Taxation of #AmericansAbroad in the 21st Century: “Country of birth” Taxation vs. “Country of Residence” Taxation- Part IV

cross-posted from citizenshipsolutions

by John Richardson

Update January 2018: This post has been updated with some new links and discussion

Part I is here.

Part II is here.

Part III is here.

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PART IV

U.S. Citizenship law of the present – Breaking The U.S. Connection – Relinquishment

Relinquishing acts – How to lose U.S. citizenship – S. 349 of the Immigration and Nationality Act

Once upon a time, the U.S. would “strip citizens” of their U.S. citizenship for voluntarily becoming naturalized citizens of another country. Like many aspects of U.S. nationality law, this was considered to be a “punitive measure”.

Prior to the U.S. Supreme Court decisions in Afroyim and Terrazas, S. 349 of the Immigration and Nationality Act, mandated an automatic loss of U.S. citizenship for those who became citizens of another country. S. 349 now clarifies that, U.S. citizens who become citizens of another country, will lose their U.S. citizenship only if they intended to relinquish their U.S. citizenship by becoming naturalized citizens of the second country. In other words, U.S. citizens have the right to NOT (absent their consent) be stripped of their U.S. citizenship even if they maintain neither ties nor “connection” to the U.S.

U.S. citizenship law of the past – The requirement of a voluntary connection

Conditions Subsequent – Automatic Loss of Citizenship For Those Born In The U.S.

 

Conditions subsequent to the retention of citizenship – Retention requirements for those born in the U.S.

In the past, U.S. nationality law has included provisions which resulted in the automatic loss of U.S. citizenship for those born in the U.S., and find themselves in the circumstances described in Categories A and B above (born in the U.S.). This was reflected in the old S. 350 of the Immigration and Nationality Act (which has been repealed) and pre-1986 S. 349 of the Immigration and Nationality Act. The general principle was that children who:

– acquired U.S. citizenship as children; and – subsequently left the U.S., and – did nothing to assert a VOLUNTARY connection to the U.S.,

would lose their U.S. citizenship. This was a clear recognition that “citizenship” was more than a “legal status” and required a “voluntary affirmation of citizenship” and/or “connection” to the community.

Automatic Loss of Citizenship For Those Naturalized in the U.S

Interestingly the old S. 352 of the Immigration and Nationality Act mandated the loss of U.S. citizenship (in some circumstances) for naturalized U.S. citizens who left the U.S. after becoming U.S. citizens.

To use an analogy to contract law, there were “conditions subsequent” for certain 14th Amendment citizens to retain their U.S. citizenship.

Conditions Precedent to Citizenship – Inability To Gain Citizenship For Those Born Outside The U.S.

American Citizens Abroad was a pioneer in fighting for the rights of “American Citizens Abroad”. Much of their early work was aimed at ensuring that children born outside the United States to Americans abroad would become U.S. citizens. At one time the U.S. had laws which required those born abroad to U.S. parents to establish residence in the U.S. or lose their U.S. citizenship. As Phyillis Michaus author of The Unknown Ambassadors notes:

“It all started back in 1961, when Phyllis Michaux, an American woman married to a Frenchman and living in France since 1946, found a friend in a similar situation. They began talking about the future of their children, their American and French citizenship and wondered whether there were other women “out there” in a similar position.

They had a question and an idea. The question was, “How many people are affected by the citizenship law 301(b)?” At the time under section 301(b) of the Immigration and Nationality Act of 1960, children born overseas of one American parent would lose their American citizenship unless they lived five consecutive years in the United States between the ages of fourteen and twenty-eight. Essentially, the children would have to move to the United States sometime before their twenty-third birthday to retain their American citizenship. The idea was to find out how many families were affected. This they did. And they did a lot more along the way.”

For this reason, I submit that the problems of Americans abroad, may be more rooted more in the laws of citizenship than in the law of tax.

U.S. citizenship law no longer based on the assumption that “citizenship” requires a voluntary connection to the community. Combining “citizenship” with “taxation” means that the U.S. claims the right to tax large numbers of people with no connection to the U.S.

Significance of U.S. citizenship law of the past …

There was a time when a voluntary affirmation and connection to the U.S. was required to retain U.S. citizenship. One would lose U.S. citizenship without the voluntary affirmation – an “citizenship opt in”. This ensured that those without a connection to the U.S., would NOT be subjected to U.S. taxation.
The repeal of Sections 350, 352, 301(b) (of the 1960 law) and the 1986 amendment of S. 349 of the Immigration and Nationality Act, mean that, it is NO longer a requirement that the children described in Categories A, B and C, affirm a connection to the U.S. in order to retain U.S. citizenship. Absent an “relinquishing act”, the circumstances of birth will be sufficient to establish (under U.S. law) citizenship and a lifetime of tax obligations.

U.S. citizenship law of the present. A relinquishing act is now required to terminate U.S. citizenship – an “citizenship opt out” (with all the horror of the possible S. 877A United States expatriation taxes)

“For those who had no choice of where or to whom they were born, surely there should be an “opt-into” US citizenship – rather than an “opt-out” of US (or any other country’s) citizenship. Anything else is ENTRAPMENT. I find that very punitive.”

For those with the “legal status” of U.S. citizens abroad, the evolution from the “opt in model” to the “opt out model” reflects a principle that citizenship is defined more in terms of a “legal status” (conferred by birth) than a “voluntary acceptance” of citizenship. This is neither desirable nor consistent with a world of increased mobility and multiple citizenships.

The problems of U.S. citizenship have been exacerbated by the twin principles that:

1. U.S. citizenship has become less and less dependent on the existence of a “voluntary” connection to the U.S.; and 2. U.S. citizenship is now a status imposed on the individual, rather than a status chosen by the individual. (Although the 14th Amendment may have been motivated by a desire to “end slavery” it is now being used as a mechanism to “create tax slavery”.)

To put it another way: U.S. citizenship has become less “something that one chooses to voluntarily connect to” and more something “one is through an accident of birth, chosen for”. This is of huge significance because the U.S. (under the guise of citizenship-based taxation) attempts to control the lives of its citizens living abroad.

What is the justification for “place of birth” taxation? The closest rationale that can be discerned is the idea that:

1. All U.S. citizens must pay taxes to the U.S.
2. U.S. citizens, regardless of where they live are still U.S. citizens.
Therefore, U.S. citizens regardless of where they live have to pay taxes to the U.S.

Interestingly, U.S. Taxation Abroad includes, but is not limited to U.S. citizens

A recent post on the Isaac Brock Society included:

“According to the 14th Amendment of the United States Constitution anyone born in the United States is a de facto US citizen regardless of whatever other citizenship they may hold in the course of their lifetime. Therefore, with the existence of CBT anyone with a United States birth certificate is forever taxable by the US even if they have never lived there as an adult or earned any money there.”

Are those “born in the U.S.” really doomed to a lifetime of U.S. tax servitude?

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