State Dept. responds to 'Accidentals' complaint over renunciation fees, citing 'costs'

In the 45-page "Memorandum in Support of Defendants' Motion for Partial Dismissal and Summary Judgment", filed on Monday in U.S. District Court for the District of Columbia, lawyers representing the State Department noted that when the U.S. government first set a fee for processing citizenship renunciations in 2010 at US$450, this was "significantly below cost".

(Five years later the fee was increased fivefold, to the current US$2,350 (€1,945, £1,765) per renunciant, which was explained at the time as being necessary to cover the increased costs of handling such renunciations, which had begun to increase in number substantially each year, in response to the 2010 law known as FATCA.)

"The Department of State acted within its authority in setting the current renunciation processing fee at the amount that it costs the Department to develop the case and determine whether loss of nationality has occurred," the 45-page "Memorandum in Support of Defendants' Motion for Partial Dismissal and Summary Judgment", filed on Monday in U.S. District Court for the District of Columbia, states in its introduction.

"As explained below, the fee does not violate the APA [Administrative Procedure Act], the [U.S.] Constitution, or customary international law.

"For these reasons, the Court should dismiss plaintiff's Eighth Amendment and customary international law claims and grant summary judgment for the government on the remaining claims. 

"Or, in the alternative, this Court should grant summary judgment for the government on all of the plaintiff's claims." 

Plaintiff's lawyer 'unsurprised'

As reported, the Paris-based Association of Accidental Americans (AAA), along with 20 so-called accidental Americans of 10 different nationalities, filed their complaint on Dec. 9 in U.S. District Court in Washington over the US$2,350 renunciation fee, arguing that it violates the U.S. Constitution and international law.

Marc Zell, one of the attorneys representing the "accidentals", said the State Department's 45-page response to their complaint was "disappointing" but not surprising, and that he and his team "look forward to filing our opposition in June".

"The government has taken the position that the right of a U.S. citizen to expatriate is not protected by the Constitution," he said.

We intend to file our opposition to the government's position, and fight for the rights of Accidental Americans around the world that wish to shed their U.S. citizenship, but cannot do so because of the $2,350 fee."

He noted that European Union officials have previously stated their belief that accidental Americans in particular should be permitted to renounce their U.S. citizenships free of charge, and that their desire to do so is a direct consequence of the effect the FATCA legislation has on their lives, as citizens of other countries. 

More than 300,000 European 'accidentals'

Although many U.S. expatriates struggle with the costs of renouncing their U.S. citizenships – which can include an "exit tax" on their assets if their wealth is above US$2 million, in addition to fees for help in renouncing typically paid to U.S. tax specialists and renunciation assistance experts – accidental Americans are particularly unwilling to pay it, as they normally have lived their entire lives outside of the U.S., with some never having even set foot there, and thus have never received any financial benefits as a result of their American status.

There are estimated to be more than 300,000 such accidentals in Europe, of which more than 40,000 are believed to live in France, where Fabien Lehagre, pictured left, a California-born accidental whose French father brought him back to France at the age of 18 months, founded the AAA in 2017. The organization currently has around 1,180 members.

In their Dec. 9 complaint, the plaintiffs argued that the right of an individual to renounce their U.S. citizenship "is a fundamental, constitutional, natural and inherent right under the U.S. Constitution."

The State Department’s fee, the claim also argues, is “essentially forcing U.S. citizens to remain U.S. citizens against their will."

Renunciation processing procedure
'time-consuming and...costly'

According to the State Department's arguments as summarized in the document filed on Monday, the government's response to the accidentals' arguments hinged in part on the fact that prior to around 2015, the number of renunciations processed in the average year was relatively small, and thus the cost of processing them was negligible.

As the number of renunciations began to surge, a 2014 survey carried out by the government found that "demand for citizenship renunciation services...had increased dramatically, consuming far more consular officer time and resources," in part because of such elements of the process as the need to "confirm that the potential renunciant fully understands the consequences of renunciation" and the need to "verify that the potential renunciant is a U.S. citizen...conducting a minimum of two intensive interviews with the potential renunciant, and reviewing at least three consular systems before administering the oath of renunciation." 

"In sum, regardless of Plaintiffs’ perception that processing a renunciation case is not complex, the processing procedure is time-consuming and therefore very costly," the lawyers acting on behalf of the State Department say. 

As reported, back in December, Zell told the American Expat Financial News Journal that the accidentals' complaint was "unprecedented in terms of the issues raised."

He added: "There is scarce case law specifically dealing with the right of expatriation as a fundamental right protected by the U.S. Constitution. There are, however, ample precedents, including Congressional legislation dating from the 19th century, that specifically refer to the right to expatriate as a fundamental natural right.

"There is also scholarly commentary to this effect."

As the complaint notes in its introduction, Thomas Jefferson described expatriation as a "natural right which all men have," in a 1779 document entitled "A Bill Declaring Who Shall Be Deemed Citizens of This Commonwealth".

The accidentals are being represented in their complaint by Marc Zell and Noam Schreiber of Zell & Associates, while the State Department is represented by Laurel H. Lum of the U.S. Department of Justice. 

To hear an interview of Zell by John Richardson, the Toronto-based American expatriate law expert, click here.

Record numbers renouncing

Since the Foreign Account Tax Compliance Act was signed into law in 2010, Americans have been giving up their U.S. citizenships in ever-increasing numbers -- even though the law actually didn't begin to come into force until July 2014.

As reported here in February, more Americans handed their citizenships back to Uncle Sam last year than during any other single year to date, in spite of the fact that U.S. embassies and consulates around the world – which are needed to process such citizenship renunciations – were closed or offering reduced services for most of the year.  data published today reveals.

The total number for 2020 was 6,705, more than three times as many as in 2019, and 1,295 more than the previous record-breaking year, 2016, when renunciations totalled 5,410, according to data published quarterly on the Federal Register (see table, left).

In 2009, only 743 renounced, the data shows, and in 2008, just 231. 

American citizenship renunciation experts say that once renunciation processing resumes at U.S. embassies and consulates around the world, as the Covid-19 pandemic begins to ease, theannual numbers will be held back initially only by the government's ability to process them, as there is believed to be a significant backlog waiting to renounce.

Some say the numbers hoping to give back their passports as soon as possible may be increasing on a daily basis by the Biden administration's talk of a US$2.3trn infrastructure spending bill and a US$1.8trn expansion of the country's social safety net, the financing of which he has openly stated will be facilitated by tax rises mainly targeting the wealthy, and U.S. companies.

Editor's Note: This is an updated version of a story that was first published here earlier in the week.