The U.S. Treasury and IRS took more than a decade to finalize, and more than 15 years after the statute was adopted in 2008.   See the new Treasury Regulations here.

See prior posts on the topic:

• The “Hidden Tax” of Expatriation – Section 2801 and its “Forever Taint.” (Posted April 2014)
•   “Covered Bequests” and “Covered Gifts”: Treasury Regulations 2801 Around the Corner? (Posted June 2024)
• Proposal to US Treasury and IRS: Await Final Regulations on “Covered Gifts” and “Covered Bequests” (Posted June 2024)

Some of the most important takeaways from these rules are the following:

1. Few individuals will ever understand the law and many of their tax advisors and return prepares will ever even know to file IRS Form 708 – United States Return of Tax for Gifts and Bequests Received From Covered Expatriate (which currently doesn’t exist in final form).
2. This Novel Tax Now Only Applies on 2025 Transfers (and thereafter).  The rules are not retroactive, after all, as the prior draft regulations contemplated.  Any taxable transfer made after the adoption of the statute and the implementation of these regulations, escape taxation.  See, § 28.2801-1(b) – Tax on certain gifts and bequests from covered expatriates.
3. Transfers made prior to 2025 on “covered bequests” and “covered gifts” will escape taxation under the law that was passed back in 2008!
4. Individuals with “Green Cards” should take care over where they live, what steps they take when they start living predominantly outside the United States (i.e., particularly if living in a treaty country such as Austria, Japan, Switzerland, etc.) and if and when they return to the U.S.. – See, Countries From Which Viewers Read Posts – Tax-Expatriation.com – First Week of 2024 (Which Ones are Tax Treaty Countries?) – Applying the “Escape Hatch”
5. Foreign Trusts Should Consider the Election.
6. Foreign (and domestic) trustees of foreign trusts need to be considered if the “covered expatriate” settled a trust or is a beneficiary.