US Citizenship for Expats, Part I
Citizenship in the United States of America is a much-coveted status. In addition to the right to vote in US elections, US citizenship confers abundant rights and privileges that are the envy of much of the world, in addition to the ability to travel without a visa (or with a visa issued on arrival) to 184 countries.
However, US citizenship also comes with a responsibility, which can feel like a burden to many: The United States taxes its citizens on their worldwide income, no matter where they live. This rule has counterintuitively led to US expats around the world trying to avoid being recognized as citizens, lest the IRS reach its long arm halfway around the planet and help itself to a percentage of their income. And, I don’t know about you, but I could probably find many other things I would rather do with my money than hand it to the IRS—and you can contact us here at CPAs For Expats if you would like to learn more about that.
This brings us to today’s questions. What is citizenship? Who is considered a US citizen? Can I avoid having my children become US citizens? And, let’s say I don’t want to be a citizen anymore, how do I go about accomplishing that?
Who Is a Citizen?
The two ways a person can acquire US citizenship are through naturalization and through birth. Naturalization, while it can be a complicated and time-consuming process, is fairly straightforward for our purposes: A person applied for citizenship, and he or she was granted it by the US Department of Homeland Security (DHS).
Citizenship by birth, on the other hand, is a much more nebulous concept. There are multiple ways one can acquire US citizenship by birth, depending on where a person is born, whether the parents are citizens, and if they are married at the time of the birth. Let’s go through the scenarios one at a time.
Birth in the United States—Birthright Citizenship jus soli
The first section of the Fourteenth Amendment to the US Constitution begins with the following sentence: “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.”
As the law stands in the United States today, this means that anyone born on US soil, including Puerto Rico, Guam, the US Virgin Islands, and (as of December 2019) American Samoa, is automatically a US citizen, regardless of the status of his or her parents. It makes no difference if the parents are US citizens, permanent residents, tourists, or illegal immigrants—the child acquires US citizenship automatically by “jus soli” (“right of the soil”), whether the parents like it or not.
There are two main exceptions today to the rule of jus soli, both of which center on the clause “subject to the jurisdiction thereof” in the above citation (and stem from the opinion of the US Supreme Court in US v. Wong Kim Ark in 1898), one of which is much more common than the other:
Children of diplomats on a mission to the United States (happens often enough);
Children born to foreign nationals during a hostile invasion of the United States by another country (hasn’t happened recently, to the best of my knowledge anyway—maybe in Guam during World War II?).
Needless to say, if either of the above situations apply to you, you probably aren’t reading this blog anyway, so let’s move on.
Birth outside the United States
The rules regarding citizenship for people born outside the United States, on the other hand, are a bit less cut and dry. The passing of citizenship from parent to child is governed by a complex set of rules set by statute, usually hinging on the marital status of the parents and whether one or both parents are US citizens.
Child born in wedlock to two US citizens: The child is a US citizen as long as at least one parent lived in the United States for any length of time.
Child born in wedlock to one US citizen parent and one non-US citizen parent: The child is a citizen if the US citizen parent lived in the US for at least five years, two years of which being after the age of 14.
Child born out of wedlock to a US citizen mother, born before June 12, 2017: The child is a citizen if the mother lived in the US for one full year before the birth of the child.
Child born out of wedlock to a US citizen mother, born after June 12, 2017: The child is a citizen if the mother lived in the US for at least five years before the birth of the child, two years of which being after the age of 14.
Child born out of wedlock to a US citizen father: The child is a citizen if the father lived in the US for at least five years before the birth of the child, two years of which being after the age of 14. In addition, the father must acknowledge paternity and agree to provide financial support for the child until he or she turns 18.
Generally, children entitled to citizenship according to the above rules cannot obtain a US visa, because citizens are required to carry a passport. They also cannot apply for an Individual Tax ID Number (ITIN), because citizens are expected to apply for a Social Security number. And, of course, they are expected to file tax returns every year once they begin earning an income.
Renunciation of Citizenship
Section 1481 of Title 8 of the US Code allows for several ways for a US citizen to lose his or her nationality, including:
Being naturalized as a citizen of a foreign state or making an oath of allegiance to a foreign state;
Serving in the armed forces of another state as an officer (or in any capacity if engaged in hostilities with the US, also see #5 below);
Taking a position in the government of a foreign state (see Johnson, Boris);
Renouncing nationality before a consular officer outside the US after age 18;
Committing treason (Editor’s Note: Don’t do this. It is the policy of CPAs For Expats to discourage our readers from performing acts that carry the death penalty).
While Section 1481 provides for these methods, the first three are rarely enforced, because the State Department operates under a presumption that a person wants to keep their US citizenship absent incontrovertible proof. And, as my editor helpfully noted above, the fifth option on that list is a capital offense, so it’s a rather poor way to try to escape the IRS.
That leaves renunciation as the most effective option. Renouncing US citizenship is a very serious—and irrevocable—act that can carry lifelong consequences, so it is a step that should not be taken lightly. Nevertheless, renunciation is becoming more and more common. The IRS estimates that nearly 4,000 US citizens renounced in 2018, more than 17 times the amount of renunciations from only 10 years earlier.
Consequences of renunciation could include:
Inability to travel to the United States—someone who renounces their citizenship would be required to obtain a visa before traveling to the US. If DHS determines that a person renounced citizenship in order to avoid taxation, they will declare the person inadmissible to the US, and he or she could be barred from ever entering the US again.
Statelessness—if a person gives up his or her US citizenship before becoming a citizen of another country, he or she could be rendered stateless. A stateless person is not entitled to the protection of any government and may lose the ability to travel, own property, work, attend school, or receive medical care.
No escape from taxes, military obligation, or criminal prosecution: If a person owes tax, is eligible to be drafted by the US Selective Service, or has violated US law, renouncing citizenship will not protect him or her from prosecution, and may not prevent him or her from being deported back to the United States by another country.
Finally, some former citizens may be considered “covered expatriates” by the IRS, subjecting them to the dreaded “Exit Tax”. What is this Exit Tax? How do I avoid it? And isn’t there an easier way to fix the problem of being an “accidental American”?
Come back next time, and we will discuss all of that, and more!
Need to get current with your obligations as a US citizen? Contact CPAs For Expats and let’s get started!