Form 8854 and the Section 877(a)(2)(C) Certification: Must Your Tax Compliance Come Before You Renounce?
On this page:
- What is the certification requirement under Section 877(a)(2)(C)?
- What makes someone a “covered expatriate”?
- Does an IRS form or its instructions carry the “force of law”?
- Do the Form 8854 instructions require tax compliance before the expatriation date?
- Can you come into compliance after renouncing and still avoid covered expatriate status?
- Are there Treasury regulations that settle this question?
- Could the IRS still challenge someone who complies after renouncing?
- Why does this matter before taking the oath of renunciation?
What is the certification requirement under Section 877(a)(2)(C)?
A former U.S. citizen or long-term green card holder (a lawful permanent resident, or LPR) becomes a “covered expatriate” under Section 877(a)(2)(C) if they fail to certify, under penalty of perjury, that they have met their federal tax requirements for the 5 preceding taxable years. The statute treats a person as covered if “(C) such individual fails to certify under penalty of perjury that he has met the requirements of this title for the 5 preceding taxable years or fails to submit such evidence of such compliance as the Secretary may require.” A “covered expatriate” is a person who triggers the U.S. exit tax rules on giving up citizenship or LPR status.
What makes someone a “covered expatriate”?
If you expatriated after June 16, 2008, the expatriation rules apply if any one of these statements is true:
- Your average annual net income tax liability for the 5 tax years ending before the date of your expatriation is more than the listed amount.
- Your net worth is $2 million or more on the date of your expatriation.
- You fail to certify on Form 8854 that you have complied with all of your federal tax obligations for the 5 tax years preceding the date of your expatriation.
The third test is the certification requirement, and it is the one tied to the timing question below.
Does an IRS form or its instructions carry the “force of law”?
An IRS form and its conditions may not carry the “force of law.” Treasury and the IRS cannot create law by publishing a substantive rule in a form. The statute is what binds. This matters because a form instruction can state a condition that the statute itself does not, and anyone citing a form will want to keep that distinction in mind.
Do the Form 8854 instructions require tax compliance before the expatriation date?
The instructions read that way. The Form 8854 instructions state that the certification must reflect that you have “complied with all of your federal tax obligations for the 5 tax years preceding the date of your expatriation.” Taken literally, that language points to compliance completed before the expatriation or renunciation date. The statute, Section 877(a)(2)(C), does not specify whether the certification has to be made before or after the date of loss of nationality.
Can you come into compliance after renouncing and still avoid covered expatriate status?
This is the open question the form instructions raise. If the instructions are correct, a person could not satisfy the rule by attempting to comply with all federal tax obligations after renouncing. Under that reading, coming into compliance for 5 years and then filing Form 8854, all after taking the oath of renunciation, would not let the person avoid “covered expatriate” status. The statute itself does not say the certification must come before the date of loss of nationality, so whether the instructions can impose that timing is unsettled.
Are there Treasury regulations that settle this question?
No. Treasury has issued no regulations on this point to date. There are only a few notices. One of them is IRS Notice 2009-85 on expatriation, and its own “force of law” is itself open to question. Without regulations, a form instruction is not the same as binding law.
Could the IRS still challenge someone who complies after renouncing?
Yes. Even where a form instruction may not carry the force of law, the IRS may still challenge a former U.S. citizen or LPR who does not also meet the condition set out in the IRS’s own instructions. The agency could argue that the person failed the certification requirement of Section 877(a)(2)(C) by not satisfying tax compliance before the expatriation date.
Why does this matter before taking the oath of renunciation?
The timing of tax compliance is a detail a former U.S. citizen or green card holder may want to weigh carefully before renouncing. The statute is silent on whether the certification must come before the date of loss of nationality, while the form instructions point to compliance before that date, so the literal-statute reading and the form-instruction reading can diverge. Consult an experienced attorney before rushing off to take the oath of renunciation.