By Lynnley Browning
FORTUNE -- Time to dump your American passport -- and with it, presumably, your bothersome U.S. tax bill. The reason, international tax lawyers say, may have less to do with offshore tax evasion and more with a new generation of sophisticated -- and legal -- tax planning.
This year will enter the record books with the highest number of expatriations ever by U.S. citizens, according to new government figures released Wednesday. Even rock star Tina Turner, a long-time resident of Switzerland who got a full Swiss passport last April, is on track to relinquish her U.S. ties, her spokeswoman said.
Some 560 Americans joined the exodus in the third quarter of this year, putting the total number so far this year at 2,369, according to Treasury Department data published by the Federal Register. That is already 33% more than the 1,781 who left in all of 2011, the previous record.
While the number of people who gave up their little blue books in the first six months of this year had already edged out the 2011 record by a hair, the recent figures firmly cement the trend.
Ditching a passport can save an American lots of money in taxes. The reason: The U.S., along with Eritrea, is one of only two countries in the world to tax its citizens on their worldwide income, regardless of where they live or work. If you reside in, say, Geneva, you still owe the U.S. tax man money on income you earn there.
Turner's name -- her birth name is Anna Mae Bullock -- does not appear on the most recent Federal Register list. But Karin Rhomberg, a spokeswoman for Turner, confirmed in an email that the "Private Dancer" and "Simply the Best" singer was on track to relinquish her U.S. passport.
Turner acquired a full Swiss passport last April, Rhomberg said. At 73, the singer, who was born in Nutbush, Tenn., lives in Kussnacht, a wealthy enclave near Zurich, with her German-born husband.
The expatriation trend has grown by leaps and bounds in recent years amid a widening U.S. crackdown on offshore tax evasion through Swiss and Swiss-style banks. Even the U.S. Embassy in Bern has a "renunciations" tab on its website.
Many of those who dump their passports have dual citizenships in other countries, such as Switzerland or Canada, immigration lawyers say. But increasingly, an onerous new U.S. Treasury rule known as Fatca is prompting smaller and mid-sized foreign banks in countries where Americans live and work to dump their American clients.
The rule, which goes into effect next July, requires foreign banks to identify and scrutinize Americans with accounts containing at least $50,000 and either report those accounts to U.S. tax authorities or withhold 30% of dividends, interest, and other payments and send that money to the U.S. Treasury. The law, widely hated by Americans living and working abroad, has made it tough to do simple financial things abroad.
"Local banks don't like dealing with Americans, so it makes it harder for Americans abroad to live normal lives," said Phil Hodgen, an international tax lawyer in Pasadena, Calif. Marylouise Serrato, the executive director of American Citizens Abroad, a Geneva-based lobby for expats, said recently in an email that "individuals with legitimate need of banking services will be locked out" of many foreign countries.
One new trend has emerged: U.S. passport renunciations by dual nationals who build family businesses in other countries that do not have estate taxes.
"Americans are realizing that their businesses are likely to be torn apart by the U.S. estate tax even if that business never touched the U.S.," Hodgen said, citing as an example a dual citizen who owns a construction company in Saudi Arabia. An owner who wants to pass his company on to his heirs will also sock them with a 40% estate-tax bill, due to his U.S. citizenship.
"You're going to see tons of people waking up to this," Hodgen said.
Congress wants to squeeze more tax revenue out of Twitter, but it's looking in the wrong place.
FORTUNE -- As Wall Street toasted Twitter this week, a very different view toward the company took hold in Washington, D.C., where Senators John McCain (R-AZ) and Carl Levin (D-MI) accused Twitter of exploiting a massive tax loophole. Specifically, they wrote:
"When Twitter goes public later this week, the company may avail itself of this existing MOREDan Primack - Nov 7, 2013 5:06 PM ET
A mistake made 20 years ago cost the Times big during the sale of the Boston Globe.
FORTUNE -- The New York Times Co.'s (NYT) purchase of the Boston Globe for more than $1 billion 20 years ago has turned out to be among the worst single newspaper acquisitions in history. But guess what? It's even worse than it looks.
How is that possible? Because the Times not only made a MOREAllan Sloan, senior editor-at-large - Nov 5, 2013 2:34 PM ET
The most likely way out of this mess will be to either kill the medical device maker tax or alter it in a way to make it acceptable to the industry.
By Cyrus Sanati
FORTUNE -- Medical device makers could end up the biggest winners in the ongoing and destructive congressional budget battle. It is extremely unlikely that Republicans will get their wish to delay implementation of the Affordable Care Act MOREOct 1, 2013 9:42 AM ET
Tax writers have announced a "blank slate" approach to the tax code overhaul.
By Tory Newmyer, writer
FORTUNE -- Corporate tax lobbyists should cancel any vacations they planned to take next month. That's the upshot of a letter the Senate's two leading tax writers sent their colleagues today to put them on notice that their overhaul of the code is starting from scratch. In other words, every corporate carve-out -- for MOREJun 27, 2013 12:52 PM ET
By the time the final papers are shuffled, the IRS and local tax authorities are likely to seek more than half a billion dollars from Tribune in regard to the sales of the Chicago Cubs and Newsday under former CEO Sam Zell.
FORTUNE -- Sam Zell is gone from the Tribune Co., but his toxic financial legacy lives on. Not only did his debt-fueled purchase of one of the nation's biggest MOREAllan Sloan, senior editor-at-large - Jun 18, 2013 9:00 AM ET
Now that Switzerland has agreed to cooperate with a broad U.S. tax evasion probe, thousands of wealthy American account holders may soon be exposed to the IRS.
By Lynnley Browning
FORTUNE -- Are you among the suspected tens of thousands of Americans with a secret Swiss bank account that you are still hiding from the Internal Revenue Service? If so, you are about to acquire a Matterhorn-sized headache.
Switzerland made a desperate MOREMay 30, 2013 5:00 AM ET
Businesses organized as partnerships account for 35% of all sales. So why are we taxing them at higher rates than other corporations?
By Stephen Chipman and Doreen Griffith
FORTUNE -- The top concern for certain business entities seeking to compete on a level playing field through tax reform has not yet been addressed.
Ways and Means Chairman Dave Camp has released a tax reform discussion draft that would simplify the tax rules for MOREMay 14, 2013 12:44 PM ET
If the recent quarter's pace continues, 2013 will become a landmark year for saying goodbye to America, tax-wise.
By Lynnley Browning
FORTUNE -- Americans are ditching their U.S. passports in record numbers, a sign of growing frustration with a system that taxes U.S. citizens on their global wealth whether they live in Montana or Mongolia.
The latest bold-faced names to relinquish their U.S. citizenship include Mahmood Karzai, a brother of Hamid Karzai, MOREMay 8, 2013 1:35 PM ET
No one says the President doesn't deserve his benefits. But it's hard to get past his plan to limit savers to half the value of what he'll walk away with.
FORTUNE -- President Obama's proposal to limit the value of 401(k)s, pensions, and other tax-favored retirement accounts to about $3.4 million certainly sounds reasonable. After all, at a time of big budget deficits, we shouldn't subsidize "the rich" with tax breaks, MOREAllan Sloan, senior editor-at-large - May 1, 2013 5:00 AM ET
|2 million Facebook, Gmail and Twitter passwords stolen in massive hack|
|Fast food worker: Protest didn't cost me pay|
|U.K. pension age to hit 69 by 2050|
|Ron Paul: Bitcoin could 'destroy the dollar'|
|China's central bank bans some Bitcoin transactions|