Senators Jack Reed from Rhode Island and Chuck Schumer from New York filed an amendment to the immigration reform bill to ensure that the U.S. Department of Homeland Security may exclude from reentry into the United States former United States citizens who renounce their citizenship to avoid taxation.
Senator Reed introduced what is often referred to as the Reed Amendment in 1996 which ensured that Americans who officially renounced their U.S. citizenship for tax purposes wouldn’t be able to freely return to the U.S. The Reed Amendment gave the Executive branch the power to determine who renounced their citizenship primarily for tax purposes and the power to deny them the right to reenter the U.S.
The proposed Reed-Schumer Amendment would update the law to make numerous changes, including making a change to section 887A of the Code to automatically exclude any expatriate who is subject to the exit tax from coming back to the U.S.
While the proposed Reed-Schumer amendment would also create a mechanism that would permit expatriates subject to section 887A to ask the U.S. Department of Homeland Security for a determination that tax avoidance was not one of the principle purposes for the expatriation, in order to receive such a determination, the expatriate has to establish through clear and convening evidence that tax avoidance was indeed not one of the principle purposes of the expatriation. This is a rather high standard and very unfavorable for expatriates.
In a press release dated June 12, 2013, Reed was quoted saying that “American citizenship is a privilege. But it seems that a privileged few are trying to game the system by accumulating wealth and benefiting from the greatness of the United States and then renouncing their citizenship to avoid paying their fair share of taxes. They are welcome to leave our country, but they should not be welcomed to return without playing by the rules and paying what they owe.”
