It is important for lawyers to be clear with their language. The use of “expatriate” and “expatriation” here is, at best, confusing. Americans who officially reside abroad are, by general definition, expatriates…. or ‘expats’ for short. By establishing a foreign residency they have expatriated. Most expats remain citizens of their country. Some have dual (or even multiple) citizenship.
If they renounce their original citizenship, they do not become ex-pats, as they already are expats.
This is true. It irritates me, too.
Humans usually use the word “expatriate” to describe a person who lives outside his or her country of citizenship.
Unfortunately, U.S. tax law has co-opted a perfectly useful word, and twisted it into a piece of jargon that is at odds with normal usage.
The Internal Revenue Code uses the word “expatriate” to specifically refer to someone who goes through a process of terminating U.S. citizenship or permanent resident status. This is what you will find in Sections 877 and 877A of the Internal Revenue Code. Yes, it is a lazy and ego-centric way for the U.S. government to approach the world: “A word means only what we say it means.”
For better or worse we have to deal with this. Worse, in my opinion.
Phil Hodgen
Philip D. W. Hodgen is the principal attorney of HodgenLaw PC, an international tax law firm based in Pasadena, California. He earned his undergraduate degree from Claremont McKenna College and his law degree from the School of Law at the University of California, Los Angeles. He then went on to earn a Master of Laws degree with a specialty in taxation from the University of San Diego School of Law. Admitted to the California bar in 1982, Phil spent nine years in law firms and with a large U.S. bank before starting his own firm in 1991.
Phil is a past chair of the International Tax Committee of the State Bar of California's Tax Section and was a member of the Executive Committee of the State Bar of California's Tax Section for 2004-2007. Phil frequently speaks on a variety of international tax, trust and estate topics to attorneys, accountants, and real estate professionals.
“Expatriate” to the U.S. tax authorities means someone who: relinquishes his/her U.S. citizenship; or cancels his/her U.S. permanent residency (AKA “green card”) status, where U.S. residency has continued for at least 8 years. We help people expatriate — we handle their wranglings with the State Department and the Internal Revenue Service. So I watch for…
We’re working on a rash of cases in which people are giving up their permanent resident visas or U.S. citizenship — expatriation cases. Expect a few blog posts along the way. Key resource for you Here’s a link to the IRS website and Notice 2009-85. This notice was published in October, 2009 and is the…
Yeah I’m internet famous. Or something. I was interviewed for an article that was published in TIME Magazine, Why More U.S. Expatriates Are Turning in Their Passports. Thanks, Helena for this. Our experience is that we are getting a lot of people who are looking to bail out of the United States. By far the majority…
There is an interesting article in the latest edition of Tax Notes International: “U.S. Expats and the Offshore Crackdown,” 58 Tax Notes Int’l 619 (May 24, 2010). I would link to it and give the author (David D. Stewart) a bit of public glory but it is behind the paywall at Lexis. And I can’t…
We do nothing but international tax stuff. On the outbound side (U.S. humans and companies doing business outside the USA) we have a steady flow of questions about the foreign earned income exclusion. The Federal government has just done a review of tax returns claiming the foreign earned income exclusion and has found (shocking, I…
People who give up their U.S. citizenship or their green card visas are subjected to the exit tax. This is imposed under Section 877A of the Internal Revenue Code. The exit tax treats you as having sold all of your assets on the day before you gave up your citizenship or your green card. If…
5 Comments
Phil,
I am going to recommend you check out the blog Eido Inoue a US born recently naturalized solely Japanese citizen. He is an occasional commenter on IBS and perhaps has one of the most interesting life stories especially for the perspective of someone like yourself who is a bit of an asia and techno phile.
He actually had a pretty poor experience relinquishing at the Tokyo Embassy until he got in touch with the chief consular office who like him originally came to Japan on the JET program. One his recommendation which I am interested as to whether you would comment on is that the easiest place in the world if you need to renounce US citizenship quickly is the American Institute in Taiwan which lacks the formality and red tape of a regular US embassy.
Welcome to IRC Land, where up is down, light is dark, and your term is defined in an unrelated section. Working here requires constant battle with the IRC just to stay current. Good luck!
In a country such as Canada with a residency based tax system(but with an exit tax) expatriation is a valid term referring to the ceasing of ones residency in Canada and moving to another country.
Oops…forgive the spelling again flaunted or flauted. Throw not through.
I typing faster than I can spell or spell check.
This whole debate with US citizenship-based taxation and FATCA has gone through the 5 stages of loss (loss of financial freedom and otherwise)
Denial has happened – The US government can’t do this, it breaks foreign laws.
Bargaining – OK we’ll send the ACA and others to Washington start talking about this.
Anger – just go on the blogs it’s apparent
Depression – well of sorts, people gutting themselves by renouncing and its implications.
Acceptance – AH…now for me this is the real interesting one. This is also going to be the toughest. Will the world final settle on acceptance?
In my opinion even if the US can push through its agenda, acceptance is going to be a long drawn out process if it can ever really get there.
There all sorts of bad laws that never went into the acceptance category and ultimately marginalised, flauted, and repealed. Examples include Prohibition, the UK’s Poll Tax, and I would through in the US’s War on Drugs. Never really accepted but regularly ignored and flauted despited harsh prison terms.
Comments are closed.
Tax laws change over time, and the information in this post above may be less accurate today than it was at the time of the last revision. This post is not tax advice for your specific situation. Please contact an international tax professional to get personalized advice for your situation.
Phil,
I am going to recommend you check out the blog Eido Inoue a US born recently naturalized solely Japanese citizen. He is an occasional commenter on IBS and perhaps has one of the most interesting life stories especially for the perspective of someone like yourself who is a bit of an asia and techno phile.
http://www.turning-japanese.info/2012/07/relinquishing-us-citizenship-in-tokyo_1845.html#!/
http://www.turning-japanese.info/2012/06/why-did-you-naturalize.html
He actually had a pretty poor experience relinquishing at the Tokyo Embassy until he got in touch with the chief consular office who like him originally came to Japan on the JET program. One his recommendation which I am interested as to whether you would comment on is that the easiest place in the world if you need to renounce US citizenship quickly is the American Institute in Taiwan which lacks the formality and red tape of a regular US embassy.
Welcome to IRC Land, where up is down, light is dark, and your term is defined in an unrelated section. Working here requires constant battle with the IRC just to stay current. Good luck!
In a country such as Canada with a residency based tax system(but with an exit tax) expatriation is a valid term referring to the ceasing of ones residency in Canada and moving to another country.
Oops…forgive the spelling again flaunted or flauted. Throw not through.
I typing faster than I can spell or spell check.
This whole debate with US citizenship-based taxation and FATCA has gone through the 5 stages of loss (loss of financial freedom and otherwise)
Denial has happened – The US government can’t do this, it breaks foreign laws.
Bargaining – OK we’ll send the ACA and others to Washington start talking about this.
Anger – just go on the blogs it’s apparent
Depression – well of sorts, people gutting themselves by renouncing and its implications.
Acceptance – AH…now for me this is the real interesting one. This is also going to be the toughest. Will the world final settle on acceptance?
In my opinion even if the US can push through its agenda, acceptance is going to be a long drawn out process if it can ever really get there.
There all sorts of bad laws that never went into the acceptance category and ultimately marginalised, flauted, and repealed. Examples include Prohibition, the UK’s Poll Tax, and I would through in the US’s War on Drugs. Never really accepted but regularly ignored and flauted despited harsh prison terms.