How to Expatriate from the United States – Part 2: Renouncing US Citizenship or Green Card Status
Two seasoned veterans in the world of US tax and expatriation law discuss investment migration questions that uniquely impact Americans.
In this second article of a four-part series, we look at the mechanics of relinquishing and renouncing US citizenship and relinquishing green card status.
Losing US Citizenship
8 U.S.C. § 1481(a) lists all seven potentially expatriating acts by which a US citizen can give up US citizenship. Renunciation of United States citizenship is a legal term encompassing two of those acts: Swearing an oath of renunciation at a US embassy or consulate in a foreign territory or, during a state of war, at a US Citizenship and Immigration Services office on US territory.
The other five acts are:
- naturalization in a foreign country;
- taking an oath of allegiance to a foreign country;
- serving in a foreign military;
- serving in a foreign government; and
- committing treason, rebellion, or similar crimes
– with the intention at the time of committing such acts to voluntarily relinquish US citizenship.
Renouncing US Citizenship
By far, the most common way that US citizens rid themselves of US citizenship is under subsection 5) of the USC. § 1481(a). This requires making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state.
Renunciation is accomplished in 4 steps:
Step 1 – Acquire a Second Citizenship
Readers of IMI are already familiar with the various ways in which Americans can acquire a second citizenship:
- at birth through either parents or birthright (i.e., jus sanguines or jus soli);
- through naturalization in a foreign state;
- through descent; or
- through citizenship by investment.
There is some discussion online that one might choose to renounce US citizenship without first obtaining second citizenship. This is legally possible under US law. In practice, however, this is very rarely done because, post-renunciation, the individual would be stateless. This is not a situation in which most clients would like to find themselves.
Second, on the two occasions when I had clients who initially did not want to reveal their second citizenships, the consular officers then questioned whether they fully understood the ramifications of their renunciation. This brought up the issue of lack of capacity, which is one of the two ways (duress being the other) that a consular officer can challenge the individual’s ability to exercise their right to renounce. Both times, after conferring with me, the clients provided evidence of their second citizenship. It is worth noting that this took place during the period when those renouncing their US citizenship were allowed legal counsel. That is not the case today, which underscores the importance of being properly advised throughout the process.
Step 2 – Organise an appointment with a US mission (embassy, consulate, or institute)
While renouncing US citizenship is a right that every US citizen possesses, from a practical sense, it is often delayed or even sometimes thwarted by the US government. US missions erect this hindrance by simply limiting or even stopping the granting of interview slots given by their consular section, US Citizen Services. As I’ve often discussed in other IMI articles, this was especially prevalent during the Covid pandemic. Even today, missions like the US Embassy in London are still working through a backlog where they are offering appointments for individuals who made their appointment request in Q3 of 2021.
Along with finding a mission that will schedule an appointment in a timely fashion, it is often also a challenge to work through the scheduling staff who respond to phone or email requests. Generally, this job is assigned to locally engaged staff who mistakenly apply the rules relating to visa applications to consular appointments. In the former, it is foreigners who are applying for the mission to exercise their discretion in granting a visitor status. In this context, missions have a specific geographic area of responsibility as they need to have “local knowledge” to make sure that visa applicants can overcome the “intending immigrant” presumption under s.214 B of the INA.
In the case of renunciation, a US citizen is exercising a right, which does not require local knowledge. Refusing a renunciation appointment to a US citizen who is not residing within the visa section’s area of responsibility is nonsensical. It would be equivalent to denying that US citizen the right to apply for a replacement passport that was lost or stolen at a US mission in a country that they happen to be visiting.
Although in an ideal world, it should not be necessary, we devote a considerable amount of time to keeping up on which missions are offering appointments. Predictably, once we locate a specific mission that is booking appointments, within two or three months, that office develops a backlog or even closes off scheduling appointments completely. This situation would not exist if the US government simply adopted the same rules of applying for a replacement passport to having a renunciation appointment. The fact that they have not done so lends credence to the theory that the US government is applying the maxim, “A right delayed is a right denied,” to slow the pace of Americans expatriating.
Step 3 – Preparing documentation for the renunciation appointment
It will often be necessary for the individual to complete this third step before even scheduling an appointment. Other missions require the forms to be completed and sent after the appointment is scheduled but before the actual date of the appointment. Although some missions have their own local additional forms, the standard five forms are:
- DS-4079 REQUEST FOR DETERMINATION OF POSSIBLE LOSS OF UNITED STATES NATIONALITY
- DS-4080 OATH/AFFIRMATION OF RENUNCIATION OF NATIONALITY OF UNITED STATES
- DS-4081 STATEMENT OF UNDERSTANDING CONCERNING THE CONSEQUENCES AND RAMIFICATIONS OF RENUNCIATION OR RELINQUISHMENT OF US NATIONALITY
- DS-4082 WITNESSES’ ATTESTATION RENUNCIATION/RELINQUISHMENT OF CITIZENSHIP
- DS-4083 CERTIFICATE OF LOSS OF NATIONALITY OF THE UNITED STATES
While the expatriating individual should complete all the forms in advance, he must sign them in front of the official conducting the formal renunciation appointment.
Step 4: Attending the renunciation appointment
Generally speaking, a pre-appointment call or meeting will take place before the formal renunciation appointment. Some missions do this pre-appointment by phone. Others schedule two meetings a day or two apart at the mission. The purpose of this pre-appointment is to make sure that the US citizen has the appropriate documentation and clearly understands the implications of the right that he is about to exercise.
The rules for the US official with whom the US renunciant is meeting are set out in the Foreign Affairs Manual. While it is useful to read this material before the appointment, it does not fully explain every element involved in the process or each element of the various forms. A perfect example is item 10 in Form DS-4081, which reads as follows:
10) My renunciation/relinquishment may not exempt me from United States income taxation. With regard to United States taxation consequences, I understand that I must contact the United States Internal Revenue Service. Further, I understand that if my renunciation of United States nationality is determined by the United States Attorney General to be motivated by tax avoidance purposes, I will be found excludable from the United States under Immigration and Nationality Act, as amended.
The first part of this statement is technically correct but highly misleading. A “US person for tax purposes” does include a US citizen (a status the person is in the process of shedding), but also includes those individuals who trigger the Substantial Presence Test. Therefore, a US citizen who renounces citizenship may still be a US taxpayer if he subsequently spends too much time in the US.
Likewise, someone who renounces US citizenship but does not trigger the Substantial Presence Test may still have US tax issues relating to certain US situs assets or US source income. We explain this latter situation elsewhere in this series.
The second part of this statement relates to the so-called “Reed Amendment”, the impotence of which provision we will illustrate in greater detail in the fourth part of this series.
This one example is indicative of the many potential misunderstandings that can occur by those who are not properly advised about the ramifications of various elements of exercising their right to renounce their US citizenship. In some cases, the results can be catastrophic for the individual.
Once the various forms are signed, the final step in the process is the payment of the fee to the cashier at the mission. Currently, the fee is US$2,350 but, recently, the US government agreed to reduce the fee to the prior rate of US$400. As of the date of publication of this article, the government has yet to gazette this change, but we expect it to do so soon. One pro tip is to have this fee in USD cash because, on occasion, the credit card machine at the mission may not be working on the date of the appointment.
Step 5 – Issuance of Certificate of Loss of Nationality
A Certificate of Loss of Nationality (“CLN”) is a document the US government issues that confirms the individual is no longer a US citizen. It is also the document that most financial institutions’ compliance departments require to prove that an individual account holder is no longer a US person for tax purposes and the institution is able to accept a W-8BEN rather than a W-9.
Traditionally, the US mission where the renunciation appointment takes place does not issue the CLN. Rather, they would forward the entire package of executed documentation, along with their notes regarding capacity and lack of duress, to State Department headquarters in Washington by diplomatic pouch. A consular official at headquarters would open the package, review the same and, if the forms were properly completed and executed and there was no question regarding the ability of the individual to exercise their right to expatriate, would stamp the CLN and forward it to the mission by return diplomatic pouch. The mission then contacts the individual to arrange pickup of the CLN.
Over three decades, I have seen the turnaround for this process take six months or more. Currently, the turnaround time is four to eight weeks but can be dramatically impacted if the State Department seconds headquarters staff to deal with matters it deems more urgent. In the past, this has occurred when staff were reassigned to deal with the issuance of emergency travel documents to US citizens caught in a war zone or visas in a refugee crisis arising out of a natural disaster.
Interestingly, over the past year, we have seen at least one US mission have a consular official at the appointment mission appropriately stamp the CLN within days of the renunciation appointment. One can hope this process becomes the new standard in the future. We will discuss the potential impact of this delay in the issuance of a CLN on future travel in the fourth part of this series.
One area of significant misunderstanding is the effective date that the individual ceases to be a US citizen. Although the CLN clearly states that the individual ceased to be a US citizen as of the date of the formal renunciation appointment, many people mistakenly believe that they are still Americans until the CLN is stamped. This misunderstanding is sometimes fuelled by consular officials returning the individual’s US passport to them at the interview.
On rare occasions, I have even heard of consular officials mistakenly telling the individual that they were Americans until the CLN was issued. Such misinformation is a perfect example of where a misinformed renunciant can cause himself significant future harm. If, after the expatriation appointment, that individual were to subsequently enter the US on their US passport, he could be deemed to be fraudulently seeking entry. This could easily result in a future prohibition of travel to the US.
In reality, the individual ceases to be a US citizen the moment he signs the various forms and pays the fee at the formal appointment. The subsequent issuance of the CLN is simply the confirmation of an existing state of fact. Although, in theory, the State Department could subsequently question the capacity of the individual to exercise his right to renounce or claim that this right was only being exercised under duress, we have never seen this occur in more than three decades of assisting hundreds of Americans in renouncing their US citizenship.
Relinquishing US citizenship
As previously noted, 8 USC. § 1481(a) lists all the five other potentially expatriating acts. Specifically, these are:
- naturalization in a foreign country;
- taking an oath of allegiance to a foreign country;
- serving in a foreign military; serving in a foreign government; and
- committing treason, rebellion, or similar crimes.
Beginning with a 1907 law, Congress had intended that mere voluntary performance of potentially expatriating acts would automatically terminate citizenship. However, a line of Supreme Court cases beginning in the 1960s, most notably Afroyim v. Rusk (1967) and Vance v. Terrazas (1980), held this to be unconstitutional. Instead, along with committing one of these acts, the individual must have the specific intent to relinquish citizenship at the time the act is committed. This intent must be proven by the totality of the individual’s actions and words.
If someone can demonstrate both the prior committing of the act and provide indisputable contemporaneous evidence of an intention to thereby relinquish US citizenship, this can result in a CLN being applied for and issued confirming loss of US citizenship as of the date of the expatriating act. This could have a significant impact on the expatriate’s tax situation, as the tax rules in place as of the date of the loss of US citizenship would apply.
Unfortunately, while many people can demonstrate the commitment of a potentially expatriating act, few can years later adequately demonstrate their simultaneous intention to thereby relinquish their US citizenship.
RELINQUISHING GREEN CARD STATUS
In our global practices spanning cumulatively three-quarters of a century, we find that green card holders, too, are often oblivious to the fact that they must take formal steps to relinquish US their permanent residency status (aka “Green Card status”). Neither allowing a green card to expire nor remaining outside the United States permanently or for long periods of time are sufficent to lose Green Card status.
Although the US government can formally revoke Green Card status as a result of either fraud or abandonment, this only occurs after an initial report is filed, a long administrative process is undertaken, and all appeals are exhausted.
By far, the most common way that individuals lose their Green Card status is by voluntary relinquishment. The procedure to surrender a green card/LPR status is pretty straightforward: The Green Card holder needs to fill out and mail USCIS Form I-407, Abandonment of Lawful Permanent Resident Status. Along with the form, the individuals will need to send in the Green Card or provide a reason why they cannot (for example, that it has been lost or destroyed). Unlike renouncing US citizenship, there is not currently a fee for relinquishing a Green Card.
After retaining a copy, the renunciant must send the I-407 form and Green Card to the address listed on the I-407 page of the USCIS website. USCIS anticipates that processing times, from receipt to completion, will be within 60 days, which does not include mailing time to or from outside of the United States.
It is worth noting that the date of deemed abandonment of the Green Card is the date of receipt of the I-407 by the USCIS. For this reason, it is best to send the package by registered mail or courier. If appropriate, an alternative is to submit Form I-407 to a US Customs and Border Protection officer at a US port of entry. The date of relinquishment is, therefore, the date that the I-407 and Green Card are handed to the port of entry official.