New Worries for Those Thinking of Renouncing US Citizenship!

No IRS[1]If you are one of the many US citizens contemplating renouncing your US citizenship, Congress recently sent a fairly clear message that now, as opposed to later, may be the right time to get out of the club. On June 12, 2013, US Senators Jack Reed (D-RI) and Chuck Schumer (D-NY) attempted to add yet another hurdle in the ongoing saga for those individuals looking to renounce their US citizenship in filing an amendment to the immigration reform bill, which attempted to ensure that the US Department of Homeland Security could exclude certain individuals from re-entry into the US forever. The proposed amendment was never voted on in the House and died before reaching the floor. If the proposed amendment had made its way into law, it would have excluded from re-entry not only former US citizens who renounce for tax avoidance purposes (as is the current law), but also renouncing individuals who are considered “Covered Expatriates” under Internal Revenue Code § 877A.

Maybe this is a response to the fact that Americans Renouncing U.S. Citizenship Increased 6 times so far in 2013!

What is most important to take away from this failed passage of legislation is that the issue of renouncing one’s US citizenship is again front and center on Congress’s radar and the only guarantee moving forward is that any potential changes will not make things any easier to get out.

Under the failed amendment, a renouncing individual who was classified as a Covered Expatriate under § 877A, would have had to prove to the Department of Homeland Security by “clear and convincing” evidence that he or she did not renounce for tax avoidance purposes. The burden of proving this negative would have fallen on the renouncing Covered Expatriate if he or she desired to ever re-enter the US.

When questioned regarding the proposed amendment, Senator Reed said:

“American citizenship is a privilege. But it seems that a privileged few are trying to game the system by accumulating wealth and benefiting from the greatness of the United States and then renouncing their citizenship to avoid paying their fair share of taxes. They are welcome to leave our country, but they should not be welcomed to return without playing by the rules and paying what they owe.”

While the failed passage of this amendment is a clear victory for those looking to renounce their US citizenship in the near future, the fact that Congress has already attempted to bring legislation before the floor in an effort to make the penalties associated with renouncing even more severe, should send a loud and clear message to all those looking to renounce their citizenship…


The Reed-Schumer Amendment failed to become US law, but the danger of inadvertently being barred from the US while also being hit with the US exit tax may still be of real concern for those considering renouncing in the near future and beyond.

It is fairly safe to say that Congress is aware of the renunciation problem they are facing, and smart money would be on another amendment or bill attempting to become law in the near future. This fact, accompanied with the Foreign Account Tax Compliance Act (FATCA) set to go into effect in 2014, may make now the best time to renounce one’s US citizenship.

The magnitude of what could be at stake when an individual looks to renounce their US citizenship in the future has the potential to be exponentially greater if Congress continues on its path to curb the record number of renunciations in 2013 and beyond.

In accordance with Circular 230 Disclosure

Tony Beecher

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3 comments on “New Worries for Those Thinking of Renouncing US Citizenship!

  • I have a client that is not a covered expatriate in accordance to the S877A criteria. She and her siblings wanted to renounce however an immigration lawyer in Toronto said the interview with the consulate would be difficult. In their case there are no taxes ever payable due to the FEI exclusion and ftcs. they just want to avoid the preparation fees and process, however they do not want to loose access to the US, say for vacations. Any ideas?

  • The Toronto consulate is said to be among the best in Canada on the topic. They shouldn’t have any problems. Consulates are generally professional and there isn’t much of an interview unless one relinquishes rather than renouncing. I seriously doubt that they should have any worries.

  • Renouncing US citizenship has become more common in recent years but it is neither an easy matter nor easy to achieve.The US has made renouncing extremely difficult to do and there are no reversals once the COLN is issued and the only way to regain one’s U.S citizenship is through the long and difficult process of naturalization under the current U.S. immigration law so one must consider vigilantly before jumping into the pool.

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