The lawsuit that triggered this is on behalf of "accidental americans" who just happened to be citizens by right of birth but have spent zero or very little time in the USA and are far from wealthy but have discovered that the US is one of only 2 countries that taxes its citizens regardless of where they live and levy hefty fines and back taxes once they find them. I would guess that the majority of folks renouncing US citizenship are mostly folks who fall into this category, not the folks with large portions of their nest eggs invested in the USA.
This is exactly the situation with those I know who have gone or are going though the process.
One was born in the US but has not lived there since she was 20. Ditto for the other person. Neither have assets or investments in any US plans. Nor is it about dodging a tax liability on a large amount of money that has been tax sheltered in the US.
Getting an IRS tax clearance certificate for them does not in any way imply that they have not filed or have tax owing. They tell me that the certificate simply confirms the opposite...that they are up to date with the IRS filings etc.
They are required to file an IRS return each year and pay tax on their world income. In most instances the tax is minimal depending on the tax treaties that apply based on the jurisdiction where they live. It is the hassle and the cost of doing so when living outside the country.
Both pay an accountant each year to complete their US tax returns on their world wide income even though none of it is income from the US. For one of them, the annual accountancy fees are higher than the tax to be paid.
So, one of my spouses friend's won $100K in a lottery. It is not subject to income tax where she lives but it is taxable income by the IRS despite the fact that she has not lived or earned money in the US for 30 plus years. Ditto for her gain on sale of her home.
As a recall, Boris Johnson, former UK PM, had a tax issue on a capital gain resulting from sale of a residence. He was born in the US...but left at age 2. IRS apparently still claimed he was subject to US tax on that gain.
They tell me that it is a PITA to go through this process. The ONLY reason they do it is the onerous nature of the US tax code on those who have lived a very short period of their non income earning lives in the US.