Category Archives: Form 8854

FATCA Reporting, The Banks And Their U.S. Citizen Customers: The Saga Continues

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Reposted with permission from The Isaac Brock Society.

In October I published a post about the U.K. division of Fidelity cleansing itself of U.S. citizen customers. Since the beginning, it has been clear that FATCA has made U.S. citizen customers a problems for non-U.S. banks. Today I was informed that FATCA reporting to the IRS has begun to find its way to U.S. citizens directly. As the above post from X.com indicates, some individual U.S. citizens are receiving communications from the IRS. The communication notes the existence of the “foreign financial asset” and that the asset should have been reported.

Significantly the letter notes the bank where the unreported account was located. In this case the bank was “Bank Hapoalim B.M” which is apparently one of Israel’s largest banks.

Interestingly on April 30, 2020 Bank Hapoalim admitted to helping U.S. citizen customers hide assets and avoid U.S. taxation. This resulted in a deferred prosecution agreement and a penalty. (The Department Of Justice Press Release is available online.) A reading of the press release strongly suggests that customers of this bank may be presumed to be guilty by association.

This is interesting news.

Of course:

“To be FORMwarned Is To Be Forearmed!”

John Richardson Follow me on X.com/Expatriationlaw

All U.S. citizens relinquishing U.S. citizenship are required to be reported in the Federal Register “Name And Shame” list

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Purpose of this post:

The following is a description of the reporting rules that apply to the State Department and U.S. Treasury when a U.S. citizen relinquishes U.S. citizenship. This discussion applies to individuals relinquishing after June 16, 2008. This brief description does NOT discuss Green Card holders who abandon their Green Cards or any reporting rules that may have been different prior to June 16, 2008*. (For practical purposes U.S. citizens who relinquish and fail to file Form 8854 will become “covered expatriates“. “Covered expatriate” status means that are subject to the 877A Exit Tax rules and the Section 2801 “covered gift” rules.) The term “relinquishment” includes “renunciation”.

The confusion continues over whether ONLY “covered expatriates are reported on the Federal Register. The names appearing in the Federal Register are here.

Commentary from Helen Burggraf and others reveals that:

– some individuals renouncing citizenship have been reported more than once
– some individuals renouncing citizenship have NOT been reported at all
– some individuals renouncing citizenship who were reported were NOT “covered expatriates”

With respect to U.S. citizenship relinquishment:

– IRC 6039G imposes specific requirements on the State Department to notify the Treasury Secretary of ALL Certificates Of Loss of Nationality issued;

– IRC 6039G requires the Treasury Secretary to publish the names of ALL relinquishers in the Federal Register. (Whether a “relinquisher” is a “covered expatriate” is NOT relevant.)

The statutory reasoning – conclusions:

1. The State Department is required to report to U.S. Treasury the names of ALL people who have been issued a Certificate of Loss of Nationality.

2. U.S. Treasury is then required to publish in the Federal Register the names of all people who the State Department has reported were issued CLNs in that quarter.

3. Individual relinquishers: (i) 6039G requires that all “Covered Expatriates” file a Form 8854. (ii)The “Secretary” requires ALL individuals to file Form 8854 in order to order to certify that because they have met their tax compliance obligations they are NOT “covered expatriates”. (Therefore form 8854 is required either by statute or by demand from the IRS.)

The statutory reasoning – tracking the relevant provisions in the Internal Revenue Code:

1. IRC 7701(a)(50) – provides statutory test for when an individual ceases to be a U.S. citizen:

“(50) Termination of United States citizenship
(A) In general

An individual shall not cease to be treated as a United States citizen before the date on which the individual’s citizenship is treated as relinquished under section 877A(g)(4).”

https://www.law.cornell.edu/uscode/text/26/7701

2. IRC 877A(g)(4) – provides the date of relinquishment of U.S. citizenship under the IRC:

“(4) Relinquishment of citizenship A citizen shall be treated as relinquishing his United States citizenship on the earliest of—
(A) the date the individual renounces his United States nationality before a diplomatic or consular officer of the United States pursuant to paragraph (5) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
(B) the date the individual furnishes to the United States Department of State a signed statement of voluntary relinquishment of United States nationality confirming the performance of an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)–(4)),
(C) the date the United States Department of State issues to the individual a certificate of loss of nationality, or
(D) the date a court of the United States cancels a naturalized citizen’s certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual unless the renunciation or voluntary relinquishment is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the United States Department of State.”

https://www.law.cornell.edu/uscode/text/26/877A

3. State Department: IRC 6039G – imposes obligation on State Department to notify the Secretary of all CLNs issued under INA 358:

“(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,”

https://www.law.cornell.edu/uscode/text/26/6039G

4. Treasury Secretary: IRC 6039G -Imposes obligation on Secretary to report names of ALL relinquishers in Federal Register:

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.

https://www.law.cornell.edu/uscode/text/26/6039G

The reporting on the name and shame list has never been accurate!

Conclusion: All people relinquishing U.S. citizenship are required to reported on the “Name and Shame” list. For reasons unknown, not everybody ends up being reported.

*On June 16, 2008 Internal Revenue Code 877A (the exit tax rules) was enacted. In addition to creating 877A, there were other changes to the expatriation rules. My impression is that the “6039G reporting regime” prior to June 16, 2008 applied to fewer people. Hence, I have restricted the above discussion to U.S. citizens relinquishing U.S. citizenship after June 16, 2008.

John Richardson – Follow me on X.com/ExpatriationLaw

Americans Abroad Aren’t Denouncing Because They Want To. They Are Renouncing Because They Feel They Have To

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Introduction/background:

Denunciation of U.S. Citizenship – From the perspective from a U.S. Senator

Renunciation of U.S. Citizenship – From the perspective of a U.S. journalist

It’s hard to have a discussion about why Americans abroad are renouncing U.S. citizenship. There are many different perspectives about renunciation. There is very little “shared reality”. Tax academics (who have the resources to know better), “pensioned intellectuals”, politicians and most journalists see this from a “U.S. resident perspective”. They don’t understand the reality of the lives of Americans abroad. But, Americans abroad are NOT a monolith. The ONLY thing they have in common is that they live outside the United States. Their circumstances vary widely. There is little “shared reality” among Americans abroad of what the issues are. AT the risk of oversimplification, I have attempted to divide “Americans abroad” into four categories (as defined below). The categorization will explain why different groups of “Americans abroad” experience the U.S. extra-territorial tax regime differently.

Hint: Americans abroad aren’t renouncing U.S. citizenship because they want to. They are renouncing U.S. citizenship because they feel they have to.

Politicians, tax academics, “pensioned intellectuals” and many journalists deal in the world of opinions. The opinions they hold are often “myths”. They are not “facts”. They are entitled to their opinions (as misguided and ignorant as they may be). They are NOT entitled to their “facts”.

This post is to describe the facts about how the extra-territorial application of the Internal Revenue Code and the Bank Secrecy Act pressure many Americans abroad to renounce U.S. citizenship. Interestingly a large percentage of those renouncing owe ZERO taxes to the U.S. government. They renounce anyway!

First, a bit of background to the problem – what is the problem and who is affected?

They do NOT meet the test of being “nonresident aliens” under the Internal Revenue Code

As SEAT cofounder, Dr. Laura Snyder explains, in the first of her 16 “working papers” describing the problems of Americans abroad:

The people most affected by the U.S. extraterritorial tax system are not a monolithic group. Some left the United States recently, some left years or decades ago. Some left as adults (some young, some middle-aged, and some retirees), while others left as children (with their families), and some have never lived in the United States (they are U.S. citizens by virtue of the U.S. citizenship of at least one parent). Some intend to live in the United States (again) in the near or distant future, while others do not intend to ever live in the United States (again). Some identify as Americans while others do not. Many are also citizens of the country where they live (dual citizens) while others hold triple or even quadruple citizenships. In referring to this group, there is no one term that sufficiently reflects its full diversity. What unites them is that they do not meet the test of “nonresident alien” under the Internal Revenue Code. Depending upon the context, this series of papers will use terms such as “persons,” “individuals,” “affected individuals,” and “overseas Americans.” The latter term has a drawback, however: it emphasizes connections to the United States while minimizing the important connections that such persons have to the countries and communities where they live.

That said, what divides Americans abroad may be greater than what unites Americans abroad!

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Biden 2024 Green Book: Message To Accidental Americans – Either comply or renounce!

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Part I – Summary of post:

The proposals for Americans abroad include:

1. A provision to (and presumption of) heighten enforcement of the 877A exit tax through changes in the Internal Revenue Code

2. A possible “carve out” from the 877A exit tax for certain Americans abroad with limited ties to the United States (under rules prescribed by the Treasury Secretary)

3. NO RELIEF whatsoever from U.S. citizenship taxation and the way that the rules apply to Americans abroad. This assumes a continuation of U.S. citizenship taxation with no evidence of change.

In other words: Either comply or renounce!

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Summary Of The Reporting Obligations Triggered By Relinquishing US Citizenship Or Abandoning The Green Card

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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

IRC 877 – https://www.law.cornell.edu/uscode/text/26/877

IRC 877A – https://www.law.cornell.edu/uscode/text/26/877A

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Part 2 – The Warren “Ultra-Millionaire Tax Act of 2021” and The Wealth Of Other Nations

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The fact that …

Leads to the obvious question of …

Hmm…

The fact is that Senator Warren is proposing to impose her wealth tax on property located outside the United States, purchased by individuals who live outside the United States, who have no connection to the United States other than (perhaps) the circumstance of having been born in the United States. Yup, it’s true.

On March 18, 2021, FATCA will turn on 11. The Senator’s proposed wealth tax explicitly states that FATCA is to be used to enforce this tax! Finally an (il)legitimate use for FATCA.

In the 18th Century Adam Smith wrote “The Wealth Of Nations”. In the 21st Century Senator Warren is proposing to impose a wealth tax on “The Wealth Of OTHER Nations”.

Discussion And Analysis

This is the second of what I expect to be a multi-part series on Senator Warren’s proposed wealth tax of 2021. As the above tweet makes clear, the practical utility of the tax depends on US citizenship-based taxation (to whom it applies) and FATCA (how are non-US assets located). In my first post, I referenced Senator Warren’s statement that:

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Individuals, Treasury, The State Department And IRC 6039G: Who has to report what when an individual renounces U.S. citizenship?

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Updated on June 29, 2024

The confusion over this topic continues on. With respect to U.S. citizenship relinquishment IRC 6039G imposes the following three specific requirements:

1. The State Department is required to report to U.S. Treasury the names of ALL people who have been issued a Certificate of Loss of Nationality.

2. U.S. Treasury is required to publish in the Federal Register the names of all people who the State Department has reported were issued CLNs in that quarter.

3. Individual relinquishers: 1. 6039G requires that all “Covered Expatriates” file a Form 8854.2. The “Secretary” requires individuals to file Form 8854 in order to order to certify that because they have met their tax compliance obligations they are NOT “covered expatriates”.

Explanation – tracking the relevant provisions in the Internal Revenue Code:

1. IRC 7701(a)(50) – provides statutory test for when an individual ceases to be a U.S. citizen:

“(50) Termination of United States citizenship
(A) In general

An individual shall not cease to be treated as a United States citizen before the date on which the individual’s citizenship is treated as relinquished under section 877A(g)(4).”

https://www.law.cornell.edu/uscode/text/26/7701

2. IRC 877A(g)(4) – provides the date of relinquishment of U.S. citizenship under the IRC:

“(4) Relinquishment of citizenship A citizen shall be treated as relinquishing his United States citizenship on the earliest of—
(A) the date the individual renounces his United States nationality before a diplomatic or consular officer of the United States pursuant to paragraph (5) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
(B) the date the individual furnishes to the United States Department of State a signed statement of voluntary relinquishment of United States nationality confirming the performance of an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)–(4)),
(C) the date the United States Department of State issues to the individual a certificate of loss of nationality, or
(D) the date a court of the United States cancels a naturalized citizen’s certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual unless the renunciation or voluntary relinquishment is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the United States Department of State.”

https://www.law.cornell.edu/uscode/text/26/877A

3. State Department: IRC 6039G – imposes obligation on State Department to notify the Secretary of all CLNs issued under INA 358:

“(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,”

https://www.law.cornell.edu/uscode/text/26/6039G

4. Treasury Secretary: IRC 6039G -Imposes obligation on Secretary to report names of ALL relinquishers in Federal Register:

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.

https://www.law.cornell.edu/uscode/text/26/6039G

Renunciation of U.S. Citizenship triggers a “Reporting Frenzy”!

It’s simply unbelievable. The renunciation of U.S. citizenship triggers more reporting obligations on the part of individuals and government agencies than anything else. More than birth. More than death. More than marriage. More than bankruptcy. More than conviction of a crime (probably). It’s unbelievable.

The purpose of this post is to “slice and dice” what those reporting obligations are.

Let’s Go On A Magical Reporting Tour

https://www.law.cornell.edu/uscode/text/26/6039G

The rules governing information reporting when one relinquishes U.S. citizenship are found in Internal Revenue Code 6039G. They impose reporting obligations on “some” individual relinquishers (“covered expatriates”), the State Department whenever a Certificate of Loss Of Nationality has been issued and on U.S. Treasury. (I will comment separately on the situation of Green Card holders at the end of this post.) Most of this is summarized in the following two tweets. But, because this is so confused, I am going to take the time to parse the statute.

It’s all in Internal Revenue Code – 6039G Note that Section 6039G is found in Subtitle F which is the – “Procedure and Administration” – part of the Internal Revenue Code. In other words, it deals only with information reporting. It does NOT impose taxation. Interestingly, Section 6039G imposes reporting requirements on individuals, the State Department, U.S. Treasury (and in the case of Green Card holders) the Immigration authorities.

That pretty much sums it up. For those who want to understand the analysis …

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The 2019 IRS "expatriation" compliance campaign: Getting ahead of the fear mongering

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On July 19, 2019 the IRS announced six new compliance initiatives.
Of particular interest to U.S. citizens and permanent residents (Green Card holders) is what is described as:

Expatriation
U.S. citizens and long-term residents (lawful permanent residents in eight out of the last 15 taxable years) who expatriated on or after June 17, 2008, may not have met their filing requirements or tax obligations. The Internal Revenue Service will address noncompliance through a variety of treatment streams, including outreach, soft letters, and examination.

What is expatriation?
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How can the IRS enforce US tax debts in foreign countries? Does renunciation of citizenship matter?

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For years people have asked the question: Can the United States enforce U.S. tax debts in foreign countries? If this is possible, how would this work. I sometimes answer questions on Quora. My answer to this question (comments invited) is here:
Read John Richardson's answer to Can the IRS confiscate non US-based assets for taxes owed after someone renounces their citizenship? on Quora

Considering the EB-5 Visa? The IRC S. 877A Expatriation Tax Demonstrates that "Not All US @TaxResidency Is The Same!"

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“Understanding U.S. Tax Residency …
The United States uses a form of “deemed tax residency“.
The Internal Revenue of the United States deems that all “individuals” (wherever they live in the world – including citizens and residents of other countries) except “nonresident aliens” are subject to taxation in the United States on their world wide income. One qualifies as a “nonresident alien” unless one is a:
1. A U.S. citizen
2. A U.S. resident as defined by Internal Revenue Code Sec. 7701(b)
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