Does he not understand that U.S. citizenship taxation and FATCA penalize Americans based on an “accident of birth”?
President Obama Confirms That Success In American Should Be Determined By Work And NOT By Accident Of Birth!
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Category Archives: citizenship based taxation
Some Americans Considering A Move To Canada May Already Be Canadian Citizens
I just got off a call with a Canadian resident who wishes to renounce his U.S. citizenship. He is NOT a naturalized Canadian citizen. Rather he was born in the United States (making him a U.S. citizen) to a Canadian citizen father (making him a Canadian citizen). The benefits of “dual citizenship from birth” means that he will be able to avoid “covered expatriate” status (no 877A exit tax payable).
During the conversation it became apparent that he has a son who born in the United States and has always lived in the United States (about 25 years old).
Amazingly, due to a change in Canada’s citizenship laws that took effect on December 15, 2025:
1. The son (born before December 15, 2025) IS a Canadian citizen!! All that is necessary is that the facts be proven to support that claim to citizenship.
2. Children born after December 15, 2025 to a “born abroad” Canadian citizen are Canadian citizens if the Canadian citizen parent has 1095 days of Canadian presence prior to the birth of the child. (Do you think it might be a good idea to acquire that presence by attending university in Canada?)
Great news for a lot of people!
A “watered down” description of this is available here on the Government of Canada site.
I suspect that this change in Canada’s citizenship laws is a “gift” to many U.S. citizens. Think of it!
Many U.S. citizens (and of course citizens of many other countries) will have the right to be recognized as Canadian citizens. For those who don’t want Canadian citizenship, there is even a simplified procedure to renounce Canadian citizenship. Interestingly the cost to renounce Canadian citizenship is $100 CDN.
Further information is available here.
In a world where people are paying huge amounts of money for a second citizenship this is a bargain!
John Richardson Follow me on X.com/expatriationlaw
Bonjour Part 7 – Bruyea and Chrisensen Cases Argued March 3, 2026
Introduction
___________________________________________________________________________
Today March 3, 2026 the Christensen (France) and Bruyea (Canada) appeals were argued. The issue is whether FTCs can be used to offset the 3.8% NIIT. The NIIT is found in Chapter 2A of the Internal Revenue Code instead of Chapter 1 which has the the FTC rules. Of course, FTCs (foreign tax credits) are available only as a credit against foreign taxes paid on foreign source income. In the context of the NIIT, it appears well settled (under the provisions of the Internal Revenue Code) that because the NIIT is found in Chapter 2A, that foreign tax credits cannot be used as a credit against U.S. tax owing. To put it simply, in enacting the NIIT, Congress imposed pure double taxation on “foreign” net investment income. Think of it (like PFIC) as a “tariff” on investing in foreign financial assets. This is a huge problem for Americans abroad because their assets (and income streams) are more likely to be foreign. Hence, it is no surprise that this litigation arises from the circumstances of American citizens living outside the United States. Both Mr. Bruyea and the Christensens are Americans abroad.
Hence, the issue in both Bruyea and Christensen is whether the tax treaties provide a foreign tax credit, where the Internal Revenue Code does not.
Do tax treaties create a foreign tax credit under circumstances where the U.S. Internal Revenue Code would NOT allow a foreign tax credit?
Paragraph 1 of Article XXIV of the Canada/U.S. Tax Treaty reads as follows:
Elimination of Double Taxation
1. In the case of the United States, subject to the provisions of paragraphs 4, 5 and 6, double taxation shall be avoided as follows: In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a citizen or resident of the United States,
or to a company electing to be treated as a domestic corporation,as a credit against the United States tax on income the appropriate amount of income tax paid or accrued to Canada;and, in the case of a company which is a resident of the United States owning at least 10 per cent of the voting stock of a company which is a resident of Canada from which it receives dividends in any taxable year, the United States shall allow as a credit against the United States tax on income the appropriate amount of income tax paid or accrued to Canada by that company with respect to the profits out of which such dividends are paid.
The France U.S. tax treaty has a similar provision which INCLUDES as follows:
ARTICLE 24
Relief From Double Taxation
1. (a) In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a citizen or a resident of the United States as a credit against the United States income tax:
(i) the French income tax paid by or on behalf of such citizen or resident;
U.S. Treasury position’s is that the language in italics In accordance with the provisions and subject to the limitations of the law of the United States allows the United States to DENY a foreign tax credit if a foreign tax credit is not allowed under the Internal Revenue Code. Obviously this interpretation would make Article XXIV meaningless. Why would it be needed? In fact, it would turn Article XXIV, which purports to be a vehicle for the “Elimination of Double Taxation”, into an Article which would guarantee double taxation. Nevertheless, that is the Orwellian position of U.S. Treasury.
On March 3, 2026 the United States Court of Appeals heard the appeals from BOTH Bruyea (Canada) and Christensen (France). The decisions of the courts of first instance (which conflicted on this question) were:
Bruyea (Canada)– The words In accordance with the provisions and subject to the limitations of the law of the United States should NOT be read to allow the United States to deny a foreign tax credit; and
Christensen (France) – The words In accordance with the provisions and subject to the limitations of the law of the United States SHOULD be read to allow the United States to deny a foreign tax credit. (The Christensen’s were successful based on arguing that a second section of the “double taxation” clause created an independent treaty based foreign tax credit.)
In accordance with the provisions and subject to the limitations of the law of
the United States
The meaning of those words is what the court has been asked to resolve. Specifically, do treaties create a foreign tax credit that extends beyond what is allowed under the IRC. If you are interested in this issue, I think you will find the oral arguments in Bruyea and Christensen interesting. They were heard back to back.
The cases are huge and the stakes are very high! If Bruyea and/or Christensen lose, I would think think that the terms of the treaty would allow the USA to deny a foreign tax credit by simply keeping a tax out of Chapter 1.
Interested to hear your thoughts on the prognosis and/or how you handle the issue of the NIIT payable on non-U.S. source income now.
Continue reading
From The OVDI Trauma Of 2011 To The Continuing Trauma Of U.S. Citizenship Abroad Today
Prologue – August 2011
Today is August 26, 2025. This coming weekend is Labour Day weekend. It was almost 14 years ago to the day that many U.S. citizens (and some former citizens) in Canada and around the world were being pressured to enter into the 2011 OVDI (“Offshore Voluntary Disclosure Initiative”). Those who entered that program, offered a substantial percentage of their wealth to the IRS, to avoid punishment. The punishment would have been for the failure to comploy with laws they had no way of knowing existed. Shockingly, many who entered the OVDI program agreed to penalties that were completely disproportionate to their noncompliance. Interestingly, many who (1) entered the program and (2) used the opt out provision paid little or no penalties.
The OVDI program was predicated on the generation of penalty threats from the IRS and the tax advisers delivering those threats to the individuals impacted. The nature of the threats evolved. Toward the deadline for entering OVDI the IRS offered increased penalty to nonresidents who didn’t know they were U.S. citizens. As noted by Robert Wood on August 11, 2011 writing in Forbes, the IRS agreed that individuals who didn’t know they were U.S. citizens would pay a reduced rate of 5% for the privilege of participating in the OVDI program. Mr. Wood describes this special concession to those who didn’t know they were U.S. citizens as follows:
You are invited to read the complete post on the Isaac Brock Society here.
From The OVDI Trauma Of 2011 To The Continuing Trauma Of U.S. Citizenship Abroad Today
John Richardson – Follow me on X.com @Expatriationlaw
Tax Law Professors Mason and Dagan: “Reconsidering Citizenship Taxation”
Introduction and purpose
In 2010 few people even knew what citizenship taxation was. It is now 2025. Awareness of the existence of citizenship taxation has expanded. An understanding of WHAT citizenship taxation actually is (it’s the the U.S. applying its worldwide tax, reporting and penalty regime on non-U.S. source income received by nonresidents) and how it impacts the lives of Americans abroad is still not understood. The nature of citizenship taxation is more fully explored in the following post:
The Road To Tax Reform For Americans Abroad: Part 2 – What Is US Citizenship Taxation?
How tax academics view citizenship taxation
Although, there have been articles about citizenship taxation written by various academics, few if any, have included a description of how U.S. citizenship taxation results in the U.S. imposing a more punitive form of taxation on Americans abroad. Of course, one must have actually experienced the reality (as opposed to the theory) of citizenship taxation to understand it.
To put it another way:
Generally, academics view citizenship taxation purely from the perspective of a U.S. tax return and a U.S. citizen living outside the United States. There is no consideration of how living as a tax resident of another country impacts U.S. tax filing.
Generally, U.S. citizens living outside the United States view citizenship taxation from the perspective of building a live outside the United States (that includes taxation) with the U.S. tax imposed on that life.
These are TOTALLY different perspectives!
Part 1: Colorado Congressman Jeff Hurd Recognizes Problems Of U.S. Citizenship Taxation
Part A – Introducing H.R. 4501
H.R.4501 – To protect the citizenship of, and provide tax-exempt status to, any American elected as the Supreme Pontiff of the Roman Catholic Church.
https://www.congress.gov/bill/119th-congress/house-bill/4501
Here is the text of the bill. It’s amazingly clear. It’s amazingly honest. It states that Subtitle A of the Internal Revenue Code will not apply to Pope Leo. It is certainly one of the most honest and clear carve outs I have ever seen. (Interestingly it would NOT exempt Pope Leo from subtitle F which contains the international information return reporting requirements.)
Let’s break H.R.4501 down:
H.R.4501 – To protect the citizenship of, and provide tax-exempt status to, any American elected as the Supreme Pontiff of the Roman Catholic Church.
H.R.4501 – To 1. protect the citizenship of (U.S. citizens abroad are being forced to renounce U.S. citizenship because of citizenship taxation) , and 2. provide tax-exempt status to (end U.S. citizenship tax jurisdiction over), any 3. American (U.S. citizen and possibly resident) 4. elected as the Supreme Pontiff of the Roman Catholic Church (appears to condition the benefit based on religion – 14th Amendment issue?).
At present there is no more information on the government site.
Part B – The tax exemption directly implicates the issue of citizenship taxation
The Internal Revenue Code (see section 1) clearly states that U.S. citizens are subject to taxation on their worldwide income. Therefore, for Pope Leo to NOT be considered a U.S. tax resident either:
1. The Internal Revenue Code would require some kind of amendment. The amendment might be a move to “residence-based taxation” or a special carve out for Pope Leo. (An example of a special carve out might be: “Individual” does not include a U.S. citizen Pope”); or
2. It could be incorporated into “A Simple Regulatory Fix For Citizenship Taxation“.
The point is that NO MATTER how this would be achieved it WILL require a rethinking of “citizenship taxation”. It will also require ensuring (if this is even possible that the amendment meet constitutional standards).
Part C – The statement of Congressman Hurd
H.R.4501 was introduced by Congressman Jeff Hurd from Colorado. The wikipedia article describes Hurd as being Catholic (presumably explaining his interest in this issue).
Interestingly, Congressman Hurd’s wife (by her own admission) was born in Czechoslovakia and may be a Czech citizen. If so, this might mean that Congressman Hurd’s five children are (by birth or naturalization) dual U.S./Czech citizens.
Further commentary about the possibility of U.S./Slovokia dual citizenship is here and here.
A press release describing H.R.4501 on his site states:
Rep. Hurd Introduces Holy Sovereignty Protection Act to Safeguard Citizenship for American Popes
July 18, 2025
Press ReleaseWASHINGTON, D.C. — Today, Congressman Jeff Hurd (CO-03) introduced the Holy Sovereignty Protection Act (H.R. 4501), legislation to protect the U.S. citizenship of any American elected to serve as the Supreme Pontiff of the Roman Catholic Church. The bill prohibits the revocation of citizenship during a papal tenure and exempts the individual from U.S. tax obligations while serving as pope, recognizing his unique role as both a religious leader and head of state.
“The election of Pope Leo XIV marks a historic moment not only for the Catholic Church but for America,” said Rep. Hurd. “This legislation ensures that any American who answers the call to lead more than a billion Catholics worldwide can do so without risking his citizenship or facing unnecessary tax burdens. This legislation recognizes the extraordinary nature of the papacy—a role at the intersection of faith, leadership, and global responsibility.”
Significantly, the press release acknowledges Congressman Hurd’s belief and understanding that:
– certain activities can trigger the involuntary relinquishment of U.S. citizenship (not the case since the 1967 decision in Afroyim v. Rusk); and
– the problematic nature of U.S. citizenship taxation (specifically the imposition of U.S. worldwide taxation on U.S. citizens living outside the United States).
Part D – Why H.R.4501 is helpful to Americans abroad and the fight for residence-based taxation
The introduction of H.R. 4501 is a clear recognition that citizenship-based taxation presents unnecessary problems (and burdens) for Americans abroad. Although Congressman Hurd does NOT suggest that Americans abroad are renouncing their citizenship because of the U.S. extra-territorial regime, the quest to “Save The Pope” is a clear recognition of the problems caused by the exiting regime.
Given that H.R.4501 appears to provide a benefit based solely on affiliation with a specific religion, I suspect that it is dead on arrival. That said, it can (and should) be used to raise the question of why ANY U.S. citizen living outside the United States should be subject to the U.S. worldwide/extra-territorial taxation regime.
Specifically, H.R.4501 is support for both President Trump’s pledge to end the double taxation of Americans abroad and the LaHood bill which was introduced in December of 2018. I suggest that it be interpreted in this spirit.
Part E – What Americans abroad and their champions should do
This is simple. As a Catholic Congressman Hurd has an interest in maintaining the viability of a U.S. citizen Pope. As a father Congressman Hurd has an interesting in enhancing the life opportunities of his children to ensure that their life opportunities are not dampened by U.S. citizenship taxation.
I would reach out to Congressman Hurd and enlist his aid in supporting the ending of the double taxation of Americans abroad!
John Richardson – Follow me on X.com @ExpatriationLaw
Appendix
Here is a July 30, 2025 “X Spaces” discussion about the Hurd bill:
A #GILTI Carveout For INDIVIDUAL CFC Shareholders Of Certain Virgin Islands Corps
Introduction and purpose:
The Big Beautiful Bill (“BBB”) Contains many surprises. Yesterday, I wrote a first post about a section of the BBB that addressed the application of the GILTI rules.
GILTI, Americans Abroad And SEC. 111110 Of The Big Beautiful Bill: The Good, The Bad And The Ugly
That post was largely based on an interesting expose in the Washington Post. This called attention to the fact that a provision in the BBB appears to provide a GILTI carveout to a U.S. C Corp. That expose failed to mention that the same section of the BBB also created an ongoing carveout for individual shareholders of Virgin Islands CFCs that appear to be “service oriented” businesses. So that the implications of this are clear, I will put it this way:
The BBB creates an opportunity for “United States Shareholders” of Controlled Foreign Corporations who are INDIVIDUALS – regardless of where they live in the world – to avoid the GILTI tax on certain kinds of income. Interestingly, U.S. citizens living abroad are still required to pay GILTI on the service oriented CFCs in their country of residence. There comes a certain point (we are well past it) where there should be an acknowledgement (even from the tax compliance community) that the U.S. tax system is deserving of nothing more than scorn and ridicule. It’s quite obvious that the “service businesses” owned by U.S. citizens abroad are exactly the same kinds of businesses that are based in the Virgin Islands and owned by U.S. residents.
Unpacking the proposed legislation
“(i) Qualified virgin islands services income.–The term `qualified Virgin Islands services income’ means any gross income which satisfies all of the following requirements:
“(I) Such gross income is compensation for labor or personal services performed in the Virgin
Islands by a corporation formed under the laws of the Virgin Islands.
“(II) Such gross income is attributable to services performed from within the Virgin Islands by
individuals for the benefit of such corporation.
“(III) Such gross income is effectively connected with the conduct of a trade or business within the Virgin Islands.
“(ii) Specified united states shareholder.–The term `specified United States shareholder’ means any United States shareholder which is–
“(I) an individual, trust, or estate, or
“(II) a closely held C corporation (as defined in section 469(j)(1)) if such corporation acquired its direct or indirect equity interest in the foreign corporation which derived the qualified Virgin Islands services income before December 31, 2023.
“(iii) Regulations.–The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out this subparagraph and subparagraph (A)(i)(VI), including regulations or other guidance to prevent the abuse of such subparagraphs.”.
What does this mean? What would be an example of a CFC that would qualify?
Let’s break this down. Imagine a tax preparation firm owned by a resident of the State of New York. Let’s imagine that he incorporates a Virgin Islands Corporation. The U.S. resident is the sole shareholder. The Virgin Islands Corporation is clearly a CFC. The purpose of the corporation is to provide tax preparation services for Americans abroad. He names the business “Virgin Islands Tax Prep”.
He then visits the Virgin Islands for the purpose of hiring and training individuals who are residents of the Virgin Islands. He trains them in the art of U.S. tax return preparation (including GILTI), forms and penalty abatement. They are being trained for the purpose of being employed by “Virgin Islands Tax Prep”.
The business is a spectacular success. Let’s consider whether “Virgin Islands Tax Prep” qualifies for the GILTI carveout.
Again, here are the rules:
“(i) Qualified virgin islands services income.–The term `qualified Virgin Islands services income’ means any gross income which satisfies all of the following requirements:
“(I) Such gross income is compensation for labor or personal services performed in the Virgin
Islands by a corporation formed under the laws of the Virgin Islands.JR Commentary: Clearly “Virgin Islands Tax Prep” is formed under the laws of the Virgin Islands. The gross income of the company is solely payment for the labor and personal services required to file U.S. Expat Tax Returns.
“(II) Such gross income is attributable to services performed from within the Virgin Islands by
individuals for the benefit of such corporation.JR Commentary: The whole purpose of going to the Virgin Islands to hire and train tax preparation employees is to prepare tax returns in the Virgin Islands for the benefit of “Virgin Islands Tax Prep”.
“(III) Such gross income is effectively connected with the conduct of a trade or business within the Virgin Islands.
JR Commentary: Obviously the gross income is compensation for services performed by a Virgin Islands company from inside the Virgin Islands.
Notice also that competitors of “Virgin Islands Tax Prep” in any other part of the world will pay the GILTI tax.
Now, close your eyes and substitute for “Virgin Islands Tax Prep” any other kind of service business. Also, reflect on the fact that Americans broad will pay GILTI tax on CFC service income in their country of residence. But, U.S. residents can avoid the GILTI tax by incorporating a company in the Virgin Islands.
My point:
The services businesses of CFCs located ANYWHERE should be exempt from GILTI!
Why is the Virgin Islands the only “Possession” that receives this benefit?
John Richardson – Follow me on X.com @Expatriationlaw
GILTI, Americans Abroad And SEC. 111110 Of The Big Beautiful Bill: The Good, The Bad And The Ugly
Introduction and purpose
GILTI – found in IRC 951A – is one of the most problematic manifestations of U.S. citizenship taxation. It has caused huge compliance problems and costs for Americans abroad. The costs are composed of (1) the compliance costs of Form 5471 and (2) the possibility of the payment of U.S. taxes. All businesses understand that taxes are a cost of running a business. GILTI has imposed costs on the businesses run by Americans abroad that citizens of other countries do not have.
To put it simply:
As explained in the following short video done with Republicans Overseas Tax, GILTI imposes costs on U.S. citizens that citizens of other countries do not have.
Unsurprisingly, organizations representing Americans abroad have (independently of efforts to end citizenship taxation) worked to achieve relief from GILTI for Americans abroad. ACA (“American Citizens Abroad”) has consistently argued that Americans abroad should be exempt from the 2017 TCJA Transition Tax and GILTI provisions. For example:
“ACA continues its advocacy for the application of a de minimis ruling that would take out from the Transition Tax and GILTI regimes small businesses run by US citizens living and working overseas.”
https://www.americansabroad.org/tcja_and_gilti_regimes_us_businesses_overseas
The “Big Beautiful Bill” does NOT include any direct relief targeted for Americans abroad. Nevertheless, the “Big Beautiful Bill” includes some provisions that may be helpful to individual shareholders of CFCs (that include Americans abroad).
The purpose of this post is to identify three respects in which the Big Beautiful Bill impacts Americans abroad. I will refer to them as:
1. The Good – By extending the tax cuts, the GILTI income exclusion will remain at 50% and not be increased to 66 2/3% (as IRC 250 and the 2017 TCJA would require). This is relief for ALL shareholders of CFCs which therefore includes Americans abroad.
2. The Bad – Certain kinds of CFCs – with individual U.S. citizen shareholders – carrying on business in the U.S. Virgin Islands will have their income excluded from the GILTI inclusion. The Virgin Islands are a U.S. territory. There is no comparable provision for:
(a) U.S. citizens running small business corporations in foreign countries; or
(b) U.S. citizens running small business corporations in other U.S. territories
This is bad because it reflects an indifference to the special problems of Americans abroad.
For commentary see the following X.com thread …
3. The Ugly – Some (but not all) CFCs with C corporation shareholders are apparently receiving a “carveout” from GILTI inclusionsl The carveout is for certain kinds of income earned in the U.S. Virgin Islands. Washington Post reporter Jeffrey Stein suggests that this is the result of paid lobbying and not a conclusion based on sound tax policy. This allows for the inference that the application of U.S. tax laws, depends on your ability to “buy” the legislation you want.
For commentary, see the following X.com threads …
The “Big Beautiful Bill” And The Obfuscation Of What The Change Means
Changes to tax laws often appear in large Omnibus bills. Omnibus bills make it easier to hide the changes in tax laws. The ability to hide change is magnified in two ways.
First – Burying The Proposed Change In A Section That Appears To Describe Completely Unrelated Issues
The GILTI changes appear in SEC. 111110 Of The Big Beautiful Bill. Interestingly, SEC. 111110 appears under the following heading:
Part 2–Additional Tax Relief for American Families and Workers
It is quite obvious that the proposed GILTI changes have NOTHING to do with “Additional Tax Relief For American Families and Workers”.
Second – by including in the legislation ONLY the change in the language of the statute.
The language is meaningless without taking the time to go to the original legislation and parse the changes.
Therefore, in the following Appendixes, I have identified the text of the changes and incorporated those changes into the original legislation. This will allow (if you are interested) to see what the legislation will look like after the proposed changes are implemented.
Specifically:
Appendix A – Identifies the relevant text in the Big Beautiful Bill
Appendix B – Identifies the existing legislation (IRC 951A)
Appendix C – Incorporates Appendix A into Appendix B which results in the identification of what 951A (the GILTI rules) would be AFTER the changes proposed in SEC. 111110 of the Big Beautiful Bill
John Richardson – Follow me on X.com @ExpatriationLaw
Exit Taxes As A Barrier To Emigration And The Need For An International Treaty To Create Uniformity And Certainty Surrounding Emigration
Exit Taxes As A Barrier To Emigration And The Need For An International Treaty To Create Uniformity And Certainty Surrounding Emigration
This blog post was written for a presentation at the MigrationConference.net on June 12, 2025. Here are the slides that will be used:
A PDF version is here:
Here is a recording of John’s brief presentation at the conference on June 12, 2025:
A more comprehensive blog post follows.
Outline:
Part A – Introduction
Part B – Emigration historically burdened by “exit taxes” (The Nazis and Soviets)
Part C – Modern Exit Taxes And First World Democracies (Canada, the United States, etc.)
Part D – A Tax Treaty Solution That Protects BOTH The Right Of Emigration And the Desire Of Governments To Tax Individuals On Gains Accruing While Living In The Country
Appendix – Human Rights Documents
Robert T. Kudrie: Citizenship Taxation, Globalization and Inequality
I came across a 2023 article published in the Florida Tax Review by Robert T. Kudrie of the University of Minnesota. The article is available here.
The title of the article is:
“Citizenship Taxation, Globalization and Inequality”
https://scholarship.law.ufl.edu/cgi/viewcontent.cgi?article=1410&context=ftr
Impressions based on a fairly quick read …
Despite its title the article seems to focus more on the importance and enhancement of tax enforcement on U.S. residents with “offshore income and assets” than on Americans abroad with income and assets in their country of residence. Put another way, I understand the article to more of an attempt to argue for enhanced enforcement of “resident-based taxation” and less of an argument for “citizenship-based taxation”. (The thesis seems to be more about ensuring that residents are taxed on their complete worldwide (offshore) income, rather than an argument that citizens living outside the United States should be taxed on their non-U.S. source income.) By confusing this issue, the article becomes one more of a series of articles that claims to justify “citizenship-based taxation” because U.S. residents are not paying tax on their non-U.S. source income.
There is very little analysis on the question of why the United States should be imposing its worldwide tax regime on nonresidents.
The author argues that Americans abroad living in select countries (those with tax systems similar to the U.S. system) should be subject to the tax system of their country of residence (residence-based taxation).
Generally the article replicates the U.S. tax academics’complete misunderstanding of how the U.S. extra-territorial tax regime affects Americans abroad. (He lives in the “echo chamber” of Avi-Yonah, Kirsch, Zelinsky, etc.) He makes not the slightest mention that the U.S. (citizenship based) extra-territorial tax regime is really about the application of U.S. taxation to the non-U.S. source income received by people who do not live in the United States.
That said, he does seem to recognize that as a matter of lack of connection to the United States, certain U.S. citizens abroad (those with less than three years of U.S. residence after the age of 18) ought to be able to cease being taxed under the U.S. tax rules and be allowed to live solely under the tax regimes of their country of residence (a good thing).
The author concludes with:
Vii. summinG up
Human mobility across states is increasing even as skepticism about some aspects of globalization grows. Concern about material inequality within states is also high and growing.
The policy proposals presented here attempt to increase the fiscal grip of the U.S. government on high income and wealth citizens who have benefited from the U.S. national environment while reducing tax interference with most Americans who choose to live abroad. The suggested policies also change the rules for those relinquishing citizenship to recover more fully tax revenue that should have gone to the U.S. Treasury. Revised policies should allow those below the top ten percent of the U.S. citizenry in income and wealth to live and pay taxes as locals in foreign countries with personal tax systems similar to that of the U.S. The very well off and those who reside in low tax jurisdictions should stay in the U.S. system. Any shift to a foreign system should entail mark-to-market capital gains taxation. Relinquishing U.S. citizenship should require the payment of both deemed capital gains and deemed estate taxation without step-up. None of this will be possible unless administration is tightened and enforcement is greatly increased. Truly effective enforcement will require greater international cooperation, but U.S. initiatives should meet success among states striving to reduce tax escape.
Generally good news for Americans abroad …
John Richardson – Follow me on X.com @Expatriationlaw