The U.S. Department of State has published a change to their Consular Fees: they are now charging the same amount of money for relinquishing U.S. nationality as they are for renouncing it:
Documentation for Loss of Nationality
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.
This means that it costs ALL American nationals thousands of dollars to change their nationality. Of course, this affects primarily the middle class and less wealthy. However, even if you make the assumption that this is an exit tax for the wealthy expat trying to avoid U.S. duties, this fee doesn’t discourage or hurt them. A tax dodger that the U.S. IRS is interested in most likely wealthy, and even if they qualified for the relinquishment instead of renunciation, a $2,350 fee is nothing for them. Accidental Americans, referring to people who don’t live in America yet acquired U.S. nationality involuntarily (such as through birth) and never use it (or weren’t even aware they possessed it until recently), give up their U.S. nationality not because they don’t wish to pay U.S. taxes, but rather because they fear the fines and/or legal hassles associated with making a mistake when constantly filing the annual (or more frequent) paperwork to the IRS. Making a mistake is easy to do, because living overseas with foreign income and assets (possibly mixed with domestic assets) makes error-less filing much more difficult.
The prose above gives a lot of reasons for the price increase, claiming that the processes for the consular officers is time and cost consuming. I, however, having relinquished my U.S. nationality (for the purpose of naturalizing to another country — that doesn’t allow dual nationality — where my family, career, and home have been for decades) at the Tokyo Embassy, have experienced the process first hand. My experience? I was less than impressed with the amount of work it entailed. In particular, I did a lot of the work (proving my U.S. nationality) myself, not the consular staff. And a lot of the other work was done by the State Department in the U.S., not the local Embassy staff. You can read about my personal relinquishment experience here:
- Relinquishing U.S. citizenship in Tokyo (part 1 of 4)
- Relinquishing U.S. citizenship in Tokyo (part 2 of 4)
- Relinquishing U.S. citizenship in Tokyo (part 3 of 4)
- Relinquishing U.S. citizenship in Tokyo (part 4 of 4)
I am willing to bet that a lot of other procedures that the state department performs, such as registering a U.S. birth or marriage overseas, require many of the same procedural checks (such as verifying U.S. nationality) that losing one’s nationality requires, yet the fees for other services are nowhere as near as high.
I also wonder, if by charging an exorbitant fee, America isn’t running afoul of the spirit of the U.N. Human Rights agreements that it agreed to and signed off on. The United Nations’ Universal Declaration of Human Rights, Article 15 states:
- Everyone has the right to a nationality.
- No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality.
One could possibly argue that by charging an exorbitant amount to “change” one’s nationality (change meaning not just acquiring a nationality, but losing one’s nationality voluntarily as well), America is attempting to prevent most Americans in the situation where they need to change their nationality (most who do so do it for family and personal reasons, not exclusively for tax avoidance reasons) from doing so.
The document about this change is asking for comments. I recommend posting your (polite and civil) comments to the document if you think that the fee is excessive.
Glad I got out when I did, had it been this way I would have not been able to afford it and that is down right terrifying.
Litigation seems necessary to test the legitimacy of these fees, and seems relatively risk free (not cost free), certainly relative to resisting the tax jurisdiction. All that is needed to resist the expatriation fee is for an individual to apply to the consulate or whatever with all the necessary forms filled out, but refuse to pay the fee. When the application to expatriate is rejected for lack of payment, a suit against the State department would seem to become ripe. I say risk-free but not cost free because the cost is time, in that the expatriation will not be complete. Even so, there is no risk of punishment for noncompliance with an applicable law so this is a relatively accessible means of widespread resistance to an unjust practice. I even wonder if one could sue the State department pro se. It could be useful to work up a strategy for common use.
So someone residing abroad would have to bring the lawsuit in the US?
I’m still far from relinquishment, but I would consider that. Litigation would be costly, though, I guess.
This for me was the last straw, and I’ll be relinquishing in a few hours. Fortunately, the fee doesn’t come into effect until November. On another note, I’ve found the embassy staff in Bern (a Swiss German, by his accent) to be friendly, helpful and efficient, and I was able to set up an appointment in only 2-3 weeks.
Though my ties to the US are VERY tenuous (one deceased US parent, never lived in US, last visit in 2003), this isn’t a happy day for me. I’m sad it had to come to this.
AJ: yes it is a difficult decision. It’s one I may (have to) make one day and I know it’ll be a sad day for me. All the best to you today.
There’s also the court’s docketing fee of $400.
What would be the basis for the lawsuit? Injunction to compel compliance with the Expatriation Act of 1868?
How would you find a US District Court with jurisdiction?
@Eido, @Allison Christians, You (Eido) state “they are now charging the same amount of money for relinquishing U.S. nationality as they are for renouncing it” and “This means that it costs ALL American nationals thousands of dollars to change their nationality.”
Let me punch some holes in what you wrote as it will improve the arguments that we from the “Borg Collective” will make.
I have argued on this board that a CLN is NOT a requirment to lose ones US Nationality if an appropriate action was taken in accordance with 8 US Code. I relinquished a decade ago, do not have a CLN but do have documentation from the US Government recognizing my relinquishment and that I am no longer a USC. That said, I do believe a CLN can be a pretty handy piece of paper to have in ones pocket!!
I would argue that this regulation further supports my argument that a CLN is not in fact required to have lost US Citizenship hence the reason I believe the above quotes by the author are incorrect.
The State Department is now acutely aware of the Expatriation Act 1868 and cites the act in 7 FAM 1200, “That any declaration, instruction, opinion, order, or decision of any officers of this government which denies, restricts, impairs, or questions the right of expatriation, is hereby declared inconsistent with the fundamental principles of this government.”
So how do you complete the circle between the left hand and the right hand? It is very c;ear that charging $2,350 to relinquish ones USC clearly runs foul to the Expatriation Act 1868 which the State Department clearly acknowledges!!
What is State charging for? They are not charging for “relinquishing” they are charging for “Documentation for Loss of Nationality.” They are charging those persons that want the State Department to issue them a piece of paper just as they charge for issuing an affadavit or notarial service.
They also state “In the past, individuals seldom requested Certificates of Loss of Nationality from the Department to document relinquishment.”
This is important for several reasons. First, it highlights in writing for those giving an FI a reasonable explanation as to why they do not have a CLN is simply that prior to the date of this notice “individuals seldom requested Certificates of Loss of Nationality.”
Second, it is not a fee for the act of relinquishment rather it is a fee to “document” same. There is a major difference between an action and documenting said action.
Now here is where Allison is on to something in stating “certainly relative to resisting the tax jurisdiction.”
I think Allison understands my above argument or if not will understand it now, but a CLN is a requirement dependent on relinquishment date to escape “tax jurisdiction.”
Effectively the IRS is now requiring the payment of an administrative fee of $2,350, circuitously through State, in order for a person to file a Form 8854 because a CLN date is required as part of that form!!
Is this action a good thing? Yes, I believe that the USG has provided another path forward for our cause. They have now confirmed in writing that CLNs were “seldom requested” which means most people that relinquished will NOT have a CLN!!! So when a FI asks a person for their CLN they can provide a reasonable explanation with their own written proof along with the State Departments own written word that such documents were “seldom requested.” The proof of not getting such a document now is the cost!!!
I do believe that State has perfected their argument on this matter but I also believe that they still need to be challenged based on the argument that this does violate the Expatriation Act 1868 and the UN Declaration. Such a challenge may force them to either back down on the fee which is good or it forces them to admit in stronger terms that the CLN is an “optional” document to have and that is good too! Arguing the case with State is a win/win for our cause.
The “bonus” in all this is that charging a fee to get a CLN, I think flies in the face with tax expatriation and Form 8854. I think if State lawyers had talked with Treasury lawyers they would not have gone down this route. It also muddies the water on the IGA agreements that were signed because many were signed when a CLN was free for to “document” a relinquishment.
OK Brockers fire back at me because iron strengthens iron. I know my argument sounds like a cheap lawyer talking but lessons were learned from the Summary Trial and the Bopp injunction. I believe that State was very careful in their choice of words.
@Moderators, would someone please download the pdf of the State document on this and place it in the permanent archive section of Brock?
The current issue of 7 FAM 1200 would also be good to have stored on another server;
This is not a surprise, it is exactly what one would have expected. Some will pay the fee and get the CLN, others will play submarine and simply ignore the whole mess. If the IRS sends them a letter because an FFI has reported them, they will simply put the letter in the bin and go on with their life. So long as they have no assets in the USA, and do not make trips there, they have little to fear. It would only be when the IRS can compel a FFI to garnish/freeze or withhold that the horror of CBT and FATCA will really be felt. Most will just break any economic/property connection to the US and live their lives. That’s how I see it now with some years of dealing with this. I would welcome comments and thoughts…am I missing something?
@Brockers another little ditty from 7 Fam 1200 Appendix A, page 15;
“The principle that a country shall determine who is a national of that country for purposes of their domestic law is a concept universally recognized under international law.”
IF that is true then it is also true that the USA has no business in determining that a Canadian Citizen in Canada is a US Citizen!!!
That is a powerful quote from State that could be of use…maybe to ADCS????
Your comments sum up what the IRS can (or, more appropriately, cannot) do. The problem, at least in Switzerland, has been overzealous banks wanting to be more Catholic than the Pope, calling in mortgages, freezing accounts and other such shenanigans.
>A tax dodger is most likely wealthy,
This is the thinking that got you FATCA. There is nothing wrong with looking at the tax bite and the compliance costs and choosing not to play. I chose not to play with many investment types based on the taxes that apply. I chose to quit working based on the tax burden my income has.
Turning you back in the final analysis is all you have.
Well damn, if I had not encourage so many relinquishers to go and pick up a free CLN, this might not have happened.
@George, I like your line of argument. By separating “tax citizenship” from actual citizenship, the US has gotten itself tied up in inconsistent legal knots. As you said, the key sentence in the announcement is “In the past, individuals seldom requested Certificates of Loss of Nationality from the Department to document relinquishment.” The reason was that, until they started enforcing tax citizenship beyond relinquishment of actual citizenship, there was no need for an individual to get a CLN. Now they are clearly admitting that a CLN is to “document relinquishment” rather than to accomplish relinquishment of actual citizenship.
@George interesting. You may well be correct. It would be good to have a test case: anyone willing to just refuse and tell the tale. If you are right, then a conclusion might be that the reasonable explanation for lack of CLN for FI documentation purposes is ‘relinquished/renounced on [date], refused to pay fee for documentary proof’. As far as where/how to sue the State Dept if in fact one was in fact prevented from expatriating by reason of refusing to pay the fee, I just don’t know the answer.
This is in Canadian guideline I do not know if this applies to other countries. If you have done a relinquishing account before 2004 you just go to bank. If the IGA is overturned Bank would not have to live by this guideline. Also even if you have a birth certificate stating born in Detroit Michigan that is not an unambiguous USA place of birth.
“8.28 In the context of an electronic record search, an “unambiguous indication of a U.S. place of birth” must include identification of the U.S. as the country of birth. Identification of a city and/or a state as the place of birth, without identification of the country of birth as the U.S., is not considered to be unambiguous.
The CRA’s views of what may be accepted as a reasonable explanation for not having a CLN despite relinquishing U.S. citizenship for purposes of Part XVIII and the Agreement are informed by certain practical realities and how changes in law over time would have influenced reasonable courses of actions taken by individuals. ”
Generally, it is the CRA’s view that an explanation demonstrating a relinquishment of U.S. citizenship (other than by a renunciation before a U.S. consular or diplomatic official) before June 4, 2004, and in accordance with the U.S. Immigration and Nationality Act (Title 8 of the U.S. Code) as it existed at the time of relinquishment, is sufficient to demonstrate a reasonable explanation as to why an account holder does not have a CLN. Financial institutions are not expected to be experts in U.S. nationality law; any such explanation accepted by a financial institution is accepted for the purposes of Part XVIII and the Agreement only and is not finally determinative of tax or nationality status.”
How about the Harper Government providing a tax credit always equal to the State Dept fee?
The Harper Government created this mess by signing the IGA and should pay for it.
Just think – it would cost them $2,350,000,000 (or $78 for every person in Canada) if all 1 million Canadians renounced and claimed my tax credit. It has to be a tax credit so you can collect it regardless if you paid tax or not.
If the US gets nasty and raises it again then Harper’s bill goes up for his stupidity.
I hope he gets hammered in the polls soon.
Fact is, all these barriers reduce our options. I’ve never understood why the US would want to create barriers to renouncing for those who might be be less than enchanted with being American. What could possibly happen when those who no longer love them can’t leave them, but still carry a US passport?
Banks could get into the loan money for a CLN business. Win-win situation!
The US Government is so deliberately spiteful. Whilst all Governments across the world provide their citizens (and locally-born non-citizens too) with the necessary financial liberties to enrich themselves overseas as well as the image of their homeland (effectively de facto ambassadors), I am so surprised that this terrorist-gangsta attitude exhibited by the United States (like sister Eritrea) has yet to be condemned by any Government or by the United Nations.
Also, let us remind them (once again) that the act of renunciation is a human right, not a criminal offence.
As far as I have understood it, relinquishers are saying “I am not a US citizen. I have not been one for years.”
And now, the burden of proof needs to be paid by the unjustly accused- the person who is actually saying i am not a US citizen to begin with.
How long before the fee for documenting a relinquishment is increased above that for renouncing due to the fact that the cost to the USG to document a relinquishment is obviously quite a bit more than the cost to administer a renunciation?
It’s actually similar to the Obama accidental American budget proposal, where those who don’t consider themselves to be US citizens need to pose and declare themselves as US citizens in order to claim that US citizenship should not be imposed on them.