Senator Reed Again Proposes Special “Tax Expatriation” Legislation Adverse to Former Citizens (not LPRs)

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This blog has covered a number of posts related to Senator Reed, important to USCs who are considering (or who have already) renounced United States citizenship.  See for instance, The 1996 Reed Amendment – The Immigration Law with “No Teeth” and “No Bite”2012 Letter Senator Reed to Janet Napolitano

As previously explained, the 1996 Reed Amendment which is part of the immigration law (Title 8), but not the tax law (Title 26) –

– has never been invoked by the federal government to bar reentry of a former U.S. citizen in its history (even when it was relevant from the mid 1990s through the following two decades).

A bit of background on Senator Jack Reed of Rhode Island is worthwhile at this point.  Senator Reed has had a long and illustrious public service career in the U.S. government.  He has a military background where he studied at West Point, served as an Army Ranger, studied law at Harvard and previously was in the House of Representatives.

Senator Reed tried in 2012 to convince then Department of Homeland Security, Secretary Napolitano to enforce the 1996 Reed Amendment to preclude Facebook co-founder Eduardo Saverin from re-entry to the U.S. after he renounced U.S. citizenship.  See portion of the letter in this blog.

Of course, Mr. Saverin would have been obliged to pay any “mark to market” U.S. tax applicable to his assets at the time of expatriation.  He could not have escaped taxation under the law as it was written; which is the current law in effect today.

This past week Senator Reed was a sponsor of a new appropriates bill for the Department of Homeland Security; the “2015 Homeland Security” bill that provides for US$47.2B (billion) in appropriates for a range of spending;  such as $10.2B for the Coast Guard, $5.5B for Immigration and Customs Enforcement (ICE), $1.6B for the Secret Service, among other spending items.

Senator Reed is identified in his own website as ” . . . A member of the powerful Appropriations Committee, which controls the purse strings of the federal government, Reed has been described by the Boston Globe as “a relentless advocate for his home state.” 

Within Senator Reed’s “2015 Homeland Security” proposed amendments, he apparently introduces a new provision to the immigration law – which is explained in his website as –

  • Reed’s provision to help prevent expatriate tax dodgers from reentering the United States calls on DHS to report within 90 days on their efforts to enforce the law that Senator Reed authored to prohibit individuals from reentering the United States if they renounced their citizenship in order to avoid taxes.
A member of the powerful Appropriations Committee, which controls the purse strings of the federal government, Reed has been described by the Boston Globe as “a relentless advocate for his home state.”  – See more at: http://www.reed.senate.gov/about/jack/#sthash.8kavSqH8.dpuf
A member of the powerful Appropriations Committee, which controls the purse strings of the federal government, Reed has been described by the Boston Globe as “a relentless advocate for his home state.”  – See more at: http://www.reed.senate.gov/about/jack/#sthash.8kavSqH8.dpuf
A member of the powerful Appropriations Committee, which controls the purse strings of the federal government, Reed has been described by the Boston Globe as “a relentless advocate for his home state.” – See more at: http://www.reed.senate.gov/about/jack/#sthash.hiulOZEi.dpuf

This Reed proposal seems very odd, since the motivation of how or why someone renounced their U.S. citizenship or formally abandoned their LPR status, became irrelevant for federal income tax purposes with the 2008 “mark to market” modifications.  See, Joint Committee Reports – 2008 Report re: HEROES Act – Mark to Market Regime – New Section 877A (55 pages)

Indeed, the reason or purpose anyone decided to renounce their citizenship, became irrelevant for tax purposes with the 2004 amendments to Title 26.  See, more detailed information on this blog in the Government Reports Re – Law.

Senator Reed’s proposal seems even more odd, when one considers that the federal government is already required to publish quarterly the list of USCs who have renounced.  See, Will the IRS simply select the list of published former citizens for tax audits?

This begs the question – Why does Senator Reed propose such legislative modifications?

  • for political reasons;
  • to attract more press;
  • to identify those who actually owe taxes – “tax dodgers”; or
  • to generally demonize United States citizens living overseas who have decided to shed their USC?

Why does Senator Reed persist on trying to get former USCs barred from re-entering the U.S., if and when they fully comply with the tax provisions; IRC Sections 877, 887A, 2801, et. seq.?  See, Reed Asks Homeland Security to Enforce Law on Ex-Citizen Tax

Also, see Senator Reed’s complete 17 May 2012 letter (Reed’s letter to Napolitano) on the subject; which of course was never enforced at the time.  It was not enforced by the Department of Homeland Security or the U.S. Justice Department.

Finally, see also, Obtaining a U.S. Visa after Renouncing U.S. Citizenship – The Cloud of the Still Living “Reed Amendment”

Senator Reed’s shadow looms large, at least theoretically, over anyone considering renouncing their United States citizenship.

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