The ABCs of Expatriation in These Chaotic Times By Alan Winston Granwell, Andrea Darling de Cortes, Leon Fresco, Kevin E. Packman and William M. Sharp
HIGHLIGHTS Expatriation has increased significantly in 2020. The latest U.S. Department of the Treasury Report reflects that a record 6,047 individuals expatriated during the first three quarters of 2020. In addition, 834,000 "green card" holders became U.S. citizens in FY 2019, which reflects an 11-year high. Why are so many individuals expatriating? Perhaps it is because we live in chaotic times, ranging from the pandemic to the contentious presidential election and transition, among other reasons. Further, U.S. taxpayers increasingly are considering moving a portion of their financial portfolios offshore for diversification and to facilitate global trading. The increase in expatriation also has caught the attention of the Treasury Inspector General for Tax Administration (TIGTA), which, in a recent report, emphasized that the Internal Revenue Service (IRS) should have controls in place to better enforce U.S. tax and reporting provisions relating to expatriates. In view of the significant uptick in expatriation activity, this Holland & Knight article reviews in Q&A format the essential elements of expatriation from an immigration and tax perspective. ________________ As discussed in Holland & Knight's previous alert, "TIGTA Tasks IRS with Enhanced Enforcement of Noncompliant Expatriates" (Nov. 23, 2020), expatriation has increased significantly in 2020. The latest U.S. Department of the Treasury Report reflects that a record 6,047 individuals expatriated during the first three quarters of 2020. This compares to the previous annual record in 2016, when 5,411 individuals expatriated. Interestingly, going the other way, 834,000 "green card" holders became U.S. citizens in FY 2019, which reflects an 11-year high in new oaths of citizenship. The increase in expatriation caught the attention of the Treasury Inspector General for Tax Administration (TIGTA), which, in a report issued on Sept. 28, 2020, emphasized that the Internal Revenue Service (IRS) should have controls in place to better enforce U.S. tax and reporting provisions relating to expatriates. Why are so many individuals expatriating? Perhaps it is because we live in chaotic times: the pandemic; the economy, social, health and climate issues; the oppressive worldwide U.S. taxation and reporting systems and the impact of the U.S. tax rules on so-called "Accidental Americans"; Foreign Account Tax Compliance Act (FATCA) and, most recently, the contentious presidential election and transition.1 Further, U.S. taxpayers increasingly are considering moving a portion of their financial portfolios offshore for diversification and to facilitate global trading. As a result of the increase in expatriations and TIGTA's report admonishing IRS to have better controls and enforcement of expatriations, in this article we review in Q&A format the essential elements of expatriation from an immigration and tax perspective.
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