Renouncing Your U.S. Citizenship: Is Divorcing Uncle Sam Right For You?
By Alexander Marino JD, LLM (US Tax)
The billionaire co-founder of Facebook, the only American member of Monty Python, a Civil Rights Leader with a PhD from Harvard, the founder of Carnival Cruise Lines and owner of the Miami Heat NBA franchise, and arguably the best chess mind to ever live have more in common than you might think. So what do Eduardo Saverin, Terry Gilliam, W.E.B. Du Bois, Ted Arison, Bobby Fischer and thousands of U.S. citizens living in Canada have in common? The answer is all five have renounced their U.S. citizenship.
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@The Mom;
I like ‘unwilling-involuntary-and-unjustly- shackled- for life and beyond -‘USdeemed-taxable-chattel’ myself, but it’s too long. : )
You’re right. Many were born outside the US and their PRIMARY birth citizenship is NOT and was never of the US. Many were born duals in other countries. Many did not ‘choose’ to move from the US to another country – they were transported and transplanted as infants and minors. Some were ‘accidentals’ who were merely born in the US on transient visits by non-US parents, or Canadian border babies with non-US mothers sent crossborder to US hospitals before birth because Canadian maternity wards were full or unequipped ).
We are a motley assortment, including the expired-greencard holders, and those who lost US status when they naturalized in Canada and elsewhere and by US law, have not been US citizens for decades or half a century, but have no CLN.
Earlier discussions at IBS attempted to resolve this – and create a better term, but all we could decide on was (1) NOT to accept the label of ‘US citizen’, or ‘US taxable person’, but to describe ourselves as first and foremost by our dominant nationality, or by our country of longterm and permanent residence (ex. Canadian citizen deemed ‘US-taxable person’ or Canadian permanent resident deemed ‘US-taxable-person’), since our dominant nationality and country of permanent residency (if a dual or greencarder) was the most salient identity for us – regardless of what the US insists. Our only other option – where possible, was to renounce or formally turn in expired greencards ASAP so that we could never be defined as ‘US taxable’ again and shed the involuntary burden that comes with it.
None of us sees ‘US taxable person’ as our salient identity. That term elevates our involuntary tax chattel status far above citizenship as a role with rights. Citizenship is a far far broader concept than merely a ‘convenient and coercible source of taxable assets’, but the US Treasury and the IRS has been allowed and empowered to re/define ‘citizenship’, and ‘taxable’ apparently supercedes any other aspect, conception or role of a ‘citizen’ that the US State Department or any other US body might hold.
@badger, The Mom
“US Tax Slave’ (USTS) works well for me but is a bit dramatic and has been ruined for us by a past Brock contributor.
There are those who by virtue of their disability (one of my sons has a disability – severe autism and developmental delay (read that as mental retardation), which makes him unable to understand the “ramifications of renunciation”. Thus on that point, the US will (since citizenship was transmitted through my wife) hold him hostage for the rest of his life; making his benefits for his disability and that should go towards his benefit into income that the United States can tax. So three of my children can renounce (do they need to be FBAR compliant too considering that we’d like to give them savings accounts or is Obama going to happily gouge their accounts and charge them penalties for not filing FBARs as well). I have said this before ad nauseum ad infinitum, but the United States has this air of entitlement to other people’s funds that makes me absolutely sick to my stomach.
@the Animal
Every government feels it has that entitlement, it’s just that the US does it extraterritorially too. They also rely on the element of surprise for the added penalty revenue which makes it all the more sickening.
US Expats – shackled for life to the Homeland
@bubble,
The ‘drama’ inherent in this for me is more like that in a documentary rather than a feature film. US citizenship has become both comedy and tragedy. Weeping under a mask of ironic laughter, and laughing madly through a mask of tears – I await my jubilee day – full emancipation from this unwanted and involuntary status being the only resolution I can live with.
@the mom & @ badger says,
thanks for your wonderful posts regarding who we are, and our own claim to identify
@monalisa1776, can you get in touch with me directly? My (UK) MP is interested in hearing directly from someone in the UK who has been…, well, let’s say ‘negatively affected’ by US citizenship based taxation and the upcoming FATCA and IGA. I’m trying to get him to have the UK push back on FATCA, improve the UK/US tax treaty, and so on. I think you’d make an ideal person to convince him that it really is as bad as I’ve been telling him for the past year (I think he believes I’m making it up). If you’re willing, that is.
@Watcher, yes, I would be! You’ll have to contact me by email via Petros though. He could then send me your number or email. When it’s all finally cleaned up, I will have lost at least thirty thousand pounds when combining all the taxes and professional fees; I realise it’s not as bad but still will have also lost twice that amount in assets that had to be gifted to my spouse to protect our assets from the U.S.
We have always kept our finances separate which I used to resent because his income is a lot more secure than mine. I feel as though I’m having to fend for myself even though we’re married which has caused me a lot of bitterness, especially as he has not offered me any extra help towards all the costs I’ve suffered.
But I can’t exactly blame him because he also feels threatened by the U.S. and is instinctively looking out for himself. It’s also turned out to be a blessing in disguise in that by keeping all our money separate, his assets (apart from our jointly owned flat) are much safer from the IRS, as he’s a NRA.
One thing all this has taught me is that even in marriage we are ultimately on our own; no one, not even my husband, owes me a living.
He was able to retire at merely 50 plus he inherited from his parents; I’m now only a couple years younger than he was when he retired and had been working and saving so hard in hopes that I too could relax when he gets his state pension in three years. We had hoped we could enjoy those golden years together.
But all that’s happened has ruined all these plans; I know feel resigned to at least another twenty if not twenty five years more of the grind. :/ I feel very embittered. However, I also have to keep reminding myself of how fortunate I am to have hopefully survived relatively intact in spite of the huge blow. It’s also taught me to never take anything for granted and that as I have been blessed with good health, that retiring early would have been selfish of me in many ways.
My spouse is also a shield; had the IRS wiped me out, then at least he could have protected me indirectly by providing a base, both economically and emotionally.
I’m also blessed that our marriage has survived such an ongoing stressful event.
@monalisa1776, thanks for responding. I tried emailing Petros a couple of days ago, but nothing back yet so I don’t know if I got the right email or not. It’s a problem when both of us hide behind aliases, isn’t it?
After over a year of my bothering my MP on this, he’s now interested in hearing from a first-hand sufferer. I don’t qualify, since I disengaged from the US four or five years ago. You do, though.
If/when you email, you might as well also copy your own MP. Maybe a bit of noise in parliament about this will stir some action. I think the UK has been far too willing to just toe the US FATCA line here. Remember that FATCA comes on top of several recent US domestic tax laws that have unilaterally undermined the US/UK tax treaty. Time to call a halt.
@Watcher
I’m not British but I would be happy to share my recent experience with your MP.
@Watcher,
I sent you an e-mail last night, and then one around 10 this morning with Mona Lisa’s e-mail address (she gave the okay). These e-mails didn’t appear to bounce, but sounds like you didn’t get them. So, if you’d like to get in touch with Mona Lisa send me an e-mail at pacifica@isaacbrocksociety.ca
But that’s good that you just posted your MPs address here for her convenience. That’s super that you “bothered” him enough that he got interested!
@Watcher, I would be happy to do that but would it help if I mentioned your actual name though, to perhaps remind him that you’ve already mentioned the issues with him.
Again though, don’t know if he would listen to me either because I began investing in PFIC mutual funds whilst still just a U.S. citizen living in Britain. Didn’t get dual nationality till 2007 plus renounced earlier this year.
I suspect that they would not particularly care about someone who was only a U.S. citizen or even a dual because they’ll probably argue that my primary citizenship was still my American one, given that it’s my identity and birthplace.
I would assume they’d only really care about someone who was purely British. I gather that even naturalized Brits will never be considered quite the equal of native-born Britons. See what I mean?
Sorry if I seem negative but believe I’m just being realistic. Nevertheless, nothing ventured, nothing gained as they say!! 😉 You could get Pacifica to email you my email address.
I am afraid that I don’t think the British government will offer me much protection as they seem to take the line of least resistance; heLL, I don’t even know if State will approve my renunciation because I did admittedly become quite emotional when taking the oath; they may have thought I felt under duress.
@pacifica, mailed to xxx@mailinator.com? If so, that’s not an entirely…, um… real email service. It’s a spam sink-hole, so it’s not surprising I didn’t get your email.
@edelweiss, assuming you’re living in the UK, by all means do so. There’s a whole spectrum of pain here. Just because you’re not a UK citizen, doesn’t mean you might not one day become one. While you live in the UK, why shouldn’t you have all the same financial rights as every other non-UK citizen resident?
@monalisa1776, just say you were referred to my MP by one of his constituents, regarding FATCA. i’ve been a total thorn in his side on this for months. Trust me, he’ll recognize the subject matter from that one acronym alone! I’ll warn him some emails are headed his way anyway. I don’t see the citizen-since-2007 thing as being a problem. That’s “long term” enough to count. Plus it mostly covers your SOL, so it’s arguable that stuff before that wasn’t very relevant anyway. You’ve been in the UK for ages. Just stress that, then it’s off into a vent on the unfairness of US taxes and how it’s affected you and your husband. Plenty of material there, I think.
OK, @Watcher, will do! 😉
I agree that we have to do all we can. I will know that I’ve at least tried.
@ Watcher,
So, that explains it! I wondered a bit about that odd address (but usually the fake ones really jump out at me). Anyway, no problem, as Mona Lisa has your MP’s contact info now. I’m really glad he wants to hear about what this is doing to real people’s lives. Thanks for getting him interested and thanks, Mona Lisa, for sharing your story with him!
@Pacifica, it will realistically take me a couple days to get something together though, especially as I’m suffering a bit of a hangover plus will be working all weekend, though should have something certainly within a week! 😉
@monalisa,
Perhaps the MP would be interested in hearing from your husband as well (if he was willing).
After all, those affected go far beyond just those of us directly defined as ‘US taxable persons’. Our spouses and family members live with the spectre of the US hanging over the whole household, through jointly held assets, associated compliance costs, possibility of a debt created via draconian penalties, restrictions on joint investments, estate issues, restrictions on advance planning (if the US person named with POA), etc. and, the stress of witnessing the pain and fear of the US person member over the prolonged periods built in to ANY path – whether it be full ostrich, quiet filing, VD, or simply going forward.
That the British citizens are witnesses and are affected by this is something powerful that they can speak to – unchallenged by any caveats about the length of their UK citizenship status. After all, if the UK-only citizens knew how this would affect their households, they would have had a chance to work it out and plan for it better before this crunch came. Perhaps it would give your UK spouse an opportunity to vent at the unfairness – and make an indelible impression on the UK MP.
I don’t say this to magnify any feelings you may have about the effect on your joint household – as we know, this is not our fault as defined ‘US persons’ at all – we are not responsible. I have worried about this in my own household. All responsibility for the pain and torment resides squarely with the US – as the lawyer on another thread here, it is a ‘contrived’ crisis – unnecessary and unwarranted. Our outsized compliance costs did not add anything to the US coffers at all. Most people owed zero tax, and what they were assessed with comes only from the machinations of the US refusal to treat us fairly – and allow us to invest and save just as the homelanders do. And now you are well out of any future plans they may have to tap into your household assets. What did they really gain in the short or long term?
Congratulations on shedding the burden. I know what a struggle it has been to get to that point – compliance wise and emotionally. I hope the US consular official who witnessed it was affected by your sincere distress and felt guilt and responsibility on behalf of the US – and I don’t see how they can not feel or understand it – you wouldn’t be the first or only that could not help honestly showing emotion. Don’t start worrying about any denial of CLN based on your visible stress – it would be ludicrous for them to use that as the basis for denying it – imagine how that would play out in a more public way – very very bad PR for the US. The power mad US emulating repressive countries – holding their own citizens hostage – forcing them to jump through hoops and causing extreme duress and emotional torment. Oh yeah, that’s right, that is what they are doing!
@ mona lisa,
One thing more – re your hesitancy about having only become a UK citizen in more recent years.You have already proven – over all the years you have lived in the UK that you have been a loyal law-abiding taxpayer where you actually earn and receive services – and have contributed all you were required – to the UK. That should be enough for any one person – and should be good enough credentials for your UK MP. I feel that we should have no need to be uniquely singled out in the world as a group who are so ‘special’ that we must prove our tax loyalty and duty lifelong to TWO governments! No-one else is volunteering for that thankless and unjust burden.
@ monalisa
There will be a better day ahead for you. Once you have that CLN and you feel confident that the SOL has passed then you and your husband can have a normal financial life — free to have joint or separate accounts, whatever suits you best. And you will have only one tax master not two to satisfy. That’s something to look forward to.
@monalisa,
Look back and realize how far you’ve come since the start of your horror story. You’re completing the end of the marathon and freedom from what I consider has been undue abuse. Be proud of what you’ve accomplished — and thanks for being another to tell your story and open some eyes. We ALL wish you the very best.
I’ve written a long email to Watcher’s MP. I covered citizenship based taxation as background and FATCA. I offered to speak by phone or meet in Westminster. In the event that they could benefit someone else, I’ve stripped out the personal bits and present my arguments against FATCA below:
FATCA is a non-monetary trade barrier to the US financial system
A failure on the part of any Foreign Financial Institution (FFI) to be FATCA compliant results in 30% withholding of both principal and interest on US sourced payments. The withholding is the sledgehammer (or perhaps more accurately, a nuclear bomb) to crack a nut or in this case to force compliance. An FFI will have to choose between access to the US financial system or violating its local country laws in regards to data privacy and data protection. The US can not be allowed to erect such a trade barrier to its markets.
FATCA causes national origin discrimination
FATCA creates a class of customer (an EU citizen/resident with US indicia) that is significantly more expensive and carries inherently more risk for an FFI to do business with. With this increased cost and risk, it is entirely unsurprising that FFIs have been terminating business relationships. Evidence of this is widespread and I would encourage you to read the submission by American Citizens Abroad to the IRS which contains a series of personal anecdotes including EU residents denied financial services (http://genevalunch.com/files/2012/06/acastatementapril2012s.pdf). As a result, the only UK citizen/resident who is not able to access fully the UK financial services market is a UK citizen/resident with US indicia. The US can not be allowed to compel discrimination of UK citizen/residents by FFIs.
An IGA is state-sponsored national origin discrimination
Because FATCA would cause FFIs to violate UK and EU data privacy and data protection laws, the US has sought to implement IGAs. The UK, for instance, has signed an IGA. As a result of the enabling legislation required in the UK by the UK IGA, the UK will exempt only one type of individual from the full protection of the UK and EU data privacy and data protection laws: a UK resident with US indicia. The US can not be allowed to compel the UK to discriminate against its own residents.
The US is not offering and can not deliver “reciprocity”
While the US is forcing the entire world to search bank, brokerage, fund management and insurance company customer databases for those with US indicia, the US is offering to “pursue the adoption of regulations and advocating and supporting relevant legislation to achieve such equivalent levels of automatic exchange.” (Model 1 IGA, Article 6.1) That doesn’t sound like a reciprocal undertaking, does it? As of 1 January 2013, US financial institutions will be required to report to the IRS US-source interest income of accounts belonging to non-resident aliens (US parlance for those resident outside the US). The US has agreed to share this data with 80 countries of its choosing. However, this is unlikely to be of any use to recipient countries because it is so easily side-stepped. Any income that is not interest income will not be reported and any interest income that is not US sourced will also not be reported. I would expect these accounts will hold dividend paying stocks (not reported) or foreign bonds (not reported). Furthermore, the undertaking to think positive thoughts about reciprocal information exchange is given by the executive branch and not the legislative branch which is responsible for, you know, legislation. FATCA is unbelievably one sided and deliberately so.
FATCA is the height of US arrogance and hypocrisy
The US accused UBS of holding $20 billion of US client assets and Wegelin $1 billion. The Florida Bankers Association in sworn testimony before the House Committee on Financial Services claimed the State of Florida alone has $60-$100 billion of non-resident alien assets (http://financialservices.house.gov/uploadedfiles/102711sanchez.pdf). The Tax Justice Network listed the State of Delaware as the most secretive tax haven (http://www.guardian.co.uk/business/2009/nov/01/delaware-leading-tax-haven). Mr. Obama criticised Ugland House in the Cayman Islands for having 12,000 businesses registered there calling it “the largest building in the world or the largest tax scam in the world.” Meanwhile, 1209 North Orange Street in Delaware had 285,000 separate businesses registered there and the State of Delaware is home to approximately 900,000 residents and 945,326 registered businesses (http://www.nytimes.com/2012/07/01/business/how-delaware-thrives-as-a-corporate-tax-haven.html?pagewanted=all&_r=0). The US accuses the rest of the world of sheltering US assets while acting as the world’s largest tax haven with a number of states providing impenetrable secrecy. Why should the rest of the world follow a US policy of “do as I say, not as I do.”
FATCA benefits only the US and US financial institutions
It is clear that FATCA benefits the US government. The Joint Committee on Taxation believes FATCA will raise $8.71 billion in the 2010-2020 period (https://www.jct.gov/publications.html?func=startdown&id=3650). Although, I suspect that the vast majority of that money will come from US taxpayers outside the US who may have fallen out of compliance with the US’ unique citizenship based taxation. This also means that a significant amount of that $8.71 billion will be taken out of other economies of the world and not spent there. The number is also astonishingly low given the US annual budget deficit is $1 trillion and the national debt is $16 trillion (north of $60 trillion if you include unfunded liabilities). The other beneficiary of FATCA is the US financial system since every US financial institution will avoid the cost of implementing FATCA and will probably also be receiving funds from UK citizen/residents denied financial services in their home market.
FATCA is expensive and the entire cost is inflicted outside the US
Estimates for the cost of implementing FATCA vary. KPMG says the cost of implementation exceeds the revenue the US will receive (ie $8.7 billion over ten years). Other estimates suggest the cost is $250 million for a global non-US financial institution. With RBS, Lloyds, and Barclays and a host of other financial institutions calling the UK home, the UK will bear a disproportionately high cost and this could easily be billions of dollars. Regardless of what the total cost is, at a time when the financial services sector is recovering from the great recession this is money that would be much better used for repairing balance sheets, providing mortgages or lending to local businesses and not on implementing a brain fart from the US congress.
@ Eidelweiss
One word — AWESOME!
@Em, absolutely. Such good work, Edelweiss.
Great wording @Edelweiss. Very valuable for others to draw on for our own correspondence.