When it comes to compliance there is a lot of confusion as to:
- what day does loss of citizenship occur and
- what roles do f8854 and a
- Certificate of Loss of Nationality play?
The filing requirements are explored in two posts by John Richardson.
BRIEF SYNOPSIS
Before June 3, 2004 (before the creation of the “Tax Citizen”)
The date of your “expatriation”was determined solely by the provisions of the Immigration and Nationality Act.
June 3, 2004 – June 16, 2008 (after the creation of the “Tax Citizen”)
You continued to be treated as a “U.S. person” for tax purposes UNDER THE INTERNAL REVENUE CODE until you gave “notice” of your “relinquishment” to a government agency. For this period part of the “notice” was filing Form 8854 with the Internal Revenue Service. In other words, there was no way to cease to be a “U.S. person” for tax purposes until you had notified the IRS.
After June 16, 2008 –
A.The issuance of a CLN is confirmation that the State Department has agreed that you have relinquished U.S. citizenship. A CLN is a confirmation that you have met the “notice requirement” under the Internal Revenue Code.
B. The CLN is one way (a self-certification is also possible) to satisfy “foreign banks” that you are NOT a U.S. person for tax purposes under the Internal Revenue Code. (In other words, a CLN is a “sufficient” but not a “necessary condition” to prove non-USness.
Read more HERE
*****
1. Is the loss of U.S. citizenship for nationality purposes dependent on having a Certificate of Loss of Nationality (“CLN”)?
The answer is absolutely not.
349(a) of the Immigration and Nationality Act specifies conditions under which one relinquishes U.S citizenship.
2. Is the loss of U.S. citizenship for tax purposes dependent on having a Certificate of Loss of Nationality (“CLN”)?
Prior to June 3, 2004 – NO for either immigration or tax purposes
June 3, 2004 – June 16, 2008 – NO for either immigration or tax purposes.
After June 16, 2008 – No for immigration purposes – It is necessary as a confirmation of having met the “notice requirement” to end U.S. citizenship for tax purposes
3. What is the role of a Certificate of Loss of Nationality (“CLN”)?
For Immigration and Nationality Purposes – no relevance whatsoever
For Tax Purposes – The Internal Revenue Code
The accusation of U.S. citizenship is triggered by various indicia (U.S. place of birth, U.S. residence, U.S. phone number, etc.). The U.S. “place of birth” is the most dangerous indicia. Those with a U.S. place of birth can rebut the accusation of U.S. citizenship with either:
A. The CLN; or
B. A “Self Certification” (that must meet specific requirements) documenting why:
– the person has relinquished U.S. citizenship; and
– does NOT have a CLN.
A denial of U.S. citizenship will generally require proof.
In general, those who have relinquished U.S. citizenship under the Immigration laws of the United States prior to June 3, 2004 are more likely to be able to “self certify” that they are NOT U.S. citizens even though they do NOT have a CLN. This position is consistent with the August 2015
4. Why is the Certificate of Loss of Nationality (“CLN”) of value?
It’s simple. Unless you live in the United States, life as a U.S. citizen abroad, in a FATCA, FBAR and CBT world, will be an endless source of anxiety and difficulty. A Certificate of Loss of U.S. Nationality is becoming one of the most sought after documents in the world today.
5. What is the role of a Certificate of Loss of Nationality (“CLN”) in a FATCA inquisition?
June 16, 2008 – Present
IF (you relinquish U.S. citizenship under the Immigration and Nationality Act) THEN
You continue to be treated as a “U.S. person” for tax purposes UNDER THE INTERNAL REVENUE CODE until you give “notice” of your “relinquishment” to a government agency. The “notice” requirement is NOT to the IRS, but to the State Department. (See S. 877A(g)(3) and S. 877A(g)(4) of the Internal Revenue Code.) Once “appropriate” notice is given to the State Department you cease to be a U.S. taxpayer from the date the notice is given (on a prospective basis).
Read more HERE
“Issued in error”, apparently.
http://isaacbrocksociety.ca/renunciation/comment-page-215/#comment-6972612
In that person’s case I hope she made numerous photocopies of the CLN before sending it back. Very useful for solving bank problems. As good as the real thing, especially a notarized copy!
Yes, I remember that series of posts. Trying to claim a past relinquishment based on CBC employment as the expatriating act did seem a bit dodgy to me at the time. Nevertheless, if I had been Molly, I would have told ’em to F-off. But different strokes for different folks and Molly opted to return the CLN.
I particularly liked BC_Doc’s post stating that he too, would have sent it back, but not before making several certified copies of it!!! BC_Doc was a great refusnik voice and I always enjoyed his posts. I can’t help wondering if he owns of one of those CCFCs potentially affected by this latest transition tax travesty. If so, I’ve got a good hunch what his message to the US government would be.
Claiming past relinquishment based on naturalization in another country seems like a slam dunk to me;
1. Did the expatriating act occur? Of course; the individual has the citizenship certificate to prove it.
2. Was it voluntary? Of course; no one would naturalize as a citizen of another country if they didn’t want to do so.
3. Did the individual intend to lose their US citizenship? Their intent was what they say it was unless the State Department can show that they later did something which refutes that claim. Even the use of a US passport has not been fatal to past relinquishment claims because the individuals were able to state that they were coerced into using it by ignorant border guards.
“Of course; no one would naturalize as a citizen of another country if they didn’t want to do so.”
Calgary411’s son was not born in the US so the 14th amendment doesn’t directly apply. Calgary411’s son was naturalized at birth and the 14th amendment applies to that naturalization. (For any new reader who comes across this without knowing the background, Calgary411’s son lacks mental capacity to choose to want to be naturalized.)
“Calgary411′s son was naturalized at birth and the 14th amendment applies to that naturalization.”
Not correct. Calgary411’s son was born in Canada to 2 USC parents (at least one of whom met the US residency requirement), which automatically gave him both US and Canadian citizenship at birth. He didn’t need to go through a naturalization process for either citizenship and no one had to decide or choose anything.
“which automatically gave him both US and Canadian citizenship at birth”
Yes — which automatically naturalized him at birth so he didn’t have to go through a process.
Right, maz57, your clarification that my Canadian-born son was not naturalized at birth.
http://isaacbrocksociety.ca/2016/01/16/born-abroad-to-us-citizen-parents-in-a-cookvtait-world-are-you-a-us-citizen-or-do-have-a-right-to-us-citizenship/
and
http://isaacbrocksociety.ca/2016/01/16/again-can-the-u-s-deem-somebody-to-be-a-u-s-citizen-or-in-the-fatca-fbar-and-cbt-world-forcibly-impose-u-s-citizenship-on-a-person-born-outside-the-usa/comment-page-1/#comment-7084080 (with reference to Department of Homeland Security U.S. Citizenship and Immigration Services Policy Manual). My adult son does not have the requisite mental capacity to renounce that extraneous, burdensome deemed USC, which I view as deemed entrapment into the costs of yearly US tax and reporting compliance, born in Canada, never registered as a US Birth Abroad, never lived in the US and never has had any benefit from the US, only his country of birth and residence, Canada.
Who knew — not me, not his dad — naivety yes, never having learned of US CBT in US schooling.
The new view of the definition might serve though, *automatically naturalized at birth*. Certainly was not by consent.
Barry Goldwater Jr., Ted Cruz, and Calgary411’s son were made US citizens at birth by US statutes not constitution. None of them consented at the time of birth though two of them did years later. They were all naturalized at birth by US statues.
In the Canada – US tax treaty, the “savings” clause becomes Canadian law, but I don’t think US statues naturalizing people at birth become Canadian law. Calgary411 could claim that her son isn’t a US citizen under Canadian law regardless of the ambiguity in US law.
US citizens living outside the US and born outside the US have no problems whatsoever if they keep this information to themselves. My daughter, for example. I expect she will never suffer the consequences of unwanted US citizenship.
Calgary 411, in your case their may be particular challenges due to power of attorney issues etc.
I actually know a couple, both Canadian, with a child born in the US who is severely disabled. I dread having this chat with them. It’s not yet clear where things stand in terms of mental capacity because communication is very limited; it’s possible he could one day give consent to renounce, but equally possible he could not. The big concern would be an executor or trustee trying to bring the estate and all it’s RDSPs into compliance.
“In the Canada – US tax treaty, the “savings” clause becomes Canadian law, ”
The saving clause that appears in the US tax treaty only lets the US escape the “no double taxation” convention. It doesn’t impose any requirement under local law for USCs to pay the double taxation. Rather an important distinction.
Those who never file have got it right; if a USC living in Canada or Europe or Australia never files (and no one with PoA or executor responsibilities files for them or their estate), that’s just fine under the law of the land, as far as I a non-lawyer can see, please correct me if I’m wrong.
The definition of naturalization is: “……the legal act or process by which a non-citizen in a country may acquire citizenship or nationality of that country…..”.
If an individual is a citizen of a country at birth (i.e. is born a citizen of a country), they are never a non-citizen, therefore it is not only unnecessary, it is impossible for them to naturalize.
maz57 – I think courts would probably rely on the law not the dictionary! 🙂
In a US court, no doubt Calgary’s son and my children would all be held to be USCs.
But a US court is never going to be asked.
This is about trusts, but perhaps it applies also for individuals?
https://www.dhestatelaw.com/blog/2014/10/residence-of-executor-may-have-important-tax-consequences.shtml
Perhaps the CRA could be asked to clarify whether an estate being administered by a tax-resident-only-in-Canada executor would be tax resident only in Canada.
Thinking about this… if local law holds the executor personally liable for payment of taxes by a dual USC’s estate, it would seem to follow that the executor could only be held liable for payment of taxes to a jurisdiction in which s/he is tax-resident; and perhaps payment of taxes which the deceased person has agreed to pay (by filing US tax forms).
The executor couldn’t be held personally liable for payment of taxes which couldn’t have been collected from the deceased person.
I speculate.
And that (I speculate further) is why Section 2801 imposes the “covered expatriate” tax on the trapped US-resident recipient of the legacy, rather than on the estate of the “covered expatriate”.
“Covered expatriates” being similar to unicorns, beyond US borders.
@maz57
I’m actually a rare bird that is a Canadian citizen through both naturalization and birth. I moved to Canada from the US when my Canadian mother decided to return home. I naturalized in 1996, but years later Canada changed it’s citizenship laws making me a Canadian citizen at birth through my mother. In spite of identifying as an American, I figure I’m more Canadian than most Canadians because I both chose and was born a Canadian.
@BB
I guess you can call yourself a “Double” Canadian. Good grief, I’ll never catch up with you!
I guess “double” is more appropriate than “more”, if we’re to believe that “a Canadian is a Canadian is a Canadian”. I just thought I’d say “more” for the irritation of those out there who think that that I’m somehow less Canadian for identifying as an American.
@plaxy
Re: Appointment of an executor. My aim is to appoint an executor who is not only a Canadian resident, but lives in a small town somewhere out in the middle of Canada where everyone is totally ignorant of US tax. That way my estate will be settled and the CRA satisfied with no mention of the US whatsoever. I doubt the CRA gives a hoot about US tax liability whether the individual is dead or alive. Its not their job and its not their problem.
maz – I’m sure you’re right. My residual anxieties about this have probably been quite unnecessary. Nevertheless, I’m pleased I came across that article about tax-residence of the executor, as it has clarified the situation for me.
Yes, I was pleased to read the excerpt and thanks for taking the trouble to post your find.
I too have changed executors, found someone aware of the (purely theoretical) risk, but with no US ties and no interest in bothering with US tax compliance.
From the quote above, I take it to be a similar situation to a still-living dual citizen in Canada: Canadian law cares not one bit about whatever US tax obligations a person might have. The only risk is to US assets or income etc.
I’m curious, though: if a US person dies and the executor is Canadian only, is the estate still subject to FATCA reporting?
Nononymous – Guidance from the UK says:
https://www.icaew.com/-/media/corporate/files/technical/tax/international-tax/hmrc-uk-us-fatca-guidance-notes.ashx?la=en
I don’t know if that would be the same for Canada and other countries.