By Peter Schroeder - 08/12/13 04:24 PM EDT
American citizens living abroad are renouncing their citizenship in record numbers, according to new government data.
Data from the IRS released Friday shows 1,130 individuals "expatriated" themselves from the U.S. by either renouncing their citizenship or terminating long-standing U.S. residency. It's the highest single quarter of such expatriations ever recorded.
The first half of the year suggests that 2013 will be a record year for U.S. citizens abandoning their American affiliation, according to The Wall Street Journal.
The publication cites numbers collected by Andrew Mitchel, an international tax attorney, that reveal more Americans have renounced their citizenship or terminated long-standing U.S. residency in the first half of 2013 than in all of 2012. The previous quarterly record of 679 was reported in the first quarter of 2013.
A number of major foreign governments, including Switzerland, have reached agreements with U.S. officials to implement the law, which requires foreign banks that do not share accountholder information with the IRS to face a 30 percent withholding fee on certain U.S. transactions.
Regulators finalized rules implementing the Foreign Account Tax Compliance Act (FATCA) in January, and renouncements have jumped to record levels ever since.
In drafting the rules, regulators faced substantial pushback from the financial industry, who warned that improper implementation could pose significant burdens on global banks trying to cooperate with the law. Treasury officials said they tried to take these concerns into account in drafting and finalizing the rules.
A Joint Committee on Taxation report estimated that if FATCA were in place in 2009, it would have blocked about $8.5 billion in tax evasion over a decade.
Democrats made offshore tax avoidance a central plank of their campaign message in 2012, and Democrats went so far as to introduce bills targeting famous expatriates, such as Facebook co-founder Eduardo Saverin. Born in Brazil and now living in Singapore, Saverin renounced his U.S. citizenship in 2011 to save up to $100 million in taxes.
Sen. Charles Schumer (D-N.Y.) and other Democrats introduced a bill targeting wealthy Americans abroad renouncing their citizenship that would subject them to double the usual tax rate and bar them from ever returning to the U.S.
But even notable Democrats faced scrutiny over offshore investments. Before being confirmed as Treasury Secretary, Jack Lew faced probing questions about a $56,000 investment in a Cayman Islands fund, dating back to his brief stint at Citigroup.
Lew ultimately sold that investment at a loss when he returned to public service in 2010 and said he did not know at the time that particular investment had a facet in the Cayman Islands, which is known for being a tax haven.