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Hi Blog. For a Sunday Tangent, here’s the NYT on how some (former) Americans are giving up their US Citizenship due to double-taxation concerns (which I’ve heard before) and also being treated as potential terrorists by US banks for having addresses abroad (I have a Canadian friend who’s fallen into that category; makes it very difficult to pay American credit card bills, and the credit companies enjoy the windfall of charging late fees). My reason for giving up US citizenship was one of the rare political issues: See what happened here. Arudou Debito in Sapporo
New York Times 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.”
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.”
“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.”
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.”
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.”
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.”
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.”
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.”
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.”
21 comments on “NYT: More American Expatriates Give Up US Citizenship”
“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.”
Giving up your citizenship doesn’t cancel your tax bill, but what kind of punishment could they hand down? Fines and penalties? Couldn’t you just ignore them if you’re not an American anymore? Not letting you back into America? Well, if you were going to give up your citizenship then I assume going back to America isn’t a big priority for you, anyway.
Bravo. Some of these former Americans will naturalize in Japan, no doubt. Naturalization numbers are picking up in Japan, and many people realize that the paperwork drill is not as daunting as they previously believed. The CEO of Maruhan naturalized, and kept his original name. He encourages others to naturalize and actively participate in the nation’s society and politics too. He is yet another role model for people who will become Japanese. He is successful, ethnically Korean, but proud Japanese citizen.
After 15 years, I am naturalizing later this year. Not for tax reasons. (I have never made anywhere close to the exemption limit.) But rather for reasons due to Japan: constant concern over visa renewals, police harassment over being foreign, difficulty in obtaining bank loans, us vs. them mentality, voting rights, etc. I need it to stabilize my life in Japan.
Anyway, a few comments.
> “It’s taxation without representation,” she added.
Representation generally means suffrage (voting) rights. Any US expatriate has the right to vote and is done via absentee ballets.
> 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.
Was not aware of this. I had no problems changing the address to my Japanese address. They even send me monthly bank statements, although I hardly ever use the account anymore.
One question that comes to mind, since I’ve seen mention of this on Japan message boards and forums is if a US citizen renounces citizenship, let’s say while living in Japan on a visa, what does the renouncement do to the visa status – if anything? I wouldn’t think that Japan would suddenly change anything for the person, such as grant them permanent residency or Japanese citizenship simply because one choose to renounce their homeland. Any ideas on this?
— The visa question is moot in this case. Only an idiot would renounce a citizenship without having another one in its place. Otherwise you’re stateless, and that presents a world of problems anywhere.
You snagged Slate’s “Bogus Trend Story” of the week, from a few weeks back:
Actually, the number of Americans renouncing citizenship is much lower than it was in the Vietnam War era. Even then, maybe about 2,000 people.
The trend nowadays seems to be to gain as many dual citizenships and PR’s as necessary. And then keep it a secret if a government has a one-citizenship policy. And not file taxes unless they catch up with you.
Congratulations on the increase of naturalization. I myself am most likely to become a citizen(I mean, if I am going to live in the nation for the rest of my life, why not?) so this is good news to see. People in the states do not like my idea(haven’t been called a traitor just yet..) so it is nice to see this.
— I have been called a traitor. At least twice. The first time was by a person in the State Department (actually in a US Consulate). That was a shock. And it certainly made me feel even less inclined to be an American.
“Well, if you were going to give up your citizenship then I assume going back to America isn’t a big priority for you, anyway.”
I believe that the U.S. authorities could issue a warrant for your arrest for tax evasion, then try to serve that warrant if you entered U.S. territory. If you have to travel abroad for business or want to visit family, it could be a major inconvenience.
Actually, there is a UN convention which makes it legally impossible to voluntarily become stateless. No citizen of a country who has signed it is actually allowed to renounce their nationality without having another one already.
For some reason only 34 countries have signed this convention though, which incidentally includes neither the US or Japan.
The American Jobs Creation Act (AJCA) of 2004 amends Section 877 of the Internal Revenue Code (IRC), which provides for an alternative tax regime for certain, expatriated individuals. Amended IRC 877 eliminates the tax avoidance criteria for imposition of the expatriation tax on certain types of income for 10 years following expatriation, and creates objective criteria to impose the tax on individuals with an average income tax liability of $127,000 for tax year 2005 (or higher amount for later years) for the 5 prior years or a net worth of $2,000,000 on the date of expatriation. In addition, it requires individuals to certify to the IRS that they have satisfied all federal tax requirements for the 5 years prior to expatriation and requires annual information reporting for each taxable year during which an individual is subject to the rules of IRC 877. Further, expatriated individuals will be subject to U.S. tax on their worldwide income for any of the 10 years following expatriation in which they are present in the U.S. for more than 30 days, or 60 days in the case of individuals working in the U.S. for an unrelated employer. Finally, even if they do not meet the monetary thresholds for imposition of the IRC 877 expatriation tax, the new law provides that individuals will continue to be treated as U.S. citizens or long-term residents for U.S. tax purposes until they have notified the Secretary of the Department of State or of Homeland Security of expatriation or termination of residency. The implementation date of this provision is retroactive and applies to expatriations occurring after June 3, 2004. The expatriation is not effective until the notification and tax satisfaction certifications are filed with the IRS and the Department of State or of Homeland Security.
As an American who is self-employed and who flies regularly back and forth between Japan and the U.S., personally for me, I don’t see that much of a huge significance, but that’s just me. I am married and have a family here, I am not sure if I plan on living in Japan for the rest of my life, but even if I do, I would never give up my birth name or citizenship, but again, that is just my humble opinion (too proud of my family name) I don’t call anyone that chooses to do otherwise a “traitor” I think, each to his own.
The tax thing doesn’t really bother me either. If I have to pay, then so be it. I do reside between both countries as well as my kids, so why not? I just wanted to show that there is another point out there of people like me that are happy with keeping their American Citizenship and wouldn’t trade it in for the world.
— Well, no shit. Nobody was denying you exist.
( I have been called a traitor. At least twice. The first time was by a person in the State Department (actually in a US Consulate). That was a shock. And it certainly made me feel even less inclined to be an American.)
Im sure they did, funny thing is how they will do back flips for anybody who isnt an American while dissing their own kind, I personally witnessed it. Ill never renounce, but a state dept goof got a lot of nerve to call anybody a traitor after what I witnessed.
Clean up your own house before you go judging others. I used to judge debito for his citizenship choice, but he doing more than anybody at the state dept for gaijin rights thats for sure.
— What did you witness?
Received from cyberspace:
Since your site has covered US expatriation, I wanted to pass along this link. It’s a detailed how-to guide for US citizenship renunciation:
Its the consulate officers duty to inform you of the consequences of your act and perhaps persuade you to reconsider. It is not his duty to call you a traitor. I dont think that renounceation is being a traitor, I thought that was commiting espionage etc. There are millions who become U.S. citizens every year, so thats sort of a double standard. I will never renounce, I dont trust this or any other country to protect my rights but this is my opinion. Im just addressing the fact that a state dept rep called u a traitor. I will not put down here what I witnessed as it was serious.
Considering the pricing on the services provided by the U.S. Embassy in Japan, maybe Mike feels like he’s being double-taxed. $100 to have some nobody witness my affidavit that I’m not currently married?
Although the express lane for American citizens at least means the day isn’t completely wasted.
I’ve read this article and more with intense interest. I’ve been married to Japanese man (I’m a US citizen)(second marriage) for eleven years now. In a little less than a year we are moving to Japan for good. Being middle-aged we have no plans on ever moving out of Japan once we arrive. This is it-for the rest of our lives. We’ve discussed my immigration status-and what our plans will be once we arrive in Japan. First, spouse visa, second, permanent resident. I’ve been thinking long and hard about the future. I’ll be 50 soon and husband will be 55-we certainly can’t see ourselves leaving Japan to start over AGAIN ten or twenty years from now..! Besides, in Japan we have a home, jobs, a life. I really have nothing left in America. (I’ve been living in Saipan for the past 30 years) I have a sister in the states..but no property etc. The logical conclusion we came to was that I become a Japanese citizen. At first my heart lurched at the thought…but then I thought, my parents became naturalized citizens of the USA when they emigrated from Germany, if they did it-why can’t I? It makes no sense for me not to become naturalized in Japan if I intend to live there for the rest of my life. I wonder, has naturalized expat ever been detained or penalized when returning to the US for a trip? I guess my biggest fear is that I will be harassed by US immigration if I try to enter the US as a tourist…will be following this blog closely….!
— You won’t be. I’ve done it about five times and so far no problems.
I do have one question that I forgot to ask. I read that one requirement to being naturalized in Japan is that you must show you can support yourself and your family? My husband is the bread-winner. I will work (plan to open a small English school) but he will definitely be the main source of income. Is this taken into consideration-that he is the bread-winner of the home?
— Yes. Otherwise no dependent wife would ever be able to naturalize.
a friend sent me this information:
Documentation for Renunciation of Citizenship
The CoSS demonstrated that documenting a U.S. citizen’s
renunciation of citizenship is extremely costly, requiring American
consular officers overseas to spend substantial amounts of time to
accept, process, and adjudicate cases. A new fee of $450 will be
established to help defray a small portion of the total cost to the
U.S. Government of documenting the renunciation of citizenship.
from this website:
— Then don’t renounce.
Connie: the U.S. Embassy will find any excuse to charge outrageous sums for the most mundane requests. How many expatriates can the U.S. government process for the cost of one cruise missile?
Have you seen the new cost of I130s? having went through all that before, one of the clowns actually put my pic on the wifes visa card. With all the money you are paying the fools, seems the least they could do is get that right. Have you seen the lines at the embassy? People standing out in the heat. Now I hear you got to pay just to use the phone to call about information.
If I feel that having a Japanese Citizenship is of benefit to me then I’ll pay the fee-no problem. The more I think about this, the more logical it seems to me to have Japanese citizenship -if that is where I plan on spending the rest of my life. I am not my “passport” quite honestly, it’s just paperwork to me and if it more beneficial to have Japanese “paperwork” then I think I’d be silly not to go that route. The sad thing is that if you try to talk about it people call you a traitor..! I’ve lived in Saipan for 30 years and have never been able to avail the full benefits of my US citizenship here- even though Saipan is a US Commonwealth!
Im not going to ever renounce, but I wouldnt sweat the traitor name calling thing. The same people that say that will do back flips for non U.S. citizen types and crap all over U.S. citizens. Ive seen it time after time. you can go to some bases here in Japan and a large percentage of the people are from another country, serving in the U.S. military. Dare mention a word about, oh hell no, but the thing is most of those non U.S. citizen types will end up residing back in their home country, drawing a U.S. military pension. Dont ever bring that up though [repeated point deleted]