Sunday, February 15, 2015

It appears someone is listening in the Administration at the Treasury; at least a little bit?

General Explanations of the Administration’s Fiscal Year 2016 Revenue Proposals (Released February 2015)    
Buried deep into the proposal of the US$3.99 trillion fiscal year 2016 expenditure plan, is a provision to “provide relief for certain accidental dual citizens.”  See pages 282 and 283 of the proposal.
The proposal has a window of opportunity that starts to close with time and then shuts in January 1, 2018;  i.e., the 2 year period after January 1, 2016.
Obama Budget Proposal to “Provide Relief for Accidental Americans”? Will the Proposal to Modify the Expatriation Rules Become Law?
The proposal would not adopt residency based taxation for all U.S. citizens, as it exists in the rest of the world, but would exclude certain U.S. citizens from the “mark to market” tax on expatriation (i.e., the “exit tax”) who :
  1. became at birth a citizen of the United States and a citizen of another country,
  2. at all times, up to and including the individual’s expatriation date, has been a citizen of a country other than the United States,
  3. has not been a resident of the United States (as defined in section 7701(b)) since attaining age 18½,
  4. has never held a U.S. passport or has held a U.S. passport for the sole purpose of departing from the United States in compliance with 22 CFR §53.1,
  5. relinquishes his or her U.S. citizenship within two years after the later of January 1, 2016, or the date on which the individual learns that he or she is a U.S. citizen, and
  6. certifies under penalty of perjury his or her compliance with all U.S.  Federal tax obligations that would have applied during the five years preceding the year of expatriation if the individual had been a nonresident alien during that period.
Only these U.S. citizen individuals (who meet all 6 criteria) will not be subject to any U.S. tax as a U.S. citizen but instead they will be taxed the same as a non-resident alien, which in effect is residency based income taxation for this narrow class of U.S. citizens.  The word tax is used generically, to presumably also exclude them from U.S. estate, gift and generation skipping transfer taxes.. 

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