THE TRANSATLANTIC MAGAZINE
THE TRANSATLANTIC MAGAZINE
Representative Darin LaHood (R-IL), a member of the House Committee on Ways and Means, introduced the Residence Based Taxation for Americans Abroad Act yesterday, December 18, 2024. The bill would implement a Residence Based Taxation (RBT) system for US citizens currently living overseas.
As you probably know, the United States is one of only two countries that uses Citizenship Based Taxation (the other is Eritrea). Under this system, US citizens are liable to US taxes regardless of where they live or even whether they earn income in the United States.
Rep. LaHood's bill would permit Americans living overseas to elect to be treated as a non-resident American, allowing them to be subject to US tax only on US-sourced income and gains. Mr LaHood is hopeful the bill can be considered in a reconciliation package next year.
Although the exact number of US citizens living abroad is unknown, recent studies estimate them to total more than 5 million people, including Americans that were born and raised in the United States but have since moved abroad indefinitely, as well as accidental Americans,
individuals who hold dual citizenship in the United States and a foreign country but are unaware of their status as US citizens.
Rep. LaHood said, This is a non-partisan issue that impacts US citizens with roots in districts across the country. In today's world, Americans choose to live and work abroad for a host of reasons, and that does not mean that they should be subject to more onerous tax and compliance burdens. I look forward to working with President-elect Trump and my House colleagues on both sides of the aisle to modernize our tax code to ensure Americans are not punished for living and working abroad.
Brandon Mitchener, Executive Director of Tax Fairness for Americans Abroad (TFFAA), a non-profit advocating for RBT that worked closely with Rep LaHood in the drafting of the bill, said, For the first time in our lifetimes, Americans abroad can see the light at the end of the long, dark tunnel that has cost them huge amounts in accounting fees, ruined relationships, and made it impossible for them to live normal lives. We thank Mr. LaHood for his leadership and look forward to working with him to collect feedback on this non-partisan approach and to help advance the bill to the president's desk next year.
In response to the news, Marylouise Serrato, Executive Director of American Citizens Abroad (ACA) said, This long-awaited legislation is a critical step forward in bringing about something ACA has worked hard to achieve over many years. The bill builds on Congressman Holding's Tax Fairness for Americans Abroad Act of 2018 and we're pleased to note, includes multiple features of ACA's RBT modeling in our Side-by-Side Analysis dated 2022 and studies
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Fabien Lehagre, president of the Association of Accidental Americans, commented, This bill is a tremendous step forward for all Americans living abroad, whether they are expatriates or Accidental Americans. It provides a concrete response to the unbearable challenges we have faced for more than a decade. By separating American nationality from taxation, this reform finally acknowledges the realities of life abroad. We hope it will be passed quickly and gain the support of all members of Congress, as well as President Trump.
