February 2, 2018 - Phil Hodgen

GILTI: In Which Foreign Corporation Income is Made Taxable

Poker players are always looking for tells — inadvertent signals by their opponents. The Tax Cuts and Jobs Act has a tell. Our Federal government has told us what they think of us.

They think we are incipient felons.

If you had any doubt about our how our Federal Overlords view us, new Internal Revenue Code Section 951A should clarify things for you. This new law introduces a new acronym: GILTI.

Not Quite Territorial Taxation

The new tax laws are great if your name is Apple or Google.

But for American entrepreneurs living abroad and running regular businesses, (tax) life is worse in 2018 than it was in 2017.... continue reading

Friday Edition
January 30, 2018 - Phil Hodgen

The Consequences of Filing Form 8854 Late

Form 8854, I like to say, is how you log out of the U.S. tax system when you give up U.S. citizenship or permanent resident status. Let’s look at the procedural aspects of this mandatory paperwork:

  • Why you must file Form 8854;
  • When you must file Form 8854; and
  • What happens if you don’t file Form 8854 on time?
Why Form 8854 Exists


Congress imposed the data collecting requirements for expatriates. The IRS took these instructions from Congress and, wielded its its general authority under 6011 to design forms and collect data. Form 8854 is the result. The IRS also took its authority under 6071 and set the filing deadlines that we work with.... continue reading

January 25, 2018 - Haoshen Zhong

Tax Law Changes Made a CFC-PFIC Overlap Easier

This post notes a change in the way controlled foreign corporation (CFC) rules work now that the newly passed tax law is in effect. This change makes it more likely that a person would fall under the CFC rules instead of the passive foreign investment company (PFIC) rules. Unfortunately, it may have caused some persons to be subject to both the CFC rules and PFIC rules.

What are PFICs and CFCs?

Passive foreign investment company (PFIC) is a classification under US tax law. It is designed to discourage US persons from investing abroad through foreign investment vehicles. When a US person owns shares in a PFIC, the US person is subject to extremely punitive tax and reporting rules.... continue reading

January 19, 2018 - Phil Hodgen

The Evident Accounting Complexity of Section 951A

There has been a lot of ballyhoo over the last few years about mega-multinationals (like Apple and Google) and their international tax structures. The amounts of money stashed abroad are staggering. But frankly, spending time complaining about Apple and Google’s tax planning is a mug’s game — the political ideologue’s version of smugly judgmental nattering about the Kardashians.

Meanwhile, real people roam the surface of Planet Earth, living real lives. Think of a normal American citizen living abroad, running a consulting business with $1 million of revenue and $500,000 of expenses. That’s real, and his problems are worth talking about.

Our American citizen abroad is the human embodiment of a multinational business enterprise.... continue reading

Friday Edition
January 16, 2018 - Phil Hodgen

Why (Some) Expatriates Cannot Own Guns

I want to give you a slight detour from tax law to see a little-known Federal law that applies to U.S. citizens who renounce their nationality.

The topic is guns–former U.S. citizens cannot (legally) own them. The topic is interesting in its own right, but it is meta-interesting too:

  • It shows how anti-expatriate fervor has seeped into Federal law generally; and
  • How few people have seen this and care about it, either in specific application or for its implications.

You might not care about guns. You might be violently anti-gun (haha see what I did there?). But the propensity for ever-extending tendrils of Federal legislation might be of interest to you.... continue reading