Those born with American citizenship are thought to have a great privilege. Not everyone, however, wants this “privilege” but regardless of their desires, they have US citizenship foisted upon them as a matter of US law.
Under the US immigration laws there are two general ways by which a person receives American citizenship at birth. The first way is simply by being born within the borders of the United States, regardless of the circumstances. US citizenship is automatic in such a case even if, for example, the parents were in the country for only a brief period of time before leaving with their newborn baby in tow.
This is a common law concept called “jus soli”, or the “law of the soil” “Jus soli” is a rarity in the modern world with the United States being one of only thirty countries which has it in place as a means for birthright citizenship. An exception is made to the American “jus soli” rule in cases of children born to certain visiting foreign diplomats. See INA 301(a) and INA 301(b). See 8 CFR 101.3.
Another general way for people to receive American citizenship at birth is to be born abroad to at least one American citizen parent, who has lived in the United States for a certain period of time prior to the birth. Let’s look more closely at one of the ways in which an individual can be born an American citizen under this method.
Immigration and Nationality Act (INA)
The INA provides, in relevant part at Section 301(g), as follows:
Sec. 301 [8 U.S.C. 1401] The following shall be nationals and citizens of the United States at birth:
“(g) a person born outside the geographical limits of the United States and its outlying possessions of parents one of whom is an alien, and the other a citizen of the United States who, prior to the birth of such person, was physically present in the United States or its outlying possessions for a period or periods totaling not less than five years, at least two of which were after attaining the age of fourteen years…”
Simply put, this means the US parent automatically transmits US citizenship to his or her child if the US parent met the physical presence requirements stated above. What does this really mean? The answer may surprise you and is best illustrated by a real-life case.
Child’s mother is a Saudi Arabian & American dual national. Mother was not born in the USA, but she lived in the USA for many years starting at age 2 through age 20. She became a US citizen only at age 19. After marriage, at age 20 she moved back to Saudi Arabia with her Saudi Arabian husband who is not a US citizen. Their Child was born in Saudi Arabia.
Question: Is Child a US citizen under the provisions of the INA, quoted above? Clearly, Mother had at least 5 years physical presence in the US, including at least 2 years after the age of 14. However, she was not a US citizen till age 19 and she left the USA 1 year later. The answer hinges on whether the Mother had to be a US citizen while fulfilling the requirement to have at least 5 years physical presence in the US, including at least 2 years after the age of 14.
Answer: I posed the question to two separate US Consulates. Both of them provided the same answer – “Yes, the child is a US citizen under these circumstances.”
The parents of this child were none too happy with this answer. They asked me many times if they could renounce the US citizenship of their child. I had to advise them that this is not possible.
“Accidental Americans” and the Tax Burdens of American Citizenship
Many individuals who are born with United States citizenship under the circumstances described above never consider themselves Americans. They do not live in America, have established lives elsewhere, probably don’t have a US passport, and may not even visit the country. They are aptly referred to as “Accidental Americans.” Despite these facts, Accidental Americans are subject to US tax laws which they are often time unaware they are obliged to follow, but which apply regardless of where they live.
Briefly, every US citizen has the obligation to file US tax returns and to pay all US taxes, no matter where that US citizen lives in the world. The US Income Tax is a graduated tax rate (as high as 39.6%) imposed on income earned by individuals. For US persons (that is, a US citizen, a so-called “Green Card” holder or a “US resident” due to substantial physical presence in the US) “income” means worldwide income from whatever source derived and from wherever it is derived in the world. The income that is taxed is not limited to any particular type of income such as salaries or business income; it includes for example interest, dividends, rents, royalties, commissions, capital gains, prize winnings, inventory sales proceeds and so on. It also includes the fair market value of goods, services or the like that are provided by an employer as part of the compensation package (for example, accommodation; education for children; airline tickets home; domestic helpers). In addition to US Income taxes, US citizens must not forget US Gift and Estate taxes (for example, the estate of a deceased US citizen must pay US estate tax based on the value of the worldwide assets of the decedent) as well as the myriad of tax information reporting requirements that must be satisfied.
You can read more about the tax problems that come with being an accidental American on my blog posts here and here. Renouncing one’s American citizenship is no easy task, and is getting more and more difficult with the current increase in people who are doing so.
While many “Accidental Americans” may be unhappy with having US citizenship forced upon them at birth, there are likewise many who will fight to demonstrate they are entitled to US citizenship at birth. For such persons, who were not entitled to the citizenship in the first place because it was recognized erroneously, the Department of State will indeed revoke the documentation that was incorrectly issued. You can read a recent decision here.
Parent or Guardian – What Should You Do?
US tax planning in the kinds of cases discussed in this post is critical. If the individual cannot expatriate currently because he is quite young, it is very important to structure his affairs to minimize any US tax bite during the time he remains a US citizen and in planning for a future expatriation. A well-meaning parent or guardian may often look to foreign (non-US) trust structures to ensure care of the child, or for family succession plans. However, setting up such a “foreign” trust with a US individual as a beneficiary may well be the worst action to take from a US tax planning perspective! The stakes are high. Get proper advice.
More Information – For those wishing to read a detailed history of US citizenship laws since the adoption of the US Constitution in 1788, and the convening of the First US Congress in 1789, read the late Andy Sundberg’s excellent summary. In 1977, Andy and other individuals living in Switzerland founded the American Children’s Citizens Rights League, after they learned that their children born overseas would not have American citizenship. Andy’s tireless efforts with the US Congress led to a change in US legislation which made it easier for children born abroad to Americans to acquire American nationality. In 1978 he founded the American Citizens Abroad to address the broad range of issues specific to Americans living and working abroad. You can read more about Andy here.
Follow me on Twitter: @VLJeker