Expats Live in Fear of Malevolent Time Machine
Of relevance is the following:
It should be self-evident, however, that such a result is absurd, and cannot have been intended.
Congress cannot possibly have meant to treat individuals who had long since relinquished their U.S. citizenship, and whose expatriations had always been respected for federal tax purposes, as if they had been citizens all along.
Undoubtedly, Code Sec. 877A was meant to apply solely to individuals that, on (or after) the date of enactment, were otherwise treated as citizens (or long-term residents) for federal tax purposes.
Any individual who took all steps required to successfully terminate citizenship for federal tax purposes, under the tax laws as in effect immediately prior to enactment of the 2008 Act, would not again need to relinquish U.S. citizenship and thus could not be within the intended scope of Code Sec 877A(g)(4).
Unfortunately, there is some evidence that the Treasury Department DID in fact intend for this to occur. Now that might not necessarily have been the intent of Congress(And I think Congress as body would be quite hostile to this intent). However, the actual legislative text was heavily influenced by Treasury. I will post more later
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Thanks so much, Michael, and co-author Ellen Brody! I just gave it a quick read — I’m going to print it out and really read it thoroughly. It means so much to long-ago relinquishers like myself trying to get a handle on this weirdness! I’ve put the link to it in introductory section of the Consulate Report Directory.
Dear Pacifica and others – You’re more than welcome! I hope the article (along with the American Bar Association report I’m drafting, which will be quite a bit similar) will do some good. And, in any case, at least you know someone cares and, in the highly unlikely event of an IRS person raising the argument, will have something you can present to that agent in your defense, assuming your loss of citizenship occurred before the magic date in 2004.
Dear Tim — Can you elaborate on why you believe Treasury may intend a different result? I’m quite skeptical.
@Michael
It goes back to an old JCT report from 1995. Unfortionately I only have a copy in image based pdf so I can’t copy and paste the relevant passage. Basically it was a series of letters back and forth from Treasury to the chief of staff of JCT. This was in the lead up to the 1996 expatriation law as part of HIPAA.
Basically at the time Treasury was proposing a “mark to market” tax similar to what was later imposed in 2008. (Congress at that time decided to instead strengthen the existing 1966 amendments as part of HIPAA law). According to what Treasury told the JCT their proposed mark to market exit tax law would retroactively re-instate “tax” citizenship to all those who had previously relinquished but not given notice to the Secretary of State. This was very much a concern of the JCT and in fact the JCT appeared to be incredulous that Treasury was proposing to do this. None of this came to pass as Congress at that time went in a different direction of strengthening the old 1966 tax structure. However, I guess the question how much should the 2008 law be interpreted through the original 1996 mark to market proposal. My guess is the courts would rule that as a matter of law the 2008 statute has nothing to do with Treasury’s 1996 proposed law.
I will try to link the very long JCT report that I found all this in later this evening. There is also a JCT report for the HEART Act(2008) but I don’t think there is much of relevance in it.
Tim — Thanks for answering. I don’t think I’m worried about some crazy proposal from 1995 causing the 2008 legislation to be interpreted to reinstate citizenship. Of course, I’d be curious to see it, but I can’t say that worries me.
The whole report was an absolute monster. It was like a thousand pages of scanned in unsearchable pdf. I bring it up many as a legal “viewpoint” of how Treasury’s lawyers might interpret the statute. That does mean at all in my view that a court would view this old JCT report as somehow a signal a view of Congressional intent in enacting the 2008 law.
I also know one of the Treasury lawyers involved in the 1995-1996 expatriations law debates who is now a law professor at Notre Dame largely agrees with your position. In fact he published a paper on this issue you may want to read. Linked below
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=785425
Kirsch actually looks at it from a going forward perspective of someone committing a relinquishing act in the present day but then not giving notification to the Secretary of State.
Thank you for this well written paper. What could a US citizen who is subsequently naturalized (but thereafter continues to use her US passport/file US returns thereby evidencing no present intention when naturalized in Canada to give up her US citizenship) subsequently do to effectively renounce beyond going through the process of renouncing before a Consulate? For example, being elected as a government official in Canada; cease using her US passport; etc? My question is whether there is a practical mechanism to, by action, give up US citizenship and bypass the Embassy and exit tax related issues.
@ Steve,
Unfortunately, it’s not possible to bypass the embassy (or a consulate) because in order to have the US recognise the relinquishment of citizenship, one must apply for a Certificate of Loss of Nationality even if the relinquishment is not done by formal renunciation.
All relinquishments are done under s. 349(a) of the Immigration and Nationalities Act. Renunciation (formal oath made at a consulate) (349(a)(5)) is the only means of relinquishment where the relinquishing act itself takes place at an embassy or consulate.
However, for all other forms of relinquishment, although the relinquishing act has already taken place, you must notify the US govt of it by attending at an embassy or consulate and completing the prescribed application forms for a Certificate of Loss of Nationality.
To cease using a US passport is not in itself an act of relinquishment. It can be used as evidence of a relinquishment – eg, person relinquished by naturalising with intent to relinquish (349(a)(1)) and stopped using their US passport as of that date. The other example you give, being elected as a govt official in Canada, with intent to relinquish, would be an act of relinquishment under 349(a)(4). Other government posts are also in that subsection, and sub (3) deals with serving in the military as a potentially relinquishing act.
Here’s a link to a Brock post that may have some information on this topic. Also check out the posts near the top of the sidebar on renunciation, relinquishment, consulate reports.
Michael Miller
Again, thanks so much for your work on this. Your paper brings me as close as I’m ever likely to get to understanding the history of this issue and how present law should not affect people who effectively lost citizenship decades ago. I now have a CLN stating that I haven’t been an American citizen since the late 1960’s and that will have to suffice. Thanks to people like you and of course the Brockers, I don’t lose too much sleep over the issue anymore.
Steve Claus — I’m only a tax lawyer, and don’t have expertise in the immigration laws, but I would be concerned about whether using the US passport or filing US returns would adversely affect the position that you ceased being a US citizen. I would urge you to consult someone who’s qualified to advise on immigration matters.
Thanks for this wonderfully clear paper. It would seem only fair to follow the law as it was at the time the relinquishment/renunciation took place. Otherwise, no one would ever have protection of any kind and effectively, would result in Americans never being able to cease being citizens. It IS supposed to be a democracy “with liberty and justice for all,” eh?
Steve Klaus – again, I’m no expert on these things, but continuing to use a US passport and file US tax returns will almost certainly mean that you couldn’t relinquish; you would have to renounce. By doing these things, the US government takes the view that you didn’t intend to relinquish your citizenshp so you are effectively a dual citizen.
There is no way to avoid an embassy visit/s. You must go through either a relinquishment or renunciation procedure to obtain a Certificate of Loss of Nationality which is the only way to formally tell the US government that you are no longer a US citizen. Also note that even if you relinquish/renounce it does not relieve you of any outstanding US tax obligations.
Michael, thanks for your essay on the issue. Question: Do you think a Private Letter Ruling would eliminate doubt, or would someone have to challenge it in court if the issue ever came/comes up?
@Steve Klaus, Medea wrote:
The language sometimes slips in these comment streams. It is normal. However the sentence would be more accurate as such: “again, I’m no expert on these things, but continuing to use a US passport and file US tax returns after becoming a citizen of another country will almost certainly be interpreted by the State Department as meaning that you didn’t have an intention to relinquish your US citizenship.” Please see: When relinquishing, actions speak louder than words.
This is the issue: When you go into the consulate to renounce, you renounce by making an oath before a Consular officer. That is the only way to relinquish at a Consulate, through renunciation. Otherwise, the other potentially relinquishing acts never occur at the Consulate but at a Canadian citizenship ceremony or in a non-US government building (when a person takes an oath of loyalty), etc. The purpose of making a Consulate appointment is so that you can inform a Consular Officer in writing that you committed a potentially relinquishing act with the intention of losing US citizenship–not to relinquish, but to inform them that you have indeed relinquished US citizenship. You are de facto and de jure not a US citizen from the moment you commit the relinquishing act with the intention of losing your US citizenship–and this is the case whether the State Department recognizes it or not–it is an Universal Human Right enshrined in the Universal Declaration of Human Rights to be able to change your nationality.
“It should be self-evident, however, that such a result is absurd, and cannot have been intended.”
Unfortunately, absurdity-creation is what the U.S. Government does best, starting with the granddaddy of them all – citizenship-based taxation – which then begat FBAR, OVDI, OVDP, FATCA, IGA and the rest of the alphabet soup of total absurdity that’s been served to us in recent years.
FATCA = Fantastically Absurd Treatment of Citizens Abroad
I wonder if defecating in a US passport (or using several of its pages as sheets of toilet paper) inside one of the Embassy WCs would qualify as “relinquishing US citizenship”. Might be a very effective way of getting a message across.
Petros, thank you for that excellent clarification on the difference btwn relinquishing and renouncing. Well stated.
Question, is the act of applying for citizenship not also a relinquishing act if one is doing so with intent? Probably wouldn’t hold up from an IRS standpoint but might be part of the paper trial that establishes one as a relinquisher rather than a renouncer. Just a thought.
Yes, it is. See this thread:
http://isaacbrocksociety.ca/2011/12/12/relinquish-dont-renounce-if-you-can/
CHForever, I would recommend it. There’s a guy that burned his US Passport and put the videos on Youtube. Guess what? They refuse to give him a CLN.
@Michael Miller let me add my thanks to those of the others, and on behalf of my wife and two of our friends who are 1970s-era relinquishers who now all have received back-dated CLNs confirming that State Department considers they ceased to be US citizens when they became Canadian citizens in that decade. As I said to my wife and friends, I doubt the IRS will ever try to come after you, but file this article away for reference to a lawyer if that ever happens. It shouldn’t, but one never knows when dealing with some organs of US government any more. It is particularly comforting to me to see in print your agreement with my claim for the past year and more that there is no requirement in US citizenship law for anyone to notify State of their expatriating act, for that act to have effect, except the obvious case of renunciation which is the only clause in the legislation which mentions anything about the State Department defining a notification process or procedure. No one ever told these people they needed to get a CLN back in the 1970s, because there never was (and still isn’t, as far as I can see) a requirement for them to do so. In fact, it wasn’t until 1986 (I think) that further to a Supreme Court ruling about that time, the legislation was amended to include volition and intend to relinquish as part of the requirement. Up until then, my understanding (confirmed by some ca 1980 correspondence sent to a Brocker by the US Consulate in Calgary) is that if you became a foreign citizen, the onus was on you to convince State it WASN’T your intention and volition to lose USC on becoming a foreigner, in order NOT to lose your USC. And I’ve read somewhere that up until 1986 it was next to impossible to convince them of that. Moreover I can personally confirm that it was common understanding among those of us who left the US and came to Canada in the 1960s or 1970s that if you took out Canadian citizenship, your loss of USC was automatic. Which makes even further absurd and outrageous the notion that IRS could try to claim tax liabilities from such persons ex post facto today.
Thanks, Medea. But I am not sure how you can avoid filing taxes or traveling on your US passport while your citizenship application is in process. Unless technically one can claim statelessness in the interim. Being stateless isn’t unheard of but would a person being able to fend off IRS claims in particular by asserting that he/she relinquished as of the date of applying for a new citizenship rather than the date of receiving the citizenship?
@michael miller, thank you so much for putting pen to paper, so to speak, and framing the argument that so many of us claim. Your expertise as a tax lawyer gives you an ability to speak with authority to audiences that need to hear and understand our collective concerns.
And to others on this forum. When I applied for Canadian citizenship in 1984 I recieved a letter that told me unequivacally that I would loose my US citizenship. I do think this to be an important piece of evidence, and have started a search through library of Canada and archives. The archivist has responded, giving me good information, but was not able to find the document. She has indicated that there is a related file that can only be accessed through an access to information request, and she has given me the details necesary to make a request for this file, which I will do this next week.
Lagoon, your efforts, re the Archives, and the FOI request for the letter will doubtless help many from the same time period.
Tom – Sorry for the late reply. I don’t know if the IRS would be willing to issue a private letter ruling (or perhaps a closing agreement), but if they did that would resolve the issue for the person with the ruling (or closing agreement). The IRS would not be bound as to any other taxpayer — and in the case of a closing agreement, it wouldn’t normally even be possible to get a copy. In most situations, I probably wouldn’t recommend to anyone of modest means that they endure the expense and aggravation of requesting the private letter ruling (or closing agreement). Between the IRS fee and the attorneys’ fees, the cost would be significant.