The U.S. citizenship ceremony is an iconic rite of passage for immigrants.
Would-be Americans gather to pledge allegiance to the Stars and Stripes. There are cheers and often tears, patriotic speeches, sometimes music, and plenty of flag waving.
Now, a small but growing band of Americans in Canada is doing it in reverse – gathering en masse to begin the process of becoming un-American.
It was a sombre affaire at the U.S. consulate in Toronto last month as 22 Americans waited in the rain before being ushered in to what is believed to be the first citizenship renunciation meeting ever held in Canada.
Unlike most countries, the United States requires its citizens to file annual tax returns with its Internal Revenue Service regardless of where they live and work. Many of the roughly one million Canadian-American citizens long ago stopped filing, assuming they owed no tax. Many are worried now they’ll be hit with punishing penalties as a result of recent U.S. efforts to prevent its citizens from hiding assets in offshore tax havens.
New rules require all Americans to report their foreign bank and brokerage accounts every year. And by 2014, Canadian financial institutions will have to identify accounts held by U.S. citizens to the IRS.
The crackdown has provoked outrage among Canadian-American citizens in Canada.
Mark Wittgen, 51, who grew up in Indiana and came to Canada in the early 1980s, said renouncing his U.S. citizenship in response has been an emotional journey.
“I’ve been through a divorce and this is quite similar to a divorce,” explained Mr. Wittgen, who lives in Whitby, Ont., and attended the meeting at the consulate. “It’s a long, drawn-out process and there’s a lot of emotion that comes with doing what I’ve done. It’s not a fun thing to do, but it’s been forced upon me.”
The last straw, he said, was the requirement to disclose his foreign bank, brokerage and pension accounts to the IRS, which he says violates the principle of the privacy of personal assets.
“This is heavy-handed,” said Mr. Wittgen, who became Canadian in 2003 and has a Canadian wife and family.
Since the meeting, Mr. Wittgen has gone through a one-on-one interview at the consulate, where he signed an oath of renunciation, paid a $450 (U.S.) fee and handed over his U.S. passport. He’s also filed five years of U.S. back taxes. Now, he’s waiting for a confirmation certificate – the final step.
At the meeting, consular officials handed out forms, a copy of the oath of renunciation, and repeatedly stressed the serious consequences of what people are contemplating.
But officials insisted they wouldn’t discuss the “800-pound gorilla in the room” – the tax issue – according to a U.S. expat who attended the meeting.
Another American who attended the meeting said there’s “a lot of frustration with the entire experience so many of us have lived these past few months.”
Renunciation is no easy out. People who do it must pay the $450 fee and sign a renunciation oath before a U.S. embassy or consular official. Once that's done, it's Uncle Sam's turn. The IRS requires that the person submit special documents and then file any back taxes. That typically means at least five years of back taxes and thousands of dollars in penalties for not filing in the past.
Wealthy individuals, defined as those with annual income of about $150,000 or net worth of at least $2-million, also have to pay an exit tax.
A U.S. embassy official played down the significance of the renunciation meeting. He said consular officials were responding to calls and requests for information prompted by a flurry of media coverage about the tax crackdown.
“We simply decided it was more efficient to have everybody come as a group and talk to everyone at once, rather than doing it individually,” the official said. “It was simply a time-management decision.”
No further meetings are planned, but more could take place, depending on demand across the country, the official said.
“It’s a formal process and it has to be followed very specifically, and we want people to think about it,” the official added.
Several million Americans live outside the United States. Relatively few give up their citizenship, but the numbers are growing. Last year, 1,534 Americans renounced their U.S. citizenship – more than twice as many as in 2009 and a sevenfold increase from 2008. In Canada, which is home to more U.S. expats than anywhere else in the world, there are typically fewer than 100 renunciations a year.