By the Staff
of the
Joint Committee on TaxationFebruary 2003
JCS-2-03
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Title | Page(s) | |
---|---|---|
PRELIMINARY PAGES [ Title Page, Committee Members, Table of Contents ] |
Preliminary pages | |
INTRODUCTION | 1 | |
I. | EXECUTIVE SUMMARY | 2-11 |
II. | ESTATE TAX REPEAL | 12-13 |
III. | METHODOLOGY OF JOINT COMMITTEE STAFF REVIEW | 14-16 |
IV. | PRESENT-LAW TAX PROVISIONS RELEVANT TO CITIZENSHIP RELINQUISHMENT AND RESIDENCY TERMINATION | 17-47 |
A. | General Taxation of U.S. Citizens, Residents, and Nonresidents | 17-30 |
1. | Individual income taxation | |
2. | Estate, gift, and generation-skipping transfer taxation | |
3. | Income taxation of trusts, estates, and their beneficiaries | |
B. | Alternative Tax Regime for Individuals Who Relinquish U.S. Citizenship or Terminate U.S. Residency With a Principal Purpose of Tax Avoidance | 31-47 |
1. | Income taxation | |
2. | Estate, gift, and generation skipping transfer taxation | |
3. | Double tax relief | |
4. | Interaction with tax treaties | |
5. | Required information reporting and sharing | |
6. | Certain resident noncitizens having a break in residency status | |
V. | REQUIREMENTS FOR U.S. CITIZENSHIP, IMMIGRATION, AND VISAS | 48-72 |
A. | Overview | 48-49 |
B. | Acquisition and Loss of U.S. Citizenship | 50-52 |
1. | Acquisition of U.S. citizenship | |
2. | Loss of U.S. citizenship | |
C. | General Rules for U.S. Immigration and Visas for Noncitizens | 53-70 |
1. | Role of the Department of State | |
2. | Role of the INS | |
3. | Acquisition and relinquishment of immigrant visas | |
4. | Nonimmigrant visas | |
5. | U.S. port of entry inspection | |
6. | Grounds of inadmissibility | |
7. | Detecting inadmissibility: Department of State and INS lookout systems | |
8. | Waivers of inadmissibility | |
9. | Parole | |
10. | Admission to the United States: arrival and departure records | |
D. | Inadmissibility of Tax-Motivated Former U.S. Citizens | 71-72 |
1. | The immigration provision | |
2. | Attorney General access to return information | |
3. | Availability of waivers | |
4. | Effect of the immigration provision on admissibility | |
VI. | PURPOSES OF A SPECIAL TAX REGIME FOR CITIZENSHIP RELINQUISHMENT AND RESIDENCY TERMINATION | 73-82 |
A. | Background: The Tax Incentive to Relinquish Citizenship or Terminate Residency | 73-74 |
B. | Potential Purposes for a Tax Regime for Former Citizens and Former Long-Term Residents | 75 |
C. | Legislative History: Congressional Purpose for the Alternative Tax Regime | 76-81 |
1. | Foreign Investors Tax Act of 1966 | |
2. | Deficit Reduction Act of 1984 | |
3. | Tax Reform Act of 1986 | |
4. | 1995 Joint Committee staff study | |
5. | Health Insurance Portability and Accountability Act of 1996 | |
D. | Summary | 82 |
VII. | ENFORCEMENT OF PRESENT-LAW TREATMENT OF CITIZENSHIP RELINQUISHMENT AND RESIDENCY TERMINATION | 83-102 |
A. | Summary | 83-84 |
B. | Enforcement of the Alternative Tax Regime for Former Citizens and Former Long-Term Residents | 85-99 |
1. | Identification of former citizens and former long-term residents who are potentially subject to the alternative tax regime | |
2. | Determination of whether an individual's relinquishment of citizenship or termination of residency is tax-motivated | |
3. | IRS monitoring, assessment, and collection of taxes during the 10-year period after citizenship relinquishment or residency termination | |
C. | Enforcement of the Immigration Provisions | 100-102 |
VIII. | EFFECTIVENESS OF PRESENT-LAW TREATMENT OF CITIZENSHIP RELINQUISHMENT AND RESIDENCY TERMINATION | 103-139 |
A. | Summary | 103-105 |
B. | Income Tax Rules | 106-125 |
1. | Scope of section 877 | |
2. | Proof of tax avoidance purpose | |
3. | Information gathering with respect to former citizens and former long-term residents | |
C. | Estate and Gift Tax Rules | 126-131 |
1. | In general | |
2. | History of the estate and gift tax rules of the alternative tax regime | |
3. | Scope of the estate and gift tax rules of the alternative regime | |
4. | Conclusions | |
D. | Tax Treaties | 132-137 |
1. | In general | |
2. | Saving clauses | |
3. | Interaction of the alternative tax regime with tax treaties | |
E. | Immigration Rules | 138-139 |
1. | Substantive determinations of inadmissibility | |
2. | Waivers | |
IX. | SUMMARY OF OTHER COUNTRIES' TAXATION OF CITIZENSHIP RELINQUISHMENT, RESIDENCY TERMINATION, AND IMMIGRATION, AND ESTATES, INHERITANCES, AND GIFTS | 140-176 |
A. | Summary of Other Countries' Taxation of Citizenship Relinquishment, Residency Termination, and Immigration | 140-152 |
B. | Summary of Other Countries' Taxation of Estates, Inheritances, and Gifts | 153-176 |
X. | RECENT PROPOSALS TO MODIFY THE TAX TREATMENT OF U.S. CITIZENS AND RESIDENTS WHO RELINQUISH CITIZENSHIP OR TERMINATE RESIDENCY | 177-203 |
A. | Overview | 177 |
B. | Summary of Proposals | 178 |
C. | Description of Proposals | 179-194 |
1. | Clinton Budget proposal | |
2. | House bill (H.R. 3099, H.R. 4880, and S. 2769 | |
3. | Senate amendment (H.R. 5063) | |
4. | AICPA proposals | |
D. | General Issues Raised by Proposals | 195-203 |
XI. | JOINT COMMITTEE STAFF RECOMMENDATIONS | 204-220 |
A. | Recommendations Relating to the Tax Treatment of Citizenship Relinquishment and Residency Termination | 205-215 |
1. | Provide objective rules for the alternative tax regime | |
2. | Provide tax-based rules for determining when an individual is no longer a U.S. citizen or long-term resident for U.S. Federal tax purposes | |
3. | Provide a sanction for individuals subject to the alternative tax regime who return to the United States for extended periods | |
4. | Impose gift tax with respect to certain closely held foreign stock | |
5. | Impose annual return requirement | |
6. | Transition issues | |
B. | Recommendations Relating to the Immigration Treatment of Citizenship Relinquishment and Residency Termination | 216-220 |
1. | Conform present-law immigration provision to tax rules | |
2. | Eliminate discretionary exception from immigration provision | |
3. | Promote interagency information sharing | |
4. | Amend Code section 6103 | |
APPENDIX | A-1 |
Title | Page | |
---|---|---|
TABLE OF CONTENTS | A-1 | |
1. | Comparison of Saving Clause Provisions in Bilateral U.S. Tax Treaties | A-2 |
2. | Correspondence | A-10 |
3. | IRS Notice 97-19 | A-166 |
4. | IRS Notice 98-34 | A-193 |
5. | IRS Form 8854 | A-204 |
6. | Certificate of Loss of Nationality | A-209 |
7. | Oath of Renunciation of the Nationality of the United States | A-211 |
8. | Summaries of IRS Private Letter Rulings Issued to Former Citizen and Former Long-Term Residents during the Period from January 1, 1997 through July 1, 2002 | A-218 |
9. | General Accounting Office Report | A-256 |
10. | Department of State, 9 Foreign Affairs Manual, sec. 41.2, Exhibits I and II | A-274 |
11. | Congressional Research Service Report, Immigration: Visa Waiver Program, April 22, 2002 | A-278 |
12. | Congressional Research Service Report, I.S. Immigration Policy on Temporary Admissions, May 8, 2002 | A-284 |
13. | Congressional Research Service Report, Visa Issuances: Policy, Issues, and Legislation, July 31, 2002 | A-306 |
14. | Data From CLN Database for 2000, 2001, and 2002 | A-321 |
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Page #/congress/joint/jcs-2-03/index.html March 28, 2003