Surprise – You are Not a Citizen After All . . . NYT Article – After Forming Deep Roots in U.S., Man Discovers He Isn’t a Citizen
The New York Times has a fascinating article titled After Forming Deep Roots in U.S., Man Discovers He Isn’t a Citizen, May 12, 2014, by Lizette Alvarez.
The article discusses the “opposite” of someone considering expatriation; rather when a long-term resident of the U.S., who always thought he was a U.S. citizen, discovers he is not, to his dismay.
Ironically, if Mr. Mario Hernandez was never a U.S. citizen (and never a lawful permanent resident) he would be able to leave the U.S. without having adverse U.S. income tax consequences (nor his family and friends having adverse gift or inheritance tax consequences), if he can comply with the certification requirement of Section 877(a)(2)C). Never being a USC or a LPR is a blessing in disguise, when it comes to the application of the “expatriation tax” rules.
Since the resources dedicated in tax-expatriation.com focus on USCs and LPRs who reside outside the U.S., this is just a theoretical observation that surely would not be in the interest of this gentleman who has lived most of his life in the U.S. and has always considered himself a “U.S. person.”
NYT’s article –
. . . Mario Hernandez made a discovery recently that rattled him to his core: He is not an American citizen. In fact, he is not even a United States resident.
Nobody had ever told him. Not his mother or his grandparents. Not the United States Army, where he served for three years in the 1970s. Not the election supervisors in four states who tallied his votes in every major election since Jimmy Carter won the White House. Not the two state agencies where he was employed, one in Washington State and the other in Florida. And not the two federal agencies, including the Justice Department, where he spent most of his career as a prison supervisor handling notorious inmates and undergoing thorough background checks every five years. Citizenship is a requirement for the job.
The revelation came only after Mr. Hernandez and his wife, Bonita, started planning a trip to celebrate his recent retirement from the Bureau of Prisons after 22 years. The two had settled on a Caribbean cruise, which would have been Mr. Hernandez’s first time out of the country since arriving in 1965 as a Cuban refugee. On a cruise line website, he found out that a United States passport was a requirement. He did not have one and wondered whether he even had naturalization papers.
The article highlights a number of key considerations. First, how any U.S. citizen, living in any part of the world, must have a U.S. passport to enter into the U.S. See an earlier post – Coming to America. . . Accidental Americans Beware – The Law Requires a U.S. Passport!
There are a host of practical problems for people who live both in and outside of the U.S. who do not have a U.S. passport. This article highlights a very important example.
The article also demonstrates the complexity of anyone knowing with certainty, their own citizenship status and whether they are a “U.S. person” for U.S. federal income tax purposes. Imagine, the difficulties that financial institutions and companies throughout the world will have to comply with FATCA, as they attempt to identify whether their existing or new customer accounts or owners validly hold USC or LPR status. See, The Catch 22 of Opening a Bank Account in Your Own Country – for USCs and LPRs.
Incidentally, in the case of Mr. Mario Hernandez, he was a “U.S. person” for U.S. federal income tax purposes for all of the years he resided in the U.S. This is true, even if he had no legal immigration status to live in the U.S. Anyone satisfying the physical residency rules (“substantial presence test”), regardless of their legal or illegal immigration status, will be a U.S. income tax resident and subject to income tax and reporting on their worldwide income. See, “Tax Simplification: The Need for Consistent Tax Treatment of All Individuals (Citizens, Lawful Permanent Residents and Non-Citizens Regardless of Immigration Status) Residing Overseas, Including the Repeal of U.S. Citizenship Based Taxation,” by Patrick W. Martin and Professor Reuven Avi-Yonah, 2013.