U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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69–112

" ! SENATE 106TH CONGRESS

1st Session

TREATY DOC.

1999

106–13

PROTOCOL AMENDING THE TAX CONVENTION WITH

GERMANY

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

PROTOCOL AMENDING THE CONVENTION BETWEEN THE UNITED

STATES OF AMERICA AND THE FEDERAL REPUBLIC OF GERMANY FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON ESTATES, INHERITANCES, AND GIFTS

SIGNED AT BONN ON DECEMBER 3, 1980, SIGNED AT WASHINGTON, DECEMBER 14, 1998

SEPTEMBER 21, 1999.—Protocol was read the first time, and together with

the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate

(III)

LETTER OF TRANSMITTAL

THE WHITE HOUSE, September 21, 1999.

To the Senate of the United States:

I transmit herewith for Senate advice and consent to ratification

the Protocol Amending the Convention Between the United States

of America and the Federal Republic of Germany for the Avoidance

of Double Taxation with Respect to Taxes on Estates, Inheritances,

and Gifts signed at Bonn on December 3, 1980, signed at Washington, December 14, 1998. The Protocol provides a pro rata unified

tax credit to the estate of a German domiciliary for purposes of

computing U.S. estate tax. It allows a limited U.S. ‘‘marital deduction’’ for certain estates of limited value if the surviving spouse is

not a U.S. citizen. In addition, the Protocol expands the United

States jurisdiction to tax its citizens and certain former citizens

and long-term residents and makes other changes to the treaty to

more closely reflect current U.S. treaty policy.

I recommend that the Senate give early and favorable consideration to this Protocol and give its advice and consent to ratification.

WILLIAM J. CLINTON.

(V)

LETTER OF SUBMITTAL

DEPARTMENT OF STATE, Washington, September 2, 1999.

The PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you, with a view

to its transmission to the Senate for advise and consent to ratification, the Protocol Amending the Convention Between the United

States of America and the Federal Republic of Germany for the

Avoidance of Double Taxation with Respect to Taxes on Estates, Inheritances, and Gifts, Signed at Bonn, December 3, 1980, signed at

Washington, December 14, 1998 (‘‘the proposed Protocol’’).

The proposed Protocol modifies the tax treatment of certain

transfers of property by gift or upon death. The Protocol provides

a pro rata unified tax credit to the estate of a German domiciliary

for purposes of computing U.S. estate tax. It allows a limited U.S.

‘‘marital deduction’’ for certain estates of limited value if the surviving spouse is not a U.S. citizen. In addition, the Protocol expands the United States’ jurisdiction to tax its citizens and certain

former citizens and long-term residents and makes other changes

to the treaty to more closely reflect current U.S. treaty policy.

Article 1 of the proposed Protocol replaces subparagraph 3.c) of

Article 4 of the Convention, which addresses fiscal domicile. The revised provision extends, from five to ten years, the period of time

during which a citizen of one state can be domiciled in the other

state without becoming subject to the primary taxing jurisdiction

of the other state.

Article 2 amends paragraph 4 of Article 10 of the Convention,

which addresses deductions and exemptions. The Convention gives

the spouse of a decedent or donor of one state a 50-percent exemption for property subject to tax in the other state. The proposed

Protocol provides that the United States need not provide this exemption if the decedent was a U.S. citizen or was a former U.S. citizen or long-term resident who lost his or her citizenship or residency status for tax-avoidance reasons.

Article 3 of the proposed Protocol adds paragraphs 5 and 6 to Article 10 of the Convention, which deals with deductions and exemptions from estate, inheritance, and gift taxes. Paragraph 5 provides

a pro rata unified credit to the estate of a German domiciliary for

purposes of computing the U.S. estate tax. Under this provision, a

German domiciliary is allowed a credit against U.S. estate tax

ranging from the amount ordinarily allowed to the estate of a nonresident under the Internal Revenue Code ($13,000) to the amount

of credit allowed to the estate of a U.S. citizen under the Internal
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Revenue Code ($211,300 in 1999), based on the extent to which the

assets of the estate are situated in the United States.

Paragraph 6 provides a U.S. estate tax marital deduction up to the Internal Revenue Code’s applicable exclusion amount ($650,000

in 1999) when the surviving spouse is not a U.S. citizen. Certain

1988 changes in U.S. law deny a marital deduction when the surviving spouse is not a U.S. citizen. This provision is intended to

provide relief from these changes in the case of estates of limited

value.

Article 4 of the proposed Protocol replaces paragraph 1 of Article

11 of the Convention, which deals with credits. The revised provisions expands the description of persons who may be taxed by the

United States to allow the United States to apply its estate and gift

tax provisions to former citizens and long-term residents who lost

their status as such for tax-avoidance reasons.

The Department of the Treasury and the Department of State cooperated in the negotiation of the proposed Protocol. It has the full

approval of both Departments.

Respectfully submitted,

STROBE TALBOTT.
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