Imagine the shock and fear one might have if they learn they are a U.S. citizen while at the same time learning about U.S. citizenship based taxation of worldwide income regardless of where one lives. I use these terms purposefully, because a U.S. citizen who has spent almost all of their lives in the U.S., will likely have the sam reaction if they were born in another country and they were just told they should have been filing tax returns and detailed bank account reports for the last several decades under the law of that country (e.g., France, Canada, Libya, Mexico, South Africa, Germany, Eritrea, etc.). That person would probably be shocked and would also have some “fear” – depending upon which country is identified.
See, Why Section 7701(a)(50) is so important for those who “relinquished” citizenship years ago (without a CLN). . . This “shock and fear” was recently on display with a client who realized (rather should I say – “thought”) he was a U.S. citizen and therefore a U.S. income tax resident. For more background on U.S. citizenship and taxation, see – Sometimes Old is as Good as New – 1998 Treasury Department Report on Citizens and LPRs.
Ironically, the CLNs issued by the then U.S. Department of Sate versus the CLNs issued today are surprisingly similar in format and content. See Wide Window of Wait Times for CLN: One Month to 9 Months (or More?)
Imagine you have lived all of your life in your home country, for decades and decades. You were raised, educated and built your business or profession in your home country. Indeed you have become quite successful in your own country after a long life dedicated to your work.
However, by a pure act of arbitrariness (at least as far as you are concerned – since it was your mother who gave birth – without any input from you), you were born on U.S. soil. For those of us who live along the international border, this is a common occurrence.
Here in San Diego, the border crossing is one of the busiest land crossing in the world (if not the busiest). The U.S. federal government has reported (in the year 2000, which was presumably much less busier than today) it “ . . . processed over 41.5 million northbound passengers in personal vehicles and 8 million northbound pedestrians.” That is nearly 50 million going northbound, not counting the border crossing going southbound to Mexico.
The United States Department of Transportation reported that ” . . . Personal vehicles entered the United States nearly 96 million times in 2012, 33.1 million from Canada, and 62.7 million from Mexico, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics’ (BTS). Border crossings also included 10.7 million trucks, 320 thousand buses, and 37 thousand trains in 2012 (Table 1).. . . ”
Needless to say lots of Canadians and Mexicans are born in the U.S. as part of the transit to and from the U.S., just along the borders.
This gentleman was born in the border town of Brownsville, Texas, many decades ago, where thousands of Mexicans are born to this day. He took an oath of allegiance to the Mexican government in the 1960s as was required at that time pursuant to the Mexican Constitution, so as not to lose Mexican citizenship. See, the 1997 article by Paula Gutierrez in the LMU of LA International and Comparative Law Review, Mexico’s Dual Nationality Amendments: They Do Not Undermine U.S. Citizens’ Allegiance and Loyalty or U.S. Political Sovereignty.
Recently, his U.S. citizenship and tax journey began after some 40+ years.
The redacted CLN from the 1970s is part of the story.
Subsequent posts will discuss the tax and other legal implications of this CLN, when it was issued, how and why;
- what the tax law said then versus now;
- what the immigration law said then versus now;
- what it meant (under U.S. immigration law) to take an oath of allegiance to a foreign country;
- the timing of when and what date is used for “renunciation” (how many years back in time?);
- what penalties (if any) he might have vis-à-vis U.S. law?
In this case, the basic fact that he never remembered taking these specific steps back when he was a teenager of 18 years of age and shortly thereafter as a young man.
He never notified the IRS of his USC renunciation (or maybe you prefer to call it relinquishment – though there is no clear legal distinction between these two terms) pursuant to Section 7701(a)(50). – See, Why Section 7701(a)(50) is so important for those who “relinquished” citizenship years ago (without a CLN). . .
His story, fortunately has a very happy ending considering the application of Section 877, et. seq.
To be continued . . .