Two questions that I frequently receive from people who have renounced U.S. citizenship are:
I. An immigration question: What if I attempt to travel to the United States during the period of time between my actual renunciation of U.S. citizenship and actually receiving my CLN (which is my proof of having renounced U.S. citizenship)?
II. A tax question: At what point after I renounce U.S. citizenship do I cease to be treated as a U.S. citizen for U.S. tax purposes? For example, when am I free to sell my house (located outside the USA) and NOT be subject to U.S. capital gains taxes?
Two kinds of U.S. citizenship: How the issuance of a CLN affects (1) U.S. citizenship for Immigration purposes and (2) U.S. citizenship for tax purposes
1. How the issuance of a CLN affects U.S. citizenship for immigration and nationality purposes:
Immigration and Nationality Act S. 349(a) (U.S. Code 1481(a)) make it clear that the issuance of a CLN is completely irrelevant to your status as a U.S. citizen for immigration purposes. A CLN is of value ONLY for the purposes of PROVING that you are not a U.S. citizen.
Therefore, one ceases to a U.S. citizen for immigration purposes on the date of the relinquishing (renunciation) act.
2. How the issuance of a CLN affects U.S. citizenship for U.S. tax purposes
Internal Revenue Code 877A(g)(4) mandates that those relinquishing/renouncing U.S. citizenship after June 16, 2008:
– will continue to be treated as U.S. citizens for U.S. tax purposes until the CLN is actually issued; and
– the date of ceasing to be a U.S. citizen for U.S. tax purposes will be the actual date of the relinquishing act (date of renunciation).
Therefore, (assuming a relinquishing act after June 16, 2008) one continues to be a U.S. citizen for tax purposes until the CLN is issued.
These distinctions are discussed in an earlier post:
“Renunciation is one form of relinquishment – It’s not the form of relinquishment but the time of relinquishment”
Bottom line: One ceases to be a U.S. citizen for immigration purpose before one ceases to be a U.S. citizen for tax purposes.
Generally people are more concerned with travelling to the USA during the time gap between renouncing U.S. citizenship and before receiving a CLN. Fortunately, we have a “guest post” written by someone who has just experienced this issue from the Immigration perspective. He has shared his thoughts as follows:
Travel Limbo? Keep calm and CLN on.
Recently, I found myself in a potentially sticky situation enroute to a holiday in the U.S while at a Canadian airport. My Canadian passport showed a U.S. birthplace and before allowing me through, the U.S. Border Officer wanted me to show my Certificate of Loss of Nationality (CLN) or an American passport.
Although I had renounced my U.S. citizenship several months earlier, the U.S. Department of State had not yet issued my CLN. Before this experience, I had always been able to cross the border to the U.S. with my Canadian passport (the only passport I’d ever had).
Fortunately, the situation didn’t escalate. I attempted to give the officer a simple explanation that I had renounced at a U.S. Embassy many months before but the approved CLN had not been couriered in time for my trip. If he would permit me, I would show him my email correspondence with the U.S. embassy.
The officer accepted my explanation. Before he waived me through, I asked if he had any advice to share with anyone caught in travel limbo without their CLN.
Hopefully, his comments will help others to navigate a soft landing:
There is a line-up of people behind you. This is not the time to be outraged or to educate agents about the plight of Accidental Americans or dual citizens.
Travel with a copy of your CLN. If you’re still waiting for it, carry a copy of Form DS-4080 (the form you sign when you renounce and swear an oath at a U.S. Embassy). Keep copies on your phone.
Provide a reasonable explanation
If you accidentally forget your documents or booked a trip before your CLN arrives, a simple description of the renunciation process and the long wait times for the approved CLN to arrive will hopefully be reasonable enough to a reasonable officer.
Thanks to our guest blogger for the relaying the above experience!
Having experienced my son’s recent expatiation step by step it was his experience that he ceased to be a citizen for tax reporting purposes at the point he signed the renouncement document but he was told that he would remain in possession of his US Passport until such time as the Embassy received his CLN. During the point of time from his formal renouncement until the Embassy received the CLN was a two month wait and he was able to travel to the US during that time and other travel even after the CLN was at the Embassy waiting for him to make an appointment to pick it up and surrender his Passport. In summary, each Embassy might handle things different but I know in my sons case his Passport was still a valid travel document 2 1/2 months after he renounced and even two weeks after the CLN was issued right up until the day he surrendered it to the Embassy for them to cancel.
I have not heard of any cases where the Vancouver US Consulate does not take your US passport at the appointment. The Consulate advised that the receipt they gave me for the US$2350 fee should be kept with my Canadian passport until the CLN arrived. This could be useful if you have a Canadian passport showing a US place of birth, which could suggest to the US border officials you might be a US citizen and should be using a US passport. It might be OK to use a US passport between renunciation and CLN receipt, but doing this may create the opportunity for a DHS official to charge you with making a false claim of US citizenship, leading to you being permanently inadmissible under the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of September 30, 1996. A small risk perhaps, but one to think about.