prescribes. 165 A similar information statement is required for long-term U.S. residents who terminate their residency. 166 Since January 1999, individuals can provide this information on IRS Form 8854. Form 8854 requires the individual to provide: (1) the individual's social security number; (2) forwarding foreign address; (3) new country of residence; (4) all foreign countries of citizenship and the method by which citizenship was acquired; (5) the number of days the individual was physically present in the United States during the year of citizenship relinquishment or residency termination and each of the two preceding taxable years; and (6) information concerning U.S. tax liability for the five years preceding the date of citizenship relinquishment or residency termination. In the case of individuals with gross assets having a collective fair market value of more than $500,000, the form also requires the completion of a balance sheet showing assets and liabilities immediately prior to citizenship relinquishment or residency termination. If the tax liability threshold or the net worth threshold of section 877(a)(2) is met, Form 8854 asks several questions concerning the eligibility for and submission of a ruling request regarding whether the citizenship relinquishment or residency termination had as a principal purpose the avoidance of U.S. tax. The form must be signed under penalty of perjury. The information statement must be provided by former citizens no later than the earliest day on which the individual (1) renounces U.S. nationality before a diplomatic or consular officer of the United States, (2) furnishes to the Department of State a statement of voluntary relinquishment of U.S. nationality confirming an act of citizenship relinquishment, (3) is issued a certificate of loss of U.S. nationality by the Department of State, or (4) loses U.S. nationality because the individual's certificate of naturalization is canceled by a U.S. court (collectively, the "reporting date"). The office reviewing the statements is required to provide to the Secretary of the Treasury copies of all statements received and the names of individuals who refuse to provide such statements. A long-term resident whose residency is terminated generally is 168 169 165 Section 6039G(b) specifically requires some of this information to be reported, while other items are specified by Notice 97-19, as modified by Notice 98-34, and IRS Form 8854. 167 There is, however, no statutory requirement that individuals provide the required information on the official IRS form. Some Department of State consular offices will accept the information in alternate formats. Prior to January 1999, no uniform information statement (e.g., on an IRS form) existed. However, section 6039G and Notice 97-19 provide a list of certain required information. 168 169 Sec. 6039G(a) and (c). Under Notice 97-19, a former citizen whose reporting date is on or before March 10, 1997, must provide the information statement to the IRS by June 8, 1997. If the reporting date is after March 10, 1997, and on or before June 8, 1997, the former citizen must provide the information statement to the nearest consular office, the Department of State, or a Federal court (if the individual's CLN was canceled by a court) on or before June 8, 1997. If the reporting required to attach the information statement to his or her U.S. income tax return for the year of such termination. 170 In addition, a former citizen or former long-term resident who is liable for U.S. taxes under the alternative tax regime for a taxable year during the 10-year period (and accordingly must file IRS Form 1040NR) must attach to that return a statement setting forth (generally by category) all items of U.S.-source and foreign-source gross income. The IRS may impose penalties if an individual fails to provide the required information unless such failure is due to reasonable cause and not to willful neglect.171 An individual who fails to provide the required information statement is subject to a penalty for each year (of a 10year period beginning on the date of loss of citizenship or termination of residency) during which the failure to provide the statement continues. The penalty is equal to the greater of five percent of the tax required to be paid under section 877 for that year or $1,000. Interagency information sharing 172 The Department of State is required to provide the Secretary of the Treasury with a copy of each CLN documenting a loss of citizenship, that is approved by the Department of State. Similarly, the INS is required to provide the Secretary of the Treasury with the name of each individual whose status as a lawful permanent resident has been revoked or has been determined to have been abandoned. Further, the Secretary of the Treasury is required to publish in the Federal Register the names of all former citizens with respect to whom it receives the required statements or whose names or CLNs it receives under the foregoing information-sharing provisions. Because of restrictions placed on the disclosure of returns and return information by section 6103, the Department of Treasury is unable to share confidential information with the Department of State and the INS for purposes of administering civil immigration laws. 173 6. Certain resident noncitizens having a break in residency status A special rule applies in the case of a noncitizen who has been treated as a resident of the United States for at least three consecutive years, if the individual becomes a nonresident but date is after June 8, 1997, the former citizen must provide the information statement to the nearest consular office or Federal court (as the case may be) on or before the reporting date. 170 Under Notice 97-19, a former long-term resident who terminated residency after February 5, 1995, and before January 1, 1996, must attach the information statement to either a 1996 IRS Form 1040NR (whether or not the individual is required to file a tax return) or an amended 1995 U.S. income tax return. 172 Id. No similar penalties were required to be imposed under pre-1996 law. 173 For a more detailed discussion of the effect of section 6103 and the immigration exclusion for certain former citizens, see Part V.D., below. regains residency status within a three-year period.174 In such cases, the individual is subject to U.S. tax for all intermediate years under the alternative tax regime described above (i.e., the individual is taxed in the same manner as a former citizen or former long-term resident who relinquished citizenship or terminated residency for tax avoidance purposes). The special rule for a break in residency status applies regardless of the subjective intent of the individual. V. REQUIREMENTS FOR U.S. A. Overview The Fourteenth Amendment to the U.S. Constitution defines citizens as "all persons born or naturalized in the United States and subject to the jurisdiction thereof."175 Citizenship also can be conferred individually or collectively by statute. For example, by statute, U.S. citizens include individuals born abroad to an American parent. 176 178 Noncitizens fall into three categories for purposes of U.S. immigration law. First, noncitizens who enter illegally or who violate the terms of their visa status are referred to as “unlawful" or "unauthorized." Second, individuals who are admitted temporarily as visitors for a specific purpose are "nonimmigrants."177 Nonimmigrants are required to leave the country at the end of the time allotted them for the specific purpose. Third, noncitizens who receive permission to live and work permanently in the United States are called by various names, including “immigrants," "resident aliens," "lawful permanent residents," "permanent residents," or may be referred to as "green card holders." 179 Immigrants are not citizens but they are allowed to reside permanently within the United States, may apply for U.S. citizenship through the naturalization process, are able to work without restriction, with limited exceptions for government employment. All immigrants in the United States are protected by the Constitution, but the extent of that protection varies according to the status of their presence here. Similarly, all immigrants enjoy most of the statutory protections accorded by Federal and State law, but the extent of that protection also varies by alienage status. 180 A noncitizen seeking to enter the United States generally is required to present valid documentation for entry, usually a visa and a passport. These requirements, however, can be waived in certain circumstances. The Department of State and the INS form a “double check" 177 See Congressional Research Service, CRS Report for Congress, 98-918: Immigration Fundamentals (September 15, 1999) and Congressional Research Service, CRS Report for Congress, RS20916: Immigration & Naturalization Fundamentals (May 18, 2001). 179 Immigrants are defined as anyone who does not fall within one of the nonimmigrant classifications. 8 U.S.C. sec. 1101(a)(15). 180 See Congressional Research Service, CRS Report for Congress, 98-918: Immigration Fundamentals (September 15, 1999). 182 system for entry into the United States. The Department of State grants visas. The INS inspects individuals upon arrival at a port of entry and determines whether they are admitted into the country. There are many grounds for inadmissibility, including criminal history, security and public health considerations, the likelihood of becoming a public charge, and documentary requirements violations. Some grounds can be waived. Even for grounds that cannot be waived, an individual may be “paroled" into the United States for emergency or humanitarian 184 Among the grounds for inadmissibility is a provision that makes inadmissible former U.S. citizens who renounce their citizenship to avoid taxation.186 Individuals seeking permanent resident status cannot obtain a waiver of this ground of inadmissibility and therefore, cannot return to the United States on a permanent basis. Individuals seeking to enter the United States temporarily, however, may obtain a waiver of this ground of inadmissibility." Thus, while such individuals cannot establish permanent residency in the United States, they may receive a waiver to permit them to visit the United States as a nonimmigrant. 181 Under section 428 of the Homeland Security Act of 2002 ("Homeland Security Act"), Pub. Law 107-296, consular officers will continue to issue visas, but they will do so under the general supervision of the Secretary of Homeland Security. The Secretary of Homeland Security also will have general authority to refuse visas in accordance with immigration law, a power not currently given to the Secretary of State. The Secretary of State will retain authority to deny visas on foreign policy and national security grounds. The Homeland Security Act is not intended to fundamentally alter the immigration and nationality policy of the United States. 182 Under subtitle D of the Homeland Security Act, enforcement functions of the INS, including inspections, will be performed under the Bureau of Border Security, Department of Homeland Security. 183 8 U.S.C. sec. 1182(a). 184 8 U.S.C. sec. 1182(d), (h), (i), (k), (1). 185 8 U.S.C. sec. 1182(d)(5). A grant of parole is temporary permission to be present in the United States. The parolee is required to leave when the conditions supporting his or her parole cease to exist. Parole does not constitute formal admission into the country. 186 Sec. 212(a)(10)(E) of the Immigration and Nationality Act (the “INA"); 8 U.S.C. sec. 1182(a)(10)(E). |