The state of your U.S. citizenship

From The War of 1812 To The War of 2012 – America Tries Again!

In 1812, because of grievances against Great Britain, the United States attacked the British Colonies north of the 49th parallel.  These colonies  were to become Canada. The reasons for the attack included:

“Impressment

During the Napoleonic Wars, the Royal Navy expanded to 175 ships of the line and 600 ships overall, requiring 140,000 sailors.^[7] While the Royal Navy could man its ships with volunteers in peacetime, in war, it competed with merchant shipping and privateers for a small pool of experienced sailors and turned to impressment when it could not operate ships with volunteers alone. It was estimated that there were 11,000 naturalized sailors on U.S. ships in 1805 and U.S. Secretary of the Treasury Albert Gallatin stated that 9,000 were born in Britain.^[8] The Royal Navy went after them by intercepting and searching U.S. merchant ships for deserters. Such actions, such as the Leander Affair and especially the Chesapeake–Leopard Affair, incensed the Americans. Americans were outraged by the practice because it infringed on national sovereignty and denied America’s ability to naturalize foreigners.^[9] The United States believed that British deserters had a right to become United States citizens. Britain did not recognize naturalized United States citizenship, so in addition to recovering deserters, it considered United States citizens born British liable for impressment. Aggravating the situation was the widespread use of forged identity papers by sailors. This made it all the more difficult for the Royal Navy to distinguish Americans from non-Americans and led it to impress some Americans who had never been British. (Some gained freedom on appeal.)^[10] American anger at impressment grew when British frigates stationed themselves just outside U.S. harbors in U.S. territorial waters and searched ships for contraband and impressed men in view of U.S. shores.^[11] “Free trade and sailors’ rights” was a rallying cry for the United States throughout the conflict. http://en.wikipedia.org/wiki/War_of_1812#Impressment

For obvious reasons the United States believed that people had the right to renounce their British citizenship and become U.S. citizens. Although the right to renounce U.S. citizenship is not mentioned in either the Declaration of Independence or the U.S. constitution, in 1868 the U.S. Congress:

Praising expatriation as “a natural and inherent right of all people”, Congress declared in 1868 that any act of the government which “denies, restricts, impairs, or questions the right of expatriation” is “inconsistent with the fundamental principles of this government.” Note that this statement is a Congressional declaration and NOT a part of the Constitution.

Fast Forward to 2011 – A Second American Invasion of Canada

2011 will be remembered as a frightening time to be an expat U.S. citizen. The IRS through the over administration of tax laws and information reporting requirements has terrorized hard working U.S. expats. In some cases they have made rash and uninformed decisions (encouraged by some legal and accounting firms who smell blood) which are sure to have a major impact on their futures. In some cases these decisions have included handing over their life savings to the IRS. It is possible that some did this because they believed they were U.S. citizens when in fact they were not. The plight of Canada U.S. dual citizens has been the subject of a media frenzy featuring inconsistent information. The target of this witch hunt is U.S. citizens who: – do not live in the United States; and – have in their day-to-day lives, made use of one or more of the following in Canadian financial institutions: bank accounts, RRSPs, TFSAs, RESPs, life insurance policies, mutual funds, brokerage accounts and Canadian Controlled Private Corporations. In other words, they made use of the incidents of day-to-day life and attempted normal retirement planning. It is unclear whether lines of credit, ownership of U.S. real estate (did you invest in that condo in Florida?) and ownership of shares in public companies (does anybody own shares of EXXON?). The simple fact is that any U.S. expat (many of whom are also Canadian citizens) are – in the eyes of the U.S. government – presumptive criminals and tax evaders. As Canadian Finance Minister Flaherty points out:

“Most of these Canadian citizens, many with only distant links to the United States, have a very limited knowledge of their tax reporting obligations to the United States. These are honest and law-abiding people, including many senior citizens now caught in a nerve-wracking situation. Moreover, because they work and pay taxes in Canada, they generally do not owe any taxes in the United States in any event. Their only transgression is failing to file the IRS paperwork they were never aware they were required to file.” http://business.financialpost.com/2011/09/16/read-jim-flahertys-letter-on-americans-in-canada/

It is important to note that – in the eyes of the IRS – what triggers the presumption of criminality is the fact of U.S. citizenship – coupled with a bank account in Canada. (That said, through the implementation of FATCA, the IRS is attempting to force foreign banks into identifying U.S. citizens and reporting on their activities.) First, U.S. citizens and then the world!

The last U.S. invasion of Canada was in 1812.  FATCA (which takes effect in 2014) has been referred to as the “neutron bomb” of the world financial system and is a clear attack on the sovereignty of Canada and the rest of the world. To put it simply: the U.S. has attacked the rest of the world. It is the legal and moral obligation of the rest of the world to defend itself. The U.S. is heavily in debt. What it clearly does not understand is that the debtor does NOT set the terms of repayment with the creditors. It is the other way around. FATCA will result in an unwillingness of foreign countries to buy U.S. T-Bills. Chinese currency will become the reserve currency of the world. I digress. ) http://www.theglobeandmail.com/report-on-business/us-tax-crackdown-has-canadian-financial-firms-on-edge/article2192258/

But, let’s stick with 2011 where the issue is whether one has the misfortune to be a U.S. citizen. The IRS is targeting all U.S. citizens including many people who are “unaware that they are U.S. citizens.”

What has not  been discussed, and what should be discussed, is the question of those  people who are “unaware that they are NOT U.S. citizens”.

As a recent article in the Montreal Gazette makes clear:

MONTREAL – Canadians concerned about the U.S. government’s tough new tax and financial reporting crackdown first need to determine whether or not they are U.S. citizens, says a tax expert familiar with the new rules. Read more: http://www.montrealgazette.com/news/citizen+doesn+apply/5508688/story.html#ixzz1aOhsPBXw

Stay with me on this!

One Citizenship – Two Ways To Acquire It

1. A.     Citizenship Acquired By The U.S. Constitution

The 14^th Amendment of the U.S. constitution states that anybody born or naturalized in the U.S. is a U.S. citizen. This has been interpreted by the U.S. Supreme Court to mean that unless a U.S. citizen voluntarily performs an expatriating act with the intention of relinquishing his or her U.S. citizenship that the U.S. government cannot take that citizenship. In other words, you have a constitutional right to keep your citizenship. There is no constitutional right to renounce U.S. citizenship. For those who want to rid themselves of U.S. citizenship: time may be of the essence.

Bottom Line: The U.S. government cannot strip you of your citizenship without your consent.

1. B.     Citizenship Acquired By Congress – U.S. Citizenship Results Not From The  14th Amendment But From A Law

A common example (and there are certainly others) would be where somebody was born outside the U.S. to parents who were U.S. citizens at the time of the birth. This group of citizens do not have citizenship that is constitutionally protected. This is “lawyer speak” for: the government can make laws imposing conditions on their citizenship – including taking it away. (Consider the Congressional declaration of 1868 noted above.)

Canadians Who Are Unaware That They Are U.S. Citizens – Two Common Examples

1. Those Canadians who were born in the U.S. and have no other connection to the U.S. – a common example  would be one born to parents who were temporarily in the U.S.
2. Those Canadians who were born in Canada of parent(s) who either were or are U.S. citizens. This group should NOT simply accept that they are U.S. citizens. Rather they should do some investigating in terms of the issues raised in this article. See a good U.S. citizenship lawyer immediately!

Canadians Who Wrongly Believe That They Are U.S. Citizens!

These Canadians have truly won the “citizenship lottery”. How could it be that somebody could believe they are a U.S. citizen and not be one? Here are some possible reasons:

1. For those Canadians born outside of the U.S. to U.S. parent(s). You must get a legal opinion based on your circumstances and the relevant U.S. citizenship law at the time you were born. Although 14^th amendment citizenship is enduring, citizenship acquired at birth outside the U.S. has been subject to different laws over the years. For example, the marital status of your parents could be a factor. There might have been a “condition subsequent” (more “lawyer speak” for something you had to do) affecting your citizenship. There are other examples. My point is that you should NOT presume that because one or more of your parents were U.S. citizens that  you ARE a U.S. citizen.
2. For those born in the U.S. and subsequently became Canadian citizens you may not be a U.S. citizen. Once again this will require investigation into some or more of the following:

–        The date that you became a Canadian citizen;

–        The oath of allegiance that you may have taken in becoming a Canadian citizen;

–        Your attitude toward your U.S. citizenship after becoming a Canadian citizen (Whether you have traveled on a U.S. passport and/or filed U.S. tax returns after becoming a Canadian citizen);

–        Whether you have either at the time of becoming a Canadian citizen or after acknowledged that you became a Canadian without the intent of relinquishing your U.S. citizenship;

–        Your intention at the time you became a Canadian citizen This discussion is of a general nature and is obviously not intended to offer legal advice. That said, for some U.S. Canada dual citizens

it would be a mistake to simply presume without investigation that you are a U.S. citizen and therefore get caught in the ongoing IRS shakedown.

Therefore, …

Before collapsing your RRSPs and turning life savings over to the IRS  (not to mention the tax consequences in Canada – it would be worth getting a legal opinion on the “state of your U.S. citizenship”. If you are lucky you will one step ahead of  the vast majority of U.S. expats who must choose between renouncing their U.S. citizenship or never going back to the U.S. And by the way: the Government of Canada will not collect FBAR penalties for the IRS. The tax treaty does not go that far!

I invite lawyers with an expertise in this area to post a comment below this post giving your contact information.