82 thoughts on “US Passport application links Citizenship @StateDept to Taxation @USTreasury to enforce “Taxation based Citizenship””

1. @ Patricia Moon
   Does that mean that although the CND gov’t has said that the CRA won’t help the IRS collect on an alleged US “revenue offence”, it’s willing to let the offender be extradicted for a US “revenue offence”? I think the US gov’t would rather have the contents of bank accounts than more prisoners … but I could be wrong.

2. My message for those of you who are non-covered expatriates is to get out now!

   Yup. A mere reframe of an ancient famous Phil Hodgen quotation.

   Condensed version: Sauve qui peut.

   The at-sea ship began to list at least as early as February 2012
    

3. ‘When it comes to those born in the United States: Taxation and citizenship are one and the same!’

   Former holders of expired green cards might disagree.

   ‘Automatic extension to June 18, 2016, for taxpayers living outside the United States and Puerto Rico. No form is required; write “Taxpayer Resident Abroad” at the top of your tax return.
   Caution: This extension applies only for filing your tax return, not for payment. If you owe any taxes, you’re required to pay by April 18, 2016. Interest and penalties generally will be applied if payment is made after this date.’

   I thought I read somewhere that this automatic extension now DOES include an extension of time to pay, though it didn’t used to.

   ‘You can mail your tax return and payment using the postal service. If you mail a return from outside the United States, the date of filing is the postmark date. However, if you send a payment, separately or with your return, your payment is not considered received until the date of actual receipt.’

   What if one day USPS’s web site shows a trace of a registered letter taking 1 day from Shinjuku Ward Tokyo to New York NY and then 37 days from New York NY to Washington DC? What if on a later day, after you file a request for postal investigation to get an Advice of Receipt card completed (see USPS IMM 753.1), USPS’s web site no longer shows any trace of your registered letter? For example registration number RR465654759JP

4. EmBee, Patricia Moon;

   “(2) When the offense for which extradition is requested was committed outside the territory of the requesting State, the executive or other appropriate authority of the requested State shall grant extradition if the laws of the requested State provide for jurisdiction over such an offense committed in similar circumstances.. If the laws in the requested State do not so provide, the executive authority in the requested State may, in its discretion, grant extradition.”

   I don’t see any similarity between the tax regimes of the United States and Canada in this case. United States makes people pay taxes for income earned abroad. Canada would look the other way unless they have significant ties such as a house or nuclear family (spouse, dependent children) living in Canada. There is no way for the United States to argue similarity when Canada does not tax their citizens abroad.

5. @EmBee

   I don’t think CRA will collect on any CANADIAN period. And I would think that precludes any idea of extradtition. That would really only apply to US Persons resident in Canada who were not Canadians. And would constitute a specific level of tax evasion. Not just non-pmt of a bill……….

   @The_Animal

   I have found this week, that it is necessary to read more than just the actual Treaty to understand what they are talking about. The Technical Explanations plus the history of an article etc, have a lot to do with what it means. In general, it would appear that we have not understood this too well.

   For example, the 5th protocol discusses the exchange of information with regard to banks. That is something no one has ever discussed here and I was surprised to see it. So I suspect what they mean is something far more specific than how it may seem at first………..

6. @Publius

   Yup, the ones who complied early and were punished definitely fared the worst….that’s what USCA has said all along. “The minute you become compliant is when your tax problems begin….”

   There’s just no excuse nor any possible way to make sense of what they have not/have done. It’s just nuts.

7. @WhatamI

   Thanks — I was mistaken. I was confusing renunciation fee and taxes.

   So if I understand correctly:

   – When renouncing, they won’t send you a CLN if you don’t pay the fee (even though you have legally renounced; but the CLN is often necessary to prove loss of nationality, for instance to open a bank account). But they will send the CLN if you pay, even if you are not tax compliant, because this is the State Dept.
   – If you are not tax compliant when renouncing, you remain liable for taxes/penalties even after renouncing (even if you obtain a CLN) because this is the IRS.

8. @Fred, one thing that’s always worried me is that some of my tax years that I certified five years full compliance on 8854 had very complicated PFIC calculations that could be disputed by the IRS in an audit; From what I understand, my statutes of limitation won’t completely close till possibly as late as June 2020. If they discovered mistakes, they could argue that I was NOT in fact fully compliant and thus, a covered Expat. I wonder if they could even argue that I would thus still be deemed a U.S. ‘tax citizen’, even now.

   I initially worried that my earlier amended returns would be red-flagged when I made a quiet disclosure in 2011; I now fear that having renounced could have put up even more red flags.

   I feel reasonably optimistic that I should be OK because would have thought they’d have audited me by now, given that the last really complicated tax year for me was filed in 2012 for 2011, and because my 8854 was filed two years ago. But I still worry that they could try to aggressively audit renunciants going forward, to deter further expatriations.

9. @Fred,

   Not quite. There’s no such thing as “not paying the fee”. They collect it at the beginning of the appointment before you get to have the interview with the consul.

   So far as we know, they do not check tax compliance during renunciation or relinquishment approval. (Yet?) In a sense it doesn’t matter, because the IRS says you are a US citizen for tax purposes even after renouncing until you meet your filing obligations. I wouldn’t be surprised if tax compliance is eventually tied into renunciation and relinquishment approval. Of course, they would need to raise the fee even higher to cover the extra cost.

   Your 2nd point is correct.

   7 FAM 1261 says:

   U.S. citizens contemplating renunciation for whatever reason should be advised clearly and unequivocally that, if they choose to exercise their right to voluntarily and intentionally renounce U.S. citizenship under INA 349(a)(5) (8 U.S.C. 1481(a)) and the Department of State issues a Certificate of Loss of Nationality predicated upon a voluntary and intentional relinquishment, such action is final and irrevocable.

   Citizenship is not lost until the DoS approves it AND issues a CLN. To my mind, this clearly indicates that a “self relinquishment” does not exist in the eyes of the US government (or IRS or border guards), although one might be able to convince a foreign bank employee (for FATCA purposes).

10. @Trisha maybe Allison Christians could easily help with helping with this extradition elements. She easily might already know the answers.

11. “some of my tax years that I certified five years full compliance on 8854 had very complicated PFIC calculations that could be disputed by the IRS in an audit; From what I understand, my statutes of limitation won’t completely close till possibly as late as June 2020. If they discovered mistakes, they could argue that I was NOT in fact fully compliant and thus, a covered Expat.”

    I think that if they discover mistakes they could argue that you were not in fact fully compliant. But you won’t be a covered expat.

    You certified that you were compliant. Whether or not it you actually were compliant, you certified what you had to certify.

    I was penalized for writing and signing true and correct declarations under penalty of perjury, because that made the returns frivolous. The law requires signing the preprinted jurat even when I know it’s false, for example when a Form W-2 from a US employer is attached and I know that it’s false. If perjury is committed willingly then perjury is punished, but if perjury is committed unwillingly then it’s not punished. To avoid penalties for frivolousness, sign what you have to sign, regardless of whether it’s true or not.

    You certified what you had to certify, as the law requires. You’re not a covered expat. You might owe more taxes and accuracy related penalties, but that will not make you a covered expat.

12. ‘There’s no such thing as “not paying the fee”. They collect it at the beginning of the appointment before you get to have the interview with the consul.’

    I think self-relinquishers can still avoid the fee. Apply for a US passport. Declare that you relinquished in whatever year, with intention to lose US citizenship, and you never used US citizenship after that. Get your rejection letter.

    I think the consulate has to make a CLN for you even if you didn’t ask for one. I’m not sure if they have to give you the CLN but I think they have to make one.

13. @Norman,

    Can you point to anything that indicates your claim?

    I don’t think so. I just had another look through 7 FAM 1280 and 7 FAM 1380. There are many reasons that a passport might be denied, such as incarcerations, parole issues, child support arrears, etc. You get a denial letter.

    If I sat before the consul in Calgary who did my mother’s renunciation and my and other’s relinquishments, and said I was applying for a passport but I relinquished my citizenship 40 years ago, he’d scream and foam at the mouth and ask me why I was applying for a passport if I gave up my citizenship. I can’t imagine any consul even processing the application. With no application, you don’t get a denial letter.

    7 FAM 1281 says

    If the person indicates that he or she did intend to relinquish U.S. nationality in accepting a nonpolicy-level position in the government of a foreign state, follow the procedures outlined in 7 FAM 1220 for development of a loss-of-nationality case.

    I’d say that they’ll recommend you apply for a relinquishment but there is nothing to indicate that you get to bypass the process. They can’t. The consul does not have the authority to approve a loss of nationality. I’m sure that the “passport department” doesn’t either. It has to be processed by a specific DoS department. Surely you have to pay and follow the procedure.

14. @WhatAmI

    Citizenship is not lost until the DoS approves it AND issues a CLN. To my mind, this clearly indicates that a “self relinquishment” does not exist in the eyes of the US government (or IRS or border guards), although one might be able to convince a foreign bank employee (for FATCA purposes).

    of course it does not exist in the eyes of the slave master however if one has no plans or reason to ever cross the border into amerika or interact with the consulate i feel that the “self relinquishment” route is a perfectly acceptable way to deal with this problem.

    the only person we really only have to convice is a bank employee anyways…they are the only ones that seem to care….and it is very easy to just lie on what ever form they put in front of you asking you your americaness.

15. @EmBee

    “The USA is a criminal state. It will make any law it wants and ignore any law it wants in order to enable its criminal acts. And yes, it’s hard to get one’s head around all this.”

    So, to get my head around this, I would need to think like that criminal state. That sums it up about America nowadays.

    It must be said, such a monstrous effort to enforce an outdated tax policy on a trivial overseas population (mostly living in high-tax OECD jurisdictions) is so disproportionate beyond comprehension.

16. @WhatAmI.

    “Citizenship is not lost until the DoS approves it AND issues a CLN. To my mind, this clearly indicates that a “self relinquishment” does not exist in the eyes of the US government (or IRS or border guards), although one might be able to convince a foreign bank employee (for FATCA purposes).”

    I respectfully disagree with your statement. If you read INA 349 (a) (1) you will find that it states clearly that the person “shall lose his nationality by voluntarily performing any of the following acts”. There is no mention of any requirement to obtain a CLN in order to validate a relinquishment under INA 349 (a) (1). Much of US citizenship law is confusing and murky but this part is absolutely crystal clear.

    That is precisely the situation I am in and if I bothered go to the Consulate and pay the money they would eventually issue a CLN backdated to the day before I became a Canadian. If such is the case then logically I cannot now still be a US citizen.

    If you go to the IBS side bar and click on “Your experiences: Banking; Entering the US” you will find an account of my most recent experience at the hands of US Customs. In effect, they eventually conceded that I was no longer a US citizen and allowed me to enter as a Canadian on a Canadian passport.

    However, I expect that even though I am no longer a US citizen according to US State Dept. or US Customs, I imagine I would still be considered to be a US tax resident and a covered expat in the eyes of the IRS because I never bothered to file a Form 8854. I couldn’t care less.

17. http://www.state.gov/documents/organization/120546.pdf

    7 FAM 1221 b lists four questions that the consular officer should ask, and the passport applicant will answer yes to all of them.

    7 FAM 1222 c directs the consular officer to proceed according to 7 FAM 1224.

    7 FAM 1224 describes steps that we’re familiar with. There is no mention of a fee. 7 FAM 1224.5 indicates that an interview might be necessary but does not state a blanket requirement.

    7 FAM 1226 requires the consular officer to prepare an opinion memo.

    7 FAM 1227 requires the consular officer to prepare a CLN.

    7 FAM 1227 c has a textbox saying:
    “As explained in 7 FAM 1240, copies of approved CLNs are distributed to:
    Department of State Citizenship Files (CA/PPT)
    The expatriate (via the U.S. embassy or consulate)
    DHS/USCIS
    IRS
    FBI”
    Notice who the second recipient is. Also notice who the fourth recipient is.

    7 FAM 1227 e(7) says:
    “If the CLN is disapproved, but the passport was canceled and returned to the applicant for use of the foreign visa, the applicant may apply for a new passport for which the requisite fees may be charged. 7 FAM 1300 Appendix G provides guidance about circumstances when passports may be issued without charging fees.”

    Apply for a passport and declare that you already intentionally relinquished. If you get your CLN, there’s no fee. If your CLN is cancelled and then for some reason you still want a new passport, there might or might not be a fee for the new passport.

18. @MAZ57, “However, I expect that even though I am no longer a US citizen according to US State Dept. or US Customs,”

    You are no longer a US Citizen according to 8 US Code which trumps State and Customs. Any rules or statements they make beyond what the US Code says is ultra vires.

19. @Norman, I agree with your hypothesis and am tempted to test it.

20. Come to think of it, INA 349 doesn’t mention a fee! Just print that out, and slap it up against the glass when you go for a relinquishment appointment. Bingo! No fee! Just like Max57 says there is no mention of a CLN, so a CLN is not required.

21. @Cheryl,

    I don’t like to bother her unless it’s a critical sort of thing. I do not think anyone here need worry about extradition……..

22. @What Am I

    In the case of a relinquishment the fee isn’t for the loss of US nationality because that has already happened. The fee is for a piece of paper that officially documents that event, if you decide you want one. I don’t really want to bother with the rigamarole of trying to get an appointment and wasting a day (not to mention $2350) for a lousy piece of paper. So far I haven’t needed it.

    I do enjoy your mental image of slapping a printout of INA 349 against the cashier’s window.

    I was very lucky because the occasion of my getting Canadian citizenship coincided with my becoming aware of this whole US tax fiasco and I was able to make the rules work to my advantage. I feel badly for those whose only option is to go through the entire appointment/fee/renunciation meat grinder but there is nothing I can do to help them except to explain to them how the system all works. I have done this for several people I know personally.

23. @maz57, it was only through what I gleaned here that led me to insist my relinquishment (took three appts!). Also, you do have a right to become stateless & my embassy said it was not so.

    I was lucky to get out just ahead of the fee for relinquishment- I paid $0.

24. Before anybody gives me a “TL;DR”, let me say it myself. Done! (I didn’t have time to make it shorter.)

    @maz57

    I have zero interest in trying to change what you believe, but when I see statements that I believe are misleading I feel compelled to insert another view for the benefit of those quietly reading these posts trying to decide what works for them.

    At least we agree that a CLN ‘s “a piece of paper that officially documents that event”. However, we disagree on what “event” it refers to. I note that the piece of paper is titled, refers to, and documents the “Loss of Nationality”, not just the commission of a potentially expatriating act. The potentially expatriating acts listed in INA 349 are all optional (as of 1986). They are not expatriating unless you make application to the DoS and prove your case, including the action and your intent to relinquish US citizenship. They investigate and approve or deny your claim. If and only if approved, the CLN documents the loss of nationality.

    The fee of course isn’t for the piece of paper itself, it’s for the alleged cost of accepting, investigating and approving the claim. In the eyes of the US, you are a citizen until they say you’re not. They can’t take away your citizenship against your will (as of 1986), but neither can you take it away from yourself without their approval. Again, this is in the eyes of the US government.

    Many people state that since the rules and procedure are so outrageous, they don’t deserve any attention, respect or compliance. “F*k them; I declare I’m no longer a citizen. Goodbye.”. I respect that when made as an informed decision.

    Analogies shouldn’t be necessary, but I can’t think of any legal status that one can self-declare. For example:

    – just because I love someone doesn’t mean we can declare ourselves legally married
    – just because I no longer love my spouse doesn’t mean we can declare ourselves divorced
    – just because I learn to drive doesn’t mean I can declare myself to be able to drive legally
    – just because I study law in university doesn’t mean I can declare myself fit to practice law
    – just because I love Mormonism doesn’t mean I can declare myself a member of the Mormon church (I know nothing of the church, but I suspected this is the case and googled it first 😉
    – just because I give you $500,000 and move into your house doesn’t mean we can self-declare that I now own your house
    – just because I like sailing and own a boat doesn’t mean I can declare myself a member of the Blue Water Cruising Association
    – just because I performed an action in INA 349 with intent doesn’t mean I can declare myself no longer a US citizen

    In every case above, one must make application to the appropriate authority, fill out and sign forms, possibly present proof of some criteria, sometimes take an exam to demonstrate proficiency, almost if not always pay a fee, and have the application accepted and duly noted. In all cases I get a piece of paper that is convenient and portable should I ever need to present it to somebody as proof of my acquired status.

    There is nothing different or wrong about the relinquishment procedure in that it’s like everything else I can think of, except of course, it is indeed immoral, unethical and insane because it is too expensive and it should be rubber-stamped on my say-so and the DoS should not be able to pass judgment on my decision and wishes. But, like all the other cases, my status does not change in the eyes of the appropriate authority until I apply for it and have it approved.

    INA 349 says

    (a)–A person who is a national of the United States whether by birth or naturalization, shall lose his nationality by voluntarily performing any of the following acts with the intention of relinquishing United States nationality –

    Note the use of the word “shall”. “Shall” was used in the original 1952 INA when these actions allowed the DoS to strip you of US citizenship against your will. Now, since 1986, it is up to the citizen to decide, but the word “shall” remains. But the context at least makes it clear that the choice is up to the individual.

    Wikipedia says this about the word “shall”:

    Shall is widely used in bureaucratic documents, especially documents written by lawyers. Due to heavy misuse, its meaning is vague and the US Government’s Plain Language group advises writers not to use the word.

    You state that “I am no longer a US citizen according to US State Dept”, but you absolutely are until you follow the procedure and have your claim approved. You have NOT had the DoS judge your claim and rule on your status. If I remember the correct post about your US border crossing, you described the guard as a kid who didn’t even know there were ways other than renunciation to lose US citizen? Was that your post? Now you quote him as an authority about your legal status as a US citizen and that this constitutes a DoS blessing? I think he waived you through because your initial assessment of him was correct. He didn’t know diddly and you caught him at it.

    The application requirement is absolutely clear in many documents. People like to point out that INA 349 doesn’t mention fees or CLNs. Geeze Louise, it’s only one sentence long. A CLN is just a piece of paper, but it symbolizes that you have made an application that was approved and proves your legal status. It’s not the CLN that grants loss of citizenship, it’s the approved application and update to your citizenship file that does it.

    No matter because in fact, INA 349 **DOES** clearly state that you have to make a claim and prove the loss of nationality:

    (b)–Whenever the loss of United States nationality is put in issue in any action or proceeding commenced on or after the enactment of this subsection under, or by virtue of, the provisions of this or any other Act, the burden shall be upon the person or party claiming that such loss occurred, to establish such claim by a preponderance of the evidence.

    https://travel.state.gov/content/travel/en/legal-considerations/us-citizenship-laws-policies/citizenship-and-dual-nationality.html

    “The Department of State is responsible for determining the nationality status of a person located outside the United States”

    Persons Who Wish to Relinquish U.S. Nationality

    If the answer to the question regarding intent to relinquish nationality is yes, the person concerned will be asked to complete a questionnaire to ascertain his or her intent toward U.S. nationality. When the questionnaire is completed and the voluntary relinquishment statement is signed, the consular officer will proceed to prepare a Certificate of Loss of Nationality of the United States. The certificate will be forwarded to the Department of State for consideration and, if appropriate, approval.

    An individual who has performed any of the acts made potentially expatriating by statute who wishes to lose U.S. nationality may do so by affirming in writing to a U.S. consular officer that the act was performed voluntarily with an intent to relinquish U.S. nationality. A U.S. national also has the option to formally renounce U.S. nationality abroad in accordance with INA Section 349 (a) (5) .

    In the eyes of the US DoS, self-relinquishment doesn’t exist any more than self-renunciation (which nobody here has tried to claim). Yes, INA mentions that renunciation involves “formally renouncing U.S. nationality before a U.S. diplomatic or consular officer outside the United States” whereas yes it does NOT state that relinquishment must be done “before a U.S. diplomatic or consular officer outside the United States”. The 1986 changes to INA 349 were minimal and sloppy. That’s why they have pages and pages of clarification and instructions for consuls and DoS staff to follow.

    The original 1952 wording:

    SEC.349. (a) From and after the effective date of this Act a person who is a national of the United States whether by birth or naturalization, shall lose his nationality by-

    They made 2 key changes. To part (a) they added “voluntarily performing any of the following acts with the intention of relinquishing” to give the citizen the power and the choice. They also added the paragraph in part (b) that I quoted above, stating that the citizen must apply for the loss: “the burden shall be upon the person or party claiming that such loss occurred, to establish such claim by a preponderance of the evidence”. There you have it. Even INA 349 says you have to apply for the loss.

    Yes, there are many posts and blogs showing that prior to some date, 1986 or whenever, one did not have to notify the DoS of an expatriating act or get a CLN. Fine. Back then, there wasn’t a problem being a dual-citizen either. This is all about taxes, and if you decide you want to get away from the IRS (cleanly and legally), you have to start by being able to prove to US authorities that you are not a citizen.

    There have been reports here that some financial institutions in some countries (Switzerland?) don’t accept a CLN as proof that it is safe for them to open an account for the client. They want proof of tax compliance. Outrageous? I hope Canadian banks aren’t reading this, but these FIs have it right if they are trying to protect their own asses, which of course they are. All of us at IBS know that you can get a CLN without being tax compliant. And as we all know, the IRS can legally override the DoS declaration of non-US citizen and claim you as a US tax-payer until you file clean with them. I hope Canadian banks don’t figure this out, and I hope the DoS and IRS don’t increase their cooperation to the point of withholding Loss of Citizenship until the IRS says it’s OK!

    Having said all this, I have no problem with people who decide they don’t care and to ignore the insanity that the US is perpetrating on the peoples of Planet Earth. People looking to decide for themselves about where they stand with US authorities need to try to understand how the US interprets their laws. Some IBSers interpret them differently than I do. Yes of course, mine is just another IBSer interpretation. Some of the recent posts above are basically making claims based on what certain documents _don’t_ say (fees, CLNs). I’m presenting what the documents _do_ say. Take your pick.

25. @NormanDiamond, I believe you’re correct that I have honestly certified five years full tax compliance on form 8854 because I was compliant to the best of my knowledge and ability, having relied on a specialist cross-border accountant to determine what my tax liabilities were. I also paid everything I owed (a painful sum). So I certified to the best of my ability, given my circumstances.

    What concerns me though is that if the IRS went after former citizens, they could often find unintentional errors simply because calculating the correct tax due is such a grey area.

    In my situation, if I were considered a covered expat, I would end up having to fork over approximately 25% of the value of my local pension fund, a figure north of $25,000 which would be very painful, especially as I have already paid over $10,000 in pfic taxes plus close to $30,000 in accounting and other professional fees.

    So I realise it’s not life or death even if I had to pay a de facto exit tax on my pension fund , but it would really rankle me because I am not wealthy at all. But my concern is that they could still try to be nasty and aggressively go after even Minnie’s who’ve renounced in order to deter others from expatriating. I used to believe that one had to be worth over $2 million to be deemed a covered expat but realize that people could be slapped with covered status if they wanted to dispute their 8854 form.

    To be frank, it seems to me that the U.S. will not realistically come after me, especially as I’m not rich, nor have any assets remaining in the U.S.; however, I believe the U.S. could twist their interpretations of law to get a desired result if they did want to pursue somebody. I thus feel that I may never enjoy complete certainty that I am absolutely out of their system.