprocity on inbound investors who were trying to remain anonymous. But even if it doesn’t get repealed, it’s no big deal: the Obama administration left plenty of loopholes to make sure that foreigners can keep hiding their identities from both the U.S. government and their own governments.
By which of course I’m referring to Vietnam, where media reports state that 1,077 people renounced Vietnamese citizenship during the first quarter of 2017, while by counting notices in the official gazette I came up with a somewhat higher figure of 1,382. Since Vietnam’s population is roughly 92.7 million, I guess we can say, using FATCA-natics’ logic, that 92,698,618 people chose not to renounce their citizenship and so Vietnam is 99.999% perfect, right?
Sarcasm aside, Vietnamese nationality law and bureaucracy have several praiseworthy aspects. First, there are a few provisions which try to prevent “accidental citizenship”, meaning that some of the diaspora can avoid going through renunciation procedures in the first place (though as one case from the United Kingdom demonstrates, these provisions haven’t always worked very well). They even issue certificates of non-citizenship to people who never had Vietnamese nationality but need to convince other disbelieving governments or private institutions of that fact.
For those who do need to renounce, Vietnam does things relatively efficiently. The Vietnamese embassy in DC says that they accept renunciation forms by mail. The law requires them to respond to an application for renunciation within 60 working days. And the Vietnamese government managed to issue a press release about their Q1 renunciation statistics less than four weeks after the end of the quarter.
In contrast, the U.S. State Department’s unilateral demand for in-person renunciation appointments, and strict rationing of those appointments, makes the waiting list ten months long in some places. You might wait more than a year after that to get your Certificate of Loss of Nationality. They certainly don’t issue certificates of non-citizenship. And while 26 USC § 6039G(d) requires the U.S. government to publish a list of renunciants within 30 days after the end of each quarter, there was nothing relevant in Friday’s Federal Register and nothing scheduled for Monday’s either.
Thank you to all those who worked so hard to make this hearing a reality, and in particular to witnesses Daniel Kuettel and Mark Crawford for putting a human face on the FATCA disaster. Here’s a brief overview of what happens during each section of the hearing. Longer and more detailed notes after the jump. See also the official webpage for the hearing.
Microphones left on, pick up some chatter at 1:22:00 regarding the Democrats Abroad survey.

References: § 6039
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 § 871
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