Sunday, May 27, 2012
Following up on my prior posts (links below): Wall Street Journal Tax Report, New Taxes for 'Renouncers'?, by Laura Saunders:
On Capitol Hill, there is new interest in connecting taxes and passports. ...
Sens. Schumer and Casey want to change the law to raise the overall penalty on renouncers, unless they can prove they didn't decamp for tax reasons. Those who can't prove otherwise would owe a new 30% tax on all future investment gains earned in the U.S., even though they no longer are citizens and no longer live here. Failure to pay the tax would keep them from re-entering the country.
Will this proposal get traction? Clint Stretch, a veteran tax expert at Deloitte Tax in Washington, doesn't think so. "There's always a tension when the IRS gets involved with affairs usually handled by the State Department, and this does that," he says. Michael Graetz, a law professor at Columbia University and former top Treasury official, hopes the proposal goes nowhere: "This is a good example of bad anecdotes making bad legislation."
A different proposal is further along in the pipeline. It would allow federal officials to revoke or deny passports to delinquent taxpayers who owe the IRS $50,000 or more. The provision passed the Senate in February and is before the House now. Revenues it generates would be used to help fund a highway-transportation bill that extends provisions set to expire on June 30.
The measure comes on the heels of a 2011 Government Accountability Office study [Potential for Using Passport Issuance to Increase Collection of Unpaid Taxes]. ... The GAO report found that for the year it studied—2008—the State Department issued passports to more than 224,000 citizens who owed about $6 billion in tax. ... Mr. Stretch says he thinks this provision has a far better chance of passage than the Schumer-Casey bill. "This is akin to shutting off the cellphone if you don't pay your bill," he says, "and it prevents the IRS from having to send folks with guns and badges to collect the money."
Prior TaxProf Blog Posts:
- Facebook Co-Founder Renounces U.S. Citizenship in Advance of IPO, Saving Millions in U.S. Taxes (May 11, 2012)
- Will Facebook Co-Founder's Renunciation of U.S. Citizenship Increase His U.S. Tax Bill? (May 12, 2012)
- Seto, Kleinbard Explain Tax Consequences of Facebook Co-Founder's Renunciation of U.S. Citizenship (May 13, 2012)
- Tax Savings From Facebook Co-Founder's Renunciation of U.S. Citizenship: $67 Million (May 16, 2012)
- Sen. Schumer Proposes 30% Tax on Facebook Co-Founder, Others Who Renounce U.S. Citizenship for Tax Purposes (May 17, 2012)
- WSJ: New Ex-Patriot Tax on Facebook Co-Founder 'Isn't Worthy of America' (May 18, 2012)
- Estate & Gift Tax Savings From Facebook Co-Founder's Renunciation of U.S. Citizenship Dwarf Income Tax Savings (May 19, 2012)
- Should You Renounce Your U.S. Citizenship Like Facebook Co-Founder Eduardo Saverin? (May 20, 2012)