Liberty and justice for all United States persons abroad

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Category Archives: Renunciation

U.S. “TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION” (TIGTA) argues in IRS audit for much better enforcement of tax rules for those who expatriate to support “Congress’s attempts to create disincentives for tax-motivated expatriation”

Posted on by Posted in Freedom, Issues regarding US persons abroad, Law & Morality, Relinquishment, Renunciation 15 Comments

[The audit is now mentioned in Tax Connections from, I think, a tax compliance perspective]

A commenter on Brock found this link to a recent September 28, 2020 TIGTA audit, a “review to determine the effectiveness of the Internal Revenue Service’s efforts in ensuring compliance with the expatriation tax provisions under Internal Revenue Code Sections 877 and 877A…”

Expatriation is a human right.

However the United States Congress and the U.S. Treasury Inspector General for Tax Administration (TIGTA) aim to discourage anyone who renounces because they don’t want the burden of annually filing those US tax forms — there must be disincentives for these persons.

TIGTA specifically argues that without a much better IRS “Centralized effort, Congress’s attempts to create disincentives for tax-motivated expatriation via I.R.C. § 877A will not be effective”. Of course, the disincentives would be applied also to “Accidental ‘Americans'”.

The audit concluded that IRS tax compliance efforts for expatriates is a mess and found, for example:

“TIGTA found that the IRS database of expatriates was incomplete for 16,798 expatriates who did not file Form 8854. In addition, TIGTA found instances of potential nonfiling, underreporting of income, and/or payment compliance issues by expatriates. From a sample of 26 expatriates who did not file a Form 8854, five had potential unreported income over $6 million. From a sample of 61 expatriates who filed a Form 8854, 15 had potential unreported income over $17 million. Lastly, TIGTA also found that expatriates with high net worth appear to not be paying their exit tax.”

… and TIGTA made some recommendations.

IRS Webinar: “Relief Procedures for Certain Former Citizens”

Posted on by Posted in Ethics, Law & Morality, reductio ad absurdum, Relinquishment, Renunciation 3 Comments

IRS Webinar: “Relief Procedures for Certain Former Citizens”

Excerpts:

“PHILIP YAMALIS: Welcome to today’s webinar, Relief Procedures for Certain Former Citizens. We are certainly very glad you are joining us today. My name is Philip Yamalis and I am a Stakeholder Liaison with the Internal Revenue Service and I will be your moderator today’s webinar which is slated for 100 minutes. Before we begin, if there is anyone in the audience that is with the media…”

“Phil, how about stopping here first for a polling question. YAMALIS: That sounds like a great idea. Let’s do it. Our first polling question, folks. Here it is. What are some of the common tax responsibilities of United States citizens? Now is the correct response, A, annually file income tax returns reporting worldwide income if income is over a specified threshold. B, annually file all required information returns, C, annually file Foreign Bank and Financial Accounts or FBAR on FinCEN Form 114, or, D, all of the above? Please click on the radio button that you believe most closely answers this question. I’ll give you a few seconds to make your selection. OK, let’s stop the polling now and we’ll share the correct answer on the next slide. And the correct response is D, all of the above. OK. I see that 97 percent of our audience responded correctly. That’s an awesome response rate. Thanks for your attention, folks. So with that, let me turn it over to Lara…”

“Philip, why do[n’t] we stop here for our second polling question? YAMALIS: Lara, that sounds very good to me. So, audience, are you ready for the second polling question? Here it is. I’ve heard this enough, so I think we all got this, but here it is. On what IRS form must individuals who relinquished citizenship certify compliance for the five years before expatriation? Is the correct response Form 911, B, Form 5471, C, Form 8854, or D, Form 8939? You know how this goes. Click on the radio button that you believe most closely answers this question…I’m glad that 90 percent of you responded correctly, the Form 8854, Initial and Annual Expatriation Statement. Available where? Yes, on IRS.gov. That’s a great correct response rate, by the way, 90 percent. Thanks so much for paying attention, folks…”

“So, in Hypothetical 1, we have John, who was born in the U.S. and became a U.S. citizen at birth. He renounced his citizenship on October the 1st, 2019. In making a submission, he tallies up his total tax liability and it’s under the 25,000-dollar threshold. Now, here’s an important point. It was stated in the Hypothetical. John uses his best efforts in computing his total tax for each year. John computed the income from his foreign [?]mutual funds and reported them as ordinary income on the other income line of his Forms 1040. Anybody that’s familiar with foreign [?] mutual funds knows that they’re treated as special categories of investments. John should have used a Form 8621. The title of that form is Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. We often refer to these as PFICs. So, John should have reported his PFIC on a Form 8621 with some special computation, but he didn’t. He tried his very best…”

“The term, Accidental American, is not a term used by the government…”

“…Thanks again for your time and attendance. We wish you much success in your business or practice.”

If you Decide to Comply, DON’T choose a Homelander Tax Compliance Professional

Posted on by Posted in Non Resident Taxation, Renunciation 73 Comments

I was very surprised to receive the following email on Friday evening. I cannot recall ever getting anything like this before. I will not identify the author because it is not proper to publicly share an email without the permission of the sender. It is not anyone I have ever heard of before and I doubt any of you have either. It took me a while to decide if I would answer or not. I tried to put my reaction aside after all, why be surprised that a tax compliance professional would demonstrate so little awareness outside of his/her experience. In the end, I simply could not ignore how I felt. I replied and have decided to publish the email without naming its author and my response.
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Late, incomplete Federal Register expatriates list finally placed on public inspection

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No time for a detailed analysis, but the Quarterly Publication of Individuals Who Have Chosen to Expatriate for Q4 2017 has just been placed on public inspection for printing in Friday’s Federal Register, ten days later than required by law.

I count 685 names in this list, bringing the total of “published expatriates” for 2017 to 5,133 individuals. In contrast, NICS added 1,017 people to the “Renounced U.S. Citizenship” category from October to December of last year, and another 353 in January. This quarter’s Federal Register list still does not include some public figures known to have given up US citizenship more than a year ago, including Japanese legislator Kimi Onoda and Ghanaian Deputy Minister of Finance Charles Adu Boahen.

Federal Register vs. NICS statistics, 2017
First quarter Second quarter Third quarter Fourth quarter
Month,
year		 Addi-
tions		 Month-end
total		 Month,
year		 Addi-
tions		 Month-end
total		 Month,
year		 Addi-
tions		 Month-end
total		 Month,
year		 Addi-
tions		 Month-end
total
Jan 2017 377 38,380 Apr 2017 460 39,947 Jul 2017 329 41,001 Oct 2017 284 41,960
Feb 2017 344 38,724 May 2017 381 40,328 Aug 2017 326 41,327 Nov 2017 427 42,387
Mar 2017 763 39,487 Jun 2017 344 40,672 Sep 2017 349 41,676 Dec 2017 306 42,693
Q1 total 1,484 Q2 total 1,185 Q3 total 1,004 Q4 total 1,017
82 FR 21877 1,313   82 FR 36188 1,759 82 FR 50960 1,376 83 FR 5xxx 685
Annual totals for 2017 Fed. Reg. 5,133 NICS 4,690

Fundamentally, nothing much has changed. After all the broken promises about how tax reform would save us, it just turned out to be another bonanza for accountants and lawyers. The IRS still can’t publish a simple list of names in a timely fashion. Trump and Tillerson’s underlings continue to spout the same insulting excuses as Obama and Kerry’s underlings did for the $2,350 rip-off.

People who can’t hide from this whole mess continue to face absurd wait times for appointments and CLNs (made worse by ongoing chaos in the State Department), while those who are able to hide have even stronger reasons to keep on hiding.

1,759 published expatriates in Q2 2017 Federal Register list

Posted on by Posted in Relinquishment, Renunciation 71 Comments

Apologies for not posting in a while. The Quarterly Publication of Individuals Who Have Chosen to Expatriate for Q2 2017 has just been placed on public inspection for publication in Thursday’s Federal Register, four days later than required by law.

By my count, this list contains the names of 1,759 people who renounced or relinquished US citizenship under any paragraph of 8 USC § 1481(a), as compared to 1,185 renunciants (under 1481(a)(5) only) added to NICS in April, May, and June (update, 4 August 2017: and another 329 in July). The number of names in the Federal Register continues to show an upward trend, with the four-quarter moving average rising by 48% from 1,026 a year ago to 1,517 as of this quarter.

Homeland pundits continue to misunderstand what’s driving these numbers: witness this Orlando Sentinel op-ed, which tries to blame the Q4 2016 spike on Trump’s election and other issues which are of great interest to Homelanders but are hardly the centre of attention for citizens of other countries who have lived abroad most of their lives. In fact, it wasn’t until this quarter’s list that we finally started seeing names of people who verifiably gave up US citizenship since Trump’s win — for example Chris Hart, who became a citizen of Japan sometime around March, and whose name shows up at page 15 of the public inspection PDF. However, this quarter’s list also contains names from other Certificates of Loss of Nationality which took as long as four years to finish working their way through the system.

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Transcript of Hearing April 26, 2017 House Committee on Oversight & Government Reform-Meadows

Posted on by Posted in Issues regarding US persons abroad, Law & Morality, Relinquishment, Renunciation, Senate Hearings 21 Comments

beanCourtesy of Andrew Grossmann · @andygr
28th May 2017 from TwitLonger TwitLonger

This is a transcript from the FATCA Hearing held in Washington D.C on April 26, 2017.
I think it is interesting to actually read the testimonies that we heard that day. Some of the more striking aspects seem even more shocking and the mistakes stick out like sore thumbs……………..All emphases are mine – Patricia Moon

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1,313 published expatriates in Q1 Federal Register honour roll; 1,484 renunciants added to NICS for same period

Posted on by Posted in Relinquishment, Renunciation 158 Comments

The Quarterly Publication of Individuals Who Have Chosen to Expatriate for Q1 2017 has just been placed on public inspection for printing in Wednesday’s Federal Register, ten days later than required by law. This quarter’s list contains 1,313 “published expatriates”, in contrast to the FBI’s NICS gun control database which counted 1,484 renunciants for the first three months of the year (and another 460 in April).

NICS only includes people who renounce citizenship under 8 USC § 1481(a)(5). In other words, it is supposed to cover a smaller population than the Federal Register list, which includes § 1481(a)(1) – (4) relinquishers as well. So it’s clear that not all ex-citizens get their names published in the Federal Register, though there seems to be neither rhyme nor reason behind that long-standing phenomenon — (a)(5) renunciants & (a)(1) relinquishers, rich & poor, covered & uncovered expatriates, and filers & non-filers of 8854 alike are among both the published and the unpublished.

All we can say for sure is that either the State Department is not forwarding some CLNs to the IRS, or the IRS is not publishing the names from all the CLNs they receive. (Given that State should be forwarding CLNs to both the FBI and the IRS, and the FBI clearly have been receiving CLNs, I’d guess that the problems are the IRS’ fault.) It’s clearer why tens of thousands of people who abandon their green cards each year don’t show up in the list either: USCIS isn’t providing the IRS with the information they need about those folks, as we’ve discussed in more detail previously.

We still can’t tell whether the U.S. election results are having any effect on the numbers, because it’s not clear when the people named in this quarter’s list actually went and paid that $2,350 to the U.S. government — I’m not having much luck matching the names in this quarter’s list to media reports. One person in this quarter’s list is known to have relinquished in June 2016, but I can’t find any others who have previously spoken with the media about giving up U.S. citizenship. If you know the date anyone in this quarter’s list (whether yourself or a public figure) had their final appointment at the consulate, please leave a comment.

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99.999% of this country’s citizens didn’t renounce during Q1, proving that it’s nearly perfect

Posted on by Posted in Renunciation 10 Comments

By which of course I’m referring to Vietnam, where media reports state that 1,077 people renounced Vietnamese citizenship during the first quarter of 2017, while by counting notices in the official gazette I came up with a somewhat higher figure of 1,382. Since Vietnam’s population is roughly 92.7 million, I guess we can say, using FATCA-natics’ logic, that 92,698,618 people chose not to renounce their citizenship and so Vietnam is 99.999% perfect, right?

Sarcasm aside, Vietnamese nationality law and bureaucracy have several praiseworthy aspects. First, there are a few provisions which try to prevent “accidental citizenship”, meaning that some of the diaspora can avoid going through renunciation procedures in the first place (though as one case from the United Kingdom demonstrates, these provisions haven’t always worked very well). They even issue certificates of non-citizenship to people who never had Vietnamese nationality but need to convince other disbelieving governments or private institutions of that fact.

For those who do need to renounce, Vietnam does things relatively efficiently. The Vietnamese embassy in DC says that they accept renunciation forms by mail. The law requires them to respond to an application for renunciation within 60 working days. And the Vietnamese government managed to issue a press release about their Q1 renunciation statistics less than four weeks after the end of the quarter.

In contrast, the U.S. State Department’s unilateral demand for in-person renunciation appointments, and strict rationing of those appointments, makes the waiting list ten months long in some places. You might wait more than a year after that to get your Certificate of Loss of Nationality. They certainly don’t issue certificates of non-citizenship. And while 26 USC § 6039G(d) requires the U.S. government to publish a list of renunciants within 30 days after the end of each quarter, there was nothing relevant in Friday’s Federal Register and nothing scheduled for Monday’s either.

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“All Roads Lead To Renunciation” – #FATCA Same Country Exemption Edition

Posted on by Posted in Relinquishment, Renunciation 85 Comments

You can read it at the Americans Citizens Abroad site. Highlights include:

In denying the request for SCE, the Treasury Department’s final FATCA regulations focused solely on the risk of US tax avoidance. “The Treasury Department and the IRS have also decided that the risk of U.S. tax avoidance by a U.S. taxpayer holding an account with an FFI exists regardless of whether the U.S. taxpayer holds an account in his or her foreign country of residence or another foreign country.”  The regulations say nothing about the problem of lock-out.  They fix only on the unquantified and un-weighted risk that what must be a  relatively small population of US taxpayers residing in a foreign country and banking at their local bank might evade US tax.  The regulations do not say whether, and, if so, to what extent, Treasury Department took into consideration the widely-admitted fact that FATCA continues to put the community of 8 million Americans overseas at risk of lock-out from access to financial accounts needed for the management of basic living expenses (paying bills, paying rent, receiving paychecks). The problem of foreign financial account lock-out exists, and it has been proven that the FATCA rules are one of the root causes.  The Congressional Americans Abroad Caucus, the National Taxpayer Advocate, and ACA, as well as other overseas organizations, have testified to the existence of the problem and have asked for redress by the adoption of SCE.  ACA believes that Treasury Department either missed the point or failed reasonably to balance the considerations.

Updates January 6, 2017: From Treasury Regulations AKA “The Horse’s Mouth”

1. DEFINITION OF U.S. ACCOUNT

Comments requested that the definition of a U.S. account exclude accounts held by U.S. individuals resident in the same jurisdiction as the FFI with which the account is held. This comment is not adopted. The U.S. federal income tax system largely relies on voluntary compliance, and third party information reporting of the financial accounts of U.S. taxpayers is used to encourage voluntary compliance. For this reason, U.S. financial institutions are generally required to report under chapter 61 U.S. and foreign source investment income paid to account holders that are U.S. individuals. However, before FATCA, FFIs (in particular, non-U.S. payors) generally were not required to report foreign source payments made to U.S. taxpayers. The information reporting required by FATCA is intended to address the use of foreign accounts to facilitate tax evasion, and also to strengthen the integrity of the voluntary compliance system by placing U.S. taxpayers with accounts held with FFIs in a comparable position to U.S. taxpayers with accounts held with U.S. financial institutions. This is the case even for U.S. taxpayers resident abroad, since U.S. citizens and U.S. resident aliens are subject to U.S. income tax on their worldwide income regardless of where they reside and regardless of whether their accounts are maintained by U.S. financial institutions or FFIs. The Treasury Department and the IRS have also decided that the risk of U.S. tax avoidance by a U.S. taxpayer holding an account with an FFI exists regardless of whether the U.S. taxpayer holds an account in his or her foreign country of residence or another foreign country.” https://www.federalregister.gov/documents/2017/01/06/2016-31601/regulations-relating-to-information-reporting-by-foreign-financial-institutions-and-withholding-on

No, the administration of Barack Obama did NOT miss the point. The point is a simple one:
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Federal Register lists 1,379 people who didn’t want to wait for U.S. election results

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The folks over at the Federal Register have put the “Internal” Revenue Service’s Q3 2016 Quarterly Publication of Individuals Who Have Chosen to Expatriate up for public inspection. I count 1,379 names of newly-minted ex-U.S. citizens in this list, making it the second-largest list ever published (beaten only by the Q3 2015 list, which had 1,426 names).

The list is scheduled for official publication on 10 November, eleven days later than the 30-day deadline specified by 26 USC § 6039G(d). Obama’s Treasury Secretaries have only managed to meet the list’s deadline eight times out of 31 during his term as president (three so far for Jack Lew, and five for Tim Geithner, assuming we count the late Q4 2012 list as being his fault). However, Bush’s appointees didn’t have a much better track record: Hank Paulson only published one list on time during eleven quarters, while John Snow holds the all-time delay record of 516 days for the Q3 2005 list.

Who are the people in this list?

The latest list was published just after the news broke that Donald Trump won the U.S. presidential election, but contrary to media hype, there’s very little connection between that news and people who choose to give up U.S. citizenship. After every U.S. election you can find all sorts of hysterical Internet surfers claiming they want to renounce their citizenship and flee the new regime, but for the most part these aren’t the people who actually move abroad, let alone go to a U.S. consulate and pay $2,350 for State Department bureaucrats to push renunciation papers around.

First and foremost, all of the people in the Federal Register list already live in other countries, and have been living there since long before the election. This latest list includes people who are known from media reports to have given up U.S. citizenship as recently as July, though most probably made their final visit to the U.S. consulate late last year or early this year.

Some were self-identifying Americans abroad who saw cutting off their legal ties to Washington, DC (and its coterie of self-serving revolving-door bureaucrats who pretend they don’t know that they’re ruining our lives) as the only way to survive all the damage that previous presidents and Congresses inflicted on the diaspora. They’d reached their breaking points long before anyone knew who’d even be on the ballot in November, let alone how long it would take the next administration to follow through on its promises to make things right.

Others considered themselves primarily as citizens of other countries, and saw U.S. citizenship as a barrier to their lives in the country they considered home. They didn’t have any stake in who’d be U.S. president — but instead of making it easy for these de facto non-Americans to become de jure non-Americans, the U.S. government put all sorts of unnecessary barriers in their way, turning what should have been an amicable split into a bureaucratic nightmare.

Why isn’t my name in there?

In addition to being late, the Federal Register list is widely recognised as being incomplete too. Aside from the IRS, the FBI also maintains a list of renunciants in the National Instant Criminal Background Check System gun control database (NICS), in order to enforce provisions of federal law (18 USC 922(g)(7)) barring renunciants from purchasing firearms. They don’t make the names public, but each month they publish a report on the size of the database; according to those reports, the FBI added 4,240 renunciant records from the beginning of this year until 30 September (growing from 32,666 to 36,906).

In contrast, the Federal Register only gave us 3,046 renunciants and relinquishers over the same period (509 last quarter, and 1,158 in Q1). And that’s not even mentioning the tens of thousands of people who abandon green cards each year, whom the Federal Register list misleadingly implies are included as well (“[f]or purposes of this listing, long-term residents, as defined in section 877(e)(2), are treated as if they were citizens of the United States who lost citizenship”).

As always, after the jump please find an updated table of people who are known from media reports to have given up U.S. citizenship recently, including whether or not their names have appeared in the Federal Register.

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