|Updated: June 21, 2016
A recent New York Times article has highlighted the small but growing number of people who give up their US citizenship; more than twice as many people expatriated themselves in the last quarter of 2009 as in all of 2008. US citizenship can be explicitly renounced by making a statement to that effect before a US diplomatic or consular officer outside the United States (except in time of war). Alternatively it can be relinquished by undertaking one of a number of acts, such as naturalizing in another country, if one does so with the intention of abandoning one’s US citizenship. (The Supreme Court of the United States, in the 1967 decision Afroyim v. Rusk, held that US citizens have a constitutional right to remain citizens unless they voluntarily relinquish that citizenship.) For a full discussion of renunciation and relinquishment of citizenship, see our article US Citizenship—Having It, Getting It, Giving it Up.
Reasons for the highly personal decision to expatriate oneself vary widely. Some people become US citizens simply by being born in the US, or outside the US to a US citizen parent, have spent little time in the US, and do not regard themselves as ‘American’ in any way that is important to them. They find onerous the requirements imposed by their US citizenship, such as the potential for Selective Service obligations and the requirement that they travel to the US only on a US passport. Boris Johnson, now London’s mayor, famously declared in 2006 that he wished to renounce the US citizenship he had acquired through being born in New York: ‘What I want is the right not to have an American passport.’
Some expatriate Americans may feel themselves driven to abandon their US citizenship due to the ever-increasing paperwork required by the US Government of its overseas citizens. Indeed, the IRS’s own National Taxpayer Advocate noted, in her 2011 report to Congress, that ‘For some US taxpayers abroad, the tax requirements are so confusing and the compliance burden so great that they give up their US citizenship.’ In recent years an increasing number of people have concluded that their lives would be simpler without their US citizenship. During 2014 a total of 3,417 persons renounced their US citizenship or long-term lawful permanent residence. That number totalled 1,781 in 2011 and only 231 in 2008.
Relinquishing one’s citizenship is made difficult by governmental suspicion that persons are renouncing their US citizenship to avoid paying US taxes. As part of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, Congress added a tax-related ground of inadmissibility and visa ineligibility to US immigration law specifically applicable to certain former US citizens. Under the provision known as ‘the Reed Amendment,’ any former US citizen who officially renounces US citizenship and who is determined by the Attorney General to have renounced for the purpose of avoiding taxation by the US is inadmissible to the United States and ineligible for a visa. The provision can be found in section 212(a)(10)(E) of the Immigration and Nationality Act. It applies only to former US citizens who lost citizenship by officially renouncing citizenship on or after September 30, 1996.
The Reed Amendment has not been the subject of rulemaking or rigorous enforcement by either the Department of Homeland Security or the Department of State. The Department of State’s published procedures on enforcement of the Reed Amendment acknowledge a `very limited role’ for the consular officer, with an assumption that the `applicant is eligible’ unless the applicant `appears as a hit in the lookout system.’
A different approach, and one that more directly addresses the tax consequences of giving up US citizenship, was taken by Congress in 2008. In the ‘Heroes Earnings Assistance and Relief Tax Act’ (‘the HEART Act’) Congress imposed an ‘exit tax’ upon certain persons who relinquish or renounce their citizenship, mandating that the property of such persons ‘shall be treated as sold on the day before the expatriation date for its fair market value’ and taxed accordingly.
The existence of the Reed Amendment and the HEART Act’s exit tax make it more important than ever that all persons desiring to relinquish or renounce their US citizenship obtain US tax advice before undertaking such action. Immigration advice is equally vital because when a person has expatriated, that former US citizen will be subject to the immigration laws of the US the same as any other alien, including being subject to all grounds of ineligibility for visas and inadmissibility.