The GPO has just published the full text of Schumer’s proposed Ex-PATRIOT Act (S. 3205). The act creates the new category of “specified expatriates” (a subset of 877A(g)(1)’s “covered expatriates”) and gives rules for determining who is a “specified expatriate”. It then imposes a tax of 30% on U.S. capital gains of “specified expatriates”, and makes them inadmissible to the United States.
The first thing to note about the Ex-PATRIOT Act is that it would close the Reed Amendment “relinquishment loophole”. The 1996 Reed Amendment added INA 212(a)(10)(E), which states:
(E) FORMER CITIZENS WHO RENOUNCED CITIZENSHIP TO AVOID TAXATION
Any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is inadmissible.
(I wrote a Wikipedia article about the Reed Amendment for those who would like more background.) The plain language of the Reed Amendment alone (without delving into the legislative intent) would not seem to make relinquishers inadmissible. In contrast, the Ex-PATRIOT Act retains the title of that paragraph of the INA, but changes the body significantly: Timmy Geithner rather than Eric Holder would be empowered to exclude people from the U.S., and it would no longer matter whether you gave up U.S. citizenship by relinquishment or renunciation:
(i) IN GENERAL- Any alien who is determined by the Secretary of the Treasury to be a specified expatriate is inadmissible.
(ii) SPECIFIED EXPATRIATE- In this subparagraph, the term `specified expatriate’ has the meaning given that term in section 871(a)(2)(C) of the Internal Revenue Code of 1986.
(iii) NOTIFICATION OF EXCEPTED INDIVIDUALS- The Secretary of the Treasury shall notify the Secretary of State and the Secretary of Homeland Security of the name of each individual who the Secretary of the Treasury has determined is not a specified expatriate under section 871(a)(2)(C)(ii) of the Internal Revenue Code of 1986.
The other crucial part of the act is the definition of a “specified expatriate”
(C) SPECIFIED EXPATRIATE-
(i) IN GENERAL- For purposes of subparagraph (A), the term `specified expatriate’ means, with respect to any taxable year, any covered expatriate (as defined in section 877A(g)(1)) whose expatriation date (as defined in section 877A(g)(3)) occurs after the date which is 10 years prior to the date of the enactment of this subparagraph.
(ii) EXCEPTION- An individual shall not be considered a specified expatriate if such individual establishes to the satisfaction of the Secretary that the loss of such individual’s United States citizenship did not result in a substantial reduction in taxes.
This is a much tighter standard than the old procedure (I believe prior to 2004) under which former citizens could apply to the IRS for a ruling that they had non-tax reasons for giving up citizenship (see here for details). Instead it presumes you are guilty, and the only way to prove your innocence is to demonstrate that your tax bill did not go down. There are many countries with lower tax rates than the U.S. which also do not permit dual citizenship. An American who settled in one of those countries, achieved career or entrepreneurial success (or even just bought a house in the middle of a downturn and then waited a decade while real estate went up and the U.S. dollar went down), and then naturalised so he could vote on issues in the place where he lived, could become a permanent exile from the U.S.
Furthermore, the Ex-PATRIOT Act provides no exception for naturalised citizens returning to their country of origin after retirement, Americans who married non-Americans and settled abroad, or any of the other dozens of legitimate non-tax reasons that people would leave the United States. The only exceptions are those provided in 877A: people who were dual citizens at birth, or people who renounced U.S. citizenship within six months of turning 18 and did not live in the U.S. for more than 10 years.
And let’s not forget that “covered expatriates” are not just rich people. There is a third category of covered expatriate which everyone forgets about, besides those meeting the asset test or tax liability test: “877(a)(2)(C) covered expatriates”, ordinary emigrants who missed out on some of the IRS’ countless forms in their years of leading ordinary financial lives overseas, and thus cannot honestly check the Form 8854 box certifying that they have complied with all their tax obligations in the past five years. They too could become “specified expatriates” at Geithner’s whim.
I was former military as well. It only made me angrier and hardened my resolve to bust the shackles of tyranny once and for all.
The the injustices thrown upon expats by the boneheads in congress will only get worse.
Please speak out to the writers of this ridiculous bill by ringing:
Senator Robert Casey
+1 866 802 2833
+1 202 224 6542
And express your dissappointment with Speaker Boehner’s support too:
+1 202 225-0600
Possible talking points:
1) A retroactive bill that punishes people who acted within the law at the time is disturbing and immoral.
2) Rather than punish, why not compete? Lowering taxes and removing barriers to entry and exit would be the right moves for a free society and would improve America’s competitiveness and economy.
Oh dear…I am planning a road trip into the U.S. with my daughter with the disability in August. I am still waiting for my CLN, and will use my Canadian passport. I will travel with my daughter’s U.S. and Canadian passports. I just hope that we will NOT be turned away at the border.
Thanks for the information about your phone interview in London. My daughter has her phone interview there next month and is a little apprehensive about what she might be asked. I will pass on your report. Renunciation is never easy, but the more information we have, the easier it becomes. Thanks Isaac Brock! My appointment comes later in the year in Paris.
I have just found your comment on this thread and have used it to update our Relinquishment and Renunciation database at:
Best of luck on your next, May 30th, meeting. Let us know how things go with that and, finally, the successful receipt of your CLN within four to six weeks.
Hopefully, you will have no difficulty crossing the border with your daughter in August, using your Canadian passport. As backup, have that $450 receipt they gave you at the Calgary Consulate when you had your renunciation meeting!! (It is ludicrous that we are denied anything to prove we have gone through with our renunciation meetings when they have taken our US passports, refusing to give us copies of what we have signed; more so when this is just a procedure at certain Consulates.)
So let me get this straight.
I can leave the US, renounce or relinquish, and as long as I am NOT a covered expatriate, I can come back and vacation?
And this is true even if I leave, go to Chile and the Chilean government gives me $40,000 to start the NEXT Facebook, then because I expatriated before it all began I don’t have to worry???
THAT’S a weird way to lure badly needed investment capital into the USA!
It’s almost as if this Schumer guy WANTS other countries to dominate in the tech industry! Who is he working for, Mr. Chavez down in Venezuela, LOL? Or Mr. I’mADinnerJacket in Iran? (Sorry, don’t know how to spell the Iranian guy’s real name.)
I was curious about that Mr. Saverin guy, so I did some internet searching. It turns out he got screwed royally by Mark Z when they started Facebook. And it appears to have been intentional. After seeing this, I have come to the conclusion that the way the IPO was handled that it was likely Mark Z’s intention to screw the investors in the IPO, too. I mean, it’s said that anybody who wanted to could have signed up to buy during the week prior to the IPO. Which basically means, there were no “greater fools” left to buy it and drive the price up when the IPO broke on that Friday because everybody was already IN it up front. And considering that the income in Facebook is going DOWN and not up, who knows where that thing will be in 5 or 10 years.
Considering the description of how Mr. Saverin invested in Facebook and Mark Z forced him out, I cannot blame him for renouncing USA. He was screwed over on that deal (had to go to court before anybody would think of making things right) and then with all the FATCA and FBAR nonsense was probably getting screwed out of deals left and right by people who refused to do business with Americans due to the IRS filing requirements. I can see where the words “United States of America” could generate a really bad taste in his mouth. Especially with all the forms and restrictions.
“It’s almost as if this Schumer guy WANTS other countries to dominate in the tech industry! Who is he working for, Mr. Chavez down in Venezuela, LOL? Or Mr. I’mADinnerJacket in Iran? (Sorry, don’t know how to spell the Iranian guy’s real name.)”
No, he’s more likely working for the country he has visited 25 times.
This is a good place to make our displeasure over the Ex-PATRIOT act heard: https://www.popvox.com/bills/us/112/s3205 Let’s show we oppose it and send an email with our opinion to congress too (popvox makes this super easy).
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