The Ex-PATRIOT Act was a proposed

United States federal law The law of the United States comprises many levels of codified and uncodified forms of law, of which the most important is the nation's Constitution, which prescribes the foundation of the federal government of the United States, as well as va ...

to raise taxes and impose entry bans on certain former citizens and departing

permanent residents Permanent residency is a person's legal resident status in a country or territory of which such person is not a citizen but where they have the right to reside on a permanent basis. This is usually for a permanent period; a person with suc ...

. The law would automatically classify all people who relinquished U.S. citizenship or permanent residence in the decade prior to the law's passage or any future year as having "tax avoidance intent" if they met certain asset or tax liability thresholds or had failed to file any required federal tax forms within the preceding five years. People determined to have "tax avoidance intent", referred to in the text of the law as specified expatriates, would be affected in two ways. First, they would have to pay 30% capital gains tax on any U.S. property sold after the law's enactment. Second, they would be barred from re-entry into the U.S. either under immigrant or non-immigrant categories. The Ex-PATRIOT Act was first introduced as S. 3205 in the

112th Congress The 112th United States Congress was a meeting of the legislative branch of the United States federal government, from January 3, 2011, until January 3, 2013. It convened in Washington, D.C. on January 3, 2011, and ended on January 3, 2013, 17 ...

in 2012 by Senator

Chuck Schumer Charles Ellis Schumer ( ; born November 23, 1950) is an American politician serving as Senate Majority Leader since January 20, 2021. A member of the Democratic Party, Schumer is in his fourth Senate term, having held his seat since 1999, and ...

and four co-sponsors, but died in committee. Schumer and two other senators moved similar provisions in the

113th Congress The 113th United States Congress was a meeting of the legislative branch of the United States federal government, from January 3, 2013, to January 3, 2015, during the fifth and sixth years of Barack Obama's presidency. It was composed of the ...

as Senate Amendment 1252 to a major

immigration reform Immigration reform is change to the current immigration policy of a country. In its strict definition, ''reform'' means "to change into an improved form or condition, by amending or removing faults or abuses". In the political sense, "immigration ...

bill, but their amendment was not included in the version of the bill that passed the Senate.

History

The

short title In certain jurisdictions, including the United Kingdom and other Westminster-influenced jurisdictions (such as Canada or Australia), as well as the United States and the Philippines, primary legislation has both a short title and a long title. Th ...

of the Ex-PATRIOT Act is a

backronym A backronym is an acronym formed from an already existing word by expanding its letters into the words of a phrase. Backronyms may be invented with either serious or humorous intent, or they may be a type of false etymology or folk etymology. The ...

for "Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy Act". The

long title In certain jurisdictions, including the United Kingdom and other Westminster-influenced jurisdictions (such as Canada or Australia), as well as the United States and the Philippines, primary legislation has both a short title and a long title. The ...

of the Ex-PATRIOT Act as given in its Section 1 is: :A bill to amend the Internal Revenue Code of 1986 to provide that persons renouncing citizenship for a substantial tax avoidance purpose shall be subject to tax and withholding on capital gains, to provide that such persons shall not be admissible to the United States, and for other purposes. It was sponsored by

(D-New York) with initial co-sponsors

Bob Casey Jr. Robert Patrick Casey Jr. (born April 13, 1960) is an American lawyer and politician serving as the senior United States senator from Pennsylvania, a seat he has held since 2007. A member of the Democratic Party, Casey previously served as Penn ...

(D-Pennsylvania),

Richard Blumenthal Richard Blumenthal (; born February 13, 1946) is an American lawyer and politician who is the senior United States senator from Connecticut, a seat he has held since 2011. A member of the Democratic Party, he is one of the wealthiest members of ...

(D-Connecticut), and

Tom Harkin Thomas Richard Harkin (born November 19, 1939) is an American lawyer, author, and politician who served as a United States senator from Iowa from 1985 to 2015. A member of the Democratic Party, he previously was the U.S. representative for Iowa' ...

(D-Iowa). It was introduced on May 17, 2012 and referred to the

Senate Committee on Finance The United States Senate Committee on Finance (or, less formally, Senate Finance Committee) is a standing committee of the United States Senate. The Committee concerns itself with matters relating to taxation and other revenue measures generall ...

, of which Schumer is a member (on the Subcommittee on Taxation and IRS Oversight, among other subcommittees). Schumer's fellow Subcommittee on Taxation and IRS Oversight member

Ben Cardin Benjamin Louis Cardin (born October 5, 1943) is an American lawyer and politician serving as the senior United States senator from Maryland, a seat he has held since 2007. A member of the Democratic Party, he previously was the U.S. representati ...

(D-Maryland) joined as an additional co-sponsor on May 23. The introduction of the Ex-PATRIOT Act was motivated by the news that

Facebook Facebook is an online social media and social networking service owned by American company Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin M ...

co-founder

Eduardo Saverin Eduardo Luiz Saverin (; ; born March 19, 1982) is a Brazilian billionaire entrepreneur and angel investor based in Singapore. Saverin is one of the co-founders of Facebook. In 2012, he owned 53 million Facebook shares (approximately 2% of all ou ...

had renounced his U.S. citizenship. Saverin, a native of Brazil, lived in the U.S. from 1992 to 2009 before moving to Singapore. While living in Singapore, he continued to pay U.S. taxes, as the U.S. is one of the only countries which imposes tax on non-resident citizens. In January 2011, he began the procedure to renounce

U.S. citizenship Citizenship of the United States is a legal status that entails Americans with specific rights, duties, protections, and benefits in the United States. It serves as a foundation of fundamental rights derived from and protected by the Constituti ...

in favor of retaining his existing

Brazilian citizenship Brazilian nationality law details the conditions by which a person is a national of Brazil. The primary law governing nationality requirements is the 1988 Constitution of Brazil, which came into force on 5 October 1988. Brazil is a member stat ...

; he did not apply to take up Singaporean citizenship. His loss of citizenship was effective from September 2011. On April 30, 2012, his name was published in the

Quarterly Publication of Individuals Who Have Chosen to Expatriate The Quarterly Publication of Individuals Who Have Chosen to Expatriate, also known as the Quarterly Publication of Individuals, Who Have Chosen to Expatriate, as Required by Section 6039G, is a publication of the United States Internal Revenue Ser ...

in the ''

Federal Register The ''Federal Register'' (FR or sometimes Fed. Reg.) is the official journal of the federal government of the United States that contains government agency rules, proposed rules, and public notices. It is published every weekday, except on feder ...

'' as required by the

Health Insurance Portability and Accountability Act The Health Insurance Portability and Accountability Act of 1996 (HIPAA or the Kennedy– Kassebaum Act) is a United States Act of Congress enacted by the 104th United States Congress and signed into law by President Bill Clinton on August 21, 1 ...

of 1996. The story was reported in ''

Bloomberg Businessweek ''Bloomberg Businessweek'', previously known as ''BusinessWeek'', is an American weekly business magazine published fifty times a year. Since 2009, the magazine is owned by New York City-based Bloomberg L.P. The magazine debuted in New York City ...

'' and other news outlets roughly ten days later. The Ex-PATRIOT Act bill received additional coverage in July 2012 when it was revealed that singer-songwriter

Denise Rich Denise Rich (born Eisenberg; January 26, 1944) is an American-born Austrian singer-songwriter, socialite, philanthropist and political fundraiser. On June 12, 2013, Casey moved Senate Amendment 1252 to the

Border Security, Economic Opportunity, and Immigration Modernization Act of 2013 The Border Security, Economic Opportunity, and Immigration Modernization Act of 2013 (Bill S.744) was a proposed immigration reform bill introduced by Sen. Charles Schumer ( D- NY) in the United States Senate. The bill was co-sponsored by the oth ...

, a major immigration reform bill. His co-sponsors for the amendment were Schumer and Jack Reed (D-RI). The text of the amendment was identical to that of Schumer's Ex-PATRIOT Act the previous year. In a press release about the amendment, Reed stated, "American citizenship is a privilege. But it seems that a privileged few are trying to game the system by accumulating wealth and benefiting from the greatness of the United States and then renouncing their citizenship to avoid paying their fair share of taxes. They are welcome to leave our country, but they should not be welcomed to return without playing by the rules and paying what they owe." The immigration reform bill passed the Senate on June 27, 2013 without the inclusion of Casey's amendment.

Effects

Tax law

Under current law, imposes an

expatriation tax An expatriation tax or emigration tax is a tax on persons who cease to be tax resident in a country. This often takes the form of a capital gains tax against unrealised gain attributable to the period in which the taxpayer was a tax resident of t ...

on "covered expatriates". The term "covered expatriates" is defined in as former citizens or long-term residents whose world-wide assets exceeded $2 million, whose five-year average tax liability exceeded $148,000, or who could not certify that they complied with their U.S. tax obligations for the five years preceding their loss of citizenship. The tax is equivalent to the 15%

capital gains tax A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, Bond (finance), bonds, precious metals, real estate, and property. Not all count ...

that would be paid on a sale at the marked-to-market value of all of the former citizen's property. When Saverin renounced, he had to pay that expatriation tax. Going forward, under existing law he receives similar treatment to other non-resident aliens: he is exempt from U.S. capital gains tax on U.S. investments, but is subject to a 30%

withholding tax Tax withholding, also known as tax retention, Pay-as-You-Go, Pay-as-You-Earn, Tax deduction at source or a ''Prélèvement à la source'', is income tax paid to the government by the payer of the income rather than by the recipient of the income ...

on U.S.-source dividends and interest payments. He is no longer subject to U.S. gift or

estate taxes An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died. International tax law distinguishes between an es ...

; however, imposes an equivalent

inheritance tax An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died. International tax law distinguishes between an es ...

on U.S. citizen or U.S. resident heirs of covered expatriates. Section 2 of the Ex-PATRIOT Act amends to impose new taxes on certain "covered expatriates". In the new Subparagraph C, it defines the term "specified expatriate", a subset of "covered expatriate". A "specified expatriate" is defined in clause (i) as any "covered expatriate" who lost citizenship or permanent residence within the ten-year period before the bill's date of enactment, as well as future "covered expatriates". Clause (ii) exempts those who prove that their loss of citizenship "did not result in a substantial reduction in taxes". The new subparagraph A provides for the imposition of capital gains tax on "specified expatriates" at the same 30% rate as non-resident aliens who are present in the United States for more than 183 days in a tax year. Subparagraph B provides that the

tax basis Under U.S. federal tax law, the tax basis of an asset is generally its cost basis. Determining such cost may require allocations where multiple assets are acquired together. Tax basis may be reduced by allowances for depreciation. Such reduced ba ...

of a "specified expatriate" in U.S. property shall be the value of that property on the day preceding loss of citizenship.

Immigration law

Since 1996, INA § 212(a)(10)(E) (commonly known as the Reed Amendment) makes former citizens inadmissible to the United States if the

Attorney General In most common law jurisdictions, the attorney general or attorney-general (sometimes abbreviated AG or Atty.-Gen) is the main legal advisor to the government. The plural is attorneys general. In some jurisdictions, attorneys general also have exec ...

determines that they gave up citizenship to avoid taxation; however, it has never been enforced because the Attorney General is not empowered to obtain the required information in order to make that determination. There was speculation that the Reed Amendment might be enforced against Saverin, and Reed Amendment author Senator Jack Reed (D-Rhode Island) wrote to

Secretary of Homeland Security The United States secretary of homeland security is the head of the United States Department of Homeland Security, the federal department tasked with ensuring public safety in the United States. The secretary is a member of the Cabinet of the U ...

Janet Napolitano Janet Ann Napolitano (; born November 29, 1957) is an American politician, lawyer, and university administrator who served as the 21st governor of Arizona from 2003 to 2009 and third United States secretary of homeland security from 2009 to 20 ...

to urge that Saverin be barred from entering to the United States; however, Schumer stated that the Reed Amendment lacked an enforcement mechanism, and that his newly proposed Ex-PATRIOT Act was necessary to remedy this. Section 3 of the Ex-PATRIOT Act amends INA § 212(a)(10)(E), striking the whole text of the Reed Amendment and replacing it. The new clause (i) makes "specified expatriates" inadmissible. The new clause (iii) requires the

Secretary of Treasury The United States secretary of the treasury is the head of the United States Department of the Treasury, and is the chief financial officer of the federal government of the United States. The secretary of the treasury serves as the principal a ...

to notify the Secretary of State and the Secretary of Homeland Security of the name of each "covered expatriate" who has been determined not to be a "specified expatriate". Section 3 of the Ex-PATRIOT Act also amends INA § 212(d)(3) to make the Secretary of Homeland Security and not the Attorney General responsible for processing waivers of inadmissibility for "specified expatriates" seeking admission to the U.S. as non-immigrants.

Reactions

Legislators

Senator

Orrin Hatch Orrin Grant Hatch (March 22, 1934 – April 23, 2022) was an American attorney and politician who served as a United States senator from Utah from 1977 to 2019. Hatch's 42-year Senate tenure made him the longest-serving Republican U.S. senator ...

(R-Utah), who was at the time the ranking minority member of the Senate Committee on Finance, stated in an interview that while he was unfamiliar with Schumer's proposed legislation, " always bothers me when somebody renounces his citizenship in the greatest country on Earth just to save money, save taxes ... I was really upset at Eduardo Saverin for doing that, and there are others who are doing it too." House Speaker

John Boehner John Andrew Boehner ( ; born , 1949) is an American retired politician who served as the 53rd speaker of the United States House of Representatives from 2011 to 2015. A member of the Republican Party, he served 13 terms as the U.S. represe ...

(R-Ohio) described Saverin's action as "absolutely outrageous" and spoke favorably of the concept of Schumer's bill, but also stated that existing legislation should be sufficient to punish Saverin. In contrast,

Ron Paul Ronald Ernest Paul (born August 20, 1935) is an American author, activist, physician and retired politician who served as the U.S. representative for Texas's 22nd congressional district from 1976 to 1977 and again from 1979 to 1985, as well ...

(R-Texas) expressed opposition to the Ex-PATRIOT Act, stating that it "will ensnare many ordinary middle-class Americans" due to inflation and that "control

ing Ing, ING or ing may refer to: Art and media * '' ...ing'', a 2003 Korean film * i.n.g, a Taiwanese girl group * The Ing, a race of dark creatures in the 2004 video game '' Metroid Prime 2: Echoes'' * "Ing", the first song on The Roches' 1992 ...

people by controlling their capital ... has no place in a free society".

Others

Yale Law School Yale Law School (Yale Law or YLS) is the law school of Yale University, a Private university, private research university in New Haven, Connecticut. It was established in 1824 and has been ranked as the best law school in the United States by ''U ...

professor

Bruce Ackerman Bruce Arnold Ackerman (born August 19, 1943) is an American constitutional law scholar. He is a Sterling Professor at Yale Law School. In 2010, he was named by ''Foreign Policy'' magazine to its list of top global thinkers. Ackerman was also amon ...

wrote an op-ed in the ''

Los Angeles Times The ''Los Angeles Times'' (abbreviated as ''LA Times'') is a daily newspaper that started publishing in Los Angeles in 1881. Based in the LA-adjacent suburb of El Segundo since 2018, it is the sixth-largest newspaper by circulation in the Un ...

'' supporting the Ex-PATRIOT Act, stating that former citizens "should be allowed to return only under exceptional circumstances ... ey either remain Americans or they repudiate their homeland forever".

Matthew Yglesias Matthew Yglesias (; born May 18, 1981) is a liberal American blogger and journalist who writes about economics and politics. Yglesias has written columns and articles for publications such as ''The American Prospect'', ''The Atlantic'', and ''Sla ...

wrote in ''

Slate Slate is a fine-grained, foliated, homogeneous metamorphic rock derived from an original shale-type sedimentary rock composed of clay or volcanic ash through low-grade regional metamorphism. It is the finest grained foliated metamorphic rock. ...

'' that the proposal "seems very reasonable", though he also parodied the more extreme reactions to Saverin's renunciation with a " modest proposal" that former citizens should be subject to

targeted killing Targeted killing is a form of murder or assassination carried out by governments outside a judicial procedure or a battlefield. Since the late 20th century, the legal status of targeted killing has become a subject of contention within and betw ...

by drone attacks. Columnist Ruben Navarette also criticized Saverin for his "cavalier" renunciation while "hundreds of thousands of undocumented

DREAM Act The Development, Relief, and Education for Alien Minors Act, known as the DREAM Act, is a United States legislative proposal to grant temporary conditional residency, with the right to work, to illegal immigrants who entered the United States ...

students" suffered due to their own lack of U.S. citizenship.

Conor Friedersdorf Conor Renier Friedersdorf is an American journalist and a staff writer at ''The Atlantic'', known for his civil libertarian perspectives. Early life and career He attended Pomona College as an undergraduate, and attended the journalism school at ...

, writing in ''

The Atlantic ''The Atlantic'' is an American magazine and multi-platform publisher. It features articles in the fields of politics, foreign affairs, business and the economy, culture and the arts, technology, and science. It was founded in 1857 in Boston, ...

'', stated that "it is imprudent to impulsively introduce legislation in order to target a specific high profile individual who happens to be making news, especially when doing so punishes him in a way he couldn't have anticipated for doing something that was legal. Anyone who doesn't grok that much philosophy of law doesn't deserve to be in Congress."

Americans for Tax Reform Americans for Tax Reform (ATR) is a politically conservative U.S. advocacy group whose stated goal is "a system in which taxes are simpler, flatter, more visible, and lower than they are today." According to ATR, "The government's power to control ...

president

Grover Norquist Grover Glenn Norquist (born October 19, 1956) is an American political activist and tax reduction advocate who is founder and president of Americans for Tax Reform, an organization that opposes all tax increases. A Republican, he is the primary ...

spoke out against the Ex-PATRIOT Act in stronger terms, comparing it to

Nazi Germany Nazi Germany (lit. "National Socialist State"), ' (lit. "Nazi State") for short; also ' (lit. "National Socialist Germany") (officially known as the German Reich from 1933 until 1943, and the Greater German Reich from 1943 to 1945) was ...

Reich Flight Tax The ''Reich'' Flight Tax (german: Reichsfluchtsteuer) was a German capital control law implemented in 1931 to stem capital flight from the Weimar Republic, German Reich. After seizing power, the Nazis used the law to rob emigrating Jews of their f ...

and

East Germany East Germany, officially the German Democratic Republic (GDR; german: Deutsche Demokratische Republik, , DDR, ), was a country that existed from its creation on 7 October 1949 until its dissolution on 3 October 1990. In these years the state ...

's treatment of emigrants. Schumer responded angrily to the criticism in a speech on the Senate floor on May 24, 2012. Saverin himself issued a statement through his spokesman Tom Goodman stating that he was "obligated to and will pay hundreds of millions of dollars in taxes to the United States government" and that he felt it was "unfortunate that my personal choice has led to a public debate, based not on the facts but entirely on speculation and misinformation".

References

External links

* on

THOMAS Thomas may refer to: People * List of people with given name Thomas * Thomas (name) * Thomas (surname) * Saint Thomas (disambiguation) * Thomas Aquinas (1225–1274) Italian Dominican friar, philosopher, and Doctor of the Church * Thomas the Ap ...

*{{USBill, 113, SA, 1252 on

S. 3205
on GovTrack
Bob Casey's letter to John Boehner
thanking him for his support of the Ex-PATRIOT Act
Transcript of an additional speech by Chuck Schumer about the Ex-PATRIOT Act
from the ''

Congressional Record The ''Congressional Record'' is the official record of the proceedings and debates of the United States Congress, published by the United States Government Publishing Office and issued when Congress is in session. The Congressional Record Inde ...

'' of May 24, 2012 Proposed legislation of the 112th United States Congress Proposed legislation of the 113th United States Congress Exile United States proposed federal immigration and nationality legislation United States proposed federal taxation legislation