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  1. A right delayed is effectively a right denied.

    Recent actions by the US State Department (raising the renunciation fee 422% – to 2350 USD with only two weeks notice) plus the punitive and onerous IRS exit tax and 8854 regime, reeks of deliberate or effective denial of our human right to choose our citizenship (see Article 15.2; No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality. ) – and under US law, to renounce it (see Section 349(a)(5) of the Immigration and Nationality Act (INA) (8 U.S.C. 1481(a)(5)) is the section of law governing the right of a United States citizen to renounce his or her U.S. citizenship. ).

    Re the growing backlog for obtaining appointments to relinquish or renounce at the Toronto ON consulate, there is a firsthand account of direct quotes from a US Consular Official in Ontario, who stated that despite the legal right to renounce, and the obdurate insistence of the State Dept. and IRS that we must remain citizen-taxable persons until they say we are not; “….renunciations are a low priority that do not compare with high priority activities such as passport renewals, and that there will be no change in priority.”

    “…Consular Official “R” — I pointed out to R that there are many Canadians in the Toronto area with unwanted U.S. citizenship who need to renounce this citizenship. R advised that the wait time is now up to September 2015, in part because of a three week or so delay caused by the Pan AM games (yes, you heard that right)….”…

    ….”.Consular Official R (second conversation) — Told R that his boss claims that R has the power to shorten renunciation wait times. R responded by saying that the renunciations are a low priority that do not compare with high priority activities such as passport renewals, and that there will be no change in priority. R advised that Toronto people should go to Calgary or Montreal to renounce. I asked R how would a low income person find the funds to do this..”…

    There are many people in Canada and elsewhere who are being forced to renounce in order to put a stop to the abuse of those living outside the US. It is a right recognized by US law, but being deliberately delayed, and effectively denied by those who cannot afford the accounting/legal fees to satisfy the IRS exit requirements, and to travel to the few consulate locations in order to satisfy the State Dept. and obtain a CLN.

    This is why there is a Human Rights complaint that has been made to the UN, lodged by current and previous US citizens living abroad, against the US (see ).

  2. In the EU it’s going difficult for a bank to increase fees on a dual EU/US citizen with an existing account. Also from 2016 I believe EU banks will be forced to provide bank accounts to all resident EU citizens regardless of their financial situation.

    If a legal challenge is mounted and is successful to striking down the IGAs in a European Court the banks are going to be in the middle. They can’t refuse an EU citizen an account, can’t break data protection laws, and forced to comply with FATCA.

    It’s going to be interesting.

  3. Every — and I do mean every — Los Angeles to Dubai flight I have ever taken has a group of uniformed officers checking people for Title 31 violations. To other destination? Meh, nope. Those guys are not checking anyone.

  4. @Phil..there are already exit controls in place. They just aren’t overt.

    1. CBP “interviews” people on the jetway or at border crossings enforcing Title 31 violations -i.e. not reporting $10,000 the country.

    2. They regularly scan names on departing flights. IRS issuing Writ ne exeat republica anyone? See:


  5. Phil

    Perhaps I’ll have to update question 9 to $2350 for this short YouTube video I posted 2 years ago!


  6. @somewhere,

    It’s worse than it was, but it is still a good time to expatriate:

    • 1. The IRS has still not published its Regulations interpreting Section 877A and Section 2801. Whenever the IRS puts something on paper, it is generally Very Bad for Carbon-Based Biped Life Forms. Get out before they write stricter rules.
    • 2. Congress is full of it. Sooner or later the United States will start to control your ability to exit the country. When I travel, every other country tracks me going in and going out. When I leave the United States with my U.S. passport, I don’t get tracked (overtly, hahaha, sigh, hello NSA). Sooner or later you will present your passport when you get on a plane to leave the USA. And when that happens, the IRS will be there to ensure you have paid up your taxes. Remember in 2012 when they tried to pass a law saying if the IRS thought that maybe you might owe $50,000 or more they could cancel your passport? Yeah. That.
    • 3. Congress is full of it. Remember when the Facebook guy (Saverin) expatriated and Carl Schumer ranted? Yeah. More taxes on expatriates.
    • 4. Congress is full of it. We still have on the books a mid-1990s law that says that expatriates can be barred from re-entry into the United States. Expect this to come up again.

    Sorry to be grumpy about this. But the State Department created the problem by overcomplicating the renunciation process, and now they are charging people to pay for the “make work” that they created.

    It’s like the Chinese bullet fee.

  7. Phil,
    I actually submitted a claim for relinquishment at a US Consulate in Canada about one year ago, based on the “typical argument.” you noted above. I subsequently received a CLN backdated more than 25 years to the actual date of my Canadian citizenship ceremony.

    The final deciding motivation for my closing the file on this matter was grief and despair following the Sandy Hook Elementary School shooting in Newtown, Conn. After that tragedy – and the subsequent failure of any kind of meaningful gun control legislation is response – I wanted no ambiguity regarding my being solely Canadian.

  8. @Phil — There are comments on Brock reminiscing about when you said “get out now, while it’s semi-good”. Maybe it’s only a quarter-good now?

  9. @Concerned in Canada,

    The State Department complains of how much work it is to handle a renunciation case. The fact that much of this work might in fact be self-inflicted seems to escape their grasp.

    But the bureaucrats are short-sighted. A random dual-U.S./Canadian person might be more inclined to assert a relinquishment case to backdate the termination of citizenship. Note that the $2,350 fee only applies to people renouncing citizenship. It does not apply to people who have U.S. citizenship terminated by one of the other methods.

    I predict that the State Department will have more renunciations occur because of this fee hike. “I thought he was crazy but he’s drunk AND crazy. I better move out now before things get any worse!” Over any given period of time, Federal law gets worser and worser and worser. (An old guy I knew 25 years ago would use that phrase — “worser and worser and worser” — to disabuse gullible young guys like myself from making stupid decisions.)

    I also predict that the case load at the State Department to adjudicate mere “relinquishment” will increase. In fact, it will balloon. The State Department’s work load will get worser and worser and worser (!) not better. And the State Department doesn’t charge a user fee for this work, so they will have to eat the entire amount of the overhead. Typical argument: “When I acquired Canadian citizenship in 19xx, I did so with the intention of giving up my U.S. citizenship and in fact I thought that was what happened automatically.” I’ve seen it succeed.

    You’ve heard the phrase “Two heads are better than one”? Not always. Bureaucracy is an exercise in subtractive intelligence.

  10. This is especially of concern to Canadians in that:

    – The new Canada FATCA IGA requires any Canadian with “US indicia” (such as a US birthplace) to present their financial institute with a US Certificate of Loss of Nationality to “cure” their so-called “US person” status. So not only must certain Canadian citizens transact with foreign state to enjoy full privilege and legal protection of Canadian law, the foreign state has just quadrupled the cost for doing so. And there are estimated to be several hundred thousand Canadians with a tenuous tie to “US personhood.”

    – The most egregiously accidental of “accidental-Americans” – border baby Canadians born to Canadian parents visiting the US and Canadian-born Canadian citizens who’s parents were “US-persons” – are particularly affected by this. They cannot claim “relinquishment” of US citizenship by an adult act of intent – such as becoming a citizen of Canada with the intent to lose US nationality. So they must now pay $2350 USD – to a foerign state – to enjoy the full privileges of Canadian citizenship and privacy law.

    Also worth noting: a Statement of Claim against the Charter violations implicit in the Canadian FATCA IGA was filed on August 11, 2014 in Canadian Federal Court by constitutional lawyer Joe Arvay of Farris Law, on behalf of two plaintiffs who are Canadian citizens and “accidental Americans.”

    The statement of claim:

  11. @somebody,

    Thanks for the link. To me, this is “Exhibit A” to demonstrate the old adage “The beatings will continue until morale improves.”

    This is will only encourage more expatriations.

  12. @Don,

    Somewhere inside the government (and I can predict that person’s political party affiliation) a mid-career bureaucrat is saying “Everything is going according to plan.”

    I think this will only encourage expatriation.

    It’s like you work in a giant corporation that announces layoffs are coming. Who are the first people to voluntarily quit? You bet — the high achievers, the hard workers. You do your layoffs. Who is left? Your Grade C employees.

    This is Uncle Sam’s trajectory.

  13. @qm,

    Hmm. So we lock the low income, low wealth people in Uncle Sam’s corral, while the wealthier ones can still jump the fence with ease.

    What could possibly be wrong with this picture?


  14. Latest is that the renunciation fee will be $2,350.
    That is certainly well above the credit card limits and discretionary income of an awful lot of US citizens around the world. Unacceptable for many reasons, but what can be done about it?

  15. @Phil…two things..

    On chapter 6 of your exit tax book you wrote:

    “If you are an ordinary Expatriate, you will provide Form W-8BEN to the custodian. Then the appropriate withholding can occur because there is a payment from the IRA to a nonresident alien taxpayer.”

    When I e-mailed IRS tax law, they said IRAs (and I’d assume 401(k)s, etc) are ECI (not FDAP) income for a NRA–specifically the agent cited “Tax on Effectively Connected Income in Pub 519:

    |Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. **However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services.”***

    I’d assume he meant since your right to contribute to your IRA was while you were a US person, it is connected to that previous year. Of course the benefit is it let’s you file with graduated rates instead of the FDAP 30%. I’d assume you’d file a W-8ECI instead of a W-8BEN as well.

    Also, I saw the following comment on Townsend’s blog..

    Roy Berg • 6 days ago

    Re filing 5 years of returns under Streamlined to avoid covered expat status: the answer we received from a senior IRS official in LB&I is very different from the answer given above. According to this individual (email reproduced below) the 3 tests for covered expat status (net worth, tax liability, and compliance certification) must be met ON THE DATE OF EXPATRIATION.

    Therefore, filing 5 years of tax returns via Streamlined would not avoid covered expat status if the individual had renounced US citizenship.

    I think this position is incorrect, though there is a sentence in Notice 2009-85 that supports the IRS’s conclusion (though tenuously).

    The reason the position is incorrect is that the compliance certification test CANT be met on the date of expatriation… unless one were to sign the 8854 at the Consulate’s office concurrently with taking the oath of renunciation. Further, the 8854 is due on the due date (including extensions) of the 1040, which would be in the year following renunciation.

    Dangerous stuff here.

    The following is the email we received from IRS in this regard:

    Notice 2009-85 addresses who is a covered expat and it indicates all three
    tests must be met at the time of expatriation. Thus, taxpayers
    can come in to streamline to get matters resolved (we will accept the 5 years)
    but if they do it after they expatriate they will be a covered expat and should
    file the 8854 reflecting such. However, if they have not yet expatriated
    they can file 5 years under streamlined and then expatriate and be able to
    certify they are compliant so timing is an issue

  16. They’re taking a bit of gamble. How about if they got into trouble with the law making them ineligible or the government changed the citizenship rules during the residency period?

    That’s wrong that FATCA would make someone to prefer statelessness rather than hold on to the US while transitioning.

    I wish them good luck.

  17. @Don

    Correct. Renounced with no other passport. Is on the “permanent resident on the way to citizenship” track in another country. But still. Many things can happen to derail that train.

    Imagine that your decision to become stateless is the lesser of two evils . . . .

  18. @Don,

    It is possible to renounce while having no other citizenship. I know this because we have done this for people.

    Whether this is smart or not is another question. 🙂

    We like to joke about it in the office: “What are they going to do–evict you from the planet?” But the reality is that a stateless person does indeed have a precarious life.

  19. Other troubles with renouncing is people forget the US has to approve the renunciation. If the US says no you’re still a US citizen.

    Also if you aren’t already a dual citizen, the US won’t allow you to renounce because you would be made stateless.

    It could take you several years to qualify for another citizenship depending on the country.

  20. Other US tax experts continue to push US citizens to the exits by telling them to renounce if they don’t like the siphoning off of our legal local children’s registered education savings plans, our disabled dependents disability savings and NON-UStaxpayer provided disability benefits, double taxation via the Obamacare investment tax fundraiser (not addressed in any tax treaties), the punishment of our legal local post-tax wages and savings in our permanent homes outside the US, our local family home, our local mutual funds invested where we live and work and PAY FULL TAXES.

    Notable US tax lawyers advise – “if you don’t like it, ‘JUST RENOUNCE’ “, knowing full well that US law prevents minors and those deemed legally incompetent from renouncing/relinquishing. They even willfully characterize it as a ‘simple’ remedy – while knowing as experts the high cost and complexity of US compliance from abroad, as well as the complexity of the exit tax and expatriation provisions – both maintaining and achieving compliance and climbing the many deliberately punitive barriers the USG has erected to keep us on the farm – through extraterritorial claims on us and our families, our homes, our businesses, all our assets and wages – all already taxed by the jurisdiction where we actually reside and receive ACTUAL services and benefits. NO other country except the ‘failed state’ of Eritrea claims the right to tax SOLELY based on parentage or birthplace in the complete absence of any economic connection.

    Other US tax law academics justify this based on the ‘membership’ model of US citizenship – we should pay whatever fee is demanded, for the privilege of inheriting US status – whether we wanted it or not – as if the US is a club.

    Many of us are just ordinary people born, or naturalized abroad, living outside the US in our homes where we may have been for decades, or for life – and US citizenship is becoming more and more like an exclusive country club – where we can’t afford the fees, but are being sent the bill.

    Is that the model of citizenship that the US intends? I guess it is. Crossed with Hotel California.

  21. There is no downside from the US government point of view to charging higher fees and erecting more barriers and making the hoops more elaborate. They are not concerned that they will be taken to task or answerable to anyone for the resulting denial of a legal right enshrined in both US law and international principles.

    And the American Chamber of Commerce notes that it is a growth industry worth exploring from the business perspective;
    “……Here’s a hot tip for accountants and tax attorneys: now is a good time to develop specialized expertise in advising clients who may be seeking to expatriate from the United States. That demographic looks more and more like a real growth opportunity…….”
    ‘Exit Strategy: FATCA Tax Law Keeps Pushing Americans To Give Up Citizenship’
    Monday, August 18, 2014 – 12:15pm
    — Written by
    David Kinkade

  22. It’s ridiculous $2400 to hand in your passport to escape FATCA. It will be interesting if the US achieves the accolade of being the number 1 country for the highest renunciation rate by population?

    Given the current post-FATCA environment it’s certainly plausible.

    If that happens it’s a shame. The US should be a country people want to come to and not having to renounce your citizenship because boneheads in Congress can’t make the connection that people think it’s unjust and unfair to tax people living abroad.

  23. Phil – great post.

    To put it simply:

    There is no way for a “middle class” U.S. person abroad to BOTH:

    1. Comply with U.S. tax and reporting obligations; and

    2. Participate in normal financial planning, retirement saving, and generally live a productive life.

    Compliance with the first makes the second impossible.

    Compliance with U.S. tax law is complex and carries huge risks of mistakes. Your post offers an excellent (and all too common example) of what happens when the (almost inevitable) mistakes are made.

    Bottom line:

    For Americans abroad:

    retaining U.S. citizenship is a theoretical option but not a practical option.

    Yes, in theory they can live with the costs, the threats of penalties, the invasive paperwork, FATCA Hunt, etc. (which are well documented on he blogs).

    In practice they can’t.

    The biggest cost of being a U.S. citizen abroad is the time required to think about the U.S. imposed requirements of living outside the U.S. And, come to think of it, Americans abroad must also comply with the tax rules in their country of residence.

    Truth is:

    If U.S. citizens abroad want a normal life where their opportunities in life are not restricted by the place of their birth, they must divest themselves of U.S. citizenship.

    U.S. policies are forcing people to renounce their U.S. citizenship. It’s like “constructive dismissal” in an employment situation. If an employer wants to “fire someone” they can either “fire them directly” or “create conditions that make it impossible for the person to stay.

    The U.S. has created conditions which make remaining a tax compliant U.S. citizen abroad (unless you are very very rich or very very poor) impossible.

  24. Hmm. They can either charge more money or, y’know, make the whole process easier, faster, and cheaper. What would a government official do when faced with this choice? 🙂

  25. There are rumors from people visiting the Toronto Consulate also the $450 renunciation fee will soon be increased to $2400 or $2800. DOS stated that the current $450 is less than 25% of their actual costs to handle an expatriation case and they probably want to recover the remainder given the volume.

  26. The well educated and well contacted are handing in their US passports because they feel the IRS hassle isn’t worth it.

    The Eduardo Saverin’s of Facebook of the world are the exception not the rule. The US is losing the upper middle class of hi tech workers that Obama claims he wants more of in the US.

    For example, in the last Federal Register, a Canadian government worker, an Israeli photographer, a person in Nova Scotia running a retail shop, the CEO of Levano for EMEA, a scientist for Novartis in Switzerland, a professor in Canada, a doctor in Ottawa, a finance guy in Paris, a energy trader in Switzerland, a CEO in Ecuador who worked for GM in Detroit, all walking away from the US and FATCA.

    The US is the loser in the end.

    Phil if you want the details of my Linkedin research I can forward them to you if you’re interest.

    It’s one thing for the US lose low paid workers, it’s quite another for doctors, scientists, professors, and other brain drain persons to renounce.

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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.