This is a two-part blog post with Part I available HERE.
Renouncing US Citizenship if the Individual is a Minor
“Jus soli” (the law of the soil) is a rule of common law followed by the United States, under which the place of a person’s birth determines his citizenship. In addition to common law, this principle is embodied in the 14th Amendment to the US Constitution which states, in part, that: “All persons born in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.” Citizenship is also determined under various US citizenship and nationality statutes, such as the Immigration and Nationality Act (INA).
The renunciation of one’s citizenship is regarded as a personal elective right that cannot be exercised by another person. Parents or guardians cannot renounce or relinquish the US citizenship of a child who acquired his US citizenship at birth. This means that only the individual child himself can renounce his US citizenship, but this is not so easy to do in the case of children. The US Consular offices and Embassies recognize that minors who seek to renounce citizenship often do so at the urging of or under pressure from a parent(s). This pressure can sometimes be so overwhelming that it will destroy the free will of the minor such that the act of expatriation cannot be committed “voluntarily”.
Under guidelines issued by the Department of State, the younger the minor is at the time of renunciation, the more influence the parent is assumed to have. Consular officers are given strict guidelines to follow when a minor seeks to renounce his US citizenship. For example, when conducting the initial interview with a minor and during the renunciation procedure, officers are instructed to have at least one other person present. They are instructed that the parents and guardians should not be present and that the interview should take place in the presence of the consular officer and a witness, preferably another consular officer, a non-consular officer or locally employed staff. The minor should be clearly advised that upon reaching the age of 18, he has a six-month opportunity to “reclaim” his US nationality.
Even when there is no evidence of parental inducements or pressure, the relevant Consular personnel must make a judgment whether the individual minor manifested the requisite maturity to appreciate the irrevocable nature of expatriation so that his action can be treated as one that was taken “voluntarily”. In addition, it must be determined if the minor had the necessary intent to renounce his US citizenship. This will be found lacking if he did fully understand what he was doing. Under the guidelines issued by the Department of State, children under the age of 16 are presumed not to have the requisite maturity and knowing intent to undertake a renunciation of US citizenship.
Even if the consular report indicates the minor had the necessary intent and renounced his citizenship voluntarily, the matter does not end there. A CLN must be issued by the Department of State approving the renunciation. A CLN for a minor will not be issued without the concurrence of various divisions of the Department of State and without the prior appropriate consultations.
Potentially Expatriating Acts and the Minor
Section 349 of the INA, currently provides that US citizens are subject to loss of citizenship if they perform certain specified acts voluntarily and with the intention to relinquish US citizenship. Several of these potentially expatriating acts are limited by specific provisions mandating that the individual must be over the age of eighteen years at the time the act is committed.
Briefly stated, these acts are:
1. obtaining naturalization in a foreign state upon one’s own application after the age of 18 (Sec. 349 (a) (1) INA);
2. taking an oath, affirmation or other formal declaration of allegiance to a foreign state or its political subdivisions after the age of 18 (Sec. 349 (a) (2) INA);
3. accepting employment with a foreign government after the age of 18 if (a) one has the nationality of that foreign state or (b) an oath or declaration of allegiance is required in accepting the position (Sec. 349 (a) (4) INA);
The relevant provisions can be found here. In other words, there can be no finding of a loss of US nationality when these acts are committed by a person under the age of eighteen.
In addition, INA Section 351(b) provides that an individual under the age of 18, shall not be deemed to have lost US nationality by having served in the armed forces of a foreign nation under certain circumstances, or by having formally renounced US citizenship, if within six months after attaining the age of eighteen, the individual reasserts his claim to US nationality in accordance with a special procedure.
Mental Incompetency Issues
If mental competency is an issue, special care must also be taken. An individual cannot lose US citizenship unless he has the legal capacity to form the specific intent necessary to give up his US nationality. When the person has some type of mental incapacity, the question will arise whether the individual understands the seriousness of renunciation, including its irrevocable nature and the major consequences that flow from it. “Voluntariness” may also be an issue with persons who suffer from mental incapacity or impairment, as such individuals may be especially susceptible to the influence of others.
A court finding of mental incompetency, whether by a US court or one overseas, will preclude a finding that the individual has the requisite intent to renounce his citizenship. A parent, guardian or trustee cannot renounce the US citizenship on behalf of a mentally incompetent individual, since it is viewed as a personal right that cannot be exercised by any other person.
Parent or Guardian – What Should You Do?
US tax planning in the kinds of cases discussed is ever critical. If the individual cannot expatriate currently, it is very important to structure his affairs to minimize any US tax bite during the time he remains a US citizen and in planning for a future expatriation. It the individual is under a permanent mental incapacity such that renunciation will never be possible, then proper planning of US tax matters becomes even more critical. A well-meaning parent or guardian may often look to trust structures to ensure the continued care of the child or mentally challenged individual. However, setting up a “foreign” (non-US) trust for such an individual may well be the worst action to take from a US tax planning perspective! The stakes are high. Get proper advice.
Virginia La Torre Jeker J.D., has been a member of the New York Bar since 1984 and is also admitted to practice before the United States Tax Court. She has 30 years of experience specializing in US and international tax planning as well as international commercial transactions. She has been based in Dubai since 2001; prior to that time she worked in Hong Kong for 15 years as a US tax consultant for international law firms, major banks (including HSBC) international accounting firms (Deloitte) and trust companies. Early in her career she worked in New York with the top-tier international law firm, Willkie Farr & Gallagher.
Virginia is regularly asked to speak at numerous conferences and seminars for various institutes and commercial organizations; publishes a vast array of scholarly works in her area of expertise, been interviewed by CNN and is regularly quoted (or has her articles featured) in local and international publications. She was recently appointed to the Professional Tax Advisory Council, American Citizens Abroad, Geneva, Switzerland. She was a guest lecturer at the University of Hong Kong, LL.M Program (Law Department) and served as an adjunct Business Law professor at the American University of Dubai and at the American University of Sharjah where she also taught the legal / ethical aspects of internet law and internet based transactions.
5 comments on “Help, I Want to Expatriate, But They Won’t Let Me… Part II”
The U.S. refusal to allow a legal guardian to renounce on behalf of a mentally challenged dependent is not an law that protects the dependent. Rather it is a law that is discriminatory in that it prevents the mentally challenged adult from having the same right to choose his/her citizenship as does a none mentally challenged adult.
Secondly this law is discriminatory because although the U.S. government will not allow the guardian of the mentally challenged adult to step in and renounce the citizenship the government does recognize the guardianship of the parent when it comes to making sure that the mentally challenged adult follows U.S. tax law. Now this is a case of having your cake and eating it too. True recognition of a parent’s guardianship authority would mean that the legal guardian would have the authority to get his/her child out of U.S. tax prison. Because prison it is.
Dear Recalcitrant – a very thought-provoking comment. Thank you.
U.S. tax law as it applies to mentally challenged children effectively bars any tax planning for that child because anything that you set up outside of the U.S. is a foreign trust and foreign trust under U.S. tax law are constructively forbidden.
The absurdity of this situation is further exacerbated when you consider that most Western style democracies make provisions in their tax code for the care of their disabled and mentally challenged citizens/legal residents. This means that you have to ask exactly what right does the U.S. believe that it has to prevent a person with legal citizenship/residency in another country from having full and unfettered access to the tax code provisions of that country? What right does the U.S. think that it has to tax the monies that another country may give to its dependent adults? The answer is that the U.S. has no legal or moral right. For legal rights cannot exist apart from their moral foundations and in the case of citizenship based taxation the U.S. has no moral grounds to stand on.
Am I to assume that the advice is I SHOULD NOT Hold a Canadian Registered Disability Savings Plan (RDSP) for my son? Besides an RDSP not being a good investment for a US Person, he doesn’t deserve to have the benefit of such a plan — it is not for those the Government of Canada now deems a ‘second-class citizen’ by virtue of an arbitrary, unregistered NATIONAL ORIGIN by birth to a US Person IN CANADA, because I was still a US citizen at the time. Swallow hard and cash in the RDSP, turning back to the Government of Canada the bonds and grants they contributed to the RDSP and on which I have already paid income tax to the US. Too bad about the amount I paid to a US accounting firm to correctly report to the US my son’s RDSP on my behalf. How can one so-called US Person in Canada have made so many mistakes in life planning 101 and trying to best provide for my son when I am no longer alive?
All of which places a responsible parent in a profound situation of competing demands. Does one act responsibly and seek legal guardianship of a mentally challenged adult child or parent and refuse to comply with U.S. tax law or do you act irresponsibly and leave your loved one without anyone to look out for him/her. Do you leave your loved one to live off the government where you reside but in compliance with U.S. tax law, even though the U.S. is Constitutionally forbidden from extending any U.S. tax funded benefits to a none resident? It would seem that for the U.S. to also deny the mentally challenged adult the right to any taxpayer funded benefits in his/her country of residence is an injustice.
Of course this same fundamental argument also invalidates citizenship based taxation for all.
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