Liberty and justice for all United States persons abroad

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Tag Archives: Jack Reed

Homeland Security enforced Reed Amendment twice in 14 years; banished two ex-citizens who mentioned tax motivations

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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.

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Who voted for the Reed Amendment in 1995 and 1996?

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IRSCompliantForever asked this question in a comment, and I thought the answer was interesting (and complicated) enough to deserve its own post. The Reed Amendment — which bans people determined by the Attorney-General to have “renounced citizenship for the purpose of avoiding taxation” — was an amendment to the Immigration in the National Interest Act of 1995 (which eventually morphed into the Illegal Immigration Reform and Immigrant Responsibility Act of 1996), moved while the bill was being considered by the House Committee on the Judiciary. The amendment passed with broad bipartisan support — you’ll notice plenty of familiar names among the committee voters, including Chuck Schumer — while the Republican control of the House and Senate ensured the passage of the bill in which it was contained. The detailed breakdown of the votes can be found after the jump.

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Jack Reed tries again

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Undeterred by the failure of his previous attempts to legislate Exile and Punishment for Apoplectic Taxpayers Residing In Other Territories, on Monday Jack Reed (D-RI) introduced his third amendment to ban covered expatriates — people who found financial success overseas thanks to the countries to which they emigrated many years ago, or ordinary wage-earners who in the past five years missed some of the dozens of pages of confusing tax forms that Americans abroad must file and that Homelanders have never seen.

The number of this latest amendment is S.A. 1609. It appears at page S5075 of the Congressional Record for Monday, 24 June 2013; the text is identical to the earlier S.A. 1233 we discussed two weeks ago, including in its misspelling of “principal purpose” as “principle purpose”. However, it is not an amendment to the immigration reform bill itself, but rather a second-degree amendment to Patrick Leahy (D-VT)’s border security amendment S.A. 1183 — in a manner heavily reminiscent of Carl Levin’s FATCA, which after its repeated failure as a standalone bill was moved as an amendment once he finally finally find somewhere to sneakily insert it. The Senate already invoked cloture on S.A. 1183, and scheduled it for a final vote on Wednesday (tomorrow).

I’ll leave it to Tim or others to comment further on the parliamentary procedure implications of this. As he mentioned earlier, even if the amendment passes, the House might still “blue slip” the whole bill if they agree that permanent exile for ex-citizens or other provisions of the bill violate the Constitution’s Origination Clause requiring that all bills raising revenue come from the House. However, note that this version of the amendment, unlike S.A. 1252, does not include the provisions of the original Ex-PATRIOT Act that would hit covered expatriates with an additional 30% tax on U.S.-source capital gains (like that already imposed on non-resident aliens present in the U.S. for half the year or more).

Congress resumes attacks on emigrants: the Ex-PATRIOT Act is back

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In a press release on his website, Jack Reed announces that he and Chuck Schumer have moved an amendment to the immigration reform bill to make “covered expatriates” — people who give up U.S. citizenship and meet certain asset thresholds, or who have missed some of the ridiculously time-consuming piles of tax paperwork required of citizens living abroad within the past five years — into permanent exiles from the United States, in similar terms as Schumer’s failed Ex-PATRIOT Act last year.

Contrary to Reed’s mendacious claims, this amendment does not just affect people who “accumulat[e] wealth and benefit from the greatness of the United States and then renounc[e] their citizenship to avoid paying their fair share of taxes”. As even a cursory glance at Wikipedia confirms, the overwhelming majority of people who give up citizenship have lived abroad for many years and became successful thanks to the countries in which they actually live, not the United States which they made a conscious choice to leave behind.

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