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.
@foo
The banks need the proof. They wont take your word for it. Ultimate proof of being free is the CLN.
The best thing about the utterly predictable extension of the $2350 fee to relinquishers?
Not having to endure any more speculations about the convoluted retroactive possibilities for exhuming prehistoric personal intentions to lose U.S. citizenship – especially by extraterritorials who did any such thing as (1) hold a U.S. passport (2) vote in a U.S. election (3) file any U.S. taxes (4) work a week as a temp janitor for a non-U.S. municipality.
How about a Brock contest to see who can do closest guess on (1) when the current fee next increases? (2) how much it goes up by? Here’s mine: September 2016 to a round $3000. Further out? At least $6000 by September 2020.
Off-the-top-of-the-head question: Is there now any circumstance at all where an exiter will prefer to seek relinquishment because the morass of rules confers some benefit that would be lost through renunciation? (PS – Staying off the name-and-shame list is NOT one.)
Well I had been contemplating relinquishment but I guess that choice loses one of its big advantages. It does have the theoretical advantage of being able to lose citizenship without having to pay. You only pay for the CLN. I think Polly’s right: no way around the CLN.
USX: Wow! $6000! Imagine a family of 4. Only the wealthy could renounce. Well, that’s logical enough. We know that freedom in the USA is directly linked to wealth. No reason it should be any different when you leave. Jeez.
@usxcanada,
<Off-the-top-of-the-head question: Is there now any circumstance at all where an exiter will prefer to seek relinquishment because the morass of rules confers some benefit that would be lost through renunciation?
Relinquishment would get you an earlier termination date, which could be useful if the expatriating act occurs late in the year and you cannot get an appointment at the embassy until the following year. One less year of filing income tax returns and FBARs.
@foo
Isn’t a relinquishment backdated to the day one got the other passport? I thought you got the CLN dated to like 1972, and with that, no taxes were owed?
@Polly,
Right, for relinquishment the CLN is backdated to the date one got the other citizenship, if that was the expatriating event. Whereas for renunciation, it is dated from the embassy appointment.
I’m still a US citizen, so don’t have a CLN. But my understanding is that for relinquishments that far back, a CLN is not supposed to be necessary for tax purposes anyway. (Whether one’s bank would understand that is another question.)
@foo, Polly, quite right. If your relinquishment is before 2004 then you don’t need to file any returns so there’s no point in acquiring a CLN for tax purposes. The Canadian IGA also says “a reasonable explanation” for why you don’t have a CLN and that has been done by some here at IBS iirc. A sworn document witnessed by a notary should be sufficient for bank purposes.
Since when do banks have to screen customers for US tax compliance?
Well, this is great… My expatriating act will occur next month but it looks like I will have to pay anyway.
Do I need a CLN to end things with the IRS? For now I haven’t had any troubles with my banks (I was born outside the US) so if I could officially relinquish without having to buy the world’s most expensive piece of paper that would be great.
WhatAmI: “only the US can take away ones USC”. Actually only the US citizen can give it away. The US border guard who told one of us four plus years ago that he was an American “until we say you’re not” was dead wrong according to the 14th Amendment.
George: “Canada or any other country can pass legislation that for all public and private purposes multi-nationality does not exist within its territory.” I agree whole-heartedly.
As you know, an international “principle” on this point has already been established in the Master Nationality Rule expressed in Article 4 of the Hague Convention on Certain Questions Relating to the Conflict of Nationality Laws of 1930. The British Home Office says that “the practical effect of this Article is that where a person is a national of, for example, two States (A and B), and is in the territory of State A, then State B has no right to claim that person as its national or to intervene on that person’s behalf.” Apparently Canada didn’t sign on to this Convention. I would think that all Canada has to do is pick up a pen and sign the damned thing a few decades late.
“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.”
They passed FATCA and the world was “forced” to accept it. The US can pass any law it wants and the world will bow low once again if economic sanctions are threatened. Only international fortitude and resolve is going to put an end to this US domination.
Re: They passed FATCA and the world was “forced” to accept it.
Specifically, the world BANKS were “forced” to accept FATCA, since they are forced to use US currency internationally. Of course, the easiest way to comply is to kick the “Americans” out of their system. As soon as there are other alternatives to the US dollar, the world banks will flock to use them instead. Why the USA is trying to sink their own ship is beyond me.
This announcement of the cost of getting a CLN as proof is extortion, plain and simple. All the more reason to refuse to pay it and do banking with a credit union.
@MuzzledNoMore, Would it make any difference if Canada signed on to the Convention concerning the Master Nationality Rule? Given the fact that nearly every country has signed an IGA with the US, apparently that Convention doesn’t mean much to the countries that did sign on.
@rebadelev, you can’t officially relinquish without going to the embassy/consulate and therefore paying the new fee. Even if you commit an expatriating act, until the embassy/consulate is informed and they send the paperwork on to the State Department for final approval you’re still an American in the IRS/US government’s eyes.
Did you relinquish before February 6, 1995? Then you did not have to inform the State Department
http://isaacbrocksociety.ca/2011/12/16/did-you-relinquish-before-february-6-1995-then-you-did-not-have-to-inform-the-state-department/
Do you have an opinion from an IRS lawyer that this is no longer correct?
Is the US Government chasing 7 million so-called “US Persons” for their nil declarations (whilst already paying higher taxes wherever resident)? There are about 320 million people living in the USA. A disproportionate amount of energy, resources and expense is being wasted to hunt down the wrong people…
@Duality
I’m not so sure about “nil declarations”. The treaties do not protect us from double taxation. If you have tax exempt registered accounts in your country of residence, sold your primary residence, win a lottery, receive strike pay, hold non-US mutual funds, or a variety of other things, they are fully taxable by the IRS even though you may pay much more taxes to your country of residence.
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:
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
Your net worth on the date of your action was $500,000 or more.
The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1).
Table 4-1. Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004
IF you expatriated during . . . THEN the rules outlined on this page apply if . . .
Your 5-year average annual net income tax was more than … OR Your net worth equaled or exceeded
…
1999 110,000 552,000
2000 112,000 562,000
2001 116,000 580,000
2002 120,000 599,000
2003 122,000 608,000
2004 (before June 4)* 124,000 622,000
*If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008.
Reporting requirements. If you lost your U.S. citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended.
Your U.S. residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits.
Penalties. If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect.
Expatriation tax. The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section.
http://www.irs.gov/publications/p519/ch04.html#en_US_2014_publink1000222370
@Marie
Sorry, I meant “tax declarations to pay nil”. Employees like myself do not earn enough to pass the taxable threshold. In addition, I can only afford to rent over here in Europe. (It would be such a dream to own a flat!)
@homebody, see below:
“This seems to clear up whether all people who expatriated before June 3, 2004, had to file Form 8854: the current version of the form is only for people who expatriate after that date. Before that date, the so-called Reed Amendment was in effect but it was not applied systematically, and I would think that the IRS is not going to focus its ire on those who have an expatriation date on their CLN of earlier than 3 June 2004, but on those whose expatriation date is after June 16, 2008. As Miller says, those who expatriated before 3 June, 2004 (i.e., the expatriation date on the CLN) are properly grandfathered and don’t have to do a “notice event” (i.e., informing the Consulate of their expatriation). The provisions for making such people pay taxes or barring them from the United States (i.e., the Reed Amendment) were ineffective and that is why the law changed drastically in 2004. I open this to further discussion, because I myself am not an expert but am only trying to understand the requirements properly.”
http://isaacbrocksociety.ca/2012/06/19/if-your-expatriation-date-is-before-2004-the-rules-are-different/
I’m with @usxcanada on this now. The advice I have for anyone with clinging US tax citizenship is: Get the hell out while you can! The US government has lost its collective mind.
We Canadians must all insist that the next Canadian government push back against the continuing extortion of Canadian money from Canadian citizens of US origin. I hope that the defeat of the FATCA IGA by our courts will be the first step of that pushback.
Remember.. That’s $2350 US.. That’s $3127 Canadian!
I know that a self-certification is required. I don’t remember if definitive proof is demanded. Certainly IGA and the legislated FATCA differ.
I paid US$450. At the time about NZ$520. Now that the NZD has depreciated somewhat, the new fee would be NZ$3760, an over 7x increase. At some point in the future I will probably have to pay for the freedom of my two children.
Better put a savings plan together ……..stop this nonsense now!
Homebody. All that crap you are quoting has been made obsolete by the new rules. If someone relinquished before June 2004 there is nothing to be done.