Will 2015 Be a Record Year for Citizenship Renunciations?
The First Quarter of 2015 saw a large number of published names of former U.S. citizens: 1,335 total for the first quarter.
In addition, the second quarter saw a total of 460, for a 
cumulative total for the year (mid way through the year of 1,795). At this pace, the year 2015 could be a slight record of U.S. citizenship renunciations compared to the record year of 2014.
See, New Record of U.S. Citizens Renouncing – The New Normal
The names of each citizen can be located in the list published in the Federal Register.
There are a number of key considerations and strategic decisions that most all U.S. citizens need to consider prior to renouncing citizenship. See, for instance –
The “Hidden Tax” of Expatriation – Section 2801 and its “Forever Taint.”
Can the U.S. Federal Government Bar Entry into the U.S. to a U.S. Citizen without a U.S. Passport?
Global Entry, SENTRI and NEXUS after Renouncing – the “Trusted Traveler Programs” – SAFE TRAVELS!
Coming Back to the U.S. as a Permanent Resident (“Repatriating”)?
As discussed in the last post, this post addresses immigration law exclusively by a guest post writer, Ms. Teodora Purcell. She provides a good overview of EB-5 visas and the current law and likely changes in the near future.
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The Pros and Cons of the EB-5 Immigrant Investor Program
The EB-5 Immigrant Investor program was created by the Immigration and Nationality Act (“INA”) of 1990 to stimulate the US economy through capital investments made by foreign investors to create jobs. It attracts capital by facilitating US permanent resident status (aka “green card”) for foreigners who make a $1 million USD (or in some cases, $500,000 USD) investment in an eligible business that results in at least ten US jobs and benefits the US economy.[1]
The pros of the EB-5 program to the US are evident from the numbers. In FY 2014, 10,928 EB-5 petitions were filed with the United States Citizenship and Immigration Services (“USCIS”), 5,115 approved, and 12,453 pending, which translates into over $2.5 billion approved for investment and an additional $6.2 billion in capital awaiting federal adjudication, and the creation of thousands of US jobs.[2] EB-5 capital is also an attractive low cost funding tool for project developers in the US, while it offers the foreign investor a path to permanent residency that is not visa backlogged and does not require sponsorship by a US employer or relative. But is the EB-5 an easy and quick way “to purchase your green card”?
Basic EB-5 Requirements
The EB-5 program includes two separate avenues: (1) Direct EB-5 investment – where the investor invests in an enterprise and plays a role in management or policy making, which will directly create ten jobs, or (2) Regional Center based EB-5 investment – where the investor invests in a USCIS approved regional center and plays a more passive role by having policy making authority. Both require: (1) the investment to be made in a for-profit, new commercial enterprise;[3] (2) a contribution of capital at risk in the amount of $1,000,000 USD, or $500,000 USD[4] if the business is in a targeted employment area (i.e. high unemployment or rural area), aka “TEA”;[5] (3) the investment to be used for creation of at least ten full time jobs for US workers;[6] and (4) the investor to establish the path and the lawful source of the investment.
Pros and Cons of Direct and Regional Center EB-5 Investments
The Regional Center (“RC”) is an entity designated and regulated by USCIS, which pools EB-5 capital from multiple foreign investors in job-creating economic development projects within a defined geographic region and designated industries.[7] USCIS has approved approximately 600 RCs[8] and 95% of the EB-5 petitions are based on a RC investment. Notably, EB-5 RC investment funds are subject to U.S. securities and anti-fraud laws and regulations,[9] and the Securities Exchange Commission (SEC) and USCIS are raising awareness of how the EB-5 program can be misused and of the importance of proper due diligence to be conducted by foreign investors.[10]
The direct EB-5 program is permanent, whereas the RC EB-5 program sunsets on September 30, 2015, but is expected to be reauthorized by Congress for another five years, and there is proposed legislation to make it permanent.[11] The most recent bipartisan bill on the RC EB-5 program, The American Job Creation and Investment Promotion Reform Act, was introduced on June 3, 2015, known as The Leahy-Grassley Bill.[12] The proposed legislation would reauthorize the EB-5 RC program until September 30, 2020, rather than make it permanent, and will provide an overhaul of reforms to improve the program’s integrity, including raise the requirement investment amount to $800,000/ $1,200,000, respectfully.[13]
With the direct EB-5 investment, the foreign national accomplishes not only an immigration purpose but also a purpose of investing in a business that he or she runs and that may provide significant return, whereas with the RC EB-5 investment, the rate of return is typically 0.5-2% and the investor plays a more passive role. However, the direct EB-5 investor must prove direct employment of ten U.S. workers, whereas, with RC EB-5 investment, the job creation is shown by a combination of direct, indirect and induced employment using reasonable economic methodologies. Most (but not all) RCs are located in $500,000 TEAs but there can be direct EB-5 investments that also qualify for the reduced capital. Both EB-5 options require the investor to be engaged in the “management” of the enterprise, which can be satisfied if the investor is a limited partner with the rights, powers and duties normally granted to limited partners under the Uniform Limited Partnership Act.[14] Which EB-5 option to choose requires an individualized analysis of the investor’s circumstances and goals.
No Fast Track EB-5 Process and No Guaranteed US Permanent Residence
The EB-5 investors are not guaranteed a green card because of the lengthy process and possibility that the project in which they invest could fail or undergo material changes, and there is no expedite processing of EB-5 petitions. The process starts with the filing of an I-526 immigrant entrepreneur petition with USCIS, in which the investor must establish the lawful source of funds, document the path of the required investment, and show that the ten US jobs will be created within two years,[15] or that the jobs have already been created as a result of the investment.
The filing of an I-526 petition alone does not give the investor the right to stay or work in the US. Current I-526 average processing time is approximately 14 months and the I-526 approval does not give the investor permanent residence. Rather, after the approval, if the investor is outside the US, he or she and dependent family members will apply for their immigrant visas at the US Consulate in their home country, which requires additional documentation, security checks and adds another 6-12 months to the process. If the investor is in the US in valid nonimmigrant status, he or she will adjust status to permanent resident in the US, which takes about six months.[16] So after 2-3 years (provided no visa retrogression), the investor receives a green card that is conditional and valid for only two years.
Within 90 days of the conditional green card expiration (i.e. between the 21 to 24 month after the green card approval), the investor must file an I-829 application to remove the condition on permanent residence with USCIS[17], and prove that the investment has been sustained and that the requisite jobs have been created or will be created within a “reasonable time.”[18] The current average I-829 processing time is 10 months and if unsuccessful, the EB-5 investor may not only lose the green card but end up in removal proceedings. If the I-829 is approved, the EB-5 investor receives his or her permanent green card. During this process, the EB-5 investment must remain in the enterprise until the condition is removed (i.e. for 4-5 years), whereas in all other employment based green card categories, the result is a permanent green card and no such significant financial commitment is required.
The EB-5 program accounts for less than 1% of the immigrant visas issued annually by the US and throughout the process, investors are subject to the same background checks as applicants in any other visa category, and their ability to eventually apply for citizenship is the same as others. The INA allocates 10,000 EB-5 immigrant visas, of which 3,000 are reserved for the RC program, and no more than 7 percent of the visas can be allocated to any one country.[19] Since close to 85% of the investors are from China, for the first time in September 2014, the EB-5 visas became unavailable for Chinese nationals, and EB-5 visa backlog for Chinese investors may be expected in 2015. There are more significant immigrant visa quota backlogs in other categories of family and employment-based immigration, which is why the EB-5 still remains attractive.
EB-5 and Other Green Card Options
Despite the challenges investors may face in tracing the invested funds or in the job creation, and the possibility of visa backlog for some, the EB-5 is still a good option, although it is not the panacea for all foreign nationals seeking permanent residence in the US. There are other employment based visa options that may be available for the investor and these alternatives, if successful, lead to a permanent green card, do not require placement of a $1,000,000 investment at risk, and there are minimal concerns about visa availability. For the foreign nationals who choose the EB-5 green card avenue, it is important to put together a competent team that includes an immigration counsel, as well as business, tax, and securities counsels, to advise on the multiple complex issues that go into determining whether the EB5 green card path is the right choice for the client.
Immigrant investors and entrepreneurs bring substantial value to the United States, not only through the capital they deploy or the jobs they create, but also with the knowledge and experience they bring to US businesses, and working with such clients is very rewarding.
[1] The immigration EB-5 laws can be found at INA§203(b)(5); 8 CFR§204.6 and 8 CFR§216.6.
[2] https://iiusa.org/blog/government-affairs/uscis-government-affairs/citizenship-immigration-services-uscis-adjudication-data-i526-i829-petitions-reveal-unprecedented-growth-eb5-program-fiscal-year-2014/ /
[3] 8 CFR §§204.6(e) & (h).
[4] There is a proposed legislation to increase the investment amount to $1,200,000 USD and $800,000 USD, respectively. See S.1501, The American Job Creation and Investment Promotion Reform Act, available at https://www.congress.gov/bill/114th-congress/senate-bill/1501/text
[5] 8 CFR §§204.6(e) & (f)(2).
[6] 8 CFR §§204.6(e) & (j)(4). The USCIS deems the two year period to commence six months after the adjudication of the I-526 petition. See USCIS Policy Memorandum (May 30, 2013)
[7] 8 CFR §204.6(e).
[8] http://www.uscis.gov/working-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/immigrant-investor-regional-centers
[9] The interest being offered and sold in an EB-5 offering by regional centers constitute securities. See Securities Act of 1933; Securities Exchange Act of 1934.).
[10] For more information, see http://www.sec.gov/investor/alerts/ia_immigrant.htm
[11] S.744, H.R. 2131, H.$. 4178, and H.R. 4659 in the 113th Congress
[12] S.1501, The American Job Creation and Investment Promotion Reform Act, available at https://www.congress.gov/bill/114th-congress/senate-bill/1501/text. Also see http://www.leahy.senate.gov/imo/media/doc/The%20American%20Job%20Creation%20and%20Investment%20Promotion%20Reform%20Act.pdf
[13]If implemented, the Leahy-Grassley legislation will have a significant impact on Regional Centers and investors alike, some of the most notable changes proposed to the EB-5 Program include: (1) Raise the minimum investment amount for all EB-5 investors to $800,000 for TEAs and $1,200,000, respectively; (2) Establish an “EB-5 Integrity Fund” to cover the costs associated with audits and site visits to detect fraud in the United States and abroad; (3) Increased oversight of TEA designation; (4) Expanded USCIS authority to terminate Regional Center designation; (5) Establish a premium processing option to expedite USCIS adjudication of EB-5 petitions at an additional filing fee.
[14] 8 CFR §204.6(j)(5).
[15] The USCIS requires that the I-526 petition be accompanied by a detailed and credible business plan compliant with the requirements in the precedent decision of Matter of Ho, 22 I&N Dec. 206 (INS Assoc. Comm’r, Examinations, 1998).
[16] https://egov.uscis.gov/cris/processingTimesDisplay.do;jsessionid=dbcqHwZ-eEZPOcoHaz5Ru.
[17] 8 CFR §216.6
[18] 8 CFR §216.6(a)(4)(iv) . In its May 30, 2013 Policy Memorandum, USCIS has interpreted “reasonable time” to mean one year, starting at the end of the conditional residence period.
[19] INA §203(a) ; INA §204(1) & INA§202(a)(2).
Teodora Purcell | Attorney at Law
FRAGOMAN
11238 El Camino Real, Suite 100, San Diego, CA 92130, USA
Direct: +1 (858) 793-1600 ext. 52424 | Fax: +1 (858) 793-1600
TPurcell@Fragomen.com
“Expatriation” Implies Leaving the U.S., But Many More Want to Come to the U.S.: Tax Consequences
U.S. citizens and long-term residents who are considering renouncing their citizenship or abandoning their lawful permanent residency (“LPR”) are increasingly undertaking more sophisticated life and tax planning before “taking the plunge”!
Many (in my experience – all) of these “expatriates” eventually want to be able to visit the U.S. and in some cases possibly come back to live permanently. Many simply apply for and obtain a B1/B2 visa.
To appreciate how many more persons want to immigrate to the U.S. compared to emmigrate from it, see an earlier post: The Number of Citizens Leaving (Renouncing) Versus Coming (Naturalizing) is Just a Speck
This is the other “side of the coin” so to speak, since individuals contemplating coming to the U.S. often should undertake pre-immigration tax planning. One means for non-U.S. citizens to become LPRs and eventually U.S. citizens, is through the EB-5 visa program.
Immigration attorney Ms. Teodora Purcell has written prior guest posts, including: When is the loss of US nationality effective? [Guest Post from Immigration Lawyer]
The next post on this site will be a complete article by Ms. Teodora Purcell explaining in more detail the EB-5 visa program and recent developments.
As to the tax implications of immigration to the U.S. (as opposed to emigration from it), I wrote the tax chapter in the latest edition of the American Immigration Lawyers Association (“AILA’s) treatise – Immigration Options for Investors & Entrepreneurs US$199.
That treatise is heavily focused on “EB-5 investors” and the tax discussion is titled: Key U.S. Tax Considerations for EB-5 (& Other) Visa Applicants.
Ms. Teodora Purcell’s contact information is set out below:
Teodora Purcell | Attorney at Law
FRAGOMAN
11238 El Camino Real, Suite 100, San Diego, CA 92130, USA
Direct: +1 (858) 793-1600 ext. 52424 | Fax: +1 (858) 793-1600
TPurcell@Fragomen.com
The Intersection of U.S. Federal Tax Law with Collection of International Information – Including other Federal Agencies
For decades, the IRS largely worked in a vacuum, relative to other government agencies.
Changes started in earnest in 2003 after September 11, 2001, when Congress past various anti-terrorism laws. For details of the history and how and when the IRS became responsible for these functions, the IRS Internal 
Revenue Manual has a detailed explanation – Part 4, Chapter 26, Section 5. Bank Secrecy Act History and Law
In April 2003, the IRS became in charge of civil enforcement of foreign account information under Title 31. See IRM, Part 4, Chapter 26, Section 16. Report of Foreign Bank and Financial Accounts (FBAR).
The world has changed dramatically in these past few years and the IRS no longer works in such a vacuum. For a history of foreign bank and Congressional influences, see, How Congressional Hearings (Particularly In the Senate) Drive IRS and Justice Department Behavior
Today there are a host of governmental inter-agency activities along with foreign government exchanges of information; e.g., DHS, Department of State, ICE, USCIS, foreign government exchanges of information under FATCA IGAs, a plethora of federal “intelligence agencies” for “terrorism related requests” as identified in IRM pursuant to IRC Section 6103(i), foreign governments under tax treaty exchanges, among many others.
The law is not even clear as to which agencies qualify as “intelligence agencies” as they are not identified in the statute and many are presumably classified organizations.
- Who is an “intelligence agency” for purposes of the statute?
The following is a list of some of the intelligence agencies that are presumably included in the federal tax statute Section 6103(i)(7):
National |
|
| United States Intelligence Community Director of National Intelligence National Intelligence Council [NIC] National Counterterrorism Center (NCTC) National Counterintelligence Executive [NCIX] |
Official Official Official Official Official |
| Central Intelligence Agency | Official |
| National Security Agency | Official |
| National Reconnaissance Office | Official |
| National Geospatial-Intelligence Agency | Official |
| Defense Intelligence Agency | Official |
| Federal Bureau of Investigation | Official |
| Department of Homeland Security Office of Intelligence and Analysis | Official |
Other Defense Department |
|
| Assistant to the Secretary for Intelligence Oversight | Official |
| Under Secretary of Defense for Intelligence Under Secretary of Defense for Policy |
Official Official |
| Assistant Secretary of Defense for Networks and Information Integration | Official |
| Defense Information Systems Agency | Official |
| Defense Advanced Research Projects Agency | Official |
| Defense Protective Service | Official |
| Defense Security Service | Official |
| US Special Operations Command | Official |
| Army Army Deputy Chief of Staff for Intelligence Intelligence and Security Command |
Official Official Official |
| Navy Office of Naval Intelligence Naval Security Group Command Naval Criminal Investigative Service |
Official Official Official Official |
| Marine Corps | Official |
| Air Force Air Force Technical Applications Center Air Intelligence Agency |
Official Official Official |
Other Federal Agencies |
|
| National Security Council President’s Foreign Intelligence Advisory Board Office of National Drug Control Policy |
Official Official Official |
| Energy Department Office of Intelligence |
Official Official |
| Justice Department Justice Intelligence Coordinating Council OIG – Office of the Inspector General DEA – Drug Enforcement Administration NDIC – National Drug Intelligence Center USNCB – U.S. National Central Bureau |
Official Official Official Official Official Official Official |
| State Department INR – Bureau of Intelligence & Research INL – Bureau for International Narcotics and Law Enforcement Affairs CT – Counterterrorism Office DS – Bureau of Diplomatic Security |
Official Official Official Official Official |
| Treasury Department Office of Intelligence Support Office of the Under Secretary (Enforcement) FINCEN – Financial Crimes Enforcement FLETC – Federal Law Enforcement Training Center |
Official Official Official Official Official |
| National Archives and Records Administration Information Security Oversight Office |
Official Official |
A less secret organization is the Social Security Administration which now increasingly intersect with the work of
the IRS. Also, the Department of State now provides warnings on its Passport applications about tax consequences and requirements of social security numbers (“SSN”s).
See also how in an Application for a U.S. Passport there are now specifically references IRC Section 6039E.
Finally, see also how on the last page (page 28) of currently issued U.S. Passport (“Book“) and paragraph D that explains generally the taxation obligations of citizenship.
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Important Correction: Passports Required to Enter and Leave U.S. – but SSNs May be Optional
The prior post noted that both a social security number (“SSN”) and a U.S. passport is required to enter the U.S. for U.S. citizens (“USCs”).
Please note that the current application for passports include the following language and provisions throughout the application (which have been partially reproduced below):
International tax lawyer, Roy Berg at Moody’s in Calgary, Alberta, Canada brought my attention to several key issues regarding this assertion:
- Senate Finance Chairman Hatch’s amendment to the trade bill that recently passed the Senate with a favorable vote of 79:21, S.1269 – Trade Facilitation and Trade Enforcement Act of 2015 provides the following:
(e) Revocation Or Denial Of Passport In Case Of Individual Without Social Security Account Number.—
(1) DENIAL.—
(A) IN GENERAL.—Except as provided under subparagraph (B), upon receiving an application for a passport from an individual that either—
(i) does not include the social security account number issued to that individual, or
(ii) includes an incorrect or invalid social security number willfully, intentionally, negligently, or recklessly provided by such individual, the Secretary of State is authorized to deny such application and is authorized to not issue a passport to the individual.
(B) EMERGENCY AND HUMANITARIAN SITUATIONS.—Notwithstanding subparagraph (A), the Secretary of State may issue a passport, in emergency circumstances or for humanitarian reasons, to an individual described in subparagraph (A).
(2) REVOCATION.—
(A) IN GENERAL.—The Secretary of State may revoke a passport previously issued to any individual described in paragraph (1)(A).
(B) LIMITATION FOR RETURN TO UNITED STATES.—If the Secretary of State decides to revoke a passport under subparagraph (A), the Secretary of State, before revocation, may—
(i) limit a previously issued passport only for return travel to the United States; or
(ii) issue a limited passport that only permits return travel to the United States.
(f) Effective Date.—The provisions of, and amendments made by, this section shall take effect on January 1, 2016.
Finally, Mr. Berg also noted that there is a procedure for USCs without SSNs, at least currently, to apply for U.S. passports; albeit subject to the US$500 money penalty described above. See, proposed Form 13997 by the U.S. Treasury Department and the comments:
The purpose of this form,and the necessity to collect information, is to obtain a valid SSN, TIN, a written statement of reasonable cause, or an explanation from the individual as to why they don’t have a SSN or TIN.
USCs without a Social Security Number (and a Passport) Cannot Travel to the U.S.
Recent posts have focused on the dilemma facing U.S. citizens (USCs) who have no social security number (“SSN”). See an older post (23 July 2014) – Why do I have to get a Social Security Number to file a U.S. income tax return (USCs)?
These problems are quickly coming to the surface, now that financial institutions (“FFIs”) around the world and private companies and trusts (e.g., non-financial foreign entities -NFFEs) must have their owners and clients certify they are not U.S. citizens; OR report the accounts of such U.S. citizens to the IRS under FATCA and the intergovernmental agreements (“IGAs”).
The intricacies of this problem are highlighted in a technical paper I recently drafted and presented to the U.S. Treasury Department and the Joint Committee of Taxation, among other federal government groups. Some key excerpts of that paper titled URGENT NEED FOR U.S. CITIZENS RESIDING OUTSIDE THE U.S. TO BE ABLE TO OBTAIN A TAXPAYER IDENTIFICATION NUMBER (“TIN”) OTHER THAN A SOCIAL SECURITY NUMBER are set out below in this section:
The U.S. tax law imposing taxation on the worldwide income of USCs[1] residing overseas has created a dilemma that prejudices these USCs without a SSN. This strict SSN/TIN regulatory rule undermines the basic tax administration system and discourages tax compliance for those USCs who never obtained a SSN. This dilemma affects numerous USCs throughout the world, which is now compounded by the certification and reporting requirements of USCs and third parties, such as FFIs and NFFEs[ under the Foreign Account Tax Compliance Act (“FATCA”).
In short, USCs without a SSN, necessarily cannot be in compliance with U.S. federal tax law. As I point out in my paper, such –
“A law that cannot be complied with is surely a bad law, the same as a “ . . .law that cannot be enforced is a bad law.”[a]
[a] See, The Case Against Taxing Citizens, Reuven S. Avi-Yonah (March 31, 2010), University of Michigan School of Law, Law & Economics Working Papers.
The paper referenced above explains how difficult it is for USCs residing overseas to ever obtain a SSN. Specifically, it explains how difficult it is to have an in-person interview at only 18 different locations around the world with a U.S. Department of State employee. See, 12 Year Old (and Older) U.S. Citizens Residing Outside the U.S. Must Have An “In-Person” Interview in a U.S. Embassy or Consulate for SSN Application in 1 of Just 17 Posts Worldwide
As a USC residing somewhere around the world, you might decide to simply spend the time, money and resources to travel internationally to arrive in the U.S. to apply for a SSN directly with the Social Security Administration within the U.S. Unfortunately, any USC is now legally prohibited from traveling in or out of the U.S. without a U.S. passport. There are few exceptions to this general rule, none of which contemplate U.S. federal tax compliance. See, the relevant excerpts from the white paper:
C. Travel to the U.S. is Also Not An Option for a USC without a SSN, Due to 22 CFR § 53.1 Requiring a U.S. Passport
A possible solution to this TIN/SSN dilemma may appear to be a trip to the U.S. by the USC to apply for a SSN in the U.S. Unfortunately, this simply creates another dilemma, since the USC must have a U.S. passport to travel to the U.S. The immigration law regulations 22 CFR § 53.1 require that a U.S. citizen have a U.S. passport to enter or depart the United States. The relevant part of the regulations is § 53.1(a) which provides as follows:
Passport requirement; definitions.
(a) It is unlawful for a citizen of the United States, unless excepted under 22 CFR 53.2,[2] to enter or depart, or attempt to enter or depart, the United States, without a valid U.S. passport.
These regulations were first published in 2006 and unfortunately, simply create another dilemma for the USC residing overseas without a SSN. This additional dilemma is that an application[3] for a U.S. passport requires the individual have a SSN; a vicious circle back to the inability to obtain a SSN.
At the end of the day, the restrictions imposed on USCs make it legally impossible for a USC without a passport to travel to the U.S. (even if they wish they could) to obtain a SSN.
[1] See, IRC § 61 and Treas. Reg. §§ 1.1?1(b) and 1.1?1(a)(1)..
[2] The exceptions set forth in this regulation would not generally be applicable in the case of USCs residing overseas without a SSN.
[3] Application for a U.S. Passport – http://www.state.gov/documents/organization/212239.pdf.
12 Year Old (and Older) U.S. Citizens Residing Outside the U.S. Must Have An “In-Person” Interview in a U.S. Embassy or Consulate for SSN Application in 1 of Just 17 Posts Worldwide
As previous posts have mentioned, U.S. citizens (USCs) residing overseas can only comply with U.S. tax law and FATCA certifications if they have a social security number (SSN). See, U.S. Citizens Overseas who Wish to Renounce without a Social Security Number will Necessarily be a “Covered Expatriate”
See key excerpts of the paper titled URGENT NEED FOR U.S. CITIZENS RESIDING OUTSIDE THE U.S. TO BE ABLE TO OBTAIN A TAXPAYER IDENTIFICATION NUMBER (“TIN”) OTHER THAN A SOCIAL SECURITY NUMBER that explains this dilemma:
This dilemma affects numerous USCs throughout the world, which is now compounded by the certification and reporting requirements of USCs and third parties, such as FFIs and NFFEs[2] under the Foreign Account Tax Compliance Act (“FATCA”).
* * *
The regulations provide the specific rule that all USCs must have a SSN[1] as their TIN. There are no general exceptions in the regulations to the requirement that a USC must have a SSN as their TIN.
This regulatory requirement specifically directs the USC to the forms that must be completed and filed with the SSA, in order to obtain a SSN, as follows:[2]
(1) Social security number. Any individual required to furnish a social security number pursuant to paragraph (b) of this section shall apply for one, if he has not done so previously, on Form SS-5, which may be obtained from any Social Security Administration or Internal Revenue Service office. He shall make such application far enough in advance of the first required use of such number to permit issuance of the number in time for compliance with such requirement. The form, together with any supplementary statement, shall be prepared and filed in accordance with the form, instructions, and regulations applicable thereto, and shall set forth fully and clearly the data therein called for. Individuals who are ineligible for or do not wish to participate in the benefits of the social security program shall nevertheless obtain a social security number if they are required to furnish such a number pursuant to paragraph (b) of this section. [emphasis added]
These Title 26 regulations discuss individuals requesting forms from “any Social Security Administration or Internal Revenue Service office” which clearly implies that the SSA and the IRS have offices overseas.
Unfortunately, this is not the case, as the IRS recently announced it is closing its full-time walk-in offices in London, Frankfurt and Paris, as the office in Beijing, China was closed in 2014.[3] Similarly, the SSA has no overseas offices, but does have limited field office operations in Canada, the British Virgin Islands and Samoa.[4]
Therefore, it is clear that the above regulations are speaking to individuals who reside and live in the U.S., and not USCs residing overseas when it requires USCs to “ . . . make such application far enough in advance of the first required use of such number to permit issuance of the number in time for compliance with such requirement. [5]
These Title 26 regulations require the application be made well in advance of any tax filing requirements are not realistic for USCs residing overseas as is explained herein. This author has seen the issuance of SSNs take more than 6 months, even when the USC could have an interview in their country of residence.
More importantly, there are very few countries (only 17) where in-person interviews can even be held. See, discussion below.
USCs who have lived most, if not all of their lives outside the U.S., commonly do not have a SSN. The procedural requirements imposed by the SSA to obtain a SSN in these cases are complicated and unrealistic for USCs living overseas.[6] This author has seen cases where USCs residing overseas have even spent the money and resources and time to travel to the U.S. to apply for a SSN, yet were turned away by the SSA, due to various procedural requirements which were not satisfied.
Often times obtaining a SSN overseas is nearly impossible, depending upon which country and where within that country the USC resides.
A. Obtaining a SSN Outside the US by a USC – Much More than Just Filing SSA Form SS-5
The SSA does not have offices outside the U.S. although they have a so-called “Office of International Operations.”[7] The focus of OIO is the administration of social security benefits, not obtaining SSNs for USCs residing overseas. Since the SSA is assisted by the U.S. Department of State (who are not SSN experts), USCs have to rely upon various U.S. embassies and consulate offices around the world, as they try to obtain a SSN.
B. Tax Return Filing Requirements – Minimum Gross Income
Any USC individual is obligated under the U.S. federal tax law to file a federal income tax return IRS Form 1040 if they meet minimum thresholds of income. For the tax year 2015, the thresholds are low, and are reached once the gross income is at least the sum of (i) the “exemption” amount (currently $4,000) and (ii) the “standard deduction” amount (currently $6,300 for single and married filing jointly and $12,600 for married couples filing jointly).[8]
This is true, even if all of the income is earned income and eligible for the foreign earned income exclusion, which is $100,800 for the tax year 2015. [9]
Additionally, USCs living overseas necessarily have a U.S. tax return filing requirement, when they meet these low thresholds of gross income. In these cases, tax returns that are not filed by the 15th of June are not considered timely filed.[10]
II. The Social Security Administration Rules Make it Nearly Impossible for Many USCs Overseas to Reasonably Obtain a SSN
The policy and procedures of the SSA regarding issuing SSNs have changed significantly over the years.[11] The Social Security Administration (SSA) provides a detailed chronology of the major changes in policy and procedures regarding filing for and obtaining a SSN.[12] One of the most significant revisions in the last decade came from The Intelligence Reform and Terrorism Prevention Act of 2004 (P.L. 108-458), which imposes various standards for the verification of documents or records submitted by an individual.
A. Only a Few Countries Around the World have Personnel at U.S. Embassies or Consulate Offices that Can Process SSN Applications – SSA Form SS-5-FS
Applying for SSNs overseas is severely restricted compared to an application in the U.S.
According to the U.S. Department of State, Foreign Affairs Manual (“FAM”), only certain “Claims-Taking Posts” in specific countries “may” include “processing applications for Social Security Numbers.” [13]
These 17 countries (and a city in the case of Jerusalem) with Claims-Taking Posts include:
“Austria, Argentina, Costa Rica, Dominican Republic, France, Germany, Greece, Ireland, Italy, Japan, Jerusalem, Mexico, Norway, Philippines, Poland, Portugal, Spain, and the United Kingdom.”
Noticeably absent are many Western European countries, virtually all of Latin America, virtually all of Asia, virtually all of Eastern Europe, all of the Middle East (except Jerusalem), all of the African continent, all of the Australian continent and surrounding island countries and Russia, among many other significant countries, including OECD member countries.[14]
Nothing in the FAM requires any of these “Claims-Taking Posts” to actually process applications for a SSN. Plus, there are of course hundreds of other countries throughout the world, not listed above, which do not have such a U.S. Department of State Post. For these reasons, USCs in countries such as China must travel to a U.S. Department of State Post (e.g., the Philippines) which is able to process applications for SSNs.
B. In Person Interview Required for Individuals Older than 11 Years Old
Individuals who are older than 11 years old must personally go to the U.S. Embassy or Consulate with a Claims-Taking Post. See 7 FAM 530, pages 7, 12, 13 and 7 FAM EXHIBIT 530(D) Mandatory In-Person Interview Worksheet SSN Applicant Age 12 or Older – Original SSN * * *
All of these rules makes you wonder whether foreign born individuals, such as actress Kim Cattrall from Sex & the City fame would have ever obtained a social security number overseas while she lived in Canada or the UK.
[1] See, Treas. Reg. § 301.6109-1(a)(1)(ii)(A).
[2] See, Treas. Reg. § 301.6109-1(d)(1).
[3] See, Bloomberg article, 14 January 2015 by Kocieniewski, IRS Will Shut Last Overseas Taxpayer-Assistance Centers: “After budget reductions over the last four consecutive years, the IRS is forced to make tough choices during this period of fiscal austerity and these closures have relatively little impact on taxpayers and treaty partners,” said Julianne Breitbeil, an IRS spokeswoman. Also, see IRS website that still reflects the London and Paris offices as open http://www.irs.gov/uac/Contact-My-Local-Office-Internationally.
[4] See, SSA website, Service Around the World, http://www.ssa.gov/foreign/
[5] See, Treas. Reg. § 301.6109-1(d)(1).
[6] See discussion below, regarding requirements to obtain a SSN. I.II, I.I,The Social Security Administration Rules Make it Nearly Impossible for Many USCs Overseas to Reasonably Obtain a SSN
[7] See SSA website, “Office of International Operations” – http://www.ssa.gov/foreign/ “Service Around the World – Welcome to SSA’s Office of International Operations (OIO) home page. The purpose of this site is to assist Social Security customers who are outside the U.S. or planning to leave the U.S. OIO is responsible for administering the Social Security program outside the U.S. and for the implementation of the benefit provisions of international agreements. Since SSA has no offices outside the U.S., OIO is assisted by the Department of State’s embassies and consulates throughout the world.”
[8] See, IR-2014-104, Oct. 30, 2014 and IRS Publication 501.
[9] See, IRC § 911 and IRS Publication 54.
[10] See, Treas. Reg. § 1.6081-5.
[11] See, SSA website, The Story of the Social Security Number, by Carolyn Puckett, Social Security Bulletin, Vol. 69 NO. 2, 2009 (http://ssa.gov/policy/docs/ssb/v69n2/v69n2p55.html.
[12] See, SSA website, Significant Milestones in Social Security Number Policy. A detailed chronology of the major changes in policy and procedures. http://www.ssa.gov/history/ssn/ssnchron.html.
[13] See 7 FAM 530, page 2 of 64.
[14] In contrast to these 17 countries (and one city – Jerusalem) where a USC residing overseas must travel to apply for a SSN, the Treasury Department has announced it has around 100 countries that have signed, or “have reached agreements in substance” a FATCA IGA. USCs throughout the world are required by the Foreign Account Tax Compliance Act (“FACTA”) to provide their U.S. TIN to financial institutions throughout the world (on IRS Form W-9, or its equivalent), which under current law necessarily must be a SSN. Of course, if they have no SSN, they cannot sign IRS Form W-9 which provides in Part II: “Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number . . .”
[15] See, 7 FAM 534.3 e.
Inflation Adjusted Exclusion Amounts Since Inception of 2008 “Mark to Market” Expatriation Tax Law: Example
The current “expatriation” “exit tax” forces a “covered expatriate” to pay U.S. income taxation on their unrealized gains (the “mark to market” concept) as if they sold their worldwide assets.
An “unrealized gain” is the amount of gain “built into” the property or other investment of the individual, which has yet to be sold or otherwise disposed of by the him or her. For instance, the 
diagram below reflects various assets held by a “Covered Expatriate” which includes Mexican real estate with a tax basis of US$200,000 but a current fair market value of US$1.1M. This means the unrealized gain in that Mexican real property is US$900,000 (US$1.1M – US$200K).
Who is a “covered expatriate” is a very important legal analysis that needs to be considered for each U.S. citizen who wishes to renounce or “long-term resident.” See, The dangers of becoming a “covered expatriate” by not complying with Section 877(a)(2)(C) (9 March 2014).
Importantly, the law provides for an exclusion from taxation on the former (a) U.S. citizen’s (“USC”) or (b) long-term resident’s unrealized gains. (See, Who is a “long-term” lawful permanent resident (“LPR”) and why does it matter? – 19 Aug. 2014). In other words, no U.S. income tax is due and payable by a “covered expatriate” if they did not have assets with unrealize
d gains greater than a certain threshold amount.
That threshold amount has been changing annually, since the initial US$600,000 that was originally adopted into the law in 2008. It is changing due to annual inflation adjustments.
The current 2015 exclusion amount adjusted for inflation is US$690,000. See, The “Phantom” Gain Exclusion from the “Mark to Market” Tax – Increases to US$690,000 for the Year 2015 (15 November 2014).
Hence, in this case, if the only asset owned by the “covered expatriate” (assuming she became one in 2015) was the real estate in the above example with unrealized gain of US$900,000, only US$210,000 would be subject to the “mark to market” tax on expatriation (i.e., the exit tax). This is because $690,000 of the total US$900,000 unrealized gain will be excluded from taxation (US$900K – US$690K).
The Mark to Market tax regime imposes taxation on this amount, even though the real estate is never sold. This means, the “covered expatriate” must come “out of pocket” to find the cash and means necessary to pay the tax imposed under the law.
There is no economic benefit obtained from this annual inflation adjustment if a U.S. citizen or long-term resident waits to become at a later time a covered expatriate; unless they consume, deplete or lose their assets in the interim. But at least, there is an inflation adjustment, so the taxpayer is not subject to an increasing amount of gain subject to tax as time progresses and inflation eats away at the true economic value and economic growth of the individual’s assets.
U.S. Citizens Overseas who Wish to Renounce without a Social Security Number will Necessarily be a “Covered Expatriate”
U.S. Citizens Overseas who Wish to Renounce without a Social Security Number (“SSN”) will Necessarily be a “Covered Expatriate”
- The Dilemma of SSNs, TINs and USCs Residing Overseas
The prior post discussed some of the complications of United States Citizens (“USCs”) who reside outside the U.S. and do not have a social security number (“SSN”) . This dilemma exists, even though USCs are not generally required to file for or 
obtain a SSN (e.g., at birth – See, SSA Publication – “Social Security Numbers For Children” page 2, It is not obligatory to file for a SSN at birth. “Must my child have a Social Security number? No. Getting a Social Security number for your newborn is voluntary. But, it is a good idea to get a number when your child is born. . . . ).
Indeed, it is the U.S. federal tax law that requires the USC must have a SSN for their taxpayer identification number (“TIN”). I will reference various excerpts from a recent paper I drafted and presented titled URGENT NEED FOR U.S. CITIZENS RESIDING OUTSIDE THE U.S. TO BE ABLE TO OBTAIN A TAXPAYER IDENTIFICATION NUMBER (“TIN”) OTHER THAN A SOCIAL SECURITY NUMBER , including the following:
. . . the IRS’ increased focus on international tax compliance has made clear that USCs residing overseas have U.S. tax return filing obligations, even if they have no assets, no income, or no real personal connections in or with the U.S. See IRS notice from 2011 which addresses numerous aspects of tax compliance for USCs overseas, including various penalties under the law[1]:
. . . U.S. Citizens or Dual Citizens Residing Outside the U.S. . . .
The IRS is aware that some taxpayers who are dual citizens of the United States and a foreign country may have failed to timely file United States federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), despite being required to do so. . . . 2. Penalties imposed for failure to file income tax returns or to pay tax . . . 3. Possible additional penalties that may apply in particular cases . . . 6. Possible penalties for failure to file FBAR . . . 7. New reporting requirement for foreign financial assets . . . [emphases added]
USCs residing overseas are subject to the range of tax penalties that apply to all individual taxpayers (e.g., negligence penalties, failure to file penalties, late payment or failure to pay penalties, etc.).[2] Additionally, USCs residing overseas are subject to other, typically much harsher penalties for not timely filing U.S. federal information returns regarding assets located outside the U.S.[3]; alluded to above in the IRS 2011 notice.[4]
These civil penalties typically are a minimum of US$10,000 per statutory violation. USCs who live outside the U.S. necessarily have assets, such as financial accounts in their country of residence. These Title 26 information reporting requirements[5] are referred to herein as “International Information Returns.”
The IRS will not process federal tax returns and International Information Returns without a valid TIN.[6] Plus, the law does not provide for an exception for USCs overseas who do not file returns, if they do not have a SSN. Late filed, or incomplete International Information Returns and tax returns (e.g., lacking a SSN) will typically subject USCs to these penalties even in those cases when the taxpayer has no federal income tax liability.[7]
[1] See, IRS FS-2011-13, December 2011, updated February, 2014.
[2] See, IRS FS-2011-13 and as a sample of some of the many statutory penalties that could typically apply, IRC §§ 6048, 6652(f), 6677, 6654, 6655, 6698, 6699, 6166, 6653, 6675, 6715, 6715A, 6717, 6718, 6719, 6720A, 6725, et. seq.
[3] See, IRC §§ 6038, 6038B, 6038D, 6039F, 6039G, 6046, 6046A, 6048, et. seq.
[4] See, IRS FS-2011-13, December 2011, updated February, 2014.
[5] See, IRC §§ 6038, 6038B, 6038D, 6039F, 6039G, 6046, 6046A, 6048, et. seq.
[6] See, IRS website, “General ITIN Information” – http://www.irs.gov/Individuals/General-ITIN-Information – “IRS no longer accepts, and will not process, forms showing “SSA”, 205c”, “applied for”, “NRA”,& blanks, etc.”
[7] See, IRC §§ 911 (foreign earned income exclusion) and 901 (foreign tax credit), et. seq. A USC residing overseas may have no actual federal income tax liability (for various reasons), typically due to the foreign earned income exclusion and/or foreign tax credit calculation.
The above explains fairly clearly the dilemma facing USCs residing overseas.
The complexity of getting a SSN and the requirements are covered in more detail in the paper. Some key points are:
I. The Social Security Administration Rules Make it Nearly Impossible for Many USCs Overseas to Reasonably Obtain a SSN
The policy and procedures of the SSA regarding issuing SSNs have changed significantly over the years.[1] The Social Security Administration (SSA) provides a detailed chronology of the major changes in policy and procedures 
regarding filing for and obtaining a SSN.[2] One of the most significant revisions in the last decade came from The Intelligence Reform and Terrorism Prevention Act of 2004 (P.L. 108-458), which imposes various standards for the verification of documents or records submitted by an individual.
A. Only a Few Countries Around the World have Personnel at U.S. Embassies or Consulate Offices that Can Process SSN Applications – SSA Form SS-5-FS
Applying for SSNs overseas is severely restricted compared to an application in the U.S.
According to the U.S. Department of State, Foreign Affairs Manual (“FAM”), only certain “Claims-Taking Posts” in specific countries “may” include “processing applications for Social Security Numbers.” [3]
These 17 countries (and a city in the case of Jerusalem) with Claims-Taking Posts include:
“Austria, Argentina, Costa Rica, Dominican Republic, France, Germany, Greece, Ireland, Italy, Japan, Jerusalem, Mexico, Norway, Philippines, Poland, Portugal, Spain, and the United Kingdom.”
Noticeably absent are many Western European countries, virtually all of Latin America, virtually all of Asia, virtually all of Eastern Europe, all of the Middle East (except Jerusalem), all of the African continent, all of the Australian continent and surrounding island countries and Russia, among many other significant countries, including OECD member countries.[4]
Nothing in the FAM requires any of these “Claims-Taking Posts” to actually process applications for a SSN. Plus, there are of course hundreds of other countries throughout the world, not listed above, which do not have such a U.S. Department of State Post. For these reasons, USCs in countries such as China must travel to a U.S. Department of State Post (e.g., the Philippines) which is able to process applications for SSNs.
[1] See, SSA website, The Story of the Social Security Number, by Carolyn Puckett, Social Security Bulletin, Vol. 69 NO. 2, 2009 (http://ssa.gov/policy/docs/ssb/v69n2/v69n2p55.html.
[2] See, SSA website, Significant Milestones in Social Security Number Policy. A detailed chronology of the major changes in policy and procedures. http://www.ssa.gov/history/ssn/ssnchron.html.
[3] See 7 FAM 530, page 2 of 64.
[4] In contrast to these 17 countries (and one city – Jerusalem) where a USC residing overseas must travel to apply for a SSN, the Treasury Department has announced it has around 100 countries that have signed, or “have reached agreements in substance” a FATCA IGA. USCs throughout the world are required by the Foreign Account Tax Compliance Act (“FACTA”) to provide their U.S. TIN to financial institutions throughout the world (on IRS Form W-9, or its equivalent), which under current law necessarily must be a SSN. Of course, if they have no SSN, they cannot sign IRS Form W-9 which provides in Part II: “Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number . . .”
- The Necessary “Covered Expatriate Status” of a USC without a SSN
The core point of this post, with the above SSN background, is to explain how a USC without a SSN will necessarily be a “covered expatriate” since they will not be able to truthfully certify they have complied with the federal tax laws (title 26). See, Certification Requirement of Section 877(a)(2)(C) – (5 Years of Tax Compliance) and Important Timing Considerations per the Statute
As other posts have explained, “covered expatriate” status matters:
See, Why “covered expat” (“covered expatriate”) status matters, even if you have no assets! The “Forever Taint”! (20 May 2014) and The “Hidden Tax” of Expatriation – Section 2801 and its “Forever Taint.” (10 April 2014) and “Covered Expatriate” Status is a “Scarlet Letter” (10 Nov 2014).
If a USC has no SSN, they by definition will never be able to comply with the Certification Requirement of Section 877(a)(2)(C) since they will not be able to comply with IRC § 6109(a) and Treas. Reg. § 301.6109-1. As the SSN/TIN paper explains:
All United States citizens (“USCs”) must have a social security number (“SSN”) under current law as their TIN to file a federal income tax return.[1]
[1] See, IRC § 6109(a) and Treas. Reg. § 301.6109-1.
The IRS will not process federal tax returns and “International Information Returns”, as defined below, without a valid TIN[1]; which currently must be a SSN for a USC.
[1] See, IRS website, – http://www.irs.gov/Individuals/General-ITIN-Information – “IRS no longer accepts, and will not process, forms showing “SSA”, 205c”, “applied for”, “NRA”,& blanks, etc.”
Is “It’s Almost Impossible for Me to Get a U.S. Taxpayer Identification Number”; a Defense to Not Filing U.S. Tax Returns?
The U.S. federal government has made the basic task of getting taxpayer identification numbers (“TINs”) very difficult for many individuals. Without a TIN, an individual cannot file tax returns or information reporting returns.
- U.S. Citizens and SSNs – No Exceptions
U.S. citizens (USCs) residing overseas without a social security number (“SSN”) must use a SSN for their TIN. I presented a recent report to various government officials, including the international tax counsel at the U.S. Treasury Department and the Joint Committee of Taxation, among other groups. Some key excerpts of that paper titled URGENT NEED FOR U.S. CITIZENS RESIDING OUTSIDE THE U.S. TO BE ABLE TO OBTAIN A TAXPAYER IDENTIFICATION NUMBER (“TIN”) OTHER THAN A SOCIAL SECURITY NUMBER are set out below in this section:
The U.S. tax law imposing taxation on the worldwide income of USCs[1] residing overseas has created a dilemma that prejudices these USCs without a SSN. This strict SSN/TIN regulatory rule undermines the basic tax administration system and discourages tax compliance for those USCs who never obtained a SSN. This dilemma affects numerous USCs throughout the world, which is now compounded by the certification and reporting requirements of USCs and third parties, such as FFIs and NFFEs[2] under the Foreign Account Tax Compliance Act (“FATCA”).
This dilemma is a creature of the Title 26 regulatory law going back to 1974[3] and how the Social Security Administration (“SSA”) imposes strict requirements on the issuance of SSNs to residents overseas.[4] One essential step is that the USC overseas must have an in-person interview, with a designated individual (who are typically U.S. Department of State employees and some designated military personnel). They are located in only a few cities around the world.[5] Some USCs need to travel thousands of miles to merely be able to apply for and obtain a SSN.
[1] See, IRC § 61 and Treas. Reg. §§ 1.1?1(b) and 1.1?1(a)(1).
[2] See, IRC §§ 1471 et. seq. and the regulations thereunder which define “foreign financial institutions” (“FFIs”) and “non-financial foreign entity” (“NFFEs”).
[3] See, Treas. Reg. § 301.6109-1(a)(1)(ii)(A).
[4] See, 7 FAM 534.3 Applications for a Social Security Number (Form SS-5-FS).
[5] Id, page 7 FAM 534.3 Applications for a Social Security Number (Form SS-5-FS).
Further posts will discuss a number of the adverse consequences imposed on USCs who do not have a SSN and the severe penalty regime that exists under current law for those unwitting individuals.
- Non-U.S. Citizens and ITINs –
Many individuals who are not USCs nevertheless need to file a tax return and must obtain what is called an individual taxpayer identification number (“ITIN”). See IRS report Obtaining an ITIN from Abroad. An ITIN is applied for by filing an IRS 
Form W-7, and providing various original documents, principally a passport, directly to the IRS. The process is complex and time consuming. Indeed, the Taxpayer Advocate report included a key summary explanation of the problems associated with obtaining ITINs as follows:
- IRS ITIN Policy Changes Make Return Filing Difficult and Frustrating
Recent changes to the IRS’s Individual Taxpayer Identification Number (ITIN) application program are burdening taxpayers and may harm voluntary compliance.
ITINs play an important role in tax administration, as any individual who has a federal tax filing obligation but is not eligible for a Social Security number must apply to the IRS for an ITIN and then use the ITIN on any return, statement, or other document which requires a taxpayer identifying number
Under the new procedures, most applicants must now submit original documentation by mail or travel to Taxpayer Assistance Centers (TACs) to have documents certified, making the application process more difficult
Since December 17, 2003, the IRS has required ITIN applicants with a filing requirement to attach a valid federal tax return with their application (unless they qualify for an exception).
On June 22, 2012, the IRS implemented temporary changes that required all ITIN applicants to submit original documents supporting the information on their applications. Under these procedures, applicants could no longer submit notarized copies and had to send in original documentation, even if a certified acceptance agent (CAA) reviewed and certified the documentation.
On November 29, 2012, the IRS announced revised procedures for the 2013 filing season that require applicants to submit original documentation or copies certified by the issuing agency.
Although the IRS allows CAAs to submit copies of documentation for primary and secondary taxpayers after reviewing original documentation or certified copies, CAAs must still send in original documentation for all dependent applicants.
A limited number of TACs can certify documents for primary, secondary, and dependent taxpayers.
The Revised Procedures Create an Impediment for Taxpayers Required to File Returns.
The recent changes to the ITIN program have made it difficult for taxpayers to file returns.
More on ITINs to follow in later posts.
- Legal Defense?
The complexities of obtaining a U.S. TIN begs the question: “Is it a legal defense for a taxpayer to NOT file U.S. tax returns, international information returns, if it is particularly difficult (or nearly impossible in some cases) for that individual to even obtain a TIN?”
Will such a taxpayer have a “reasonable cause” defense to avoid penalties in the case of an audit? These are questions unanswered by any case law to date.
USCs throughout the world are required by FATCA to provide their U.S. TIN to financial institutions throughout the world (on IRS Form W-9, or its equivalent), which under current law necessarily must be a SSN. Of course, if they have no SSN, they cannot sign IRS Form W-9 which provides in Part II: “Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number . . . “
As FATCA requires overseas individuals, including USCs to certify under penalty of perjury their U.S. taxpayer identification number (and if they have none), they necessarily will not be able to comply with this basic reporting requirement.
Will these individuals have a defense under the law for not complying under these circumstances?
Will the government provide relief for these individuals?