Monthly Archives: January 2025

Some Worry They CAN Be Proven To Be U.S. Citizens – Some Worry That CANNOT Be Proven To Be U.S. Citizens

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January 26, 2025

Introduction and purpose

Are you or have you ever been a U.S. citizen? It depends on the “facts and circumstances”

U.S. citizenship is unique. For many it’s the only citizenship worth renouncing (many U.S. citizens are forced to renounce U.S. citizenship). For others its the only citizenship worth having. For some U.S. citizenship is the only citizenship they have ever known. One way or the other, as pointed out by Amanda Frost (and others), U.S. citizenship has certainly been weaponized.

The Weaponization Of Citizenship: From “You Are NOT American” to “You ARE American”

My week …

This has been an interesting week. It began with President Trump’s EO creating barriers to the recognition of U.S. citizenship. It ended with a call from a panicked individual who had just been to a seminar where he was informed that his child (born outside the USA) was a U.S. citizen and therefore subject to U.S. taxation.

Interestingly both the Trump EO and the panicked American identify the same two questions.

Q. 1. What happens if your ENTITLEMENT to U.S. citizenship is based on the facts and circumstances of the life of your parent(s)?

Q. 2. What happens if the RECOGNITION of your U.S. citizenship is based on determinations of the facts and circumstances of the life of your parent(s)?

There is a difference between:

(1) Truth: whether one is a U.S. citizen (assuming that certain facts are established); and

(2) Proof: whether the facts that would make you a U.S. citizen can be proven.

Either scenario is the cause of potential anxiety.

Some people worry that they cannot prove they are a U.S. citizen.

Some people worry that they cannot prove they are NOT a U.S. citizen.

Although proof is different from truth, the truth of U.S. citizenship may NOT matter without the proof of U.S. citizenship!

Interestingly the Trump EO and the panicked American abroad trigger the same issues.

Part A – Some People Worry They CANNOT PROVE They Are U.S. Citizens
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Extreme Caution Should Be Exercised In Applying For Non-Renunciation “Relinquishments” Of U.S. Citizenship

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January 25, 2025

Keeping this short, sweet and to the point:

I recommend NOT applying for Certificates Of Loss Of Nationality (“CLNs”) based on a past relinquishing act. Past relinquishing acts include ANY form of relinquishment that is not a present day “renunciation” of U.S. citizenship. (See the appendix to this post.)

If you need help with this problem feel free to reach out to me.

This recommendation is based on experiences in Canada:

– knowing several cases where the Consular appointments documenting the past relinquishing act took place almost two years ago. The individuals have still, despite repeated inquiries, NOT had a response from the State Department! To be clear, two of these were based on naturalizations as Canadian citizens after June 16, 2008 (meaning they were clearly subject to U.S. taxation up to the date of the appointment and were in fact tax compliant!)

– the new rules (using a new DS-4079) which took effect on November 1, 2024 make it VERY clear that the State Department is reviewing the evidence of voluntariness and intent to relinquish U.S. citizenship. The voluntariness and intent must be proven at the moment of the expatriating act!

– I know people who submitted applications to renounce U.S. citizenship (in Canada) prior to November 1, 2024 (and therefore prior to the beginning of the new DS-4079), who are awaiting appointments to renounce. They have subsequently received messages asking them (in anticipation of their renunciation appointments) to complete the new DS-4079. The message to them also included the statement that:

The Department of State will only have a legal basis to approve a CLN in your name if the preponderance of evidence shows that you voluntarily performed a potentially expatriating act with the intent to relinquish U.S. nationality.

Notice that the burden of proof is on the person seeking the CLN. The State Department decides what it takes to satisfy the “preponderance of the evidence” standard. This is a difficult burden to meet when the relinquishing act was many years ago. It appears that the facts of “NOT exercising any rights of U.S. citizenship” (after the relinquishing act) are insufficient to meet the evidentiary standard.

For many years I was able to assist (many) people in getting CLNs based on “relinquishing acts in the past”. The law has not changed. What appears to have changed is what the State Department will accept as evidence of meeting the “burden of proof” of voluntariness and intent. The shift in the State Department attitude appears to have started about two years ago. It is clearly expressed in the new DS-4079. I have been warning people about this for the last year or so. I strongly suggest that people exercise extreme caution in applying for CLNs based on relinquishing acts in the past. This is particularly true for those who need a CLN relatively quickly.

Bottom line: You should renounce!

At this point my suggestion is (assuming you qualify):

Renounce and use the 2019 “IRS Relief Procedures For Former Citizens“. Current information on the “Relief Procedures For Former Citizens” program is here.

If you need help, feel free to contact me.

John Richardson – Follow me on X.com @ExpatriationLaw

Appendix – 349(a) of the Immigration and Nationality Act.

What follows is the statute governing relinquishment of U.S. citizenship. I have added “JR Commentary in italics“.

Notice that paragraph (b) describes the “burden of proof”.

I suggest using (5) renunciation as your method of relinquishment. The other options are now presenting hurdles that are difficult to meett.

§1481. Loss of nationality by native-born or naturalized citizen; voluntary action; burden of proof; presumptions

(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–

JR Commentary: The general test is that the expatriating act must be or have been performed voluntarily and with the intention of relinquishing U.S. citizenship.

(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

JR Commentary: This is a past relinquishing act. I know of people who have relied on this and are having difficulty getting CLNs.

(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

JR Commentary: This is a past relinquishing act. I know of people who have relied on this and are having difficulty getting CLNs.

(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

JR Commentary: Again, only in the most extraordinary circumstances will this succeed.

(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

JR Commentary: This depends on the nature of the work for the foreign government. Only specific kinds of employment have a chance of success (and even then there is the problem of proof).

(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; or

JR Commentary: So far I have never had a renunciation, at the Consulate rejected. If you want a CLN quickly this is the way to go.

(6) making in the United States a formal written renunciation of nationality in such form as may be prescribed by, and before such officer as may be designated by, the Attorney General, whenever the United States shall be in a state of war and the Attorney General shall approve such renunciation as not contrary to the interests of national defense; or

(7) committing any act of treason against, or attempting by force to overthrow, or bearing arms against, the United States, violating or conspiring to violate any of the provisions of section 2383 of title 18, or willfully performing any act in violation of section 2385 of title 18, or violating section 2384 of title 18 by engaging in a conspiracy to overthrow, put down, or to destroy by force the Government of the United States, or to levy war against them, if and when he is convicted thereof by a court martial or by a court of competent jurisdiction.

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(b) Whenever the loss of United States nationality is put in issue in any action or proceeding commenced on or after September 26, 1961 under, or by virtue of, the provisions of this chapter or any other Act, the burden shall be upon the person or party claiming that such loss occurred, to establish such claim by a preponderance of the evidence. Any person who commits or performs, or who has committed or performed, any act of expatriation under the provisions of this chapter or any other Act shall be presumed to have done so voluntarily, but such presumption may be rebutted upon a showing, by a preponderance of the evidence, that the act or acts committed or performed were not done voluntarily.

JR Commentary: It appears that the focus of the State Department is now squarely on whether the individual seeking the CLN has met this burden of proof.

(June 27, 1952, ch. 477, title III, ch. 3, §349, 66 Stat. 267 ; Sept. 3, 1954, ch. 1256, §2, 68 Stat. 1146 ; Pub. L. 87–301, §19, Sept. 26, 1961, 75 Stat. 656 ; Pub. L. 94–412, title V, §501(a), Sept. 14, 1976, 90 Stat. 1258 ; Pub. L. 95–432, §§2, 4, Oct. 10, 1978, 92 Stat. 1046 ; Pub. L. 97–116, §18(k)(2), (q), Dec. 29, 1981, 95 Stat. 1620 , 1621; Pub. L. 99–653, §§18, 19, Nov. 14, 1986, 100 Stat. 3658 ; Pub. L. 100–525, §§8(m), (n), 9(hh), Oct. 24, 1988, 102 Stat. 2618 , 2622.)

https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title8-section1481&num=0&edition=prelim

Some IRS Medic Livestream Videos – 2026 to 2023

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Introduction:

Over the years I have been a guest on the IRS Medic Youtube Channel a number of times. The topics have been varied and of relevance to Americans abroad. I thought I would collect “some” of the videos in one post. If you scroll down, I expect that you will some topics of interest to you. Many if not most of the topics have included written presentations in PDF format. I will add those when I have the time and am able to locate them.

If after watching any of these, if you want to schedule a consultation to discuss your situation:

https://www.calendly.com/renounceUScitizenship

ExpatriationLaw.com

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Bonjour Part 3 – From Christensen To Bruyea: Boldly Go Where No Interpretation Of Foreign Tax Credits For The NIIT Has Gone Before!

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Congratulations to Stuart E. Horwich, Horwich Law LLP, London, United Kingdom, and Max Reed,
Polaris Tax Counsel, Vancouver, British Columbia, Canada, for Plaintiff.

Introduction

IRS Medic Presentation – January 20, 2025

The slides are here:

NIIT Tax Credit 2

This is the third in a series of posts about “treaty based” foreign tax credits.

The first post detailed the provisions of the U.S. France tax treaty which created the “three bite rule”. By creating the “three bite rule” the U.S. France treaty was used to create a treaty based foreign tax credit.

Bonjour: Different US Tax Treaties Provide Different US Taxation For Different Groups Of Americans Abroad

Bonjour: Different US Tax Treaties Provide Different US Taxation For Different Groups Of Americans Abroad

The second post (also based on the U.S. France tax treaty) described how the U.S. France tax treaty was used to create an independent treaty based foreign tax credit. The purpose was to allow for a foreign tax credit against the NIIT (“Net Investment Income Tax”). Although a major breakthrough, it’s important to note that this case (Christensen):

1. Found that the treaty should be interpreted to create an a foreign tax credit that was independent of the credits allowed under the Internal Revenue Code;

2. Specifically ruled that the language “subject to the limitations of the law of the United States” (found in the opening paragraph of the double taxation clause) should be interpreted to preclude a foreign tax credit for payment of foreign tax on foreign investment income.

Bonjour Part 2 – US Citizens Living In France Can Use French Tax As A Credit To Offset The Obamacare Surtax!

Bonjour Part 2 – US Citizens Living In France Can Use French Tax As A Credit To Offset The Obamacare Surtax!

This third post continues the “NIIT Tax Treaty Chronicles”. Specifically, this post details how Judge Solomson, in the case of Paul Bruyea, determined that (contrary to Judge Blank’s ruling in Christensen) that the “subject to the limitations of the law of the United States”clause in Article XXIV, Paragraph 1:

1. Does NOT preclude the use of a foreign tax credit to offset the NIIT; and

2. That Article XXIV, Paragraph 1 allows a U.S. citizen or U.S. resident living in Canada to use taxes paid to Canada as a credit against the U.S. NIIT!

Judge Blank in Christensen and Judge Solomson in Bruyea reached opposite conclusions with respect to whether the following clause (as represented in the 2016 U.S. Model Tax Treaty) can be used to create a foreign tax credit which is independent of the foreign tax credit rules in the Internal Revenue Code (Sections 27, 901 and 904).

Article 23

RELIEF FROM DOUBLE TAXATION

1. In the case of __________, double taxation will be relieved as follows:

2. In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a resident or citizen of the United States as a credit against the United States tax on income applicable to residents and citizens:

a) the income tax paid or accrued to __________ by or on behalf of such resident or citizen; and

Therefore, I expect that this issue has NOT been fully resolved.

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Understanding Double Taxation: A Methodology To Think About What It Is

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Introduction:

I received the following message from:

Dr. Suzanne de Treville
Swiss Finance Institute Professor of Operations Management, Emeritus
University of Lausanne
Faculty of Business and Economics
1015 Lausanne-Dorigny
Switzerland

A very interesting analysis of double taxation indeed. I am reproducing this as a blog post with her kind permission.

Suzanne has kindly agreed to participate in an upcoming “Spaces Discussion” as part of our “Understanding Double Taxation” series. Stay tuned!

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John,

This message is in response to your request for proposals for how to define double taxation..

My field is operations and supply-chain management. I recently retired as a professor of operations and supply-chain management at the University of Lausanne, and served as co-EIC of the Journal of Operations Management (a Financial Times 50 journal) from 2018 to 2023. I began applying operations logic to the taxation process a couple of years ago because of the usual expat problems—and the incredible difficulty of finding anyone who actually understands how this reporting should work. Democrats Abroad provided helpful material, I got to know Rebecca Lammers, and have been helping out on the analysis and drafting side of the Taxation Task Force for a couple of years.

I propose to define taxation as an operation, such that double taxation is a second pass of a taxation operation to revenue or assets.

An analogy is a harvester going over a field. We the taxpayers are the field. I am a tax resident of Switzerland, so the Swiss tax authorities make a first pass over my income and wealth. Because I am a US citizen, the IRS then makes a second pass over what has already been processed by the Swiss authorities.

A harvester making a second pass over a field collects a small fraction of what was harvested the first time. This is why 54% of 2021 returns from outside the US had no tax liability at all, compared to 19% for US tax returns as a whole. The fact that I receive a credit for the Swiss taxes paid means that my tax liability to the US is minimal. Whether or not I also pay taxes to the US does not change the fact that my income and assets have been doubly “processed”, first by Switzerland, and then by the US. And, the main costs of the second pass through the taxation process concern the cost and complexity of compliance.

Taking a harvester that is costly to run and deploying its capacity to cover fields that have already been harvested once is typically not cost effective. The IRS is short of capacity, so would do financially better to avoid using capacity in ways that bring little or no revenue. Also, collecting taxes from and managing the taxation process for those living abroad is more expensive than for domestic taxpayers. Again considering the 2021 data, we see that the tax revenue from returns with an AGI of less than $100,000 was only $708 million, and for those with an AGI of less than $200,000 it was $1.56 billion—again a relatively small number.

The complexity of reporting for expats comes not only from the need to prepare full reports to two jurisdictions, but to a large extent from the difficulty of reconciling the two operations that apply different principles. Let’s compare this to a Finnish citizen who moves to Switzerland and becomes Swiss. Each chunk of income is allocated via the tax treaty to one or the other country to be taxed. Pension income from work done in Finland before the move to Switzerland is taxed by Finland as source income if the person is a Finnish but not Swiss citizen. If the person becomes a Swiss citizen, they notify the Finnish authorities and the taxation shifts to Switzerland. There is very little in terms of duplication in reporting.

Many of the taxation problems that emerge for expats come from this second pass of a taxation operation. Although the second pass tends to produce little, it can unfairly increase the tax liability for income that is not taxed by the country of residence (e.g., disability payments). This provides little for the IRS, yet creates a crushing burden for the taxpayer. Defining taxation as a process/operation/“machine”—with double taxation being a second pass of that machine over the same revenue or assets—should make it easier to explain these problems. And, it makes crystal clear the deceptive nature of the savings clause.

Imagine that the US would eliminate this second pass over income (assets) that are taxed by the country in which the taxpayer is a tax resident. This could be combined with prioritizing US taxation of US-sourced income. I am, for example, first taxed by Switzerland on investment income from the US, then get a tax credit for those taxes to offset US taxes. The US could consider negotiating with Switzerland that US-sourced investment income would be first taxed in the US. Someone like Heitor David Pinto would be positioned to do a simulation of how an increase in US taxation of US-sourced income would compare to the loss of revenue from eliminating the second pass of the taxation machine.

One final point: International Information Returns and FATCA do not fit the definition of double—or even single—taxation. They are not that kind of machine! Their purpose combines control and penalty generation. This penalty-as-a-revenue model is beginning to be understood, and needs to be addressed, but it is not (double) taxation.

I hope that these thoughts are useful to you. Thank you for the leadership that you are showing at this critical time.

All the best,

Suzanne

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This slide presentation from Suzanne further explains the issue of double taxation.

John Richardson – Follow me on X.com/ExpatriationLaw