by Julie R Butler
I was recently reminded of the hullabaloo that broke out all over the expat-o-sphere last spring about expats who were renouncing their US citizenship. So I decided to take a closer look at the issue, starting with the source of all the discussions. I thought I found it when I came across the New York Times story on 25 April, but upon further investigation, I found that Time had also published a very similar story on 20 April.
In both stories, expats who had either insisted on anonymity or asked that their last names be withheld because of “sensitive family issues” are quoted. Both articles state the same statistics, that in the final quarter of 2009, 502 expats gave up US citizenship or permanent residency, which is more than twice the amount who did so in all of 2008. And they both contain the phrase, “toxic citizens,” used by American Citizens Abroad (ACA) director, Andy Sundberg, to drive home the point that banking and financial institutions both at home and abroad have been denying US citizens services because of increasingly intrusive role of the US federal government. Overseas Americans Week, the lobbying effort by expatriate-advocacy groups, had taken place in Washington 19 – 23 April, so perhaps it is not so surprising that the same names and the same talking points appear in both articles.
There are certainly legitimate tax and banking concerns for many citizens living abroad. Indeed, just today, Monday, 28 February, USA-Tax-News.com had the story, US Issues Rule On Foreign Bank Account Reporting, and it appears that the ACA’s lobbying effort didn’t work. Yet the whole idea of lobbyists with talking points always rubs me the wrong way, no matter what their stance, so I wanted to find more sources of information to back up what the two articles were saying.
It turns out that, despite the insistence at the end of both articles that relinquishing US citizenship is a relatively simple process, there is some confusion about this process. For example, in one expat forum, a poster claims that once a person renounces their US citizenship, they forfeit their privileges but will continue to have a tax obligation for ten more years. Then another poster explains that there is no exit tax, but some taxes on some trusts and prior property sales may be taxed if the net worth of the person is over US$2 million or they earned more than $140,000 for the five years preceding their renouncement. They also state that the ten years of tax obligation only applies if the person spends more than 30 days in a year in the US. So things aren’t so simple.
Even Simon Black of Sovereign Man is confused. From the article ironically titled Facts and Myths about Renunciation of US Citizenship:
I thought I’d dispel a few myths about expatriation because I hear these sorts of things all the time.
My personal favorite is the commonly held belief that if you renounce your citizenship, you will end up on some list… and they won’t let you back into the country.
This is simply untrue. If you already have another passport from a visa waiver country (like Canada or Germany), you could enter the US the very next day.
If your other passport is from a non visa waiver country (like St. Kitts or Panama), then you would have to go through the process of applying for a US visa at a foreign consulate just like everyone else.
This is not quite accurate. In the Visa section of the US State Department website, the page listing Classes of Aliens Ineligible to Receive Visas outlines Section 212(a) of the Immigration and Nationality Act. Down the page, under the “Miscellaneous” category, along with practicing polygamists, international child abduction, and unlawful voters is this:
(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 excludable.
Although it is possible that this provision is not being enforced, there it is on the books.
There is a further possible confusion in all of this over the double-taxation issue itself. While the United States requires all of its citizens to file tax returns reporting their income, whether in the US or abroad, they are exempt from paying taxes on any foreign earned income of up to $91,500, and beyond that, there is a foreign tax credit. The tax code gets complicated, which is another complaint of many US expats, but the reality is that despite all the noise about it, not all expats are subject to double-taxation.
Well, because I try to be thorough, I made one final search on the topic, and lo and behold, this title from Slate – Bogus Trend Story of the Week: The New York Times on Americans renouncing their citizenship – was impossible to ignore. Hmmm.
If you or anyone you personally know has actually taken steps to renounce their US citizenship, we would be very interested in hearing from you. julie@expatdailynews.com or jamie@expatdailynews.com
Julie R Butler is a traveler, blogger, freelance writer, and editor who has authored several books, self-published as eBooks, including Nine Months in Uruguay and No Stranger to Strange Lands (click here for more info). Please contact Julie for writing or editing assignments at: julierbutler [at] yahoo.com
We would love to hear your comments on this article email us at editor@expatdailynews.com
If you liked this article and want to receive an email when new content is posted, simply enter your email address below. You will be asked to confirm your subscription before we send you any notifications. You can opt out of receiving emails from us at any time.
Back to Expat Daily News
Subscribe in a reader
0 comments:
Post a Comment