Introduction

Topic No. 858 Alien Tax Clearance – Low compliance rates, not enforced but still the law that aliens (resident or nonresident with some exceptions) are required to obtain a certificate of U.S. tax compliance – AKA "Sailing Permit") before leaving the USA https://t.co/jxHWedTjyY

— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) March 18, 2023

Once upon at time (well back in the last century) I knew a person who – along with three other people – shared the rental of a house. The agreement was that they would split the rent equally and that they would split the utilities equally. The agreement also stated that on the last day of each month the group would meet and each contribute their 1/4 share of the utilities owing. The agreement further stated that in the event that any person did not pay his share of the utilities in cash that his property could be used (fair market value assessment) to pay his share. One week prior to the last day of the month one of the four realized that he would not have the money to pay his share of the utilities. As a result, two days before the last day of the month, that individual:

1. Removed all of his belongings; and

2. Moved out of the house.

The legend was that the remaining three had to pay his share of the utilities and his property remained intact. By moving out and removing his property he was able to avoid paying a debt that he owed to the group.

Unsurprisingly the Internal Revenue Code contains provisions to prevent individuals from leaving the United States or removing property from the United States to defeat the payment of tax debts. This is of particular concern to the United States if the individual is an “alien”. The requirement to obtain a “sailing permit” to leave the United States is neither well known nor enforced. That said, the “sailing permit” (even with the existence of “withholding taxes”) remains the law!

Introducing Internal Revenue Code § 6851 – Preventing Aliens From Avoiding U.S. Taxation

An alien is any individual who is not a U.S. citizen or U.S. national.

https://www.irs.gov/individuals/international-taxpayers/nonresident-aliens

What the law says …

(d) Departure of alien Subject to such exceptions as may, by regulations, be prescribed by the Secretary—

(1) No alien shall depart from the United States unless he first procures from the Secretary a certificate that he has complied with all the obligations imposed upon him by the income tax laws.

(2) Payment of taxes shall not be enforced by any proceedings under the provisions of this section prior to the expiration of the time otherwise allowed for paying such taxes if, in the case of an alien about to depart from the United States, the Secretary determines that the collection of the tax will not be jeopardized by the departure of the alien.

Notably this applies to BOTH resident aliens (AKA Green Card Holders and substantial presence) AND “nonresident aliens”. (The regulations limit its scope.) This requirement is imposed by the Internal Revenue Code. Therefore, every “long term resident” who expatriates from the United States is technically a “covered expatriate” if he does NOT comply with this section! (Sorry, it’s just the law.)

The complete statute is included as *Appendix A of this post.

The regulations are “alive and well”

IRC § 6851 is well supported by detailed Treasury Regulations. The regulations begin here:

https://www.law.cornell.edu/cfr/text/26/1.6851-1

The content of the regulations is less important than the existence of the regulations. Excellent commentary from Andrew Mitchell about the regulations may be found here. The most applicable regulation is included in **Appendix B of this post.

The Basic Point Is That:

IRC § 6851 creates a presumption (rebutted in certain regulations) that an alien is not permitted to leave the United States without receiving a clearance certificate confirming that no taxes are owed to the United States. The clearance certificate is called a “Sailing Permit”.

Interestingly, the provisions do NOT apply to U.S. citizens. (Is this an argument for or against remaining a U.S. citizen?)

IRS Publications Confirming That “The Sailing Permit REMAINS AND IS CURRENTLY The Law!”

Interestingly Chapter 11 of the 2022 edition of IRS Publication 519 confirms that the requirement of a a “sailing permit” is alive and well. Similarly IRS Tax Topic 658 confirms that:

If you’re a resident or a nonresident alien departing the United States, you usually have to show that you have complied with the U.S. income tax laws before you can depart. You do this by obtaining from the IRS a tax clearance document, commonly called a departure permit or sailing permit.

Yet, commentary from the tax community, including U.S. tax lawyer, Virginia La Torre Jeker, reports:

Sailing Permit Not Being Enforced Now or in the Past

The requirement for obtaining a sailing permit commenced in 1921, but research indicates that the IRS does not monitor or actively enforce compliance with this statutory requirement even though departing foreign nationals can owe significant tax dollars to the US government for services they have performed in the US. The law establishing the “sailing permit” requirement, as well as its legislative history, do not indicate how the requirement is to be enforced.

While a few reports of agents asking for sailing permits at departure have surfaced, the IRS has admitted that it is unable to identify from its own records foreign individuals who did not file Forms 1040C and related Form 1040NR or 1040. The IRS needs outside information, such as information from the Department of Homeland Security or the State Department, to determine the extent of noncompliance among departing foreign persons. Neither Homeland Security nor the Customs Department, are required to check departing foreigners for the sailing permit, despite their strong presence at the border, so currently the sailing permit lacks any real “bite”.

The 2010 Report From The GAO (“Government Accountability Office”)

The 2010 GAO Report …

A 2010 GAO Report while identifying the requirement of the “Sailing permit” – page 2:

Finally, some nonresidents must file a certificate of compliance, referred to as a sailing permit, before departing the U.S. to ensure that tax obligations have been satisfied. The requirement is difficult to enforce and few nonresidents fulfill it, potentially leading to broader noncompliance if individuals assume the lack of enforcement extends to other tax rules.

Recommends that the requirement of the “sailing permit” be ended – page 27:

Another requirement that has been effectively eroded by the increase in travel to the U.S and other tax laws is the requirement that aliens obtain certificates of compliance, otherwise known as sailing permits. For nonresidents working for U.S. employers, withholding has supplanted sailing permits as the primary way to minimize compliance risk.

Nonresidents working for foreign employers may not have substantial tax liabilities because of tax treaty benefits. Further, few nonresidents obtain sailing permits. IRS does not enforce the requirement, and it likely could not effectively enforce the requirement given the volume of foreign individuals departing the country daily. A lack of enforcement may also lead taxpayers to conclude that IRS does not enforce other filing requirements. Taken together, these conditions call into question whether the sailing permit requirement is still necessary to ensure compliance.

gao-10-429

The 2024 Biden Green Book – Time To Retire The Requirement Of A Sailing Permit

The 2024 Biden Green Book appears to adopt the 2010 recommendations of the 2010 GAO report.

The Green book contains the following comments in the following three sections …

General Explanations of the Administration’s Fiscal Year 2024 Revenue Proposals

With some exceptions, an individual who is not a U.S. citizen is required to obtain a certificate from the IRS (generally referred to as a “sailing permit”) that the individual has complied with all of their income tax obligations before departing from the United States.

Reasons For Change

The requirement for an alien to obtain a sailing permit is no longer necessary as the IRS has other tools to help ensure tax compliance, including withholding tax requirements applicable to payments to nonresident aliens that have been implemented since the sailing permit requirement was originally enacted.

Proposal

The requirement for an alien to obtain a sailing permit would be repealed. The proposal would be effective for taxable years beginning after December 31, 2023.

Conclusion

The law clearly states that Green Card holders and other “aliens” are required to obtain a “sailing permit” any time they leave the United States. It IS the law. On the one hand, it is clear that the law is neither desired nor enforced. On the other hand, this law can be used at any time against anybody who the government doesn’t like and is looking to punish. Furthermore, the continued existence of the requirement of a “sailing permit” leaves the non-compliant in a situation where they are forever in violation of a provision of the Internal Revenue Code.

Clearly this law must be repealed! It’s time to allow “aliens” to move from a presumption of noncompliance with U.S. law to a presumption of compliance. People should not have to worry about which laws the U.S. government will or will not enforce.

*Appendix A – Internal Revenue Code § 6851 – THIS IS REAL

26 U.S. Code § 6851 – Termination assessments of income tax

(a) Authority for making

(1) In general

If the Secretary finds that a taxpayer designs quickly to depart from the United States or to remove his property therefrom, or to conceal himself or his property therein, or to do any other act (including in the case of a corporation distributing all or a part of its assets in liquidation or otherwise) tending to prejudice or to render wholly or partially ineffectual proceedings to collect the income tax for the current or the immediately preceding taxable year unless such proceeding be brought without delay, the Secretary shall immediately make a determination of tax for the current taxable year or for the preceding taxable year, or both, as the case may be, and notwithstanding any other provision of law, such tax shall become immediately due and payable. The Secretary shall immediately assess the amount of the tax so determined (together with all interest, additional amounts, and additions to the tax provided by law) for the current taxable year or such preceding taxable year, or both, as the case may be, and shall cause notice of such determination and assessment to be given the taxpayer, together with a demand for immediate payment of such tax.

(2) Computation of tax

In the case of a current taxable year, the Secretary shall determine the tax for the period beginning on the first day of such current taxable year and ending on the date of the determination under paragraph (1) as though such period were a taxable year of the taxpayer, and shall take into account any prior determination made under this subsection with respect to such current taxable year.

(3) Treatment of amounts collected

Any amounts collected as a result of any assessments under this subsection shall, to the extent thereof, be treated as a payment of tax for such taxable year.

(4) This section inapplicable where section 6861 applies

This section shall not authorize any assessment of tax for the preceding taxable year which is made after the due date of the taxpayer’s return for such taxable year (determined with regard to any extensions).

(b) Notice of deficiency

If an assessment of tax is made under the authority of subsection (a), the Secretary shall mail a notice under section 6212(a) for the taxpayer’s full taxable year (determined without regard to any action taken under subsection (a)) with respect to which such assessment was made within 60 days after the later of (i) the due date of the taxpayer’s return for such taxable year (determined with regard to any extensions), or (ii) the date such taxpayer files such return. Such deficiency may be in an amount greater or less than the amount assessed under subsection (a).

(c) Citizens

In the case of a citizen of the United States or of a possession of the United States about to depart from the United States, the Secretary may, at his discretion, waive any or all of the requirements placed on the taxpayer by this section.

(d) Departure of alien Subject to such exceptions as may, by regulations, be prescribed by the Secretary—

(1) No alien shall depart from the United States unless he first procures from the Secretary a certificate that he has complied with all the obligations imposed upon him by the income tax laws.
(2) Payment of taxes shall not be enforced by any proceedings under the provisions of this section prior to the expiration of the time otherwise allowed for paying such taxes if, in the case of an alien about to depart from the United States, the Secretary determines that the collection of the tax will not be jeopardized by the departure of the alien.

(e) Sections 6861(f) and (g) to apply

The provisions of section 6861(f) (relating to collection of unpaid amounts) and 6861(g) (relating to abatement if jeopardy does not exist) shall apply with respect to any assessment made under subsection (a).

(f) Cross references

(1) For provisions permitting immediate levy in case of jeopardy, see section 6331(a).
(2) For provisions relating to the review of jeopardy, see section 7429.
(Aug. 16, 1954, ch. 736, 68A Stat. 833; Pub. L. 85–866, title I, § 87, Sept. 2, 1958, 72 Stat. 1665; Pub. L. 94–455, title XII, § 1204(b), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1696, 1834.)

https://www.law.cornell.edu/uscode/text/26/6851

**Appendix B – Treasury Regulation § 1.6851-2 – How The Rules Apply To Aliens

26 CFR § 1.6851-2 – Certificates of compliance with income tax laws by departing aliens.

§ 1.6851-2 Certificates of compliance with income tax laws by departing aliens.

(a) In general –

(1) Requirement. The rules of this section are applicable, except as otherwise expressly provided, to any alien who departs from the United States or any of its possessions after January 20, 1961. Except as provided in subparagraph (2) of this paragraph, no such alien, whether resident or nonresident, may depart from the United States unless he first procures a certificate that he has complied with all of the obligations imposed upon him by the income tax laws. In order to procure such a certificate, an alien who intends to depart from the United States (i) must file with the district director for the internal revenue district in which he is located the statements or returns required by paragraph (b) of this section to be filed before obtaining such certificate, (ii) must appear before such district director if the district director deems it necessary, and (iii) must pay any taxes required under paragraph (b) of this section to be paid before obtaining the certificate. Either such certificate of compliance, properly executed, or evidence that the alien is excepted under subparagraph (2) of this paragraph from obtaining the certificate must be presented at the point of departure. An alien who presents himself at the point of departure without a certificate of compliance, or evidence establishing that such a certificate is not required, will be subject at such departure point to examination by an internal revenue officer or employee and to the completion of returns and statements and payment of taxes as required by paragraph (b) of this section.

(2) Exceptions –

(i) Employees of foreign governments or international organizations – (a) Diplomatic representatives, their families and servants.

(1) Representatives of foreign governments bearing diplomatic passports, whether accredited to the United States or other countries, and members of their households shall not, upon departure from the United States or any of its possessions, be examined as to their liability for United States income tax or be required to obtain a certificate of compliance. If a foreign government does not issue diplomatic passports but merely indicates on passports issued to members of its diplomatic service the status of the bearer as a member of such service, such passports are considered as diplomatic passports for income tax purposes.

(2) Likewise, the servant of a diplomatic representative who accompanies any individual bearing a diplomatic passport upon departure from the United States or any of its possessions shall not be required, upon such departure, to obtain a certificate of compliance or to submit to examination as to his liability for United States income tax. If the departure of such a servant from the United States or any of its possessions is not made in the company of an individual bearing a diplomatic passport, the servant is required to obtain a certificate of compliance. However, such certificate will be issued to him on Form 2063 without examination as to his income tax liability upon presentation to the district director for the internal revenue district in which the servant is located of a letter from the chief of the diplomatic mission to which the servant is attached certifying (i) that the name of the servant appears on the “White List”, a list of employees of diplomatic missions, and (ii) that the servant is not obligated to the United States for any income tax, and will not be so obligated up to and including the intended date of departure.

(b) Other employees. Any employee of an international organization or of a foreign government (other than a diplomatic representative to whom (a) of this subdivision applies) whose compensation for official services rendered to such organization or government is excluded from gross income under section 893 and who has received no gross income from sources within the United States, and any member of his household who has received no gross income from sources within the United States, shall not, upon departure from the United States or any of its possessions after November 30, 1962, be examined as to his liability for United States income tax or be required to obtain a certificate of compliance.

(c) Effect of waiver. An alien who has filed with the Attorney General the waiver provided for under section 247(b) of the Immigration and Nationality Act (8 U.S.C. 1257(b)) is not entitled to the exception provided by this subdivision.

(ii) Alien students, industrial trainees, and exchange visitors. A certificate of compliance shall not be required, and examination as to United States income tax liability shall not be made, upon the departure from the United States or any of its possessions of –

(A) An alien student, industrial trainee, or exchange visitor, and any spouse and children of that alien, admitted solely on an F-1, F-2, H-3, H-4, J-1 or J-2 visa, who has received no gross income from sources inside the United States other than –

(1) Allowances to cover expenses incident to study or training in the United States (including expenses for travel, maintenance, and tuition);

(2) The value of any services or accommodations furnished incident to such study or training;

(3) Income derived in accordance with the employment authorizations in 8 CFR 274a.12(b) and (c) that apply to the alien’s visa; or

(4) Interest on deposits described in section 871(i)(2)(A); or

(B) An alien student, and any spouse or children of that alien admitted solely on an M-1 or M-2 visa, who has received no gross income from sources inside the United States other than income derived in accordance with the employment authorization in 8 CFR 274a.12(c)(6) or interest on deposits described in section 871(i)(2)(A).

(iii) Other aliens temporarily in the United States. A certificate of compliance shall not be required, and examination as to United States income tax liability shall not be made, upon the departure from the United States or any of its possessions of an alien hereinafter described in this subdivision, unless the district director has reason to believe that such alien has received taxable income during the taxable year up to and including the date of departure or during the preceding taxable year and that collection of income tax from such alien will be jeopardized by his departure from the United States:

(a) An alien visitor for pleasure admitted solely on a B-2 visa;

(b) An alien visitor for business admitted on a B-1 visa, or on both a B-1 visa and a B-2 visa, who does not remain in the United States or a possession thereof for a period or periods exceeding a total of 90 days during the taxable year;

(c) An alien in transit through the United States or any of its possessions on a C-1 visa or under a contract, including a bond agreement, between a transportation line and the Attorney General pursuant to section 238(d) of the Immigration and Nationality Act (8 U.S.C. 1228(d));

(d) An alien who is admitted to the United States on a border-crossing identification card or with respect to whom passports, visas, and border-crossing identification cards are not required, if such alien is a visitor for pleasure, or if such alien is a visitor for business who does not remain in the United States or a possession thereof for a period or periods exceeding a total of 90 days during the taxable year, or if such alien is in transit through the United States or any of its possessions;

(e) An alien military trainee admitted to the United States to pursue a course of instruction under the auspices of the Department of Defense who departs from the United States on official military travel orders; or

(f) An alien resident of Canada or Mexico who commutes between such country and the United States at frequent intervals for the purpose of employment and whose wages are subject to the withholding of tax.

(b) Issuance of certificate of compliance –

(1) In general.

(i) Upon the departure of an alien required to secure a certificate of compliance under paragraph (a) of this section, the district director shall determine whether the departure of such alien jeopardizes the collection of any income tax for the current or the preceding taxable year, but the district director may determine that jeopardy does not exist in some cases. If the district director finds that the departure of such an alien results in jeopardy, the taxable period of the alien will be terminated, and the alien will be required to file returns and make payment of tax in accordance with subparagraph (3)(iii) of this paragraph. On the other hand, if the district director finds that the departure of the alien does not result in jeopardy, the alien will be required to file the statement or returns required by subparagraph (2) or (3)(ii) of this paragraph, but will not be required to pay income tax before the usual time for payment.

(ii) The departure of an alien who is a resident of the United States or a possession thereof (or treated as a resident under section 6013 (g) or (h)) and who intends to continue such residence (or treatment as a resident) shall be treated as not resulting in jeopardy, and thus not requiring termination of his taxable period, except when the district director has information indicating that the alien intends by such departure to avoid the payment of his income tax. In the case of a nonresident alien (including a resident alien discontinuing residence), the fact that the alien intends to depart from the United States will justify termination of his taxable period unless the alien establishes to the satisfaction of the district director that he intends to return to the United States and that his departure will not jeopardize collection of the tax. The determination of whether the departure of the alien results in jeopardy will be made on examination of all the facts in the case. Evidence tending to establish that jeopardy does not result from the departure of the alien may be provided, for example, by information showing that the alien is engaged in trade or business in the United States or that he leaves sufficient property in the United States to secure payment of his income tax for the taxable year and of any income tax for the preceding year which remains unpaid.

(2) Alien having no taxable income and resident alien whose taxable period is not terminated. A statement on Form 2063 shall be filed with the district director by every alien required to obtain a certificate of compliance:

(i) Who is a resident of the United States and whose taxable period is not terminated either because he has had no taxable income for the taxable year up to and including the date of his departure (and for the preceding taxable year where the period for making the income tax return for such year has not expired) or because, although he has had taxable income for such period or periods, the district director has not found that this departure jeopardizes collection of the tax on such income; or

(ii) Who is not a resident of the United States and who has had no taxable income for the taxable year up to and including the date of his departure (and for the preceding taxable year where the period for making the income tax return for such year has not expired).
Any alien described in subdivision (i) or (ii) of this subparagraph who is in default in making return of, or paying, income tax for any taxable year shall, in addition, file with the district director any returns which have not been made as required and pay to the district director the amount of any tax for which he is in default. Upon compliance by an alien with the foregoing requirements of this subparagraph, the district director shall execute and issue to the alien the certificate of compliance attached to Form 2063. The certificate of compliance so issued shall be effective for all departures of the alien during his current taxable year, subject to revocation upon any subsequent departure should the district director have reason to believe that such subsequent departure would result in jeopardy. The statement required of a resident alien under this subparagraph, if made before January 21, 1961, with respect to a departure after January 20, 1961, may be made on a Form 1040C in lieu of a Form 2063.

(3) Nonresident alien having taxable income and resident alien whose taxable period is terminated –

(i) Nonresident alien having taxable income. Every nonresident alien required to obtain a certificate of compliance (but not described in subparagraph (2) of this paragraph) who wishes to establish that his departure does not result in jeopardy shall furnish to the district director such information as may be required for the purpose of determining whether the departure of the alien jeopardizes collection of the income tax and thus requires termination of his taxable period.

(ii) Nonresident alien whose taxable period is not terminated. Every nonresident alien described in subdivision (i) of this subparagraph whose taxable period is not terminated upon departure shall file with the district director:

(a) A return in duplicate on Form 1040C for the taxable year of his intended departure, showing income received, and reasonably expected to be received, during the entire taxable year within which the departure occurs; and

(b) Any income tax returns which have not been filed as required.
Upon compliance by the alien with the foregoing requirements of this subdivision, and the payment of any income tax for which he is in default, the district director shall execute and issue to the alien the certificate of compliance on the duplicate copy of Form 1040C. The certificate of compliance so issued shall be effective for all departures of the alien during his current taxable year, subject to revocation by the district director upon any subsequent departure if the taxable period of the alien is terminated on such subsequent departure.

(iii) Alien (whether resident or nonresident) whose taxable period is terminated. Every alien required to obtain a certificate of compliance, whether resident or nonresident, whose taxable period is terminated upon departure shall file with the district director:

(a) A return in duplicate on Form 1040C for the short taxable period resulting from such termination, showing income received, and reasonably expected to be received, during the taxable year up to and including the date of departure;

(b) Where the period for filing has not expired, the return required under section 6012 and § 1.6012-1 for the preceding taxable year; and

(c) Any other income tax returns which have not been filed as required.
Upon compliance with the foregoing requirements of this subdivision, and payment of the income tax required to be shown on the returns filed pursuant to (a) and (b) of this subdivision and of any income tax due and owing for prior years, the departing alien will be issued the certificate of compliance on the duplicate copy of Form 1040C. The certificate of compliance so issued shall be effective only for the specific departure with respect to which it is issued. A departing alien may postpone payment of the tax required to be shown on the returns filed in accordance with (a) and (b) of this subdivision until the usual time of payment by furnishing a bond as provided in § 301.6863-1.

(4) Joint return on Form 1040C. A departing alien may not file a joint return on Form 1040C unless:

(i) Such alien and his spouse may reasonably be expected to be eligible to file a joint return at the normal close of their taxable periods for which the return is made; and

(ii) If the taxable period of such alien is terminated, the taxable periods of both spouses are so terminated as to end at the same time.

(5) Annual return. Notwithstanding that Form 1040C has been filed for either the entire taxable year of departure or for a terminated period, the return required under section 6012 and § 1.6012-1 for such taxable year shall be filed. Any income tax paid on income shown on the return on Form 1040C shall be applied against the tax determined to be due on the income required to be shown on the subsequent return under section 6012 and § 1.6012-1.
[T.D. 6537, 26 FR 547, Jan. 20, 1961, as amended by T.D. 6620, 27 FR 11803, Nov. 30, 1962; T.D. 7575, 43 FR 58817, Dec. 18, 1978; T.D. 7670, 45 FR 6931, Jan. 31, 1980; T.D. 8332, 56 FR 3034, Jan. 28, 1991; T.D. 8526, 59 FR 10067, Mar. 3, 1994]

https://www.law.cornell.edu/cfr/text/26/1.6851-2

Have a question? Contact John Richardson, Citizenship Solutions.