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Beyond The Legalese

Foreign Terror Victims Denied New York Justice (For The Time Being)

5/13/2016

 
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​​In a recent decision, the Second Circuit Court of Appeals affirmed the dismissal of foreign terror victims claims against Arab Bank, PLC.   The central issue involves the use of the Alien Tort Statute, a 200-year-old United States statute, to assert claims against the bank.  The plaintiffs – most of whom are Israeli - allege that the bank aided and abetted terror attacks by maintaining bank accounts and arranging financing for the terrorist organizations primarily responsible for the attacks.   

In certain circumstances, the Alien Tort Statute allows foreign plaintiffs to bring tort claims in federal court.  In 2010, in a different matter, Kiobel v. Royal Dutch Petroleum (2d Cir. 2010) (“Kiobel I“), a panel from the Second Circuit held that the Alien Tort Statute does not provide "corporate liability" and therefore claims against corporations must be dismissed.  However, since then, other federal courts have disagreed with the Second Circuit and held that corporate liability is available under the statute.  Although the Supreme Court has not directly addressed issue, it implicitly disagreed with the Second Circuit in Kiobel I by affirming the decision on other grounds. See Kiobel v. Royal Dutch Petroleum (S. Ct. 2013) (“Kiobel II“).    

In the Second Circuit's latest decision, although affirming the dismissal of the plaintiffs’ claims, the Second Circuit recognized that its earlier decision in Kiobel I may be on shaky ground in light of the "growing consensus among our sister circuits” that corporations are proper defendants in Alien Tort Statute cases. Nevertheless, the Court was unwilling to rule in favor of the plaintiffs because of the prior panel's decision in Kiobel I.   They stated“We think that one panel’s overruling of the holding of a case decided by a previous panel is perilous,” and “[we] will leave it to either an en banc sitting of this Court or an eventual Supreme Court review to overrule Kiobel I if, indeed, it is no longer viable.”         

In raising the issue of further review en banc, i.e., by the entire Second Circuit, the Court appeared to be indicating that the Second Circuit may join its sister courts in allowing claims to proceed against corporate defendants.  If the Second Circuit law is modified, New York will likely become the preferred jurisdiction for such claims in light of its centrality as a business venue for international financial institutions and corporations.

Here's How You Could Lose Your US Passport, Especially If You Reside Abroad

5/10/2016

 
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Did you know that Uncle Sam wants your tax money whether or not you actually live in the US? In what started out as a means of preventing US-resident off-shore tax evasion, the IRS's campaign to collect taxes from Americans' foreign income affects people who simply chose to live their lives outside of the United States. No criminal activity in mind. And what's worse is that as of December 2015, anyone delinquent on over $50,000 will be slapped with a penalty which is not just a monetary fine. It's much more personal than that: No US passport. You won't be able to get a new one, or your current one will be confiscated.

Congress passed this passport-threat clause easily because it was couched in among the 5-year infrastructure spending bill, with a clause that unpaid taxes could be tied to passport issuance. The State Department will follow IRS orders in these cases.  And whether or not you live abroad, the passport punishment applies – it just might have more effect on those who need a US passport for international travel. That is, unless your driver's license is not compliant enough for the TSA in which case you'll need a passport to fly even within US borders.  But it stands to reason that most US citizens do not owe the IRS at least $50,000, and therefore the passport issue is likely a moot point. Rather, it's the citizens abroad who are more likely affected because they might not even know they need to report, much less pay US taxes. 

The US is the only country that forces its citizens to pay taxes to Uncle Sam no matter where they live. On the one hand, it's not taxation without representation, because US citizens maintain rights to vote absentee in most elections. But it is taxation without benefit: Why should money earned abroad be taxed to support another country, just because of citizenship? We can wonder until we're blue in the face, but the fact is that US citizens abroad still have to file yearly taxes.


To be sure, U.S. citizens living abroad (with physical presence of at least 330 days/year) are not required to pay taxes on earned, salaried income lower than about $85,000 per year. But they still might have to pay taxes on capital gains, self-employment, rental income and other categories – all on money earned outside of the US. In other words, you buy and sell your family's home in a foreign country, and you now owe the IRS capital gains.


Furthermore, as of 2009, on top of regular tax filing, US citizens with aggregate assets valued at $10,000 or more have to file a Report of Foreign Bank and Financial Accounts (FBAR) – and that goes for US residents as well.

The compliance requirements extend even to so-called "accidental Americans." Were you born on US soil to non-Americans? You have American citizenship. Were you born abroad to US parents, but never lived here? You have American citizenship. You might never have gotten a US birth certificate printed, but you still have to report your income to the IRS.

Yes, there are exceptions, and there is currently an amnesty program for tax-filing 3 years in the rears (which the IRS has said will end, but did not provide a deadline.) Exceptions and amnesties notwithstanding, non-compliance can be costly – fines of at least $10,000 for non-filing, and the sky's the limit on retroactive fines on non-payments in back taxes.  You might also be blocked access to social security or other US moneys.And as mentioned above, you might not be able to enter back into US borders to visit your family or conduct business because your passport will be swiped by US authorities.
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Bottom line: If you are a US citizen with any money in any foreign account, you must report it to the IRS. Living outside of the US is irrelevant. And if you don’t, you may lose your US passport without warning.
 



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