Thursday, September 27, 2012

Reed Amendment Gernerating Enforcement in 2012?

We have learned about 2-3 Expatriates who were recently denied entry into the US by Homeland Security at the Airport and put on the next plane out of town. These events happened at at different Metropolitan Airports in different US cities. We have also heard that some U.S. consular officers may have unofficially applied the Reed Amendment to refuse issuance of a visa to former U.S. citizens.  

This new official/unofficial enforcement of the Reed Amendment may be a reaction to the news about Facebook’s co-founder Eduardo Saverin having renounced his U.S. citizenship, which we discussed in our May14, 2012 post "Facebook's Co-Founder Just Defriended America." At the time there was speculation regarding whether The Reed Amendment would be applied to him thereby preventing him reentry into the U.S. and Reed himself sent a letter to Secretary of Homeland Security Janet Napolitano urging her to bar Saverin from re-entry.

The Reed Amendment was an amendment to the United States' Illegal Immigration Reform and Immigrant Responsibility Act of 1996 regarding the admission of former U.S. citizens.  It added the following text to the Immigration and Nationality Act of 1965's list of "Classes of aliens ineligible for visas or admissions" (8 USC § 1182 - Inadmissible aliens)
(E) Former citizens who renounced citizenship to avoid taxation
Any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is inadmissible.
The U.S. government has never issued regulations to implement the Reed Amendment.  One issue with the enforcement of the law was that the Attorney General was never authorized to obtain the required information from the Internal Revenue Service in order to be able to make the determination whether a former American's loss of citizenship was motivated by tax reasons. In 2004, Congress threw out the relevance of tax avoidance motives altogether and imposed an exit tax.
However, Senator Charles Schumer stated that the Reed Amendment "was written in a manner that inhibits its enforcement", and so he and Bob Casey introduced new legislation, the Ex-Patriot Act, which would make former U.S. citizens inadmissible to the United States and charge them 30% capital gains tax on their U.S. investmentson for people such as Facebook co-founder Eduardo Saverin, unless they show they didn’t renounce their U.S. citizenship to avoid taxes.
Under the bill, if you renounce with a $2 million net worth or an average income-tax liability of $148,000, tax avoidance is presumed.  Previously when presumed tax avoidance was in the law (it was changed in 2004), expats usually showed family, political, geographic or other reasons to leave.

Other highly controversial proposals would revoke or deny passports to those owing the IRS $50,000 or more; see our post Tax Delinquents May Have Passports Canceled & Be Questioned at Air & Sea Ports.  

Other related news conserning tax related actions being taken by Homeland Security was discussed in our post Dead Beat Taxpayers Residing residing outside U.S. ques Toned at U.S. border regarding back taxes. This post discussed theat Taxpayers traveling to the United States with unpaid U.S. tax assessments can be detained at the border, questioned, and flagged for follow-up enforcement. If a taxpayer has an unpaid tax liability and is subject to a resulting Notice of Federal Tax Lien, the IRS may submit identifying taxpayer information to the Treasury Enforcement Communications System (TECS), a database maintained by the Department of Homeland Security (DHS).

If you have Tax Problems and are Considering Traveling, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).

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