More American Expatriates Give Up Citizenship

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Beer Chang
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April 25, 2010

More American Expatriates Give Up Citizenship

By BRIAN KNOWLTON

WASHINGTON — Amid mounting frustration over taxation and banking problems, small but growing numbers of overseas Americans are taking the weighty step of renouncing their citizenship.

“What we have seen is a substantial change in mentality among the overseas community in the past two years,†said Jackie Bugnion, director of American Citizens Abroad, an advocacy group based in Geneva. “Before, no one would dare mention to other Americans that they were even thinking of renouncing their U.S. nationality. Now, it is an openly discussed issue.â€

The Federal Register, the government publication that records such decisions, shows that 502 expatriates gave up their U.S. citizenship or permanent residency status in the last quarter of 2009. That is a tiny portion of the 5.2 million Americans estimated by the State Department to be living abroad.

Still, 502 was the largest quarterly figure in years, more than twice the total for all of 2008, and it looms larger, given how agonizing the decision can be. There were 235 renunciations in 2008 and 743 last year. Waiting periods to meet with consular officers to formalize renunciations have grown.

Anecdotally, frustrations over tax and banking questions, not political considerations, appear to be the main drivers of the surge. Expat advocates say that as it becomes more difficult for Americans to live and work abroad, it will become harder for American companies to compete.

American expats have long complained that the United States is the only industrialized country to tax citizens on income earned abroad, even when they are taxed in their country of residence, though they are allowed to exclude their first $91,400 in foreign-earned income.

One Swiss-based business executive, who spoke on the condition of anonymity because of sensitive family issues, said she weighed the decision for 10 years. She had lived abroad for years but had pleasant memories of service in the U.S. Marine Corps.

Yet the notion of double taxation — and of future tax obligations for her children, who will receive few U.S. services — finally pushed her to renounce, she said.

“I loved my time in the Marines, and the U.S. is still a great country,†she said. “But having lived here 20 years and having to pay and file while seeing other countries’ nationals not having to do that, I just think it’s grossly unfair.â€

“It’s taxation without representation,†she added.

Stringent new banking regulations — aimed both at curbing tax evasion and, under the Patriot Act, preventing money from flowing to terrorist groups — have inadvertently made it harder for some expats to keep bank accounts in the United States and in some cases abroad.

Some U.S.-based banks have closed expats’ accounts because of difficulty in certifying that the holders still maintain U.S. addresses, as required by a Patriot Act provision.

“It seems the new anti-terrorist rules are having unintended effects,†Daniel Flynn, who lives in Belgium, wrote in a letter quoted by the Americans Abroad Caucus in the U.S. Congress in correspondence with the Treasury Department.

“I was born in San Francisco in 1939, served my country as an army officer from 1961 to 1963, have been paying U.S. income taxes for 57 years, since 1952, have continually maintained federal voting residence, and hold a valid American passport.â€

Mr. Flynn had held an account with a U.S. bank for 44 years. Still, he wrote, “they said that the new anti-terrorism rules required them to close our account because of our address outside the U.S.â€

Kathleen Rittenhouse, who lives in Canada, wrote that until she encountered a similar problem, “I did not know that the Patriot Act placed me in the same category as terrorists, arms dealers and money launderers.â€

Andy Sundberg, another director of American Citizens Abroad, said, “These banks are closing our accounts as acts of prudent self-defense.†But the result, he said, is that expats have become “toxic citizens.â€

The Americans Abroad Caucus, headed by Representative Carolyn B. Maloney, Democrat of New York, and Representative Joe Wilson, Republican of South Carolina, has made repeated entreaties to the Treasury Department.

In response, Treasury Secretary Timothy F. Geithner wrote Ms. Maloney on Feb. 24 that “nothing in U.S. financial law and regulation should make it impossible for Americans living abroad to access financial services here in the United States.â€

But banks, Treasury officials note, are free to ignore that advice.

“That Americans living overseas are being denied banking services in U.S. banks, and increasingly in foreign banks, is unacceptable,†Ms. Maloney said in a letter Friday to leaders of the House Financial Services Committee, requesting a hearing on the question.

Mr. Wilson, joining her request, said that pleas from expats for relief “continue to come in at a startling rate.â€

Relinquishing citizenship is relatively simple. The person must appear before a U.S. consular or diplomatic official in a foreign country and sign a renunciation oath. This does not allow a person to escape old tax bills or military obligations.

Now, expats’ representatives fear renunciations will become more common.

“It is a sad outcome,†Ms. Bugnion said, “but I personally feel that we are now seeing only the tip of the iceberg.â€

More American Expatriates Give Up Citizenship - NYTimes.com

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Even if you renounce your citizenship, as far as IRS is concerned there is no such thing as renouncing your citizenship. In other words, if you have assets, pension, bank accounts, Social Security, or whatever in the USA, if you renounce your citizenship IRS can seize anything they can get their hands on if you do not continue paying income tax. If you have no assets, but return to the USA without having filed or paid income tax, you can be arrested on income tax evasion charges.

If you are among those who do renounce your USA citizenship, you better check with an attorney first so that you know where you stand legally.

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I understand the frustration many US citizens are experiencing over the US tax system and banking regulations. There are many things to bitch about and plenty of room for improvement, but for an expat to give up his citizenship is drastic. Comparing the US tax and banking system to many western European nations, I think one might find Americans pay less tax. To give up US citizenship is, in my book, just dumb.

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Comparing the US tax and banking system to many western European nations, I think one might find Americans pay less tax. To give up US citizenship is, in my book, just dumb.

I agree with you, but I doubt that people giving up US citizenship because of taxes would be swayed by the fact that citizens of other countries pay higher taxes.

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The most visited web site after the 2nd Bush election was the Immigration to Canada website. It shot up in the rankings more than any other.

I know that many are upset with the course of the USA. I am one of them. I don't think we are going to be the super power in 20 years. China and India are destined to become the next powers. IMHO. We keep getting further and further behind and the more people fight one party affiliation against the other, the further back we move.

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The most visited web site after the 2nd Bush election was the Immigration to Canada website.

It was long before there was any such thing as the Internet or even personal computers, but during the Vietnam war there was also plenty of immigration to Canada.

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  • 4 weeks later...

Even if you renounce your citizenship, as far as IRS is concerned there is no such thing as renouncing your citizenship. In other words, if you have assets, pension, bank accounts, Social Security, or whatever in the USA, if you renounce your citizenship IRS can seize anything they can get their hands on if you do not continue paying income tax. If you have no assets, but return to the USA without having filed or paid income tax, you can be arrested on income tax evasion charges.

If you are among those who do renounce your USA citizenship, you better check with an attorney first so that you know where you stand legally.

Over and above the statements above - historically, the U.S. takes a grim look towards citizens that desire to have dual citizenship. Completely difficult for the average American citizen....but not impossible, because it's been done in certain circumstances.

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It was long before there was any such thing as the Internet or even personal computers, but during the Vietnam war there was also plenty of immigration to Canada.

...as well as Thailand during this period. The number of American military personnel that deserted and renounced their citizenship was outstandingly high.

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