Month: July 2023
Dual Nationality is Permitted by the U.S.; not all Countries Have Similar Rules
The July 23, 2023 post explained there is a common myth that still persists about U.S. citizenship. It is often stated (erroneously) that someone becoming a U.S. naturalized citizen must forsake citizenship to another country. See, Dual Nationality has Been Permitted in the U.S.A. since 1967: U.S. Supreme Court Confirmed Constitutional Rights of Citizenship (Afroyim v. Rusk, 387 U.S. 253 (1967))
This is true, depending upon the laws of the other country. The United States will not require the individual to forsake citizenship to the other country.
However, the laws of the foreign country may prohibit dual nationality. For instance, Germany has had a restriction that according to the Germany publication DW – is about to become easier. See, Dual citizenship in Germany set to become easier: Germany’s government is getting closer to allowing immigrants multiple citizenships after overturning a decades long ban. The idea, a long-standing tradition in many countries, is well overdue, say those affected. (May 2023)
Similarly, India has restrictions on dual nationality. According to the Indian Consulate in San Francisco –
Notice regarding Dual Citizenship (India)
Consulate wishes to clarify on the citizenship status of OCI cardholders. Constitution of India does not allow holding Indian citizenship and Citizenship of a foreign country simultaneously. The Government of India has decided to register Persons of Indian Origin of certain category as has been specified in the Section 7A of the Citizenship Act, 1955 as Overseas Citizenship of India (OCI) Cardholder. It is basically a life long Visa and with some other privileges attached which can be seen on the Ministry of Home Affairs’ website. It is reiterated that holding an OCI card in no way entitles its holders to claim the status of dual citizenship.
Indian Consulate in San Francisco –
The U.S. State Department explains U.S. dual nationality in some detail on its website – including the following statement (U.S. Department of State -Dual Nationality):
U.S. law does not impede its citizens’ acquisition of foreign citizenship whether by birth, descent, naturalization or other form of acquisition, by imposing requirements of permission from U.S. courts or any governmental agency. If a foreign country’s law permits parents to apply for citizenship on behalf of minor children, nothing in U.S. law impedes U.S. citizen parents from doing so.
U.S. law does not require a U.S. citizen to choose between U.S. citizenship and another (foreign) nationality (or nationalities). A U.S. citizen may naturalize in a foreign state without any risk to their U.S. citizenship.
U.S. Department of State -Dual Nationality
Dual Nationality has Been Permitted in the U.S.A. since 1967: U.S. Supreme Court Confirmed Constitutional Rights of Citizenship (Afroyim v. Rusk, 387 U.S. 253 (1967))
There is a common myth that still persists about U.S. citizenship. It is often stated (erroneously) that someone becoming a U.S. naturalized citizen must forsake citizenship to another country. Or a U.S. citizen becoming a naturalized citizen of another country must forsake U.S. citizenship. There are good reasons for this “myth.”
First, the federal government used to have a policy that discouraged (if not outright prohibited) nationality in another country while being a U.S. citizen in various circumstances. This despite the language in the 14th Amendment of the Constitution which provides in
relevant part:
“All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside. No state shall make or enforce any
law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.“
Section 1 of the 14th Amendment
Congress then imposed various restrictions on citizens and provided they would lose nationality in various circumstances. Specifically the Nationality Act of 1940 imposed a strict statutory rule that a:
Section § 401(e) of the Nationality Act of 1940
- ” . . . national of the United States . . . shall lose their nationality by: . . . “(e) Voting in a political election in a foreign state” [since repealed]
The Supreme Court in 1967 found that specific provision as violating the U.S. Constitution. In
that case, Mr. Afroyim was Polish born and become a U.S. naturalized citizen in 1926. The Court concluded he had voted in elections in Israel (after emigrating from the U.S. to Israel in 1950 – without formally renouncing his U.S. citizenship). The opinion of the Court concluded:
We hold that the Fourteenth Amendment was designed to, and does, protect every citizen of this Nation against a congressional forcible destruction of his citizenship, whatever his creed, color, or race. Our holding does no more than to give to this citizen that which is his own, a constitutional right to remain a citizen in a free country unless he voluntarily relinquishes that citizenship.
U.S. Supreme Court in Afroyim (1967)
The decision in Afroyim is in stark contrast to the earlier Supreme Court decision of Perez v. Brownell, 356 U.S. 44 (1958). In the earlier decision SCOTUS cited to the same 1940s Nationality Act – [Section § 401(e) of the Nationality Act of 1940]. The Court explained that the petitioner was born in the U.S. (unlike Afroyim who was born in Poland per the Court); explaining the individual was born in Texas, yet found that he lost his citizenship by voting in political elections in Mexico. The odd notion in Perez is that although he was born in the U.S. the Court referred to him as a “native-born Mexican citizen”. The key facts summarized by that Court were as follows:
Petitioner was born in Texas in 1909. He resided in the United States until 1919 or 1920, when he moved with his parents to Mexico, where he lived, apparently without interruption, until 1943. In 1928 he was informed that he had been born in Texas. At the outbreak of World War II, petitioner
knew of the duty of male United States citizens to register for the draft, but he failed to do so. In 1943 he applied for admission to the United States as an alien railroad laborer, stating that he was a native-born citizen of Mexico, and was granted permission to enter on a temporary basis. He returned to Mexico in 1944 and shortly thereafter applied for and was granted permission, again as a native-born Mexican citizen, to enter the United States temporarily to continue his employment as a railroad laborer. Later in 1944 he returned to Mexico once more. In 1947 petitioner applied for admission to the United States at El Paso, Texas, as a citizen of the United States. At a Board of Special Inquiry hearing (and in his
subsequent appeals to the Assistant Commissioner and the Board of Immigration Appeals), he admitted having remained outside of the United States to avoid military service and having voted in political elections in Mexico. He was ordered excluded on the ground that he had expatriated himself; this order was affirmed on appeal. In 1952 petitioner, claiming to be a native-born citizen of Mexico, [356 U.S. 44, 47] was permitted to enter the United States as an alien agricultural laborer. He surrendered in 1953 to immigration authorities in San Francisco as an alien unlawfully in the United States but claimed
the right to remain by virtue of his American citizenship. After a hearing before a Special Inquiry Officer, he was ordered deported as an alien not in possession of a valid immigration visa; this order was affirmed on appeal to the Board of Immigration Appeals.
It does not seem that either Mr. Perez of Mr. Afroyam were much concerned about U.S. federal
tax consequences of their U.S. citizenship. Indeed, Mr. Perez was only a boy of about 10 years old when his parents left Texas to reside in Mexico where he remained for about 23 years before returning to the U.S. Afroyam tried to return to the U.S. apparently after his marriage failed in Israel.
Today, the U.S. Department of State articulates their policy and law of dual nationality for U.S. citizens seeking foreign citizenship. See, U.S. Department of State website:
U.S. law does not impede its citizens’ acquisition of foreign citizenship whether by birth, descent, naturalization or other form of acquisition, by imposing requirements of permission from U.S. courts or any governmental agency. If a foreign country’s law permits parents to apply for citizenship on behalf of minor children, nothing in U.S. law impedes U.S. citizen parents from doing so.
Dual Nationality
With that said, see Survey of the Law of Expatriation from 2002: Department of Justice Analysis (Not a Tax Discussion)
Too Much? – Treasury Proposes Changes in the Expatriation Tax Law – per Green Book (2023 Fiscal Year) – Part I of II
The Administration made specific proposals in its Fiscal Year 2023 Revenue Proposals to modify key provisions in the law associated with “covered expatriates.” Importantly, they proposed two key concepts that can have far reaching consequences –
- Creating, in effect, a new monitoring system of those who become “tax expatriates” – specific to filing of IRS Form 8854 – and
- Extending the statute of limitations period indefinitely in the event IRS Form 8854 is not filed by the “tax expatriate”.
What does this mean from a practical perspective to individuals around the world? Specifically, to (i) citizens who formally renounce their citizenship, and (ii) lawful permanent residents who have left the U.S. and did not formally abandon their immigration status with USCIS?
First, anyone who fails to file IRS Form 8854 with their tax return or files a false or inaccurate form has to be concerned under current U.S. tax law.
The U.S. federal tax law has a specific crime, for making a false statement or signing a false tax return or other document – which is known as the perjury statute (IRC Section 7206(1)). This is a criminal statute, not civil. Some people are also under the misunderstanding that a false tax return needs to be filed. The statute is much broader and includes “. . . any statement . . . or other document . . . “.
(1) Declaration under penalties of perjury
Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; or . . .
The IRS Form 8854 has a specific penalty of perjury signature requirement independent of any U.S. federal income tax return to be filed. See the current language below:
See a prior post –
* Filing False Expatriation Tax Form – IRS Form 8854
Filing a false IRS Form 8854 . . . becomes problematic quickly for any individual who carelessly discloses inaccurate asset information (or no asset information at all). See, the 2016 indictment of a NY business professor discussed previously here: Expatriation Tax Form 8854 is Part of Criminal Tax Case
Whether criminally or civilly, taxpayers should never underestimate the importance of filing complete and accurate tax returns; specifically including IRS Form 8854, Initial and Annual Expatriation Statement.
In addition to these cases, the Department of Justice has been actively involved in pursuing criminal charges against various individuals associated with tax expatriation cases. See the U.S. Supreme Court of last year to take up a criminal case – Regarding an Unnamed Law Firm that Advises International Tax & Expatriation Matters. A petition for a writ of certiorari to the U.S. Supreme Court was unsealed regarding the 9th Circuit case, In re Grand Jury, case Nos. 21-55085, 21-55145. In that case a law firm and a company was held in contempt of court: Re: a Grand Jury Subpoenas –
The panel affirmed the district court’s orders holding
appellants, a company and a law firm, in contempt for failure
to comply with grand jury subpoenas related to a criminal
investigation, in a case in which the district court ruled that
certain dual-purpose communications were not privileged
because the “primary purpose” of the documents was to
obtain tax advice, not legal advice.
Importantly, the IRS and the DOJ currently have extensive legal tools at their disposal to pursue taxpayers who may owe taxes as a result of becoming a “covered expatriate.” The above criminal cases reflect their interest and appetite in pursuing such cases.
In addition to criminal exposure, the civil tax exposure can be extensive and the IRS is not shy about assessing tax and international information penalties (even if the assessment for penalties such as not filing IRS Form 5471 are unlawful, as determined by the U.S. Tax Court recently – ). See April 3rd, 2023 decision by the United States Tax Court (the “Tax Court”) – Farhy,[6] stating that the IRS does not have statutory authority to assess penalties under section 6038(b).
The next Part II post will discuss the details of the Administration’s proposed change.
Spoiler Alert: The Author thinks its highly unlikely these changes will be adopted by Congress!