U.S. Hikes Fee To Renounce Citizenship By 422%

Robert W. Wood

Over the last two years, the U.S. has had a spike in expa­tri­a­tions. It isn’t exact­ly Ellis Island in reverse, but it’s more than a drib­ble. With glob­al tax report­ing and FATCA, the list of the indi­vid­u­als who renounced is up. For 2013, there was a 221% increase, with record num­bers of Americans renounc­ing. The Treasury Department is required to pub­lish a quar­ter­ly list, but these num­bers are under-stat­ed, some say con­sid­er­ably.

The pres­ence or absence of tax moti­va­tion is no longer rel­e­vant, but that could change. After Facebook co-founder Eduardo Saverin depart­ed for Singapore, Senators Chuck Schumer and Bob Casey intro­duced a bill to dou­ble the exit tax to 30% for any­one leav­ing the U.S. for tax rea­sons. That hasn’t hap­pened, but tax­es are still a big issue for many.

To leave America, you gen­er­al­ly must prove 5 years of U.S. tax com­pli­ance. If you have a net worth greater than $2 mil­lion or aver­age annu­al net income tax for the 5 pre­vi­ous years of $157,000 or more for 2014 (that’s tax, not income), you pay an exit tax. It is a cap­i­tal gain tax as if you sold your prop­er­ty when you left. At least there’s an exemp­tion of $680,000 for 2014. Long-term res­i­dents giv­ing up a Green Card can be required to pay the tax too.

Now, the State Department inter­im rule just raised the fee for renun­ci­a­tion of U.S. cit­i­zen­ship to $2,350 from $450. Critics note that it’s more than twen­ty times the aver­age lev­el in oth­er high-income coun­tries. The State Department says it’s about demand on their ser­vices and all the extra work­load they have to process peo­ple who are on their way out.

The notice says:

1. Consular offi­cers must con­firm that the poten­tial renun­ciant ful­ly under­stands the con­se­quences of renun­ci­a­tion, includ­ing los­ing the right to reside in the United States with­out doc­u­men­ta­tion as an alien.

2. Consular offi­cers must ver­i­fy that the renun­ciant is a U.S. cit­i­zen and they must con­duct a min­i­mum of two inten­sive inter­views with the poten­tial renun­ciant. Consular offi­cers must even review at least three con­sular sys­tems before admin­is­ter­ing the oath of renun­ci­a­tion.

3. The final approval of the loss of nation­al­i­ty must be done with­in the Directorate of Overseas Citizens Services in Washington, D.C. After that, the case is returned to the Consular offi­cer over­seas for final deliv­ery of the Certificate of Loss of Nationality to the renunciant.4. These steps add to the time and labor be involved in the process. Accordingly, the Department is increas­ing the fee for pro­cess­ing such requests from $450 to $2,350.