The mystery of the fleeing Americans

Last December, ICIJ Research Editor Margot Williams reported on the rapidly growing number of Americans abroad who are renouncing their US citizenship. For her story, she compiled a database of Americans who had recently cut ties with Uncle Sam. The database is now updated to reflect the latest figures.

Last week, the US Internal Revenue Service published the most recent list of “Individuals Who Have Chosen to Expatriate” for the quarter ending Dec. 31, 2013. The newest figures showed that expatriations have continued to surge – with nearly 3000 people renouncing U.S. citizenship in 2013.

 

Source: Internal Revenue Service, Quarterly Publication of Individuals, Who Have Chosen To Expatriate, as Required by Section 6039G

There are 631 new entries in the list, but one is an address rather than a name.  And there have been many names duplicated over the years, as reported by Patrick Cain of Canada’s Global News.

I’ve reported on the expatriation issue in “Americans abroad denounce offshore tax law’s unintended consequences” (12/13/13) and “The mystery of the fleeing Americans” (12/6/2013). The list of recent expatriates is now updated through 2013, and it is posted here.

Reports have also found discrepancies in the statistics on expatriations from different U.S. government agencies.  Cain, the Global News reporter, points out that the list in the Federal Register conflicts with statistics kept by the FBI.  In January, Cain reported that the FBI number for 2013 citizenship renunciations was more than 3,100. The FBI keeps track of people who have renounced U.S. citizenship because they are barred from buying guns in the United States, according to U.S. law.

The FBI and IRS statistics do not include citizens who have not “renounced” but have “relinquished” their citizenship – for example, by taking on another country’s citizenship – and reported this to the Department of State.  Tina Turner, a long-time resident of Switzerland, relinquished her U.S. citizenship in October – but her name does not appear on the IRS expatriation list.

“Good luck movin’ up, cause I’m movin’ out” – Billy Joel

Billy Joel is not on the list. Songwriter Denise Rich is.

As the United States government’s crackdown on offshore bank accounts held by US citizens and permanent residents grows wider, more taxpayers are turning in their passports and green cards and leaving the US for good, Internal Revenue Service reports show.

From January through September of 2013, more than 2300 citizens and long term residents have “expatriated” – which includes “U.S. citizens who have relinquished their citizenship and long-term residents who have ended their residency.”  That’s more than twice the expatriations in 2012 and ten times the IRS total in 2008, the year before Swiss bank UBS AG agreed to disclose the secret accounts of 4,450 American account holders to the IRS and criminal prosecutors investigating tax evasion. 

Source: Internal Revenue Service, Quarterly Publication of Individuals, Who Have Chosen To Expatriate, as Required by Section 6039G

Why are so many Americans suddenly so eager to cut their ties with Uncle Sam?

In part, the answer is a mystery. The expatriation forms don’t require respondents to explain why they’re moving away. But a random sample of the most recent ex-Americans suggests that they are a disproportionately wealthy bunch. And there are several intriguing potential explanations that I’ve found.  

I’m hoping that along with the database of recent expatriates below, these ideas will inspire you to help solve the riddle of what these expatriates are doing – and find some juicy stories along the way.

One possible explanation may be avoiding taxes. The US is one of only two countries in the world (along with Eritrea) that taxes all of the global assets of its citizens and permanent residents, regardless of where they are earned.  Expatriation does not avoid taxes – in 2008 the U.S. imposed a hefty “exit tax” on wealthy departing citizens and residents, which takes into account all assets held worldwide. But it may be that paying a single “exit tax” on existing assets is cheaper than remaining subject to US tax rates for a lifetime. 

Another possibility may be avoiding US tax authorities and the fees or even criminal penalties that would result from full disclosure. New rules and penalties for nondisclosure of foreign accounts and the complications of new reporting requirements are making more citizens living abroad consider renunciation of U.S. citizenship, even among the less affluent, like retirees and spouses of overseas nationals.  The IRS has collected more than $5.5 billion from taxpayers who offered to disclose their unreported offshore income to avoid criminal prosecution and penalties, according to a 2013 GAO report, but “may be missing continued evasion.”

A third explanation could be the burdens caused by new US tax laws. In 2010, Congress enacted the Foreign Account Tax Compliance Act, or Fatca (sounds like Fat Cat?), which will require international financial institutions to provide information annually to the IRS about U.S. account holders, starting next year.  Americans living abroad are concerned that some foreign banks are closing their accounts, refusing mortgages, and turning American clients away, according to a recent McClatchy story.

The US Treasury department has posted a defense of Fatca, entitled “Myth vs FATCA: the truth about treasury’s effort to combat tax evasion.”  Their statement  seeks to refute the idea that renouncing citizenship will make things easier for legitimate taxpayers:

       “U.S. taxpayers, including U.S. citizens living abroad, are required to comply with U.S. tax laws.  Individuals that have used offshore accounts to evade tax obligations may rightly fear that FATCA will identify their illicit activities.  Yet a decision to renounce U.S. citizenship would not relieve these individuals of prior U.S. tax obligations, and might well create additional U.S. tax obligations for certain citizens and long-term residents who give up citizenship or residency.”

How do you renounce or relinquish citizenship, or abandon permanent residency in the U.S.? It’s not easy. The State Department’s instructions are here and here.

The IRS instructions for filling out the “Expatriation Statement” – Form 8854 – are here.

Who are the people who have made the choice to renounce citizenship or give up permanent residence status? Are they “fat cats” or ordinary Americans, living abroad for employment or family reasons? It’s hard to know, because the lists of expatriations published quarterly in the Federal Register reveals just the names, without location or other identifying information. 

I’ve pulled together all the names in the quarterly reports since December 2004 into a spreadsheet here:

https://docs.google.com/spreadsheet/ccc?key=0AuwuMVmtXq4IdDB5NkJ1Slp6VFA5SHhUeDhjcFVqWEE&usp=drive_web#gid=0

If you’re interested in helping us figure out who’s moving out, take a look at the 9,242 names. If you can identify individuals and their occupations, send an e-mail and I’ll add to our research. If you find a good story, please let us know!

Margot Williams is ICIJ's research editor. You can reach her at mwilliams@icij.org


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