I
104TH CONGRESS
1ST SESSION
H. R. 1812
To amend the Internal Revenue Code of 1986 to revise the income, estate,
and gift tax rules applicable to individuals who lose United States citizenship.
IN THE HOUSE OF REPRESENTATIVES
JUNE 9, 1995
Mr. ARCHER (for himself and Mrs. JOHNSON of Connecticut) 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 revise
the income, estate, and gift tax rules applicable to indi-
viduals who lose United States citizenship.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Expatriation Tax Act
of 1995’’.
SEC. 2. REVISION OF INCOME, ESTATE, AND GIFT TAXES ON
INDIVIDUALS WHO LOSE UNITED STATES
CITIZENSHIP.
(a) IN GENERAL.—Subsection (a) of section 877 of
the Internal Revenue Code of 1986 is amended to read
as follows:
‘‘(a) TREATMENT OF EXPATRIATES.—
‘‘(1) IN GENERAL.—Every nonresident alien in-
dividual who, within the 10-year period immediately
preceding the close of the taxable year, lost United
States citizenship, unless such loss did not have for
1 of its principal purposes the avoidance of taxes
under this subtitle or subtitle B, shall be taxable for
such taxable year in the manner provided in sub-
section (b) if the tax imposed pursuant to such sub-
section exceeds the tax which, without regard to this
section, is imposed pursuant to section 871.
‘‘(2) CERTAIN INDIVIDUALS TREATED AS HAV-
ING
TAX
AVOIDANCE
PURPOSE.—For purposes of
paragraph (1), an individual shall be treated as hav-
ing a principal purpose to avoid such taxes if—
‘‘(A) the average annual net income tax
(as defined in section 38(c)(1)) of such individ-
ual for the period of 5 taxable years ending be-
fore the date of the loss of United States citi-
zenship is greater than $100,000, or
‘‘(B) the net worth of the individual as of
such date is $500,000 or more.
In the case of the loss of United States citizenship
in any calendar year after 1996, such $100,000 and
$500,000 amounts shall be increased by an amount
equal to such dollar amount multiplied by the cost-
of-living 
adjustment 
determined 
under 
section
1(f)(3) for such calendar year by substituting ‘1994’
for ‘1992’ in subparagraph (B) thereof. Any in-
crease under the preceding sentence shall be round-
ed to the nearest multiple of $1,000.’’
(b) EXCEPTIONS.—
(1) IN GENERAL.—Section 877 of such Code is
amended by striking subsection (d), by redesignating
subsection (c) as subsection (d), and by inserting
after subsection (b) the following new subsection:
‘‘(c) SECTION NOT TO APPLY TO CERTAIN INDIVID-
UALS.—
‘‘(1) IN GENERAL.—Subsection (a)(2) shall not
apply to an individual if—
‘‘(A) such individual is described in a sub-
paragraph of paragraph (2) of this subsection,
and
‘‘(B) within the 1-year period beginning on
the date of the loss of United States citizenship,
such individual submits a ruling request for the
Secretary’s determination as to whether such
loss has for 1 of its principal purposes the
avoidance of taxes under this subtitle or subtitle
B.
‘‘(2) INDIVIDUALS DESCRIBED.—
‘‘(A) DUAL CITIZENSHIP, ETC.—An indi-
vidual is described in this subparagraph if—
‘‘(i) the individual became at birth a
citizen of the United States and a citizen
of another country and continues to be a
citizen of such other country, or
‘‘(ii) the individual becomes (not later
than the close of a reasonable period after
loss of United States citizenship) a citizen
of the country in which—
‘‘(I) such individual was born,
‘‘(II) if such individual is mar-
ried, such individual’s spouse was
born, or
‘‘(III) either of such individual’s
parents were born.
‘‘(B) LONG-TERM FOREIGN RESIDENTS.—
An individual is described in this subparagraph
if, for each year in the 10-year period ending on
the date of loss of United States citizenship, the
individual was present in the United States for
days 
or 
less. 
The 
rule 
of 
section
7701(b)(3)(D)(ii) shall apply for purposes of
this subparagraph.
‘‘(C) RENUNCIATION UPON REACHING AGE
OF
MAJORITY.—An individual is described in
this subparagraph if the individual’s loss of
United States citizenship occurs before such in-
dividual attains age 181⁄2.
‘‘(D) INDIVIDUALS SPECIFIED IN REGULA-
TIONS.—An individual is described in this sub-
paragraph if the individual is described in a
category of individuals prescribed by regulation
by the Secretary.’’
(2) TECHNICAL AMENDMENT.—Paragraph (1)
of section 877(b) of such Code is amended by strik-
ing ‘‘subsection (c)’’ and inserting ‘‘subsection (d)’’.
(c) TREATMENT
OF PROPERTY DISPOSED
OF
IN
NONRECOGNITION TRANSACTIONS; TREATMENT OF DIS-
TRIBUTIONS
FROM
CERTAIN
CONTROLLED
FOREIGN
CORPORATIONS.—Subsection (d) of section 877 of such
Code, as redesignated by subsection (b), is amended by
striking the last sentence and inserting the following new
paragraphs:
‘‘(3) PROPERTY EXCHANGED IN NONRECOGNI-
TION TRANSACTIONS.—
‘‘(A) IN GENERAL.—Gain on any exchange
of property to which this paragraph applies, de-
termined as if such property had been sold for
its fair market value on the date of the ex-
change.
‘‘(B) TRANSACTIONS
TO
WHICH
PARA-
GRAPH APPLIES.—This paragraph shall apply
to any exchange during the 10-year period de-
scribed in subsection (a) if—
‘‘(i) gain is not recognized on such ex-
change in whole or in part for purposes of
this subtitle,
‘‘(ii) income derived from such prop-
erty was from sources within the United
States (or, if no income was so derived,
would have been from such sources), and
‘‘(iii) income derived from the prop-
erty acquired in the exchange would be
from sources outside the United States.
‘‘(C) 
EXCEPTION.—Subparagraph 
(A)
shall not apply if the individual enters into an
agreement with the Secretary which specifies
that any income or gain derived from the prop-
erty acquired in the exchange (or any other
property which has a basis determined in whole
or part by reference to such property) during
such 10-year period shall be treated as from
sources within the United States. If the prop-
erty transferred in the exchange is disposed of
by the person acquiring such property, such
agreement shall terminate and any gain which
was not recognized by reason of such agreement
shall be recognized as of the date of such dis-
position.
‘‘(D) SUBSTANTIAL DIMINISHING OF RISKS
OF OWNERSHIP.—For purposes of determining
whether this paragraph (and subsection (a)) ap-
plies to any property transferred by the individ-
ual in an exchange, the running of the 10-year
period described in subsection (a) shall be sus-
pended for any period during which the individ-
ual’s risk of loss with respect to the property is
substantially diminished by—
‘‘(i) the holding of a put with respect
to such property (or similar property),
‘‘(ii) the holding by another person of
a right to acquire the property, or
‘‘(iii) a short sale or any other trans-
action.
‘‘(E) SECRETARY MAY EXTEND PERIOD.—
To the extent provided in regulations prescribed
by the Secretary, subparagraph (B) shall be ap-
plied by substituting the 15-year period begin-
ning 5 years before the loss of United States
citizenship for the 10-year period referred to
therein.
‘‘(4) INCOME
OR
GAIN
DERIVED
FROM
CON-
TROLLED FOREIGN CORPORATION.—Any income or
gain derived from stock in a foreign corporation but
only—
‘‘(A) if the individual losing United States
citizenship owned (within the meaning of sec-
tion 958(a)), or is considered as owning (by ap-
plying the ownership rules of section 958(b)), at
any time during the 2-year period ending on the
date of the loss of United States citizenship,
more than 50 percent of—
‘‘(i) the total combined voting power
of all classes of stock entitled to vote of
such corporation, or
‘‘(ii) the total value of the stock of
such corporation, and