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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 10468 Introduced in House (IH)]

<DOC>

118th CONGRESS
  2d Session
                               H. R. 10468

  To amend the Internal Revenue Code of 1986 to establish an elective 
   residency-based income tax for nonresident citizens of the United 
                    States, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           December 18, 2024

  Mr. LaHood introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL

 
  To amend the Internal Revenue Code of 1986 to establish an elective 
   residency-based income tax for nonresident citizens of the United 
                    States, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Residence-Based Taxation for 
Americans Abroad Act''.

SEC. 2. ESTABLISHMENT OF ELECTIVE RESIDENCY-BASED INCOME TAX FOR 
              NONRESIDENT CITIZENS OF THE UNITED STATES.

    (a) In General.--Part II of subchapter N of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subpart:

``Subpart E--Residency-based Income Tax for Nonresident Citizens of the 
                             United States

``Sec. 899. Election by nonresident citizens of the United States to be 
                            subject to residency-based income tax 
                            rules.
``Sec. 899A. Imposition of tax on deferred income of certain electing 
                            individuals.
``Sec. 899B. Certificates of nonresidency.
``Sec. 899C. Regulations.

``SEC. 899. ELECTION BY NONRESIDENT CITIZENS OF THE UNITED STATES TO BE 
              SUBJECT TO RESIDENCY-BASED INCOME TAX RULES.

    ``(a) In General.--In the case of any electing individual:
            ``(1) Residency-based income tax.--The rules of subsection 
        (b) shall apply for the taxable year for which the election 
        under this section is made and all subsequent taxable years 
        until such election is terminated under subsection (d).
            ``(2) Application of tax on deferred income.--The rules of 
        section 899A shall apply as of the day before the election date 
        (as defined in section 899A). A termination of any election 
        under this section shall have no effect on the application of 
        section 899A.
    ``(b) Application of Residency-Based Income Tax.--In the case of 
any electing individual, the rules of this subsection are as follows:
            ``(1) In general.--Section 7701(b)(1) shall be applied--
                    ``(A) by treating any electing individual as an 
                alien individual,
                    ``(B) by substituting `not' for `neither a citizen 
                of the United States nor' in subparagraph (B), and
                    ``(C) by treating the United States as including 
                the possessions of the United States.
            ``(2) Modification of substantial presence test.--Section 
        7701(b)(3) shall applied without regard to subparagraphs (B) 
        and (C).
            ``(3) Requirement of tax residency.--Notwithstanding 
        section 7701(b), an electing individual shall not fail to be 
        treated as a resident of the United States unless such 
        individual is a tax resident of a foreign country.
            ``(4) Treatment as united states persons based on 
        residency.--Section 7701(a)(30)(A) shall be applied without 
        regard to the phrase `a citizen or'.
            ``(5) Coordination with fatca withholding.--For purposes of 
        section 1472, an electing individual with a certificate of 
        nonresidency issued under section 899B shall be treated as 
        having established status as an individual who is not a 
        specified United States person.
            ``(6) Exemption from certain reporting and records 
        requirements with respect to foreign assets and transactions.--
        Sections 6038D and 6046, and section 5314 of title 31, United 
        States Code, shall not apply.
            ``(7) Coordination with rules on expatriation.--Section 
        7701(a)(50) shall not be treated as applying with respect to 
        the application of this subpart.
            ``(8) Waiver of treaty saving clause.--The United States 
        waives the application of each saving clause in any United 
        States income tax treaty with respect to electing individuals. 
        For purposes of the preceding sentence, the term `saving 
        clause' means any provision which would (but for this 
        paragraph) prevent the electing individual from benefitting 
        from a provision of the treaty eliminating double taxation.
    ``(c) Electing Individual.--For purposes of this subpart--
            ``(1) In general.--The term `electing individual' means any 
        citizen of the United States who has in effect an election 
        (made at such time and in such manner as the Secretary may 
        provide) to have the provisions this subpart apply.
            ``(2) Citizens born abroad.--In the case of any citizen of 
        the United States who is born outside the United States, such 
        individual shall be treated as a electing individual until such 
        time as such individual becomes a resident of the United States 
        under clause (ii) or (iii) of section 7701(b)(1)(A).
            ``(3) Exception for federal employees.--Notwithstanding any 
        other provision of this subpart, an individual shall not be 
        treated as an electing individual for any taxable year if such 
        individual is employed by the Federal Government at any time 
        during such taxable year.
    ``(d) Rules Related to Election.--
            ``(1) Manner of election.--An election under this section 
        shall be made at such time and in such manner as the Secretary 
        may provide and, once made, is irrevocable (but may be 
        terminated as provided in this section).
            ``(2) Requirements of election.--An election under this 
        section shall not be effective unless--
                    ``(A) the tax imposed under section 899A (if any) 
                is paid (or deferred under section 899A(b)) at such 
                time as the Secretary may provide, and
                    ``(B) the electing individual certifies under 
                penalty of perjury that the electing individual has met 
                the requirements of this title for the 5 preceding 
                taxable years and submits such evidence of such 
                compliance as the Secretary may require.
            ``(3) Termination of election.--An election under this 
        section--
                    ``(A) shall be terminated as of the close of the 
                taxable year preceding any taxable year (with respect 
                to which the election would otherwise apply) for which 
                the electing individual is a resident of the United 
                States under clause (ii) or (iii) of section 
                7701(b)(1)(B), and
                    ``(B) may be terminated by the electing individual 
                at such time and in such manner as the Secretary may 
                provide.
    ``(e) Special Rule for Short-Term Nonresidency.--If an election 
under this section by an electing individual is terminated before the 
beginning of the fourth taxable year to which such election would 
otherwise apply, subsection (b) shall not apply to any taxable year to 
which such election would have otherwise applied.

``SEC. 899A. IMPOSITION OF TAX ON DEFERRED INCOME OF CERTAIN ELECTING 
              INDIVIDUALS.

    ``(a) General Rules.--For purposes of this subtitle--
            ``(1) Deemed sale.--All property of a specified electing 
        individual shall be treated as sold on the day before the 
        election date for its fair market value.
            ``(2) Recognition of gain or loss.--In the case of any sale 
        under paragraph (1)--
                    ``(A) notwithstanding any other provision of this 
                title, any gain arising from such sale shall be taken 
                into account for the taxable year of the sale, and
                    ``(B) any loss arising from such sale shall be 
                taken into account for the taxable year of the sale to 
                the extent otherwise provided by this title, except 
                that section 1091 shall not apply to any such loss.
        Proper adjustment shall be made in the amount of any gain or 
        loss subsequently realized for gain or loss taken into account 
        under the preceding sentence.
    ``(b) Specified Electing Individual.--For purposes of this 
section--
            ``(1) In general.--The term `specified electing individual' 
        means any electing individual if the net worth of the 
        individual as of the election date exceeds the basic exclusion 
        amount in effect under section 2010(c)(3) as of such date.
            ``(2) Net worth.--The term `net worth' means, with respect 
        to any electing individual, the excess (if any) of--
                    ``(A) the fair market value of all assets of such 
                individual, over
                    ``(B) the indebtedness of such individual.
    ``(c) Election Date.--For purposes of this section, the term 
`election date' means the first day of the first taxable year to which 
the election under section 899 applies.
    ``(d) Exceptions.--
            ``(1) In general.--Subsection (a) shall not apply to any 
        interest in the following property of the specified electing 
        individual:
                    ``(A) Any deferred compensation item.
                    ``(B) Any qualified retirement plan (as defined in 
                section 4974(c)).
                    ``(C) Any specified tax deferred account.
                    ``(D) Any interest in a nongrantor trust.
                    ``(E) Any real property located in the United 
                States.
                    ``(F) Any real property located outside the United 
                States if, during the 5-year period ending on the 
                election date, such property has been owned and used by 
                the specified electing individual as such individual's 
                principal residence for periods aggregating 2 years or 
                more.
            ``(2) Deferred compensation item.--For purposes of this 
        subsection, the term `deferred compensation item' means--
                    ``(A) any interest in a plan or arrangement 
                described in section 219(g)(5),
                    ``(B) any interest in a foreign pension plan or 
                similar retirement arrangement or program,
                    ``(C) any item of deferred compensation, and
                    ``(D) any property, or right to property, which the 
                individual is entitled to receive in connection with 
                the performance of services to the extent not 
                previously taken into account under section 83 or in 
                accordance with section 83.
            ``(3) Specified tax deferred account.--For purposes of this 
        subsection, the term `specified tax deferred account' means a 
        qualified tuition program (as defined in section 529), a 
        qualified ABLE program (as defined in section 529A), a 
        Coverdell education savings account (as defined in section 
        530), a health savings account (as defined in section 223), and 
        an Archer MSA (as defined in section 220).
            ``(4) Nongrantor trust.--For purposes of this subsection, 
        the term `nongrantor trust' means the portion of any trust that 
        the specified electing individual is not considered the owner 
        of under subpart E of part I of subchapter J. The determination 
        under the preceding sentence shall be made immediately before 
        the election date.
    ``(e) Election To Defer Tax.--
            ``(1) In general.--If the specified electing individual 
        elects the application of this subsection with respect to any 
        non-readily tradable property treated as sold by reason of 
        subsection (a), the time for payment of the additional tax 
        attributable to such property shall be extended until the due 
        date of the return for the taxable year in which such property 
        is disposed of (or, in the case of property disposed of in a 
        transaction in which gain is not recognized in whole or in 
        part, until such other date as the Secretary may prescribe).
            ``(2) Determination of tax with respect to property.--For 
        purposes of paragraph (1), the additional tax attributable to 
        any property is an amount which bears the same ratio to the 
        additional tax imposed by this chapter for the taxable year 
        solely by reason of subsection (a) as the gain taken into 
        account under subsection (a) with respect to such property 
        bears to the total gain taken into account under subsection (a) 
        with respect to all property to which subsection (a) applies.
            ``(3) Termination of extension.--The due date for payment 
        of tax may not be extended under this subsection later than the 
        due date for the return of tax imposed by this chapter for the 
        taxable year which includes the date of death of the specified 
        electing individual (or, if earlier, the time that the security 
        provided with respect to the property fails to meet the 
        requirements of paragraph (4), unless the electing individual 
        corrects such failure within the time specified by the 
        Secretary).
            ``(4) Non-readily tradable property.--For purposes of this 
        subsection, the term `non-readily tradable property' means any 
        property other than property which is readily tradable on an 
        established securities market.
            ``(5) Security.--
                    ``(A) In general.--No election may be made under 
                paragraph (1) with respect to any property unless 
                adequate security is provided with respect to such 
                property.
                    ``(B) Adequate security.--For purposes of 
                subparagraph (A), security with respect to any property 
                shall be treated as adequate security if--
                            ``(i) it is a bond which is furnished to, 
                        and accepted by, the Secretary, which is 
                        conditioned on the payment of tax (and interest 
                        thereon), and which meets the requirements of 
                        section 6325, or
                            ``(ii) it is another form of security for 
                        such payment (including letters of credit) that 
                        meets such requirements as the Secretary may 
                        prescribe.
            ``(6) Waiver of certain rights.--No election may be made 
        under paragraph (1) unless the specified electing individual 
        makes an irrevocable waiver of any right under any treaty of 
        the United States which would preclude assessment or collection 
        of any tax imposed by reason of this section.
            ``(7) Elections.--An election under paragraph (1) shall 
        only apply to property described in the election and, once 
        made, is irrevocable.
            ``(8) Interest.--For purposes of section 6601, the last 
        date for the payment of tax shall be determined without regard 
        to the election under this subsection.
            ``(9) Special rule if election of residency-based income 
        tax terminates before property is disposed of.--In the case of 
        any property with respect to which an election under this 
        subsection has been made, if the election under section 899 
        with respect to the electing individual terminates before the 
        beginning of the taxable year in which such property is 
        disposed of, this section shall not apply to such property.
    ``(f) Special Rules.--
            ``(1) Termination of deferrals, etc.--In the case of any 
        specified electing individual, notwithstanding any other 
        provision of this title--
                    ``(A) any time period for acquiring property which 
                would result in the reduction in the amount of gain 
                recognized with respect to property disposed of by the 
                electing individual shall terminate on the day before 
                the election date, and
                    ``(B) any extension of time for payment of tax 
                shall cease to apply on the day before the election 
                date and the unpaid portion of such tax shall be due 
                and payable at the time and in the manner prescribed by 
                the Secretary.
            ``(2) Step-up in basis.--Solely for purposes of determining 
        any tax imposed by reason of subsection (a), property which was 
        held by an individual on the date the individual most recently 
        became a resident of the United States (within the meaning of 
        section 7701(b)) shall be treated as having a basis on such 
        date of not less than the fair market value of such property on 
        such date. The preceding sentence shall not apply if the 
        individual elects not to have such sentence apply. Such an 
        election, once made, shall be irrevocable.
            ``(3) Separate application to each election.--In the case 
        of any individual who makes more than 1 election under section 
        899, this section shall be applied separately with respect to 
        each such election.
    ``(g) Transitional Rule.--
            ``(1) In general.--This section, and subsection (a)(2) and 
        (d)(2) of section 899, shall not apply to--
                    ``(A) any individual if--
                            ``(i) as of the introduction date, such 
                        individual meets the ordinary residence test 
                        under paragraph (2),
                            ``(ii) such individual has not been a 
                        resident of the United States (as defined in 
                        section 7701(b)(1)(A)(ii)) for at least 3 of 
                        the last 5 taxable years ending before the 
                        introduction date, and
                            ``(iii) such individual certifies under 
                        penalty of perjury that the electing individual 
                        has met the requirements of this title for the 
                        last 3 taxable years ending before the 
                        introduction date and submits such evidence of 
                        such compliance as the Secretary may require, 
                        and
                    ``(B) any individual who has not been a resident of 
                the United States (as defined in section 
                7701(b)(1)(A)(ii)) at any time during the period 
                beginning on the later of the date such individual 
                attains age 25 or March 18, 2010, and ending on the 
                date of the enactment of this section (and such 
                individual shall be treated as described in this 
                subparagraph without regard to whether or not such 
                individual has met the requirements of this title at 
                any time).
            ``(2) Ordinary residence test.--An individual meets the 
        ordinary residence test if such individual is a tax resident of 
        a foreign country and such foreign country is the place where 
        such individual regularly, normally, or customarily lives.
            ``(3) Introduction date.--For purposes of this subsection, 
        the term `introduction date' means the date of the introduction 
        of the bill which, upon enactment, enacted this section.

``SEC. 899B. CERTIFICATES OF NONRESIDENCY.

    ``(a) In General.--Upon application, the Secretary shall issue a 
certificate of nonresidency--
            ``(1) to any electing individual if the Secretary 
        determines that an election by such individual under section 
        899 is in effect, and
            ``(2) to any citizen of the United States born in a foreign 
        country after the date of the enactment of this section.
    ``(b) Termination of Certificate.--A certificate of nonresidency 
issued under this section shall terminate on the first date after such 
issuance with respect to which the individual to whom such certificate 
is issued--
            ``(1) is a resident of the United States (as defined in 
        section 7701(b)(1)(A)(ii)), or
            ``(2) in the case of an individual described in subsection 
        (a)(1), otherwise ceases to have an election in effect under 
        section 899.
    ``(c) Publication of Certificate Numbers.--The Secretary shall 
maintain a searchable public database and shall--
            ``(1) promptly upon the issuance of any certificate of 
        nonresidency, update such database to include the certificate 
        number and date of issuance of such certificate, and
            ``(2) promptly upon the termination of any certificate of 
        nonresidency, update such database to indicate the termination 
        of such certificate and the date of such termination.
    ``(d) User Fees.--
            ``(1) In general.--The Secretary shall impose a user fee of 
        $100 per application under this section. Fees received under 
        this subsection shall be available to the Secretary (without 
        need of further appropriation) for the costs of processing 
        applications under this section.
            ``(2) Inflation adjustment.--In the case of any calendar 
        year beginning after 2025, the $100 amount in paragraph (1) 
        shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year determined 
                by substituting `2024' for `2016' in subparagraph 
                (A)(ii) thereof.
        If any increase under the preceding sentence is not a multiple 
        of $5, such increase shall be rounded to next lowest multiple 
        of $5.
    ``(e) References.--Except where the context clearly indicates to 
the contrary, any reference in any provision of law to a certificate of 
nonresidency issued under this section shall include only such 
certificates which have not been terminated.

``SEC. 899C. REGULATIONS.

    ``The Secretary shall prescribe such regulations or other guidance 
as may be necessary or appropriate to carry out the purposes of this 
subpart.''.
    (b) Clerical Amendment.--The table of subparts for part II of 
subchapter N of chapter 1 of such Code is amended by adding at the end 
the following new item:

``subpart e--residency-based income tax for nonresident citizens of the 
                            united states''.

    (c) Effective Date.--The amendments made by this section shall 
apply to elections made after the date of the enactment of this Act for 
taxable years ending after such date.

SEC. 3. PARTICIPATING FOREIGN FINANCIAL INSTITUTIONS PROHIBITED FROM 
              DISCRIMINATING AGAINST NONRESIDENT UNITED STATES 
              CITIZENS.

    (a) In General.--Section 1471(b)(1) of the Internal Revenue Code of 
1986 is amended by striking ``and'' at the end of subparagraph (E), by 
striking the period at the end of subparagraph (F) and inserting ``, 
and'', and by inserting after subparagraph (F) the following new 
subparagraph:
                    ``(G) not to have policies or practices that 
                discriminate against opening or maintaining financial 
                accounts for individuals who are citizens of the United 
                States and residents of the country in which the 
                financial account is to be opened or maintained.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) Transition rule.--During the 1-year period beginning on 
        the date of the enactment of this Act, an agreement shall not 
        fail to be treated as described in section 1471(b)(1) of the 
        Internal Revenue Code of 1986 solely by reason failing to 
        include the requirement of subparagraph (G) thereof if the 
        institution entering into such agreement satisfies such 
        requirement at all times during such period without regard to 
        whether such requirement is included in such agreement.
                                 <all>
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