Tax & Accounting Blog

Who Is a U.S. Citizen and Why It Matters: Part 4 – Loss of U.S. Citizenship?

1099, ONESOURCE, Tax Information Reporting, TIN Compliance, W-8 & W-9 Foreign Reporting, Withholding Management October 17, 2012

The 14th amendment also prevents U.S. citizenship from being involuntarily cancelled. Although Congress enumerated certain acts that shall lead to a loss of citizenship, the Supreme Court has held that the only way a U.S. citizen may expatriate is through his or her own voluntary and intentional actions of renunciation or abandonment. Section 349(a) of the Immigration and Naturalization Act (as amended following invalidation by the Supreme Court of certain actions) lists the expatriating acts that are grounds for loss of U.S. citizenship when done with the clear intent of abandoning U.S. citizenship. The list includes making a formal renunciation of nationality in a foreign state before a diplomatic or consular officer of the U.S.

 1. Voluntary Renunciation

U.S. embassies and consulates have established procedures for processing U.S. citizens wishing to renounce their citizenship. There has been a spate of such renunciations by U.S. citizens residing abroad. These renunciations have been caused largely by the increased enforcement (and administrative cost) of U.S. income tax return filing and disclosure form obligations and by the impact on U.S. citizens residing in foreign countries of the soon-to-be-implemented Foreign Account Tax Compliance Act (FATCA). FATCA, which was enacted in 2010 to prevent U.S. citizens residing in the U.S. from using foreign accounts and entities to evade U.S. income taxes, has had as an unintended consequence. Foreign financial institutions now routinely close or refuse to open bank or other financial accounts for U.S. citizens residing abroad because they wish to avoid the high cost of complying with FATCA.

2. Denaturalization

U.S. citizenship may also be lost by denaturalization. The government may seek denaturalization of a citizen by establishing by clear, convincing, and unequivocal evidence that the naturalized citizen gained citizenship by intentionally concealing or willfully misrepresenting a material fact. To be valid, the underlying permanent residency status upon which the citizenship application is based must also be valid. For example, a permanent resident whose petition for permanent resident status was submitted by a U.S. citizen spouse may be denaturalized if the fact becomes known that the individual was still legally married to another when the petition was submitted. Failure to comply with U.S. tax obligations as a resident alien may also be problematic. Permanent resident status is subject to a rebuttable presumption of abandonment if the individual submitted U.S. tax returns as a nonresident alien. Questions regarding the submission of U.S. nonresident tax returns are asked on the N-400, Application for US Citizenship.