In a short November 2015 report which seems to have gone unnoticed by compliance professionals, the U.S. Department of Homeland Security — responsible, via one of their myriad sub-agencies, for deciding whether a person who shows up at a U.S. border crossing can legally enter the country — revealed (p. 2):
Since 2002, two individuals who admitted to having renounced for tax avoidance purposes were found to be inadmissible under section 212(a)(10)(E) of the Act. Five additional individuals were identified as possibly inadmissible on the basis of section 212(a)(10)(E). One was served a notice to appear, but was not placed in removal proceedings. The four others were paroled, one of whom was deferred for inspection and later admitted.
Many countries, including Australia, Denmark, India, the Philippines, and the United Kingdom grant their former citizens “diaspora visas” or allow them to re-acquire citizenship easily — a simple humanitarian gesture so that emigrants can make decisions about their nationality without worrying they will be blocked from coming back to visit their hometowns, attend their high school reunions, watch their nieces & nephews grow up, or care for their parents in their dying days.
In contrast, the U.S. threatens its diaspora with permanent banishment: § 212(a)(10)(E) of the Immigration and Nationality Act, known for short as the Reed Amendment, makes former citizens inadmissible if DHS (originally, the Attorney-General) determines that they “renounced United States citizenship for the purpose of avoiding taxation by the United States”. Some Canadians have stated openly that fear of the Reed Amendment is their sole reason for retaining U.S. citizenship.
The thing is, Reed’s badly-drafted law didn’t bother giving the IRS authorisation to share tax information with DHS, meaning it’s nearly impossible to enforce legally. So you might ask: how did DHS make this determination in the cases mentioned above? (pp. 3, 5):
Interagency coordination between DHS and DOS operations in this area is improving continuously, but there currently are no advisable options for altering enforcement of the inadmissibility ground against persons who do not affirmatively admit to renouncing their U.S. citizenship for the purpose of avoiding U.S. taxation …
Despite the legal, operational, and policy challenges to the full implementation of section 212(a)(10)(E) of the Immigration and Nationality Act, the Department of Homeland Security and the Department of State remain committed to continuing to strengthen lines of communication, improve information sharing, and develop more consistent protocols to ensure that both Departments are aware when a renunciant admits that he or she renounced U.S. citizenship for the purpose of U.S. tax avoidance.
So there you have it, straight from the horse’s mouth: they have no way to enforce the Reed Amendment unless you “admit” to a government official the obvious truth that taxation-based citizenship is making it miserable for you to lead a normal life in the country you have chosen to call home.