North America

Why Americans Are Increasingly Renouncing Their Citizenship

Mona Shah, Esq.
New York City

The United States has one of the most coveted passports in the world. Despite this, in the past few years, a growing number of people have chosen to give up American citizenship.

Each quarter, the IRS publishes a record of the latest “covered expatriates” who have chosen to expatriate. Note that the list of expatriates only includes individuals who are subject to the US exit tax, i.e., those who exceeded the minimum threshold of over US$2 million in worldwide assets and/or who have paid an average annual federal tax over the last five years of at least US$190,000. We have no way of knowing how many non-HNWI Americans are expatriating.

While there is plenty to criticize about the US and its policies, the decision to willingly give up the rights and protections you were born with – or, more significantly, give up the permanent residence and citizenship you may have spent many years and hundreds of thousands of dollars to obtain – is a much more serious (and expensive) decision than simply complaining on social media. There are also more consequences to that choice than one might think. 

Why are so many choosing to go through this process? The reasons obviously vary from person to person, from emotional to financial. This article will explore the process itself, some of the more common triggers, and a fragment of the history behind it.  

The Painful Process of Expatriating From the US

It’s one thing to say you’ll do it, but it’s another thing to actually do it. Plenty of people post on their social media during election season, saying, “If so-and-so gets elected, I’m moving to Canada!” The implication is that they will be so dissatisfied with the United States that they will no longer want to be a part of it.

But renouncing US citizenship is not as simple as moving to a different country; it’s a complex process. It involves quite a bit of paperwork (hopefully done with the assistance of lawyers and experts in the industry), and significant fees. Yes, you have to pay the United States to take away its passport (and it’s not a small fee either; it’s over $2,000).

Then, you must sit an interview with a consular officer at an embassy or consulate outside of the United States. Also, note that, depending on your paperwork and how that interview goes, you may have to pay an additional exit tax. This is on top of the rights and privileges you lose with your citizenship and the fact that you should have a second citizenship to avoid statelessness (though not required). It is not something to be done lightly. 

Tax reduction is the primary motive

Taxes are the number one reason to ditch the US passport. In a global economy with the increasing availability of remote work, many find it advantageous to live abroad. Be it to live closer to family, gain a better-paying job, find a jurisdiction better suited to your business, or simply enjoy better weather; there are many reasons to live and work outside of your home country.

But for those who hold an American passport, leaving the US doesn't end your tax obligations to the IRS, because of its infamous citizenship-based taxation system. The only other countries that impose tax on its non-resident citizens are Eritrea, Myanmar, and Tajikistan - not exactly paragons of liberalism.

The vast majority of countries tax based on residency; some tax only territorially; others don't tax incomes at all. In any case, 98% of countries don't tax you unless you're currently living there. If you live in a residence-based tax jurisdiction (most countries), and you also hold a US passport, presuming your income exceeds the Foreign Earned Income Exclusion threshold of US$120,000), you typically pay taxes to both countries. 

But giving up your US citizenship for the express purpose of saving on taxes could get you blacklisted.

If US authorities find that you renounced US citizenship to avoid being taxed by them, you risk beoming inadmissible for entry into the United States. This is in the same section of inadmissibility as international child abduction and unlawful voting. To renounce for this reason is to burn your bridges with the United States government. 

The tearing social fabric

Anyone who has lived or worked in the United States in the past decade would be familiar with its increasing political tensions. Political discourse has become less discussion and more diatribes. And major candidates are becoming less popular and more disconcerting.

In fact, the Pew Research Center noted earlier this month that roughly a quarter of all Americans hold unfavorable views of both Biden and Trump, regardless of affiliation. When narrowed down to younger adults ages 18-29, that number rises to 40% with a negative view of both candidates. 

Overall, the country’s political landscape has deteriorated to the point where enthusiastic participation in the democratic process is less rewarding, more aggravating, and, to some, even frightening. 

The concerns regarding the current political and social climate do not stop at the ballot box, legislation, or even Supreme Court rulings. According to a 2023 YouGov study, 65% of American adults think the country is more divided than usual.

Factor in a 2022 YouGov/Economist poll that shows over 40% of US respondents anticipate a second civil war before 2032, and it's perhaps easy to see why some are looking for a new home for themselves and their families. 

Even if these fears turn out to be unwarranted, it is understandable that such constant stress day in and day out, heightened during election years, could become exhausting. And so long as they have citizenship, many will continue to feel that nagging guilt prodding them to continue to participate in the process, even if they have removed themselves from the country. 

In addition, recent years have shown increased friction from openly discussed topics that were previously considered taboo (at least to the general public). More and more debate, protests, legislation, and court cases regarding LGBTQ rights, abortion, religion, and racism, resulting in real-life consequences and passionate outcry.

Many of these issues hit close to home for people, and vigorous disagreement sometimes sparks a physical altercation. While many are inspired to stay and make a difference in the country they call home, some may choose to simply move to another country already more in line with their values (and with less chance of having to fight for them physically). 

Theoretical worry about possible violence, however, is not the only safety concern many have. A steady news cycle of gun violence also has affected residents, with many longing for other parts of the world they perceive as safer. I’m not hypothesizing here, either. I’ve had clients opt to leave the country after the 2022 shooting in Uvalde, Texas. If you and your family do not feel safe where you are, immigrating somewhere else makes sense. People have been doing it since time immemorial. 

US citizenship renunciations in history

Some may consider surrendering citizenship an extreme response to social unrest, but living history suggests many Americans are indeed prepared to do just that. During the eight years of direct US involvement in the Vietnam War, estimates indicate as many as 100,000 U.S. citizens left the country to avoid the draft. President Jimmy Carter issued a mass pardon for such individuals in 1977, but only about half returned. 

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During World War II, the US government interned many American citizens of Japanese descent and their families in camps. In these camps, they faced interrogations and had their “Americanness” questioned. Most directly, many were made to complete a loyalty questionnaire. In the questionnaire, the respondents were directly asked if they would fight for the United States if drafted and if they would renounce allegiance to the Emperor of Japan.

Due to the uncertain state of their futures (and whether they would be deported to Japan regardless and under the rule of that Emperor), their treatment in the camps, and the great insult of having to defend themselves against suspicion due to genetics, many refused to answer or refused to denounce loyalty to the emperor.

The US government did not expect this reaction. In response, it passed the Denaturalization Act of 1944, which allowed citizens to renounce their citizenship while in the United States under certain circumstances. For a variety of reasons, including being under duress, over 5,500 American citizens of Japanese descent renounced their citizenship (a number that was also much greater than anticipated).

After the war, thousands were then slated for deportation, though with the assistance of a civil rights attorney, Wayne M. Collins, nearly all those who requested repatriation and restoration of their citizenship had their cases resolved by 1965. In the end, the number of individuals deported to Japan after the war was reduced to just over a thousand. 

Just like the choice to pursue citizenship in the United States, the choice to renounce should be done willingly and with the help of someone fully informed and qualified to give advice. 

Unexpected consequences 

Keep in mind that you should speak with an immigration (and tax) lawyer before taking any material steps. Renunciation has many significant consequences, and it is important to speak with an expert before making any decisions. While cheaper, choosing to speak with a consultant may result in poor advice and be far more costly later. 

If US authorities find you have renounced to reduce your taxes and make you inadmissible for entry, you would still have to pay all those taxes stemming from before your renunciation and any other outstanding financial obligations such as child support payments.

It still also remains possible for other countries to deport you to the US after you've expatriated. You also cannot renounce your children’s citizenship.

And because, as mentioned, the IRS publishes a list of expatriates, if you are above a certain net worth, your decision to renounce will become public knowledge. And the IRS is not the only government entity that keeps a list of expatriates. The FBI also keeps a list. This is in part because the FBI is responsible for the National Instant Criminal Background Check System (NICS), and a person who has renounced citizenship is prohibited from receiving firearms in the United States. 

For more information on the topic of renunciation, please also check out our recent podcast episode with Alexander Marino, a seasoned professional in cross-border tax law, estate planning, and U.S. expatriation law. 

IMI Pro members can also read international tax and immigration experts David Lesperance and Melvin Warshaw's authoritative guide:

The Tax-Efficient Way to Renounce US Citizenship

The report answers questions like:

  • Why are Americans giving up their citizenships in increasing numbers?
  • Which tax regimes apply to expatriates?
  • How does the exit-tax work, and how may it be reduced or avoided altogether?
  • Who should worry about the expat tax regimes?
  • What are the legal and tax implications of expatriation for green card holders and US citizens?
  • Which actions trigger the expatriation tax regime?
  • Who are “covered expatriates”?
  • The 3 Covered Expatriate Tests
  • How Covered Expatriates are taxed
  • What paperwork is involved in the expatriation tax regime? 
  • How to use pre-expatriation trusts
  • The 5 steps to formally renouncing citizenship
  • How to relinquish Green Card status
  • How to file taxes after expatriating
  • How expatriation affects future travel to the US
  • and countless other questions and topics

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Mona Shah AuthorSubscriberParticipant

Mona Shah is the Managing Partner of the firm that bears her name and a recognized industry leader in EB-5 law.

Following a legal career that spans four decades, she has attained many accolades and awards: Top 25 EB-5 attorneys by EB-5 Investors Magazine eight years in a row, recognized as a Top Lawyer by Who‘s Who International and as a ‘Top Attorney of North America.

Mona is a Lexis Nexus Practice Advisory Editor, and a published author. Mona has written numerous articles and blog pieces in all aspects of EB-5 immigration law as well as the corporate and securities aspect.

Mona also pioneered and hosts the first and longest podcast series (spanning over 6 years) that focuses on foreign direct investment and EB-5. She has been honored for her work by various groups and non-for-profit organizations.

Mona’s extensive knowledge of all facets of U.S. immigration law and her practical expertise ranges from specialist business petitions to convoluted, multi-issue deportation and removal litigation to complicated corporate and securities issues in EB-5 petitions.

Her firm, Mona Shah & Associates Global, represents individual, high profile and corporate clients from all over the world. Mona and MSA Global have raised millions of dollars for projects in the US.

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