This piece is a report of an article by Helen S. Cheng and Dina Y. Name of Withers Bergman LLP by was originally published in the November 13, 2017 issue of Tax Notes.

Here is a summary (leaving out details of the Exit Tax with which we are all already familiar):

In theory, surrendering your U.S. citizenship for tax purposes can be expensive. However, the IRS sometimes has difficulty enforcing the exit tax against expatriates. Now the State Bar of California is recommending legislative changes that would make enforcement easier and expatriation more expensive.

Once an exit tax is assessed, the IRS has authority to place tax levies on the person’s domestic accounts, but has limited authority to collect the amount owed from any property held overseas.

To correct this, the State Bar of California’s proposal recommends that the U.S. legislature amend the Internal Revenue Code and related laws to close the information gaps and improve communication between the departments. The proposed laws, if adopted would essentially change the order of filing, requiring a U.S. taxpayer to complete Form 8854 and pay the exit tax before completing expatriation through the State Department or Department of Homeland Security. They would also allow the departments to exchange information about expatriating taxpayers, to the extent necessary to enforce the exit tax.

In addition, the Bar recommends requiring expatriates to consent to ongoing personal jurisdiction in the U.S. for five years.This would allow the IRS to seek enforcement in U.S. courts, rather than filing tax collection matters abroad.

I haven’t seen anything else about this idea and have no knowledge that it has gained ground. However, were this to happen, presuming those who can remain under the radar will continue, those who need to renounce may find it a lot harder……….

How is the IRS levying taxes to renounce US citizenship different from the Berlin Wall?

cross posted from Quora

by John Richardson
Lawyer (1982-present)

President Kennedy at the “Berlin Wall”

On June 26, 1963 President Kennedy gave his historic “Ich bin ein Berliner” speech. After World War II, the administration of the City of Berlin was divided among the allied powers (Soviet Union, USA, Britain and France). In 1961, the Soviets created a wall in order to prevent their people from leaving the Soviet Sector. (The City of Berlin was actually inside East Germany). Among other things, President Kennedy’s speech included the line: “We have never had to put a wall up to keep our people in – to prevent them from leaving us.”

Congressman Ron Paul speaks about “walls”

As Ron Paul once said: “The wall could be used to keep people in!”

Does the United States have any prohibitions on leaving the United States?

As a matter of fact yes.

In order for a U.S. citizen to legally leave the United States, the citizen must have been issued a U.S. passport. This is a legal requirement. U.S. citizens are NOT permitted to leave the United States on a non-U.S. passport. There is an interesting history to the United States using refusals to issue passports, as way to keep people inside the United States. See for example this discussion from “Today In Civil Liberties History”:

“Some of the more famous passport denial cases involved the famed African-American singer and left-wing political activist Paul Robeson, whose passport was cancelled on August 4, 1950; the noted artist Rockwell Kent, who was denied a passport extension on August 7, 1950; and the distinguished scientist Linus Pauling, who was denied a passport on May 11, 1952.”

The United States does have a history of attempting to prevent U.S. citizens from leaving the United States. But, the United States (unlike those who tried to climb the Berlin Wall) has not (to the best of my knowledge) shot for attempting to leave.

See also:

U.S. Passport as Instrument of Control

An excellent “scholarly” review of the Passport requirement is here:

The history of the requirement that U.S. citizens only use U.S. passports to enter the U.S.

Is there an analogy between the building of the Berlin Wall and the “Exit Taxes” imposed under Sec. 877A of the Internal Revenue Code today?

First, what are these “Exit Taxes” anyway?

“Exit Taxes” are taxes that are imposed on people who sever “tax residency” with a country. For a comparison of Canada’s Exit/Departure tax and the U.S. Exit Taxes see:

Canada’s “residence-based” departure tax vs. the US “citizenship-based” Expatriation Tax – Focus on Canada’s Tax

The U.S. “Exit Tax” is particularly draconian. It has no equivalent anywhere in the world. In part this is because the U.S. imposes “Exit Taxes” on renouncing citizenship (in addition to the $2350 administrative fee). Other countries impose Exit/Departure taxes when one physically moves from the country. (This illuminates one of the differences between U.S. “citizenship-based taxation” and “residence-based taxation” as applied by other countries. On this point see:


U.S. citizens who live in the United States are fed a steady diet of “The United States is the “Land of the Free”. Although absolute freedom is NOT possible (JFK said “Freedom has many difficulties”), even in a comparative sense, Americans have fewer freedoms than the citizens of many other countries. I have provided a Quora answer to this question before.

John Richardson’s answer to Which country’s citizens enjoy more freedoms than Americans?

How do the Internal Revenue Code S. 877A Exit Taxes Work?

Renouncing US citizenship? How the S. 877A “Exit Tax” may apply to your Canadian assets – 25 Parts

U.S. “Exit Taxes” are imposed by Internal Revenue Code Sec. 877A. They are imposed by the Internal Revenue Code on certain people “covered expatriates” who relinquish U.S. citizenship. A “covered expatriate” is a person who relinquishes U.S. citizenship and triggers one or more of these three events: (1) has certain levels of income (determined by the U.S. tax payable), (2) a net worth of 2 million USD or more or (3) who cannot certify U.S. tax compliance for the five years prior to his/her relinquishment.

Part 4 – “You are a “covered expatriate” – How the “Exit Tax” is actually calculated”

For examples that demonstrate how incredibly punitive the U.S. “Exit Taxes” are (and specifically how they operate to confiscate non-U.S. pension plans) see:

Part 5 – “The “Exit Tax” in action – Five actual scenarios with 5 actual completed U.S. tax returns.”

The Section 877A Exit Tax impacts primarily Americans who already live outside the United States and are “tax residents” of other countries

The U.S. “Exit Tax” is triggered by relinquishing U.S. citizenship.

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

Most people relinquish U.S. citizenship when they already live outside the United States.

Therefore, I would say that:

The Berlin Wall was to prevent people for leaving Easy Germany!

The U.S. Exit Taxes are designed to punish those who have ALREADY left.

Furthermore, the Berlin Wall was to prevent EVERYBODY from leaving. The U.S. “Exit Taxes” are to punish only SOME (“covered expatriates”) who leave the United States.

Therefore, although both the Wall and the Exit Taxes are/were bad things, the are not the same.

A more relevant comparison “might” be between the German “reichsfluchtssteur” and the U.S. Exit Taxes. Both of these taxes are (at their core) ways to prevent capital from leaving the country. It is described in the above Wikipedia link as:

“The Reich Flight Tax ( German: Reichsfluchtsteuer) was a capital control law implemented in order to stem capital flight from the Weimar Republic. The law was created through decree on 8 December 1931 by Reich President Paul von Hindenburg. The Reich Flight Tax was assessed upon departure from the individual’s German domicile, provided that the individual had assets exceeding 200,000 RM or had a yearly income over 20,000 RM. The tax rate was set at 25 percent. In 1931, the Reichsmark was fixed at an exchange rate of 4.2 RM per USD; 200,000 RM was equivalent to $47,600 USD (equivalent to $766,000 in 2017).”

Although not triggered by tax non-compliance, note that (like the U.S. Exit Tax) it was triggered by both income and asset levels. The “Reichsfluchsteuer” was apparently a 25% tax. The “U.S. Exit Tax” (when applied to pensions) could very easily exceed 25%. Furthermore, the “U.S. Exit Tax” is largely a tax on non-U.S. pensions and other U.S. assets (making it the only known Exit Tax that effectively imposes confiscatory “taxation” on foreign pensions” and other foreign assets).

That said, (in fairness) it is possible to physically move from (or otherwise leave – provided you have a U.S. passport) the United States and NOT be subjected to the U.S. “Exit Tax” (it applies on relinquishment of citizenship). Therefore, the U.S. Exit Tax although harsher when applied, applies to fewer people AND is NOT a physical barrier to leaving the United States (although it is a clear barrier to creating a life in another country).

Possible conclusion:

How is the IRS levying taxes to renounce US citizenship different from the Berlin Wall?

U.S. Exit Taxes are more like the German Reichsfluchtsteuer than like the Berlin Wall (but financially more punitive than the Reichsfluchtsteur).

The Berlin Wall was designed to punish people who tried to leave East Berlin.

The U.S. “Exit Taxes” are used to punish those who have already left the United States.

Both, are designed to punish those who attempt to sever relationships (physical or political) with their respective “Homelands”.

But, considering the future …

It is interesting that the United States is now considering building it’s own wall. Those who don’t learn the lessons of history are doomed to repeat history.