In July 2012, Leneuoti Tuaua and four other plaintiffs filed suit in the D.C. District Court against the U.S. government and three State Department officials, claiming that American Samoans should be entitled to U.S. citizenship rather than their current “U.S. national” status. The lawsuit was dismissed in June 2013, but the plaintiffs appealed to the D.C. Circuit in February.
A number of legal scholars have filed amici briefs for the appellants, including Michael Ramsey of the the Tenth Amendment Center. More recently, the Department of Justice filed its own amicus brief attempting to rebut the appellants’ claims. Marianas Variety reports:
On Tuesday, the Obama administration on filed a brief before the District of Columbia Circuit Court arguing that Americans born in U.S. territories have no constitutional right to citizenship. Relying on a series of controversial Supreme Court decisions known as the Insular Cases that have been compared to Plessy v. Ferguson, the Obama administration defended a federal statute that expressly creates two classes of American nationals: those who enjoy the protections of U.S. citizenship and those who do not.
One of the more obscure consequences of this two-class system is a corner-case interaction between the Immigration & Nationality Act and the Internal Revenue Code: U.S. non-citizen nationals abroad are not “U.S. Persons” for tax purposes under 26 USC § 7701(a)(30).
This has no effect on American Samoans at home, since they — like every else — pay taxes to their local government for the services they actually use. It does make things simpler for American Samoans who move to Apia or Auckland or Australia or beyond. Due to the U.S.’ strange system of non-resident taxation — shared with only one other country on the planet, Eritrea — U.S. citizens (including Puerto Ricans and U.S. Virgin Islanders) and green card holders who live in other countries must spend thousands of dollars on professional assistance checking in with the IRS every year to prove the obvious fact that they’re already paying taxes to the country where they live and owe no U.S. tax. However, non-citizen nationals abroad are exempt from the IRS’ requirements.
But for the far more numerous American Samoans living in the fifty states, who pay the same taxes as their neighbours, this exemption is useless — and nevertheless, they pay a high cost for it: they cannot enjoy the same voting rights as people from other U.S. territories, nor many other rights enjoyed by other Americans, such as sponsoring a foreign spouse for a non-quota green card. Under Washington’s bizarre ideology, the price for freedom of emigration is your right to vote and your right to family life.
American Samoans and FATCA
Various sources have explored the impact of “non-citizen national” status on American Samoans residing in California, Hawaii, and other states. But here, I’ll discuss the lesser-known impact on American Samoans residing in other countries, such as the 489 people who reported their place of birth as American Samoa in New Zealand’s 2006 census.
As Marianas Variety points out:
Tuaua v. United States considers whether the Constitution’s guarantee of birthright citizenship extends to people born on American soil in a U.S. territory. The plaintiffs in the case were born in American Samoa, a U.S. territory since 1900. Among the plaintiffs are three veterans. American Samoa is distinguished as having the highest casualty rate in Iraq and Afghanistan of any U.S. jurisdiction. By statute, these plaintiffs and others born in American Samoa are recognized as “nationals, but not citizens, of the United States,” meaning that these passport-holding Americans must naturalize in order to be considered citizens by the federal government.
So back in the Homeland, the federal government has doubled-down on its commitment to maintaining rigid lines between “U.S. citizens” and “non-citizen nationals”. But abroad, the situation is even worse: thanks to FATCA — the U.S. effort to hunt down every American who maintains a so-called “foreign” bank account outside of the U.S., even if that account is down the street from them in the country where they actually live — non-citizen nationals are mistakenly being subject to the disadvantages of U.S. citizenship, while enjoying none of the corresponding advantages.
The confusion begins because of FATCA Intergovernmental Agreements which define “U.S. Territory” to include American Samoa, without clarifying whether bank customers born in American Samoa should be treated as falling under the “U.S. place of birth” category of “U.S. Indicia”. These same IGAs still define “U.S. Person” to include only “a U.S. citizen or resident individual”, not a U.S. non-citizen national, meaning that an account opened by an American Samoan who resides in a foreign country (though not one who resides in American Samoa) technically is not a U.S. reportable account under FATCA.
But do you serious think banks in New Zealand — let alone in non-Anglophone countries — will understand this when confronted with an American Samoan customer who carries a blue passport listing a place of birth which is clearly defined under the IGA as “U.S. Territory”? Or will those banks just close the accounts of American Samoans and cancel their mortgages, as they have done to other members of the American diaspora?
Evidence: financial institutions don’t understand the citizen/national distinction
I have located only one bank (DHB Bank, a Dutch/Turkish commercial bank) whose publications suggest that their legal advisers grasp the intricacies of the American Samoa issue. Far more typical of the Compliance Complex is the law firm of Arendt and Medemach, which — possibly due to inter-language confusion over the distinction between “citizen” and “national” — erroneously claims that under Luxembourg’s IGA:
Luxembourg FIs will be required to report accounts held by individuals that are classified as a Specified US Person under FATCA, including US nationals, US permanent residents, as well as on non-US entities that are controlled by such persons.
Similarly, F&C Investments (a subsidiary of Canada’s BMO Financial Group), presumably responding to FATCA, now states that “all registered [fund]holders must be over 18 years of age and not US Nationals/Persons”.
This illustrates a broader phenomenon: non-U.S. financial institutions are not responding to FATCA by spending their time and money doing in-depth studies of the history of United States nationality legislation in order to make sure that they don’t mistakenly report people’s accounts to the IRS when no reporting is required by law; instead they’re just kicking out all customers with any sign of U.S. taint, whether those customers be “practicing” U.S. citizens, non-citizen nationals, citizens of other countries with no connection to the U.S. beyond a parent or a place of birth, or even people who already went to a U.S. consulate to report their relinquishment of U.S. citizenship & get a CLN.
And while the State Department takes great care to ensure that American Samoan “non-citizen nationals” — whether at home or in other countries — aren’t mistakenly granted any of the benefits of American citizenship unless they’ve paid that US$680 naturalisation fee, it is doing absolutely nothing to prevent foreign banks and governments from discriminating against them on the mistaken assumption that their unusual legal status is equivalent to American citizenship.
In short, under FATCA, American Samoans are going to suffer the same harm to their freedom of emigration as other Americans. The issue here is not taxes: American Samoans living outside of the United States don’t have to pay any taxes to the U.S. government under the Internal Revenue Code, but other Americans born in the fifty states, Puerto Rico, USVI, or Guam who reside abroad rarely end up owing actual taxes to the U.S. government either.
Instead, for most members of the American diaspora, the primary injury from the U.S.’ ideology of “citizenship-based taxation” is not the tax but the ridiculous reams of IRS paperwork filed every year (and the draconian penalties for errors on that paperwork) to demonstrate that you owe no tax, and the discriminatory refusal by local financial institutions to offer you the same services that they offer to all your neighbours, for fear of what the IRS will have to say about it — and now, American Samoans abroad are suffering the latter fate along with the rest of the American diaspora.
Everyone be sure to thank Carl Levin for piling one more injustice on top of American Samoans — who can’t even get redress by trying to vote him out of office.