Boris Johnson, US Tax and the Reed Amendment – More Trouble in Store for the Mayor of London?


In February it was reported that Boris Johnson, the high profile Conservative Mayor of London, is planning to renounce his U.S. citizenship. Born in New York to British parents who just happened to be living there at the time, Johnson first threatened to renounce his birthright in 2006 when he was told that he could, of course, enter the U.S. on his American passport, but not his British one. “As far as I can interpret the psychology of the rule,” he fumed at the time, “it is part of America’s new them-and-us mentality, the Manichaean division of the world into Americans and non-Americans, obliterating any category in between. Listen, buddy, the Americans seem to be saying. You got a right to be American? Then you do us the courtesy of travelling on the world’s number one passport when you come here. What you got to be ashamed of, boy?”

Nine years on, Mr Mayor, who has not lived in the U.S. since he was a child, has restated his desire to renounce the consequences of what he has described as “an accident of birth”.  “The reason I’m thinking I probably will want to make this change”, he told The Sunday Times, “is that my commitment is, and always has been, to Britain.”

Some commentators have suggested that the move is designed to remove a potential obstacle to his scarcely-veiled ambitions of becoming Prime Minister of the United Kingdom. Although there is no legal barrier to prevent a dual citizen from holding the highest political office in the land, a renunciation of U.S. citizenship would avoid unwelcome questions about his loyalties.

Others point to Johnson’s recent run-in with the IRS. He was hit last year with a U.S. tax bill for the GBP730,000 profit on the sale of his London home. That amount was not liable to tax in the U.K., but was taxable in the U.S. as a gain on the overseas transaction of a U.S. citizen.

Once again, Boris was livid.  “It’s absolutely outrageous”, he said in November 2014. “Why should I [pay it]? I haven’t lived in the United States since I was 5 years old.” Yet by January, on the eve of a major tour of the U.S., the Mayor had paid up – much to the disappointment of some U.S. expatriates. “The scene I wrote had him dumping Starbucks coffee in the Thames!” wrote one. “Guess the 7.6 million U.S. deemed tax slaves living abroad must look for another hero.”

Another argued that Johnson’s acknowledgment of his “servitude” left him with no choice but to renounce his U.S. citizenship. “He simply cannot both be the Mayor of London and the loyal and humble servant of the United States of America”, assisting in “the transfer of U.K. capital to the U.S. Treasury.” The conclusion was inescapable: “Salvation lies only in renunciation of U.S. citizenship.”

Yet while a renunciation of citizenship would free Boris from the long arm of the IRS, it might have a painful consequence for the would-be PM. Under the so-called Reed Amendment, introduced by Congressman (now Senator) Jack Reed in 1996, “Any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is inadmissible” to the U.S. (8 USC § 1182(a)(10)(E)).

On its face, this seems to mean that Johnson runs the risk of being barred from entering the land of his birth if he renounces his U.S. citizenship – not least because his own aides were reported in February to have said that his “priority was to avoid paying more to the U.S. tax authorities”.

The reality of that risk is another question. For one thing, there are no procedures to implement the Reed Amendment because the Federal Government has never issued the requisite regulations. Thus there are no powers for the Attorney General to obtain from the IRS the information that, one might imagine, would be necessary for him to determine whether a former citizen’s renunciation of citizenship was “for the purpose of avoiding taxation” by the U.S. Small wonder, perhaps, that not one former citizen has ever been formally refused entry to the U.S. on the grounds of the Reed Amendment – although there have been reports of it being enforced unofficially by some U.S. consular officials abroad.

It is unlikely that the Reed Amendment is currently looming large in Boris Johnson’s mind. In addition to his official responsibilities as Mayor of London, Boris is standing for election as an MP in the U.K.’s May 7 general election and is playing an increasingly prominent role in the Conservative Party’s campaign. Whether, when the electoral dust settles, he has second thoughts about renouncing his U.S. citizenship, remains to be seen.

Dr Craig Rose, Technical Editor, Global Tax Guide

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