'Accidental' and expat Americans join forces to combat unfair US tax law

'Accidental' and expat Americans join forces to combat unfair US tax law
'Accidental Americans' have American citizenship but no real ties to the US. Credit: Belga/ David Stockman

An initiative has been launched to fight against the American extraterritorial law, Citizenship Based Taxation (CBT). This sees people who find themselves with US citizenship against their choosing having to pay tax twice and declare all their income.

So-called "accidental Americans" are people who acquired American nationality through the right of citizenship because they were born in the United States. Yet aside from their birth, many have no ties with the US and have spent all their adult lives elsewhere. Those permanently living in Belgium have been called upon to help fund a legal challenge against CBT, which requires them to file taxes in the US.

The fundraising campaign was launched six weeks ago by Fabien Lehagre of the Association of Accidental Americans (AAA) – a group created in 2017 to defend and represent the interests of these unwilling citizens. It aims to bring together ex-pat Americans and "accidental Americans" to legally challenge the application of CBT.

"This method of taxation exposes Americans with no real connection to the US to penalties from its federal taxation authority in case of errors on declarations. It can also mean people are taxed twice and face annual costs to use the services of a Certified Public Accountant (CPA)," Lehagre told The Brussels Times in a statement.

Large-scale mobilisation

The only other country in the world to use this method of taxation is Eritrea. Lehagre said that in the coming months, legal actions will be taken in the US against this tax law. Money raised by the fundraiser will help support these actions. So far, almost €52,000 has been raised.

The US government does not formally track how many Americans leave the United States, but the most recent estimate puts the figure at nearly nine million. Lehagre hopes that by mobilising even a few hundred thousand of these, much can be achieved.

Some "accidental Americans" who have joined the movement claimed neither they nor their parents were ever informed about the law. They said that renouncing their US nationality at this point has become too expensive: the US State Department currently charges a flat fee of $2,350 (€2,176) for renouncing US citizenship – around 20 times more than in other high-income countries.

Another lawsuit launched by AAA seeks to slash these fees to $450 (€416). However, even if the fee is reduced, exiting is not just about paying a fee and handing in a passport: those with US citizenship must separately file with the Internal Revenue Service (IRS) and prove five years of IRS tax compliance.

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Lehagre's battle against the extraterritoriality of American legislation started seven years ago and is primarily against FATCA (Foreign Account Tax Compliance Act), which requires any foreign bank with an account held by an American citizen to provide the US IRS, with details including the number of the account, but also the balance and interests due.

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