reposted from Accidental Americans Public Group Facebook page by Sora Fon

This is a superb piece of work!

In 2013 Eric at Isaac Brock Society analysed available USG statistics to suggest that an increasing proportion of babies born abroad to US citizens is not being registered with a US consular office. While a few argue that citizenship is dependent upon registration (or, in the alternative and after the age of 5, application for a US passport), the better view is that the child is an American citizen at birth regardless — but that quite apart from the fact that the USG will not know of his/her existence, US case law establishes a (rebuttable) presumption of alienage in the case of a foreign birth and codified State Department practice (9 FAM 202.1-2 and 7 FAM 080) allowing the issuance of nonimmigrant visas and the admission to the US under visa waiver for a person who “has a possible claim to U.S. citizenship but is unable or unwilling to obtain documents to establish that status”.

The IRS has no standing to bring a proceeding to determine citizenship: its purview is to enforce the tax laws against those who by birth in the USA are (with very few exceptions) prima facie US citizens (under the 14th Amendment or by statute) or if born abroad have availed themselves of an attribute of US citizenship.

With the advent of #‎FATCA‬ and more stringent enforcement of ‪#‎FBAR‬, foreign trust (Form #3520), foreign company (Form #5471) and foreign collective, entity-based investment (‪#‎PFIC)‬ law, lifetime income and, for the self-employed, Self-Employment Tax (in the absence of a Totalisation Agreement) residence abroad as a US citizen is seen as untenable. But with the advent of a $2,350 renunciation fee and expatriation tax (Form 8854) especially for “covered expatriates”, observance of US law can be a practical impossibility. Taxes (through unrelieved double taxation and “payroll” taxes) and penalties can exceed 100% of income and assets. Pensions and tax-sparing savings may be impossible. Non-American spouse and offspring can be impoverished. Banking facilities and jobs may be denied although it’s unclear how generalised this problem has been.

Congress enacted these oppressive laws on purpose:
Congress Knew About Diaspora Phantom Gains Problem and Refused Fix .

It is part and parcel of the curious US notions of its own Exceptionalism and of Permanent Allegiance of those who, in its own right, the USG claims as its citizens, that even if those citizens have never set foot on American soil their primary obligation is to the USA and not any other country or society. (That Islam argues that sovereignty is reserved to Allah, and that foreign sovereigns may have other ideas can be left for discussion another day.)

There are at least 5 bilateral tax treaties containing mutual collection provisions, although these may not be applicable for persons who held the citizenship of the treaty partner at the time an unpaid tax accrued, and they may not apply to penalties:

Section 6330 Appeals Conference Memo

Only the Canadian provision is commonly invoked. Extradition for “tax crimes” rarely happens and when it does it is most often in connection with VAT “carousel fraud” and fraudulent income tax refund scams.

U.S. Efforts to Extradite Persons for Tax Offenses

Writs ne exeat republica to prevent a noncompliant taxpayer departing the United States are occasionally issued, and noncompliant citizens may be questioned on arrival in the US if their names appear on the TECS database used by immigration officers.

DHS:Privacy Impact Assessment Update for the TECS System See also Internal Revenue Manual § 5.1.18).

The worse it gets, in some respects the better it may be for those affected. Either the law will become so notoriously defied and so unenforceable abroad (though maybe not for want of trying) that (insofar as it damages the family lives of poor and working-class “accidental Americans”) human rights norms are invoked. Or penalties may be found disproportionate or their incidence intolerable by other countries: Blocking statutes, such as those enacted by several countries in response to the US Foreign Corrupt Practices Act, are possible.

Or notwithstanding that it is within the exclusive purview of each state to determined who are its nationals, other countries could refuse to give effect to US claims of “US Person” status to certain dual citizens and others resident on their territory. Resolution of cases of conflict of nationalities was more robust in the first half of the 20th Century:

Report on Nationality, Including Statelessness by Mr. Manley O. Hudson, Special Rapporteur

But that was before the Afroyim (1967) and Terrazas (1980) judgments of the US Supreme Court which seem to have assumed that possession of American citizenship is a precious commodity, not easily disposed of. For that reason the Ishikawa Kawakita (treason) and Yaser Esam Hamdi (terrorism) cases caused the USG so much grief.

So where does that leave us? Those who defy the USG are rarely going to advocate publicly for their position. It is useful, however, to take note of the raw statistics: In 2015 the State Department said “8.7 million AmCits … are overseas at any given time these days” and that “6.8 million reside overseas”. We have not seen these figures substantiated and they are probably estimates.

Passport issuance statistics are here. Citizen numbers are published from time to time in “Department of State Bureau of Consular Affairs Overseas Citizens Services”. As for tax returns filed from “other areas” than the 50 US states:

Historic Table 2 State Data Tax Year 2013 Sere the table under the map, very bottom of last column “Other”(695,000 for 2013, of which 257,000 were joint).

(This comment is a cooperative effort of my office)