Flott & Co.’s recent experience in assisting two former US citizens seeking formal documentation of their prior loss of US citizenship underscores the need for expanded guidance on the relinquishment of US citizenship in the US Department of State Foreign Affairs Manual (Volume 7 – Consular Affairs) (“FAM”).

In cases that appear to have been the first of their kind at US consulates in two major Canadian cities, Flott & Co. clients met confusion and inconsistency firsthand. Both clients were born in the United States. They had become naturalized Canadian citizens years ago, one in the 70’s and one in the 80’s. Both ceased using their US passports, filing US tax returns, and otherwise behaving like US citizens. Both used their Canadian passports for international travel and otherwise took up their new lives as Canadians. Neither formally renounced US citizenship when they became Canadians.

Last year, news of the Internal Revenue Service’s crackdown on US citizens living overseas and the consequences of the failure to file annual US tax returns and reports of foreign (i.e., Canadian) bank accounts (known as FBAR’s) spread across Canada. Both clients felt exposed to sanctions, even though they did not consider themselves to be US citizens. Press coverage of the pending implementation of another US law aimed at identifying bank accounts of US citizens living outside the US, called the Foreign Account Tax Compliance Act (FATCA, for short), heightened their concerns over their citizenship status. Neither wanted to file US tax returns or FBAR’s or have their financial accounts in Canada reported to the IRS. However, they had no documentation of their status as former US citizens.

Another concern was the change in the documentation requirements for Canadians entering the United States. Whereas previously Canadians had been able to enter the US without presenting a passport, now they are required to show one as identification. When the passport requirement came into force, some US immigration officers began questioning persons with Canadian passports that showed a US birthplace. Birth in the US confers automatic US citizenship, and INA Section 215(b) [8 USC §1185(b)] makes it unlawful for any citizen of the United States “to depart from or enter, or attempt to depart from or enter, the United States unless he bears a valid United States passport.”
After reviewing the facts and circumstances of their cases, Flott & Co. advised both individuals to apply for a Certificate of Loss of Nationality of the United States (“CLN”). It was clear from the evidence they provided that both had abandoned their US citizenship years ago, before many of the laws that now control expatriation and exit from the US tax system were enacted. It made sense for them to seek a CLN based on their past expatriating act rather than take the oath of renunciation in the present. More about relinquishment vs. renunciation.

When we approached the two consulates about relinquishment, both reacted as if the clients were intent on renouncing their US citizenship. One required documentation to be submitted in advance. The other would not accept anything prior to an interview. Both consulates were quite familiar with renunciation because the procedure is outlined in detail in the FAM. However, both were quite unsure how to deal with these relinquishment requests and handled them quite differently. In the first instance, the client was told to return in six months for an interview. When she returned to the consulate six months later for the interview and to sign the documents we had prepared, the consular officer was confused as to how to proceed after going through them. In the end, the client left without completing the process. In the second case, the client was allowed to complete the paperwork we had prepared and submitted to the consulate in advance, the same forms ultimately submitted by the first client. He was told that a consular officer would review it, but was given no indication of what would happen next. What followed was six months of silence.

The dramatically different handling of these cases at major US consulates in a single country persuaded Flott & Co. to approach the Department of State to suggest that enhanced guidance on relinquishment is needed to avoid such inconsistencies and uncertainties in process and procedure. To its credit, the Department agreed and is now studying the matter with a view to creating such guidance. In the meantime, both relinquishment cases are progressing. One has been sent to Washington for processing and the other will follow by the end of August.