US Citizen Gives Up Citizenship

Since 2011, almost 1,800 people have renounced their US citizenship or turned in their green cards. Has America lost its luster? Why would anyone give up a golden citizenship?

Many have left America because taxes are too high. According to the IRS, the number of citizens who have given up citizenship is almost eight times as many as the number in 2008, and more than the combined total of 2007, 2008 and 2009. The US is one of the few countries to impose taxes on citizens who earn income abroad. While the deadline for stateside taxes is April, the deadline for those living abroad is June. Though the deadline for US citizens abroad is later, there is much paperwork and many obstacles when filing taxes abroad. There is also no way to avoid filing, unless you renounce your citizenship.

As a US Citizen living abroad, you still have to report and file on all bank accounts. This includes international joint accounts and retirement funds. The IRS has high monetary penalties for those who do not report all their bank accounts, often as much as $10,000 or 50% of your undeclared accounts.

The Report of Foreign Bank and Financial Accounts and the Foreign Account Tax Compliance Act are two of the IRS’s filing requirements that affect US citizens abroad. The first law requires all Americans, and those abroad, to declare any overseas bank accounts that hold at least $10,000 using a supplementary file form. The second law requires foreign financial organizations to report information on US clients to the IRS. However the US has announced that they will allow foreign and domestic institutions to report information directly to the government, instead of going through the IRS. Failure to do this can be drastic for these institutions, and could result in 30% tax withholdings on US payments and property sales.

Foreign Earned Income Exclusion rules allow foreign income of at least $95,100 to be earned tax-free in the US. The IRS allows a few grace periods for expatriates to file back taxes without being subject to criminal charges; however, severe monetary penalties are quite possible.

See you in my next blog.

Nalini S Mahadevan, JD, MBA
Immigration Attorney
Lowenbaum Partnership, LLC
St. Louis, Missouri

Tara Mahadevan

Copyright 2012. All rights reserved.

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Civil Unions

Civil unions are usually viewed as a benefit to same sex couples, allowing the parties to legalize their relationship and recognize that they are a couple just like you and me. The Illinois Senate has passed the bill and it has gone up to Governor Pat Quinn for signature. Governor Quinn is scheduled to sign the bill next year. The law could take effect next summer, June 11, 2011. But with this law, Illinois has enacted a law that has widespread effects. The law is called The Illinois Religious Freedom and Civil Union Act. The law was enacted because same sex couples were denied marriage benefits, and there was no compelling state interest or rational basis to deny same sex couples these marriage benefits. The bill particularly mentions that the purpose is not to interfere with religious freedom or beliefs about marriage. The bill will apply equally to same and opposite sex partners (something new) who want to enter into a civil marriage or union. Same sex partners will be called ‘spouse’, ‘immediate family’, and ‘dependent’. This is important because it has implications for divorce, probate law and other domestic relations law. So same sex couples can marry, divorce and have standing in court to sue on these actions. They can also inherit under probate law as a civil union spouse, sue for emotional distress, wrongful death, loss of consortium under Illinois tort law. As spouse, they can apply for insurance benefits – health and accident, be eligible for group insurance in employee insurance plans. Under Illinois tax law, they will be eligible as spouses for taxes and tax deductions as spouses and dependents. Marriage, under the Illinois law, is prohibited between siblings, uncle and nephew, aunt and niece. Because same sex couples are treated as ‘spouses’ under the marriage and divorce law of Illinois, they can now share rights to make end of life decisions, nursing home decisions, transfer of property to spouses, and survivor benefits. Under workers’ compensation rules, ‘spouses’ can claim benefits. Did I say there was something different about this bill? Well, heterosexual couples who do not want to marry, can opt for a civil union and enjoy the same benefits as a married couple would do. Why, you ask? Let us say that a couple is interested in a domestic partnership because they face loss of health insurance and other benefits, or seniors who will lose their social security survivor benefits, pension or income if they remarry, then this bill offers a way out. Seniors can also now have the right to make emergency decisions for their ‘spouse’ under this new law. It recognizes the relationship without the concomitant problems of marriage. So it provides straight couples some legal support but no title of marriage. Employers should review their employee benefits, especially health insurance, and family leave benefits and their compliance with applicable labor laws. Couples who opt for civil unions under this law can also make end of life decisions–they do not have to have powers of attorney to end, for example, a vegetative state. Remember the Terry Schaivo case? They also have the right to make funeral home decisions and take charge of the remains. But these protections are offered only at the state level and have no application at the federal level. Tax law, immigration law and a host of other laws will not recognize these relationships as spouses. I guess you could then claim a ‘spouse’ under the new law as a dependent under state law but not federal law. The federal law, the Defense of Marriage Act, recognizes marriage as a union only between a man and a woman. DOMA does not recognize civil unions even if the union is recognized by the state. This is a legal conundrum because the full faith and credit clause of the US Constitution makes it mandatory to recognize the laws of another state in the Union, and accord foreign state laws equal application and status. But same sex unions or marriages are non-existent in federal law. A United States Citizen or legal permanent resident cannot sponsor a same sex partner of foreign citizenship to live with them in the United States as their ‘spouse’. Same sex marriage was banned in California after Proposition 8 was passed. But on August 4, 2010, a federal district court decided that such a ban violated the Equal Protection clause of the US Constitution. The equal protection clause does not guarantee equality among individuals or classes but only that the laws would be applied equally to all. The question remains for us: are some more equal than others? Is the federal government practicing discrimination by the unequal application of laws, or by denying rights to some? Is this a slippery slope we should not venture on?

See you in my next blog.

Nalini S Mahadevan, JD, MBA

Attorney at Law

www.lawyersyoucantalkto.com

Copyright 2011. All rights reserved.

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TSA and Other Intrusions on Our Privacy

Yesterday, it was TSA intruding on our privacy with full body scanners and full body pat downs. These searches caused issues for persons with disabilities. TSA officers need more training on how to interact with disabled persons. Tom Sawyer, a retired special education teacher, had a urostomy (artificial bladder) and was embarrassed by TSA officers who ruptured his bag in an over zealous search. Today, air travelers are participating in a boycott of full body x-ray and opting for the full body pat down. The only persons who were affected were their fellow passengers!  The shoe bomber of 2002 and the Christmas day bomber of 2009 taught us not only to fear the dreaded holiday weight gain, but also terrorists who feel the holidays merit their special attention. I’ll take weight gain over being blown up…ha!

The alternative to intrusive scans is racial profiling. Targeting a particular racial group for extra law enforcement attention: Israel has mastered the art. Sometimes air passengers are questioned for 3 hours before a flight. If you are Arab, Israeli or a foreigner flying on El Al, then you are subject to humiliating body searches and in depth interrogation. The Israelis do not find it necessary to question innocent passengers who are 99% of the traveling public. There are no airline terrorist incidents affecting the Israeli airline.

An even greater threat to us is our online privacy. Today, the Wall Street Journal has a front page article about information collection by data mining companies. Two US companies, Kindsight, Inc. and Phorm, Inc, are promoting deep packet inspection as a way of collecting information about you as you surf the net. Their technology reads and analyzes data as it flies across the internet. This is very detailed profiles of internet activities, capable of reading e-mail and sensitive online activity. These services are used by internet advertisers to target consumers with particularized ads tailored and based on developed, detailed internet profiles. How does it work? You are online, sending e-mails, watching online videos, site surfing. The information is collected and sent in data packets from your computer to your internet service provider (ISP). The ISP channels your search to websites. These companies have the capability of reading (inspecting) these data packets traveling between ISPs and the websites you want to visit. Then when you visit the website, you see an ad from a store that you last visited online, or a news story that may be in your interest range. This profiling is possible because these companies know more about your habits, income, assets and debts than you thought possible. They know your age, driving history, your addresses, whether you rent or own, the names of your family members. These details from public websites can be easily obtained by anyone who knows where to look on the internet. The technology is largely driven by the need for more revenue; targeted ads garner more interest and revenue. This is especially true now that ISPs are under greater fire to provide more services at lower prices. When I was researching articles for this blog, I received ads from my favorite stores. Of course, I would be more tempted to click on the ad. That is what these companies want; targeted ads provide larger revenue streams. As I surf the net, I try to use not only Google, but also Bing, Ask and Yahoo for my searches. Use some of the lesser known search engines. Opt out of privacy announcements. I now read every online agreement before I agree. As with everything internet, buyer beware.

See you in my next post.

Nalini S Mahadevan, JD, MBA

Attorney at Law

www.lawyersyoucantalkto.com

Copyright 2010.  All rights reserved.

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What a Republican Win Means to Me

So the Republicans won last week and we know that candidate Lisa Murkowski from Alaska may have lost, largely because her name was misspelled by the voter and could not have been counted. Sow what does a Republican win mean for immigration? If Republicans are pro-business, that means that business may start humming again largely due to the fact that the uncertain legislative climate is behind us. The 4,000+ changes brought about by health care reform and wall street reform had businesses reeling, trying to play catchup with compliance.

A Republican win also means that enforcement at the border and against businesses will remain at the same high level of execution. So there may be a better business climate leading to more hiring and causing businesses to bring over more foreign workers, provided they did not take TARP funds (bailout funds) from the federal government or have repaid the funds. Right now, businesses are not hiring foreign nationals because they are busy laying off workers. Enforcement business has been steady in immigration, whether it is deportation of out of status foreign citizens or punishing businesses employing foreign citizens without work visas.

I also practice estate planning. For CPAs and lawyers and the IRS, working in this area means the uncertainty of 2010 carry over basis may be over! Finally we will go back to having $3.5 million of exemption from federal estate taxes, so my Missouri estate planning clients will now have more advice from me, other than “please don’t die in 2010!” Congress still has to enact new law to give effect to my dreams, but I can dream now! As a small business owner, I heave a sigh of relief! Now I think I will stop working for Uncle Sam until June. When you are a small business owner, you wear many hats: lawyer, parent, tech geek, accountant and even counselor. I had to hire a service to process payroll because it was consuming too much time and I was never sure I had the numbers correct. If you pay too little, the fines and penalties can really add up from the State and Federal tax man.

So I freed up some time to actually practice law. We need less government and more private enterprise. More money in my pocket as a small business, and I may actually be able to hire another person in the office. What a revolutionary thought!  When you think about unemployment, there is a structural unemployment of 5.5%; total unemployment 11%. Structural unemployment means joblessness caused not by lack of demand, but by changes in demand patterns or obsolescence of technology; and requiring retraining of workers and large investment in new capital equipment. So there were already 51.5% of the population of the US not working when the recession started in 2007. Now there are 5-6% more. Look at it another way: 89-90% of persons employable are working. Maybe when you wake up and see the unemployment number you will feel better about your situation. I see people who have lost their jobs. These people are on a work visa or are awaiting a grant of permanent residency. For these people, it is a precarious living, made worse by the fact that their very existence in this great country is jeopardized by being jobless. Perhaps an enlightened immigration policy that favors business will be enacted by the new Republican party in power. I can dream can’t I?

See you in my next post.

Nalini S Mahadevan, JD, MBA

Attorney at Law

www.lawyersyoucantalkto.com

Copyright 2010.  All rights reserved.

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Enjoying Your Life

I guess you could ask me why I am writing about enjoying life rather than about some legal topic that I usually blog about. I have realized that I need to enjoy my life in order to enjoy coming to work everyday and dealing with clients’ problems. So how do I enjoy life?  Friends online and in real life; exercise and the outdoors. This weekend I went to Forest Park in St. Louis, Missouri. I rented a paddle boat, the kind you paddle with your feet. It is a lot harder than it looks! The day was beautiful, the fountains were spewing water everywhere, and the wind carried the spay with it! As I watched, four wedding parties came and went, took pictures with their friends, jumped in the air for an action shot. It took me about an hour and twenty dollars, but it was invigorating and renewing. Just the thing I needed to face Monday.

Fall colors at Creve Coeur Lake Park, Creve Coeur, Missouri

Forest Park Lake, St. Louis, Missouri

See you in my next post.

Nalini S Mahadevan, JD, MBA

Attorney at Law

www.lawyersyoucantalkto.com

Copyright 2010.  All rights reserved.

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Birthright Citizenship

Recently my sister sent me an article by James Walsh on birthright citizens. While I was researching this topic, I came across an article in the Huffington post, which stated that Senator Mitch McConnell felt that there was no harm in looking into why foreigners were coming to the US for the express purpose of having their babies on US soil so that the babies could be US citizens under the 14th Amendment of the US Constitution. Was this a big problem? I did not know. Recently, James Walsh commented that, “The nation looks to the U.S. Congress to remedy fraudulent naturalizations and the Supreme Court to clarify the jurisdictional question of automatic birthright citizenship”. George Will wrote in The Washington Post that, “If those who wrote and ratified the 14th Amendment had imagined laws restricting immigration — and had anticipated huge waves of illegal immigration — is it reasonable to presume they would have wanted to provide the reward of citizenship to the children of the violators of those laws? Surely not.” Both James Walsh and George Will are caught up in the phrase “jurisdictional question of automatic birthright citizenship” (and in some fashion that naturalization is handed out like candy to unqualified legal permanent residents). So what does the phrase ‘subject to the jurisdiction’ mean? For that we have to examine some principles of US law. United States law combines jus soli, meaning citizenship by birth in a nation’s territory, and jus sanguinis, meaning citizenship by descent, i.e. parents who were citizens. Before the Declaration of Independence in 1776, residents of the 13 original colonies were British citizens. After Independence, these persons could choose to remain a British subject or become a citizen of one of the 13 States. At this point there was no US citizenship by birth. The original Constitution only said that the American President had to be a citizen and ‘natural born’. But the terms ‘citizen’ and ‘natural born’ were not defined anywhere. Recently, the issue of ‘natural born’ featured prominently as an issue for both Presidential candidates in 2008. Senator McCain was born in the Canal Zone in Panama of US citizen parents. In 2008, a legal scholar Professor Gabriel J. Chin argued that McCain did not become a citizen until a year later in 1937, when Congress passed a law to confer US citizenship on Canal Zone born children. Until 1937, these children fell into a gap in law conferring US citizenship on children born to US citizen parents. Similarly, President Obama was also thought not a US citizen for failure to produce his Hawaiian birth certificate. But this blog is about who has birthright citizenship. Clearly from these examples, you have to be born on US soil and territory to be a US citizen, to be ‘natural born’. The 14th Amendment, Section 1 states, “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside. No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws”. Until the 14th Amendment, slaves and their descendants were not US citizens; American Indians were still held to be non citizens because they were born in territory that was not subject to the jurisdiction thereof. This anomaly in the law was changed by subsequent law. So now a Native American becomes a US citizen at birth. Persons born in Puerto Rico, Gaum and US Virgin Islands are also citizens. Only birth in American Samoa and Swains Islands does not confer US citizenship, although these persons may call themselves US Nationals! In the last few decades of the nineteenth century, Chinese born immigrants, who were legal permanent residents (now commonly called ‘green card’), were ineligible by law to become US citizens. In US v. Wong Kim Ark, in a decision after the 14th Amendment was passed, the US Supreme Court held that Ark was a US citizen because he was born in San Francisco and had not “either by himself or his parents acting for him, ever renounced his allegiance to the United States, and that he has never done or committed any act or thing to exclude him therefrom”. In 1985, authors Peter H. Schuck and Rogers M. Smith, wrote that the phrase in the 14th Amendment ‘subject to the jurisdiction thereof‘, should be re-interpreted to exclude children of persons who did not have green cards. In other words, children of persons who were here legally in the US on a non-immigrant visa, and those who were here illegally, should not be able to become US citizens by virtue of their birth in the US; they were not subject to the jurisdiction thereof, and they owed foreign allegiance. The New York terrorist attacker Faisal Shasad stated when he took the oath of citizenship, he did not mean it–he said it for convenience!!! While I, as a naturalized citizen, recoil at that statement, as an immigration attorney, I am even more incensed! His statement casts a dark shadow over all naturalizations. We should probably revisit the phrase in Ark, done anything to renounce his allegiance…’, when we try to re-evaluate the tenets of birthright. My point is to all the lawmakers and naysayers who want to amend the 14th Amendment by restating the phrase ‘subject to the jurisdiction thereof‘. Don’t throw out the baby with the bathwater.

See you in my next post.

Nalini S Mahadevan, JD, MBA

Attorney at Law

www.lawyersyoucantalkto.com

Copyright 2010.  All rights reserved.

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Do you have to pay Estate Tax in 2010?

Since 2000 I have heard the mantra over and over again, ‘if you die in 2010 you don’t have to pay estate tax. Even Bill Gates does not have to!’ Well, the truth of the matter is that even if he, or for that matter ‘you’, died in 2010, your heirs may not pay estate tax, but they may be liable to pay a tax on the difference between what you paid for the asset and the sale price of the asset. In layman’s terms, if grandma bought a house for $40,000, died in 2010, and you inherited the house and sold it for $100,000, then you owed the government taxes on the difference of $60,000. So in lieu of an estate tax, there is a ‘carryover basis’ of valuing the asset at date of death. The reality is that there is a ‘step up in basis’ of $3.5 million that a surviving spouse can claim. So maybe there is no tax; but the problem is that the IRS has not set out any rules, issued any federal regulations or forms to cover the eventuality of dying in 2010. No one expected the inaction of Congress on the matter. So CPAs, estate planning lawyers and the IRS are left wringing their hands over the inaction. And more complications for residents of states that levy a state estate tax, that may have not been repealed along with the repeal of the federal tax. In Missouri, there is no estate tax. If you have property in Illinois, there is an estate tax on estate valuations over $2.0 million. So farmland may be affected or even real estate developers dying in 2010 who may owe no federal estate tax, but may owe Illinois estate tax. The irony of the matter is that a taxable estate of over $5 million would pay federal estate tax of $675,000 in 2009 and $1,653,400 in 2011, if Congress does not change the law. This affects farmers and other growers, small business persons; people who do not fit the ‘rich’ mold. But the larger the estate, the lower tax the estate would be liable to … estates of $50 million would pay $20.9 million in 2009 and less than $20 million in 2011, if the law is not changed! I don’t think that that is what was intended. So in 2011, the federal government will collect more federal revenue on inheritance money than it did in 2009. In 2011, the largest estates would pay less as a percentage of value. Warren Buffet must be smiling.

See you in my next post.

Nalini S Mahadevan, JD, MBA

Attorney at Law

www.lawyersyoucantalkto.com

Copyright 2010.  All rights reserved.

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