cross-posted from citizenshipsolutions
Update January 2018: This post has been updated with some new links and discussion
Part I is here.
Part II is here.
Part III is here.
*****
PART IV
U.S. Citizenship law of the present – Breaking The U.S. Connection – Relinquishment
Relinquishing acts – How to lose U.S. citizenship – S. 349 of the Immigration and Nationality Act
Once upon a time, the U.S. would “strip citizens” of their U.S. citizenship for voluntarily becoming naturalized citizens of another country. Like many aspects of U.S. nationality law, this was considered to be a “punitive measure”.
Prior to the U.S. Supreme Court decisions in Afroyim and Terrazas, S. 349 of the Immigration and Nationality Act, mandated an automatic loss of U.S. citizenship for those who became citizens of another country. S. 349 now clarifies that, U.S. citizens who become citizens of another country, will lose their U.S. citizenship only if they intended to relinquish their U.S. citizenship by becoming naturalized citizens of the second country. In other words, U.S. citizens have the right to NOT (absent their consent) be stripped of their U.S. citizenship even if they maintain neither ties nor “connection” to the U.S.
U.S. citizenship law of the past – The requirement of a voluntary connection
Conditions Subsequent – Automatic Loss of Citizenship For Those Born In The U.S.
Conditions subsequent to the retention of citizenship – Retention requirements for those born in the U.S.
In the past, U.S. nationality law has included provisions which resulted in the automatic loss of U.S. citizenship for those born in the U.S., and find themselves in the circumstances described in Categories A and B above (born in the U.S.). This was reflected in the old S. 350 of the Immigration and Nationality Act (which has been repealed) and pre-1986 S. 349 of the Immigration and Nationality Act. The general principle was that children who:
– acquired U.S. citizenship as children; and – subsequently left the U.S., and – did nothing to assert a VOLUNTARY connection to the U.S.,
would lose their U.S. citizenship. This was a clear recognition that “citizenship” was more than a “legal status” and required a “voluntary affirmation of citizenship” and/or “connection” to the community.
Automatic Loss of Citizenship For Those Naturalized in the U.S
Interestingly the old S. 352 of the Immigration and Nationality Act mandated the loss of U.S. citizenship (in some circumstances) for naturalized U.S. citizens who left the U.S. after becoming U.S. citizens.
To use an analogy to contract law, there were “conditions subsequent” for certain 14th Amendment citizens to retain their U.S. citizenship.
Conditions Precedent to Citizenship – Inability To Gain Citizenship For Those Born Outside The U.S.
American Citizens Abroad was a pioneer in fighting for the rights of “American Citizens Abroad”. Much of their early work was aimed at ensuring that children born outside the United States to Americans abroad would become U.S. citizens. At one time the U.S. had laws which required those born abroad to U.S. parents to establish residence in the U.S. or lose their U.S. citizenship. As Phyillis Michaus author of The Unknown Ambassadors notes:
“It all started back in 1961, when Phyllis Michaux, an American woman married to a Frenchman and living in France since 1946, found a friend in a similar situation. They began talking about the future of their children, their American and French citizenship and wondered whether there were other women “out there” in a similar position.
They had a question and an idea. The question was, “How many people are affected by the citizenship law 301(b)?” At the time under section 301(b) of the Immigration and Nationality Act of 1960, children born overseas of one American parent would lose their American citizenship unless they lived five consecutive years in the United States between the ages of fourteen and twenty-eight. Essentially, the children would have to move to the United States sometime before their twenty-third birthday to retain their American citizenship. The idea was to find out how many families were affected. This they did. And they did a lot more along the way.”
For this reason, I submit that the problems of Americans abroad, may be more rooted more in the laws of citizenship than in the law of tax.
U.S. citizenship law no longer based on the assumption that “citizenship” requires a voluntary connection to the community. Combining “citizenship” with “taxation” means that the U.S. claims the right to tax large numbers of people with no connection to the U.S.
Significance of U.S. citizenship law of the past …
There was a time when a voluntary affirmation and connection to the U.S. was required to retain U.S. citizenship. One would lose U.S. citizenship without the voluntary affirmation – an “citizenship opt in”. This ensured that those without a connection to the U.S., would NOT be subjected to U.S. taxation.
The repeal of Sections 350, 352, 301(b) (of the 1960 law) and the 1986 amendment of S. 349 of the Immigration and Nationality Act, mean that, it is NO longer a requirement that the children described in Categories A, B and C, affirm a connection to the U.S. in order to retain U.S. citizenship. Absent an “relinquishing act”, the circumstances of birth will be sufficient to establish (under U.S. law) citizenship and a lifetime of tax obligations.
U.S. citizenship law of the present. A relinquishing act is now required to terminate U.S. citizenship – an “citizenship opt out” (with all the horror of the possible S. 877A United States expatriation taxes)
“For those who had no choice of where or to whom they were born, surely there should be an “opt-into” US citizenship – rather than an “opt-out” of US (or any other country’s) citizenship. Anything else is ENTRAPMENT. I find that very punitive.”
For those with the “legal status” of U.S. citizens abroad, the evolution from the “opt in model” to the “opt out model” reflects a principle that citizenship is defined more in terms of a “legal status” (conferred by birth) than a “voluntary acceptance” of citizenship. This is neither desirable nor consistent with a world of increased mobility and multiple citizenships.
The problems of U.S. citizenship have been exacerbated by the twin principles that:
1. U.S. citizenship has become less and less dependent on the existence of a “voluntary” connection to the U.S.; and 2. U.S. citizenship is now a status imposed on the individual, rather than a status chosen by the individual. (Although the 14th Amendment may have been motivated by a desire to “end slavery” it is now being used as a mechanism to “create tax slavery”.)
To put it another way: U.S. citizenship has become less “something that one chooses to voluntarily connect to” and more something “one is through an accident of birth, chosen for”. This is of huge significance because the U.S. (under the guise of citizenship-based taxation) attempts to control the lives of its citizens living abroad.
What is the justification for “place of birth” taxation? The closest rationale that can be discerned is the idea that:
1. All U.S. citizens must pay taxes to the U.S.
2. U.S. citizens, regardless of where they live are still U.S. citizens.
Therefore, U.S. citizens regardless of where they live have to pay taxes to the U.S.
Interestingly, U.S. Taxation Abroad includes, but is not limited to U.S. citizens
A recent post on the Isaac Brock Society included:
“According to the 14th Amendment of the United States Constitution anyone born in the United States is a de facto US citizen regardless of whatever other citizenship they may hold in the course of their lifetime. Therefore, with the existence of CBT anyone with a United States birth certificate is forever taxable by the US even if they have never lived there as an adult or earned any money there.”
Are those “born in the U.S.” really doomed to a lifetime of U.S. tax servitude?
And there it is, my children ARE considered by US law to be US citizens as are all other children born outside the US to at least one US parent.
@japanT
“And there it is, my children ARE considered by US law to be US citizens”
As are Irish children born outside Ireland to at least one Irish born citizen parent. It is there for the claiming, but if you don’t claim it, they will not have it. In Ireland it’s a gift worth accepting, but you don’t have to accept this American poisoned chalice.
Banks are sending all the info they have on their solely own citizens whom spent too much time in the US. They will, if not already, send info on those born in the countries to US parents. Bet that that info may already be on the birth certificates of many. Not sure it is on my children’s but it is on other birth related certs as well as his family registry.
As long as Ireland does not coerce other nations to find and turn over info on Irish nationals, the comparison is meaningless. As long as Ireland practices RBT only, the comparison between Irish born abroad and Americans born abroad is meaningless.
Germany does as Ireland does, yet I am not at all concerned because Germany does not practice CBT nor have the power to force other nations to treat their citizens as German citizens.
My Japanese bank requires my US SSN, they have never asked for the German equivilent. Some how, I doubt they ever will.
Not the same thing, what Ireland nd Germany practice and what the US is doing.
JapanT
Did you register your kids as Americans? Do they have ssns?
Do they have Japanese citizenship?
With the US embassy, no. However, the citizenship of their non Japanese parent is entered on his family registry as required by Japanese law, and possibly on the birth certificate.
@japanT
Those non US citizens who spend too long in the US are surely another issue as they are officially tax resident in the US but I am not sure how banks can determine that?
It’s your and later your son’s choice if he decides to become a US citizen whatever the bank says or does and you can refute any action they may take.
They are not your son’s keeper.
The letter from the bank is quite clear. Anyone who has spent 183 or more days in the US over a three year period will have the balance, all transactions, name, address etc. sent to the US IRS as will any and all US citizens. We either agree or can not open an account. So, for my kids, they either allow it or find a way to live without any income. Or, join the yakuza.
@japanT
Yes, it’s the 183day, 3yr rolling average that Hodgen warns about otherwise you become a US tax resident. It applies to everyone, not just your kids.
I have seen it on some EU bank questionnaires to determine US tax residency.
Not sure what your kids need to open accounts in Japan, do they have Japanese passports, does it have place of birth?
Japanese regular employess do not usually need to do their own tax returns, their companies do it for them, or hire an accounting and tax firm to do so. So, if a Japanese company sends their employess to the US, they provide all such info to the government or the hired accounting firm
The accounting firm my spouse’s company used tried to force us to file together when doing my spouse’s tax return for the 3 month secondment they did in the US. That was an adventure. Took three years to complete.
In Japan, one can not receive their income if they do not have a bank account, usually with a bank of the employer’s choosing. Gov. benefits are also direct deposited.
@ JapanT
I understand this can be a problem for you but I do not think that your son should have a problem.
Most governments and (hopefully by extension banks) understand there is a choice when it comes to registering citizenship conferred by parents to children born abroad.
A British friend of mine who had worked in the US for many years brought his US born/passport child home with him and his British wife while he worked on a research project in the UK. Coming through British immigration the officer asked him, “how long are you planning to stay with the US child?”
taken aback he said ,
“at least a year, but I thought my child was automatically also British.”
“Not unless, you have had him registered, and have a passport for him” was the reply.
He was eventually allowed through, on the promise, that he would either register him within 3 months or leave with him within the allotted period!
Thanks.
Not the situation we face here. UK Immigration is not under threat of 30% withholding in US dervied income. Different motivations, different outcomes.
My childrens’ bank account info will be sent to the US. This being the case, they will be denied any position that would require them to have signing authority over an employer’s account.
The information of their parents’ citizenship is hard wired into all the identification they must provide banks, credit card companies, schools, hospitals, employers, post office, everything.
@japanT
I still don’t understand how if they are not registered as US citizens then they are arguably solely Japanese. But then I am not in Japan….
Because Japan, just like every other country, has allowed the US to determine who living in their country is and is not subject to US tax and reporting laws. If banks must report anyone who the US says is a US person or be fined, banks are going to report all US persons. Furthermore, the Japan Bankers Association says just that.
He can not expect anymore protection from data sharing that a full blooded Japanese National can, and Japanese banks are reporting them too.
Registering a birth abroad is not needed for childre born of USCs to also be USCs. Not registering them only makes it more difficult for the US to learn of their existance. But when the citizenship of the parents is baked into your ID documents, those who are under threat of fines for not reporting US persons to the US will report them to the US.
Again, not me saying this, Japan Bankers Association says that that is what they are doing right now.
There are plenty of non registered non US born children around the world who have perfectly legitimate bank accounts that are not being reported. Even if they are ‘mistakenly’ are reported to the US as US persons and those persons then receive an IRS letter, what then? You can respond, stating, this is not a registered US citizen, he is soley Japanese or you can ignore it.
USCs in Model 1 countries can ignore it (though the consequence may be that the application for an account is refused). The Model 1 IGA protects the banks from 30% withholding.
The Model 2 IGA does not protect the banks.
“If banks must report anyone who the US says is a US person or be fined, banks are going to report all US persons.”
Yep.
@plaxy
I remember that there was a reference here to the difference in the definition of a US person, (born abroad to a US citizen and the need to register or not) between the Treasury and The State Dept, (no guesses as to which.)
I am not about to look for it…time to get a life other than brock. 🙂
I said: “The Model 2 IGA does not protect the banks.”
Correction. The Model 2 IGA protects banks from the 30% withholding, but to report an account the bank has to get the accountholder’s permission. Which would make it quite risky for a bank to open an account for a person who it thinks might be a US person, if the person refuses to give permission.
If I recall correctly, Japan has a model 2 IGA. I know the banks report directly to the US, which would not provide the protection of reporting to their gov. which then forewards it on to the IRS.
I do not fear the IRS, but do fear what my banks and eventually employers will do due to the threats they face, and more for what will happen to my kids. They might as well have the Stars and Stripes tatooed across their faces. Can not live long in Japan without a bank account. Was shocked to learn that even the homeless have bank acvounts. Well many do, anyway.
“…difference in the definition of a US person, (born abroad to a US citizen and the need to register or not.”
I think there’s some confusion. Only children who can prove their US citizenship can be registered at a US consulate. Registering or not registering does not affect a child’s status.
Heidi,
Banks do not care what either the State or Treasury say who is or is not a USC, they will either report all possible US persons (including the odd poor soul that has absolutely no connection to the US) or avoid and evade all such persons. They too have goals other than trying to figure out what that nonsense from a foreign country may mean. They will report all or deny service to all and get on with their lives.
“If I recall correctly, Japan has a model 2 IGA. I know the banks report directly to the US, ”
Yes, that’s why they have to get the accountholders permission, as I understand it.”
“which would not provide the protection of reporting to their gov. which then forewards it on to the IRS.”
Exactly.
Plaxy,
Some of your posts appeared after I posted. According to the English version of FATCA letter I got, they say it only applies to those opening new accounts. That is to say, they need the permission of one who is opening a new account and will not open an account for one who refuses to give this permission by signing the form given. It clearly states that this permission is required only new accounts but does not say anything about existing accounts.
A Japanese friend if mine just found a version online in Japanese. In addition to what the English version states, it sats that information on current accounts will be shared with the IRS, no statement of permission from the account holder is required.
So, as I thought, my accounts have been being reported for a year or more now.
I suspect this is the case for all Type 2 IGA countries.
@japanT
But we really don’t know what the reporting of minnows will glean yet do we? The IRS are understaffed and overburdened, they are unlikely to concern themselves with anything that isn’t worth their while.
I may be a little slow in my old age but I am still confused how your son would be identified as an American on a bank account.
In short,
What the law says is irrelevant. If the institutions in question are operating under duress from the US, then anyone who might possibly maybe might be a US person will either be reported to the IRS or shunned.
“…sats that information on current accounts will be shared with the IRS, no statement of permission from the account holder is required.
So, as I thought, my accounts have been being reported for a year or more now.”
That makes sense, in view of the treaty provisions. All USCs with pre-existing foreign accounts are already supposed to be reporting their accounts to the IRS, so no permission would be needed. That hadn’t occurred to me.
And that’s why my bank, in a Model 1 country, felt free to ignore my CLN – because I didn’t have a CLN at the time FATCA began.
Interesting. Thanks, JapanT.