New Bill Targets Renunciation of Citizenship to Avoid Taxes

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Two United States senators, Democrats Charles Schumer of New York and Bob Casey of Pennsylvania, have introduced a bill that addresses the increasingly common issue of U.S. citizens who renounce their citizenship, sometimes in order to avoid tax obligations. The bill, known as the Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy Act, or “Ex-PATRIOT Act,” would create a presumption of intent to evade taxes for certain individuals who renounce their citizenship. The two senators specifically cited the case of Eduardo Saverin, a co-founder of the popular social networking site Facebook, as a motivation for the bill.

The 30 year-old Saverin, who was born in Brazil, moved to the U.S. in 1992 and became a naturalized citizen in 1998. He was one of the original founders of Facebook and was prominently featured in the 2010 film The Social Network, which presented a somewhat-fictionalized account of the company’s origins. Saverin moved to Singapore in 2009, where he has invested heavily in various businesses in Brazil, Asia, and the United States. He reportedly began the process of renouncing his U.S. citizenship in September 2011, and the Federal Register published a notice of his renunciation on April 30, 2012.

Saverin’s renunciation announcement came several weeks before the initial public offering (IPO) of Facebook stock, which caused speculation that he was motivated to do so to avoid taxes on his anticipated earnings. The IPO was expected to increase Facebook’s value to around $100 billion, and Saverin stood to make up to $4 billion. Saverin maintains that he did not renounce his citizenship because of the IPO, but the fact remains that he stood to save millions of dollars in tax liability. The United States imposes tax liability on citizens living abroad, while Singapore’s tax laws are apparently much more lenient. Saverin’s motivation for renouncing his citizenship is important for more than just his tax liability, as it may affect his ability to return to the U.S., even as a visitor.

United States immigration law establishes categories of people who are deemed “inadmissible” to the country. These categories generally apply to people abroad who are seeking a visa. Most categories of inadmissibility relate to criminal history, prior immigration violations, and national security concerns. The statute specifically classifies as inadmissible former citizens who, in the Attorney General’s determination, renounced their citizenship to avoid taxes.

A former citizen seeking admission to the U.S. can challenge such a finding, and the burden is typically on the government. The Ex-PATRIOT Act would create a presumption of intent to evade taxes for people renouncing their citizenship who have either a net worth in excess of $2 million, or whose average taxes for the previous five years exceed $148,000. The bill has already gained supporters and detractors. The most cogent objection so far seems to be the observation that existing law already punishes tax avoidance, making the bill unnecessary.

The United States immigration system is often complex and beset by politics. Contact Gus Shihab today online or at (800) 625-3404 to schedule a confidential consultation with a skilled and experienced Ohio immigration visa lawyer who can help guide you through the system.

More Blog Posts

Nigerian Man Who Settled in Columbus Decades Ago Becomes a Citizen, Immigration Visa Lawyer Blog, February 23, 2012
Design Changes, Meant to Improve Security and Fight Fraud, are Coming for Employment and Citizenship Forms, Immigration Visa Lawyer Blog, November 2, 2011
USCIS Announces Plan to Streamline Filing of Citizenship Forms, Immigration Visa Lawyer Blog, October 30, 2011
Photo credit: ‘Facebook by countries’ by Ferfosado (Own work) [>CC-BY-SA-3.0], >via Wikimedia Commons.