cross posted from Citizenship Solutions.
The $2350 “relinquishment fee” does NOT mean that people should simply renounce citizenship http://t.co/nKanxobfhQ
— Citizenship Lawyer (@ExpatriationLaw) September 7, 2015
On September 6, 2015 it was reported on the Isaac Brock Society that the State Department intended to begin charging $2350 for both “relinquishments” and “renunciations”. The proposed rule is to be published on September 8, 2015. With respect to “relinquishments” the Federal Register states:
The Department is expanding the application of and renaming item 8 in the Schedule of Fees to “Administrative Processing of Request for Certificate of Loss of Nationality.” The fee will be applied to cover not only services to U.S. nationals (i.e., U.S. citizens and non-citizen nationals) who relinquish nationality by taking the oath of renunciation under 8 U.S.C. 1481(a)(5), but also to cover services to U.S. nationals who relinquish nationality under 8 U.S.C. 1481(a)(1) to 1481(a)(4) or any earlier-in-time relinquishment statutes administered by the Department of State and request a Certificate of Loss of Nationality. Currently, the fee is paid by those taking the oath of renunciation under 8 U.S.C. 1481(a)(5) at the time the oath is sworn. The fee would be collected from an individual claiming to have relinquished nationality at the time that person requests the Certificate of Loss of Nationality (that is, after completing Form DS-4079 and signing before a consular officer Part II of Form DS-4079 entitled “Statement of Voluntary Relinquishment of U.S. Citizenship”). The Fiscal Year 2012 Cost of Service Model update demonstrated that documenting a U.S. national’s relinquishment of nationality is extremely costly whether the service is for a relinquishment under 8 U.S.C. 1481(a)(1) to 1481(a)(4) or a relinquishment by renunciation under 8 U.S.C. 1481(a)(5). Both require American consular officers overseas to spend substantial amounts of time to accept, process, and adjudicate cases. The cost of the service is not limited to the time consular officers spend with individuals prior to and at appointments. The application is reviewed both overseas and domestically to ensure full compliance with the law. The consular officer must determine that the individual is indeed a U.S. national, advise the individual on the consequences of loss of nationality, and ensure that the individual fully understands the consequences of loss, including the inability to reside in the United States unless properly documented as an alien. Through documentary review, consideration of the individual’s circumstances, and careful interviewing, the consular officer also must determine whether the individual is seeking loss of nationality voluntarily and with the requisite intent, as required by U.S. Supreme Court case law and by statute (8 U.S.C. 1481). This determination can be especially demanding in the case of minors or individuals with a developmental disability or mental illness.
The consular officer must also ensure that the commission of an expatriating act was as prescribed by statute, which is often an issue in non-renunciation relinquishment cases. The loss of nationality service must be documented on several forms and in consular systems as well as in a memorandum from the consular officer to the Department’s Directorate of Overseas Citizens Services in Washington, DC (“OCS”), in the Bureau of Consular Affairs. All forms and memoranda are closely reviewed in OCS by a country officer and a senior approving officer, and may include consultation with legal advisers. This review entails close examination of whether the requirements of voluntariness and intent are satisfied in the individual case. Some applications require multiple rounds of correspondence between post and the Department. The final approval of the loss of nationality must be done by law within the Department (8 U.S.C. 1501), by OCS, after which the case is returned to the consular officer overseas for final delivery of the Certificate of Loss of Nationality to the individual. In addition, every individual issued a Certificate of Loss of Nationality is advised of the possibility of seeking a future Administrative Review of the loss of nationality, a time-consuming process that is conducted by OCS’s Office of Legal Affairs.
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.
The effective date will be November 9, 2015,. I have been aware of this impending fee increase for some time. Hence, it comes as no surprise. Furthermore, if you accept the validity of the $2350 fee for renunciations then a similar fee for “relinquishments” is justifiable.
There has been and continues to be extensive discussion of this increase. What does it mean? Why now? Is this to discourage “relinquishments”? What does this say about the character of the U.S. Government? At a bare minimum, the fee increase is a continuation of a pattern of abuse of Americans abroad. That said …
The purpose of this post is to comment on a question asked by, USXCanada, who is a long time (I believe) blogger at the Isaac Brock Canada. He or she includes an interesting question in this comment:
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.)
The answer is yes! The “relinquishment fee” is an irritation but it is NOT a reason to simply default into a “renunciation”. Now, I am writing this post quickly and I invite others to add their thoughts. But, here are categories of reasons why those who believe that they have validly relinquished U.S. citizenship, under U.S. law, should insist on a CLN based on a relinquishment.
Category 1 – For at least “citizenship purposes” the relinquishment date is always prior to the renunciation date.
Category 2 – The difference in treatment under other U.S. laws between “renunciations” and other forms of relinquishment.
Let’s examine each category.
Category 1 – For at least “citizenship purposes” the relinquishment date is always prior to the renunciation date.
Before, listing reasons I remind you of the difference between a “relinquishment” and a “renunciation”. (There is only “relinquishment” and “renunciation” is just one form of “relinquishment”. The difference is in the timing.) I urge you to read a previous post that describes “relinquishments” and notes “renunciation is one form of relinquishment”. The “take away” from that post is that it’s the time of the relinquishment that is the key and NOT the form of the relinquishment. To be specific:
The issue is NOT the form of relinquishment. The issue is the date of relinquishment.
Why would the “date of the relinquishment” matter? Well there are at least two reasons.
Transmission of U.S. citizenship – Imagine one can successfully argue for a “relinquishment date” prior to your children being born. This would mean that (if you are not a U.S. citizen) that you could NOT transmit U.S. citizenship to your children.
The tax issue – do the “Exit Tax and S. 877A Rules apply to you?” I commented on this issue in the other post as follows:
Since 2004, the U.S. Internal Revenue Code has contained provisions (2004 American Jobs Creation Act and 2008 HEART Act) which mandate that those who:
1. Relinquish U.S. citizenship under the Immigration and Nationality Act;
2. Continue to be treated as U.S. citizens for tax purposes until they notify the U.S. government.
The effective date of the creation of what I will call “The Tax Citizen” was June 3, 2004.
This means that since June 3, 2004 those who relinquished (including by renunciation) their citizenship under the Immigration and Nationality Act continue to be taxed as U.S. citizens until they notify the U.S. government in a prescribed way. To put it simply, there are tax and form consequences to relinquishing U.S. citizenship after June 3, 2004.
The “Tax Citizen” didn’t exist prior to June 3, 2004. Therefore, those who relinquished U.S. citizenship prior to June 3, 2004 may have no further tax obligations to the IRS.
This means that, in terms of tax consequences:
There may be (and likely is) a difference between a “present day renunciation” and a relinquishment that took place prior to June 3, 2004. The difference is NOT in the kind of relinquishment, but in the date of the relinquishment.
As U.S. tax lawyer Michael Miller suggests:
For persons whose CLN shows a loss of citizenship date that is on or before June 3, 2004, section 877A should not apply. Even if the CLN is received today. I’ve discussed this with people at the IRS and they’ve informally stated that they agree.
In conclusion …
There is NO difference between “relinquishment” and “renunciation” (renunciation is just one form of relinquishment). For tax purposes, there is likely a difference between a “relinquishment” prior to June 3, 2004 and a “relinquishment” (including a “renunciation” after June 3, 2004. When it comes to U.S. tax obligations:
The difference is in the date of the relinquishment. The difference is NOT in the form of relinquishment.
Is a CLN (“Certificate of Loss of Nationality”) a necessary condition for NOT being treated as a “U.S. tax citizen”? Probably not, but this issue has been the topic of much discussion. For those who are truly interested in this, I invite you to read my recent post:
Taxability Freedom Day: On what day does a “U.S. person” cease to be a “U.S. taxpayer”?
Category 2 – The difference in treatment under other U.S. laws between “renunciations” and other forms of relinquishment under other U.S. laws. Here are “some examples”:
S. 1182 of the Immigration and Nationality Act descries categories of “excludable aliens”. The list includes:
(E) Former citizens who renounced citizenship to avoid taxation
Any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is inadmissible.
This is commonly referred to as the Reed Amendment. It has never been enforced. It is hard to see how it could be enforced. The statute in its plain language imposes a number of hurdles on the U.S. government. See the following interview between Virgina La Torre Jeker and Bill Yates.
Do you want to be on an FBI list? In a fascinating post at the Isaac Brock Society, Eric reports that:
The FBI has released the latest monthly report on the number of records in NICS, the National Instant Criminal Background Check System. Alongside hundreds of thousands of records of convicted criminals and the mentally ill, NICS now contains 21,308 records of people who have formally renounced U.S. citizenship, up from 20,830 last month.
As discussed in our earlier post about NICS, this number includes only emigrants who lost U.S. citizenship under INA § 349(a)(5) or (6) by swearing an oath of renunciation — meaning they had lived abroad for many years and were now naturalising in a country whose laws require applicants for naturalisation to renounce all other citizenships prior to being granted a certificate of naturalisation (such as Denmark or Hong Kong), or they were choosing to give up U.S. citizenship after a long period of being dual citizens — which they might choose to do immediately after moving out of the U.S., or decades after their emigration.
NICS does not include records of people who relinquished U.S. citizenship, which normally occurs when emigrants naturalise or enter government service in a country which does permit dual citizenship, but nevertheless choose to have this treated as an “expatriating act” by the U.S. State Department. Based on 1994–1995 State Department data and the Isaac Brock Society’s own collected reports of readers giving up U.S. citizenship, the ratio of renunciants to relinquishers seems to be between five-to-four and six-to-four. That would suggest that roughly eight or nine hundred people gave up U.S. citizenship in one way or another last month.
Chuck Schumer’s Expatriot Act – Do you remember this piece of vindictiveness? Assuming this description from Wikipedia is correct, the Expatriot Act was:
A bill to amend the Internal Revenue Code of 1986 to provide that persons renouncing citizenship for a substantial tax avoidance purpose shall be subject to tax and withholding on capital gains, to provide that such persons shall not be admissible to the United States, and for other purposes.
In fact, the Expatriot Act would apply to all covered expatriates.
Who knows? Maybe at some point (I doubt it) the United States of America will go “Full Schumer”.
Conclusion …
This issue is of concern ONLY if you wish to have a CLN. If you believe that you have “relinquished U.S. citizenship” prior to June 3, 2004, I would think twice before applying for a CLN. (Note that the FATCA IGA does allow for a “self-certification” of non-U.S. citizenship.) Under the Immigration and Nationality Act, relinquishment of U.S. citizenship is NOT and has NEVER been dependent on having a CLN.
That said, if you:
A. Believe that you have “relinquished U.S. citizenship” prior to June 3, 2004; and
B. Feel that you must have a CLN
you should still ask for a CLN that reflects the date of actual relinquishment of citizenship under the Immigration and Nationality Act!
John Richardson
Unfortunately, the Ex-PATRIOT Act was aimed at all covered expatriates, not just (a)(5) renouncers.
https://www.congress.gov/bill/112th-congress/senate-bill/3205/text#idB45F75E5311342B6B88EC81F4BC1C8AF
That was part of what Chuckie meant when he said that the Reed Amendment “was written in a manner that inhibits its enforcement”. The folks in Mordor have known about that particular loophole at least since the early 2000s and have been trying to fix it it since then.
http://isaacbrocksociety.ca/2014/12/09/bipartisan-attempts-to-exile-former-u-s-citizens-20022008/
“It is unclear what the ‘effective date’ will be.” It’s November 9, 2015. The side box on the Federal Register page says: “Section 22.1, Items 2.(a), 2.(b), and 2.(g) of this rule become effective September 23, 2015. Section 22.1, Item 8 becomes effective November 9, 2015. Written comments must be received on or before November 9, 2015.” The relinquishment fee is item 8.
“In the past, individuals seldom requested Certificates of Loss of Nationality from the Department to document relinquishment. ”
No duh– because before FATCA, people weren’t being singled-out for loss of banking, jobs, and loans in their home country!
“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.”
Um, “supply & demand”? Shouldn’t it be the other way around? Things become faster & more streamlined, lowering costs? Not more costly? Sure sounds like they’re setting up for increases soon.
“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.”
So, the $2350 is not for the relinquishment/renunciation, but for the piece of paper (CLN)?
Does this mean we can still relinquish free of charge until November 9? I’m going to do this right away. I became a Swiss citizen in December 2014, and I then sent them my taxes/FBARs for that year, but havent had any other contact with them. Anything I should worry about? Where do I start?
To the above list A. and B. I would add:
C. If you feel confident that your claim to relinquishment will not be denied by the DOS… The point is that it is unclear whether those relinquishment claims which are rejected by the DOS will still incur the $2350 fee. I suspect it will. Going for relinquishment is a gamble, going for renunciation is a sure thing. If both cost $2350, that should be considered along with the valid points A. and B. as well.
The elephant in the room is that regardless of relinquishment date do you want a cln.
I suspect many dependent on country will be satisfied being able to answer no if you are a us citizen.
Form 8854 and related matters are Usa law and dependent on where you live with no force.
Relinquishing today then self documenting is a viable plan dependent on circumstances
I am a Canadian citizen today because of Canadian law changes but will not get a Canadian passport to visit Canada and when asked citizenship I will not say canadian
Eric@: “Unfortunately, the Ex-PATRIOT Act was aimed at all covered expatriates, not just (a)(5) renouncers.”
Yup. And worth noting that Ex-PATRIOT would make even some former green-card holders inadmissible.
Watcher you point out a good philisophical point
People need and will make decisions in regards to paper dependent on needs
Some brockers will do what they need to do to continue their life in their country and are content never stepping foot in the Usa again
Other brockers have a need or desire to live outside the Usa but visit the usa
It took me awhile but post fatca having relinquished but no cln that at some point I may no longer be welcomed as a tourist spending money
To date I have had no problems visiting and once was asked about prior usness
But again I can see divergence of opinions here at brock likely dependent on circumstances
My life is outside the Usa and my focus is being able to function outside the Usa as a non us citizen and be in compliance with the laws of my country not foreign law.
@AJ: First thought: to avoid the fee, you’ll need to have your final US consulate appointment before November 9 — they will charge based on the date you show up at the consulate to sign all the paperwork, rather than the date of your relinquishing act (your naturalization in Switzerland). Plan for potential days off of work so you can travel to a nearby country with fewer relinquishments; it may be difficult to get an appointment in Switzerland within two months.
State Department Foreign Affairs Manual discussing relinquishment interviews:
http://www.state.gov/documents/organization/120546.pdf#page=9
@AJ
I am told the Consulate in Luxembourg are less busy and only a day trip by car or train from CH.
Do you have the last 5yrs of tax filings under your belt? If not, you will be considered a covered expat. If this concerns you, then you can back file in the streamline program and include a letter stating you were unaware of the filing requirements.
Thanks for the replies! Thankfully, my tax affairs are all in order. When this all started a few years ago, I took action. I sorted out my own and my families tax situation, and we began the long process of becoming Swiss. I was planning on perhaps waiting until the end of the year to relinquish. I have already performed a relinquishing act, and I figured I could wait a year before taking the final step, provided I perform no affirming act, like filing my taxes again. I wanted to wait in case something improved. Silly me.
…I’ve contacted the Embassy in Berne, and they will be sending me the ‘package’. He also said that it should be possible to get it done before the new fees come into effect. I’m going to stay hopeful, and assume he’s telling the truth.
Although I won’t trust the US government any farther than I can throw it, by all accounts embassy staff are mostly friendly and helpful.
…on another note: I’ve finally learned that nothing good comes of waiting for things to improve with these guys. Back when renunciation cost 450$, I figured I could afford to pay that, and I left myself the option of either relinquishing for free right away, or waiting to see if things improved and paying the fee if need be. Then they raised the price to 2350$, which took renunciation off the table. I committed the relinquishing act at the end of 2014, but thought I could wait a bit before notifying them (my next ‘affirming act’ would have been filing my 2015 taxes in summer 2016). Now they’ve raised the price of relinquishment, and I realise I’ve finally run out of time. It’s time to go.
Good point, notamused. Choosing door #2 (renunciation) may be the less dicey choice should State keep your fee if they should reject your case for relinquishment.
When a government chooses to close its exit doors for even a few, what’s to stop them from closing them for all?
One other reason why a person may seek a back dated CLN is for estate administration purposes. If a person has an assiduous executor, such as a corporate executor (often a Trust company), the executor may decide that it is necessary to file past due U.S. returns. This is aside from any estate tax considerations. Having a CLN (depending on the relinquishment date) should solve that problem.
Thanks, Hazy.
You’re right, except — “discretionary trusts / Canadian Henson trust” that may be in place for persons with a disability, including those ENTRAPPED who cannot renounce their US-deemed US citizenship for any amount of money through any US law firm / the US Department of State, etc. …
May something change to protect any who would be so ENTRAPPED and not able to get that CLN!
@George “My life is outside the Usa and my focus is being able to function outside the Usa as a non us citizen and be in compliance with the laws of my country not foreign law.”
you hit the nail on the head with this one. I agree 110% with you and I will most certainly never be setting foot in Amerika again.
If this is true, then I am 100% fucked. There’s no way I can get in under the deadline, and though I did pass the Canadian citizenship test here (19/20) I might be waiting another eight weeks to take the oath. No way I can get it all done in time now.
@mjh49783, as @george said on another thread, you can still relinquish your US citizenship by becoming a Canadian citizen. If you make copies of your Canadian citizenship card or certificate, make a copy of the new US regulation about charging US$2350 for a CLN, and prepare a letter for your bank and other financial institutions explaining that you are not applying for a CLN because of the high cost, that should serve as a reasonable explanation why they should not report your accounts to the CRA/IRS under the FATCA/IGA. If the bank nevertheless insists that they need a CLN from you to cover their ass, tell them you will be happy to get one if they will pay for it.
@AnonAnon
….and if I ever have to visit that damn country ever again because of any future family issues?
….Then sure, I ‘might’ be able to convince a bank here that I don’t have a CLN, simply because I don’t have $2350 to flush down the toilet, and MAYBE they might not sell me out to the IRS. Maybe. But ultimately, my relinquishment of US status will have no legal effect, since I chose to not pay the blood tithe to have my passport cancelled with the ‘bearer expatriated’ stamp, as I now cannot afford to do so, so what is the point?
http://isaacbrocksociety.ca/2015/03/05/state-department-claims-renunciants-are-still-u-s-citizens-until-cln-approved/comment-page-1/
Therefore, the way I see it now, I have two choices. Maybe three…..
1. To accept things, which at this point, I don’t have any choice for the time being.
2. To formally renounce later, once I have the money, and hope I’m not chasing a forever upward moving target. If I have to pay anyway, then why in the hell not?
3. Hope that someone recognizes this extortive, and punitive $2350 fee for what it is, as a violation of the human right to expatriate, and sues the government over it. (Probably has only a slightly better chance than a successful legal challenge against citizenship based taxation.)
Therefore, as I’ve said, I’m basically fucked. Convincing the bank to not fuck me over, doesn’t fix the problem of what I need to do for my wife, due to her disability, as she continues to decline. Neither does trying to bury my head in the sand, and attempting to do something half assed and dubious, with the vain hope of being overlooked. FATCA is not the problem, because in the end, FATCA is only a symptom.
US citizenship, on the other hand, IS my problem. My only way out now is to pay the slave master. Otherwise, I am stuck in Hotel California until I pay. It is what it is, and that is what I need to recognize before I can reformulate a proper plan of what to do.
@mjh49783, I think it depends on whether you are making peace with the IRS as part of your relinquishment of US citizenship. If you are, then I don’t think you need to worry about having a CLN to visit the US either. Just go with your Canadian passport, and if they say you should be entering on a US passport because you were born there, tell them that you have relinquished your US citizenship. If they ask for a copy of your CLN, tell them you couldn’t afford to buy one.
If you aren’t planning to follow all the IRS exit rules, it might be a different story, but then a CLN wouldn’t help you either.
My main point is one that others on this site have made as well: The CLN is a document that others might want to see, but you don’t need a CLN in order to relinquish US citizenship by taking out Canadian citizenship. So if anyone asks you to show a copy of a CLN to “prove” that you are not a US citizen, just tell them that you “couldn’t afford to buy the souvenir programme” and show them your Canadian citizenship card instead, along with a statement that by taking Canadian citizenship you voluntarily relinquished your US citizenship. (Note: For a person who has to renounce US citizenship in order to relinquish it, it’s a different story, because that must be done at a consulate, and the consulate will charge the fee to administer the oath of renunciation.)
@mjh49783, you said, “But ultimately, my relinquishment of US status will have no legal effect, since I chose to not pay the blood tithe to have my passport cancelled with the ‘bearer expatriated’ stamp, as I now cannot afford to do so, so what is the point?”
I don’t see why that is a problem. After you become a Canadian citizen with intent to relinquish your US citizenship, you will travel on a Canadian passport and won’t be using your US passport any more. You could write a letter to the US State Department and ask them what you should do with it, since you won’t be needing it any more.
@mjh49783, your real concern may be whether you will be able to continue to visit the US for family reasons after you become a Canadian citizen and relinquish your US citizenship. It might be helpful for you to know that there have been no reports (that I know of, anyway) of people with Canadian passports showing a US place of birth who have been denied permission to visit the US. If the border agent asks why you are not entering on a US passport, just tell them that you are no longer a US citizen. In my own experience of two recent visits, they didn’t even ask.
@anonanon
I am not Canadian but have entered multiple times with no issues and was treated equally bad as if I had been a usc
@mjh as anon and me have stated this is a journey not a race.
Once you take the oath you have relinquished if that is what you want
You can then answer no to the usc question
After that you decide on cln but you may find yourself more comfortable
But anyone saying they are a usc because they do not have a cln is foolish