Tag Archives: Tax citizen

U.S. Citizenship clarification: Time between your actual renunciation and the date your CLN is issued

Two questions that I frequently receive from people who have renounced U.S. citizenship are:

I. An immigration question: What if I attempt to travel to the United States during the period of time between my actual renunciation of U.S. citizenship and actually receiving my CLN (which is my proof of having renounced U.S. citizenship)?

II. A tax question: At what point after I renounce U.S. citizenship do I cease to be treated as a U.S. citizen for U.S. tax purposes? For example, when am I free to sell my house (located outside the USA) and NOT be subject to U.S. capital gains taxes?

Two kinds of U.S. citizenship: How the issuance of a CLN affects (1) U.S. citizenship for Immigration purposes and (2) U.S. citizenship for tax purposes

1. How the issuance of a CLN affects U.S. citizenship for immigration and nationality purposes:

Immigration and Nationality Act S. 349(a) (U.S. Code 1481(a)) make it clear that the issuance of a CLN is completely irrelevant to your status as a U.S. citizen for immigration purposes. A CLN is of value ONLY for the purposes of PROVING that you are not a U.S. citizen.

Therefore, one ceases to a U.S. citizen for immigration purposes on the date of the relinquishing (renunciation) act.

2. How the issuance of a CLN affects U.S. citizenship for U.S. tax purposes

Internal Revenue Code 877A(g)(4) mandates that those relinquishing/renouncing U.S. citizenship after June 16, 2008:

– will continue to be treated as U.S. citizens for U.S. tax purposes until the CLN is actually issued; and

– the date of ceasing to be a U.S. citizen for U.S. tax purposes will be the actual date of the relinquishing act (date of renunciation).

Therefore, (assuming a relinquishing act after June 16, 2008) one continues to be a U.S. citizen for tax purposes until the CLN is issued.

These distinctions are discussed in an earlier post:

Renunciation is one form of relinquishment – It’s not the form of relinquishment but the time of relinquishment

Bottom line: One ceases to be a U.S. citizen for immigration purpose before one ceases to be a U.S. citizen for tax purposes.

Generally people are more concerned with travelling to the USA during the time gap between renouncing U.S. citizenship and before receiving a CLN. Fortunately, we have a “guest post” written by someone who has just experienced this issue from the Immigration perspective. He has shared his thoughts as follows:

Travel Limbo? Keep calm and CLN on.

Recently, I found myself in a potentially sticky situation enroute to a holiday in the U.S while at a Canadian airport. My Canadian passport showed a U.S. birthplace and before allowing me
through, the U.S. Border Officer wanted me to show my Certificate of Loss of Nationality (CLN) or an American passport.

Although I had renounced my U.S. citizenship several months earlier, the U.S. Department of State had not yet issued my CLN. Before this experience, I had always been able to cross the border to the U.S. with my Canadian passport (the only passport I’d ever had).

Fortunately, the situation didn’t escalate. I attempted to give the officer a simple explanation that I had renounced at a U.S. Embassy many months before but the approved CLN had not been couriered in time for my trip. If he would permit me, I would show him my email correspondence with the U.S. embassy.

The officer accepted my explanation. Before he waived me through, I asked if he had any advice to share with anyone caught in travel limbo without their CLN.

Hopefully, his comments will help others to navigate a soft landing:

Keep calm

There is a line-up of people behind you. This is not the time to be outraged or to educate agents about the plight of Accidental Americans or dual citizens.

Show proof

Travel with a copy of your CLN. If you’re still waiting for it, carry a copy of Form DS-4080 (the form you sign when you renounce and swear an oath at a U.S. Embassy). Keep copies on your phone.

Provide a reasonable explanation

If you accidentally forget your documents or booked a trip before your CLN arrives, a simple description of the renunciation process and the long wait times for the approved CLN to arrive will hopefully be reasonable enough to a reasonable officer.

Thanks to our guest blogger for the relaying the above experience!

John Richardson

The “plain language” of S. 877A – To whom does the U.S. Exit Tax apply?

The “Plain Language” of the S. 877A Rules – To Whom does S. 877A apply? What is the “Relinquishment Date?

Synopsis:

Many Americans abroad are confused by the difference between “relinquishment” and “renunciation”. I recently wrote a post explaining that:

1. Renunciation is one form of “relinquishment”; and

2. The issue is the “relinquishment date” and not the form of “relinquishment”.

This post will explain exactly why the date of relinquishment matters.

To put it simply:

Those with a “Relinquishment Date” after June 16, 2008 may be subject to the confiscatory provisions of the S. 877A Exit Tax.

This post will make the argument that the “plain language” of the combined effects of S. 7701(a)(50) and S. 877A(g)(4) compel the conclusion that those with a “Relinquishment Date” prior to June 3, 2004 are NOT subject to the S. 877A Exit Tax.

My analysis follows.

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The United States of America – One country two citizenships – Introducing the “Tax Citizen”

Dual Citizenship – American style – All Americans are both “Citizens” and “Tax Citizens”

One Country – Two Citizenships

First Citizenship – Citizenship for Nationality Purposes

Americans have always been proud of their U.S. citizenship. Most U.S. citizens regard their U.S. citizenship as the most valuable thing they have. Most Americans will fight for their citizenship. They will die for their citizenship. They believe that their U.S. citizenship gives them rights and privileges that citizens of other nations simply do not have. Whether true or not, this is how U.S. citizenship is regarded. Citizenship for “Nationality” is what gives people the “rights of citizenship”. At present, these rights include: the right to enter the United States (as long as you have a U.S. passport), the right to work and the right to vote (as long as you meet the voting requirements of your State). That’s all. No more and no less (as long as you have a U.S. passport).

Second Citizenship – Citizenship for Tax Purposes

What could be better than U.S. citizenship? Why not a second U.S. citizenship? The United States Congress rewarded U.S. citizens by giving them all a “Second U.S. Citizenship”. On June 3, 2004 the American Jobs Creation Act gave all U.S. citizens a second citizenship. To be specific, on June 3, 2004 all U.S. citizens became U.S. “Tax Citizens”.  Interestingly, the U.S. public never asked for “Tax Citizenship”. The status of “Tax Citizen” was simply conferred on them. “Tax Citizens” have no rights. They have only obligations. The obligation is pay taxes. I recently heard it said that:

“U.S. citizenship is the gift that keeps on taking.”

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