Key Concepts of Senate Finance Chairman Hatch’s Proposal Re: “Non-Resident U.S. Citizens”

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The complete report can be located at the Senate Finance Committee website at Comprehensive Tax Reform for 2015 and Beyond – Senate Republican Staff

The crucial policy considerations are set out in the report.  The key paragraph of the report is reproduced here:Republican Senate Finance Report Proposal for Tax Reform - U.S. Citizenship Based Taxation and Expatriation

The principle idea is to impose U.S. income taxation on U.S. sources only for U.S. citizens residing overseas.  The report leaves many unanswered questions.  One of those questions is how to integrate the “expatriation tax rules” into such a concept?  There is one sentence addressing this point, which contemplates the “mark to market exit tax” will continue as part of the law, if such a proposal were to become law.

The report does not discuss how the U.S. transfer tax system (U.S. estate, gift and generation skipping transfer taxes) might be reformed.  Current law, imposes worldwide U.S. estate, gift and generation skipping transfer taxes on the worldwide assets of a U.S. citizen.

Time will tell if such a proposal gets any political traction in Congress or at the White House.

2 thoughts on “Key Concepts of Senate Finance Chairman Hatch’s Proposal Re: “Non-Resident U.S. Citizens”

    bubblebustin said:
    March 9, 2015 at 9:49 pm

    What would happen to people who left the US decades ago but have been paying US taxes? Would they too have to pay an exit tax on top of the taxes they’d paid over the years, when someone who hasn’t been paying taxes for years will get a pass on both?

    Dani Küttel (@SwissTechie) said:
    March 10, 2015 at 4:11 am

    It’s quite amazing that this is being discussed. Years ago, I couldn’t imagine such being possible.

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