Liberty and justice for all United States persons abroad

The Isaac Brock Society

1,795 thoughts on “Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions)”

  1. Hello Petros,

    Thank you for all your work on this topic.

    Concerning relinquishment, I cannot find a firm answer to the following question.
    Does relinquishment release me from FBAR/FATCA requirements?

    I found this:
    http://travel.state.gov/law/citizenship/citizenship_778.html
    LOSS OF NATIONALITY AND TAXATION
    P.L. 104-191 contains changes in the taxation of U.S. citizens who renounce or otherwise lose U.S. citizenship. In general, any person who lost U.S. citizenship within 10 years immediately preceding the close of the taxable year, whose principle purpose in losing citizenship was to avoid taxation, will be subject to continued taxation.

    I moved from the U.S. in 1976 and naturalised in my new country in 1990. I think I am protected, but would appreciate your opinion.

    Thank you.

  2. Take a look at Phil Hodgen’s blog under the recent “Expatriates failing the certification test …..” regarding renouncing versus relinquishing. k

  3. From Phil Hodgen’s blog, posted yesterday, March 19th:

    Phil,

    I offer the recent experience of a client with the Frankfurt Consulate to add to your collection of anecdotes:

    Client made contact to renounce and was sent a packet of clear and concise info with the usual standardized warnings. Made a renunciation appointment. Paid his fee.
    Was in and out in less than 30 minutes. No muss, no fuss, i.e. apart from a standardized warning to “do the right thing taxwise” there was no irrelevant questioning by State Dept. personnel concerning matters of no concern to them like motivation, past tax filing history, FBARs or Form 8854.

    I see no reason for the US to discourage expatriation of persons who are US citizens only by operation of law. It is a clear “win-win” for all concerned.

    Both the erstwhile “citizen” and the US government get rid of a useless burden.

    In the case of the citizen, they are relieved of the costs of complying with the nonsensical obligation to file tax returns and otherwise keep the US government informed about his/her financial comings and goings.

    In the case of the US Government they get rid of the obligation to process said tax returns which, even if duly filed usually produce nothing but processing costs or refundable credit payment obligations for the US; ditto for the idiotic FuBAR and other “gotcha” reporting requirements.

    These “citizens” are no loss to the US. They have no emotional attachments, few, if any, financial attachments and zero political loyalty to the USA.

    Plus, the US (i.e. the State Department) gets to pocket a $450 fee which because of the Congress’ blockheaded refusal to properly fund consular operations overseas they desperately need to pay their light bill among other things.

    So it’s no wonder the present policy concerning renunciation at State seems to be: “Pay your fee, get in line, 4 windows, no waiting”.

    The IRS’s “loss” is the State Department’s gain.

  4. hopelessly confused says:
    March 19, 2012 at 12:01 pm
    Mr. Hodgen

    I would be so grateful if you could answer this question. I would like to proceed with relinquishment of US citizenship (been in Canada for 58 years, 45 of those years as a Canadian citizen.)

    1) In the Notes on 26 USC Sec. 877, there is an exception regarding the exit tax – submitting Form 8854 will not be required ” if the individual establishes to the satisfaction of the Secretary of the Treasury that the individual’s loss of US citizenship occurred before Feb. 6, 1994″. In your opinion, will the IRS accept this and not require submission of form 8854 and/or back tax returns and FBAR’s once an individual has obtained a backdated CLN? A lot of people are depending on this clause, including possibly myself, and I find it worrying because –
    2) Nowhere in the instructions for form 8854 is this 1994 date mentioned and if indeed it is valid it would affect a lot of people.
    Links are:

    http://codes.lp.findlaw.com/uscode/26/A/1/N/II/A/877/notes
    Under Effective date of 1996 amendment – (3) special rule (B)

    http://www.unclefed.com/Tax-Bulls/1997/Not97-19.pdf
    Under Section X, Transition Provision , and

    http://www.gpo.gov/fdsys/pkg/USCODE-2010-title26/pdf/USCODE-2010-title26-subtitleA-chap1-subchapN-partII-subpartA-sec877A.pdf
    Page 1856 Under Effective date of 1996 amendment 511(g) (3)(B)

    Phil says
    Hello Hopelessly,

    I don’t have much guidance for you on this that I am willing to talk about publicly. (Blowback on current cases is the reason). I seem to remember that on the Isaac Brock Society site there were a couple of people who had experience with this.

    My suggestion is that if you possibly can go out the front door (Form 8854 etc.) you should do it.

    totally confused says:
    March 19, 2012 at 9:55 pm

    There are certainly people at Isaac Brock who have relinquished their citizenship and are pinning their hopes on this exception, but I don’t know of anyone who has actually had success in relinquishing, getting a CLN, and avoiding 8854 and the exit tax. As you know, the crux of relinquishing citizenship (as opposed to renouncing) is to have committed an expatriating act and not to have done anything since that time to indicate that you still consider yourself American – including filing tax returns. Why bother to have the relinquishing process on the table at all if, at the end of the road, the result is the exactly the same as renouncing, if not worse

    Phil says:
    March 19, 2012 at 10:52 pm
    One’s primary purpose is to terminate citizenship. Why take the hard way there, just to prove a point?

    For people where no exit tax will be triggered, I think the default method (Form 8854) should be followed. If presented with two alternative paths — a sidewalk or a dense jungle where you have only a blunt machete — why deliberately choose the more difficult one?

    In other words, I agree with you.

  5. The point of relinquishing citizenship is that you, the citizen decide unilaterally that you are no longer a citizen. You then may tell the state department to get a CLN, and file a 8854, if you still recognize the tax authority of the United States over you. But if you are no longer a citizen, what truck do you now have with the IRS. Only if you need to get assets out of the states.

  6. I’m not entirely sure what Phil Hogden means when he says “in other words, I agree with you.” Agree with what, exactly?

    Beyond that, here’s how I see this playing out — and I have no illusions here that there are any magic bullets to be fired. What follows is all my own surmise — and I’m not a lawyer.

    By applying for a CLN through relinquishment (my wife’s chosen route) you are telling the state department that you believe (never mind what they believe) that you ceased to be a US citizen on the day you “expatriated.” In our case that would be 1974. The goal is to get that CLN with a 1974 date on it (renouncing won’t give you that date).

    If successful, that 1974-dated CLN can be waved in front of a judge if necessary, or, more likely, can be shown to a bank manager who might (emphasize “might” at this point in time) be asking you questions about your citizenship status. It will stop him from sending any financial data to the IRS, or, worst case, telling you he’s closing your accounts. This, to me, is the main value of a back-dated CLN. I think DOS will issue it because if it does, the matter is concluded and out of its hands. If it doesn’t, then there’s the risk of a court challenge (highly unlikely, but still a risk) and there’s every likelihood that this person will front up again to formally renounce. I guess the $450 fee has some value to them, but I still think DOS will take the path of l;east resistance. I hope I’m not wrong.

    Now, will that back-dated CLN be recognized by the IRS? Frankly, I doubt it very much. They are on a witch hunt for every and any source of revenue they can explore. If they think they can bully you into giving them some money, they will go for your jugular. Hell, they salrrady had some tragic success using that technique. I fully expect my wife to begin getting a series of threatening letters, with increasingly vitriolic language in them, from the day she gets her CLN. The first of those letters will elicit a full, detailed response to the IRS telling the agency that it has no jurisdiction and to go away. I’ll construct some impressive legalese once I’ve researched it.

    The IRS will of course continue to send these ever-more-threatening missives regardless. But we won’t know what they contain because after the first one– which we answered — all subsequent correspondence will be sent back, unopened, by double-registered mail, to Doug Shulman (or whoever his replacement is). Possibly they’ll get tired of the game (we won’t, we’re retired!), but big bureaucracies sometimes take decades to get the message. We’ll take some comfort in the fact that in a small way, and at a relatively small cost to us, we will be adding to their office expenses — somebody has to sign for all the s**t we’re sending them.

    The only other issue, of course, is crossing the border. We’ve come to terms with that already, recognizing that the IRS will have us on a database readily available to customs and border. So no more trips south. The only real risk could come from being on a flight somewhere else that gets diverted to a US airport for who-knows what reason. That’s a gamble we’ll take I guess.

    As I said — no magic bullets in any of this. We are dealing with a rogue country that wants to bully anyone it can grasp with its tentacles and extract whatever tribute it can. There is no morality to their behaviour, never mind any legality. The best approach, in my opinion, is to work their system to YOUR best advantage, and do nothing more. Trying to bargain with the devil never ends well.

    Sorry — that went on a bit. Time on my hands today.

  7. Arrow The IRS won’t bother writing to you although i think you would love to fire an arrow in their direction.

  8. @ Arrow
    Sounds like a plan. I may join you.
    @Chester
    Why don’t you think the IRS will pursue you – unto the ends of the earth?

  10. Chester12: Remember that the IRS has always been ready to go the computer-generated route. Once they set it up in the computer, it will spit out letters ad nauseum until someone tells it to stop. And why would they tell it to stop?

    One of the little pieces of data my wife gave the consulate was her old US Social Security number. When DOS sends the CLN notification along to IRS, you can bet the SSN will be part of the file. It won’t take long to determine there’s been no tax return filed since 1969, feed that info in with a current address, and voila — let the games begin!

    Hijacked2012: Welcome aboard. Might be the voyage of the damned, though.

  11. It’s easier to be a prisoner on parole than to get rid of your US citizenship.

    They think we hate them for their freedoms?!?

    A vacation to North Korea sounds more fun than this.

  14. @Cornwall: The IRS Legal department may be looking at the law as it is now and thinking it applies back to Noah and the Ark. However, I am going with something posted by Petros on 16 December which shows that before 6 Feb 1994 there was no requirement for those relinquishing to provide any IRS specific forms including 8854. Trying to apply an amendment made in 1995 (with a “special rule” which backdated it to 1994 to a time before 6 Feb 1994 is making retroactive law and cannot be done.

    Take a look at
    http://isaacbrocksociety.com/2011/12/16/did-you-relinquish-before-february-6-1995-then-you-did-not-have-to-inform-the-state-department/#more-197

  15. Cornwall: Thanks for posting that. I just read a big chunk of it and it makes for chilling reading. Bottom line, the IRS (as an agent of the US government) is trying to apply a citizenship status on people long after they’ve lost or surrendered all citizenship benefits. It simply confirms what I have always believed — the IRS will never let you go — not even after you are dead.

    Johnbb: You have a valid point, but I fear that in order to build a bullet-proof case you would have had to apply for your CLN before 2006 when they introduced this new “tax citizenship” regime. By applying in 2012, you are applying under the terms of the new law. I’d like a lawyer to take a run at that …

    Regardless, it shows psychopathic intent on the part of the morally-bankrupt politicians down there who thought this was a fair and reasonable set of rules to impose. Just how much of this kind of extra-territorial legislative BS is the rest of the world going to tolerate?

  16. @Arrow: I’m not going to worry about the 2006 date as I think there is a difference between the CLN which is a piece of paper and expatriation which is the act. I expatriated in 1973 and there was no need even to have intent at that time (though I did) and there was no requirement to inform State or IRS so I relinquished my US citizenship in 1973 and I don’t think a 2006 law made in that country has much to do with me.
    Until I’m forced to spend money on a lawyer I’m sticking with that.

  17. Cornwall wrote:

    The IRS legal department informed me in October 2011 that the IRS does not consider US citizenship to be lost until a 8854 is filed. Period.
    The best explanation I have seen for why this is so can be found at the following website address. Of particular interest is the section that begins on page 383.

    The right of expatriation is recognized by both United States law and international law as a unilateral and fundamental right of the citizen. Let see if the IRS can ever make their rules stick. They cannot if (1) the person is in a foreign country with all their assets in a foreign jurisdiction; (2) the IRS has no other leverage such as access to the United States territory to hold over the ex-citizen. I.e., if the person never returns to the United States the IRS can do anything against the person. Even it the person did return, there is little the IRS can do without charging the person with a crime, which would enable the US to hold the person without bail.

    If the IRS tried to make a reluctant citizen face their wrath, the courts would have to determine if the exit tax were constitutional, and it is not constitutional, so I doubt that they’d want to face a court challenge.

    The reason it cannot be constitutional is that the right of expatriation is a FUNDAMENTAL right. Any obstacles place in front of a FUNDAMENTAL right are unconstitutional. Say you want to make Koreans pay a special tax at the polls during the presidential election. That is an obstacle to a FUNDAMENTAL right to vote. Therefore it cannot be constitutional. Neither can their be an exit tax because everyone has the right to expatriate guaranteed by the United States laws which are based upon the Constitution of the United States.

    See: http://isaacbrocksociety.com/2011/12/19/forget-about-form-8854-filing-last-5-years-of-tax-etc-usa-law-establishes-a-right-to-unilateral-expatriation/

  18. @All above
    I am not sure if this is pertinent to the above posts but it might be. I came across an article by a Virginia Law Firm – I believe the name is Flott. The article can be found at http://www.accidentaluscitizen.com/articles/ – In the article, on page 3, they give an example of ‘Joan’ who met and married John, a Canadian. She moved with him to Canada in 1980, became a Canadian citizen on July 4, 1985. She has done nothing since that date to negate her expatriating act. She hears in the press about the present situation. The article states ‘Though believing that she has not been a U.S. citizen since July 4, 1985, Joan also knows that she has done nothing formal to “exit” her U.S. citizenship’ Renouncing can only be done by a current U.S. citizen. What can Joan do? ‘She can seek formal recognition that she relinquished her U.S. citizenship on July 4, 1985, when she took the oath of Canadian citizenship. In other words, she could seek formal recognition of her expatriation and her status as a former U.S. citizen as of 1985, and thus not be liable for any penalty under new U.S. tax initiatives.’

    Now I did note that the article states she is not ‘liable for any penalty’. I am not sure whether that means she is not liable to file tax returns and other forms.

    Is this one more case of even the lawyers don’t agree with each other? The article was published on March 14, 2012 at the above site. It is worth a read as it goes into other situations where people are required to file U.S. forms. Also, talks about “Accidental American” and their obligations. Worth a read

  19. I’m no lawyer, but it seems clear to me that making renunciation of citizenship contingent upon anything would be a violation of the UN Universal Declaration of Human Rights.

    Pretty much every country in the world signed up to it, including Uncle Sam. But then again, we all know how much respect Uncle Sam has for treaties and conventions.

  20. See also http://expattaxandlaw.com/us-citizen-abroad.html. under USC Abroad Who Has Not Been Filing Tax Returns regarding expatriating before 1994.

    Who knows if this would work; who knows if it includes filing back taxes and FBAR’s, – who really knows anything. This expert says this, that expert says something else. I’m pretty much at the end of my rope with all this.

  21. I’ve received what I consider a promising reply to my email to the Executive Director of the Centre for Constitutional Studies at the U of A. She writes,
    “Thank you for your query. This is indeed an interesting and important question and one which I will be discussing with our summer students. Unfortunately we do not have the resources to take on a research project before the summer – our students will be working on research and writing beginning in May. If we are able to provide you with information over the course of the summer months we will certainly do so.”
    I’ve written back thanking her and saying I would be more than willing to provide additional information, or to find her more contacts and/or stories if need be.
    It’s a better response than I’d hoped for, and I knew we were too late for current term, so I’m actually pretty happy. Haven’t heard back from U of Toronto, yet, though.

  22. @hijacked 2012
    Interesting link above. But I agree with you – who do we believe. How can there be two different laws – one the State Department recognizes and another one for the IRS

  24. @Everyone
    This is a real “interesting” comment. So are the suggesting someone who reliquished in 1977 file a 1978 non resident return. Can you even find one of those.

    Individuals who performed an expatriating act before February 6, 1994 (effective date of new Exit Tax reporting regime) but did not obtain a Certificate of Loss of Nationality until after that date, may nevertheless escape from the Exit Tax regime if you file a Form 1040NR marked “Expatriation Return” for the year in which you obtain a Certificate of Loss of Citizenship and otherwise satisfy the IRS that the individual lost his citizenship before that date.

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