Paul L. Caron

Tuesday, December 22, 2020

A Simple Regulatory Fix For U.S. Citizenship Taxation

John Richardson, Laura Snyder & Karen Alpert (University of Queensland), A Simple Regulatory Fix for Citizenship Taxation, 169 Tax Notes Fed. 275 (Oct. 12, 2020):

Tax Notes Federal (2020)This article explains the simple regulatory actions that United States Department of the Treasury can take that would, in the absence of legislative change, improve the lives of Americans living overseas and permit the IRS to better focus its limited resources to more effectively administer the U.S. tax system.

Most articles like this conclude with a caveat that the solutions proposed are not panaceas. This article proposes a solution that actually would be a panacea. Modifying reg. section 1.1-1 to exclude Americans living overseas from the definition of the terms “individual” or “citizen” would change the lives of those millions of Americans. Further, it would enable the IRS to stop diverting resources to the ineffective administration of a global tax system89 and to employ those resources to more effectively administer a national one.

In the alternative, Treasury could take a series of other, more prompt regulatory actions. Their cumulative effect would not be panacean, but would still relieve significant burdens on both Americans living overseas and the IRS.

As important as these regulatory changes are, they will not be the end of the road for Americans overseas. In order that they may have the option to retain U.S. citizenship, tax justice is required. As easily as a Treasury regulation can be adopted by one administration, it can just as easily be reversed by another. Therefore, as important as the role of Treasury is in bringing immediate relief to Americans living overseas, this problem screams for Congressional action.

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Is the simple fix stopping confiscatory taxation?

Posted by: Anon | Dec 24, 2020 8:55:21 AM

I doubt that Treasury has the power to exclude citizens overseas from US taxation. The authors may be making different assumptions than I about the scope of Treasury's regulatory powers.

Posted by: Ted Seto | Dec 22, 2020 11:55:26 AM