See also: Please read this post if your actual expatriation date is before 2004 (Updated)
The blog post on ex post facto stirred up a flurry of e-mails between members of the society. It switched on a light bulb for some that the State Department and the IRS were trying to pull a fast one, and that those who were following rules at the time of their relinquishment were not required to follow the new rules.
According to the instructions for 8854, and USC 26 section 877, the date of expatriation is as follows (US Code at Cornell University):
(4)Relinquishment of citizenship
A citizen shall be treated as relinquishing his United States citizenship on the earliest of—
(A) the date the individual renounces his United States nationality before a diplomatic or consular officer of the United States pursuant to paragraph (5) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
(B) the date the individual furnishes to the United States Department of State a signed statement of voluntary relinquishment of United States nationality confirming the performance of an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C.1481(a)(1)–(4)),
(C) the date the United States Department of State issues to the individual a certificate of loss of nationality, or
(D) the date a court of the United States cancels a naturalized citizen’s certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual unless the renunciation or voluntary relinquishment is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the United States Department of State.
Now this is all well and good, namely with regard to item (B) above, which states that the expatriation date is the day that a person informs the State Department. But the question remains when did this law actually come into effect; for it cannot be applied ex post facto to those who committed an expatriating act before that date. One of the members of the Isaac Brock Society tracked it down: The answer is that if you relinquished your US citizenship before February 6, 1995, you were not required to have informed the State Department. My correspondent thus wrote to me (reproduced with permission):
As it turns out, the timeline of important amendments and changes to Section 877 of the Internal Revenue Code (26 USC) dealing with Loss of Nationality begins much earlier than the June 2, 2004 amendment which introduced the infamous IRS Form 8854. For our purposes (meaning those who committed relinquishing acts in the 60’s, 70’s and early 80’s), the truly significant date vis-a-vis the IRS is actually February 6, 1994, as referenced in the 1996 Amendment – the most important one for us to understand, I believe. In a nutshell, those of us who committed qualifying relinquishing acts before February 6, 1994 are absolutely NOT subject to amendments made after this date under the terms of a “special rule”. As a result, it appears that we have no requirement to provide any IRS-specific forms or statements to the IRS, including form 8854! It would appear that a simple notification letter from us (notarized and duplicated, I would suggest) indicating that the Department of State has processed and issued a CLN showing a relinquishment date prior to February 6, 1994 should suffice. This seems to be the means by which a back-dated CLN issued by State could be used to provide sufficient information to the IRS to not require any further action. Of course, while State eventually provides its own direct notification to the IRS, I think it is important that we provide a “good faith” letter as well.
I have found some important references to this date, within FindLaw notes and in the official IRS Code. I am providing links and screen shots to relevant portions of these references, as follows:
1. FindLaw notes for 1996 Amendment:
http://codes.lp.findlaw.com/uscode/26/A/1/N/II/A/877/notes
[I have bolded the most relevant text]
EFFECTIVE DATE OF 1996 AMENDMENT
Section 511(g) of Pub. L. 104-191 provided that:
“(1) In general. – The amendments made by this section [amending this section and sections 2107 and 2501 of this title] shall apply to –
“(A) individuals losing United States citizenship (within the meaning of section 877 of the Internal Revenue Code of 1986) on or after February 6, 1995, and “(B) long-term residents of the United States with respect to whom an event described in subparagraph (A) or (B) of section 877(e)(1) of such Code occurs on or after February 6, 1995. “(2) Ruling requests. – In no event shall the 1-year period referred to in section 877(c)(1)(B) of such Code, as amended by this section, expire before the date which is 90 days after the date of the enactment of this Act [Aug. 21, 1996].
“(3) Special rule. –
“(A) In general. – In the case of an individual who performed an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)-(4)) before February 6, 1995, but who did not, on or before such date, furnish to the United States Department of State a signed statement of voluntary relinquishment of United States nationality confirming the performance of such act, the amendments made by this section and section 512 [enacting section 6039F of this title] shall apply to such individual except that the 10-year period described in section 877(a) of such Code shall not expire before the end of the 10-year period beginning on the date such statement is so furnished.
“(B) Exception. – Subparagraph (A) shall not apply if the individual establishes to the satisfaction of the Secretary of the Treasury that such loss of United States citizenship occurred before February 6, 1994.”
Amendment by Pub. L. 104-188 applicable to taxable years beginning after Dec. 31, 1999, with retention of certain transition rules, see section 1401(c) of Pub. L. 104-188, set out as a note under section 402 of this title.
2. Another FindLaw reference:
The FindLaw reference is here (though the majority of the article is out-of-date as it was written in 1999):
http://library.findlaw.com/1999/Jun/1/129807.html
QUOTE: A special transition rule applies to any U.S. citizen who committed an expatriation act before February 6, 1995 and who did not submit such a statement.
3. Extracts from IRS Code Title 26, Section 6039G – Information on individuals losing United States citizenship:
pacifica777 –
I know that IRS is contending officially that 877A applies even if a person relinquished before HIPAA (1994) and that has not yet been challenged in court.
Interesting. Can you provide any citation to the source(s) of what you know?
No. I just realised (on reading your comment) that I’m not aware of an official statement. Thanks for pointing that out! I think I’ll go back and revise that sentence for better accuracy.
I do know it hasn’t been challenged in court, though.
I guess my thinking got mixed up as I was writing that Michael Miller has reported to Brock that he’s heard off-the-record, therefore “unofficially,” from IRS employees that IRS isn’t interested in the pre-1994s. But officially, I’m not aware of IRS issuing any statement either way.
Phil Hodgen’s opinion is: “This means that you will get your Certificate of Loss of Nationality backdated to 1979, but from the IRS point of view they will take 2012 as your expatriation date,”
At one point Phil said he was going to do a blog article on this matter, and as I mentioned in another comment, Michael Miller has an article coming out soon, and I’ll be interested to read the bases for their differing points of view.
I figure that since the IRS (and the entire U.S. Government, for that matter) has never made a single attempt to contact me in all the 43 years I’ve lived in Canada then they can hardly expect any greater effort from me. While Steven Mopsick annoys me about many things, I take his advice on this particular matter to heart: a long-ago relinquisher would be most foolish to enter the den of the sleeping bear.
I will deal with State for my CLN, but that is as far as I intend to go.
More information about my consult with three lawyers. I am not comfortable posting their names without their permission. I can tell you how I found them though.
One lawyer is quoted on this site. I contacted him for a personal consultation and gave him the details of my case. The lawyer is very conversant with the issues related to relinquishment vs renunciation and the changes in tax law over time. We spoke about risk, and that the issues for relinquishers are like a double low probability combination. If I wanted certainty, the lawyer could, if I wanted to spend between $5-10,000 go forward to get an opinion letter from IRS. If I did that the first consult they would have with IRS would be on a no names basis, to ask questions about whether or not IRS would issue an opinion letter (or something to that effect, they are my lay person words). While I would like to do this, so that there could be something in writing from IRS on this matter, I really don’t have that kind of money to spend. However, going this route would give the ‘certainty’ that we are all seeking about the issues of concern related to the need to contact IRS after relinquishing.
The second lawyer was referred to me by an accounting firm here in Victoria BC where I live. When I took my elderly mom, who is a US citizen and landed immigrant to the accountant, they asked me about my own status. I later had a consult with them about my own affairs, no notes taken during the meeting. They will not take on clients in situations like mine unless the client has consulted with a tax lawyer. The law firm they recommended is in Seattle. The lawyer I spoke with in Seattle is one of the owners of the firm and she is dealing with people from all sorts of nationalities around the world on the issues discussed on this forum. She is the one who said the changes and differences between the state department and IRS differences in the date of determination of reliquishment are a legal theory matter. She essentially said the same thing as the first lawyer – I have a good case for relinquishment, and there should be no need to contact IRS.
The third lawyer is someone in Calgary. I googled to find someone who had spoken about FATCA and was a tax lawyer. Their advice during my initial consult was that I did need to clear taxes, and needed to file for 5 years etc. Upon later reflection, I came to appreciate that their advice was based on a ‘literal’ interpretation of existing law/regulations as they are written. While they acknowledged the evolution of these laws, they did not support my arguement that I had no obligation to the US on tax matters after becoming a Canadian citizen in 1985. It was their office that called me yesterday to say they had done further investigation on the matter, and that all I needed to do was to file for a CLN. They also told me the appointment process I used to book my appointment in Calgary was the wrong process. (Calgary and Vancouver use different processes for booking for relinquishment appointments – I have posted elsewhere on this site about these differences). I did not take detailed notes during the conversation, but I recall them saying they had talked to someone at IRS about the matter. Given they they have changed their advice to me, I am quite happy to go back and to confirm whether this was based on a conversation with IRS or something else. This law firm has several people who for years had worked with IRS.
So…if one had the resources, it seems that getting a good lawyer to go the route suggested by the first lawyer, that is getting an opinion letter from IRS, or at least a consult on a no-names basis, might be the way to go. However, I am not sure you’d get IRS to put something in writing.
So, given the 3 + hours of conversations I have now had with 3 lawyers, I am very comfortable in understanding that the form for advising on the consequence of relinquishment/renunciaton is something that did not take into account the fact that so many people technically relinquished long ago – and are now only realizing that documentation of this reliquishment is something that is needed.
Hope this helps.
@ Deckard,
I agree with you, common sense and low-hanging fruit versus high-hanging fruit when it comes to the sleeping bear.
The whole thing’s absurd, even the CLN application is enough hassle.
Lagoon: Why did they say you used the wrong process to book your appointment? Sorry – I cant find the reference to it here.
@Lagoon,
Thanks so much for your post re the opinions of the different lawyers. The info seems to definitely agree with the two lawyers who posted on this site, as I am a long ago relinguisher(1072), it is good to have additional confirmation.
@Woofy
My comments for this are over in the Consulate Report Directory Thread. In short, the Vancouver consulate said to book online… I did that for an appointment in Calgary, and was just advised on Friday that I have to email the Calgary consulate to book an appointment. So, two different processes are being used, and no information about how to book an appointment for relinquishment is posted on the consulates webpages.
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Thanks very much for sharing this, Lagoon!
There’s a lot there, so I created a new post for it: Pre-1995 Relinquishers: Three Recent Legal Opinions.
Thanks Lagoon! And here’s a question for general discussion: Many here will have obtained a CLN and hence be officially single Canadian citizens. But, and I am no lawyer, as I read the FATCA rules one of the US “indicia” that will be used by the banks for FATCA compliance is a US place of birth. Having a CLN does not change that, and I see no mention of a rule for those having a CLN AND a US place of birth. Looks to me like an oversight, but those peeps will be defined ubdeer the rules a a “US PERSON” and still fall under FATCA and maybe have their accounts closed along with other bad things.
I did the same thing as Woofy. My expatriating Canadian citizenship occurred in October 1979. With my American income tax declaration for 1979 filed in Spring 1980, I also included a letter saying I had become a Canadian citizen and would no longer file. The only feedback I got from them was a notice that I had made an error in my calculations of $97. I sent them a cheque, they sent me a thank you receipt and that’s the last I heard from them.
Too bad I didn ‘t make a copy of the letter.
Wouls IRS still have it in their files?
Woofy. You are happily mistaken. Firstly , the bank won’t know place of birth. Secondly, there are provisions in the proposed regs and IGAs (which merely regurgitate the US regs) to negate the effects of a US birth place with a CLN or other adequate explanation.
“(C) U.S. place of birth–(1) Accounts opened on or after January 1, 2013. For accounts opened on or after January 1, 2013, a withholding agent has reason to know that a withholding certificate provided by an individual payee or beneficial owner is unreliable or incorrect if the withholding agent has, either on accompanying documentation or as part of its account information, a place of birth for the payee in the United States. A withholding agent may treat the individual payee as a foreign person, notwithstanding the U.S. birth place, if the withholding agent has no knowledge that the individual has any other U.S. indicia described in this paragraph (e) and the withholding agent obtains a copy of the individual’s Certificate of Loss of Nationality of the United States or Form I-407, Abandonment of Lawful Permanent Residence Status. A withholding agent may also treat the individual payee as a foreign person, notwithstanding the U.S. birth place, if the withholding agent obtains a non-U.S. passport or other government-issued identification evidence of citizenship in a country other than the United States and either a copy of the individual’s Certificate of Loss of Nationality of the United States or Form I-407, or a reasonable explanation of the account holder’s renunciation of U.S. citizenship or the reason the account holder did not obtain U.S. citizenship at birth. “
usxcanada, you asked pacifica777 for a source for the statement :
“I know that IRS is contending officially that 877A applies even if a person relinquished before HIPAA (1994) and that has not yet been challenged in court.”
There’s this document at the IRS web site that provides a source:
http://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax
It contains this paragraph, which does seem to claim that Form 8854 must be filed even by people who “renounced” (note, not “relinquished”) on or before June 3, 2004:
“The expatriation tax applies to the 10-year period following the date of the expatriation action. Individuals that renounced their US citizenship and long-term residents that terminated their US residency for tax purposes on or before June 3, 2004 must file an initial Form 8854, Initial and Annual Expatriation Information Statement. For more detailed information refer to Expatriation Tax in Publication 519, U.S. Tax Guide for Aliens.”
AnonAnon, usxcanada &pacifica777
Looking through Publication 519, I found the following:
Expatriation Tax in Publication 519, U.S. Tax Guide for Aliens. (page 23)
Expatriation Before
June 4, 2004
If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U.S. taxes. Unless you received a ruling from the IRS that you did not expatriate to avoid U.S. taxes you are presumed to have tax avoidance as a principal purpose if:
1. Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or
2. Your net worth on the date of your action $500,000 or more.
The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table
4-1)
Now, I believe this question is of concern mainly to those on this site who relinquished long ago. In that case I would say it is highly likely that most did not come close to the reporting thresholds described ($100,000 in ave. tax for 5 years or $500,000 N/W) at the time of their relinquishment. I certianly know in my case, I had not learned how to dream of those amounts at the time of my expatriation in the 1970s.
@Only a Canadian…The Foreign investors tax act of 1966 (effective 1/1/67) started the 10 year rule. It was seldom enforced and lawyers always found ways around it. It was also subjective since they didn’t really define threshold amount of what constituted expatriating for tax purposes.
HIPPA went effective 2/5/95. The only real difference from before was 1) form 8854 was required if you expatriated for tax purposes. It’s not clear if it is required if you didn’t expatriate for tax purposes since the website says(http://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax#_Expatriation_On_or_Before June 3, 2_1): Individuals that renounced their US citizenship or terminated their long-term resident status for tax purposes on or before June 3, 2004 must file a Form 8854 to comply with the notification requirements under IRC 877 and 877A. 2)the threshold amounts were made objective and adjusted for inflation.
After AJCA of 2004, people who did an expatriating act on or after 6/4/2004 or after had to tell the consulate and file 8854 before they were out of the system.
After HEART of 2008, you had to to also tell the consulate you were out of the system to make it effective, but you didn’t have to file 8854 to get out insofar as future liability is concerned. But you were/are subject to penalties if you don’t file 8854.
Actually, the date of the HIPPA laws was retroactively applied to Feb 5, 1994. They made a transition provision. If you relinquished between 2/5/94 and 2/5/95 AND informed the consulate/embassy, you didn’t have to fill out 8854 and 1040NR if you’re rich for 10 years. If you informed the consulate/embassy after 2/5/95 that you relinquished, you got the 8854 and 1040NR 10 year rule on you if you’re rich (i.e. expatriated for tax purposes).
Very confusing as to the dates.
IF the IRS says the only significant date for them is the date the ex-citizen notified DOS, wouldn’t they be applying 2013 as the date for those obtaining their CLN this year? Then, according to their cutoff dates, it is 2008 and after that would apply ( in their twisted mind ) for determining filing obligations.
I am really glad that Lagoon posted those lawyers’ opinions, since a first reading of the docs is so confusing.
Incidentally, 7 FAM 1220 indicates that the refusal to submit a DS-4081does not mean the CLN will be refused ( though I don’t think I’ll bring that up at my appointment ).
Duke of Devon, Hi!
You posted a very interesting answer to Woofy about the criteria a withholding agent could use to consider a US born person as foreign.
A withholding agent may also treat the individual payee as a foreign person, notwithstanding the U.S. birth place, if the withholding agent obtains a non-U.S. passport or other government-issued identification evidence of citizenship in a country other than the United States and either a copy of the individual’s Certificate of Loss of Nationality of the United States or Form I-407, or a reasonable explanation of the account holder’s renunciation of U.S. citizenship or the reason the account holder did not obtain U.S. citizenship at birth. “
I’m thinking of old relinquishers who are likely to be unaware of FATCA until a bank gives them trouble…it sounds to me that presenting the same data to the bank as one would to the Consulate for a CLN might allow them to be classified as foreign without having a CLN. That would seem to me a reasonable explanation in the sense of the doc you cited. Could also present them with the state department’s 7 FAM 1220 that says the date of loss of nationality is the date of the expatriating act.
As to the banks not knowing your birth place, wouldn’t an IGA allow CRA to tell the banks to gather that info? Seems to be what is happening in Switzerland.
Old Worrier. No the CRA will not tell Canadian banks to ask for place of birth. Read the UK IGA. What the banks will ask for, when opening new accounts, is citizenship. Someone who relinquished years ago can honestly answer ‘Canadian’ Period. Full stop. Bob’s your uncle. No need for CLN or anything else. The banks are not going to be a problem. The border may be.
Duke, Hi again!
Not so worried about my case. But for those that might come up against FATCA at the last moment when there may be long waiting lists for CLNs (especially Quebec francophones who are hearing zero in their media), it might be nice to know they could handle the situation without a CLN. The text you posted would seem to indicate that possible. Thanks for putting it up. You seem to be doing a lot of phenomenal work getting information of this process.
@Old&Simple—Informing the consulate was part of the transition provision in 94-95 as regarding HIPPA rules. If you informed the consulate before 2/5/95 that you relinquished after 2/5/94, you got out of the 10 year rule.
Anyone who did a relinquishing act before 2/5/94 didn’t have to inform the consulate at all and be subject to the 10 year rule (other than the very vague and rarely practiced FITA provision which didn’t have definitions of being wealthy back then)
For all practical purposes, anyone who relinquishes 2/4/94 – 6/3/2004 has an expatriation date the recognized as the date of the naturalization or oath (e.g.relinquishing act). They are subject to the 10 year rules if they are rich from the date of the relinquishing act and subject to 6039F reporting (8854). 6039F (8854 form) is unclear if it is required now. They said originally it was required if you expatriated, but the IRS says on their website today that it is required “if you expatriated for tax purposes”
From 6/4/2004 onwards, you had to inform the consulate of your act before the IRS recognized the expatriation and they only recognize it from the date you informed the consulate.
I have finally received a response from the US Embassy in Merida. The contact says that all my documents that I have gathered “should” be sufficient, with no further clarification. And that “the determination of a loss of citizenship is made by the Department in Washington, D.C., so while we can gather all the information during your appointment, the determination will come at some point afterward.”
Sounds good,, except a question: In scheduling an appointment, it asks for my citizenship and passport number. It just doesnt feel right putting US citizen, it really doesnt. However, I guess I will indicate that to speed up the process? Surely there cant be any risk in doing so, Right?
@msd,
Glad to hear you’ve heard back from the embassy and are closer to the finish line!
I don’t know why one or the other (US or Canadian) would speed up or delay the process at Merida. Do you know why it might? At any rate, with the online booking system here, where it asked for citizenship I put Canadian and it didn’t cause any delay. I answered that question with what I believed, as that was the truth I was seeking to have recognised. I didn’t consider putting anything except Canadian because I refused to acknowledge any other citizenship.
@msd,
I totally agree with pacifica. You are trying to prove that you are NOT a U.S. citizen – that you ‘relinquished’ that citizenship and only got a U.S. passport because you were pressured into it. I think one of the RISKIEST things you could do at this point would be to put down your U.S. passport number and/or U.S. citizenship.
When I booked my appointment in Vancouver, using the online site, I wrote that I was a Canadian and put down my Canadian passport number. Of course, I never had a U.S. passport but I really do believe you would be telling them that you still think of yourself as an American.