For years Congress has attempted in some fashion or another to get rid of the ex-pat tax exemption or inflict new exit taxes on those leaving the U.S. to live abroad.
Jeez, can’t they just let us go in peace? Their attempts at taking one last swipe at those of us trying to make a new life somewhere else is reminiscent of darker regimes in history.
I imagine the next step is to confiscate our watches and jewelry off our very bodies before boarding the plane to leave.
Last year, HR 3056, “The Tax Collection Responsibility Act,” nearly passed. It would have imposed a tax of 30% on all assets valued over $600,000 (total) for all citizens leaving the U.S. This was to be based on fair market value at the time of the expatriation.
Since a bill with the phrase “tax collection” in the title didn’t fly for obvious reasons, Congress wised up and decided to sneak some similar legislation into a better, sweeter sounding bill. So they tested some new names with a focus group thus was born “The Heroes Earnings Assistance and Relief Tax Act of 2007” or the endearing acronym “HEART” for short.
From “Tax Collection” to “Relief Tax Act” but with the same result: higher taxes.
Since Americans and Congressmen like to “assist heroes,” and most of us never read beyond the first line of anything, this bill has flown right through. It’s already passed both houses (as of May 2008) and now awaits signature from our esteemed president.
What does it do?
The exit tax provisions of S.877A apply to certain US citizens who relinquish their citizenship and long-term residents who terminate their permanent residence status (known as “expatriation”). An individual is a long-term resident if he/she was a lawful permanent resident in at least eight out of the fifteen taxable years ending with the year in which the residency termination occurs. The mark-to-market tax would apply to any US citizen who relinquishes citizenship and any long-term resident who terminates US residency if the individual:
- Has an average annual net income tax liability for the five preceding years ending before the date of expatriation that exceeds $139,000 (2008 amount, adjusted annually for inflation);
- Has a net worth of $2 million or more on the date of expatriation; or
- Fails to certify under penalties of perjury that he or she has complied with all US federal tax obligations for the preceding five years or fails to submit such evidence of compliance as the Secretary may require.
According to PriceWaterHouseCoopers “Global Watch”, depending on your income, this new law could really smack your finances hard if you have money, or perhaps even help you if you’re already poor (which would make leaving the U.S. for another country prohibitive anyway). In their “Bottom Line” assessment of the bill, they state:
The change may be beneficial or harmful to different expatriates, depending on their circumstances. Expatriates with substantial assets may be subject to significant taxes under the new provisions, even if little or no tax would have occurred as a result of S.877. Other expatriates with relatively low assets may owe no tax under S.877A and be spared the ten-year tax and filing requirements that would have applied under S.877.
Here’s a link to the full text of the bill: HR 3997
Best,
Mels
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This is absolutely HORRIFIC!! Thank you for sharing! I am going to put it all over my facebook account. I’m gettin’ out of the United States come hell or high water!!