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Thursday, February 23, 2017

Expatriation Trends

On February 10, Adam Taylor reported at The Washington Post:
This week, the Treasury Department released its quarterly list of individuals who had chosen to “expatriate” — i.e., renounced their U.S. citizenship or gave up their rights to permanent residence.
The list is notable for a couple of reasons. First off, Britain's Foreign Secretary Boris Johnson is on it. This means that Johnson, a dual-national who was born in New York City, has finally renounced his citizenship (as he had long promised he would). Secondly — and far more importantly in the grand scheme of things — the list shows that Johnson is just one of a total 5,411 individuals to expatriate in 2016.
As law firm Andrew Mitchel LLC noted on its blog, this was a 26 percent increase over 2015, when there were 4,279 names on the list. And it is a 58 percent increase over 2014, when there were 3,415 names on the list. As data collected by the firm showed, while the number of individuals who expatriated from the United States had stayed pretty flat from the 1960s — and actually dipping for a while in the 1990s and early 2000s — over the past five years it has dramatically surged upward.
The United States is one of the only countries in the world that requires its citizens and permanent residents to file taxes even when they live abroad. Eritrea is the only other country to have a similar policy. This unusual policy a relic of the Civil War and the Revenue Act of 1862, which called for the taxing of U.S. citizens abroad — in part to punish men who fled the country to avoid joining the Union army.
This is no new policy — Americans abroad have always been covered by federal tax laws. However, things changed in 2010, when the Foreign Account Tax Compliance Act (FATCA) was enacted. This law essentially requires foreign financial institutions to check whether an account holder is a U.S. citizen or permanent resident. In some cases, Dunn said, they would ask for proof that the account holder is not a U.S. citizen.
The end result here is that whereas in the past a U.S. citizen abroad might be able to get away with not filing their U.S. taxes, that has become vastly less likely under these new circumstances. In some cases, this can be extremely costly: Johnson was known to have racked up a large U.S. tax bill for the sale of his home in London, even though he had not lived in the U.S. since he was a small child.