{"id":11081,"date":"2022-09-07T12:01:08","date_gmt":"2022-09-07T12:01:08","guid":{"rendered":"http:\/\/13.40.31.108\/?p=11081"},"modified":"2022-09-07T12:02:58","modified_gmt":"2022-09-07T12:02:58","slug":"the-u-s-supreme-court-decides-how-to-punish-us-expats-with-the-fbar","status":"publish","type":"post","link":"https:\/\/ustaxconsultants.es\/es\/the-u-s-supreme-court-decides-how-to-punish-us-expats-with-the-fbar\/","title":{"rendered":"The U.S. Supreme Court Decides How to Punish US Expats with the FBAR."},"content":{"rendered":"

\"\"By Andreas Kluth<\/a> at Bloomberg. August 26, 2022<\/p>\n

Andreas Kluth\u00a0is a Bloomberg Opinion columnist covering European politics. A former editor in chief of Handelsblatt Global and a writer for the Economist, he is author of \u201cHannibal and Me\u201d<\/p>\n

The US Supreme Court has lately polarized Americans with controversial verdicts on abortion, guns, climate change and more. Another case on its docket, by contrast, will get intense scrutiny mainly from\u00a0millions<\/a>\u00a0of Americans living abroad.<\/p>\n

Alexandru Bittner v. United States<\/a>\u00a0is about some of the tax and compliance rules the US slaps on its own expats. These can be so draconian as to amount to criminalizing the sheer act of living outside the US.<\/p>\n

Bittner is a businessman and a dual citizen of the US and Romania. He used to live and work in Romania and, naturally, had to open financial accounts there. What he apparently didn\u2019t know \u2014\u00a0many expats don\u2019t \u2014\u00a0is that he had to declare all these accounts every year to the US Treasury\u2019s Financial Crimes Enforcement Network<\/a>, on a form colloquially known as the FBAR.<\/p>\n

All parties in the case agree that Bittner\u2019s failure to make timely and proper disclosures was \u201cnon-willful,\u201d meaning unintentional. Even so, the penalties are stiff.\u00a0One appeals court assessed his fine at $50,000, or $10,000 for each of the five years in which the FBAR was omitted. Another court put the punishment at $2.72 million, or $10,000 for each\u00a0account\u00a0that should have been on each FBAR, each year.<\/p>\n

The first amount is painful, the second ruinous \u2014\u00a0and, frankly, insane. The Supreme Court now\u00a0has to decide which is lawful<\/a>.<\/p>\n

This question mark about penalties is\u00a0one of many ambiguities about\u00a0FBARs. But even FBARs are just the tip of the iceberg.<\/p>\n

Americans abroad suffer\u00a0a long list of indignities<\/a>\u00a0in trying to comply with US laws. Most of them don\u2019t owe the IRS any actual tax (because they usually pay at\u00a0higher\u00a0rates to their host countries and subtract those amounts from their American liabilities). But they must still fill out incomprehensible forms demanding information that\u2019s often unavailable or ambiguous \u2014\u00a0at great cost of time, worry and money.<\/p>\n

Some expats, for example, find themselves owning plain-vanilla mutual funds registered in their host country \u2014\u00a0employers sometimes put such investments into occupational retirement schemes by default. To the IRS, these are PFICs, or \u201cpassive foreign investment companies\u201d \u2014\u00a0a synonym for toxic. The resulting paperwork (Form 8621) is considered the most complex in the entire American tax code, and the taxation tantamount to confiscation.<\/p>\n

Depending on what an American expat does next, there\u2019s more misery to come. If she marries a \u201cforeigner\u201d (the reason why many Americans move overseas in the first place), she may face nightmares about joint accounts, inheritance and more, even before considering any children. More punishment awaits those who own a foreign business\u00a0or do pretty much anything interesting.<\/p>\n

US expats may also struggle\u00a0to open \u2014\u00a0or keep open \u2014\u00a0financial accounts abroad. Foreign banks and brokers must report on \u201cUS persons\u201d (citizens or Green Card holders) to the US. Rather than run the risk of American retaliation for errors and omissions, many financial institutions prefer to\u00a0have no American customers at all.\u00a0This particular problem is a consequence of the Foreign Account Tax Compliance Act (FATCA), notorious Obama-era legislation that has upended the lives of many US expats.<\/p>\n

But the original reason for the entire hairball of complexity is the peculiar American way of taxation, which is in effect unique in the world (only Eritrea has something vaguely similar).\u00a0That approach is called citizenship-based taxation (CBT). It means that a person\u2019s passport or Green Card,\u00a0not\u00a0the place of residence, determines tax status and liability.<\/p>\n

The unintended consequences are legion. One is to snare \u201cAccidental Americans\u201d in the nets of the IRS and FinCEN. These are people who \u2014\u00a0usually because their parents happened to be in the US when they were born \u2014\u00a0have US\u00a0citizenship<\/a>\u00a0but otherwise no connection to America. One day, they may receive a letter informing them of bureaucratic torment on a scale that would impress Franz Kafka.<\/p>\n

This (largely coincidental) intertwining of citizenship law and tax law over the decades has made the US unique.\u00a0All\u00a0countries want to crack down on tax cheats who hide money in offshore accounts \u2014\u00a0that\u2019s why ever more governments are agreeing to share financial information with one another. But only the US hits millions of expats who have modest assets and little clue every time it targets rich and sophisticated tax dodgers living stateside.<\/p>\n

In a sign of growing desperation, a guerrilla insurgency of litigation is now forming from Canada to Israel to Europe. In the UK, a woman named\u00a0Jenny Webster<\/a>, American-born but British, has been taking the British authorities to court for sharing her financial information with the US, arguing that this amounts to violations of her data privacy.<\/p>\n

In France, Fabien Lehagre, born in the US but French by upbringing, founded the\u00a0Association of Accidental Americans<\/a>. He\u2019s got legal cases under way in several countries. With his input, France\u2019s National Assembly recently passed a measure that would make its government stop sending people\u2019s financial data to the US in accord with FATCA, unless the US reciprocates by sending information about French taxpayers in return. But the bill\u00a0was nixed<\/a>\u00a0in the French Senate.<\/p>\n

In the Netherlands, a court recently prohibited a local bank from closing the accounts of Accidental Americans in the country. And the European Parliament sent\u00a0a delegation<\/a>\u00a0to Washington, DC, to discuss the problems caused by FATCA.<\/p>\n

But all these efforts only treat the symptoms of the underlying aberration, which is citizenship-based taxation. So another group of lawyers \u2014\u00a0including Marc Zell, an Israeli-American, and John Richardson, a Canadian-American \u2014\u00a0wants to challenge the constitutionality of CBT as such, at least in its current form. They\u2019re now building their case.<\/p>\n

There are\u00a0lots of reasons<\/a>\u00a0why people born in the US at some point find themselves living abroad. It shouldn\u2019t be US government policy, even implicitly, to make such lives unnecessarily difficult. America must treat all its citizens equally, whether they live at home or overseas.<\/p>\n

The nine robed justices now have an opportunity to send the first small sign that they got that message. Alexandru Bittner shouldn\u2019t be financially ruined just because he made unintentional errors while he lived abroad. Nor should any other American \u2014\u00a0or indeed anybody at all.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Andreas Kluth at Bloomberg. August 26, 2022 Andreas Kluth\u00a0is a Bloomberg Opinion columnist covering European politics. A former editor in chief of Handelsblatt Global and a writer for the Economist, he is author of \u201cHannibal and Me\u201d The US Supreme Court has lately polarized Americans with controversial verdicts on abortion, guns, climate change and […]<\/p>\n","protected":false},"author":4,"featured_media":11082,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[25,23,1],"tags":[],"class_list":["post-11081","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fatca","category-irs","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/posts\/11081","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/comments?post=11081"}],"version-history":[{"count":0,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/posts\/11081\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/media\/11082"}],"wp:attachment":[{"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/media?parent=11081"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/categories?post=11081"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/tags?post=11081"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}