Saturday, March 1, 2014

IRS CI Is Looking at Renunciations of Citizenship Just in Case (3/1/13)

It is reported the IRS CI is interested in the reasons that U.S. citizens renounce their citizenship.  Jaime Arora, IRS Criminal Investigation Division Looking Into U.S. Citizenship Renunciations, 2014 TNT 41-8 (3/3/14).  The article is nonspecific about what the IRS is looking for and the consequences might be if they found something.

Still, there are tax requirements for renouncing citizenship in certain cases.  I won't go into them now, but link to blogs on the subject here.

I can imagine that mishandling the various forms and representations required for renunciation, including the tax forms and representations, could be a crime under various federal statutes -- tax and nontax -- and, at last if something was done wrong related to taxes, conceivably the renunciation conduct could refresh statutes of limitations for tax crimes that might have otherwise expired.


  1. How can this defendant be prosecuted for a FBAR violation after the SOL has expired?
    The information was filed by DOJ on 12/18/12, six months after the 6-year SOL had expired on
    the violation that occurred on 6/30/06.

  2. It seems to me that the IRS CI is getting bored with current duties or is the OVDI/P conveyor belt running out of juicy cases to feed the revenue quotas ?

  3. Mr. Johnson,

    Facially, on the facts you present, there does appear to be an SOL problem. However, one thing that has happened in other cases is that DOJ, realizing that there is a looming SOL problem, will request an extension of the criminal statute of limitations in order to continue the discussion as to whether there will be an indictment. The threat, implicit or explicit, is that, without the extension, the indictment will be forthcoming in the normal SOL. I don't know whether that happened here, but it could have.

    I am sure that, if there were an SOL problem, it would have been raised by now.

    Thanks for raising this issue.

    Jack Townsend


    ..........The FBAR statute of limitations for criminal violations is only 5 years.......

  5. Thanks, but the facts as narrated still raises the question of whether the charging document (indictment or information) was timely. I appreciate your reminding readers that the criminal statute is 5 years. The civil statute for the FBAR penalties is 6 years.

    Jack Townsend

  6. Unfortunately, I have found that many people who take it upon themselves to renounce U.S. citizenship are doing this with ease as to the process via the United States Department of State. The tax process in contrast is quite complex and that is where the problems can arise under the taxation rules. This is where I'm afraid there's a lack of specific knowledge and understanding.

    I have compiled a comprehensive resource of laws, government reports, United States Department of State resources, internal Revenue Service resources, among others in a single location. In addition, there are media reports along with a number of technical articles I have published in the CCH International Taxation Journal.


    Patrick W. Martin


  7. Jack -

    The two articles published in the International Tax Journal of mine on this subject are as follows if you want to reference them for your readers:

    Accidental Americans” – Rush to Renounce U.S. Citizenship to Avoid the Ugly U.S. Tax Web” International Tax Journal,CCH Wolters Kluwer, Nov./Dec. 2012, Vol. 38 Issue 6, p45

    Table of Contents

    * Factors to Consider Prior to Seriously Considering Renouncing U.S. Citizenship

    * 2008 Change in Law – “Mark to Market” Income Tax Regime

    * Myths – about Renouncing U.S. Citizenship

    * Deemed Sale of Property – “Mark to Market”

    * (1) $663,000 (+ as adjusted for inflation) Gain Exclusion and Certain Property Excluded

    * Tax on a U.S. Citizen or Resident Who Receives a “Covered Gift” (or Covered Bequest) from a “Covered Expatriate”

    * Conclusion

    Oops…Did I “Expatriate” and Never Know It: Lawful Permanent Residents Beware! International Tax Journal, CCH Wolters Kluwer, Jan.-Feb. 2014, Vol. 40 Issue 1, p9

    “Expatriation” from the U.S. is often very controversial in the
    context of U.S. citizens who formally renounce citizenship. There is
    probably no other U.S. international tax topic for individuals that can
    strike greater personal emotions than leaving the U.S. To some, it
    sounds like abandoning the country. Americans do not have a history or
    tradition of leaving the U.S. to make their careers, families and
    fortunes abroad, unlike the Dutch, Mexicans, British, Spanish, Indians
    and many others from countries around the world

  8. First, whats the point of having an SOL if they can just ignore it whenever they want and second, it seems to me that the more money you hid, the less of a punishment you get. Look at Curran in Florida who had 42 mil hidden. She literally got 5 mins of probation, that was it. Ty Warner hid over 100 mil and got a couple years probation. This schmuck hides a little over half a mil and goes to prison for over a year and his fines/taxes almost equal what he had in there? There's something seriously wrong here.

  9. The next step in making America more like Eritrea is to ban renunciations all together, forcing US citizenship upon individuals for life and thereby making it impossible for expats to integrate and assimilate into their locality.

  10. American Citizens Abroad (ACA) has provided testimony to the Senate Homeland Security and Governmental Affairs Permanent Investigations Subcommittee following its recent hearing on offshore tax evasion, and has recommended that the United States should implement a residence-based tax (RBT) system to avoid penalizing American expatriates.

    The ACA, as the principal organization representing Americans overseas, has limited its comments to tax issues which impact US citizens and green card holders resident overseas.

    Under the current citizenship-based tax (CBT) system, Americans abroad remain subject to US taxation as though they were still US residents. Under RBT, only US residents, whether Americans or foreigners, would be subject to US income, estate and gift taxation, while Americans resident abroad would be taxed under essentially the same rules applicable to non-resident aliens.

    The ACA has proposed that, as part of a general tax reform package, an election should be provided to citizens who are long-term non-resident citizens to be taxed as non-resident
    aliens if they meet certain conditions – for example, a minimum period of residence abroad, and an exit tax imposed on electing taxpayers where they are deemed to sell all assets at the time of election.

    In her testimony, ACA’s Executive Director Marylouise Serrato pointed out “the disastrous effects on Americans living overseas of recent Internal Revenue Service (IRS) enforcement methods,” starting with the first Overseas Voluntary Disclosure Program and culminating in the passage and impending implementation the Foreign Account Tax Compliance
    Act (FATCA).

    She said that the ACA has noted public statements by the IRS and members of Congress that have often referred to “tax cheats” with “no distinction between US residents deliberately hiding assets in foreign bank accounts and overseas residents who by necessity have foreign bank accounts in their local bank.”

    Admitting that many Americans resident overseas were still not filing US tax declarations and the Foreign Bank Account Report, she said that this was “largely due to ignorance of their filing obligation, not deliberate tax evasion. In fact, an IRS study has shown that over 90
    percent of Americans resident abroad owe no US taxes.”

    In fact, Serrato added, “since Americans abroad pay taxes in the first place to their country of residence, it commonly never occurs to them that a second filing to the US is due under the unique US CBT system, … (while), unfortunately, a significant consequence of FATCA
    legislation is that foreign financial institutions are refusing bank accounts for Americans resident overseas.”

    It has become noticeable that even Americans abroad who are in full compliance with US taxes are being significantly affected – “accounts are being closed due to FATCA, investment in local non-US mutual funds is impossible due to the passive foreign investment reporting
    requirements, and efficient saving for retirement is not possible due to the US tax treatment of contributions to foreign pensions.”

    In addition, the 3.8 percent Medicare Tax is being imposed with no allowance for foreign tax credits, “which is blatant double taxation of Americans abroad, (and) is all the more objectionable as Americans abroad do not even have access to Medicare.”

    As all of these problems is put down by the ACA to the “unique CBT coupled with aggressive US techniques to stop tax evasion,” and Congress is urged by the ACA “to support tax reform to adopt RBT, the efficient and fair taxation system applied throughout the entire rest of the

  11. Jack, the nations of the world should adopt a policy of reciprocal CBT — you
    tax your citizens resident in our territory we claim the right to tax
    our citizens resident in your territory.

    13% of US residents are
    foreign born,
    if they transmitted citizenship to at least one offspring
    this would result in more than a quarter of the US population required
    to file and pay taxes to another country.
    How would the USA feel about losing tax revenue when their own immigrant citizens would have to pay their mother country taxes.

    It is terrible that there is taxation without representation

  12. Not a surprise, especially considering Carl Levin’s demand on behalf of the Investigations Committee that FATCA information be available to law enforcenement and national security for investigation of money laundering, drug trafficking, terrorist financing and other crimes.

    ....."Speaking at the Federal Bar Association’s Section on Taxation meeting
    in Washington on February 28, Cooper said that the IRS’s objective is
    to determine why people are making that choice and whether it is related
    to any particular laws. “If we find something, we do; if not, we just
    move on,” he said. Cooper said he could not discuss how CI obtains

    renunciation referrals or documents".......

    The USG government reminds me of a five year old in a playground that is so obnoxious that he/she can’t find a playmate. The solution: call the school principal and try to get the other kids to play with me. (They don’t want to play with the particular five year old because the other kids bring toys to the playground and she brings forms.)
    The US is a bully, or so it appears to those who live beyond our shores. Nobody likes a bully, whether he operates in the schoolyard or in the international arena. Those who support a bully do so out of fear. Hence, bullies never have any real friends. They have followers who are intimidated by the arrogance and power of the tormenter.

    As Nina Olsen has said, tax compliance for U.S. citizens abroad is pretty much impossible. At the moment some are trying to be compliant (haven’t yet figured out they won’t be able to do it) and some are not. With FATCA more will try to be compliant and realize they can’t. Once
    people have resigned themselves to the fact that compliance is impossible two things will accelerate:
    First, the renunciations will go off the charts.
    Second, people will give up trying to comply.
    That’s where we are going. It’s too bad that the US Gov can’t understand this.


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