Why More American's Are Giving Up U.S. Citizenship

Why More Americans Are Giving Up U.S. Citizenship

6 Comments
February 26, 2014 at 1:11 pm  •  Posted in Celebrity Beat, Taxes by  •  6 Comments

In recent years, the United States has begun cracking down on overseas banks that allow Americans to hide their money tax-free. In 2010, Congress passed the Foreign Accounts Tax Compliance Act, affecting every foreign bank that does business with the U.S. The act also applies to retirement accounts and mutual funds.

A burst of renunciations in 2010 (over 1,500–doubling the previous year’s numbers) coincided with a new part of the law that requires individuals to report foreign assets worth as little as $50,000. (A separate provision forces Americans to disclose foreign bank holdings larger than $10,000.) Numbers continued to climb to nearly 1,800 renunciations in 2011, then dipped in 2012. By the 3rd quarter of 2013, however, there were a record 2,369–likely due to a new part of the law that is taking effect.

The new provision requires financial institutions to report all foreign accounts held by Americans. This has inevitably prompted some foreign banks drop their American clients altogether rather than risk entanglements with American law enforcement. As a result, Americans wishing to avoid paying American taxes, and/or continue doing business and banking outside of the U.S. have opted to turn in their American passports.

The United States is unique (similar only to the country of Eritrea) in that citizens living and working abroad must continue to pay U.S. taxes on top of taxes to the country in which they live and do business.

High-Profile Individuals Who Gave Up U.S. Citizenship

Eduardo Saverin, the Facebook co-founder who infamously had a falling out with Mark Zuckerberg, conveniently ditched his U.S. citizenship just ahead of the company’s I.P.O. Although born and raised in Brazil before moving to the United States in 1992, he now lives in Singapore. He owes an exit tax on capital gains from stock holdings, even if he doesn’t sell the shares. His chances of being barred from entering the U.S. again? Pretty high.

Tina Turner relinquished her citizenship late last year. She has lived in Switzerland for nearly two decades and recently married her German boyfriend of 27 years. We’re pretty sure, although she has a Swiss bank account, that she has reasons for leaving the country other than evading her U.S. taxes.

John Dorrance III, heir to the Campbell’s soup fortune, cashed out of the family business when he sold his 10.5 percent stake in 1995-1996. Dorrance renounced his U.S. citizenship and moved to Ireland prior to the sale.

Denise Rich, who wrote songs for Aretha Franklin and Jessica Simpson, renounced her citizenship last year, saving tens of millions of dollars in taxes. Her two daughters live in London, which she plans to make her permanent residence.

Sir John Templeton, pioneer global investor who founded the Templeton Mutual Funds, was called “arguably the greatest global stock picker of the century” by Money magazine in 1999. He sold the Templeton Funds in 1992 to the Franklin Group for $440 million. He fled to the Bahamas and took British citizenship in 1968, preferring to give his money to individuals rather than governments. His philanthropic activities in the U.S. have been estimated at over $1 billion.

Ted Arison, Jewish founder of Carnival Cruise Lines and original backer of the NBA’s Miami Heat, renounced his citizenship in 1990, taking his multi-billion dollar fortune to Israel, where he lived out the rest of his life.

Terry Gilliam – the only American in the famous Monty Python comic troupe — renounced in 2006 and became a British citizen. He is quoted as saying, “When I kick the bucket, American tax authorities would assess everything I own in the world—everything I own is outside of America—and then tax me on it, and that would mean my wife would probably have to sell our house to pay the taxes.”

Renouncing citizenship involves interviews, paperwork, and legal procedures, as well as exit taxes, capital gains taxes, and other surprises. Expatriates may have trouble re-entering the U.S. in the future without a visa.

Jessica Walters

About 

Jessica Walters studied creative writing at Utah Valley University and has been a NakedLaw author since 2011. She enjoys reading and writing about health and parenting. Jessica lives with her husband and two young children in Utah.

6 Comments

  1. J Dunn / March 8, 2014 at 5:22 am / Reply

    Wonder what would happen if the people demanded that all the money given to foreign countries be tracked & accounted for. You will see that some of this money found its way to a swiss bank account in Obama’s name or somebody he trusts. WAKE UP AMERICA. Both political parties know about this. That’s why the republicans don’t do anything.

  2. Nom Deplume, Esq. / March 7, 2014 at 6:41 am / Reply

    I follow the quarterly publication of individuals who have chosen to expatriate and I want to make one correction: This number started to spike appreciably in 2009, not 2010, and did so before FATCA became law. So while some renunciations were based on FATCA, and probably many not reported in the aforementioned report (which does not record ALL renunciants, only those that meet the criteria for making the list), renunciations increased dramatically after Obama became president and before any of his signature tax and healthcare policies became law. Further, except for a brief lull, renunciations have stayed high three years after the law was enacted. If this were FATCA-driven, one would expect to see a surge and then a decrease to “normal” levels. This didn’t happen. Thus, it would be misleading to imply that FATCA was the reason for such a dramatic increase in renunciations. It may be one reason but it isn’t the only reason, and for the “wealthy” that appear on the quarterly publication (who, presumably, can afford the compliance cost), I submit that it is a tangential consideration. I would submit that estate taxes are likely a bigger driver for that cohort than FATCA.

  3. patricia tanner / March 6, 2014 at 6:55 am / Reply

    The government acts like the mob. Fire them all they are doing harm than good. They keep taking and we as the voters have nothing to show for it except empty bank accounts , no jobs for the common voter like my husband and son. The gov keeps saying that jobs are available ware? Not Massachusetts that’s for sure. We the people speak out!!

  4. Gerald O'Hare / March 5, 2014 at 5:39 am / Reply

    Rich people are blinded from greed. Once they have to pay taxes the get out of Dodge. They can never have enough money can they. Well let them never return ever because we don’t need them.

  5. Uncle Fred / March 4, 2014 at 6:27 am / Reply

    You haven’t seen anything yet, wait till the Feds get the national debt so high that our money becomes worthless . It will get so bad that they will seize all money accounts including 401k’s, savings and anything worth anything. It will get so bad the the Mexican Government will build a fence on their side of the border to keep us all north of the border.

  6. Paul grisham / February 27, 2014 at 12:49 pm / Reply

    us veterans in America are tired of the BS everyday is a different deal nothing gets done

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