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.
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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 This was reflected in the old S. 350 of the Immigration and Nationality Act (which has been repealed) and pre-1986 S. 349 of the Immigration and Nationality Act.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?
Plaxy,
While I agree that in terms of FATCA dying, drowning it in a seas of useless (to them) data is good. But once that data is shared, there is no way to ensure its security.
JapanT – very true, but the banks and IGA partners probably aren’t going to apply the threshold anyway, so we may as well look on the bright side and enjoy the thought of the IRS drowning. 🙂
The more the defaults of FATCA (compared to CRS) become apparent, the more chance that a new broom might be able to shift the approach away from John-Doe-ing everyone born in America to John-Doe-ing only those with actual indicia of cross-border transactions.
And hopefully move away from the mindless and ignorant assumption that “US birthplace” is synonymous with “US tax-resident.”
“JapanT – very true, but the banks and IGA partners probably aren’t going to apply the threshold anyway, so we may as well look on the bright side and enjoy the thought of the IRS drowning. :-)”
He he he, yes the thought of the IRS drowning in a sea of mostly zeros is a pleasant one. However, as a one time victim of actual ID theft and a three time victim of having my personal info leaked, 2 of which were by the US gov., I am perhaps a bit more sensitive to having my finacial data out there for one and all to have access to.
They have stupidly hooked their dragnet onto a characteristic that is extremely broad but far from inclusive. By tagging on “US birthplace” they’ve actually created significant holes in their net. (Naturalized USCs, USCs born abroad to USC parents, and GC holders.) The vast majority of whom, just like the vast majority of US-born, are of course not tax evaders; but the small tax-evading minority will not be slow to understand that FATCA is not a problem for them.
So it goes, with the IRC: every attempt to close a loophole generates new loopholes. They really ought to start all over.
JapanT – yes, I agree. Especially in these days when data theft has become a multinational industry. And the thieves, unlike the IRS, do know how to handle the volume of data.
@ Plaxy,
Exactly.
Which is why I do not fear the IRS but I do fear what will happen as consequences of their maddness. They are setting us all up to by ID theft victims of magnitudes as yet not seen. In addition to the horrors of having your ID stolen while resident in the country of your nationality, we have the additional benefit of the threat of having our passports yanked due to someone using this info to steal our IDs and sticking us with their tax bills.
“By tagging on “US birthplace” they’ve actually created significant holes in their net. (Naturalized USCs, USCs born abroad to USC parents, and GC holders.) “
Perhaps not all, at least not yet, but USCs born to USC parents in Japan are in the net.
With all the data minning going on and the tech. to gather, compile, match, compare, etc, it is probably not that far in the future that birth records will be paired with passport and visa data, as is currently being done here in Japan, and shared via FATCA and CRS. Far fetched not that long ago but very easy to do now. Again, it is being done now in Japan and probably others.
There is no threshold being applied. All accounts of even 2 dollars are being reported by Model 1 countries as I was told by my bank. I am not making anything up as I was told by several bankers in different banks as they are looking to penalize anyone with even the slightest amount of money. Threat are banks in different jurisdictions that I visited. Every bank and central govts are scared by US as they are scared of withholding taxes I was told. Not trying to scare anyone or my intention. This is a reality even I a dual national not born in US is facing as I don’t have the birth of US listed on my passport like most of you but banks are requiring every citizen of the world to sign FATCA forms for opening even 1 dollar account or in local currency. I was shocked to see even young students are being made to sign this form by banks as they are getting over zealous due to US. The banks have all signed an agreement with IRS for GIN number for all entities, trusts or banks to report anything to US govt. I was shocked to see and hear it from bankers in several jurisdictions. Please I advise you to rearrange your affairs and renounce asap or do something as the yoke is getting thinner and its menacing.
It’s early days in the passport-revocation saga, but one thing we know: the IRS would need to assess the amount of tax due, and notify the passport-holder. So as long as nothing is heard from the IRS, passport revocation is not imminent and can go on the back-burner.
@JapanT, Yes dual nationals without a US birth place are also affected as I am one of them affected by this and all reporting is done as I found out too. Many dual nationals in other countries are affected too and most of them had never heard it before as they were living outside US for 20-30 plus years. I told this to someone while attending a funeral who had not lived in US for 30 plus years and he was confused what should I do now. I told him do something before they find out as your local bank is reporting every little account to them and they are sorting it out with central govts and banks. I am sorry to give you bad news guys as I have been in touch with bankers and they even deny accounts even if you mention the blue golden eagle passport as one you own. This has become the most toxic passport in the world. Never thought I would say that but I am sick of being denied by local brokerages and banks as they are scared of my passport only and reject me as an applicant living in HK.
“but one thing we know: the IRS would need to assess the amount of tax due, and notify the passport-holder. So as long as nothing is heard from the IRS, passport revocation is not imminent and can go on the back-burner.”
No, they only need to notify who they think is the passport holder. If your ID has been stolen by someone using an address in North Carolina, then the IRS may send said notification to N. Carolina. When no response is received by the deadline, then it is you, not the the ID thief, who loses their passport.
When someone renewed my Drivers license with their photo and address but my name it was because they could no longer get a DL in their own name, too many moving violations. I am fortunate that I had not been stopped during the several months I was unwittingly driving on a nonvalid DL, especially when out of state. At least some time in jail as I tried to prove I am me and that I did not commit any of the crimes whoever stole my ID did in my name. Would have been ugly.
Now, thousands of miles away, I have learned that the US DoD and VA leaked all info they had me I wonder how much real estate “I” now “own” and how much “I” “owe” in taxes, fees and penalties. How many VA loans have “I” taken out but have failed to repay? Used to just wonder about this, now somewhat concerned.
JapanT – “Perhaps not all, at least not yet, but USCs born to USC parents in Japan are in the net.”
Yes, unfortunately, in any country where information about the birthplace of the parent gets associated with the child’s official records, FATCA oppression looms for the innocent child as for the innocent parent; but those wanting to evade US taxes would presumably just move their accounts to a country with less comprehensive record-keeping.
@Harrison
While some here seem to not want to believe that, I think those posting on this thread know what you are saying. What has been most discussed on this thread is duals that have not been registered with the US embassy as a birth abroad and are thus without a US passport, such as my kids.
Japan has a preexisting system that roots them out, have you run into any such duals getting “caught” in the EU?
JapanT – “No, they only need to notify who they think is the passport holder. If your ID has been stolen by someone using an address in North Carolina, then the IRS may send said notification to N. Carolina. When no response is received by the deadline, then it is you, not the the ID thief, who loses their passport.”
Hasn’t happened. Not likely to happen. Wait till it does happen, before worrying about it.
Sufficient unto the day are the IRS threats thereof.
I’m off, to take my own advice and forget about the IRS. 🙂
Harrison,
My apologies, your are talking about Type 1 IGA countries. That IS or has been in question. Thanks for you comments.
“Hasn’t happened. Not likely to happen. Wait till it does happen, before worrying about it.”
How do we know? We were 3 1/2 behind knowing that our accounts were being reported.
“I’m off, to take my own advice and forget about the IRS. :-)”
Enjoy.
@iota
Exactly. The indicia method of flagging US account holders has no doubt resulted in a lot of false-negatives and false-positives. We’ll never know though as long as account holders aren’t notified by either the CRA or the IRS, which raises the question – what’s the purpose?
@BB
I’d bet there are lots of people who have no connection to the US that are none the less being reported to the IRS.
Some by accident, others by mistake and every now and then, a few due to malice.
“We’ll never know though as long as account holders aren’t notified by either the CRA or the IRS, which raises the question – what’s the purpose?”
Revenge against the bankers.
“It’s early days in the passport-revocation saga, but one thing we know: the IRS would need to assess the amount of tax due,”
Yes and no. The IRS would need to assess an amount, but the amount wouldn’t need to have any relationship with reality.
“and notify the passport-holder.”
No they don’t have to. Example: Bobby Fischer.
““and notify the passport-holder.”
No they don’t have to. Example: Bobby Fischer.”
As I recall, the legislation ‘requires’ notification. But, as you have posted in the past, the IRS’s attempts to notify are feeble at best.
The first revocation letters were supposed to go out last March. Has anyone heard anything about them. I’m wondering if it was postponed pending review.
Think I recently read of around of mailings to begin soon. Not sure if this would be the postponed 1st mailing or the 105th.
The letters will be personally hand-delivered by Rex Tillerson. He has nothing better to do.
If you see a distinguished silver-haired gentleman at your door, do not answer.