Tag Archives: renounce US citizenship

Why the S. 877A(g)(1)(B) "dual citizen exemption" encourages dual citizens from birth to remain US citizens and others (except @SenTedCruz) to renounce

Introduction – The S. 877A(g)(b)(B) “born a dual citizen” defense to being a “covered expatriate”
The “dual citizen” exemption to the S. 877A “Exit Tax” rules is not well understood. It is also not as simple (who could have known) as it initially appears. The focus of this discussion will be on being born both a Canadian citizen and a U.S. citizen. Although the post is “Canada centric” (hey, I am a lawyer in Canada), it will help anybody hoping to benefit from this wonderful “defense”. For the benefit of those born before February 15, 1977 (the date of the second Canada Citizenship Act), I am required to explore some of the history and difficulties of the the 1947 Canada Citizenship Act. This will lead me into a discussion of the “Lost Canadians” citizenship issue – pioneered by Don Chapman.
This is the 1st of seven posts analyzing the “dual citizen exemption” to the S. 877A Exit Tax which is found in S. 877A(g)(1)(B) of the Internal Revenue Code. Please remember that the “dual citizen exemption” is available ONLY to those who meet the “five year tax compliance test”.
1. What is the S. 877A(g)(1)(B) “dual citizen exemption” and why does it encourage those “born dual citizens” to not renounce U.S. citizenship?
2. The history of Canada’s citizenship laws: Did the 1947 Canada Citizenship Act affirm citizenship or “strip” citizenship and create @LostCanadians?
3. The S. 877A “dual citizen” exemption – I was born before the first ever Canada Citizenship Act? Could I have been “born a Canadian citizen”?
4. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act – Am I still a Canadian or did I lose Canadian citizenship? (The “Sins Of The Father”)
5. The S. 877A “Dual Citizen” exemption: The 1947 Canada Citizenship Act and the requirements to be “born Canadian
6. “The S. 877A “Dual Citizen” exemption: I was born a dual citizen! Am I still “taxed as a resident” of Canada?
7. The S. 877A “Dual Citizen” exemption: “MUST certify tax compliance for the five years prior to relinquishment
Here, we go, Post number 1 …


U.S. Senator Ted Cruz and London Mayor Boris Johnson are “high profile” examples of people who have the “unwanted citizenship” of the countries of their birth. Each of them has found the citizenship of the country of his birth to be inconvenient.
Ted Cruz was born in 1971 in Canada. He was therefore born a Canadian citizen. He claims to have been born to a U.S. citizen mother and was therefore a U.S. citizen by birth. (Whether he qualifies as a “natural born citizen” is a different question.) As a Canadian citizen he had the right (prior to renouncing Canadian citizenship) to live in Canada. Had Mr. Cruz, moved back to Canada, he could have avoided the U.S. S. 877A Exit Tax. Incredible but true. It will be interesting to see whether Mr. Cruz regrets renouncing his Canadian citizenship. As you will see, by renouncing Canadian citizenship, Mr. Cruz surrendered his right to avoid the United States S. 877A Exit Tax.
Here is why …
The S. 877A Exit Tax rules in the Internal Revenue Code, are the most punitive in relation to U.S. citizens living outside the United States (AKA Americans abroad). To put it simply, with respect to Americans abroad, the S. 877A Exit Tax rules:
– operate to confiscate assets that are located in other nations; and
– operate to confiscate assets that were acquired by U.S. citizens after they moved from the United States.
There is not and has never been an “Exit Tax” anywhere else that operates in this way. The application of the S. 877A Exit Tax to assets located in other nations, is both an example of “American Exceptionalism” at its finest and a strong deterrent to exercising the right of expatriation granted in the “Expatriation Act of 1868“.
But, the “Exit Tax” applies ONLY to “Covered Expatriates” and “dual citizens from birth” can avoid being “Covered Expatriates” …
As has been previously discussed, the Exit Tax applies ONLY to “covered expatriates“. There are two statutory defenses to becoming a “covered expatriate”. This post is to discuss the “dual citizen from birth” defense to being treated as a “covered expatriate”. I have discovered that this defense is NOT as well known or understood as it should be.
The statute granting the “dual citizen from birth” defense to “Covered Expatriate” status reads as follows:
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Renouncing US citizenship: The Road More (Forcibly) Traveled

I came across the two following interesting article/comments on the same day at about the same time. They are significant NOT because they focus (as most of these articles do) on why Americans abroad must should come into U.S. tax compliance. Rather the focus on what it means to live as a U.S. Tax Compliant American abroad (something I have written on here).
First the perspective of a “young dual UK/US citizen” living in the UK.

I am a young dual UK/US citizen. I left the States as a child with my family, and while I hold fond memories of the US, I have built my life so far in the UK and I don’t foresee myself returning stateside in the near or medium term. Life has just worked out that way.
I cannot understand how the US can treat its overseas citizens so poorly. After a horrible awakening to the nightmare of citizenship based taxation, complex reporting requirements and (terrifying) enforcement laws, I came into US compliance (at great expense, having hired a tax specialist to put together my 120+ page filing which proved that I didn’t owe anything to the US. Unsurprising for a 24 year old with no assets who has worked for only 2 years since college).
Now, I am compliant. What next? I look ahead and all I see are serious impediments to my ability to plan for my future appropriately, and, as dramatic as it sounds, to live a free and normal life in the country of my choosing. All thanks to US tax policy. It looks impossible to save and invest efficiently here in the UK; starting my own business is totally out of the question as long as I am a US citizen living in Europe, and I worry that I may lose access to basic banking services as a result of FATCA. These worries are just the tip of the iceberg. Something has got to give! Do I: a) give up my US citizenship, b) keep my citizenship and stay at my home in the UK, but severely limit my ability to save and subject myself to eternal US filing costs (financial and stress-related), not to mention permanent exposure to risk of US tax penalties that could wipe out whatever I do manage to save; or c) move back to the US with my tail between my legs, which seems to be what the US government is encouraging us to do (with a heavy stick rather than a carrot).
Accidentals don’t care about their US citizenship and want to be rid of it, and so they should be. I, however, am not an accidental, I am an American, and I detest this awful system which is putting me under immense pressure to give up my birthright, for no good reason.
The US must end citizenship-based taxation, and must introduce representatives in Congress for expatriate voters specifically — we have NO voice right now and we are being abused without a second thought from the US government. The stupidest part is that even in a world of perfect compliance (basically impossible), the amount of money the US will raise from shaking down its overseas citizens pales in comparison to the costs being imposed on those citizens, foreign governments and foreign businesses to comply with these maniacal rules.


Second, the thoughts of a investment advisor who explains: “What Foreign Expats Who Live In The U.S. Have that Americans Expats Don’t”


The article includes:

For American expats, some of their financial struggles may be in part from the Foreign Account Tax Compliance Act, which aims to ensure that Americans living overseas pay their fair share of U.S. taxes.
Signed into U.S. law on July 1, 2010, FATCA took effect in July 2014. The first international exchange of taxpayer information between the IRS and foreign financial institutions, which is part of the IRS’ overall efforts to implement FATCA, took place in late September.
The information exchange involves certain intergovernmental agreements that not only enable the IRS to receive information from foreign financial institutions but also enable more efficient exchange by allowing a foreign tax administration to gather information and provide it to the IRS.

Many critics and expatriates argue FATCA is a compliance headache that often makes it difficult for Americans living abroad to maintain legitimate bank accounts — and curbs banks’ willingness to serve expats.
In 2010 the question was: why would an American abroad renounce U.S. citizenship?
In 2015 the question is: why would an American abroad NOT renounce U.S. citizenship?
How can a country treat its citizens abroad so horribly?