Eileen Gu and the repercussions of renouncing U.S. citizenship

ZHANGJIAKOU, China —Eileen Gu, the American-born skier who now competes for China, spent much of her recent gold medal news conference sidestepping questions about her citizenship.

Gu is the most prominent of a number of Olympic athletes in Beijing, including skaters and hockey players, who were raised in America but now compete for China. The IOC allows athletes with dual citizenship to compete but requires them to hold a passport for the country which they represent in the Olympics. China does not permit dual citizenship, at least according to the laws on its books. However, the process for renouncing American citizenship carries significant long-term repercussions for anyone wishing to remain connected in any way to America.

The actual renunciation process is fairly quick — a simple declaration that you want to end your U.S. citizenship, the payment of a fee and the surrender of your passport — but the repercussions could last a lifetime.

Renouncing citizenship — the process

Americans who renounce their citizenship often do so because they’re interested in extricating themselves from the American tax system, which imposes substantial tax reporting burdens on American citizens even living overseas. A much smaller category of “accidental Americans” — for instance, children of American diplomats born overseas — renounce their citizenship because they’ve never lived in America.

To renounce citizenship, an American must walk into an overseas embassy — renouncing citizenship while on U.S. soil is extremely rare — and declare their intentions, in person, to a consular officer. The soon-to-be-former citizen must complete a questionnaire, sign a statement of intent and pay a fee of $2,350, the highest in the world for this purpose. The aggregate effect of these hurdles is to ascertain that an individual is serious about giving up their citizenship.

“A consular officer will often give you some pushback because of the repercussions,” says Sanford Posner, an immigration lawyer with FisherBroyles, LLP with nearly a quarter-century of practice experience. “If you have family in the United States you need access to, by giving up your U.S. passport, you are essentially making it very difficult to get back into the United States.”

Verbally renouncing citizenship as an act of protest or defiance may carry some symbolic weight to the demonstrator, but in the eyes of the United States government, there’s no legal weight behind it.

“Until you sign away your citizenship and give up your passport to a consular officer,” Posner says, “it’s just a statement into the ether.”

One crucial element of renouncing citizenship: ensuring that one already has obtained citizenship in another nation. Without that overlap, an individual risks being deemed “stateless,” which can cause difficulty with virtually every aspect of public life: the ability to work, study, receive medical benefits, own or rent property, or even marry. Stateless individuals have no protection of any country, and run the risk of being kicked out of the United States entirely and permanently.

The Federal Register publishes a quarterly list of individuals who have renounced citizenship. It’s purported to be comprehensive, but expatriates have reported waits of months or years before appearing on the list.

Eileen Gu’s name does not appear on any quarterly list to date.

The financial impact of surrendering citizenship

The financial implications of renouncing citizenship are substantial, particularly for high-net-worth individuals. The United States does not want to surrender citizens that can provide continual tax income, and the barriers in place are designed to make renouncing citizenship a costly affair for years to come.

“Giving up your passport is a taxable transaction,” says Marc Schwartz, an attorney, CPA and founder of Schwartz International, an international tax advisory firm. “If you give up your passport and your net worth is less than $2 million, it’s typically not an issue, but if it’s more than $2 million, you have to do a fictitious ‘sale’ of everything you own in the world.”

In other words: You total up your assets not just in the United States, but around the world, you assess their tax basis and their fair-market value, and whatever you’ve “gained,” above approximately $740,000, you pay taxes on it. For a minor-league hockey player, this would likely not be an issue; for someone with multiple worldwide endorsement contracts like Gu, the financial costs involved in surrendering an American passport would be substantial.

Even renouncing the passport doesn’t end the U.S. government’s involvement in an expatriate’s business. “What you need to do [when renouncing a passport] is file a final-year tax return, and the IRS has three years to audit it, more if there’s suspicion of fraud,” Schwartz says. “You’re never really out of the U.S.’s crosshairs.”

Long-term implications

“A person seeking to renounce U.S. citizenship must renounce all the rights and privileges associated with citizenship,” a State Department spokesperson told Yahoo Sports.

Such privileges include not only the right to vote, but the ability to seek the assistance of a United States embassy while living in their new home country. Most notably, surrendering citizenship means surrendering the right to freely enter and leave the United States without the use of a visa — either a student visa, a work visa, or some other form of certification giving the now-former-citizen the temporary right to remain in the United States. Such visas come with requirements and restrictions — someone on a visitor visa, for instance, is not permitted to work in the United States.

What if our now-former citizen decides they made a mistake? It’s a long process to undo renouncing citizenship, and one with no guarantee of success.

“You would basically start back at square one,” Posner says. “There are two ways to become a citizen: either through a family member — spouse, parent, immediate relative — or through an employer. You have to go through various non-immigrant and immigrant visas before becoming a citizen.” Such processes typically take many years in the best-case scenarios.

Is China enforcing its own rule?

If Eileen Gu and other American athletes competing for China have in fact renounced their citizenship, they may enjoy the benefits of representing a new nation. But their legal, financial and logistical relationship with the country of their birth will have become infinitely more complicated.

Again, the IOC doesn’t have a problem with athletes having dual citizenship. The reason the issue has come to the forefront is because of China’s rule against it. The question is, whether they’re enforcing it.

Jeremy Smith is a hockey player from Dearborn, Michigan, but is competing in the games for China. He told ESPN that one of the conditions to playing for China was that he would not renounce his U.S. citizenship.

"They were like, 'Do not worry. We will not ask you. This is not what this whole process is about. It's about getting you qualified for the Olympics,' " he said.

Smith also told Yahoo Sports, “When I'm in China, I'm a Chinese. I'm supported by the Chinese, and I'm truly thankful for that. And when I go to America, I'm American.”

If you’ve been following the Eileen Gu story, that line of reasoning should be familiar.

“I’m American when I’m in the U.S.,” Gu has stated on multiple occasions when asked about her citizenship, “and Chinese when I’m in China.”