U.S. citizenship renunciations at near stand-still globally, as demand reported to spike ahead of election

So few Americans will have been able to formally complete the often-lengthy renunciation process over the last few months, in fact, that the quarterly publication of the most recent cohort of renunciants to have formalized the giving up of their American citizenships – which normally comes in the first week of August – is certain to be viewed with particular interest when it finally appears.

As reported here in May, the number of renunciants’ names on the list for the first quarter of 2020 was the highest for any quarter on record thus far, according to renunciation data experts, at 2,907. 

Experts who specialize in helping Americans to renounce say that U.S. citizenship renunciations-processing has been resumed in a few countries, or is scheduled to be soon, but that it remains impossible in most other jurisdictions, at least to their knowledge.

They noted that the U.S. government doesn't consider renunciations-processing a priority service.

State Department:
'Emergency services the priority'

A State Department spokesperson didn’t address the issue of renunciations services directly, but said that “U.S. embassies and consulates remain open for emergency U.S. citizen services”, and that as U.S. embassies and consulates begin to reopen their services to the public, in a phased approach, the State Department is “prioritizing routine services to U.S. citizens, such as passport services, Consular Report of Birth Abroad (CRBA) applications, renunciation, and voting services”. 

The result, at least in Canada, is that “dual American/Canadian citizens haven't been able to appear at U.S. consulates to renounce their citizenship since the third week in March, and those who had existing renunciation appointments have been told that appointments will not be available until August 4 at the earliest, but [even for them] there is no set date for when they will begin,” John Richardson, a citizenship renunciation expert who is based in Toronto, told the American Expat Financial News Journal on Thursday. 

“At present those beginning the renunciation process can get themselves 'into the queue', but there is no indication when their actual renunciation appointment will take place," he added.

“In others words, individuals are now effectively prevented from renouncing their U.S. citizenships.”

Green card "abandonment", however, “is still possible by mail," according to Richardson.

Alexander Marino, director of U.S. tax law and co-leader of the U.S. Tax Practice of Calgary, Canada-based Moodys Tax Law LLP, said the unprecedentedly-strong interest Moodys is seeing in renunciations is being driven in part by a widespread belief on the part of many expat Americans that the already-difficult tax situation they endure, as a result of being U.S. expats, is likely to worsen if Joe Biden wins the presidential election in November, as is currently predicted.

“Many [expats] are trying to renounce now, while the rules are in their favor, in case Trump loses in November,” Marino said.

Moodys, which during normal times often holds seminars on expatriation in key expat markets, such as Canada and the UK, is thought to help more Americans to give up their citizenships every year than any other firm.

As reported, the Democratic Party’s 2020 platform doesn’t offer any relief to expatriate Americans, even though expat representatives for both parties have been campaigning since even before President Trump took office for changes to the way American expats are taxed.

The Republican platform calls for the abolishing of the 2010 anti-tax-evasion law known as FATCA, and replacement of the current citizenship-based tax regime with one that would be based on residency, in line with most of the rest of the world.

Last year, a U.S. Government Accountability Office report identified FATCA as having introduced a range of issues that, among other things, it said had contributed to a "nearly 178%" increase in the rate of citizenship renunciations between 2011 and 2016.

'Most consulates and
embassies closed' 

Currently, Moodys understanding is that “most U.S. consulates and embassies worldwide are still closed,"  Marino said, adding that one exception he’s aware of is New Zealand, which is known for having handled the Covid crisis better than most other jurisdictions.

Like Richardson, Marino says the understanding is that some renunciation services are set to resume in Canada on August 4, but he too notes that it remains to be seen how long it will be before the previously-existing service levels will be restored.

As reported here in March, the U.S. State Department announced in February that it was closing two renunciation processing centers in Canada – in Halifax and Quebec City – which sparked concern even then that those waiting for their renunciations to go through would have to wait even longer than was the case at that time.

In addition, those individuals who previously might have been able to make use of the Halifax or Quebec City centers would now need to factor in the additional time and costs involved of traveling to one of the processing centers that remained open. 

Prior to the passage of the Foreign Account Tax Compliance Act in 2010, relatively few of the 7 million to 9 million Americans resident overseas tended to renounce their citizenships in the average year.

However – and as the GAO report mentioned above noted – the difficulties FATCA introduced to the global financial services industry, in the form of burdensome new compliance requirements, coupled with the shock discovery by many expatriate Americans that they were obliged to file U.S. tax returns every year and potentially pay U.S. taxes, something many had been unaware of previously, caused renunciations to take off, even before FATCA finally came into force in 2014. (See table, left.) 

A separate phenomenon is that interest on the part of ordinary Americans to move abroad, often to retire, has been growing steadily in recent years. One of the driving forces of this trend is that the money the average American has saved for retirement goes a lot further in countries like Mexico, Portugal and Costa Rica than it does in the U.S.

Last week, International Living, an Ireland-based magazine and news website for expatriates, said it has registered a “massive”, five-fold “surge” in the number of Americans checking out its online facility that provides information on moving out of the U.S.

“Over the last three months, International Living has seen a surge of 504.97% in traffic” to its “How to Move Out of the U.S.” website page, the publication said.