Information Concerning Tax-Motivated Expatriation (Correspondence,
05/01/2000, GAO/GGD-00-110R).

Pursuant to a congressional request, GAO provided information on
tax-motivated expatriation, focusing on: (1) the Internal Revenue
Service (IRS) procedures relevant to the enforcement of tax-motivated
expatriate rules related to income, estate, and gift taxes; (2) IRS'
procedures for using the private letter ruling process; and (3)
Immigration and Naturalization Service (INS) and Department of State
procedures for preventing tax-motivated expatriates from reentering the
United States.

GAO noted that: (1) IRS' enforcement of tax-motivated expatriate rules
has focused on collecting and publishing data on recent expatriates,
establishing a process for expatriates to request letter rulings--that
is, an IRS determination that they are not tax-motivated
expatriates--and maintaining a database of certain information
concerning expatriates; (2) IRS does not yet have a systematic
compliance effort aimed at enforcing income, estate, or gift tax laws
related to tax-motivated expatriation; (3) according to IRS officials,
expatriates are subject to IRS' normal enforcement programs for
nonresident aliens; (4) in December 1999, IRS initiated a project to
assess compliance among expatriates who have self-reported information
concerning their income tax liability and assets as required; (5) the
project is scheduled to conclude by July 2000; (6) IRS' private letter
ruling process provides expatriates with the opportunity to overcome the
treatment of being tax motivated under the law; (7) expatriates in
certain categories described by statute can request a review of the
facts and circumstances of their expatriation in order to avoid the tax
consequences of being treated as a tax-motivated expatriate; (8) as of
December 15, 1999, IRS had issued 113 rulings concerning expatriation;
(9) State and INS have not implemented procedures to prevent former U.S.
citizens who are tax-motivated expatriates from reentering the United
States; (10) according to INS officials, this inaction has resulted
primarily from the lack of any existing mechanism for the Attorney
General to obtain the taxpayer information from IRS necessary to carry
out the programs; (11) IRS and INS have now identified and agreed upon
such a mechanism, and INS has recently drafted proposed regulations;
(12) these draft regulations have been reviewed by IRS and State and are
currently under review by the INS Office of General Counsel, which is
then to send them to the Department of Justice for review; and (13)
according to INS officials, the proposed regulations will also be
subject to public comment.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-110R
     TITLE:  Information Concerning Tax-Motivated Expatriation
      DATE:  05/01/2000
   SUBJECT:  Tax evasion
	     Law enforcement
	     Letter contracts
	     Immigration or emigration
	     Debt collection
	     Proposed legislation
	     Americans abroad
	     Program management

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GAO/GGD-00-110R

United States General Accounting Office
GAO

GAO/GGD-00-110R

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B-284837
Page 3              GAO/GGD-00-110R Tax-Motivated Expatriation
B-284837

May 1, 2000

The Honorable William V. Roth, Jr.
Chairman
The Honorable Bill Archer
Vice Chairman
Joint Committee on Taxation

Subject: Information Concerning Tax-Motivated Expatriation

In a December 7, 1999, letter to the Comptroller General, you
asked us to assist the staff of the Joint Committee in its
review of various issues related to tax-motivated
expatriation, that is, leaving the United States and giving up
U.S. citizenship or long-term residency status for the purpose
of avoiding U.S. taxes. In that regard, you asked that we
obtain information on the following areas: (1) the Internal
Revenue Service (IRS) procedures relevant to the enforcement
of tax-motivated expatriate rules related to income, estate,
and gift taxes; (2) IRS' procedures for using the private
letter ruling process; and (3) Immigration and Naturalization
Service (INS) and Department of State procedures for
preventing tax-motivated expatriates from reentering the
United States.

To further assist us in focusing our efforts, your staff
provided us with a detailed list of questions that related to
these general areas and asked that we gather information to
respond to the questions. During several subsequent meetings,
your staff further clarified some of the questions and advised
us to delete others. As agreed, the questions together with
the relevant information that we obtained form the substance
of this report and are included in the enclosure.

U.S. citizens or long-term permanent residents expatriating on
or after February 6, 1995, are generally treated as being tax-
motivated if they meet at least one of two financial criteria.
The criteria are (1) an average net income tax liability for
the prior 5 years greater than $100,000 and (2) a net worth of
$500,000 or more on the date of expatriation.1 Expatriates
found to have a tax avoidance motive are subject to special
rules for U.S. income, estate, and gift taxes for a period of
10 years after the date of their expatriation. In addition,
former U.S. citizens found to have renounced their citizenship
for the purpose of avoiding U.S. taxes are not to be allowed
to reenter the United States.

In summary, IRS' enforcement of tax-motivated expatriate rules
has focused on collecting and publishing data on recent
expatriates, establishing a process for expatriates to request
letter rulings-that is, an IRS determination that they are not
tax-motivated expatriates-and maintaining a database of
certain information concerning expatriates. IRS does not yet
have a systematic compliance effort aimed at enforcing income,
estate, or gift tax laws related to tax-motivated
expatriation. According to IRS officials, expatriates are
subject to IRS' normal enforcement programs for nonresident
aliens. In December 1999, IRS initiated a project to assess
compliance among expatriates who have self-reported
information concerning their income tax liability and assets
as required. The project is scheduled to conclude by July
2000.

IRS' private letter ruling process provides expatriates with
the opportunity to overcome the treatment of being tax
motivated under the law. Expatriates in certain categories
described by statute can request a review of the facts and
circumstances of their expatriation in order to avoid the tax
consequences of being treated as a tax-motivated expatriate.
As of December 15, 1999, IRS had issued 113 rulings concerning
expatriation.

The State Department and INS have not implemented procedures
to prevent former U.S. citizens who are tax-motivated
expatriates from reentering the United States. According to
INS officials, this inaction has resulted primarily from the
lack of any existing mechanism for the Attorney General to
obtain the taxpayer information from IRS necessary to carry
out the programs. IRS and INS have now identified and agreed
upon such a mechanism, and INS has recently drafted proposed
regulations. These draft regulations have been reviewed by IRS
and the Department of State and are currently under review by
the INS Office of General Counsel, which is then to send them
to the Department of Justice for review. According to INS
officials, the proposed regulations will also be subject to
public comment.

In performing our work, we reviewed tax and immigration laws
and procedures relating to expatriates; interviewed officials
from IRS, the State Department, and INS; and collected
relevant information and other data relating to expatriation
and expatriates.

In order to answer your questions relating to statistics and
other types of data, we analyzed relevant information
collected from two samples we drew from original source
documents maintained by IRS. Details of the sampling
methodology are described in the enclosure.

We conducted our work between December 1999 and March 2000, in
accordance with generally accepted government auditing
standards. We received oral comments on a draft of this report
from IRS, the Department of State, and INS. Where appropriate,
we made changes to this report on the basis of these comments.

As agreed, unless you publicly announce its contents sooner,
we plan no further distribution of this report until 30 days
after the date of this letter. At that time, we will send
copies to the Commissioner of IRS, Commissioner of INS, and
Secretary of State. We will also send copies to those who
request them.

If you have any questions about this letter or the enclosure,
you may contact me or Joseph E. Jozefczyk on (202) 512-9110.
Wendy Ahmed, Robert Floren, Leon Green, Cheryl Peterson,
MacDonald Phillips, and Liz Scullin made key contributions to
this report.

Cornelia M. Ashby
Associate Director, Tax Policy and
   Administration Issues

_______________________________
1The criteria as defined in Internal Revenue Code section 877,
Expatriation to Avoid Tax, are adjusted annually for inflation
and, as of 1999, stood at $552,000 in net worth and $110,000
in average prior income tax liability.

Tax-Motivated Expatriation: Enforcement of IRS and
Immigration Act Provisions
Page 6  GAO/GGD-00-110R Tax-Motivated Expatriation
GAO Responses to Questions Posed by the Joint
Committee on Taxation
     1. How many U.S. citizens have expatriated
each year since 1991?

Year        Numbera
1991               619
1992               556
1993               697
1994               858
1995-97b      1,903
1998               440
1999               433c

aData for 1991-94 are from the State Department,
based on the Certificates of Loss of Nationality
(CLN) issued each year; data for 1995-99 are from
IRS data on expatriates published in the Federal
Register each year.
bData for 1995-97 are not distinguished by year
because IRS published the total number of
expatriates for all 3 years in 1997 (the year
after the requirement was enacted).
cAccording to the State Department, the decreased
expatriation in the late 1990s may reflect an
economic downturn in Asia as fewer people
renounced their U.S. citizenship as a condition of
employment in an Asian country.

     2. What are IRS' procedures for obtaining
information on expatriates?

ï¿½    Certificates of Loss of Nationality and
expatriate tax information statements for former
U.S. citizens are collected by the State
Department from its Foreign Service posts and are
to be forwarded to IRS monthly.
ï¿½    INS provides annually to IRS a computer disc
identifying individuals who gave up their
residency permits (green cards). However, IRS does
not use the data to track expatriates because the
data do not distinguish former long-term residents
from other former green card holders and generally
do not include tax identification numbers.

 3a1. How many expatriates self-reported that they
met the criteria for presumed tax motivation?

ï¿½    Based on IRS' expatriate database, of the
1,158 expatriates who provided expatriate tax
information statements indicating whether they met
the tax-motivation criteria, 182 said they met one
or both of the criteria.
ï¿½    The 1,158 who provided expatriate tax
information statements were among the 2,735
individuals who expatriated from 1995 through 1999
and whose names were published in the Federal
Register from 1997 through March 2000.1

ï¿½    For the 1,158 who provided expatriate tax
information statements, 955 included a Social
Security Number.
     3a2. How many other expatriates met the
criteria but did not self-report?

ï¿½    IRS' expatriate database indicates that
1,577, or 57 percent, of the 2,735 expatriates
listed in the Federal Register did not provide
expatriate tax information statements when they
expatriated.2 As a result, IRS does not have their
responses to the tax-motivation questions or their
Social Security Numbers (SSN). IRS has generally
been unable to determine whether these expatriates
met the tax-motivation criteria (e.g., by
ascertaining prior income tax liabilities) because
of the difficulty matching tax records without
knowing the taxpayer's SSN.
ï¿½    In January 2000, IRS mailed notices to the
expatriates who had not provided expatriate tax
information statements. The effort is part of IRS'
Compliance Improvement Project (CIP) for
expatriates, started in December 1999. IRS
officials said that, as of March 7, 2000, they had
reviewed 229 of about 300 responses received. Less
than 10 percent of the 229 respondents said they
met at least one of the tax-motivation criteria.

 3a3. How many of the above expatriates met each
tax-motivation criterion?

IRS' expatriate database indicates that, of the
182 expatriates who self-reported that they met
the tax-motivation criteria:

ï¿½    137 met the income tax liability criterion
and
ï¿½    177 met the net worth criterion.

3b. How many expatriates were eligible to request
rulings under each of the eligibility criteria of
section 877(c)?3

Information is not available.

3c. How many expatriates who self-reported meeting
the tax-motivation criteria also submitted ruling
requests?

Twenty-three persons filing an expatriate tax
information statement at the time of their
expatriation and self-reporting that they met at
least one of the tax-motivation criteria also
requested a private letter ruling.

3d1. Where have presumed tax-motivated expatriates
relocated, i.e., what countries?

We reviewed a second sample of 242 expatriate tax
information statements and found that former U.S.
citizen expatriates reported 23 countries of
citizenship and 23 countries of residence. We also
estimate that 39 percent reported a country of
residence different than their country of
citizenship.4 Given questions of disclosure of
taxpayer information, we are unable to provide
information on specific countries.

3d2. What countries have granted passports to each
presumed tax-motivated expatriate?

Information is not available.

3d3. In what countries does each presumed tax-
motivated expatriate maintain substantial
connections?

IRS does not routinely request each expatriate to
provide information about "substantial
connections." Under IRS notice 98-34, modifying
part IV of notice 97-19,5 IRS requests information
on the expatriates' "ties" to the United States
and to the foreign countries where they are
citizens and where they reside if they are
requesting private letter rulings to avoid being
treated as tax-motivated. These "ties" include
such information as location of the individual's
home, family and social relationships,
occupations, political and cultural activities,
business activities, and the locations where an
individual administers property.

3e. What methods of expatriation were used?

According to State Department officials, U.S.
citizens desiring to expatriate must sign an oath
of renunciation or statement of intent at a U.S.
Foreign Service post to receive a CLN. A statement
of intent certifies that the expatriates intended
to give up their U.S. citizenship when they
committed certain expatriating acts, such as
naturalization in a foreign country.  For tax
purposes, the date of the expatriating act, not
the signing of the statement is considered the
date of expatriation.

4. How much U.S. income tax was collected from
expatriates before and after the 1996 amendments?

IRS has not tracked this information.

5. What are IRS' procedures for monitoring tax-
motivated expatriates for 10 years after they
expatriate?

IRS has no specific procedures in place for
monitoring expatriates' tax compliance during the
10-year period.

5a. How many people is IRS monitoring under
section 877?

None.

6. What are IRS' procedures for assessing and
collecting income tax from tax-motivated
expatriates?

No specific procedures exist to date.

7. How does IRS coordinate enforcement with other
countries?

No specific procedures exist to date. IRS
officials said that its information exchange
programs with treaty partners potentially could be
used to obtain information on expatriates. IRS
also has mutual collection assistance agreements
with five countries (Canada, France, Denmark,
Sweden, and the Netherlands). However, these
agreements are limited to assistance in collecting
tax from U.S. citizens residing abroad and do not
extend to expatriates.

8. What are IRS' procedures for enforcing the anti-
abuse rules of section 877(d)?

No specific procedures exist to date.

8a. How many "gain recognition" agreements6 have
been filed by expatriates to avoid immediate gain
recognition on an initial exchange of property?

According to IRS officials, none have been filed.

9. What are IRS' procedures for determining a tax-
avoidance motive among expatriates who do not meet
the financial criteria of section 877(a)(2)?

No specific procedures exist to date.

10. Of the expatriates IRS has identified as
meeting the tax-motivation criteria, how many were
U.S. citizens and how many long-term U.S.
residents?

ï¿½    IRS has not independently identified
expatriates meeting the tax-motivation criteria.
IRS' expatriate database identifies expatriates
who self-reported meeting the criteria.
ï¿½    Based on our analysis of IRS data, the 182
individuals identified in IRS' database as meeting
the tax-motivation criteria included some former
long-term residents who had requested IRS private
letter rulings.7
ï¿½    The 113 expatriates who had received IRS
private letter rulings as of December 15, 1999
included 56 citizens and 57 former long-term
permanent residents.

 11. How much U.S. estate tax (including interest
and penalties) was collected from nonresident
aliens after 1990?

IRS has generally not tracked the amount of estate
tax paid by nonresident aliens. However, according
to a study by IRS' Statistics of Income Division,
nonresident aliens reported net estate tax
liability of $16.5 million in 1995 and $22.6
million in 1996.8

12. How many nonresident aliens paying U.S. estate
tax were tax-motivated expatriates?

IRS has not tracked this information.

12a. How much estate tax has been paid by tax-
motivated expatriates?

IRS has not tracked this information.

13. How much U.S. gift tax was collected from
nonresident aliens after 1990?

IRS has not tracked this information.

14. How many tax-motivated expatriates have paid
U.S. gift tax, and how much have they paid?

IRS has not tracked this information.

15. How many tax-motivated expatriates have paid
generation-skipping tax?

IRS has not tracked this information.

16. What are IRS' procedures for identifying
nonresident aliens who have made a lifetime gift
of U.S.-situated property?

IRS has not tracked this information.

16a. Are there different procedures for
nonresident aliens who have expatriated within the
last 10 years?

No.

17. How does IRS determine if an expatriate or
other nonresident alien with U.S.-situated
property has died?

IRS has no procedures for determining if a
nonresident alien with U.S.-situated property has
died. IRS generally does not receive any third-
party information when an expatriate or other
nonresident alien with U.S. estate tax obligations
dies, although IRS receives some foreign estate
tax returns as part of its information exchange
with treaty partners.

18. How many tax returns have been received from
the estates of expatriates?

IRS officials said that one expatriate estate tax
return is currently being audited, but IRS has no
data on the number of such returns identified or
audited previously. According to the officials,
any estate tax return self-identified as an
expatriate's return is to be selected for audit.9

18a. How many of these returns were for
expatriates who reported meeting the tax-
motivation criteria?

IRS has not tracked this information.

18b. How many gift tax returns have been received
from expatriates?

According to IRS officials, gift taxes are
generally reviewed as part of estate tax audits.
Some additional gift tax returns are selected for
audit annually without regard to the taxpayer's
expatriate status.

19. What are IRS' procedures for identifying tax-
motivated expatriates who are subject to the old
estate and gift tax rules for expatriates?

IRS has not tracked this information.

     19a. How many tax-motivated expatriates have
been subject to the old estate and gift tax rules
for expatriates?

IRS has not tracked this information.

     20. How many estates have been subject to the
estate tax rules for tax-motivated expatriates
(including those whose estates include stock in a
foreign corporation)?

IRS has not tracked this information.

     20a. What is the total value of their
interests in foreign corporations?

IRS has not tracked this information.

     21. Of the tax-motivated expatriates
identified by IRS as being subject to estate and
gift taxes, how many were U.S. citizens and how
many were long-term residents?

IRS has not tracked this information.

     22. How many private letter rulings have been
issued to expatriates under section 877, by year?

Year        Rulings
1997               17
1998                 3
1999               93a
 
aDuring 1998, IRS revised its private letter
ruling procedures for expatriates and deferred
rulings until the revision was completed. Also,
the 93 rulings in 1999 were as of December 15,
1999.

     22a. How were these cases concluded?

As of December 15, 1999, 113 cases had been
decided as follows:

ï¿½    22 favorable and 30 "fully submit" to
citizens (see response to question 22b),
ï¿½    36 favorable and 21 "fully submit" to long-
term residents, and
ï¿½    4 unfavorable (all to citizens).

22b. What were IRS' rationales for the rulings
issued?

ï¿½    According to IRS Chief Counsel officials,
each ruling is based on the unique facts and
circumstances of the case, including the factors
noted in questions 25a.
ï¿½    The officials said that the rationale for a
"fully submit" ruling is that the evidence
provided is inconclusive as to tax motivation. A
"fully submit" ruling allows IRS to reassess tax
motivation based on a subsequent audit of an
individual's return, while favorable and
unfavorable rulings are final determinations not
subject to such reassessments.

 23. How many expatriates requesting rulings were
previously identified as tax-motivated by IRS?

     IRS has relied on self-reporting and the
ruling process to identify tax-motivated
expatriates, although the recently initiated
expatriate CIP may identify some who did not self-
report. As discussed in question 3c, 23 persons
who self-reported meeting the tax-motivation
criteria also requested rulings.

     23a. Explain cases where expatriates
requesting rulings did not self-identify.

     One explanation is that a few expatriates
requested rulings in advance of their
expatriation. IRS officials said that advance
ruling requests have been relatively rare,
although they have not tracked the exact number.
However, we cannot explain other inconsistencies
from our review of IRS files.

     24. What are IRS' procedures for identifying
and following up on expatriates who met the tax-
motivation criteria but did not submit a ruling
request?

     No specific procedures exist to date. IRS'
database of expatriate information only includes
individuals who self-reported that they met the
tax-motivation criteria and also indicates whether
they have requested a ruling.

     24a. What are IRS' procedures for following
up on expatriates who received an unfavorable
ruling?

     No specific procedures exist to date.

     24b. What are IRS' procedures for
reconsidering an expatriate's tax motivation in
later audits, where the expatriate previously
received an IRS ruling, and how often has this
occurred?

     No specific procedures exist to date. Under
notice 98-34, IRS can reconsider "fully submit"
rulings in later audits of the taxpayer. However,
IRS has not done so to date and has had no special
procedures for selecting such cases for audit. In
any case, it may be too early for returns from
"fully submit" recipients to have been audited
because returns to be audited typically are not
selected until about one year after returns are
filed and "fully submit" rulings were not issued
before November 1998.

     25. What are IRS' procedures for reviewing
section 877 ruling requests?

ï¿½    IRS' Office of Chief Counsel said it first
screens ruling requests to ensure that the
expatriate is eligible to request a ruling under
section 877(c)(2).
ï¿½    A request from an eligible expatriate is
assigned to an attorney with experience in the key
issues applicable to the request (e.g., income
taxes, estate taxes, or foreign corporations).
ï¿½    The attorney's preliminary decision is
reviewed by one of two attorney-managers and
circulated to other managers in the Office of
Associate Chief Counsel (International) and to the
Office of Assistant Commissioner (International).
Final ruling decisions are signed by one of the
two attorney-managers.

 25a. In these reviews, what criteria does IRS use
to determine whether a tax-avoidance motive
exists?

According to IRS Chief Counsel officials, there is
no "bright line" test for determining whether
someone expatriated with a tax motivation. Rulings
are based on the unique facts and circumstances of
each case, including

ï¿½    U.S. and worldwide tax liabilities before and
after expatriation;
ï¿½    countries of residence and citizenship;
ï¿½    nontax reasons cited for expatriation;
ï¿½    amount of unrealized gain in assets removed
from the United States and the tax result of the
immediate disposition of such assets, should the
taxpayer receive a favorable ruling, compared to
the tax result if the taxpayer had not
expatriated; and
ï¿½    potential U.S. estate tax savings for
expatriates who are 60 years of age or older.

 26. What factors has IRS found to be most relevant
in making rulings on whether expatriates were tax-
motivated?

     IRS officials said that all factors are
considered, but a key factor is the expatriate's
U.S. income tax liability in the years following
expatriation, should the taxpayer receive a
favorable ruling, compared to the tax result if
the taxpayer had not expatriated.

     27. Have IRS' written procedures changed with
the issuance of notice 98-34?

     Yes. IRS added a category of ruling in which
it expresses that the principal purpose of tax
avoidance is not deemed to exist. IRS plans to
retain the right to reassess motivation in a
subsequent audit. IRS officials describe these as
"fully submit" rulings.

     27a. Have IRS' procedures changed in practice
with the issuance of notice 98-34?

     Yes, as of December 15, 1999, 51 "fully
submit" rulings have been issued.

     28. How many expatriates, of those whose
names have been published in the Federal Register,
have applied for U.S. visas?

     According to State Department officials, data
on visa applicants is not centralized and does not
distinguish former U.S. citizens from other
applicants.  In particular, the data do not
include Social Security Numbers or other means of
positively identifying former U.S. citizens.

     29. What are the INS and State Department
procedures for granting each type of visa to
nonresident aliens?

ï¿½    U.S. consular officers stationed at 207
Foreign Service posts throughout the world are
directly responsible for the issuance or refusal
of visas. The two types of visa are the (1)
immigrant visa, which is required when the
applicant intends to become a permanent resident
of the United States, and (2) nonimmigrant visa,
which is required when the applicant intends to
stay in the United States temporarily.
ï¿½    According to State Department officials,
consular officers are required to check for each
visa applicant in an automated "Lookout" system to
determine whether the applicant is known to be
excludable from the United States under the
Immigration and Nationality Act (e.g., known
terrorists are restricted from obtaining a U.S.
visa). Immigrant visas are also subject to certain
overall and per-country numerical limits. The
Lookout system currently does not identify
individuals who expatriated with a tax motivation.

     30. What are the INS and State Department
procedures for enforcing the 1996 amendments to
the Immigration and Nationality Act?

     INS and the State Department currently have
no procedures for denying visas to applicants who
renounced their U.S. citizenship with a tax
motivation, as provided in the amendments. The act
requires the Attorney General to determine whether
an individual's renunciation of U.S. citizenship
was tax-motivated. However, according to INS
officials, no mechanism exists for the Attorney
General to obtain from IRS the taxpayer
information necessary to make such determinations.
IRS and INS have recently identified and agreed
upon a possible mechanism-under proposed
regulations currently in draft form--that the
Attorney General might use to obtain taxpayer
information from IRS.

     31. What are the procedures for determining
whether visa applicants are former U.S. citizens
who renounced their U.S. citizenship with a tax
motivation?

     No procedures exist for identifying former
U.S. citizens, including those who renounced their
citizenship with a tax motivation. Under the
Immigration and Nationality Act, INS is
responsible for determining whether visa
applicants renounced their U.S. citizenship with a
tax motivation. INS has recently drafted proposed
regulations in this regard, and according to INS
officials, they have been reviewed by IRS and the
Department of State. The proposed regulations are
currently being reviewed by INS' Office of General
Counsel before being sent to the Department of
Justice for further review. The proposed
regulations will also be subject to public
comment.

     31a. Who makes the decision on whether to
issue a visa?

     U.S. consular officers stationed at Foreign
Service posts abroad approve or disapprove visa
applications, although prior renunciation of U.S.
citizenship is currently not a factor in these
decisions.

     31b. How many visa applicants have been
denied a visa because they had renounced their
U.S. citizenship?

     None.

     31c. How many of these were denied because
they renounced their U.S. citizenship with a
presumed tax motivation?

     None.

     32. Are the types and numbers of visas issued
to former U.S. citizens monitored by the State
Department?

     No.

     32a. If yes, how do they monitor such
information?

     Not applicable.

     33. What are IRS' procedures for sharing
information with the State Department and INS for
the purpose of enforcing the 1996 amendments to
the Immigration and Nationality Act?

     IRS officials said that IRS has no procedures
for sharing information on former U.S. citizens
for the purpose of enforcing the 1996 amendments
and that sharing tax information with other
federal agencies generally violates the disclosure
restrictions of section 6103 of the Internal
Revenue Code, aside from specific exceptions noted
in the law.  However, as noted in response to
questions 30 and 31, INS and IRS have recently
identified a potential mechanism for the Attorney
General to receive taxpayer information without
violating the disclosure restrictions.

     34. What are the State Department and INS
procedures for sharing information with IRS for
the purpose of enforcing the 1996 amendments to
the Immigration and Nationality Act?

     The State Department and INS currently have
no procedures for sharing information with IRS for
the purpose of enforcing the 1996 amendments. As
noted previously in response to questions 30 and
31, INS and IRS recently identified a potential
mechanism for the Attorney General to receive from
IRS the taxpayer information necessary to enforce
the act.

     35. What are the IRS and State Department
procedures for ensuring that the Form 8854,
Expatriation Information Statement, is filed?

ï¿½    The State Department's guidance to its
consular posts, as of November 1996, calls for
them to obtain tax information statements, as
required in Internal Revenue Code section 6039G,
from any person who loses U.S. citizenship. The
expatriate tax information statements are then to
be forwarded with the Certificates of Loss of
Nationality to the Internal Revenue Service. Based
on our sample of 200 IRS CLN files, we estimate
that 84 percent of those processed after November
1996 did include expatriate tax information
statements (see question 3a2). The State
Department's guidance also required posts to note
in the CLN file when expatriates refused to
provide statements. However, we found no such
reports in the sample files we reviewed at IRS.
ï¿½    Former long-term U.S. residents are required
to file form 8854 by the due date of their income
tax return for the year in which they gave up
their U.S. residency.
ï¿½    Also, IRS has not assessed the penalty for
not filing an expatriation tax information
statement.10 IRS officials said that there are
difficulties in assessing the penalty, such as the
lack of a Social Security number or other
definitive means of identifying the expatriate.

 35a. How many expatriates have filed a form 8854?

ï¿½    IRS data indicate that 1,158, or 42 percent,
of the 2,735 expatriates published in the Federal
Register filed an expatriate tax information
statement indicating whether they met the tax-
motivation criteria.
ï¿½    Form 8854 did not exist before January 1999,
and IRS has not tracked the number filed. The
expatriate tax information statements we sampled
were generally provided on State Department forms.

_______________________________
1The total of 2,735 takes into account IRS'
publication in March 2000 of a corrected listing
for the quarter ending in June 1998.
2Our review of IRS' paper files for a random
sample of 200 former U.S. citizen expatriates we
selected from the population of 2,735 expatriates
listed in the Federal Register (including both
those who self-reported that they met the tax
motivation criteria and those who did not) yielded
similar results, i.e., about 60 percent did not
include expatriate tax information statements.
However, our sample also found that expatriate tax
information statements were generally included
with CLNs processed after November 1996 (about 84
percent, +/- 8 percent). See response to question
35 for additional information.
3The eligibility criteria include (1) dual
citizenship (e.g., citizenship at birth of the
United States and another country), (2) long-term
foreign residency, and (3) renunciation of
citizenship upon reaching the age of majority.
4This estimate is based on a sample of 242 former
U.S. citizen expatriates, including 27 expatriates
who had previously reported annual tax liabilities
of at least $100,000 based on data collected by
IRS as part of its expatriate CIP and 215
expatriates who were randomly selected from the
remainder of the population of 1158 expatriates
listed in the Federal Register and who had
complete tax information statements.  The 95
percent confidence interval around this estimate
is 22 percent to 56 percent.
5IRS has issued two notices--97-19 and 98-34--to
provide guidance for expatriates. Notice 97-19
describes certain federal income, estate, and gift
tax consequences of expatriation and procedures
for requesting a private letter ruling. Notice 98-
34 modifies some of the procedures described in
notice 97-19 for requesting a private letter
ruling.
6Gain recognition agreements are an option for
expatriate taxpayers who would otherwise be
required to immediately recognize income or gain
from certain sources. In a gain recognition
agreement, the expatriate agrees to recognize as
U.S. source income any gain or income derived from
the sources in the 10 years following
expatriation.
7According to IRS officials, the expatriate
database was meant to include only former U.S.
citizens and any exceptions would be due to the
inadvertent inclusion of some former long-term
residents who requested IRS private letter
rulings.
8Internal Revenue Service, Statistics of Income
Bulletin (Winter 1997-1998).
9Question 6b of the estate tax return for
nonresident aliens (form 706NA) asks whether the
decedents lost U.S. citizenship or residency
within 10 years of their death.
10In 1999, the penalty was the greater of $1,000 or
5 percent of the tax required to be paid under
section 877 for the year.
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