Ex-US citizens say they paid ‘astronomical fee’ to give up citizenship. They’re suing
Every year, a number of U.S. citizens choose to renounce their citizenship. They pay a fee, make a formal statement to officials, sign documents and hand in their passports.
For centuries, this renunciation process was free. The first required fee was introduced in 2010 and set at $450. In 2014, this fee was increased to $2,350 — where it has remained since.
Now several former U.S. citizens have filed a lawsuit against the U.S. government saying the $2,350 they were required to pay to give up their citizenship was an “astronomical fee.”
The U.S. government described the higher fee as being “at cost.”
The four ex-citizens are arguing that the fee violates their “natural right to expatriate,” according to a class-action lawsuit filed Oct. 4 in the United States District Court for the District of Columbia.
The four are now citizens of Germany, the Netherlands and France. Their lawsuit says the fee required for giving up U.S. citizenship was “excessive ... arbitrary, capricious and illegal because … it was used to fund governmental functions completely unrelated to renunciation services.”
The lawsuit follows a proposal from the U.S. Department of State on Oct. 2 to lower the required fee for renouncing U.S. citizenship.
The proposed rule would lower this fee from the current “at cost” amount of $2,350 to the “below-cost” amount of $450, according to the document published in the Federal Register.
The State Department said processing people’s request to give up their U.S. citizenship “has always been extremely costly.” The process is “necessarily time consuming” and involves “safeguards” to ensure “the renunciation is both voluntary and intentional,” officials wrote.
The department said it is lowering the required renunciation fee because of public concerns about its cost and an increase in the difficulties faced by U.S. citizens living abroad due to changes in financial reporting laws.
Those who give up their U.S. citizenship are not required to explain their motivation. However, the State Department’s “anecdotal evidence” suggests renunciation can be linked to the financial requirements imposed on U.S. citizens abroad.
The U.S. has a citizenship-based tax system meaning that U.S. citizens must pay taxes regardless of where in the world they live. As part of this system, the government imposed “stricter financial reporting requirements … on foreign financial institutions with whom U.S. nationals have an account” beginning in 2010, the State Department said.
Rachel Heller, one of the ex-citizens suing the U.S. government, summarized her experience paying taxes to NBC News.
“(Paying taxes) was far more complicated for people living overseas,” Heller told the outlet. “And the threatened fees if you did it wrong or left something off by mistake were so high that I got really paranoid about trying to do it myself.”
Esther Jenke, another one of the ex-citizens involved in the lawsuit, expressed a similar sentiment to The Guardian.
“Americans abroad are treated as criminals and tax evaders, when most of us are just normal people who just live outside U.S. borders,” she told the outlet.
The former citizens are suing for a refund of $1,900 for themselves and others who paid the higher renunciation fee, according to the lawsuit.
The State Department is accepting comments on its proposed rule to lower the renunciation fee until Nov. 1. Comments can be submitted via the Regulations.gov website or by email at fees@state.gov. The implementation will be determined after this input period.
The Office of Legal Affairs could not be reached for comment. The U.S. Department of State does not comment on pending litigation.
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