Former Americans who renounced their citizenship want their money back | ET REALITY

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Last fall, Nina Nelson went to the United States embassy in Paris and renounced her citizenship to move to the United States of America.

Nelson, now 67, called the decision “painful” and did not make her happy. She had not lived in the United States since she was a child. And being a U.S. citizen living abroad can be exhausting, literally.

The United States is one of the few countries that taxes based on citizenship and not geography. This means that Americans living abroad must file a tax return and may find it more difficult to open a bank account due to reporting rules for foreign banks imposed by the U.S. government.

“I did it because of ongoing stress,” Nelson said of his decision to renounce his U.S. citizenship.

The process to obtain the certificate of loss of nationality, which included taking an oath of resignation after several months on the waiting list, cost him $2,350, a fee that the United States began to impose in 2014 on those trying to resign. their citizenship. For the previous four years, the fee was $450. And before that, the certificate was free.

On Monday, the State Department announced a proposal to return the fare to $450, a move it noted earlier this year. Now, Ms. Nelson and others who paid the higher amount want some of their money back. She and three other plaintiffs, including citizens of Germany and the Netherlands, filed a class-action lawsuit against the State Department seeking reimbursement for the $1,900 difference.

The lawsuit calls the higher fee “arbitrary, capricious, and illegal because, among other things, it was used to fund government functions completely unrelated to waiver services.”

The State Department declined to comment on the lawsuit. But in your proposal announcing the rate change On Monday, he said the citizenship waivers were “extremely costly for the department, as they required consular officials and employees abroad,” as well as in the United States, to “spend a lot of time” handling those requests. He said that in 2010 the $450 fee “represented less than 25 percent of the cost to the United States government.”

Fabien Lehagre, president of the Association of Accidental Americans, a nonprofit in Paris that led the lawsuit, said in an email that he estimated about 30,000 Americans would be entitled to refunds if the lawsuit was successful, based on the number of quitters. provided by the State. Department.

The group uses “accidental Americans” to refer to Americans who live outside the United States and have little connection to the country. In 2020, the organization filed another lawsuit challenging the $2,350 fee. This year, what the lawsuit was dismissed.

There are no precise figures on how many Americans live abroad, but the State Department estimated in 2020 that the figure was around nine million.

“For 200 years, it was possible to renounce American citizenship at no cost,” Lehagre said. “The State Department made the renunciation procedure profitable when it saw more and more American citizens renouncing their American nationality.”

For Lehagre’s group, the lawsuit is the latest battle aimed at shifting American fiscal policy away from a citizenship-based policy. In 2010, Congress passed the Foreign Account Tax Compliance Act, which required foreign banks to report accounts held by Americans to the Internal Revenue Service and increased financial reporting requirements for Americans living abroad.

The law made tax filing mandatory for Americans with foreign assets who live abroad, even though many of them do not have strong ties to the United States.

Banks that fail to comply with U.S. reporting requirements face heavy financial penalties. The law was intended to discourage Americans from hiding taxable income, but opponents of those measures say they have had adverse effects on many Americans living abroad. Some banks, for example, refuse to accept American customers, creating difficulties for Americans seeking mortgages in other countries. The rules have also created bureaucratic headaches for American executives working for foreign companies.

Ms. Nelson was born in Fort Wayne, Indiana, to an American father and French mother who met at the end of World War II. Her father moved the family to France when she was 12, and Ms. Nelson has remained there ever since, eventually becoming a French citizen. Because of U.S. reporting requirements, Ms. Nelson said, she had to use a specialized accountant to file her tax return each year, at a cost of $1,500, even though she had no income to report. .

Nelson said he deliberated for years whether or not he would renounce his citizenship. When he finally did, Nelson said he felt bad, “like he had done something against my own will.”.”

“I felt compelled to do it because it seemed to be the only way out of a situation that I couldn’t control and that I didn’t like,” Ms. Nelson added.

Esther Jenke, another lead plaintiff in the lawsuit, grew up in Iowa and moved to Germany nearly three decades ago after meeting her future husband in graduate school. She renounced her citizenship in November 2018, citing financial reporting requirements.

“My husband and I bought a house. “If we sell the house, even if it is our primary residence, because from the American perspective it is foreign property, we would have to pay capital gains taxes,” said Ms. Jenke, 55.

According to the State Department, demand for citizenship renunciations increased to 3,436 in 2014 from 956 in 2010. The increase in demand for consular services, the State Department argued, merited a fee increase.

Others who have renounced their citizenship citing US tax laws include Boris Johnson, former prime minister of Britain, who did it in 2017 when he was Secretary of Foreign Affairs. He left the United States for the United Kingdom as a child and had dual citizenship.

The proposed fare reduction is a small consolation, said Jenke, who spent the first 26 years of his life in the United States. First of all, she never wanted to give up her citizenship. And her I can’t get it back.

“It was extremely emotional because I’m an American,” Jenke said. “I still get angry. “I feel emotional and angry because my own country forced me to make a decision that I probably never would have made otherwise.”

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