Would renouncing US citizenship but retaining US nationality be a solution to CBT?


Shadow Raider says

Due to the extreme difficulty in having a decent discussion about CBT with Congress, I decided to start a plan B. I’m not abandoning the RBT proposal, but I see that it’s going to take a long time, so I came up with an alternative that may work in the meantime. I’ll explain it below.

In US law, nationality and citizenship are not exactly the same thing. Citizenship is actually a subset of nationality, so all US citizens are also US nationals, but it is possible to be a US national without citizenship. Such status was historically created for people in US territories, and today it only applies to American Samoa.

What is interesting is that the alleged “benefits of citizenship”, often mentioned as the justification for CBT, are actually benefits of nationality. US nationals without citizenship also use a US passport, receive US consular protection, and they can enter, live, study and work in the US without restriction. They can also apply to become US citizens, if they wish (after residing in the US for a short period). The only rights specifically for citizens that I’m aware of are the right to vote, to work in US government jobs, and to sponsor foreign relatives to immigrate to the US. US nationals without citizenship also transmit their status to their children born abroad.

What is also interesting is that the US tax code mentions US citizens all the time, but not US nationals. US nationals without citizenship are taxed as aliens, so they are taxed on worldwide income (and are subject to reporting requirements on foreign assets) if they reside in the US, and are taxed only on US income (and are not subject to reporting requirements on foreign assets) if they don’t reside in the US. Basically, they are subject to RBT. There is no “nationality-based taxation”.

And what is even more interesting is that US law only allows renunciation of the entire US nationality, which includes US citizenship, but not just the citizenship. That’s why the document that renunciants get is called a Certificate of Loss of Nationality.

You may have realized where I’m going with this. My proposal is to allow people to renounce only US citizenship while retaining US nationality if they wish. I suppose many Americans abroad would like this option, as they would get rid of CBT, FBAR, FATCA etc. but would keep a US passport and the ability to return to the US at any time and even to become US citizens again later. They would still be subject to the expatriation taxes but not to the Reed amendment, because they would become aliens under the tax code but not under immigration law. The option would be totally voluntary, of course.

I know that this proposal is not nearly as good as RBT, and it would not work for people like calgary411′s son. But it’s a sort of temporary solution, and I believe it would be much easier to implement and to gather support in Congress. It would consist of only a small paragraph to be added to the section of law that deals with renunciation (I already wrote a draft), and it would not touch the tax code at all. It would completely avoid the Ways and Means and Finance committees and the heated debate about taxes, and would satisfy those who stubbornly want to keep the tradition of CBT.

I would like to contact some congressmen to see if they are interested. The American Samoan delegate would be a good start, as he is aware of the subject and recently stated that citizenship should be a choice. Also, his constituency is very small, so he may be more accessible than regular congressmen.

What do you think? Is this idea too weird, or it is worth a try? If you had the option, would you renounce US citizenship but keep US nationality?

UncleTell says

@Shadow Raider

This is a great idea, it’s almost too logical. It’s so logical that many in congress probably won’t go for it. The only problem I see with your idea is that it creates a new loophole for the wealthy American residents who want to avoid taxes while still enjoying many of the benefits of a US national, and I know just as well as you do that Uncle Carl and Uncle Chucky will never agree to such an idea. I wouldn’t even be surprised if the two of them, after hearing of such an idea, would do all that they could to turn their coveted and sacred CBT to NBT (Nationalism Based Taxation)

@Shadow Raider,

You are definitely onto something. In fact I think this is the right way forward.

When I renounced US citizenship I received a CLN, but in my heart I did not renounce being an American and never will. How can I do that? Being American is in my blood, I have ancestors who came to America on the Mayflower. And just because most of the politicians in Washington have betrayed the ideals of the American Revolution, doesn’t mean that I have.

In fact, I still consider myself as more American than most of the Homelanders who have never even taken the time to read the Constitution. I cherish the ideas about the relationship between man and the state as they were written in the Declaration of Independence and Bill of Rights.

This whole idea of renouncing one’s nationality (the blood in one’s veins) is crazy and creates a lot of confusion and pain in the hearts of those being forced to renounce being an “American.”

Shadow Raider, you are definitely on to something. This is not just an issue about CBT vs. RBT. This is an issue about the difference between citizenship and nationality.

2 thoughts on “Would renouncing US citizenship but retaining US nationality be a solution to CBT?

  1. calgary411

    Thanks for never stopping that creative brain of yours! This would seem a logical option and one the US may be able to accept, their pride intact (even if it would not help those like my son).

  2. mjh49783

    Shoot! I don’t think they even give green card holders such a deal, as they’re just as liable for ‘CBT like’ taxation as a ‘US person’, until the US recognizes that they are no longer US persons by abandoning their green card status. Especially if they don’t properly surrender their green cards on their way to the exits.


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