Tax law seen as driving Americans to renounce citizenship

Stanley Amland threw it off. So did Ingrid Bracke. Rhoda May Derksen ditched hers, too.

The names, picked at random for this article from the Federal Register, are among the 3,415 Americans who renounced their U.S. citizenship or relinquished their residency permits last year.

As a national debate rages about “anchor babies” and the constitutional amendment that grants “birthright citizenship” to anyone born on U.S. soil, a record number of Americans and green card holders are becoming ex-Americans.

In fact, the first three months of 2015 set a new high for renunciations — 1,335 — in any quarter-year in U.S. history.

“I would suspect the majority are what we might call ‘external Americans,’ ” said Duncan Hollis, a former State Department legal adviser now on the faculty of Temple University’s Beasley School of Law.

“They have U.S. citizenship but don’t reside here. A number feel the U.S. tax system unfairly burdens them. It would be interesting to see if others are doing it for political reasons, or to signal some view on American foreign policy.”

Confirming their motives isn’t easy. Citizens who renounce generally do so long after they have left the country. The Federal Register doesn’t cite what drove their decisions or which countries they call home now. Moreover, the data represent only the people who formally expatriate. People who move away and just “disappear” are never counted.

A 2013 online forum of the BBC gave some hints of differing viewpoints.

“I renounced my U.S. citizenship because of the way the U.S. spent my taxes on illegal wars,” Walt Hopkins wrote from Kinross, Scotland.

From Dubai, United Arab Emirates, Cheryl Keown wrote: “My husband and I pay our taxes, with no reservations. We’d never consider giving up our American citizenship. Why give up such a precious heritage, that so many people around the world would be envious to have?”

In a nation of 320 million, losing a few thousand in a year is hardly an exodus. But why now?

“It’s almost entirely about taxes and FATCA,” the Foreign Account Tax Compliance Act of 2010, said Temple Law professor Peter Spiro, author of “Beyond Citizenship: American Identity After Globalization.”

The act’s main provisions took effect in July 2014.

“The U.S. is the only country that taxes on the basis of citizenship rather than residency,” said Spiro, which means Americans must file returns on worldwide assets, regardless of where they live or the money was earned. That is not true, he said, for citizens of other countries if they live outside their homeland and earn money outside.

“The main purpose of FATCA was to police against asset offshoring for tax evasion by (Americans) parking large amounts of money outside the U.S.,” said Spiro. But Americans of modest means who live and work outside the United States “are getting caught in the FATCA dragnet.”

FATCA doesn’t change the amount a person owes, he said. Rather, it adds “onerous” reporting requirements that hike fees for accounting and legal services.

Americans who want to shed their citizenship have to file “loss of nationality” paperwork at U.S. embassies and consulates abroad. It cannot be done in America.

Establishing their informed consent is critical because renunciations generally are irreversible.

“They make you jump up and down and swear on a stack of Bibles to show that you really mean it,” said Spiro.

A recent report on Globalnews.ca, a Canadian website, said the backlog at the U.S. Consulate in Toronto has people waiting 10 months for appointments.

The top countries in which Americans shed citizenship are Canada, Britain and Switzerland, the site reported.

A month after FATCA went into effect, the cost to file a renunciation jumped from $450 to $2,350. Andrew Mitchel, a Connecticut attorney who has closely tracked renunciations, thinks the fee increase was related to the need to hire more personnel “to do the processing” of “the flood of people” seeking to dissolve their citizenship.

U.S. law requires the Treasury Department to publish the names of renunciants but no other identifying data.

“You’d find a variety of stories,” said Spiro, “expatriates who were born in the U.S. and still have deep, sentimental attachments; others whom I’d call ‘accidental Americans,'” such as Boris Johnson, the mayor of London, who was born in the United States when his parents lived here and “got slammed” with a U.S. capital gains tax when he sold his London home.

“You’d find some, like Eduardo Saverin,” co-founder of Facebook, who was a naturalized American, moved to Singapore with his IPO windfall, and renounced his U.S. citizenship in 2011, said Spiro.

Or the soul-singing legend Tina Turner, a resident of Switzerland for more than two decades who swore an oath of Swiss nationality in 2013 and relinquished her U.S. citizenship.

“Most people on that list are high-asset people,” said Spiro. “But it’s not just one story. You get a whole range.”

But one generality applies, he said: Anyone shedding U.S. citizenship likely has “another premium citizenship,” such as Canadian, European or Australian, “which allows them wide, visa-free travel.”

Attorney Chris McLemore, of Butler Snow, an international firm that tracks expat affairs, put it bluntly to CNN Money last year: “From an international perspective, the world is split in two halves — the people who are desperate to get U.S. citizenship and the people who are desperate to give it up.”