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The Battle Against the IRS Unfair Taxation of Americans Abroad

Volume XVII, Issue 31

FATCA reporting form

Americans are having a hard time managing their money in French accounts these days and getting worse all the time. News out is that the French banks may have no choice, but to close thousands of Americans’ bank accounts, to the tune of 40,000! And, we have the good ol’ U.S. of A. and FATCA regulations to thank for that.

If you don’t know about FATCA, then take note of it now. “The Foreign Account Tax Compliance Act (FATCA), which was passed as part of the HIRE Act, generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments. The HIRE Act also contained legislation requiring U.S. persons to report, depending on the value, their foreign financial accounts and foreign assets.”

It might not sound like such a bad idea to combat tax evasion, but the problem is that banks around the world are scrambling to comply which is costing them a lot of time and money to service U.S. customers, with risks of fines. In addition to that, anyone holding a U.S. passport for any reason is subject to the law. This includes “Accidental Americans*” who have citizenship through family connections and may never have actually even lived or worked in the U.S., which make up the crux of the 40,000 estimated to possibly close.    

* Source: Wikipedia.org:

The Accidental Americans Association

The Accidental Americans Association

An Accidental American is a citizen of a country other than the United States who may also be considered a U.S. citizen or eligible for U.S. citizenship under U.S. nationality law but is not aware of having such status, or has only become aware of it recently during adulthood. Accidental Americans’ U.S. citizenship arises due to their parents’ ties to the United States rather than their own choices: they may be born in their own country but to one U.S. citizen parent who emigrated from the United States, or they may be born in the U.S. to parents residing in the country temporarily for work or study and then return to their own country in their early childhood, with few if any memories of the United States. The term may also sometimes be applied to people who definitely are not U.S. citizens but have some other sort of connection with the country, for example green card holders who moved back to their country of origin and let their green cards expire without formally cancelling their U.S. immigration status, or non-U.S. citizens married to Americans abroad. Such tenuous connections to the United States began to become a more salient issue in the late 2000s due to Internal Revenue Service crackdowns which were ostensibly aimed at tax evaders hiding assets in secrecy jurisdictions but ended up having much broader effects on people with U.S. citizenship who resided in other countries, as well as their families.[2][3] These issues arise from the somewhat unique policy held by the U.S. which imposes income tax obligations on worldwide income on anyone who holds U.S. citizenship, regardless of where the person resides or where the income is earned.
For the moment, France was able to negotiate a brief period where the banks can supply just the individual’s date of birth, without a tax number, as so many “Accidental Americans” don’t even have one. But, after that period is over, the banks may have no choice, but to shut them all down.

Interestingly, Accidental Americans are often children born in the U.S., even if their parents weren’t American and didn’t live long enough in the U.S. to account for any revenue. And insanely enough, because the U.S. bases taxation on citizenship, they are actually required to file a tax return, even if they have never worked in the U.S. at all.

As a result, bank accounts are tough to open, getting mortgages from French banks near to impossible and Americans are the “pariahs” on the banking industry. France is just one of the hundreds of countries around the world dealing with the problem and it is estimated that it affects about 300,000 Americans in Europe alone.

We are not taking it lightly. Expatriate-based organizations are openly battling the problem. I urge you to join these organizations and help us all fight the battle that discriminates against Americans living abroad. Accidental Americans in France have a voice. Visit americains-accidentels.fr/ for more information.

The ACA logo

American Citizens Abroad is also one of them. At our upcoming North American Expat Financial Forum in Paris September 18th, Michael J. Larsen, Member of the Board of Directors and Executive Committee will be discussing “Residency-Based Taxation, and is it happening now?” (the forum is free, with limited seating, so be sure to register before it’s too late!).

American Expat Financaial News Journal

Every American Democrat should be in touch with Democrats Abroad which is planning to re-introduce two bills, one of which calls “for the creation of a ‘standing commission’ that would review all laws that are currently having an adverse impact on Americans resident abroad, and also work to prevent new laws from being enacted that inadvertently harm non-resident Americans.” (Source: American Expat Finance, another organization that can keep you informed.)

The other bill, known as the “Overseas Americans Financial Access Act,” is a reversal of FATCA, as it releases the banks from their current obligation to report Americans’ accounts who legally reside in the country to the IRS, called the “Same Country Exemption.” On top of that, Democrats in Congress are fighting to change the U.S.’s citizenship-based tax regime with a residence-based system, as it is with every other country in the world except for the U.S. and one other (Eritrea). This would alleviate Americans from having to file tax returns every year if they have no taxable income.

Monte Silver

Monte Silver

Monte Silver, an Israel-based U.S. tax attorney, is at the forefront of the battle. A few months ago, he filed a lawsuit against the U.S. Treasury and the I.R.S. challenging various aspects of the Transition-tax regulations they issued. “As anticipated, yesterday [July 1st] they just filed their motion to dismiss the lawsuit on two technicalities. If we win this motion, we basically win the case, and if we lose the motion, then we lose the case.”

To see the Government’s motion, go to silvercolaw.com/blog/. To receive regular updates about the litigation, join hundreds of other small business owners on Facebook

And if you wish to dig further, the Stanford Graduate School of Business issued a report, “Transparency and Tax Evasion: Evidence from the Foreign Account Tax Compliance Act (FATCA).” In summary, it concludes that any income the IRS gains thanks to FATCA is offset by that which is lost from expatriation and that it does nothing to stop tax evasion strategies, one of which is investment in real estate! (Download the report PDF

When you purchase real estate outside of the U.S., it’s a way of moving your money into a real asset and diversifying into another currency. This is a smart financial move for a variety of reasons, including tax “avoidance,” not necessarily tax “evasion.” France requires that a property purchaser disclose the source of his funds — not how they were earned, but from what account they are derived. That account can be in any bank around the world, as long as the bank is willing to attest to the source being the account-holder. A clever tax evader can use undeclared funds from a foreign bank to purchase the property, reducing the sums in the bank account, freeing him from the obligation of reporting the larger sum. Should the property be sold at a later date, there is no reason the owner must repatriate the money to the U.S. and can be held in foreign accounts, all perfectly legal and non-taxable by the U.S., except for any capital gain. So, the bottom line is that it would be easy to agree with Stanford’s report that FATCA is not a valid solution to a tax evasion question.

Besides the fact that we have helped hundreds of Americans invest in real estate in France, we have good news that we have a special relationship with a French bank which is happy to open accounts for Americans, as long as we make the introduction. We offer this as one of our special services. To learn more, email [email protected].

A bientôt,

Adrian Leeds - Nice, France

Adrian Leeds
Adrian Leeds Group

Respond to Adrian







P.S. There will be no French Property Insider and no Parler Paris nor Parler Nice between August 12 and 15 while I pretend to be a lizard on the sands of the Spanish island of Ibiza.


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