The downside of maternity tourism: why US citizenship is a burden for 'casual' Americans

Many girls from post-Soviet countries go to the United States to give birth to a child there, because a baby born in the States automatically receives American citizenship. Moms think that a US passport is the best birthday gift, but often it is a disservice and not a ticket to a bright future. Eritrea and the United States are the only two countries in the world that require all their citizens to file tax returns annually, regardless of where they live. And since 2010, when the Foreign Account Tax Compliance Act, or FATCA, came into force in the United States, all global banks have been required to report on the activities of their clients with American citizenship. Why do people born in the USA suffer from this, the publication explained Time.

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This year, the United States began to seriously enforce this law. Although the US Treasury Department temporarily relaxed rules last year, that regulation expired in January when the Treasury Department refused to extend the moratorium on penalizing banks that violate FATCA.

Effective January 1, 2020, the United States has threatened to impose fines on foreign banks that do not release information about their US citizens to the IRS. Since then, these rules have created problems for thousands of people, who are threatened with closing their accounts or denied services by their banks.

“The impact on people's lives has been enormous,” says Mark Zell, an American lawyer in Israel. — People can't get a mortgage. They cannot get bank loans for business. At the same time, many don’t even know that they are Americans.”

Now lawsuits filed from around the world are set to correct the situation. On Dec. 1, organizations representing Americans in Europe filed complaints against the governments of Luxembourg and Belgium, demanding that they immediately stop transferring personal banking information of European citizens to the United States—which they say violates strict European and national privacy laws.

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In early December, Zell sued the US State Department on behalf of 20 “random Americans” whose lives were upended by FATCA. Sharing information may also be a violation of European Union data protection laws and may also be a violation of the US Constitution.

Lawyers and groups who have struggled with the fallout of FATCA for years hope that the rise to power in the United States of a new administration will give them a chance to get some changes to the law.

“Under the guise of fighting tax fraud, the United States has created a monster,” says Fabien Lehagre, founder and president of the Paris Association of Accidental Americans, who was born in California in 1984 and lived there for only 18 months.

According to him, FATCA is “a monster that has accidentally made Americans outcasts of the international banking system.”

"Everybody Thinks We Are Rich Americans"

When President Barack Obama signed FATCA in 2010, his intention seemed reasonable: to catch wealthy Americans hiding their wealth from the IRS in foreign banks. This comes after a whistleblower in the 2000s recounted how Americans hid billions of dollars in tax-free Swiss banks.

But the law acts as a trap with dire, unintended consequences. In several interviews, lawyers and victims describe how ordinary people got caught up in years of trouble when they suddenly learned that they were American.

There is no exact data on the number of “random Americans”. Banking organizations estimated their number at more than 110 in Europe back in 000, but this data was only collected from a subset of banks. By some estimates, at least 2016 million Americans live abroad, many of them with close ties to the United States. However, the law does not distinguish between these people and those who were simply born in the country.

Brower-Hugsteen, a barber from the Netherlands, is an American citizen but has no ties to the United States. She was born in 1967 in Bellflower, California, where her parents were farmers, and when she was 13 months old, the family returned home to the Netherlands, where the woman still lives. She doesn't even speak English.

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When Dutch bank Rabobank asked for her U.S. Social Security number in 2018, she “thought it was a mistake.” She ended up filling out bank forms for U.S. citizens without providing a taxpayer identification number, an omission that appeared to anger bank executives.

FATCA probably never intended to target foreigners like Brower-Hoogsteen, who have nothing to do with the United States and don't have to pay a cent in taxes.

“There is a problem with Americans who want to use foreign tax havens to hide their income,” Zell says. - But they are not expats. They are in the USA."

Zell's lawsuit against the State Department, filed Dec. 9 on behalf of the Paris Association of "Accidental Americans," argues that the law "affected Americans who have nothing to hide." It argues that FATCA violates the US Constitution by effectively forcing people to remain US citizens against their will - in part because fees for renouncing US citizenship jumped from $2014 to $450 in 2, an amount many cannot afford.

However, more and more people are paying a renunciation fee. In the first three months of this year, 2 people renounced US citizenship, the highest quarterly figure in the history of such statistics. American expat organizations believe the real figure is likely much higher as many names do not appear on the official register and say the increase is partly due to FATCA.

Apart from renouncing citizenship, there is little that Americans can do to avoid risks. Groups pushing for changes to FATCA have not found support in the US. Both Republicans and Democrats have refused to bring the issue up in Congress and the US Treasury Department.

“I think the group of 'casual Americans' is too small in their eyes,” says Rob Gerretsen, a former retail sales executive from Amsterdam who was born in 1957 in New York, where his father worked in a bank. They returned home before their second birthday, but at 63, Gerretsen is fighting to keep his bank account in the Netherlands, which they want to close because of FATCA.

He says he is very angry at the indifference of American politicians to the plight of "accidental Americans" and American expats.

"They think we're rich Americans who are hiding our money," he says.

Problems in the courtroom

Changes may be coming in Washington, but lawyers who have worked for years to amend the FATCA law doubt that the Joe Biden administration will want to do anything in this direction.

“President-elect Biden is from Delaware, which Europe always points to as an example of hypocrisy in the US,” says Filippo Noseda, a London-based tax lawyer, referring to Delaware's tax-free treatment for corporations. Noseda fought for years in EU and UK courts on behalf of expats trapped by FATCA.

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Noseda believes that Biden will have no desire to change FATCA, as this law was introduced when he was vice president of the United States.

“The only solution is to go to court,” he says.

After all, only the courts can force the US to change course. Several legal claims across Europe are on the verge of being pending in the courts. They argue that FATCA violates data protection laws in the EU, which are much stricter than in the US.

Noseda filed a complaint against the British tax authorities on behalf of an American expatriate named Jenny, who moved to the UK after graduating from college in 1997 and now works at a university.

The complaint alleges that the bank is illegally sharing her personal data with the US in violation of EU privacy rules (which Britain still falls under), including her name, date of birth and the amount of money in the account.

“This is confidential information, and we think it's too much,” Noseda says. He calls FATCA data sharing "absurd."

Similar efforts are being made in the 27 countries of the European Union that are subject to the EU's General Data Protection Regulation, or GDPR, with its stringent restrictions on information sharing. Two rulings against US internet companies have restricted the transfer of online data from Europeans to the US.

According to lawyers, the same principle may be true for FATCA. The Association of Casual Americans is planning to sue two EU countries, claiming that the agreements that the governments of these countries entered into with the United States to transfer people's financial data were illegal.

“We are convinced that the situation will be in our favor,” says Lehagre, president of the Association, an occasional American, French, and non-English speaker; he spent years fighting to change FATCA.

The new lawsuits, which he said will be filed by December 31, aim to prove that FATCA violates Europe's GDPR. If the group wins the case, the decision could be taken to the EU Court of Justice and extended to all Europeans. That would make data-sharing agreements with the United States illegal, “forcing the European Union to renegotiate with the United States,” Lehagre says.

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If these lawsuits don't work, people will be forced to keep trying to take matters into their own hands.

Ronald Ayres, 62, a retired KLM pilot from Barchem, the Netherlands, left the United States when he was a few months old after being born on a US military base in New Jersey, where his father, a Dutch army officer, was stationed exchange of experience. In 2018, his Dutch bank, De Volksbank, accused him of forgery - Ayres indicated on a bank form that he had “no other tax residence” other than the Netherlands. The bank demanded that he provide a U.S. Social Security number or his account would be closed. At the end of November, he sued De Volksbank to keep his bank account open.

Ayres says he is unsure of his victory. And finding another Dutch bank that would accept him as a client turned out to be impossible, since banks usually refuse everyone associated with the United States. His mortgage company warned him that if he didn't manage to resolve the situation, they could strip him of ownership of the house he bought in 2018. He is considering renouncing his US citizenship, but fears that he could be forced to pay taxes to the IRS.

“What kind of world do we live in? - he says angrily. “Maybe we can go back to the way we paid my dad, cash in a brown paper bag.”

He says his battles with FATCA were deeply stressful: "I haven't gotten enough sleep in the last two years."

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