A group of former Americans who have renounced their citizenship has taken a bold step by filing a class-action lawsuit against the US government. The lawsuit claims that the fees imposed on individuals looking to relinquish their passports are excessive, unconstitutional, and a means for the US government to profit. This article will delve into the details of the lawsuit, highlighting the financial burden faced by renounced citizens and the potential implications of this ongoing legal battle.

The Burden of Exorbitant Renunciation Fees

Renounced citizens face astronomical fees when relinquishing their US citizenship.

A core grievance of the lawsuit concerns the exorbitant fees imposed on individuals seeking to renounce their US citizenship. Since 2014, anyone wishing to relinquish their American passport is required to pay a renunciation fee amounting to $2,350. This fee has been deemed arbitrary, capricious, and illegal by the plaintiffs.

The lawsuit argues that the high cost of renunciation infringes upon individuals' constitutional rights, as it places an undue financial burden on those who can no longer afford to meet the extensive US tax requirements or those who simply no longer wish to be citizens.

Desperate Measures: The Increasing Trend of Renunciation

Americans abroad are renouncing their citizenship due to the burdensome tax demands.

The Foreign Account Tax Compliance Act (FATCA) requires all US citizens, regardless of their residency, to file annual tax returns. This policy has resulted in both accidental Americans and long-term expatriates bearing the brunt of the US tax demands.

The Rise of Renunciations after FATCA

Introduced in 2010, FATCA compelled banks worldwide to disclose information about potential US account holders to the Internal Revenue Service (IRS). Consequently, it became arduous for individuals to undertake routine financial transactions as the required paperwork increased.

Renunciation applications have surged in recent years as individuals become increasingly frustrated with the demands of the US tax system. Notable individuals, such as former UK Prime Minister Boris Johnson, have voiced their opposition to the high tax expectations imposed on them.

Excessive Fees: Financial Consequences for Americans Abroad

For many Americans living overseas, renunciation seems like the only option to secure their financial stability. Fiona, an accidental American born in California but residing primarily in the UK, was appalled by the legal fees she encountered while renouncing her citizenship. She spent approximately £15,000 ($18,100) on legal expenses alone, further shedding light on the financial strain individuals face.

As of now, the US State Department has not reduced the renunciation fee from $2,350, despite acknowledging the issue. The ongoing class-action lawsuit concludes that reimbursements should be granted to the estimated 30,000 individuals who have already paid this excessive fee.

Challenging the US Government: A Class-action Lawsuit

Renounced citizens have launched a class-action lawsuit accusing the US government of unconstitutional profiting.

The group of renounced citizens has banded together to challenge the US government through a class-action lawsuit. Their primary argument articulates that the renunciation fee excessively and wrongfully funds governmental functions unrelated to renunciation services.

The plaintiffs maintain that this financial burden infringes upon both their constitutional rights and the principles of fairness. They are seeking to halt the profiting scheme established by the US government and recover at least a portion of the fees paid by renounced citizens in recent years.

This ongoing legal battle raises broader questions about the constitutional obligations of liberal democracies, the burdens imposed on diaspora communities, and the viability of citizenship-based taxation in an increasingly interconnected world.

Conclusion

The class-action lawsuit filed by renounced American citizens sheds light on the significant financial burden imposed on individuals seeking to relinquish their US citizenship. The excessive renunciation fees have sparked a growing trend of individuals renouncing their American ties. Whether this legal battle brings about a reduction in fees or partial reimbursements remains to be seen, but it is clear that the demands of the US tax system and renunciation process have created financial strain for Americans abroad.

This case also raises important questions about the fairness of citizenship-based taxation and reflects a larger debate regarding the constitutional obligations of liberal democracies to their diaspora communities. As the legal battle continues, it is worth considering the broader implications of renouncing citizenship and the potential need for reform.

FQA

Are there any alternatives to renouncing my US citizenship?

Renouncing US citizenship is not the only option. Some individuals choose to establish legal residency in other countries without forsaking their American citizenship. Consulting with a tax professional and exploring various options is advisable when considering the best course of action for individual circumstances.

How can renouncing citizenship affect my tax obligations?

Renouncing US citizenship can have specific implications for an individual's tax obligations. One should carefully assess the consequences, such as potential capital gains taxes on certain assets and navigation of the exit tax provisions. Seeking professional advice before renouncing is crucial to fully understand the financial implications.

Does the class-action lawsuit seek to abolish renunciation fees entirely?

The class-action lawsuit advocates for a reevaluation of the current renunciation fees and calls for reimbursement of the excessive fees already paid. While the ultimate outcome cannot be predicted, it is aimed at addressing the disproportionate financial burden on individuals wishing to renounce their US citizenship.

Can the US government change the renunciation fees independently?

The US State Department has the authority to adjust renunciation fees. While the intent to reduce the fees back to $450 has been voiced, substantial changes are yet to be implemented. The ongoing litigation raises questions about the future of renunciation fees and the concept of reasonable financial burden for individuals choosing to relinquish their US citizenship.