My earlier blog post discussed some of the complications that arise when certain individuals wish to renounce their US citizenship. The would-be renunciant must give up US citizenship “voluntarily” and with the requisite “intention” in order to meet the legal requirements for an effective renunciation. This can be a difficult hurdle to surmount in the case of minors, mentally challenged individuals and the elderly who may be in cognitive decline.
Complications surrounding US citizenship arise in areas other than the expatriation setting. The use of assisted reproductive technology (ART) brings a host of citizenship issues. For example, using sperm or eggs donated by a non-anonymous US person, or when ART is used by Americans living abroad who are married to foreign persons, or by those who are in a same-sex marriage. In these cases, the parents may be unaware that US citizenship is likely being transmitted even though the child is born abroad.
Many individuals do not think about the issues surrounding transmission of US citizenship when using ART but given its prominence in the modern times in which we live, the topic cannot be ignored. Whether the child will hold US citizenship from birth should be explored well beforehand with a complete understanding of the US tax ramifications of citizenship. Before delving into the US citizenship issues surrounding the use of ART, below is a brief overview of some relevant US tax issues.
US Citizenship – Benefits and Burdens
US citizenship comes with many benefits, but for the American living abroad, the US tax system creates, what are viewed by an increasing number, as serious taxation burdens. The US has a very unique system of income taxation, for example. US citizens cannot escape an annual income tax, assessed on worldwide income, regardless of their residence abroad. “Income” means worldwide income from whatever source derived and from wherever it is derived in the world. The tax rate is graduated with the maximum currently at 37%. Worldwide investment income is also be subject to an additional surcharge of 3.8%; full details here.
Ownership in any “foreign” (non-US) entities can create significant tax problems as well as detailed and onerous information reporting duties that are often sore points with foreign relatives or business associates who do not want financial information revealed to the US Internal Revenue Service. The information to be revealed can include balance sheets, profit & loss statements, information about trust holdings and details about foreign financial accounts that involve both the US and non-US persons.
Then there is the quagmire of US Gift and Estate taxes, FATCA and Mr. FBAR as well as US excise taxes on foreign life insurance, other types of insurance and foreign annuities. More details here and here.
Assisted Reproductive Technology and Transmitting US Citizenship
The US Department of State determines whether a child born abroad to a US citizen parent acquired US citizenship at birth. A child born abroad acquires US citizenship at birth if the parent or parents of the child meet the conditions prescribed in specific provisions of the Immigration and Nationality Act (INA).
Recognizing the advances in ART, the State Department updated its interpretation and application of Section 301 of the INA. In a nutshell, children born abroad to parents, at least one of whom is a US citizen and who are married to each other at the time of the birth, will be US citizens from birth if they have a genetic or gestational tie to at least one of their parents and meet the INA’s other requirements. Previously, the Department’s interpretation and application of the INA required that children born abroad have a genetic or gestational relationship to a US citizen parent. This prevented some same-sex couples from transmitting US citizenship to children born overseas because the DOS interpreted the birth as being “out of wedlock” for immigration purposes. A number of same-sex couples sued DOS over its previous surrogacy policy. This change allows increased numbers of married couples to transmit US citizenship to their children born abroad.
How the INA Rules Worked Before and how they Work Now
Here’s an example: Assume a same-sex male married couple one of whom is a US citizen and the other, a French citizen contract with a French woman to act as egg donor and to carry their child (a “surrogate”). The sperm donor is the French citizen; the egg donor is the surrogate French woman who will also carry the child. The child is born in France. Under the prior interpretation of the INA, the child could not attain US citizenship at birth because there was no genetic or gestational relationship to the US parent.
Because of the policy change, DOS interprets the INA to mean that a child born abroad must be genetically or gestationally related to a US citizen parent or to a non-US citizen parent who is married to a US citizen parent at the time of the child’s birth. The US parent must meet statutory transmission requirements of INA 301 or 309 in order for the child to acquire US citizenship at birth (generally this means the parent has had certain periods of physical presence or a residence in the United States prior to the birth of the child):
- A US citizen father who is the genetic father of the child may transmit citizenship to the child if he meets all other statutory requirements in order to transmit US citizenship to the child at birth.
- A US citizen mother who is the genetic or the gestational and legal mother of the child may transmit US citizenship to the child if she meets all other statutory requirements in order to transmit US citizenship to the child at birth. A gestational mother is the woman who carries and gives birth to the child.
- A US citizen parent who is not genetically or gestationally related to the child may transmit citizenship to the child if they are, at the time of the child’s birth, married to a parent who has a genetic or gestational connection to the child. The US parent must also meet all other statutory requirements in order to transmit US citizenship to the child at birth.
Using the same example, the child born in France will become a US citizen at birth because the child’s US citizen parent (while not genetically or gestationally related to the child) is married to a parent who has a genetic connection (sperm donor) to the child. This assumes the US parent meets the required INA statutory requirements (for example, the US citizen parent lived in the US for a minimum of 5 years, at least 2 of which were after the US citizen parent was aged 14).
Surprise! You’re an American
Given how the rules work, a child born through use of ART can be born an American citizen in surprising ways. If there is a genetic or gestational relationship to the US citizen parent, the child can be an American. Sperm donors and egg donors come to mind and the rules are complicated!
US citizenship cannot be transmitted by an anonymous sperm or egg donor, even if a clinic, sperm bank, or intended parent(s) purport to certify that the sperm or egg was donated by a US citizen. The Department of State must know the identity of a US citizen to adjudicate a claim of derivative citizenship through them. If a claim to citizenship is made through a sperm or egg donor who was not anonymous, or was initially anonymous but their identity was later revealed, US citizenship is certainly a possibility and the State Department should be contacted for adjudication guidance.
Be careful out there.
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Posted September 15, 2022
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