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Abstract:
This Article addresses a fundamental issue underlying the U.S. tax system in the international context: the use of citizenship as a jurisdictional basis for imposing income tax. As a general matter, the United States is the only economically developed country that taxes its citizens abroad on their foreign income.

Despite this broad general assertion of taxing jurisdiction, Congress allows citizens abroad to exclude a limited amount of their income earned from working outside the United States. Influential lobbying groups, including businesses that employ significant numbers of U.S. citizens abroad, argue that this exclusion is necessary in order to keep American business competitive overseas. Recently, these groups have argued that modern developments, including lowered barriers to trade and the increased mobility of workers, strengthen this argument, and that the United States must allow an unlimited foreign earned income exclusion, or perhaps abandon citizenship-based taxation altogether, in order to remain competitive.

This article analyzes how modern developments in the global economy affect the case for citizenship-based taxation. The article concludes that recent globalization trends strengthen, rather than weaken, the general case for taxing U.S. citizens living abroad. Moreover, it concludes that these modern developments weaken the case for giving preferential treatment to income earned by citizens working abroad.

Tax, International tax, Citizen, Citizenship, Taxation, International, Jurisdiction, Expatriate, Globalization

Abstract:
This article questions the frequently-asserted axiom that Congress's taxing power knows no bounds. It does so in the context of recently-enacted legislation that creates a special definition of citizenship that applies only for tax purposes. Historically, a person was treated as a citizen for tax purposes (and therefore taxed on her worldwide income and estate) if, and only if, she was a citizen under the nationality law. As a result of the new statute, in certain circumstances a person might be treated as a citizen for tax purposes (and therefore taxed on her worldwide income and estate) for years or even decades after she is no longer a real citizen under the nationality law.

The analysis first looks at international law principles, concluding that in certain circumstances the new statute exceeds the prescriptive jurisdictional limits of customary international law. It then examines the constitutional implications, arguing that the statute, at least in certain circumstances, reflects a rare occasion where Congress might have exceeded its Article I taxing powers. Moreover, even to the extent the statute is within Congress's powers, certain aspects of it violate the due process limitations of the Fifth Amendment. These conclusions highlight the importance of Congress taking constitutional and international law considerations more seriously with respect to future legislation in the increasingly important area of international taxation.

Tax, international tax, customary international law, citizenship, nationality, expatriation, extraterritorial, prescriptive jurisdiction, due process, equal protection, Fifth Amendment, enumerated powers, treaties

Abstract:
During the past few years, several high-profile U.S.-based multinational corporations have changed their tax residence from the United States to Bermuda or some other tax haven. They have accomplished these expatriations, and the resulting millions of dollars of annual tax savings, merely by changing the place of incorporation of their corporate parent, without the need to make any substantive changes to their business operations or their U.S.-based management structure. Congress and the media have focused significant attention on this phenomenon. Despite this attention, Congress initially enacted only a non-tax provision targeting corporate expatriations - a purported ban on expatriated companies entering into contracts with the Department of Homeland Security. This Article addresses this alternative sanction, concluding that it is prototypical symbolic legislation, with no instrumental effect. The Article also discusses the extent to which the initial Congressional debate over expatriations may have had indirect instrumental effects by furthering the informal enforcement of social norms. Ultimately, after almost three years of debate, Congress enacted a tax provision intended to deny the desired tax benefits to expatriating corporations.

The Article also addresses the substantive tax policy implications of this response, concluding that it illustrates the tenuous normative underpinnings of the place-of-incorporation rule for determining corporate residence and the need for Congress to reconsider what makes a corporation American in an increasingly globalized world.

Tax, international tax, inversions, expatriation, symbolic legislation, social norms, multinational corporations

Abstract:
This Article addresses the increasingly important role of administrative guidance in interpreting the United States' international treaty obligations. The relationship between administrative guidance and treaties raises important issues at the intersection of international law, constitutional law, and administrative law.

These issues are explored in the context of the United States' extensive tax treaty network. Tax treaties play an important role in a global economy, attempting to reconcile the complex and ever-changing internal tax laws of different countries. The Treasury Department is considering the increased use of administrative guidance to interpret the meaning and application of tax treaties, particularly in response to the increasingly sophisticated business structures and cross-border transactions utilized by multinational corporations.

This Article considers the weight that courts should give to unilateral administrative guidance when interpreting tax treaties. The Article concludes that Treasury's traditional ad hoc approach based on informal technical explanations is entitled to little, if any, deference in interpreting previously negotiated bilateral agreements between sovereign nations. However, the Article identifies certain limited circumstances where formal Treasury regulations might enable the Treasury Department to influence the application of previously negotiated tax treaties without violating the United States' obligations under these treaties.

Tax, international tax, treaties, regulations, interpretation, Vienna Convention

Abstract:
On several occasions in the past decade, when confronted with taxpayers taking advantage of the Internal Revenue Code in ways that Congress considered objectionable, Congress responded in an unusual way. Rather than merely modifying the Internal Revenue Code to alter the tax consequences of the taxpayer's actions, or imposing traditional civil or criminal penalties on the taxpayer, Congress turned to alternative sanctions. For example, in response to United States citizens who renounce citizenship to avoid taxes, Congress enacted public shaming provisions that require publication of the individuals' names in the Federal Register and modified the federal immigration laws to banish the former citizens from re-entering the United States. Similarly, in response to United States corporations that reincorporate abroad to reduce United States tax liability, Congress enacted legislation purporting to ban the corporation from entering into future government contracts. This Article, relying primarily on the public shaming and immigration-law banishment provisions applicable to individuals who renounce citizenship to avoid taxes, analyzes the alternative sanctions from three perspectives: their instrumental effects, their expressive function in altering social norms, and their role as symbolic legislation. This Article concludes that alternative sanctions, when used to deter or condemn behavior for which the tax code provides a tax benefit, produce significant instrumental, expressive, and symbolic problems. This Article suggests a narrower role for alternative sanctions, as a limited tool of tax enforcement, that might avoid these problems.

tax, taxation, sanctions, alternative sanctions, immigration, shaming