Renunciation of US citizenship to avoid paying taxes

With concern over higher tax rates in the United States relative to some low tax destinations such as Singapore and Belarus, and the rise of economic citizenship in many emerging countries around the world a record number of United States citizens especially those who identify themselves as investors have sought renunciation of US citizenship as a tax planning strategy. Many have even inquired about “relinquishment” without full renunciation of US citizenship to avoid paying U.S. taxes while still preserving U.S. citizenship and its benefits.

Loss of Citizenship

Section 349 (a) of the Immigration and Nationality Act set out the expatriation acts by which a national of the United States by birth or naturalization can lose United States nationality. Formal or official renunciation at a U.S. consulate [Section 349 (a) (5)] is one means of losing United States nationality but it not the only means. Some United States citizens with dual nationalities who hold political office abroad may lose United States nationality when they take an oath of allegiance to a foreign state, if the act of taking the oath was done with the intent of relinquishing United States nationality.

Renunciation of US citizenship for tax reasons can make a former citizen ineligible for a U.S. visa

The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA) added a new ground of inadmissibility for certain former citizens who renounce citizenship to avoid paying taxes. Section 212 (a) (10) (E) of the Immigration and Nationality Act states.

“Any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is inadmissible.”

But the ground of inadmissibility in Section 212(a) (10) (E) applies only to renunciations of U.S. citizenship that took place on or after September 30, 1996. Furthermore the statute requires specific intent to avoid paying U.S. taxes. Specific intent requires that the former U.S. citizen subjectively desired loss of U.S. citizenship to avoid paying U.S. taxes. Therefore the reason for renouncing U.S. citizenship is important. Public statements about the reason for renouncing US citizenship may come back to bite. But the surrounding circumstances of the renunciation may still prove specific intent to avoid paying U.S. taxes even if the former U.S. citizen was silent on the issue.

The regulations effecting the statute state that “an alien who is a former citizen of the United States, who on or after September 30, 1996, has officially renounced United States citizenship and who has been determined by the Secretary of Homeland Security to have renounced citizenship to avoid United States taxation, is ineligible for a visa under INA 212(a) (10) (E).” 22 CFR 40.105. But the statute has been criticized both for the ambiguity of its language and as a possible violation of international law.

Role of U.S. consulate

The role of the State Department and the consular officer is very limited in implementing this ground of inadmissibility. The extent of coordination between the Internal Revenue Service and the immigration agencies is unclear. But unless the applicant appears as a hit in the consular lookout system revealing a finding of inadmissibility under INA 212(a) (10) (E), a consular officer is required to assume that the visa applicant is eligible. So it is entirely possible that persons who renounce to avoid U.S. taxes may slip under the radar.

Conclusion

Renunciation of US citizenship is a very serious decision and is not just a matter for high net worth individuals. However choosing to live abroad as over 6 million Americans do, is not the same as renunciation. As with many areas of immigration law the general rules seem simple but the details and exceptions to the rules are complex and confusing. Before renouncing citizenship consult with both an immigration attorney and a tax attorney to evaluate the specific circumstances of your case as each case is unique. Under current immigration law even if you are found inadmissible a discretionary waiver may be available for non-immigrant admission into the United States.

CIRCULAR 230 NOTICE: IRS Regulations require us to inform you that any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transactions or matter addressed herein.

Las Vegas Immigration Attorney Gary Goodin

Resources for more information

1. Laura Saunders, Should you renounce Your U.S. citizenship W.S.J. , May 18, 2012

2. 77 Fed. Reg. 25538 – 25545 (April 30, 2012)

3. Antigua Starts Program to Sell Citizenship

The Visa Waiver Program

Visa Waiver for Tourism or Business

The visa waiver program allows visa free travel to the United States for citizens of certain countries, if the person meets certain requirements. A visitor coming to the United States as a business visitor or a tourism from a list of countries designated by the Attorney General for inclusion in the Visa Waiver Program (VWP), may not need a visa (B visa) if he or she intends to come to the United States for 90 days or less to transact business (WB status) or for tourism (WT status).

Visa waiver program eligibility

To be eligible for the visa program the visitor coming for 90 days or less must present

  1. A valid unexpired Machine Readable Passport (MRP) from a visa waiver program country
  2. A non-transferable round-trip ticket
  3. Arrive in the United States by a carrier with an agreement with the Attorney General of the United States to electronically transmit passenger data before the carrier arrives in the United States, and
  4. Execute immigration I-94W (front and back) and customs forms before entry into the United States. 8 USCS § 1187.

The visitor must still be able to show that they can financially support themselves while in the United States and are not a safety threat to the United States.

What countries take part in the Visa Waiver Program?

The countries that the attorney General has designated for inclusion in the Visa Waiver program are those nations that present little law enforcement challenges to the United States (e.g. low rates of fraud, high counter-terrorism co0peration) and have low rates of disqualification for non-immigrant entry into the United States. At present the visa waiver program is applicable to the following 38 countries:

Andorra Hungary New Zealand
Australia Iceland Norway
Austria Ireland Portugal
Belgium Italy San Marino
Brunei Japan Singapore
Czech Republic Latvia Slovakia
Chile Liechtenstein Slovenia
Denmark Lithuania South Korea
Estonia Luxembourg Spain
Finland Malta Sweden
France Monaco Switzerland
Germany the Netherlands Taiwan
Greece  United Kingdom

The visa waiver program does not apply to British overseas citizens, British defendant territories’ citizens, or citizens of British Commonwealth countries.

If I entered the US under the Visa Waiver program am I eligible to extend my stay, change to another visa class or adjust status?

No. Persons in WB or WT status are not eligible to apply to the United States Citizenship and Immigration Services (USCIS) for an extension of status, change of status or adjustment of status. Adjustment of status (getting US green cards) is only permitted based upon a petition by an immediate relative such as a spouse. But if the visitor seeks to adjust status while in removal because he has violated his status, he is barred from adjusting status.

What rights do I waive by participating in the Visa Waiver program?

If a visitor from a visa waiver country who is inadmissible or deportable after admission, the person waives the right to a removal hearing except for an asylum-only hearing (if the visitor expresses a fear of returning to her country). Generally asylum is the only relief to which a visa waiver entrant is eligible once in removal and detention is mandatory (no immigration bond or voluntary departure) until removal. A person who fraudulently enters under the Visa Waiver program (e.g. an Algerian using a fake French passport) is bound by the terms of the visa waiver program and asylum is the only relief available.

I came in on the visa waiver program, can I file a visa waiver program adjustment of status?

Yes, but only if you are not in removal and based upon an immediate relative petition. If you are married to a US citizen, you can adjust status, i.e. get a green card without leaving the United States.

Conclusion

US immigration law issues can be complex and confusing. Put the matter into the hands of an experienced immigration professional. If you have any questions about your immigration options under the US visa waiver program call us at 702-423-2721 or email us to schedule legal consultation.

Gary Goodin, Las Vegas Immigration Lawyer

Form i751 and divorce

I751 and the conditional permanent resident

Form I751 applies to conditional permanent residents. Conditional permanent resident (CPR) status is the immigration status that you get upon entering the United States with an immigrant visa or adjusting status to permanent resident unless the marriage is more than two years old. You can be granted conditional resident status as an original immigrant spouse of a US citizen or permanent resident. The immigrant spouse’s children may also obtain CPR status when the qualifying marriage of their parent is under two years old.

Conditional residents have the same rights, privileges, and responsibilities as lawful permanent residents. They have the right to file petitions on behalf of qualifying relatives and the privilege of residing permanently in the United States in agreement with the immigration laws. CPRs have a duty to register with the Selective Service System when required, and to comply with all laws and regulations of the United States including an obligation to file taxes on  income inside and outside the United States. See 8 C.F.R. 216.1.

Removal of Conditions by Joint Petition

To preserve permanent resident status a conditional resident must fulfill his obligation to file i751 conditions form for removing conditions on residence under INA section 216(c)(1). The filing is due within 90 days of the second anniversary of residence. The petition must be filed jointly with the petitioner who filed an immigration petition or fiance visa petition for you.

However, in certain cases, it is possible to file i751 alone without the petitioner in when the petitioner is dead, abusive or the qualifying marriage is legally terminated.

How are the conditions on residence removed using form i-751?

A conditional permanent resident (CPR) must file an i-751 removal of conditions form with supporting evidence and the correct filing fee within the 90-day period before the two-year green card expires. USCIS may allow late filing of form I751 under certain exceptional circumstances.

The conditional resident and the person who filed the original immigrant visa petition or fiancé(é) petition will file the I-751 form with USCIS. Both parties must sign the form.

The CPR will get an appointment notice with a specific time, date and place to capture his fingerprints, photo and  signature at a local USCIS Application Support Center. In practice a conditional resident will not have to surrender the 2-year Conditional Resident Card previously issued by the USCIS.

The conditional resident must establish that:

  1. The marriage was legal where it took place;
  2. The marriage has not been terminated;
  3. The marriage was not for the purpose of obtaining residency, and
  4. No fee (other than an attorney’s fee to assist filing) was paid.

If the USCIS Service Center Director finds that the marriage was in good faith and not to get around U.S. immigration laws, he may waive an interview. If not, the Director may ask for a marriage immigration interview or start a marriage fraud investigation. With some form i-751 petitions the USCIS may interview couples more than once. If the director approves the joint petition he or she will give written notice of the decision (I-797C, Notice of Action).

conditions i-751 - file forms i-751

Conditional permanent resident divorce

What if my petitioner refuses to sign the i751 petition?

When the marriage relationship is dysfunctional i-751 petitions may need extra care. A divorced or legally separated CPR may ask for a waiver of the joint filing requirement. To do so, the CPR must establish any one or more of the following:

  1. She entered the marriage in good faith, but the marriage was terminated (other than through death);
  2. She entered the marriage in good faith, but she or her child was battered and or suffered extreme mental cruelty;
  3. Termination of status and removal from the United States would cause  extreme hardship.

A conditional  resident who is unable to file a joint petition because divorce or annulment proceedings have started, may not apply for a waiver under the good faith marriage exception until the marriage is legally terminated.

If the couple is separated and has started divorce or annulment proceedings, the USCIS may still approve an I751 petition. The USCIS Service Director may not deny your I751 petition just because you are separated or have started divorce proceedings. However separation or the start of divorce proceedings may suggest that you entered into the marriage to get a green card.

Can I get a waiver if I am separated but not divorced?

There is no waiver of the joint filing requirement if you entered into a good faith marriage but are separated or in divorce proceedings. However, if you are in divorce proceedings and cannot get your U.S. citizen or lawful permanent resident spouse to file jointly, you may still ask for the waiver based on termination of the marriage.

A conditional resident who does this will get a USCIS Request for Evidence (RFE) for a decree with a response time of 87 days. The conditional resident gets the opportunity to prove eligibility for the waiver by submitting a copy of a final divorce decree or annulment.

It is a good idea to seek legal advice during the breakdown of the marriage before pursuing a waiver based upon divorce. You should also consider that obtaining a final divorce decree may take longer than the RFE response time.

What if divorce proceedings start after we filed the joint I751 petition? Do I have to re-file?

If the CPR filed an I-751 petition jointly but later become separated or have a pending divorce the USCIS will issue the CPR a Request for Evidence (RFE) with an 87-day response period. In the RFE, the USCIS will ask the CPR to send a copy of the final divorce decree. It will also request a written statement from the CPR that the jointly filed petition be treated as a waiver petition.

Avoiding-i-751-interview – Bona fide marriage evidence

To avoid an I-751 interview, you must demonstrate to the USCIS that your marriage was in good faith marriage and not just for a green card. You can prove a good faith marriage by showing that you lived together and mixed your finances by having joint assets and liabilities.

Bona fide marriage evidence may include tax returns showing that you filed taxes as married even if one of you made no income. You must show shared experiences – you vacationed together, were together at social outings and spent time together with family and friends.  Evidence of bona fide marriage may also include birth certificate of children together, proof of pregnancy, fertility treatment or even medical records related to a miscarriage.

Conclusion

As each person has a different immigration and marriage situation you should seek specific legal advice on how to file forms i-751 from an experienced immigration attorney. If you have any questions about removing conditions on residency or other immigration through marriage concerns contact us at 702-423-2721 to book an initial consultation. We also offer consultations for complex marriage immigration interview matters.