A bill pending in the U.S. Senate targets citizens who renounce their citizenship, a process known as expatriation, as a means of avoiding tax liability. An increasing number of citizens are expatriating every year, although it is not clear how many, if any, do so to avoid taxes. U.S. immigration law deems anyone who expatriates for such tax-related reasons inadmissible to reenter the country, but the burden of proof of intent is generally on the government. The new bill, if passed, would effectively reduce the government’s burden for certain expatriates. Lawmakers were motivated to write the bill from news of Facebook co-founder Eduardo Saverin’s expatriation, announced shortly before he stood to make a huge profit on Facebook’s initial public offering (IPO).
Saverin was born in Brazil and moved to the United States with his family, when he was still a minor, in 1992. He became a naturalized citizen in 1998. As a Harvard undergraduate student, he co-founded the now-global social networking website Facebook. The company’s formation was presented in a dramatized form in the 2010 film The Social Network. Facebook’s IPO in May 2012 brought in billions of dollars and set several records, making the founders and early investors quite wealthy.
In 2009, Saverin moved to Singapore, where he began investing in businesses ventures in multiple countries. He reportedly began the process of expatriating in the fall of 2011. Notice of his expatriation appeared in the Federal Register, which publishes a quarterly list, on April 30, 2012. This was only a few weeks before Facebook’s IPO, leading to speculation that Saverin was motivated by the sizeable tax bill, estimated at $67 million, that he would owe to the Internal Revenue Service. The IRS still collects taxes from U.S. citizens living overseas. Saverin maintains that he did not expatriate to avoid taxes, but rather to cement his ties to Singapore.
Under current U.S. immigration law, a U.S. citizen who renounces citizenship “for the purpose of avoiding taxation by the United States,” as determined by the U.S. Attorney General, is deemed inadmissible to the country.
In Saverin’s case, he most likely would not have to address this issue unless he petitions for a visa to return to the U.S. The designation of “inadmissible” generally means that a person cannot enter the country at all, even as a temporary visitor. Common categories of inadmissiblity include repeat immigration violators, violent criminals, and individuals believed to represent a national security threat.
The Senate bill, titled the Ex-PATRIOT Act (“Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” Act), would create a presumption of an intent to avoid taxation when certain people expatriate. The law would apply to individuals with a net worth in excess of $2 million, or people who owed an average of $148,000 or more in income tax over the previous five years. The law would apply retroactively to anyone who expatriated in the last ten years. Democratic Senators Charles Schumer of New York and Bob Casey of Pennsylvania introduced the bill. Opponents of the bill argue that it is unnecessary, as it addresses conduct already prohibited by immigration law.
The New York immigration lawyers at Samuel C. Berger, P.C. help immigrants seeking visas to come to, or remain in, the United States. To schedule a consultation with one of our skilled attorneys today, contact us online, or by calling (212) 380-8117.
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Photo credit: ‘Facebook on Nasdaq’ by ProducerMatthew (Own work) [CC-BY-SA-3.0], via Wikimedia Commons.