Expatriation generates a "reporting" frenzy! Report Early! Report Often! Report Everything! But, who is required to report what and to whom? What is the statutory basis for the reporting? What about Green Card holders? https://t.co/dAH1ihnpi7
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) February 1, 2023
The American Expat Financial News Journal reliably reports information about the “Name and Shame List”. The report generally includes information about the number of people on the list and people who are reported more than once. The report often attempts to determine whether those on the list are citizenship relinquishers or green card abandoners.
The purpose of this brief post is to explain the statutory basis for the reporting obligations, identify the relevant statutes and clarify some common misconceptions.
A summary of the analysis is that:
1. All individuals renouncing (whether “covered expatriates” or not) US citizenship during the relevant period are to be included on the “Name and Shame List”.
2. Green Card holders that are “long term” residents” are required to be included on the list
It is common knowledge that the lists contain many inaccuracies on the list.
Which statutes are relevant to determining the reporting obligations?
IRC 6039G – https://www.law.cornell.edu/uscode/text/26/6039G
General Reporting Requirement – 6039G (US Citizens) and 877(e) (Green Card Holders)
IRC 6039G in combination with IRC 877(e) impose reporting requirements on the following three groups of people:
A. Individuals: The statutory obligation is that “Covered Expatriates” must File Form 8854
B. The Secretary Of State or The Agency Responsible Issuing “Certificates Of Loss Of Nationality” Or For Receiving Green Card Abandonments (I-407s): – The statutory obligation is to report ALL individuals to the Secretary Of The Treasury
C. The Secretary Of The Treasury: The statutory obligation is to report all citizenship relinquishers and green card holders who are “Long Term Residents” on the “Name and Shame” list.
Let’s begin with IRC 6039G.
Individuals required to report to the IRS: 6039G(a)(b)and (c) apply to individuals and generally require “covered expatriates” to report information which is reported on Form 8854.
26 U.S. Code § 6039G – Information on individuals losing United States citizenship
Notwithstanding any other provision of law, any individual to whom section 877(b) or 877A applies for any taxable year shall provide a statement for such taxable year which includes the information described in subsection (b).
(b)Information to be provided
Information required under subsection (a) shall include—
(1)the taxpayer’s TIN,
(2)the mailing address of such individual’s principal foreign residence,
(3)the foreign country in which such individual is residing,
(4)the foreign country of which such individual is a citizen,
(5)information detailing the income, assets, and liabilities of such individual,
(6)the number of days during any portion of which that the individual was physically present in the United States during the taxable year, and
(7)such other information as the Secretary may prescribe.
(1)an individual is required to file a statement under subsection (a) for any taxable year, and
(2)fails to file such a statement with the Secretary on or before the date such statement is required to be filed or fails to include all the information required to be shown on the statement or includes incorrect information,
such individual shall pay a penalty of $10,000 unless it is shown that such failure is due to reasonable cause and not to willful neglect.
This section mandates the reporting of information which is reported on Form 8854. The general purpose of Form 8854 is to determine:
(i) whether the individual is a “covered expatriate” and therefore subject to the 877A Exit Tax rules; and
(ii) if an Exit Tax payable, how much the tax is.
Government Agencies Reporting To Treasury Secretary: 6039G(d) requires the State Department and Agency responsible for administering the immigration laws to report to the Treasury Secretary ALL individuals who are issued a CLN and ALL individual Green Card holders who file an I-407 to abandon their Green Cards
(d)Information to be provided to Secretary
Notwithstanding any other provision of law—
(1)any Federal agency or court which collects (or is required to collect) the statement under subsection (a) shall provide to the Secretary—
(A)a copy of any such statement, and
(B)the name (and any other identifying information) of any individual refusing to comply with the provisions of subsection (a),
(2)the Secretary of State shall provide to the Secretary a copy of each certificate as to the loss of American nationality under section 358 of the Immigration and Nationality Act which is approved by the Secretary of State, and
(3)the Federal agency primarily responsible for administering the immigration laws shall provide to the Secretary the name of each lawful permanent resident of the United States (within the meaning of section 7701(b)(6)) whose status as such has been revoked or has been administratively or judicially determined to have been abandoned.
Note that this requires that the names of ALL citizenship relinquishers and green card abandoners to be delivered to the Treasury Secretary. Whether they are “covered expatriates” is irrelevant.
6039G – Flush language at the end requires the Treasury Secretary to publish the name of “each individual” losing United States citizenship (whether a covered expatriate) or not!
Notwithstanding any other provision of law, not later than 30 days after the close of each calendar quarter, the Secretary shall publish in the Federal Register the name of each individual losing United States citizenship (within the meaning of section 877(a) or 877A) with respect to whom the Secretary receives information under the preceding sentence during such quarter.
Notice that there is no reference to “green card holders”. But:
*Note that 877(e) states that “long term residents” are treated the same as U.S. citizens for the purposes of 6039G. This means that “long term residents” abandoning their Green Cards are also required to be listed on the “Name and Shame” list.
*What about Green Card abandonments? The answer is found in IRC 877(e)
(e)Comparable treatment of lawful permanent residents who cease to be taxed as residents
Any long-term resident of the United States who ceases to be a lawful permanent resident of the United States (within the meaning of section 7701(b)(6)) shall be treated for purposes of this section and sections 2107, 2501, and 6039G in the same manner as if such resident were a citizen of the United States who lost United States citizenship on the date of such cessation or commencement.
For purposes of this subsection, the term “long-term resident” means any individual (other than a citizen of the United States) who is a lawful permanent resident of the United States in at least 8 taxable years during the period of 15 taxable years ending with the taxable year during which the event described in paragraph (1) occurs. For purposes of the preceding sentence, an individual shall not be treated as a lawful permanent resident for any taxable year if such individual is treated as a resident of a foreign country for the taxable year under the provisions of a tax treaty between the United States and the foreign country and does not waive the benefits of such treaty applicable to residents of the foreign country.
Conclusion: Long term residents are reportable on the “Name and Shame” list.
The Final Question: Why do all US citizen relinquishers have to file a Form 8854?
With respect to individuals, I interpret Section 6039G to mean that ONLY “covered expatriates” are required to meet the reporting obligations on Section 6039G. But, in order to avoid being a “covered expatriate”, Internal Revenue Code Section 877(a)(2)(C) specifically says that one will be a “covered expatriate” unless:
(C)such individual fails to certify under penalty of perjury that he has met the requirements of this title for the 5 preceding taxable years or fails to submit such evidence of such compliance as the Secretary may require.
Form 8854 is where people certify that they have met the requirements for the five year period. In Notice 2009-85 Treasury states specifically in relation to the compliance test that if an individual:
(3) fails to certify, under penalties of perjury, compliance with all U.S. Federal tax obligations for the five taxable years preceding the taxable year that includes the expatriation date, including, but not limited to, obligations to file income tax, employment tax, gift tax, and information returns, if applicable, and obligations to pay all relevant tax liabilities, interest, and penalties (the “certification test”) the individual will be a “covered expatriate”. This certification must be made on Form 8854 and must be filed by the due date of the taxpayer’s Federal income tax return for the taxable year that includes the day before the expatriation date. See section 8 of this notice for information concerning Form 8854.
In conclusion, this is the reason that those who are NOT covered expatriates file Form 8854. It’s not required by statute. It’s required by Treasury.