“Employees of Raytheon Polar Services are not working or employed in a ‘foreign country’ and therefore, do not qualify for federal income tax exclusions or deductions.” —RPSC Memo
“The ordinary meaning of ‘foreign country’ includes Antarctica, even though it has no recognized government.” —U.S. Supreme Court
For those who work outside the United States, the IRS permits a “foreign earned income exclusion” as long as the citizen was physically present in a “foreign country” for at least 330 days. This generally means that when U.S. citizens leave the comforts of home to work for a year in Russia or Japan or Canada or Iraq, they are deprived of the roads, libraries, tactical precision-bombers, and other proud luxuries purchased with the American tax dollar, and are thus exempt from paying taxes on income up to $80,000: a gift from Congress to those stupid enough to leave the bountiful homeland to work in low and filthy foreign places amongst godless heathens.
For years and years, decades in fact, Americans spending the winter at remote stations in Antarctica have claimed the foreign income exclusion, and for years and years the IRS has refunded their taxes. But something happened in 2002, some cubicled Rip Van Winkle awoke from a thousand-year nap, or some new species of handshake was bred from a discreet coupling between Utah and Washington, and a small but ambitious faction of IRS clerks blew a gasket. The IRS sent “income tax return adjustments” to everyone who had wintered in Antarctica during 2001. Though the IRS had already processed the returns and refunded people’s money, they now wanted all the money back, plus interest and “accuracy penalties” of over a thousand dollars each.
As one winter-over after another received the IRS letters, people began to look for reasons why some people got letters but others didn’t. Similar to the social effects in Albert Camus’ The Plague, some felt they would surely be protected because they went to a tax attorney, or bought the extra insurance at H & R Block, or filed early, or reported this or that mailing address from the hundreds of viable USAP mailing addresses. But as the numbers of unstruck winter-overs dwindled, a slow realization dawned that the letters were not isolated incidents regarding the particulars of this or that tax return: the IRS was coming after ice workers.
With the realization that everyone was now in the same boat, people began to discuss whether to pay or to fight. Six thousand dollars plus penalties was a lot of money to roll over for, people said, but on the other hand trying to battle the IRS sounded like a painful and long-term commitment. A few people paid. A few people began filing their own appeals. But mostly people sat on the fence, hoping something would happen to force a decision. Then when people began to receive letters not only from the 2001 tax year, but from 2000, then 1999 as well, the unintelligible moo of uncertainty was drowned out by the sound of pants being shit. Now, instead of six or seven thousand dollars, some people were looking at fifteen or twenty thousand dollars. This was what people had been waiting for. Some borrowed money from friends or family to pay the IRS, some signed up to pay by installment, and others, now with too much at stake not to argue the matter, set off dazed down the yellow brick road, a ragtag outfit emboldened by words of justice and thoughts of money to call class-action bullshit on the shifty Wizard of Ogden, Utah.
The increased stakes conveyed a seriousness of purpose from the IRS that they were, indeed, not fucking around. The black and white computer-generated IRS forms by their every nuance depict a simple, calculable reality where everything is known and nothing is questionable. A thick bundle of paperwork arrived with each letter, including Publication 594: “What You Should Know About The IRS Collection Process”. Publication 594 includes a simple flowchart for how your interaction with the agency will proceed, a kind of choose-your-own-adventure in tax collection. Beginning the adventure at the top of the flowchart is “You receive a tax bill in the mail.” From here you have two choices: the short, simple, and relaxing choice of “Pay the full amount now”, or the bullet-marked, messy, and work-ridden choice of gathering copies of the bill, tax returns, canceled checks, and “any records” before you head down to your local IRS office. Another IRS form helpfully reminds that simply paying what you are told not only decreases potential interest and penalties, but also “Eliminates further contact with us”.
The matter still stands. Most of the letters have been dispersed, and those who call the IRS directly are told to pay now or there will be trouble. Some who have had their appeals rejected are looking at payment options. But over a hundred other Antarcticans are geared up for a long-term battle in court, where the matter will ultimately be decided.
With this history out of the way, here are the main points of dispute that define the argument over Antarctic taxation:
Pro-Tax:
1. Everyone should pay taxes, even people who work in Antarctica.
2. The IRS states in Publication 54 that “Antarctic regions” are not a “foreign country”, thus those who work in Antarctica are not eligible for the foreign earned income exclusion.
Anti-Tax
1. Whatever the reasons for the foreign earned income exclusion, if the exemption includes any Americans who work abroad, it should also include Antarctica, because Antarctica is as abroad as it gets.
2. The U.S. Supreme Court states in Smith v. United States, 507 U.S. 197 (1993), that Antarctica is a “foreign country”, thus those who work in Antarctica are not convinced that the IRS position regarding Antarctica is consistent with federal law.
3. In numerous de facto ways, Antarctica is treated as a foreign country by the agencies that manage U.S. activities in Antarctica.
Discussion:
Item 1:
The first item brings emotion to the table, where people use words like “duty” or “fairness” or “justice”. Some people say that anyone who tries to avoid paying taxes is wrong from the get-go. Some say that taxes are no more legitimate than mafia extortion. Others say that if X avoids taxes, then it is just for Y to also avoid taxes. These issues will continue to be discussed long after the legal issue is settled.
Item 2:
The IRS has stated that Antarctica is not a “foreign country”. The Supreme Court has stated that Antarctica is a “foreign country”. Which agency holds more legal authority? This is the class-action question that will be answered in some backwater federal tax court.
Item 3:
It is easy for U.S. agencies (NSF, DOD, NASA), corporations (Raytheon, Holmes & Narver, Lockheed-Martin), and citizens (Bob, Paul, and Mary) to surmise that since they are all in league together, in the same place, at the same time, with the same passports, and knowing the same Creedence Clearwater Revival songs, that for daily purposes Antarctica is pretty much the United States, but with fewer TV channels. This assumption is convenient because it keeps us from lapsing into obscure Chinese dialects at crucial Operations meetings, and allows us to recall with fond homesickness the U.S. regulations regarding vehicle registration embodied by the variety of state license plates sentimentally affixed to the fleet of trucks in McMurdo.
In this regard, Bob and Paul and Mary might be comforted by the overwhelming American-ness of the American stations, with their American hamburgers, American machinery, and American paperwork, and thus in the course of a day are unlikely to imagine that any but American laws apply to them. However, American corporations and federal agencies take a more sophisticated approach: Antarctica is America sometimes, and sometimes it’s not, depending on who’s asking. If Bob or Paul or Mary are asking, then they are probably up to something, so the answer will be that Antarctica is 100% American as far as they need to know, so don’t try anything funny. But when the corporate accountant is asking, the question becomes more complicated, at which point the corporate lawyer arrives to do justice for the team, which might occasionally require that Antarctica is as far away from the United States as it looks on the map. And in those rare moments of consciousness when the federal government asks itself whether Antarctica is American for daily purposes, it sends an agonized impulse toward some distant authority, doesn’t hear back, and so makes a deal with itself not to ask or answer these kinds of questions in the future under threat of fines or imprisonment, then gets back to the daily business of playing the Antarctic fiddle from both sides.
There are many de facto ways in which the National Science Foundation, Raytheon Polar Services Company, and other involved agencies treat Antarctica as a foreign country, on a daily basis, and in the normal course of business. As these agencies typically shift responsibility to each other when considering information that has unwieldy consequences, the following points convey incidents or aspects that are relevant to the United States Antarctic Program, regardless of the sub-agency responsible:
Cigarettes sold to employees in Antarctica bear this seal: “U.S. Tax Exempt For Use Outside U.S.”
OSHA told employees who tried to file an incident report that Antarctica is not under OSHA jurisdiction.
In the winter of 2001, a Human Resources representative told a resident, “You have no rights down here.” While in practice this is true enough, NSF handbooks emphasize the responsibility of USAP applicants to U.S. law, suggesting also that the rights of U.S. law might accompany such responsibility, meaning that those working in Antarctica may be legally entitled to Constitutional Rights presently abridged. Whether the federal government eventually deems Antarctica a “foreign country” or “not a foreign country”, the current situation of full taxation without civil rights favors only the interests of the federal government and its contractors.
At American stations, expired food is served daily in the galley, as well as sold in the station store.
Raytheon has claimed that Antarctica is both a foreign country and that it is not a foreign country, according to its legal circumstances. In the employee packets that Antarctic workers receive from Raytheon at the beginning of each season is a proclamation that “Employees of Raytheon Polar Services are not working or employed in a foreign country and therefore, do not qualify for federal income tax exclusions or deductions.” (The IRS claims that merely receiving this document illustrates a binding agreement on the part of the employee.) Meanwhile, a group of Antarctic workers has filed suit against Raytheon charging that because all employees in Antarctica work overtime (at least six days a week) without receiving overtime pay, Raytheon is violating the Fair Labor Standards Act, a federal law. To refute the charge, Raytheon has argued that “the Plaintiffs and other similarly situated employees are exempt pursuant to 29 U.S.C. §213(f) of the [Fair Labor Standards Act] because Antarctica is a ‘foreign country’ within the meaning of the statute.”
Thus:
“Employees of Raytheon Polar Services are not working or employed
in a foreign country…” —Raytheon
“Antarctica is a ‘foreign country’…” —Raytheon
For more on this subject, read The IRS vs. Antarctica.
