@Tim alerted us to this “opinion paper” just issued by the Republican staff of the U.S. Senate Finance Committee.
The December 11, 2014 paper, entitled “Continuing the Conversation on Comprehensive Tax Reform” has a section dealing with the question of citizenship-based taxation.
This is a very brief outline “analysis” only and does NOT equal introduced legislation — which I hope will happen during the next two years — and which may well fail to be passed into law.
Go to page 282/293:
“The United States needs to rethink its taxing rules for nonresident U.S. citizens.
If a U.S. citizen is living and working abroad with some permanence, and the primary nexus the individual has to the United States is citizenship, we think it makes sense to tax the individual, as a general rule, only on income from U.S. sources.
A test would need to be developed to determine at what point a U.S. citizen is considered a nonresident of the United States and then at what point the U.S. citizen is considered to be a resident again.
Some factors that may be considered include the permanence and purpose of the stay abroad, residential ties to the United States, residential ties to the foreign country, and regularity and length of visits to the United States.
The test could be adopted, in some part, from the existing rules that are used to determine residency of alien individuals, i.e., those individuals who are not U.S citizens.
In addition, an exit tax could be applied when the U.S. citizen is considered a nonresident and no longer subject to U.S. worldwide taxing jurisdiction. If the U.S. citizen later becomes a resident and then becomes subject to U.S. worldwide taxing jurisdiction, then the individual’s basis in her assets would be the fair market value of the assets at the time she again becomes a resident.”
[---Many readers believe that ANY position taken by the United States is not deserving of attention or comment and will have nothing whatsoever to do with the U.S.
It is irrelevant to them whether the U.S. moves towards residence-based taxation, or not.
Others appreciate that this slight "snippet" of an opinion by the U.S SFC Republicans does not go far enough and is short on details (I don't like the "exit tax" either). The "opinion" might well have zero future consequence.
The default and expectation is that CBT WILL ALWAYS be imposed on U.S. citizens. The options then include resistance to an unjust law, compliance for life (and beyond death) or compliance for the purpose of renunciation, if one is willing and financially able to afford the costs.
But do we really feel that it would be preferable if the SFC Republicans had NOT stated in a public document an opinion beginning with the sentence: "The United States needs to rethink its taxing rules for nonresident U.S. citizens." --- or if the RNC had NOT passed a resolution moving towards residence-based taxation?
I have asked my (Democrat) reps on the SFC and the House W&M Committee, Senator Maria Cantwell and Congressman Jim McDermott, respectively, to work with the Republicans on the two committees to help introduce legislation during the next two years that will move us closer to RBT. I also emailed Senator Orrin Hatch, who probably will soon be the Chair of the SFC, and asked him to help get this legislation moving.
If you have any interest in the Republican majority introducing legislation during the next two years to kill CBT I suggest that you send your thoughts to Republicans Overseas, your reps in House/Senate (if you have any), Orrin Hatch and other members of the SFC, etc. Be specific and provide your timeline. Appreciate that the positive SFC opinion and RNC resolution are a long long way from legislation.
[You might also want to contact the SFC by sending an email to Aaron_Fobes@Finance.Senate.gov who is the Republican Press Officer for the SFC. Ask him to forward your thoughts to the relevant staffer/Members.]
Also, I asked and will continue to ask that John Richardson, our ADCS legal counsel, provide expert testimony at the SFC hearing at which the RBT proposal will be discussed. The January 2014 submission John Richardson, former IRS attorney Willard Yates, and I made to the SFC can be found here.]