More Rich Americans Renounce U.S. Citizenship for Lower Taxes

More Americans are renouncing U.S. citizenship for tax reasons.A U.S.-born resident of Ireland recently came into some money after he and his wife sold a farm they inherited from her parents. Instead of enjoying his windfall, the man is furious at the Internal Revenue Service for penalizing him for running afoul of the agency's confusing regulations regarding the reporting of income from foreign bank accounts. He is so mad, according to his attorney, Jane Bruno, that he's considering renouncing his U.S. citizenship.

While such a move is drastic, it's also becoming increasingly common. In fact, so many people are eager to renounce their U.S. citizenship for tax reasons, that in some U.S. embassies there's a waiting list to escape from the clutches of Uncle Sam.

Part of the reason for the rising interest in renunciation is burdensome rules like the one about foreign accounts designed to catch people who use quitting their citizenship as a way to illegally duck their tax obligations, says Bruno, who is based in Palm Beach Gardens, Fla. The Irish resident, whom she declined to name, was slapped with a penalty of several thousand dollars.

"These penalties that they came up with are oversized when compared to the misdeeds that were committed," Bruno says.

Triple the Number in a Year

As many as 743 people with American citizenship or legal resident status renounced their U.S. citizenship in 2009 -- three times as many as in 2008 -- which resulted in a waiting list for people to say farewell to the red, white and blue at the U.S. Embassy in London, according to the Financial Times. That represents a tiny fraction of the 7 million or so Americans living abroad, but does underscore the growing unease about the Obama administration's taxation policies among the wealthy, according to experts.

Many of those leaving the U.S. behind have dual nationality and may not have lived in the country for years. Others have lived overseas for so long that America no longer feels like home. As Bruno points out, rescinding American citizenship is something not to be taken lightly. Not only do you lose the protection of the U.S. government, but the financial benefits don't kick in for several years. In fact, a former U.S. citizen is required to file tax returns to the IRS for several years after giving up citizenship.

"Also, persons who wish to renounce U.S. citizenship should also be aware that the fact that a person has renounced U.S. citizenship may have no effect whatsoever on his or her U.S. tax or military service obligations," according to the U.S. State Department's website. "In addition, the act of renouncing U.S. citizenship will not allow persons to avoid possible prosecution for crimes which they may have committed in the United States, or escape the repayment of financial obligations previously incurred in the United States or incurred as United States citizens abroad."

The Wealthy Have Been Quitting for Years

Wealthy people have been quitting their American citizenship for tax reasons for years. Tennessee-born mutual fund investor John Templeton did it in 1968. He died in 2008 in the Bahamas at the age of 95. John Dorrance III, grandson of the founder of Campbell Soup (CPB), quit being an American, as did members of the Getty Family. Companies including Tyco (TYC) and Transocean (RIG) have done the same thing. Some worry whether the newest crackdown will encourage more taxpayers to quit the U.S.

"U.S. citizens are in a uniquely horrible position as expatriates, wherever they reside, since the U.S. is just about the only major nation which taxes its citizens regardless of their residential status," according to Tax-News.com.

The crackdown on wealthy taxpayers is continuing. In April, IRS Enforcement Chief Steve Miller told members of Congress that tax revenue continues to be lost to offshore loopholes despite efforts to shut them down. Senate Finance Committee Chairman Max Baucus urged the IRS to be more vigilant. That may wind up driving more wealthy Americans overseas.

David Lesperance, a Canadian attorney, says he has seen a seven- or eightfold increase in cases of people looking to renounced their U.S. citizenship. The advantages of doing so are too great to pass up for financial and personal reasons such as divorce.

"They are not bound to a particular location to maintain their wealth," Lesperance says, adding that many people have found they can recreate their lifestyle abroad, and in some cases -- heaven forbid -- improve it. Wealthy expatriates know that "government at all levels are going to need money" and that "things are not going to get better for us."

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9 Comments

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mclare100

Love it or leave it ! I am proud to be an American ! I don't want to live anywhere else !

November 15 2013 at 2:25 PM Report abuse rate up rate down Reply
fgojr

The United States used to be looked at as the country to go to to prosper.It is fast losing its appeal.The elected officials have forgetten who put them there. Each party does not want to lose face and as a result we the general public suffers. For the first time our leader finished second as the worlds most powerful. When you look at his track record you can see why. If we dont make any improvement the slide downward will continue and more people will be looking elseware .

November 15 2013 at 9:39 AM Report abuse rate up rate down Reply
Nita

We have friends who moved to Mexico. Cheaper to live there, way cheaper. They live in a nice community, have a nice house and are not taxed to death.

May 17 2012 at 10:09 PM Report abuse rate up rate down Reply
cme4dtaleskk22

Are you telling me these wealthy "Americans" were blessed and made their fortune and got their great education IN AMERICA and now want to turn their backs on America??? !!! Do tell. And now they DON'T want to pay their fair share of taxes? Are there any real Americans out there who are willing to pay their fair share of taxes (that made this country great, btw), and if the going gets tough, are they willing to stick it out!! Heck no. When American needs you, you leave. How can helping those less fortunate be more fulfilling than having that 2nd vacation home - or even a vacation at all, or that 3rd or 4th BMW or antique cars, or 1/2 million dollar paintings, or designer clothes, or $500 shoes or $1000 haircuts The hard-working REAL American has his hand out to help his neighbor in any way he can. I say three cheers for the Red, White and Blue and to all those who care enough to stick it out. You'd think even 1 billion would be enough to live on, but they gotta have more. I rest my case.

May 11 2012 at 4:52 PM Report abuse +1 rate up rate down Reply
Dennis DeWitt

PERSONS WHO WISH TO RELINQUISH U.S. CITIZENSHIP

If the answer to the question regarding intent to relinquish citizenship is “yes ,” then the person concerned will be asked to complete a questionnaire to ascertain his or her intent toward U.S. citizenship. When the questionnaire is completed and the voluntary relinquishment statement is signed by the expatriate, the consular officer will proceed to prepare a certificate of loss of nationality. The certificate will be forwarded to the Department of State for consideration and, if appropriate, approval will follow.

An individual who has performed any of the acts made potentially expatriating by statute who wishes to lose U.S. citizenship may do so by affirming in writing to a U.S. consular officer that the act was performed with an intent to relinquish U.S. citizenship. Of course, a person always has the option of seeking to formally renounce U.S. citizenship abroad in accordance with Section 349 (a) (5) INA.

This information believed to be current as of January 2011.

For full Report visit http://TheTaxHavenReport.com

May 30 2011 at 4:58 PM Report abuse rate up rate down Reply
fulburrow

The US is the only major country in the world that thinks it has a right to tax people who are not resident in the US and have no income in the US. In some cases just having a parent who was American makes the US government think they own you. Usually if you are the only country doing something, you figure out that perhaps you shouldn't be doing it.

Our family have traditionally been very pro-American, largely because of our historic family ties to the country. You would think America would appreciate families like ours, always helping to build grass-roots support for the country. However the government has become so arrogant and the IRS so nasty that we are rapidly becoming very anti-American. To pursue foreigners who did not even know they were US citizens is quite frankly despicable. To claim you can fine them $10,000 for not filing forms that even Americans have not heard of is worse than despicable.

March 22 2011 at 7:05 AM Report abuse +1 rate up rate down Reply
neonrider

What kind of fool would want to become or even to remain a U.S. citizen? USA is growing increasingly desperate and now once can immigrate to the USA by investing measly $100K as an active business, but with biz ops plenty abroad people choose to live elsewhere. So while more and MORE U.S. citizens renounce their citizenship, less and LESS immigrants knock on the U.S. door, especially that the U.S. Gov. has become the largest criminal enterprise, and everyone knows why (JFK, 9/11 the inside job, chemtrails, political prisoners in America, etc.). Oh by the way, I and all my investments will also be leaving the country soon, for good. Wish me luck in the new destination, which happens to be in one of the world's freeest countries somewhere in the eastern parts of Europe.

February 19 2011 at 4:51 PM Report abuse rate up rate down Reply
1 reply to neonrider's comment
fulburrow

Actually, Neonrider, if you are a Mexican labourer and don't expect that either you or your children will ever be doing anything other than picking fruit or cleaning homes in Southern California then the benefits of US citizenship probably do outweigh the disadvantages.

March 22 2011 at 7:12 AM Report abuse rate up rate down Reply
trifam4

We will evetually loose all productive people since our government punishes sucess and rewards failure

July 31 2010 at 1:22 PM Report abuse +3 rate up rate down Reply