US Homeland Security Bill amendment hits at expat tax dodgers

A proposed amendment to the new Homeland Security Bill is suggesting that expats who have renounced US citizenship to avoid US taxes should be banned from re-entry.

Long-term overseas residents who are former citizens of the USA and have renounced their citizenship in order to avoid paying annual USA taxes on their overseas earnings will effectively be banned from returning to their country of origin if the amendment succeeds. Offenders would need to have been identified as such by the Secretary of Homeland Security.

Expats who have renounced their citizenship for another reason, such as a wish to stay long-term for family reasons in a foreign country which does not accept dual citizenship, will also be caught in the trap if they cannot prove by evidence their reason was not to avoid US taxation. Now known as the Taxpatriate Bill, the ruling if adopted may well cause serious problems for genuine expatriate former US citizens.

According to a Congress spokesperson, the number of US expats renouncing their citizenship has soared in recent years, with the very wealthy to the fore. Tina Turner, Eduardo Saverin and Denise Rich are three such, although renouncing citizenship is a lengthy, convoluted procedure.

If tax duties are not met as part of the procedure, penalties are severe, dependent on the personal wealth of the individual. To be judged as a ‘covered’ expatriate, a person relinquishing his or her citizenship must have an average tax liability of over $155,000 over the previous five years, or have failed to certify under oath that that all US tax obligations have been met for the previous five years.

The proposal to penalise covered expats unable to prove their motivation for citizenship renouncing was made by three senators in Congress. It was later dropped, but was incorporated into the Homeland Security Bill.