Citizenship Matters

I am, legally speaking, a citizen of the Netherlands. If you asked the US Foreign Service, they’d probably say I have US citizenship too, at least until I get my Certificate of Loss of Nationality. If you asked the IRS, on the other hand, they would say I’m no longer a US citizen.

What does it mean to say you are a citizen of a particular country? This question is in the news a lot lately, mostly because of the trouble Donald Trump is trying to stir up in Ted Cruz’s candidacy for President.

Cruz, apparently, was born in Canada, not the US. Trump questions his eligibility to run for President based on the US Constitution, which says, in Article II, Section 1, that

No Person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President; neither shall any Person be eligible to that Office who shall not have attained to the Age of thirty five Years, and been fourteen Years a Resident within the United States.

The question, then, is whether Cruz counts as a “natural born Citizen.” On the one hand, you could say that he is natural born in that he was born a US citizen. He may have been born in Canada, but his mother was American, so he was also American right from birth. On the other hand, you could argue that the writers of the Constitution meant “natural born Citizen” to mean born on US territory.

Accidental American citizenship

This point is being followed very closely by overseas Americans because so many of us, called “accidental Americans” have been trapped by one or the other of these arguments:

  • Some were born on US soil, often because their foreign parents were in the US for work. Or, as in the case of many Canadians, they were born at the nearest hospital, which happened to be over the border in the US.
  • Others have never lived in the US or never even set foot in the US. Yet they are also accidental Americans because one or both of their parents are American.

Either way, while Cruz wants to make the argument that he’s as American as Trump, these “accidentals” didn’t ask for (and most don’t want) their US citizenship.

A citizenship class system

The discussion brings out an interesting phenomenon around US citizenship: it establishes classes of citizenship.

1. First-Class Citizenship

The highest class is those who were born and still live in the US. They have full rights, including the right to privacy as defined by US law and the right to vote for representatives to the Senate and House who represent their needs in the region where they live. It makes sense that they pay taxes to the US for services they receive in the US.

2. Second-Class Citizenship

Second-class citizens were born outside the US but have US citizenship, either through their parents or through naturalization, and live in the US now. This class has the same rights as the first class, except that they may not be able to run for President. While Cruz’s situation still has to be clarified, the reason why Austrian-born Arnold Schwarzenegger has never run for President is that he is a naturalized, not natural born, citizen. People in this class also pay taxes to the US for services they receive in the US.

3. Third-Class Citizenship

The third class is made up of those with US citizenship (either natural born or naturalized) who have lived in the US before, but live elsewhere now. This was my particular situation until I renounced my citizenship. At third-class level, they have lost the same rights to privacy that those who live in the US enjoy: since they are presumed guilty of hiding money overseas, they have to submit a list of all account balances held overseas (the FBAR) to the Financial Crimes Enforcement Network. Notice that first and second class citizens do not have to do this unless they are under investigation for a federal crime.

Since they don’t live in the US, third class citizens receive no services from the US, and yet still have to file tax forms and, after exemptions, pay taxes to the US. They pay taxes and receive services where they live as well. They can still vote, but since they vote based on where they lived in the past in the US, their elected “representatives” don’t actually represent them. Can you imagine only being able to vote in the place you moved away from 18 years ago?

4. Fourth Class Citizenship

The fourth and bottom class of US citizens is made up of citizens who have never lived in the US. Very few from this group, despite being citizens, feel any sense of connection to the US at all. From what I’ve been reading on-line, it can be difficult for them to register to vote in the US, if they even wanted to. At the same time, like third-class citizens, they are expected to file US tax forms and, after exemptions, pay taxes to the US, despite receiving no services from the US. Like the third class, they have lost the right to privacy and have to file the FBAR. They pay taxes and receive services where they live as well.

Clearly the third and fourth classes gain little from being US citizens, and I’ve noticed quite a few comments on-line to the effect of “Well, then they should just give up their citizenship.” This can be very difficult because of the requirement to become tax-compliant (which usually means filling out several years of hopelessly complicated tax filings to prove they don’t owe anything to the US). The US also imposes a fee of $2350 for the “service” of renunciation.

Is this what the writers of the Constitution meant when they specified that a Presidential candidate has to be a “natural born Citizen”? On the one hand, it’s clear that they intended a class-based system. After all, the original Constitution accepted slavery and denied women the vote.

I doubt, though, that they intended for citizenship itself to become a scale with different gradations of rights and requirements, with some citizens enjoying higher value than others.

Whatever the original intentions, should the US be enforcing such a system now?

My whole US citizenship series:


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You forget the long term green card holder. Called citizen for tax purposes only. May have no right to enter the US but have all the tax obligations. Have to expatriate like citizens and pay a tax if the have enough money.

I think your missing the fact that they are treated as citizens for matters of the tax code. It doesn’t matter if the green card expires and they have no right to enter the US.
A long term GC holder faces the same expatriation process as a citizen.
Even though you have expatriated you are still in a bucket were the IRS treats you differently. The tax treaties give the US a right to go after you for 10 years.
A covered expatriate carries a special IRS mark for life. So you never really escape the IRS.

It’s a strange feeling to read that I am a ‘first-class’ citizen, with the implication of that label in most other circumstances, but yes, I am a natural born citizen still residing in the US. However, our daughter is now a third class citizen, and our granddaughter comes in at fourth class. Like most Americans I was ignorant of the issues ex-pats faced and only because of her have I even become aware of FATCA and FBAR, etc. I appreciate your clear writing and informative series because from a purely emotional place I would be very sad if she were to renounce her citizenship.Are there other families of ex-pats that may want to unite in bringing pressure on our representatives to address these unfair issues? Is there a place you might point me to? Thank you!

Another angle one might explore is classification of citizenship/permanent residency in other countries. Example, if you are a US person in The Netherlands then via the Tax Treaty you are treated as 2nd class under the laws of The Netherlands. You are subjected to US tax and compliance, and as no other OECD nations have citizenship based taxation, then you are treated by your government as 2nd Class compared to citizens from all other countries.

The Netherlands via the tax treaty could have put in protections shielding from and not acquiescing to US extraterritorial taxation, and not accepting the US written text of the treaties. All other countries are not exempt from injustices inflicted but they are complicit. It may be said that countries of the world are participants in US tax and compliance bulling of US persons tax resident overseas. This point needs to be pressed as too often the reaction of officials of non US countries is that it is a matter for the US government; as if nothing to do with their government, and their citizens and permanent residents living on their soil. It is no less than US intervention into the internal affairs of other countries, which should be called out for what it is as bullying and should be objected to.

One could say that there is also a fifth class of US citizenship, i.e. that of a “covered expatriate”. Under US law, a covered expatriate is NOT a citizen for immigration purposes, but is a “tax American” or US citizen for tax purposes. He/she is not allowed to vote or even enter the US without a visa and is probably unlikely to obtain a visa. This status even extends to the affected person’s property after death, i.e. impacts any possible American heirs to whom he might bequeath money, property or any other assets.

I encourage this. You might emphasize the distinction between citizens for nationality purposes and citizens for tax purposes. One can cease to be a citizen for nationality purposes (renounce U.S. citizenship) and continue to be a “citizen” for tax purposes. See IRC S. 7701(a)(5) and follow the trail.

The same principle applies to Green Card holders. See S. 7701(b)(6) of the IRC which makes it clear that one continues to be a U.S. taxpayer even when a Green Card Holder no longer lives in the United States. This provision has existed since 1984. In other words, to get rid of the Green Card for tax purposes some very specific steps must be taken.

Excellent idea. Many readers are probably totally unaware of this category.

Hello Rachel:

Thanks for your series of posts of posts on renouncing U.S. citizenship. To carry on our Twitter discussion:

I believe that what you describe as a “class system” is better described as a “caste system”. It’s very clear that the purpose of what you describe as the “third class” and “fourth class” citizens, is to assist in paying the expenses of the “first class” and “second class” citizens.

This reality is expressed in the form of #PFIC taxation, Obamacare surtax (3.8%), and other taxes, fines and penalties imposed on those living abroad. The purpose of the reporting requirements (FBAR, Form 8938, From 3520, etc.) is to identify the assets that are subject to this punitive taxation. “So, renounce”, say the Homelanders.

As you know a “third or fourth class citizen” must pay the Homeland to renounce and to be relieved of the responsibility of paying for the “first class” and “second class” citizens. This payment is in the “form” (no pun intended) of administrative fees ($2350), five years of taxes and for a very large number of people (think “covered expatriate”) the S. 877A Exit Tax. The S. 877A Exit Tax is neither understood nor properly described by most tax and legal professionals. It is far more pervasive (and pernicious) than most realize. In addition, once one is identified as a “covered expatriate”, that status will follow you for life and will make it impossible to make gifts or bequests to U.S. persons (leading to family renunciations).

How is this different from a “caste system” where the lower castes are required to pay for the higher level castes. It shocks the conscience to realize what America has become.

This is hopelessly confusing, especially to those who would naturally consider themselves to be law abiding US citizens residing outside of the country. There are lots of acronyms that are used like FATCA and FBAR but I’ll throw in one more to express my reaction, FUBAR! Anita