The Washington Post reported yesterday that music legend Tina Turner relinquished her U.S. citizenship at the U.S. embassy in Switzerland. The Post cited a report from the embassy and a “knowledgeable source” as follows:

The key word in the embassy report apparently is the term “relinquishment.” That means, a knowledgeable source told us, that she did not “formally renounce her U.S. citizenship under 349(a)(5) Immigration and Nationality Act, but took Swiss citizenship with the intent to lose her U.S. citizenship.” As opposed to formal renunciation — a much more complex process, we were told — there are no “tax or other penalties for loss of citizenship in this fashion.”
Unfortunately, there are several problems with this story.

  1. Why did the U.S. embassy issue a report to the press about this? What happened to personal privacy? The Department of State is required by law to report the names of all expatriates to Internal Revenue Service, which publishes them quarterly in the Federal Register, but that is a far cry from issuing a report to the press about a celebrity.
  2. Relinquishment, which is terminating U.S. citizenship based on proof that you have performed an expatriating act with the contemporaneous specific intent to expatriate, is generally more complex than renunciation, not less. A big trap for the unwary is using your U.S. passport for any purpose after the expatriating event. That contradicts the intent to relinquish that is required for the expatriating act to cause loss of citizenship.
  3. The tax consequences of relinquishment are identical to those of renunciation. The effective date of relinquishment for tax purposes is the date you tell the U.S. government about it, not the date of the expatriating act, so it is not retroactive for tax purposes. An “exit tax” applies to most expatriates who have a net worth of $2 million or more, or who are not fully tax compliant.
  4. There is a section of the immigration law that attempts to banish tax-motivated expatriates from the United States. When the Office of General Counsel of the former Immigration and Naturalization Service was asked to confirm that this section does not apply to relinquishment they said don’t count on it. The bills that Senators Reed and Schumer have introduced to expand the scope of this section apply equally to renunciation and relinquishment, and if passed they will be retroactive to expatriations with an effective date of 2008 or later.

So it is not correct to say that there are no “tax or other penalties for loss of citizenship” by relinquishment rather than renunciation. The penalties are the same either way.


Posted by: Steve Trow