Closely following on the heels of their previous announcement that the $2,350 fee for renunciation — twenty times as high as in other developed countries — “protects” the human right to change nationality, the folks at the State Department have announced that they’ll be extending that “protection” to people who relinquished U.S. citizenship under 8 USC § 1481(a)(1) through (4) and seek to obtain Certificates of Loss of Nationality documenting that fact as well.
In the latest Schedule of Fees for Consular Services to be published in the Federal Register on Tuesday (80 FR 53704, 53707), Under Secretary of State for Management Patrick F. Kennedy or one of his ghostwriter minions proclaims:
Currently, nationals who renounce nationality pay a fee of $2,350, while nationals who apply for documentation of relinquishment of nationality by the voluntary commission of an expatriating act with the intention to lose nationality, do not pay a fee. However the services performed in both situations are similar, requiring close and detailed case-by-case review of the factors involved in a request for a Certificate of Loss of Nationality, and both result in similar costs to the Department.
In the past, individuals seldom requested Certificates of Loss of Nationality from the Department to document relinquishment. Although the Department was aware that an individual relinquishment service was among the most time consuming of consular services, it was rarely performed so the overall cost to the Department was low and the Department did not establish a fee. Requests for a Certificate of Loss of Nationality on the basis of a non-renunciatory relinquishment have increased significantly in recent years, and the Department expects the number to grow in the future, causing the total cost of this service to increase. At the same time, the Department funds consular services completely from user fees. The Cost of Service Model continues to demonstrate that such costs are incurred by the Department when accepting, processing, and adjudicating relinquishment of nationality cases; therefore, the Department will collect a fee from all individuals seeking a Certificate of Loss of Nationality. Taking into account the costs of both renunciation and non-renunciation relinquishment processes, the fee will be $2,350.
If you do not need a CLN in the first place, nothing in the Immigration and Nationality Act requires you to obtain one to document your loss of US citizenship, and people who relinquished before 4 June 2004 did not have to report their relinquishment to the State Department in order to end their status as U.S. tax subjects either. However, FATCA regulations and IGAs require people with U.S. indicia to show their banks a CLN or provide a “reasonable explanation” of why they do not have U.S. citizenship.
See this earlier post for discussion of what banks might accept as a “reasonable explanation”, and let us know if you find a bank which will accept the absurd price-tag as an explanation of why you don’t have a CLN.
@USCitizenAbroad
They can’t see that it’s easy to get a better life outside the United States.
Probably their situation is much like mine: in theory one could have a better life outside the US but in practice whenever one actually applies for a job outside the US the realities of the job market elsewhere make the decision to stay stateside a no-brainer.
What if the Government of Canada passed a law retroactively allowing “dual national” Canadian citizens to lose their other nationality at the time they became Canadian I.e. Birth, time of naturalization etc.
Or MANDATED retroactively such loss but passed another law to allow anyone to retroactively gain it back!!!
@WhatAmI
That is what I am saying. And the banks are afraid of the 30% sanction because they must comply with the terms of US/Canada IGA to avoid this financial sanction. Therefore if a CLN is not produced, they will treat an account as reportable. They are not likely to accept a reasonable explanation for the lack of a CLN.
@WhatAmI
The IGA protects the banks from the 30% regardless, and all the bank has to do is treat the account as a reportable account if they don’t get a CLN.
Under the current IGA–and bearing in mind that things may change with Justice Martineau’s ruling expected by Sept 23 and/or the Dayton judge’s expected injunction ruling by Sept 30–what are the consequences for the banks if they fail to report a so-called “reportable” account?
@George—that seems very clever about the passport application and just saying yes, I have acquired another citizen with intent to relinquish, give me my US passport, whaddya gonna do punk. Sort of like judo: when your opponent strikes, use that against him and trip him so he falls. Great idea.
I wonder what @eric thinks
sorry, I see @Eric’s response already. thanks
@Dash1729, @PatCanadian,
I can’t research this now to verify it, but I believe that there is nothing a Canadian FI can do to trigger the 30% sanction from the US/IRS. If a bank fails to perform its due-diligence and reporting, they would be in trouble with the CRA, not the IRS. With the IGA, there is never any direct contact between FIs and the US, and there is never any possibility of a 30% against an individual FI.
When a FI goes overboard and insists only on a CLN (not allowing any reasonable explanations) I think they are covering their own butts as to not run afoul of the CRA, and to simplify and reduce their training costs. It’s simple to insist on a CLN. It’s not simple to have dozens or hundreds of employees passing judgment on “reasonable” explanations. Even is all non-CLN explanations were funneled through one person or small department, it’s still easier to insist on a CLN. It’s no surprise that many are doing this, but out of fear for the CRA, not the IRS or the 30% sanction. This sanction doesn’t belong in this conversation at all, IMO.
I wonder what is going to happen when the ADCS wins its court case.
Surely, without the extortion of the 30% sanction, Canada would not have signed on to FATCA. Perhaps few countries would have. Why bother? I think FATCA has been agreed to everywhere because the extortion was effective. All governments, including the Canadian PC party, chose the lesser of two evils and signed up for FATCA.
What I’ve been wondering is if the Supreme Court justices are free to pass judgment on the ADCS case based on its merit alone, without having to weigh in the consequences of ruling in favour of ADCS and striking down the IGA and its enabling legislation. Our government had to consider the alternative. Does the Supreme Court? Can the government influence the Supreme Court decision in back-room discussions about the fallout if the IGA is struck down?
@Cheryl
That is actually an interesting thought. Why haven’t other countries created laws of their own to protect their dual citizens from this torture? Like saying that they would actually prohibit duality retroactively. Maybe we could come up with some other “new laws” countries could creatively vote into law which would otherwise help their citizens. One off the top of my head would be passports without place of birth. There are probably loads of laws that could have been created to help, much like the King of Denmark who wore a Star of David to protect danish jews during WW2.
I honestly think that the whole world is supporting whatever it is America wants or needs for fear of a collapse of the country which is the economic motor of the whole world.
I am not disputing that the CRA is an intermediary in the process. The financial information goes from the FI”s to the CRA to the IRS. The 30% sanction is what put this process into place. It happened due to the bank’s fear of the 30% sanction and their consequent imploring of the Con government to put the IGA in place. Bypassing direct contact with the IRS softened the blow for FI’s but does not negate the root cause of the problem.
From CRA frequently asked questions:
3. How do Canada and the U.S. enforce the reporting of information by their respective financial institutions?
“In Canada, the due diligence and reporting requirements that the agreement imposed on Canadian financial institutions were implemented through new legislation, including Part XVIII of the Income Tax Act. As the administrator of Canada’s tax laws, the CRA is responsible for monitoring and enforcing the due diligence and reporting requirements in Canada for Canadian financial institutions under the agreement.”
Please see CRA website:
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/fq-eng.html
Cheryl and Polly,
Thanks for your common-sense thinking. What do I know, but why couldn’t such retroactive legislation be passed in our own countries — as was done in the US, assuming that everyone who was told they would lose their US citizenship by becoming a citizen in another country, would want that US citizenship back so making it so? Surely our own countries could — if they have the will — take back some of their own legislative powers — those legislative powers of a sovereign country that protects its own people.
@Cheryl,
I don’t think I understand your suggestion. A foreign country cannot take away US citizenship from a USC. They can insist that a USC give up USC (with the DoS) before naturalizing them with new citizenship (I think Japan does this?) but only the US can take away ones USC, and even then, as of 1986, only with the individual’s consent (not counting treason, etc).
If Canada passed a law prohibiting dual citizenship, retroactive or not, one is still a USC IN THE EYES OF THE DoS AND IRS until the US tells you that you are not. Even if Canada decides to declare that you are not a USC, that doesn’t help you much because the US defines a USC for FATCA purposes and if you attempt to enter their country.
I don’t see any benefit to anyone in your suggestion. What am I missing?
@WhatAmI. I’m not sure…a legal whiz I am not but I think if there was a will there is a way by better minds than mine. It is my understanding that still today when a foreign person becomes a U.S. citizen in their oath they have to renounce their other citizenship!! Why not us and why not retroactively. Obviously this wouldn’t help everyone but it would help those with Alzheimer’s, mental disability, kids
Continued…kids of Canadians who didn’t know they were American etc. I don’t know but maybe thinking outside their parameters might help. Beat them at their own game ????
@WhatAmI, Canada or any other country can pass legislation that for all public and private purposes multi-nationality does not exist within its territory.
The USA can pass a law that says every human being on planet earth is a US Citizen, but they can not force another country to recognize it.
@WhatAmI…repeating above comment to your attention
I disagree. Extortion of 30% sanction does belong in conversation:
I am not disputing that the CRA is an intermediary in the process. The financial information goes from the FI”s to the CRA to the IRS. The 30% sanction is what put this process into place. It happened due to the bank’s fear of the 30% sanction and their consequent imploring of the Con government to put the IGA in place. Bypassing direct contact with the IRS softened the blow for FI’s but does not negate the root cause of the problem.
From CRA frequently asked questions:
3. How do Canada and the U.S. enforce the reporting of information by their respective financial institutions?
“In Canada, the due diligence and reporting requirements that the agreement imposed on Canadian financial institutions were implemented through new legislation, including Part XVIII of the Income Tax Act. As the administrator of Canada’s tax laws, the CRA is responsible for monitoring and enforcing the due diligence and reporting requirements in Canada for Canadian financial institutions under the agreement.”
Please see CRA website:
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/fq-eng.html
@WhatAmI, “When a FI goes overboard and insists only on a CLN (not allowing any reasonable explanations) I think they are covering their own butts as to not run afoul of the CRA, and to simplify and reduce their training costs. ”
Then they get sued in a local Court which might have a jury of fellow local citizens.
Banks where I live have been absolutely crushed by the Courts paying billions in PPI claims to little people.
@Deckard1138 – I agree. FATCA will eventually become a two information exchange with the US telling the banks to send over data from the US Government’s US Person wanted list in future.
@Tim, in the post FATCA IGA world, if true, you must never ever admit or concede that you might be or even may been at one time a US Citizen.
@Cheryl,
If Canada had a law retroactive or not saying that one had to renounce USC upon becoming a Canadian, how is that done? It’s done by making an appointment with a US consulate (waiting up to a year for it), paying US$2350 to renounce, filing 5 years of taxes and 6 years of FBARS. The US considers you a USC until the US tells you that you are not. They go by their own laws. There’s nothing a Canadian law can do to shortcut that. Sure, Canadian law can say that you are only a Canadian citizen in the eyes of Canada, but that doesn’t turn away FATCA or the IRS.
@PatCanadian,
Yes, you repeated your post that the 30% sanction caused the banks to plea with the government to sign up for FATCA. No disagreement there. But your post now doesn’t mention anything about the banks insisting on a CLN. Now that the IGA is in place due to the 30% extortion, and the banks no longer fear the 30% sanction because the CRA and IGA protects them from the IRS and the 30% sanction, they have no reason to use the 30% sanction as a reason to insist on a CLN and refusing some reasonable explanation for not having a CLN. That’s my only point!
@George has stated it very clearly. Each country can pass all the laws they want, but they only apply within their own territory. Canada cannot pass a law that tells the US that an individual is no longer a USC.
The US can pass a law saying that every human being is a USC, but they cannot force another country to honour that law. Well, of course, not unless that other country has signed a FATCA IGA, which clearly states that the US determines the definition of a USC and those accounts must be reported.
@WhatAmI
I said, “And the banks are afraid of the 30% sanction because they must comply with the terms of US/Canada IGA to avoid this financial sanction.” They are now complying. I believe there is still a fear factor there and apparently you do not. What is the issue?
I also said, “Bypassing direct contact with the IRS softened the blow for FI’s but does not negate the root cause of the problem.”
We are all entitled to a difference of opinion. The end.
@WhatAm. So what if Canada retroactively says that registration of birth abroad, a child born in Canada who resides in Canada for XXX years, etc are acts of naturalization. I’m just saying that better minds then me if there was a will could figure this out! That wouldn’t help everyone but hey we should think outside the box.
@PatCanadian,
We agree on everything except one point. If you are saying that a Canadian FI will get the 30% sanction if they don’t comply with FATCA, that’s the only thing that I disagree with!