Can Someone be Inadmissible to the US for Renouncing for the Purpose of US Tax Avoidance?

Renouncing US Citizenship & Renounce Citizenship Taxes – What does it mean to be inadmissible to the US if you renounce US citizenship for the purpose of US tax avoidance under the Reed Amendment?

Deciding to renounce US citizenship is a very personal and agonizing decision, especially if you have very close connections with the US. It can also be daunting because once a person renounces their US citizenship, they are then subject to US visa law and will need an ESTA or visa to enter the US to visit for business or tourism or to work in the US. Therefore, it is important to obtain advice prior to renouncing US citizenship on whether you are admissible to the US. There are many ways a person might be inadmissible to the US but below we will specifically discuss the provision under the Reed Amendment that makes a person inadmissible if the US government proves that they renounced US citizenship for the purpose of US tax avoidance.

What the Act Says About Renouncing Citizenship Taxes

Under Immigration and Nationality Act (“INA”) Section 212(a)(10)(E), a former U.S. citizen can be found inadmissible to the US if they “who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is inadmissible”. This provision, also referred to as the “Reed Amendment” named after US Senator, Jack Reed, was introduced to address concerns about individuals renouncing citizenship primarily to evade tax obligations. Individuals determined to have renounced U.S. citizenship for the purpose of avoiding taxation are deemed inadmissible to the United States under this provision, meaning that they cannot obtain a visa or enter the U.S. as a non-immigrant or immigrant.

Due to the challenges in the US government proving intent to avoid taxation and the lack of enforcement mechanisms, this provision is rarely applied. In effect, it is very unlikely that a person will be found inadmissible based on this provision.

Why this Provision is Difficult to Enforce?

There have been very few, if any, findings of inadmissibility under the Reed Amendment. This is largely due to the complexities involved in proving intent behind renunciation and the lack of a clear mechanism for enforcement by the Department of Homeland Security (DHS) and the US Department of State, the agency that issues US visas, does not have any procedures in effect to implement the Reed Amendment.

The key element for determining inadmissibility under INA Section 212(a)(10)(E) is the intent to avoid taxation. The DHS has the burden to prove that a person was motivated to renounce their US citizenship to avoid US tax avoidance. Proving intent usually involves assessing the subjective motivations of the individual at the time of renunciation. This is inherently challenging, as it requires evidence that directly links the act of renunciation US citizenship for the purpose of avoiding U.S. taxes. Such evidence might include financial records, statements made by the individual, or other documentation that explicitly indicates tax avoidance as the primary motive. However, the DHS has not published any specific regulations or guidelines detailing the evidence required to prove intent to avoid taxation under INA Section 212(a)(10)(E). This absence of a regulatory framework makes it difficult to determine what constitutes sufficient evidence of intent to avoid taxation, resulting in the provision remaining largely unimplemented.

Furthermore, the DHS has not published any guidance or regulations on implementation of INA Section 212(a)(10)(E). This lack of regulatory framework means there are no established procedures for determining whether a renunciation of US citizenship was motivated by tax avoidance. During the consular interview, consular officers are advised to record if the individual was likely renouncing for tax avoidance purposes in their opinion, but they are not in a position to make determinations about tax avoidance.  As a result, the Department of State (DOS) takes the position that unless there has been a specific finding by DHS, a consular officer should assume the renunciant is not inadmissible on this ground. This effectively means that, in practice, the provision is rarely applied.

Conclusion

In summary, while INA Section 212(a)(10)(E) provides a legal basis for finding former U.S. citizens inadmissible if they renounce citizenship to avoid taxes, the lack of implementing regulations and the difficulty in proving intent have resulted in minimal enforcement. It is highly unlikely that a person renouncing U.S. citizenship for tax-related reasons will be found inadmissible under this provision.

This is posting is for informational purposes and is not intended as legal advice. If you require further assistance or advice relating to the above, If you require further assistance or advice relating to the above, please contact our Principal Lawyer, Janice Flynn at janice@flynnhodkinson.com.