By SUSAN CALLAHAN, Associate Editor and Featured Columnist
Since shortly after the election of former President Obama, a phenomenon of tracking the number of US citizens who give up their citizenship has become a parlor game of sorts played by most of the major newspapers on a slow news day. The typical headline is "Record Number of US Citizens Giving Up Their Citizenship". The numbers for the year are then compared with the numbers for the prior year and the appropriate percentage is given. For 2016, the new number reported by the IRS, which tracks renunciations, is 5,411, up by 26% over the prior year.
The reasons for the increase in the numbers of those giving up US citizenship will never fully be known because, at the time of the renunciation, few people ever declare their reasons publicly.
But what is a fact is that the steep increase dates from the passage of the Foreign Account Tax Compliance Act ("FATCA") by then President Barack Obama on March 18, 2017.
FATCA law requires financial institutions abroad to report to the IRS details of any account held by an American. It also requires Americans to report their accounts held abroad above certain amounts. Because of FATCA reporting burdens, many financial institutions stopped allowing Americans to open accounts. About 78% of Americans surveyed by the Wall Street Journal said that complying with FATCA puts them at a disadvantage to citizens of other countries.
The US remains the only nation in the developed world to tax its citizens even when they are living outside the nation. The small African nation of Eritrea is the only country other than the US to tax both on the basis of citizenship and residency.
All other countries follow a residency taxation rule, which means they only tax those who are residing in their countries and who therefore are receiving the benefits of living in the country.
Many US citizens living abroad, fed up with the hassles of lifetime compliance with US tax law even while they are outside the US, have decided to snip the cord.
There are two choices when you reach this point --- relinquishment or renunciation. What's the difference?
The Legal Difference Between Relinquishment and Renunciation
Relinquishment is the broader concept. Renunciation is a type of relinquishment.
Let's take the narrower concept first, renunciation. You have to do something, take steps, and have the intent to give up your citizenship in order to renounce. It does not happen accidentally. Here are the steps, as set forth by the US State Department:
"A person wishing to renounce his or her U.S. citizenship must voluntarily and with intent to relinquish U.S. citizenship:
A person wishing to renounce his or her U.S. citizenship must voluntarily and with intent to relinquish U.S. citizenship:
As you can see, it's actually terribly difficult if not impossible for anyone to renounce their citizenship without intending to do so. You have to go to a consulate and sign an oath.
Relinquishment, on the other hand, is something that can sometimes happen, well, accidentally.
You can renounce your US citizenship by going to the consulate, filing a form of renunciation
Here is what the relevant law says:
"Sec. 349. [8 U.S.C. 1481]
(a) A person who is a national of the United States whether by birth or naturalization, shall lose his nationality by voluntarily performing any of the following acts with the intention of relinquishing United States nationality-
(1) obtaining naturalization in a foreign state upon his own application or upon an application filed by a duly authorized agent, after having attained the age of eighteen years; or
(2) taking an oath or making an affirmation or other formal declaration of allegiance to a foreign state or a political subdivision thereof, after having attained the age of eighteen years; or
(3) entering, or serving in, the armed forces of a foreign state if
(A) such armed forces are engaged in hostilities against the United States, or
(B) such persons serve as a commissioned or non-commissioned officer; or
(4) (A) accepting, serving in, or performing the duties of any office, post, or employment under the government of a foreign state or a political subdivision thereof, after attaining the age of eighteen years if he has or acquires the nationality of such foreign state; or
(B) accepting, serving in, or performing the duties of any office, post, or employment under the government of a foreign state or a political subdivision thereof, after attaining the age of eighteen years for which office, post, or employment an oath, affirmation, or declaration of allegiance is required; or
(5) making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state, in such form as may be prescribed by the Secretary of State"
To Relinquish, You Have to Intend to Relinquish
Notice that the first part of the law requires that you have the intention to give up your US citizenship. If you have that intent and then you do something such as taking citizenship in another country, bingo!
Now, the US and many other countries allow dual citizenship. So how do you avoid unintentionally giving up your US citizenship when you become a citizen of say, the UK or Greece or some other country?
Firstly, the State Department "presumes" that you want to retain your US citizenship even if you become a dual citizen. The State Department presumes that "U.S. nationals intend to retain United States nationality when they obtain naturalization in a foreign state, declare their allegiance to a foreign state, serve in the armed forces of a foreign state not engaged in hostilities with the United States, or accept non-policy level employment with a foreign government."
When you next apply for a passport, the consulate will simply ask you whether it was your intent to give up your US citizenship, and if you answer "no", the State Department will certify in its database that you have retained US citizenship.
Note that it is a State Department presumption that keeps you from unintentionally losing your citizenship when you become a dual citizen. To ensure that you do not lose your citizenship, you should consider stating in the affirmative that you intend to keep your US citizenship, in a sworn statement at the time you become a dual citizen. You should make sure the consulate has received this statement. You should send it on a way that requires signature tracking upon receipt.