The State Department Should Allow For US Citizenship Renunciations To Take Place By Video

This post has been co-authored by Diane Gelon* (see “Reflections Of An Expatriation Lawyer“) and John Richardson

Prologue

In September of 2021 the Paris based “Accidental Americans Association” filed a lawsuit against the US State Department. The lawsuit was brought in an attempt to force the State Department to allow individuals to renounce their US citizenship. (A prior lawsuit by the “Accidental Americans Association” was based on the excessive $2350 renunciation fee.)

The lawsuit is evidence of the extreme frustration that many Americans abroad are experiencing because they (1) are unable to renounce US citizenship and (2) justifiably feel that they are prisoners of the circumstances of their birth.

It was recently announced that “The US Department of State (DOS) is suspending in-person interview requirements at local consulates for a year for numerous non-immigrant work visa categories and their families (spouse and dependent children“. In London the US Embassy is conducting telephone meetings to deal with Social Security issues. (Prior to Covid this would have required an in person meeting at the Embassy.) The State Department is clearly reducing the number and kinds of services that require “in person” Consulate visits.

The purpose of this post is to argue that renunciations of US Citizenship need not take place through in person interviews at a US Embassy or Consulate. Rather renunciations of US citizenship can and should take place through video conferencing. The backlog in processing renunciations is explained as being related to the Covid-19 pandemic. A response to the pandemic has been that more and more legal proceedings are taking place through video conferencing. Both Canada and the UK (and certainly other countries) are conducing citizenship ceremonies by video, entire court cases are held via video conferencing, and documents can be witnessed and certified by video. We have discussed various aspects of this issue with each other over a long period of time as well as benefiting from discussions with Dubai based lawyer Virginia La Torre Jeker and Esquire Founder Jimmy Sexton.

There is no law that requires that renunciations of US citizenship take place inside a US Consulate or Embassy!

This post is composed of the following seven parts leading to the following conclusion:

Americans abroad and their representatives should pressure the State Department to use their statutory authority to allow renunciations by video conferencing. The State Department has the statutory authority to do so. The fact that the State Department does not currently allow renunciations through video conferencing doesn’t mean that it cannot allow renunciations through video conferencing!

Part I – Introduction: Why Americans Abroad Are Renouncing US Citizenship
Part II – An appointment to renounce US citizenship is hard to find
Part III – Why there is NO legal requirement that renunciation appointments must take place inside a US Embassy or Consulate
Part IV – The State Department website does not specifically state that renunciations must take place inside the US Consulate or Embassy
Part V – Americans abroad and their organizations must push the Biden administration to allow renunciations of US Citizenship through video conferencing
Part VI – Interesting Bobby Fisher anecdote supporting the view that renunciations are not required to take place inside US Consulates
Part VII – Diane Gelon and John Richardson update their November 29, 2020 podcast with a December 29, 2021 podcast

Part I – Introduction: Why Americans Abroad Are Renouncing US Citizenship

Although not understood by resident Americans, many Americans living outside the United States have reluctantly concluded that they must renounce their US citizenship. To be clear, the desire to renounce US citizenship is coming primarily from the middle class Americans abroad who have neither the financial nor emotional resources to comply with the US extraterritorial tax regime while also complying with what are at times conflicting laws in the country where they reside. The difficulties experienced by Americans Abroad are well described in the recent “SEAT Survey” compiled from the exhausting efforts of SEAT President Laura Snyder. The majority of those renouncing do NOT renounce to avoid US taxation. In many cases they do NOT owe US tax. Different people have different reasons for renouncing. But, three reasons that figure prominently are:

1. The cost of compliance with complex US tax laws along with the constant threat of penalties; and

2. The inability to benefit from the retirement planning options in their country of residence because they are subject to two tax regimes. Americans abroad are subject to both US tax laws and the tax laws of their country of residence. For example, in many countries the capital gain on the sale of a principal residence is tax free but for US citizens the capital gain on the sale of their principal residence is subject to taxation.

3. The inability to open bank and financial accounts when living outside the USA either with US or non-US financial institutions. It is extremely difficult for an American living abroad to open or maintain a bank or financial account.

People gradually arrive at the decision to renounce US citizenship because of the interplay between US citizenship-based taxation (US citizens living outside the United States are treated for tax purposes as though they live in the United States) and because they are also subject to the tax systems where they live. For those who have never considered this reality, we invite you to pause and consider what this might mean to be subject to the tax systems of two countries (often incompatible) at the same time!

Tax systems are about far more than taxation and the collection of revenue

In the 21st Century a country’s tax system is how the country creates financial and retirement planning opportunities. The most basic examples would be US 401K plans and IRAs. In Canada the equivalent would be RRSPs, TFSAs, etc. Uk residents benefit from ISAs. Australian residents benefit from their Superannuation. Notice that during 2020 the US distributed Covid relief payments through the tax system. (Interestingly the US CARES payment and the Canadian CERB were characterized differently for tax purposes.) To put it simply, in the 21st Century, a country’s tax system determines the country’s way of life. (I was amused to hear a young adult living in Canada tell me that: “In Canada on their 18th birthday everybody opens a TFSA”.) The prevalence and importance of taxation is what motivated Charles Adams to write his book: “For Good And Evil: The Impact Of Taxes On The Course Of Civilization“. (Incidentally I am doing a series of podcasts on the lessons in For Good And Evil with Esquire Founder Jimmy Sexton.)

Americans living outside the United States, as tax residents of other countries, must manage their retirement planning to live in that country. However, US citizens are also subject to the US tax system even when they don’t live in the United States. The US tax system does NOT (in the absence of a specific treaty provision) recognize the retirement planning opportunities available in other countries. This means that the US tax system will effectively nullify tax benefits available in other countries.

A simple example might be (and there are many more):

– US citizens living in Canada would like to participate in Canadian TFSAs (which under the Income Tax Act of Canada provide tax sheltered growth); but

– the Internal Revenue Code of the United States does NOT recognize a TFSA as a vehicle (like a ROTH IRA) with tax sheltered growth. The US imposes taxes on a Canadian retirement planning vehicle which is specifically designed to be tax deferred in Canada!

What the Canadian tax system giveth, the US tax system taxeth!

Such are the problems of being subject to both the Canadian and US tax systems at the same time! I will add that (although not directly relevant to this post) that:

The US actually imposes a separate and more punitive tax system on US citizens who live outside the United States!

To be clear, Americans abroad are not renouncing US citizenship because they want to. They are renouncing US citizenship because they feel they have to. For those who are permanently resident abroad, renunciation is often a matter of financial survival.

Part II – An appointment to renounce US citizenship is hard to find

The process of renouncing US citizenship is lengthy, cumbersome, stressful and at $2350 USD the most expensive in the world. Furthermore, some US citizens renouncing US citizenship will be subject to the 877A Expatriation tax regime. Most US Embassies and Consulates discontinued renunciations in March of 2020. Since that time there has been a gradual reopening. For example Canada has started processing renunciations again for Canadian residents (but the waiting lists remain long).

At the time of writing the UK Consulates remain closed for renunciations. Some countries allow residents of the country to make appointments to renounce (Australia, Dubai, Italy). To put it simply: A renunciation appointment continues to be hard to find. (For many people the delay in renouncing US citizenship could result in their becoming “covered expatriates” and subject to the 877A expatriation tax.)

The State Department explains the absence of appointments to renounce US citizenship because (in their view) renunciations must take place inside a US Consulate or Embassy. In November of 2020 I explored this issue with UK based lawyer Diane Gelon in the following podcast. We discussed the question of whether – as a matter of law – renunciations of US citizenship must take place inside a US Consulate of Embassy. Our conclusion was that there is no legal requirement that renunciations of US citizenship must take place inside a US Consulate of Embassy.

Part III – Why there is NO legal requirement that renunciation appointments must take place inside a US Embassy or Consulate

Here is the analysis leading to the conclusion that there is no legal/statutory requirement that renunciations take place inside a US Consulate or Embassy. The analysis is informed by the relevant statute noting that the statue itself delegates to the State Department the obligation to prescribe the formal rules governing renunciation of citizenship.

1. The Governing Legal Statute And What That Statute Requires

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

ยง1481. 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

(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

The statute requires that the renunciation must be:

1. Voluntary
2. Intentional
3. Performed outside the USA
4. Before a diplomatic or consular officer
5. In such form as may be prescribed the the Secretary of State

Note that the statute defines the basic parameters and requirements. The statute specifically delegates to the Secretary of State the obligation to prescribe what is meant by “in such form form as may be prescribed by the Secretary of State”. There is nothing in the statute itself that requires the renunciation to take place inside a US Consulate. The statute does require that the renunciation take place before a diplomatic or consular officer. Note that diplomatic or consular officers may not be the same! (See for example the discussion of Bobby Fischer and his renunciation chronicles in Japan.)

It is completely possible for a renunciation to take place “before a diplomatic or consular officer” and NOT take place inside the US Consulate. An obvious example would be by some form of video conferencing. Citizenship ceremonies are now taking place by video conferencing in both Canada and the UK. There is absolutely no logical reason why renunciations cannot take place in a similar manner.

2. The Procedure Prescribed By The Department Of State And What It May Prescribe

Although the law requires that the renunciation take place before a Consular Officer there is NO REQUIREMENT that the renunciation take place in front of the Consular Officer in the Consulate. The Secretary of State MAY require that renunciations take place inside the Consulate. The Secretary of State MAY also require that renunciations take place by Zoom (why not protect the Consulate officers from covid?).

The key point is that the “requirement” that renunciations take place inside a US Consulate (if it exists at all) is something that is:

– not prescribed by law

– if a requirement at all, is a requirement prescribed by the State Department

Part IV – The State Department website does not specifically state that renunciations must take place inside the US Consulate or Embassy

State Department Website

https://travel.state.gov/content/travel/en/legal/travel-legal-considerations/us-citizenship/Renunciation-US-Nationality-Abroad.html

Renunciation of U.S. Nationality Abroad

A. THE IMMIGRATION & NATIONALITY ACT

Section 349(a)(5) of the Immigration and Nationality Act (INA) (8 U.S.C. 1481(a)(5)) is the section of law governing the right of a United States citizen to renounce abroad his or her U.S. citizenship. That section of law provides for the loss of nationality by voluntarily and with the intention of relinquishing nationality:

“(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” (emphasis added).

B. ELEMENTS OF RENUNCIATION

A person wishing to renounce his or her U.S. citizenship must voluntarily and with intent to relinquish U.S. citizenship:

appear in person before a U.S. consular or diplomatic officer,
in a foreign country at a U.S. Embassy or Consulate; and
sign an oath of renunciation

Renunciations abroad that do not meet the conditions described above have no legal effect. Because of the provisions of Section 349(a)(5), U.S. citizens can only renounce their citizenship in person, and therefore cannot do so by mail, electronically, or through agents. In fact, U.S. courts have held certain attempts to renounce U.S. citizenship to be ineffective on a variety of grounds, as discussed below.

The requirement described is that one must appear “in person before a US consular or diplomatic officer”. It is reasonable to infer that appearing through video conferencing where the person can be seen, identified and spoken with would/should meet that “in person” requirement.

Part V – Americans abroad and their organizations must push the Biden administration to allow renunciations of US Citizenship through video conferencing

Americans abroad and their representatives should pressure the State Department to allow renunciations by video conferencing. The State Department clearly has the statutory authority to do so. The fact that the State Department does not currently allow renunciations through video conferencing doesn’t mean that it cannot allow renunciations through video conferencing!

Part VI – Interesting Bobby Fisher anecdote supporting the view that renunciations are not required to take place inside US Consulates

Part VII – Diane Gelon and John Richardson update their November 29, 2020 podcast with a December 29, 2021 podcast

Happy New Year!

This post was co-authored by John Richardson@Expatriationlaw and Diane Gelon – Diane@DianeGelon.com

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*Reflections Of An Expatriation Lawyer by Diane Gelon

See this “Twitterduction” to the post …

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