WSJ (18 Feb. 2015): London Mayor Boris Johnson to Renounce U.S. Citizenship After Tussle With Uncle Sam

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Ironically, the outspoken London Mayor has decided to renounce his U.S. citizenship, according to an article published by the Wall Street Journal.

See, WSJ: (18 Feb. 2015) – London Mayor Boris Johnson to Renounce U.S. Citizenship After Tussle With Uncle Sam

This article reported that his U.S. tax bill was at issue – :

In case you missed it: London Mayor Boris Johnson has said he will renounce his U.S. citizenship following a high-decibel tax squabble with his country of birth. At issue: a tax bill U.S. tax authorities claimed he owed on some London property. The mayor will (of course) keep his citizenship in the U.K. as his political ambitions continue to play out.

A previous post in November 2014 discussed a news report of the London Mayor and his U.S. citizenship and hence U.S. tax residency status.  See, According to news press, London Mayor, dual citizen, refuses to pay United States income taxes

Surely, he will be careful and thoughtful about the steps he is taking as part of his U.S. citizenship renunciation.  His reported response to the news reporter last year could prove risky under U.S. law, to the extent he intentionally refuses to file U.S. income tax returns and pay taxes.  The following line of questions and answers could be quite damning for him:

Presenter Susan Page then pressed him whether he would pay the bill, to which he said: “I think it’s outrageous.

“Well, I’m – no is the answer. Why should I? I haven’t lived in the United States for, you know, well, since I was five years old.

“I could but I pay – I pay the lion’s share of my tax, I pay my taxes to the full in the United Kingdom where I live and work.”

Here, the London Mayor has indicated he is not filing tax returns, yet knows he has a legal duty to file them and pay a tax owing under U.S. law.  He goes further to say “I could . . . pay . . .”   While rarely used standing alone by prosecutors (without other criminal claims brought), it is a crime that carries up to a 12 month prison sentence, to not file a U.S. return, supply information or pay tax;  see, IRC § 7203.  The relevant language of the statute is as follows:

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution.

Here, the government has yet another stick it can pull from its bag of sticks to be used against current and former U.S. citizens residing outside the U.S.  It is of course, very common, that individuals who have spent most of their lives outside the U.S. have not filed any U.S. tax returns nor paid any U.S. income taxes.  At what point, might these individuals have U.S. civil tax liability and what facts are necessary to give rise to criminal tax liability?

The vast majority of U.S. citizens residing overseas owe little to no U.S. income taxes because (i) modest income amounts and the impact of the “foreign earned income exclusion” or (ii) they reside in a country with higher taxes and tax rates than the U.S. because of the “foreign tax credit”.  See, USCs and LPRs Living Outside the U.S. – Key Tax and BSA Forms

A couple observations about London Mayor Boris Johnson.  First, he would be well advised not to make public statements about filing [or not] U.S. tax returns or paying [or not] U.S. taxes.  Second, he will want to carefully consider completing and filing accurate U.S. tax returns as part of his formal renunciation process; particularly for the year in which he sold his London home tax free under UK laws.    Third, he will want to understand carefully, the details of what is and should be filed on IRS Form 8854, after he has visited the U.S. embassy and files his Form DS-4080, Oath of Renunciation of the Nationality of the United States. 

Finally, the case could present a unique international political and public relations nightmare for the  U.S. Department of Justice, if they decided to bring any sort of criminal tax charges against the London Mayor.  It would seem highly unlikely in my opinion.

The government has a strict requirement that prohibits a United States Attorney (e.g., the high profile Preet Bharara, U.S. Attorney for the Southern District of N.Y. Attorney ) from unilaterally bringing tax charges against individuals.  See, 6-4.200, Tax Division Jurisdiction and Procedures, which provides in relevant part:

“. . . The Assistant Attorney General, Tax Division . . . must approve any and all criminal charges that a United States Attorney intends to bring against a defendant in connection with conduct arising under the internal revenue laws, regardless of which criminal statute(s) the United States Attorney proposes to use in charging the defendant. See 28 C.F.R. § 0.70.

Also, only the Tax Division can authorize warrants of public officials, which presumably would extend to London Mayor Boris Johnson.  See, See, 6-4.130, Search Warrants. 

On a related post, see, How many former U.S. citizens and long-term lawful permanent residents have filed (or will file) IRS Form 8854? and Revisiting the consequences of becoming a “covered expatriate” for failing to comply with Section 877(a)(2)(C).

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