International Tax · Citizenship Renunciation · LPR Abandonment
International Tax Shareholder
EB-5 Visa – a common Path to a “Green Card” and then USC
Pathways to United States Citizenship – (USC): Focus on the EB-5
Every individual who ultimately becomes a naturalized U.S. citizen must first qualify for lawful permanent resident (“LPR”) status unless a narrow statutory exception applies. Although public attention frequently focuses on the EB-5 immigrant investor program, with the idea they are those with greater assets and income (contemplating taxes) EB-5 investors represent only a very small percentage of all individuals who become lawful permanent residents. Understanding the relative size of each immigration pathway is essential because every pathway ultimately raises many of the same U.S. tax issues—including worldwide income taxation, estate and gift taxation, and the tax consequences of later abandoning lawful permanent resident status or renouncing U.S. citizenship.
The EB-5 visa has been a fixture of U.S. law since the early 1990s. It was not until 2009 that a substantial number of EB-5 visas were issued in a given year, 4,218 to be exact. Statistically, the total EB-5 visa leading to LPR status is a fraction of the other categories as explained here. For an excellent overview of the law and categories, see the CRS report- Permanent Legal Immigration to the United States: Policy Overview (Updated November 4, 2024)
EB-5 Visa – to a “Green Card” then to United States Citizenship – (USC)
From the laws inception in 1992 through FY2004, there were only 6,024 EB-5 visas issued during that 12 year period. That is an annual average of only approximately 500 persons. See, the GAO Report on Immigrant Investors. As the program grew in popularity so too did the location of investors from around the world. It was not until 2009 when the total number of investors started growing substantially. Most significantly in 2009 when 4218 EB5 visas were issued, still less than 1/2 of the 10,000 allocated annually by the statute.
These numbers kept going at an annual pace especially starting in 2012, when 6,764 EB-5 visas were issued and then around 10K+/- annually for the last dozen years or so, up until the years that were impacted by a change in the law and a bit by COVID (2020 and 2021).
Chinese Investors Have Dominated the total Group of EB-5 Investors
The country-of-origin analysis is important because practitioners frequently advise clients from these jurisdictions regarding immigration planning, cross-border tax planning, and eventual expatriation planning with consequences in those countries.
I have compiled the total list of countries from which EB-5 visa investors came from as summarized in the Country of Origin global graphic for FYE 2024. There are over 100 countries from which these investors came from, but again, China is the dominant country, followed by Vietnam, India, Taiwan and then South Korea as the countries with the greatest number of investors. South Africa comes next, followed by Brazil and then Mexico, but each with less than 200 total investors, each country as follows:
China
9547
Vietnam
1533
India
1428
Taiwan
513
Korea, South
325
South Africa
158
Brazil
157
Mexico
128
Hong Kong S.A.R.
116
Venezuela
97
Canada
81
Great Britain & N. Ireland
63
Russia
58
Nigeria
52
Turkey
44
Colombia
44
France
38
United Arab Emirates
30
Germany
29
Japan
25
Singapore
23
Kazakhstan
21
Peru
20
Ukraine
17
Sweden
15
Argentina
15
Egypt
14
The importance of this analysis is to help individuals (and their advisors) who fit into these categories, e.g., who have a pathway to a green card and then on to become a naturalized U.S. citizen, understand the potential “tax expatriation” consequences of their decisions over the long-run.
What are the U.S. “tax expatriation” consequences to individuals who go down these pathways, including to their dependent children, or spouses or any future beneficiaries who are “United States person”?
What are the tax expatriation consequences if the individual later decides they do not want to be a green card holder or a U.S. citizen and later wishes to abandon their lawful permanent residency status or formally renounce their U.S. citizenship?
These and many other questions should be considered, especially for long-term family planning. Not just for the investor, but for their children and spouse, who may be eligible for the visa that can lead to LPR status and eventually to USC. Facilitating younger children (under 21 years of age) is a common driver for EB-5 investors for families who want the United States to be a pathway for their children’s’ future.
Why These Immigration Pathways Matter from a Tax Perspective
Every pathway leading to lawful permanent resident status almost always subjects the individual to the comprehensive U.S. federal income tax system. Depending upon the individual’s assets, family structure, treaty residence, and future living plans, obtaining a green card will also have significant implications for:
worldwide income taxation;
estate and gift taxation;
foreign trust reporting;
information reporting obligations under various laws;
controlled foreign corporation rules;
PFIC reporting;
exit tax planning; and
long-term succession planning.
Equally important, many lawful permanent residents eventually decide to return permanently to their country of origin or another foreign jurisdiction. Those individuals—and frequently their spouses and dependent children—must carefully consider the tax consequences of formally abandoning lawful permanent resident status or, after naturalization, renouncing U.S. citizenship. The sooner individuals and their advisors realize these consequences, the better they can plan for important life decisions.
Those tax consequences are collectively referred to as the U.S. tax expatriation rules, and they form the principal subject of this website.
The legal pathways towards lawful permanent residency status can be broken down into the following categories and the EB-5 category is a fraction (only about 1%) of the total pool leading to LPR status:
This category includes EB-1 through EB-5 categories that include individuals with extraordinary ability, certain professionals, other skilled workers. The chart I prepared here reflects the total number of EB-5 visas issued cumulative. This chart reflects the total number of cumulative EB-5 visas that have been issued through the FYE 2024 of approximately 131K. This does not take into consideration how many of these were issued to the principle investor versus spouses and children under twenty-one years of age. See, 8 U.S. Code § 1153(b).
EB-1, EB-2 and EB-3 represent the greatest group of individuals who obtained LPR status (e.g., approximately 5X, each category compared to the EB-5 category). See Yearbook of Immigration Statistics, Table 6.
For instance, annually the EB-1 through EB-3 categories are processing about 50K per year of each, and the EB-5 category is only 131K over most of its 25 year life (or about 10K per year – for more recent years). Approximately 16% of all green card holders come through these employment based preferences.
Table – Approximate Decade-Average Share by Category, FY2014–FY2023
Category
Approx. Share
Notes
Family-sponsored (total)
~64%
Immediate relatives + family preferences combined
— Immediate relatives
~46%
Spouses ~26%, parents ~14%, children ~6%
— Family preferences (F1–F4)
~18%
Numerically capped at 226,000
Employment-based (EB-1–EB-5)
~16%
Capped at 140,000; breached in COVID years
Refugees & asylees
~12%
Numerically unlimited; ceiling-driven volatility
Diversity
~4%
Statutory ceiling 55,000
All other / special
~4%
SIV, U/T victims, cancellation, registry, etc.
C. Diversity Immigrant Program
The annual diversity lottery, allocated by random selection, to natives of countries with historically low rates of immigration to the United States. See, 8 U.S. Code § 1153(c). The Attorney General plays a key role by statute in this determination. There is a statutory maximum of 55,000 and only represents about 4% of all LPRs compared to the larger pool. This program is on hold as of December 19, 2025 when the USCIS policy memorandum (PM-602-0193) directs officers to place an immediate hold on pending adjustment of status, ancillary benefits and associated waiver applications for individuals applying through the Diversity Immigrant Visa program. [1, 2]
D. Humanitarian and Special Pathways: Refugees/Asylees
Several routes proceed outside the preference system (the three categories above). Refugees and asylees adjust under a specific statutory regime; self-petitioning abused spouses and children proceed under other provisions; victims of qualifying crimes and of trafficking can adjust from U and T nonimmigrant status; and certain children subject to qualifying juvenile-court findings can qualify, among others. There are statutory limits placed on this group.
Whatever category one uses for LPR status, there will be important U.S. federal tax consequences to them and typically their family members. That’s the large part of the focus on this forum where the author has written about the subject of how it all ties to “tax expatriation”. As previously reported, there are 3.88 million “LPR” individuals who are living outside the U.S. – per the 2024 report by the U.S. federal government. Many of them live in a treaty country. See, Table 1 of the Homeland Security, Office of Immigration Statistics – Estimates of the Lawful Permanent Resident Population in the United States and the Subpopulation Eligible to Naturalize: 2024, and Revised 2023.
Part II of Part II: The Gold Card – The U.S. Tax Costs – “It’s like the green card, but better and more sophisticated.”
See Part I for the background discussion, which was published more than a year ago.
This article focuses on the tax consequences of the “Trump Gold Card” program and, in particular, the implications if participation ultimately leads to U.S. citizenship (“USC”).
The final version of the Gold Card program requires a $1 million contribution to the federal government, rather than the $5 million amount initially discussed in April 2025. See the government website, The Trump Gold Card is Here.
It is also important to note that President Trump established the Gold Card program through Executive Order 14351 in September 2025. Congress did not enact the program through legislation.
The Cost of a Trump Gold Card
For a $15,000 Department of Homeland Security processing fee and, following successful background review, a $1 million contribution to the federal government, an applicant may obtain U.S. permanent residence through the Gold Card program.
Why Would an Ultra-High-Net-Worth Individual Voluntarily Enter the U.S. Tax Net?
A fundamental question arises: Why would an ultra-high-net-worth (“UHNW”) individual contribute $1 million to obtain U.S. residence and potentially U.S. citizenship, thereby becoming subject to one of the world’s most expansive tax systems?
For many individuals, acquiring U.S. citizenship or lawful permanent resident (“LPR”) status can result in exposure to:
U.S. income taxation on worldwide income;
U.S. gift taxation on worldwide transfers of property; and
U.S. estate taxation on worldwide assets at rates that currently reach 40%.
U.S. Estate and Gift Taxation of Worldwide Assets
The United States generally imposes estate and gift taxes on the worldwide assets of U.S. citizens. In addition, lawful permanent residents who are domiciled in the United States may become subject to the same worldwide transfer tax regime.
Unlike many countries, the United States generally does not permit its citizens to escape worldwide taxation simply by relocating abroad. Most U.S. income tax treaties and estate and gift tax treaties contain a “savings clause” that preserves the right of the United States to tax its citizens notwithstanding treaty provisions.[1]
U.S. Estate and Gift Taxation of Worldwide Assets
As a result, the worldwide assets of a U.S. citizen may be included in the U.S. transfer tax system under IRC §§ 2001 and 2031 (estate tax) and IRC §§ 2501 and 2511 (gift tax).
Consider a U.S. citizen who owns:
a residence in Norway;
shares of a Mexican corporation;
a bank account in Singapore;
an interest in a Liechtenstein foundation (Stiftung);
a portfolio of securities held through a London financial institution; and
an apartment in Dubai.
Subject to applicable valuation and ownership rules, each of these assets generally forms part of the individual’s worldwide taxable estate for U.S. estate tax purposes.
By contrast, a non-U.S. citizen who is not domiciled in the United States generally would not be subject to U.S. estate tax on any of these assets, unless they include U.S.-situs property such as stock issued by U.S. corporations.
The difference can be dramatic: no U.S. estate tax exposure versus potential exposure to a 40% U.S. estate tax on worldwide assets.
U.S. Income Taxation of Worldwide Income
The contrast is equally significant in the income tax context.
A nonresident generally is subject to U.S. income taxation only on limited categories of U.S.-source income and income effectively connected with a U.S. trade or business.
A U.S. citizen, however, remains subject to U.S. federal income taxation on worldwide income regardless of where the individual resides.
Consequently, a foreign entrepreneur, investor, or family office principal who acquires U.S. citizenship will find that income earned from businesses, investments, trusts, partnerships, and financial accounts throughout the world generally becomes reportable to the Internal Revenue Service and subject o U.S. income taxation.
That result raises an obvious question: if the program is available, why have so few ultra-high-net-worth individuals pursued it successfully?
The most obvious explanation is that the long-term U.S. tax consequences may outweigh the perceived immigration benefits for many globally mobile individuals.
Comparison to the EB-5 Program
Different applicants may have different motivations.
The traditional EB-5 immigrant investor program generally requires a qualifying investment that, if successful, may ultimately be recovered. The program also requires satisfaction of statutory requirements, including job creation. Approximately 200,000+/- individuals have obtained a green card through the EB-5 program.
EB-5 Visa Applicants by Country
By contrast, the Gold Card program requires a direct contribution to the federal government.
In either case, the successful applicant receives lawful permanent resident status. However, if the Gold Card ultimately serves as a pathway to naturalized U.S. citizenship, the applicant may become subject to the unique worldwide taxation regime applicable to U.S. citizens.
The Expatriation Problem
If Gold Card holders ultimately naturalize as U.S. citizens, future departure from the U.S. tax system will necessarily become significantly more complicated.
Individuals who later seek to relinquish U.S. citizenship will necessarily face the expatriation rules of IRC § 877A and be tainted with “covered expatriate” status.
As discussed in earlier posts, covered expatriate status can have substantial long-term tax consequences for both the expatriating individual and future recipients of gifts and inheritances.
Legal Questions Surrounding the Program
The Gold Card program also raises constitutional and statutory questions.
Unlike the EB-5 program, which was enacted by Congress, the Gold Card program was created through executive action. Congress did not amend Title 8 of the United States Code to establish a new immigrant category.
Whether the Executive Branch possesses sufficient statutory authority to create such a program remains an open legal question (I am doubtful it will be sustained – if challenged) and will likely be the subject of continued litigation and judicial review.
The outcome of pending litigation involving other immigration-related executive actions may provide useful guidance regarding the scope of presidential authority in this area. We await the outcome of the latest case litigated through the courts. See, Supreme Court appears likely to side against Trump on birthright citizenship which was also issued by an executive order.
Who Truly Benefits?
Who is the ideal candidate for a Trump Gold Card? Only one person thus far has one.
For almost all HNW individuals, the immigration benefits, travel flexibility, business opportunities, and potential pathway to U.S. citizenship would rarely justify the cost. Someone with assets below US$20M might find it attractive.
For almost all others—particularly those with substantial foreign businesses, investment portfolios, trusts, and family wealth located outside the United States—the long-term consequences of worldwide U.S. income, estate, and gift taxation will almost always substantially outweigh the advantages.
As a result, any prospective applicant for a Trump Gold Card should carefully evaluate not only the immigration benefits of the program (+ the uncertainty in the law), but particularly the tax consequences that will follow for decades thereafter.
What is U.S. citizenship-based taxation, and who does it reach?
The U.S. taxes based on citizenship, not just on where a person lives. A U.S. citizen who has spent nearly all of their life outside the U.S. can still fall within the U.S. tax system. Lawful permanent residents (green-card holders, also called LPRs) residing outside the U.S. can be reached as well. Many people in both groups are shocked to learn how broad this scope is.
Why does the IRS focus so heavily on accounts and assets outside the U.S.?
In recent years the IRS and the Tax Division of the Department of Justice (DOJ) have aggressively pursued assets and accounts located outside the U.S. That pursuit has put a keen focus on the offshore holdings of U.S. citizens and green-card holders who live abroad.
What are the “New Filing Compliance Procedures for Non-Resident U.S. Taxpayers”?
In August the IRS articulated its position for U.S. citizens and lawful permanent residents residing outside the U.S. in a document titled “New Filing Compliance Procedures for Non-Resident U.S. Taxpayers.” It sets out how the IRS approaches the filing obligations of those taxpayers.
What is the IRS non-filer program?
The IRS has had, for years, a specific program aimed at “non-filers,” meaning persons who do not file U.S. income tax returns. The program is detailed in the Internal Revenue Manual (IRM), the IRS’s internal handbook of procedures. It can apply to U.S. citizens and green-card holders living overseas who have not filed.
What can happen if a U.S. citizen or green-card holder living abroad never files a U.S. return?
When a taxpayer does not file, the IRS may prepare a “substitute return” on that person’s behalf. A substitute return is a return the IRS files for the taxpayer, rather than one the taxpayer files. This can apply to U.S. citizens and lawful permanent residents residing overseas who are non-filers. Anyone facing this situation may want to consult an experienced attorney.
Where is the non-filer program actually written down?
The non-filer program is laid out in the Internal Revenue Manual at section 4.19.17, the Non-Filer Program. Its subsections cover the full process:
Is there a legal difference between “relinquishing” and “renouncing” U.S. citizenship for tax purposes?
For U.S. federal tax purposes, “relinquish” and “renounce” are in effect interchangeable. Many people assume the two words carry an important legal distinction. For federal tax purposes, they generally do not. This question was first taken up in an earlier post dated June 21, 2014. The expatriation tax statute, IRC Sections 877 and 877A (the U.S. tax rules that apply when a person gives up U.S. citizenship), uses both terms in the same breath. What drives the tax result is not which word applies but the “expatriation date.”
What date actually matters under the U.S. expatriation tax rules?
The key time reference is the “expatriation date.” Under IRC Sections 877 and 877A (the U.S. expatriation tax rules), this date is defined in Section 877A(g)(3). It focuses on specific dates tied to meetings or events with the U.S. Department of State. Because the tax outcome turns on this date, the choice between the words “relinquish” and “renounce” does not, by itself, change it.
Why don’t the words “relinquish” and “renounce” change the tax outcome?
Both words point to the same thing under the tax law. The expatriation tax statute, IRC Sections 877 and 877A, uses “renounce” and “relinquish” in the same breath. The result instead depends on the “expatriation date” defined in Section 877A(g)(3), which is tied to specific meetings or events with the U.S. Department of State. So the terminology a person uses does not, on its own, change the federal tax treatment.
Consult an experienced attorney about how these rules apply to a specific situation.
Why Are Foreign Banks Closing Accounts for Americans Abroad?
Is it hype, or is it real? Many U.S. citizens and lawful permanent residents (green-card holders) living overseas have heard that foreign banks are closing their accounts. Here is what actually shows up in practice, and why so many people are moving their money home.
Are foreign banks really closing the accounts of Americans living overseas?
It is hard to know with certainty how accurate these claims are. If it has happened to you, of course you will know it. In practice, account closings have turned up in places such as Hong Kong, London, Geneva, and Zurich. But they do not appear to be a widespread practice, at least not anecdotally.
What have news reports said about banks cutting off American expats?
Several published reports have raised the issue, including:
The Wall Street Journal, “Expats Left Frustrated as Banks Cut Services Abroad” (11 Sept 2014).
The Wall Street Journal opinion piece by Colleen Graffy, “How to Lose Friends, Citizens and Influence.”
Time Magazine, “Swiss Banks Tell American Expats to Empty Their Accounts.”
The Huffington Post (Aug 2014), “Expatriate Tax Sense or Broad-Brush Overreach: The U.S. Foreign Account Tax Compliance Act (FATCA).”
The New York Times (April 2013), “Overseas Finances Can Trip Up Americans Abroad.”
The Association of Americans Resident Overseas, on Americans abroad being denied access to banking and investment opportunities.
American Citizens Abroad, which compiles various news accounts of accounts being closed.
Does the size of the account change how a foreign bank responds?
It appears to. For individuals with large investment accounts, for example greater than US$1 million, banks seem to accommodate them, or at least require them to move their assets to a U.S. affiliate or branch. Those with smaller accounts, for example less than US$100,000, appear to see a broader brush stroke of closures.
If foreign banks aren’t the main driver, who is closing these accounts?
Much of it is the individual’s own decision, not the bank’s. What has been widespread in practice is a plan by individuals to close foreign financial accounts and relocate the assets to a U.S. financial institution. This includes U.S. citizens and lawful permanent residents (green-card holders) living outside the U.S. The move is the individual’s choice, not the financial institution’s.
Why are U.S. citizens and green-card holders abroad choosing to close their foreign accounts?
The reason is generally not FATCA (the Foreign Account Tax Compliance Act) itself, but a desire to reduce the compliance costs of filing and reporting on foreign accounts. FATCA seeks to co-opt foreign banks as long-arm enforcement of U.S. tax law. Even so, the driver people cite is cost, not the statute. Multiple tiers of reporting of foreign assets is now required. It can cost a small fortune to retain a good international tax adviser who is aware of these reporting requirements.
What reporting makes holding foreign accounts so expensive?
Two main layers apply to U.S. citizens and lawful permanent residents living outside the U.S.: the FBAR (the Foreign Bank Account Report) and IRS Form 8938 (Specified Foreign Financial Assets). For those with significant assets and numerous accounts, the professional fees and costs of reporting these accounts accurately can become exorbitant. That is especially true when the risk of potentially devastating civil penalties is weighed into the mix.
What penalties are people worried about?
The IRS now regularly threatens large, multiple-year 50% willfulness penalties for those who did not file an FBAR. This risk is more than just perceived. The Zwerner FBAR case is one example, and it has been described as probably a Pyrrhic victory for the government for U.S. citizens and lawful permanent residents living outside the U.S. The combination of cost, compliance burden, and penalty risk is what drives many people to act.
Is it actually illegal for a U.S. person to hold a foreign bank account?
No. There is no legal restriction for a U.S. citizen to hold foreign accounts. A U.S. citizen or lawful permanent resident residing outside the U.S. will generally find it easier, from a lifestyle and personal financial management perspective, to have an account in their home country. The irony is that the practical effect pushes in the opposite direction.
Where are these assets ending up?
The practical effect, anecdotally, is that U.S. financial institutions are receiving these assets and investments. As individuals close foreign accounts to cut compliance costs and penalty risk, the money flows back into the U.S. rather than staying in their home country abroad.
Can you keep your green card and still “expatriate” for US tax purposes?
Yes. Many lawful permanent residents (LPRs, or green card holders) assume they have not “expatriated” for US tax purposes as long as they have not handed their green card back to US Citizenship and Immigration Services (USCIS). That assumption can lead to a rude awakening. Under IRC Section 7701(b)(6), a green card holder can cease to be treated as a lawful permanent resident for federal tax purposes without ever formally abandoning the card with USCIS.
What is IRC Section 7701(b)(6)?
IRC Section 7701(b)(6) is a provision Congress added in 2008 that says when a green card holder stops being treated as a lawful permanent resident for federal tax purposes. The relevant part provides that an individual shall cease to be treated as a lawful permanent resident if the individual commences to be treated as a resident of a foreign country under a tax treaty between the United States and that country, does not waive the benefits of the treaty applicable to residents of the foreign country, and notifies the Secretary of the commencement of such treatment.
What are the three tests for losing LPR status under Section 7701(b)(6)?
The statutory language sets out three tests. A green card holder is no longer an LPR for federal tax purposes when all three are met:
The individual is treated as a resident of a foreign country under the provisions of a tax treaty;
The individual does not waive the benefits of that treaty; and
The individual notifies the Secretary of the commencement of such treatment.
Can filing Form 1040NR end your green card status for tax purposes?
It can. Each of the three tests under Section 7701(b)(6) appears to be satisfied by a green card holder who files IRS Form 1040NR as a non-resident while living in a country that has a US income tax treaty. In that situation the individual may be treated as having ceased to be a lawful permanent resident for federal tax purposes, even though the green card itself was never returned to USCIS.
What happens once you stop being a lawful permanent resident under the tax law?
There can be a host of unintended consequences for an individual who ceases to be a lawful permanent resident under the federal tax law. The expatriation provisions of Section 877A and Section 2801, among others, can be implicated, along with many other provisions of the law. For background, see “Accidental Americans” – Rush to Renounce U.S. Citizenship to Avoid the Ugly U.S. Tax Web,” International Tax Journal, CCH Wolters Kluwer, Nov./Dec. 2012, Vol. 38 Issue 6, p45.
How does a green card holder formally abandon LPR status?
For those who wish to formally abandon their lawful permanent resident status, there is a specific DHS/USCIS form used for that purpose: Form I-407. Filing this form is the route to formally relinquishing the green card with the immigration authorities, which is separate from the tax-law treatment described above under Section 7701(b)(6).
The IRS announced a new “streamlined” filing program in June 2014 for US citizens and lawful permanent residents with unreported foreign accounts. Here is how the program works and where its legal risks lie.
What is the IRS “streamlined” program for offshore accounts?
The streamlined program is an administrative procedure the IRS announced in June 2014 for US citizens (USCs) and lawful permanent residents (LPRs, or green-card holders) who did not file US tax returns, information returns, or FBARs (FinCEN Form 114, the Foreign Bank Account Report) covering their foreign accounts. An earlier version was announced in June 2012 and has since been removed from the IRS website. The program asks the taxpayer to file under a certification, and for US residents to pay a “5% miscellaneous offshore penalty.” It is an administrative procedure, not a change in the underlying law.
Does the streamlined program give any legal protection or finality?
No. Legally speaking, this administrative procedure provides no legal protection or finality to the taxpayer. It does not protect against penalties for failure to file tax returns, failure to file information returns, or failure to file FBAR forms. It also does not protect against IRS audits of prior years while the statute of limitations is still open. The IRS or the Justice Department can still fully pursue a US citizen or green-card holder who did not properly file US income tax returns, information returns on foreign assets, or FBARs for prior years, as provided under the law.
What is the “5% miscellaneous offshore penalty”?
For US residents using the streamlined program, the “5% miscellaneous offshore penalty” is an amount equal to 5% of the relevant foreign assets that the taxpayer agrees to pay in order to participate. It is not a penalty that exists under the law in the first place, and it may have no correlation with any income taxes actually owing. As a result, a good-faith taxpayer who made an inadvertent mistake about complex tax provisions can end up paying a portion of their principal assets, not just tax.
Can the IRS be required to refund the 5% penalty if you change your mind?
No. Under the terms of the Certification, the government will never be required to refund the 5% miscellaneous offshore penalty. The taxpayer waives “all defenses against and restrictions on the assessment and collection of the [5%] miscellaneous offshore penalty.” It is a one-way street. Once the money is paid it does not come back, even though the penalty is not something contemplated under Title 26.
What does the streamlined certification require, and who wrote it?
The certification is a statement the taxpayer signs under penalties of perjury. It is not drafted in the taxpayer’s own words; it is drafted by the US federal government. By signing, an individual may expose themselves to greater liability if the government later wants to challenge the certification. The certification turns on terms like “negligence,” “inadvertence,” and a “mistake” that is a “good faith misunderstanding” of the law. It is entirely unclear how the government will interpret these terms in any particular case.
Can the government challenge your certification after you file?
Yes. The IRS’s limited resources mean the vast majority of streamlined cases likely will not be challenged. Even so, there are many ways a certification can be challenged against a particular taxpayer. For example, if a taxpayer threw away the monthly bank statements for a foreign account for the year 2012, that may breach the Certification, and the terms seem to provide that all bets are off against the taxpayer. Signing under penalties of perjury is what creates this exposure.
Could the government later decide you belonged in the OVDP instead?
Yes. Some practitioners expect the government to selectively pursue taxpayers who entered the streamlined process when it believes they should have gone in under the Offshore Voluntary Disclosure Program (OVDP) instead. That determination is made by the government, not the individual taxpayer, and it can put the taxpayer in further jeopardy after they have already filed under streamlined.
Why is the FBAR described as a “trap”?
The FBAR has been used as a trap for the taxpayer. If an individual did not check the right box on Schedule B, Part III of their tax return, the government may argue they were “willfully blind” of the FBAR filing requirements, even if they genuinely did not know about them. The FBAR regulations are extremely complex. Few tax experts anywhere could pass a basic exam on what counts as a “financial interest in” or “signature authority over” an account under these regulations, with many scoring only around 75%, a C or maybe D grade.
Does the streamlined program apply to green-card holders as well as US citizens?
Yes. The same exposure applies to both US citizens (USCs) and lawful permanent residents (LPRs, or green-card holders) who did not properly file US income tax returns, information returns on foreign assets such as IRS Form 8938, or FBARs. Both groups face the same lack of protection from penalties and audits. Both can be pursued by the IRS or the Justice Department for prior years.
A concrete example: why might the program produce an unjust result?
Consider Pierre, who moved from France to the US about 10 years ago. He was an accountant in France, his English is poor, and he relies on an English-only return preparer who never asked whether he held non-US assets. Pierre inherited Swiss and French accounts worth about US$3M, plus real estate outside Paris worth about US$2.5M that generates monthly rent. His preparer always checked the “No” boxes on Schedule B, Part III and never filed FBARs or IRS Form 8938. His sophisticated French advisers told him those European assets were taxable only in France and Switzerland. Foreign taxes withheld there exceed his US tax, so after the US foreign tax credit he owes less than US$1,000 of federal income tax. To join the streamlined program, he would pay about US$325,000, which is 5% of US$6.5M.
Why would a good-faith taxpayer pay $325,000 to settle a $1,000 tax bill?
This is the core unfairness of the program for US residents. A taxpayer like Pierre may owe less than US$1,000 in federal income tax, yet the 5% miscellaneous offshore penalty would require paying about US$325,000, a large portion of a family inheritance, for an inadvertent mistake about very complex rules. That US$325,000 is not contemplated under Title 26. There is no clear legal basis for requiring a good-faith taxpayer to hand over part of their principal to the government for an honest misunderstanding.
What are the choices if you do not enter the streamlined program?
A taxpayer in Pierre’s position faces two hard choices. The first is to comply under Title 26 by filing amended returns, and risk that the IRS and Justice Department pursue multiple-year 50% willfulness penalties by arguing he was “willfully blind,” as in the Zwerner case, even though the penalty for failing to file IRS Form 8938 is generally limited to 3 years at $10,000 per year. The second is to be forced into the streamlined procedure and pay a large portion of his European family inheritance to the US, simply because he did not file IRS Form 8938 or FBARs. Both paths carry real risk.
How does your immigration status decide whether you owe U.S. tax?
Your U.S. tax status starts with your immigration status. The U.S. taxes a “U.S. person” (the technical term used for U.S. federal tax purposes) on worldwide income, and whether you are a “U.S. person” depends largely on immigration concepts. Three immigration-based categories can make someone a U.S. person:
U.S. citizenship;
lawful permanent residency (a green card); and
meeting the substantial presence test as a non-citizen.
A person in any of these categories may have U.S. income tax residency, and so may be subject to U.S. income tax on income earned anywhere in the world.
Who counts as a U.S. citizen for tax purposes?
Almost every individual born in the United States is a U.S. citizen under the 14th Amendment. Citizenship can also pass from a parent. A child born outside the U.S. to a U.S. citizen parent may also be a U.S. citizen at birth through “derivative citizenship,” meaning citizenship derived from a U.S. citizen parent. The U.S. Citizenship and Immigration Services (USCIS) publishes “Nationality Chart 1, for Children Born Outside U.S.” to help determine whether such a child was a U.S. citizen at birth. Because U.S. citizens are “U.S. persons,” they are generally subject to U.S. tax on their worldwide income.
Can a green-card holder or visa holder be a “U.S. person” too?
Yes. Two non-citizen categories can still make someone a “U.S. person” for tax. The first is a lawful permanent resident (LPR), a green-card holder; LPR status carries a series of complex rules that can affect “U.S. person” status. The second is a person who is neither a citizen nor an LPR but who meets the “substantial presence test,” a tax test based on the number of days an individual is physically present in the United States. A person in either category may be treated as a “U.S. person” and taxed on worldwide income.
What is FATCA, and why is your foreign bank asking if you are a U.S. person?
If your foreign bank has asked whether you are a U.S. person, FATCA is why. FATCA (the Foreign Account Tax Compliance Act, Chapter 4 of Subtitle A of the Internal Revenue Code) entered into force in January 2014. It imposes obligations on financial institutions (“FFI”) and basically all private companies and legal entities (“NFFE”) throughout the world to confirm whether they have any “U.S. person” account holders or owners. That worldwide duty to check is what leads banks and companies outside the U.S. to ask account holders about their U.S. status.
How does a former U.S. citizen prove they are no longer a “U.S. person”?
A former U.S. citizen must generally provide a Certificate of Loss of Nationality (CLN), Form DS-4083, to prove they are no longer a U.S. person. This is a specific requirement both under the FATCA regulations and under a provision adopted into the FATCA intergovernmental agreements (IGAs) signed between the U.S. and other countries. For example, Annex I of the IGA between the U.S. and Spain addresses CLNs. Without the CLN, a financial institution may continue to treat the individual as a U.S. person.
Why does a U.S. place of birth make foreign banks ask for extra proof?
A U.S. place of birth is a warning sign to a withholding agent. Under Treasury Regulations Section 1.1441–7T, a withholding agent has reason to know that documents claiming foreign status are unreliable if its records show an unambiguous U.S. place of birth. To still treat such an account holder as a foreign person, the agent generally needs documentary evidence of citizenship in a country other than the United States (described in § 1.1471–3(c)(5)(i)(B)), plus one of the following:
a copy of the individual’s Certificate of Loss of Nationality (CLN); or
a reasonable written explanation of the renunciation of U.S. citizenship, or of why the person did not obtain U.S. citizenship at birth.
Alternatively, a valid Form W–8 establishing the account holder’s foreign status, together with that citizenship evidence and the written explanation, may satisfy the requirement.
Once you are no longer a U.S. person, does FATCA reporting stop?
Generally yes, once the right documentation is on file. A person who is no longer a “U.S. person” can generally avoid FATCA reporting to the IRS by a foreign financial institution (FFI), or by a company or legal entity (NFFE) in any country outside the U.S. The condition is that the supporting documentation, namely the Certificate of Loss of Nationality (CLN), is provided to that institution or entity. Until the CLN reaches the institution, FATCA reporting on the account may continue.
What is an Apostille Certificate, and why pair it with a CLN?
An Apostille Certificate is an international authentication confirming that an official document is genuine for use in another country. When providing a Certificate of Loss of Nationality (CLN) to a foreign financial institution or company, it is often advisable to obtain an Apostille Certificate along with the CLN. Some third-party organizations will accept the CLN only when it carries this certification. Pairing the apostille with the CLN can help the document be accepted abroad.
Future posts will cover more on the interplay of FATCA and former U.S. citizens and lawful permanent residents.
Does “covered expatriate” status only matter for wealthy people?
No. It is easy to assume the US expatriation tax rules only reach the rich, the wealthy, and the private-jet set. The press usually features wealthy renouncers like Tina Turner and Eduardo Saverin, the co-founder of Facebook, which fuels that assumption. But wealth is not the trigger. The rules can reach the poorest former US citizen, and certain long-term green card holders, wherever they live, if they fail the certification requirement in IRC Section 877(a)(2)(C).
What are the net worth and income tax tests people usually focus on?
Most coverage of expatriation focuses on two dollar thresholds. The first is the net worth test of US$2 million. The second is the income tax liability test of roughly US$125,000 of average annual net income tax. A “covered expatriate” is a former US citizen, or long-term green card holder, who on giving up that status either crosses one of those dollar thresholds or fails to certify tax compliance under Section 877(a)(2)(C). Because the headlines fixate on the dollar tests, the certification path is the one people miss.
Can you be a covered expatriate if you have no assets?
Yes. The certification requirement under Section 877(a)(2)(C) applies regardless of wealth. A former US citizen, or certain long-term green card holder, who cannot certify compliance becomes a “covered expatriate” even with almost nothing to their name. This is why the rules can reach so-called Accidental Americans who have spent little or no time in the US. The dollar thresholds are only one way in; failing to certify is another.
Does US expatriation tax apply to green card holders too?
Yes. The expatriation tax rules reach certain long-term lawful permanent residents (green card holders), not only US citizens. When a long-term LPR relinquishes or abandons their green card, the same certification requirement under Section 877(a)(2)(C) applies. A long-term LPR who cannot certify compliance becomes a covered expatriate on the same terms as a citizen who renounces.
If you have no assets, do you owe US income tax when you expatriate?
No. The expatriation income tax runs through a “mark-to-market” regime, which taxes unrealized gains as if you sold everything the day before you leave. With no assets, there are no unrealized gains, no tax base, and so no exit income tax. Even cash produces none. US dollars carry a tax basis equal to their face amount, so there is no unrealized gain on cash to tax.
What are the two points where expatriation can trigger US tax?
There are two. The first is the moment a US citizen or green card holder expatriates, that is, leaves the US tax system. This is the exit tax on unrealized gains, and it produces nothing for a person with no unrealized gains. The second arrives later, when a US person receives a covered gift or bequest from the covered expatriate under IRC Section 2801. That second point can land decades after the expatriation event.
What is the Section 2801 tax on covered gifts and bequests?
IRC Section 2801, enacted in 2008, taxes the US person who receives a gift or bequest from a covered expatriate. The recipient pays effectively 40% of the fair market value of the property received. There are virtually no deductions or exemptions, so the 40% applies to the full value. The gift or bequest can be direct or indirect, for example through a trust. Treasury has a proposed-regulation project underway under Section 2801.
Can someone with significant assets still owe no exit income tax?
Yes. Unrealized gains, not wealth, drive the exit income tax. Compare USC “A” with US$5,000 in total assets and USC “B” with US$15 million of cash in the bank and nothing else. Both owe the same exit income tax: US$0. Cash carries a tax basis equal to its amount, so neither has any unrealized gain to tax. And if neither can satisfy the certification requirement under Section 877(a)(2)(C), both are covered expatriates just the same.
Why would a covered expatriate with no assets ever create a future tax bill?
Because the Section 2801 tax can land long after expatriation, on assets you do not have yet. Two things change over time. You may grow or inherit assets after expatriating, while no longer a US citizen, ending up with far more than you hold today. And people in your life, family or friends, may become US residents even if none are today. Either shift can set up a future covered gift or bequest from you to a US person.
How much tax could a modest future inheritance trigger?
Take USC “A,” who renounces and, 40 years later, leaves a US$120,000 bequest to a daughter who has since moved to the US. Under Section 2801, the daughter would owe more than US$40,000 in tax on that inheritance, roughly 40%, with virtually no deductions or exemptions. That is a heavy burden on a relatively modest inheritance. It is one of several scenarios that show how covered expatriate status can matter over the long run.
How realistic is it that a future heir becomes a US person?
It is common. One family member moves to the US temporarily for work or graduate school, gets married, and decides to stay, even for a while. Often they have children, who are US citizens by birth in the US. A US person is now part of the family tree. A future gift or bequest from a covered expatriate to that person can fall under Section 2801, decades after the expatriation itself.
World Cup & Playing in the United States: Green Card Holders, the Treaty Tiebreaker, and the Global Athlete or Entertainer
As the world’s athletes have arrived to perform on U.S. soil, the U.S. tax system is a broad net. The 2026 FIFA World Cup—hosted across the United States, Mexico, and Canada—is a useful occasion to revisit a question that recurs every time a global athlete or entertainer steps onto a U.S. field, stage, or court: what does the United States get to tax, what forms govern the answer, and when does a visiting performer or athlete cross the line from nonresident into resident – including if they hold a lawful permanent resident card?
This blog is dedicated to issues of “tax expatriation” which crosses into different professions and global lifestyles. See, for instance the following prior blogs:
There are of course many famous athletes who were not U.S. citizens and then became green card holders and oftentimes then became naturalized U.S. citizens. Since the Knicks just won the NBA championship after 53 years, one of their greatest, Patrick (mi tocayo) Ewing left Jamaica as a boy, became a green card holder and then a naturalized citizen. A 1985 New York Times article, A Favorite Son Goes Home, describes his first return to the island since a boy.
Soccer players, have moved all over the world and Alejandro Zendejas is a current U.S. World Cup player born in Ciudad Juarez, Chihuahua, Mexico, at the border who later obtained lawful permanent residency and also became a naturalized citizen. That means (as a result of his naturalized U.S. citizenship) if he were ever to renounce his U.S. citizenship, he would necessarily become a “covered expatriate” as defined in the tax statute.
Athletes and entertainers are specially taxed in the U.S. in the sense they typically receive few benefits from the U.S. income tax treaty network. For instance, a world famous Norwegian soccer player such as Erling Haaland who has already equaled the Norwegian record (in just his first match) for most World Cup goals, previously belonging to midfielder Kjetil Rekdal is presumably subject to the U.S.-Norway treaty. The U.S.-Norwegian Income Tax Treaty is one of the very old tax treaties (1971) still on the books and has an “old fashioned” artist/entertainer/athlete provisions imbedded in the independent services provision that allows each government to specially tax artists and athletes if they earn over US$3,000.
A protocol to the treaty adopted in 1980 has a “new” article 14A specific to artists and athletes as reflected here in its entirety allowing the government to tax athletes and entertainers when they perform in the country (overriding other protective provisions of the treaty – e.g., Business Profits Art. 5, Independent Personal Services Art. 13 and Dependent Personal Services Art. 14):
The IRS also adopted a specific program, called the Central Withholding Agreement (“CWA”) program created by Revenue Procedure 89-47 specific to artists and athletes. I personally think it is a program that is not authorized by the statute and often applied by the IRS in a manner that violates the withholding tax regime we have in Chapter 3 of our statutory tax law, Subtitle A. In practice, third parties are subject to the 30% withholding tax on certain gross proceeds paid to companies other than the artist or athlete, if the athlete or artist doe not participate with the IRS in their CWA.
Mexico
In the case of global soccer players, even one with a “lawful permanent resident” card (i.e., a “green card”) they may be subject to the Chapter 3 withholding tax rules if the athlete is like Mr. Aroeste (Aroeste v. United States (Case No. 22-cv-00682-AJB-KSC)) holding a green card in his pocket, but not a U.S. income tax resident by application of the residency rules set forth in an income tax treaty. Will the soccer player become a “covered expatriate” and not even know it (oops)?! It can get tricky quickly.
Meanwhile, Mexico and the U.S. have both advanced to the knockout round.
Canada plays Switzerland and presumably has a 99% chance of advancing to the Round of 23.
which has a chart reflecting the total Chinese investors as a percentage of total – Part II of Part II: The Gold Card – The U.S. Tax Costs – “It’s like the green card, but better and more sophisticated.”
5 visas issued cumulative. This chart reflects the total number of cumulative EB-5 visas that have been issued through the FYE 2024 of approximately 131K. This does not take into consideration how many of these were issued to the principle investor versus spouses and children under twenty-one years of age. See, 8 U.S. Code § 1153(b).
adjustment of status, ancillary benefits and associated waiver applications for individuals applying through the Diversity Immigrant Visa program. [1, 2]
