Dramatic Rise is US Expatriations May Have its Roots in Foreign Asset Disclosure Laws

by Geoffrey Weg

Since 1998, under Internal Revenue Code Section 6039G, the U.S. Government publishes in the Federal Register the names of all US citizens who choose to expatriate (i.e., renounce their U.S. citizenship).  From 2004 through 2008, the number of expatriations per year averaged approximately 625 (from a high of 744 in 2009 to a low of 232 in 2008).  However, from 2009 to 2011, something interesting happened – the number almost tripled to approximately 1800 expatriations in 2011, with the number expected to be as high or higher in the first quarter of 2012. 
 

So what’s going on?  
 

The Federal Register does not reveal an individual citizen’s purpose for expatriation (nor is any citizen required to provide a reason to the government).  However, for tax professionals, one huge change in tax law stands out like a sore thumb – FATCA – the Foreign Account Tax Compliance Act.  According to the IRS, the purpose of FATCA is, “an important development in U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts”.  Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS.  In addition, FATCA requires foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.  As a practical matter, both tax practitioners and US citizens living abroad now face a huge administrative burden in order to comply with FATCA.  And while direct evidence is lacking, anecdotal evidence from tax practitioner and taxpayer advocate groups indicates that it is this burden – FATCA – that is directly responsible for the dramatic increase in US expatriation.  
 

So why should we care?  
 

Indeed, 1800 expatriates constitutes something like 0.001% of all US taxpayers – a proverbial drop in the bucket.  On the other hand, in order to be listed in the Federal Register, a taxpayer must have a net worth above $2 million (and/or income above a specified and significant level).  In other words, these are individuals with significant income and assets, and they are deciding to leave our country, taking their skills, assets and tax-paying abilities with them.  Moreover, the number of people doing this is simply skyrocketing.  If it continues, at some point there will be a noticeable impact on the US economy.  Congress and the Department of Treasury should take this new trend seriously, and think long and hard about whether to continue to impose this burden on these taxpayers, and ultimately, on all Americans.

Contact Geoffrey Weg

Three Outstanding Attorneys Join Valensi Rose

We are pleased to announce the addition of litigators Louis E. Kempinsky and John C. Keith and the return of tax and estate planning specialist Kelly S. Keuscher to our firm.  

Louis E. Kempinsky

Lou Kempinsky is a seasoned trial attorney specializing in business and commercial disputes. Lou's practice encompasses trial and appellate work in Federal, State and Bankruptcy courts. He has been lead counsel in numerous jury and non-jury trials involving a wide variety of substantive issues, including real estate, contract, corporate, business torts, Commercial Code, lender liability, bankruptcy, franchise, corporate governance, professional accountability, partnership, environmental, trademark and other intellectual property.

He also has extensive experience representing the interests of both creditors and debtors, along with all of the other constituencies involved, in bankruptcy cases and out of court workouts and restructurings.

While Lou has been privileged to represent successfully at trial both entrepreneurs and Fortune 100 companies, he is just as proud of his accomplishments in enabling his clients to enforce and protect their rights, as well as to advance their short and long-term interests, without the necessity for protracted litigation. To achieve those goals, he pursues a course of proactive counseling along with ongoing efforts to address client issues well before they reach the courthouse steps.

When not working on behalf of clients, he will act as a mediator or arbitrator to assist others in dispute resolution. He also writes and lectures frequently on matters relating to business litigation, trial practice and corporate governance. He is active in the community and in local and national bar associations. Lou has been honored by the American Bar Association for his work in the Section of Litigation and recognized by U.S. News & World Report for providing top tier legal representation. He has for the past eight years had the distinction of being named a California "Super Lawyer" by Law and Politics Magazine and Los Angeles Magazine. In his spare time, Lou is an avid wine collector and enjoys travel, the theater, wine and his bike.

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John C. Keith

In his broad-based business litigation practice, John Keith helps resolve his clients' legal challenges across a variety of issues, including:

• Bankruptcy
• Breach of contract and commercial disputes
• Breach of fiduciary duty and director and officer liability
• Fraud and business torts
• Insurance
• Intellectual property and trade secrets
• Partnership and LLC disputes
• Securities and shareholder derivative actions

In recognition of his practice achievements in litigation, John was twice named as one of Southern California's "Rising Stars" by Law & Politics and Los Angeles Magazine, for the years 2009 and 2010. He obtained his law degree in 2003 from the University of California, Berkeley School of Law (Boalt Hall).

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Kelly S. Keuscher

Kelly Steven Keuscher practices in the areas of estate planning, trusts, probate, taxation, non-profit organizations, and general business transactional law. Kelly holds both J.D. and M.B.A. degrees, and his background includes more than ten years working for various public agencies. He has also served as a consulting attorney for the Probate Division of the Los Angeles Superior Court.

Kelly has represented numerous individuals, businesses, and charitable organizations in matters ranging from estate and tax planning to transactions to litigation. Kelly utilizes his broad range of experience and expertise to develop efficient and innovative solutions for his clients.

Contact Mr. Keuscher

The addition of Lou, John and Kelly compliments and expands on our exisitng practice areas and allows us to continue to serve our clients in the best way possible. For more information or to contact an attorney, email us at info@vrmlaw.com.