In Uncategorized on 04/02/2014 at 16:50

Or, in high-school French, beat it, Franco-American taxpayers, some of your French social security taxes ain’t deductible or creditable.

Remember James Cecil & Anne-Marie Swank? No? Then see my blogpost “Don’t Sweat the Small Stuff”, 8/7/13. Jim and Anne-Marie were scrapping with IRS in a small-claimer over the creditability of the French la contribution sociale généralisée (general social contribution or CSG) and la contribution pour le remboursement de la dette sociale (contribution for the repayment of social debt or CRDS). But STJ Armen, the Judge With a Heart, sent Jim and Anne-Marie to cool their heels while IRS fought out their battle in a fully-briefed full-dress Tax Court T. C., because small-claimers aren’t precedential and can’t be appealed.

Well, Jim and Anne-Marie get their questions answered, and I’ll wager they’re no happier with Judge Lauber’s answer than the stars of the T. C. STJ Armen was talking about, Ory Eshel and Linda Coryell Eshel, 142 T. C. 11, filed 4/2/14.

If CSG and CRDS are taxes that would exempt Ory and Jim and Anne-Marie and Linda from paying US FICA or SE, then they’re not creditable under Section 901 because “section 317(b)(4) of the Social Security Amendments of 1977 (SSA), Pub. L. No. 95-216, 91 Stat. at 1540, nevertheless precludes credits for these taxes.” 142 T. C. 11, at p. 3.

Taking a leaf from Richard Wagner’s Die Meistersinger von Nurnberg, Act III, Scene V, you may ask “Mein! Was ist das?”

It’s the totalization agreement. No, it’s got nothing to do with pari-mutuel betting. It’s a US-France treaty that prevents double taxation for social security-type purposes and credits people who work for a time in each country, so they get full benefits. For an example of how totalization works, see 142 T. C. 11, at p. 11, footnote 3.

But experts aren’t in agreement that CSG and CRDS are social security taxes (not creditable) and not income taxes (creditable).

Judge Lauber: “The parties agree on all questions of basic fact and have expressed that consensus by filing cross-motions for summary judgment. The parties disagree on one point that may be relevant in interpreting the international agreement at issue–namely, how the French Government, at various times, has characterized CSG and CRDS for purposes of EU law and internal French law….. We conclude that this disagreement does not give rise to a material factual dispute that would prevent the Court from deciding this case on summary judgment.

“Under Rule 146, this Court’s determination of foreign law ‘shall be treated as a ruling on a question of law.’ As a result, disputes about the proper interpretation or characterization of a foreign law are not disputes of material fact that preclude summary judgment.” 142 T. C. 11, at pp. 5-6 (Footnote omitted).

It doesn’t matter how the French interpreted the laws, the European Court of Justice bounced them on their interpretations. Since the statutes creating CSG and CRDS were enacted post-totalization, the question is whether they “amend or supplement” the French social security system. If they do, then the Social Security Act precludes a credit for them against US income tax, as FICA and SE aren’t excluded from US income tax.

And Judge Lauber finds that, notwithstanding French waffling on the terms of the totalization agreement post-ratification (by which the US isn’t bound), the revenue from the taxes go to pay for shortfalls in French social security.

And that’s enough. No credit.

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