Introduction – “You Have To Know The Past To Understand The Present”
The 2011 creation of the Isaac Brock Society revolved around citizenship, taxation and citizenship taxation. The Brock community evolved into an important source of research on these issues. Most of the. discussion on Brock has focused on U.S. citizenship taxation. However, the question of citizenship is even more important. Citizenship laws in general and the law of U.S. citizenship in particular is lengthy and complex. It is a blend of history, statutes, court decisions and the constitution as stated in the 14th Amendment (those born or naturalized in the United States are U.S. citizens). The greater the complexity, the harder to understand and the easier to confuse. Confusion is toxic when one is experiencing the fear and uncertainty caused by the application of the U.S. tax system to Americans abroad.
Many readers if the Isaac Brock Society had moved to Canada as U.S. citizens and subsequently naturalized as Canadian citizens. Depending on the date of their naturalization as Canadian citizens, many had understood AND INTENDED their voluntary naturalizations as constituting a relinquishment of their U.S. citizenship. To be crystal clear: the U.S. statute governing relinquishment of U.S. citizenship prior to 1986 – INA 349(a) – stated that naturalization as a Canadian resulted in the automatic relinquishment of U.S. citizenship. Notably, a Certificate of Loss Of Nationality (“CLN”) was NOT required to lose U.S. citizenship. It was not until the 1986 amendments to the U.S. Immigration and Nationality Act that the requirement of “intention” to relinquish U.S. citizenship was added to INA 349(a). Regardless, a CLN was not and has NEVER been required to relinquish U.S. citizenship under the INA.
Until June 3, 2004 U.S. citizenship for purposes of taxation under the Internal Revenue Code, was U.S. citizenship for the purposes of immigration. Put another way: If one ceased to be a U.S. citizen for nationality purposes, one ceased to be a U.S. citizen for tax purposes. Because, citizenship could be relinquished without specific notification to the U.S. government, it was possible to cease to be a U.S. citizen for tax purposes without notifying the government. (Those interested in a “deeper dive” on this issue may find one of my 2015 posts – discussing the timing of relinquishment of U.S. citizenship – to be of interest.)
From June 3, 2004 a Certificate of Loss Of Nationality has been a requirement to lose U.S. citizenship for tax purposes. The issuance of a Certificate of Loss of Nationality (“CLN”) functioned as NOTIFICATION to the U.S. Government that the individual was no longer a U.S. citizen for either immigration purposes or for tax purposes. The requirement of a CLN to lose U.S. citizenship for tax purposes was introduced on June 3, 2004 (clearly stated to operate prospectively) and reconfirmed by the HEART Act which took effect on June 16, 2008.
My last post on Brock discussed the OVDI program that ran through the summer of 2011. During that horrible summer of 2011 many in the tax compliance community were (in my opinion) incorrectly advising ALL individuals born in the United States that without a Certificate of Loss Of Nationality, one was forever treated as a U.S. citizen for purpose of U.S. tax, reporting and penalties. Think of it! People who had naturalized as Canadian citizens in the 1970s were being told that the 2008 HEART Act operated retrospectively and that:
- They never lost their U.S. citizenship for tax purposes; and
- They were liable for taxes, forms and penalties going back to the 70s.
(The claim of the “retrospective/retroactive” application of the 2008 HEART Act was discussed in an excellent 2015 Brock post by Patricia Moon and Carol Tapanila which may be read here.)
My next Brock post will specifically discuss the claim – courtesy of a small group of “tax professionals” that people who relinquished U.S. citizenship prior to 2004 and do not have a CLN – were/are still subject to U.S. taxation.
My point is that:
Since 2004 there has been a difference in U.S. citizenship for nationality purposes and U.S. citizenship for tax purposes.
This distinction is important to understand at least one of the issues in the Dan Duggan extradition.
So, concludes my brief discussion of the past. Let’s see if that discussion helps us understand the present.
The Present – Introducing Daniel Duggan A Example Of Naturalizing As A Citizen Of Australia And Not Seeking A CLN Until Later – When Did He Lose His Citizenship For Tax Purposes And For Nationality Purposes?
Note: The issue with Mr. Duggan is when he relinquished U.S. citizenship for nationality purposes. Specifically: did Mr. Duggan cease to be a U.S. citizen for nationality purposes at the time that he naturalized as an Australian citizen in 2012?
An interesting podcast introducing Mr. Duggan is here. A brief overview of the facts from Wikipedia includes:
Daniel Edmund Duggan (born 1969) is a former U.S. Marine Corps pilot. He renounced his U.S. citizenship, became an Australian citizen in 2012, and was arrested in October 2022 at the request of the U.S. government seeking his extradition based on charges of arms trafficking, specifically training Chinese fighter pilots to land jets on aircraft carriers and laundering money.[2] Duggan has denied the charges.[3]
After more than three years of incarceration in Australia, the Dan Duggan extradition appeal is scheduled to take place on October 16, 2025. The issue is whether Australia should extradite Mr. Duggan to the United States. Mr. Duggan is a citizen of Australia. Article 5 of the U.S. Australia extradition treaty states that:
“Neither of the Contracting Parties shall be bound to deliver up its own nationals under this Treaty”
Therefore, Australia retains discretion over whether to extradite Mr. Duggan. Nevertheless, I expect that the hearing will focus on the process and Australia’s obligations under the treaty and not the fairness of the process to Mr. Duggan.
Why would this be of interest to U.S. citizens generally and Americans abroad particularly? There are at least three reasons.
- One issue is whether Mr. Duggan was a U.S. citizen at the time that the (alleged) offenses were committed. In his own words, Mr. Duggan describes his voluntary relinquishment of U.S. citizenship by naturalizing in 2012 as an Australian citizen with the intention of relinquishing U.S. citizenship. He (apparently) did not seek a U.S. Certificate Of Nationality (“CLN”) until a few years later as also confirmed here. The question of the date of Mr. Duggan’s relinquishment of U.S. citizenship (with a variety of opinions) is also part of this Reddit thread.
- As explained here, the United States uses extradition treaties as a mechanism to export U.S. criminal law into other countries. In Mr. Duggan’s case, the issues include whether his (alleged) conduct was a crime in Australia (dual criminality) and whether he was subject to U.S. jurisdiction (citizenship). Exporting U.S. criminal law into other countries is an example of the U.S. penchant for the extra-territorial application of its laws.
- Extradition based on tax related issues is possible. As explained by journalist Taylor Hudak and subsequently discussed on IRS Medic, the United States used the U.S. Spain extradition treaty to arrest Roger Ver. The arrest and claim of extradition was based on charges of tax evasion in conjunction with his relinquishment of U.S. citizenship. The 2020 Tinkov case is a second example of extradition based (in part) on filing a false Form 8854. (Interestingly both the Tinkov and Ver cases have been settled.)
The Duggan arrest and extradition – The Basic Facts
Dan Duggan is a former U.S. Citizen and former U.S. Marine fighter pilot who served 13 years in the U.S. Military. According to this Wikipedia article (and additional commentary), he moved to Australia in the early 2000s, married and naturalized as an Australian citizen. According to the @FreeDanDuggan handle on X.com, he has a Certificate Of Loss Of U.S. Nationality stating that he relinquished U.S. citizenship in 2012.
Mr. Duggan has been indicted by the United States for conduct which includes violating U.S. Arms Control laws. Specifically he is alleged to have provided flight training to Chinese military pilots and money laundering. The indictment, which is interesting reading, is here.
The offences charged include:
18 U.S.C. 371 (Conspiracy), 22. U.S.C. 2278 (Arms Export Control Act), 22 C.F.R. Parts 120 – 130 (International Traffic In Arms Regulation), 18 U.S.C. 1956 (Money Laundering), 18 U.S.C. 2 (Aiding and Abetting and Causing An Act to be Done), 18 U.S.C. 981(a)(1)(C) and 28 U.S.C. 2461(c) (Criminal Forfeiture).
Clearly the charges were framed to meet the requirements of the U.S. Australia extradition treaty. Specifically, the charges must be “punishable under the laws of both contracting states by deprivation of liberty by more than one year“.
Notably the first paragraph (Grand Jury Sworn In on November 3, 2016) of the indictment reads:
Defendant Daniel Edmund DUGGAN (hereinafter “DUGGAN”) was a citizen of the United States of America, a former commissioned officer in the United States Marine Corp, and a Naval Aviator. DUGGAN was also a citizen of Australia.
The indictment assumes that Mr. Duggan was a U.S. citizen during the period that he was ALSO an Australian citizen. Was Mr. Duggan a U.S. citizen after his 2012 naturalization as a citizen of Australia? What was the date of his relinquishment of U.S. citizenship? Was the relinquishment of U.S. citizenship effective on the date that he naturalized as a citizen of Australia? Alternatively was his relinquishment effective only from the date that he applied for his CLN? Notably, a CLN is NOT required to relinquish U.S. citizenship under the Immigration And Nationality Act. A CLN is – since 2004 – required to cease to be a U.S. citizen under the Internal Revenue Code.
Significantly, at least some of the charges are based on conduct that occurred AFTER his 2012 relinquishment of U.S. citizenship. Apparently Mr. Duggan did NOT apply for a Certificate of Loss Of Nationality until 2016. The U.S. Government appears to be taking the position that he was a U.S. citizen until the CLN was issued. (In other words the U.S. is using the tax definition for loss of U.S. citizenship and not the immigration definition of loss of U.S. citizenship.) The issue of the date of loss of U.S. citizenship is an item of great interest to Americans abroad. This is true for both tax issues and for the ability to pass U.S. citizenship on to a child.
The Duggan Extradition Process
At the request of the United States (and based on the indictment), Mr. Duggan was arrested in Australia and has been held without bail for more than three years. Neither the U.S. Australia extradition treaty nor the Australian extradition statute requires that degree of inhumane treatment. Why has Mr. Duggan not been granted bail?
Understandably the Duggan family is in a desperate financial situation. Those inclined to donate to his defence may do so here.
The Duggan case matters to BOTH the Duggan family and to Americans abroad generally!
It’s obvious why the Duggan case matters to the Duggan family.
It’s less obvious why the Duggan case matters to U.S. citizens generally. For U.S. citizens it matters whether they have a constitutional right to relinquish U.S. citizenship and what the date of relinquishment is. In the Ver case the U.S. government took the position that there is no constitutional right to expatriate. In the Duggan case the U.S. government is clearly taking the position that relinquishment is dependent on the issuance of a CLN.
Further reading on the Duggan case
Dan Duggan Part 2 – For The Sake Of Its Citizens And Sovereignty Australia Must Terminate The Extradition Treaty With The United States
Happy Canadian Thanksgiving!!
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