H. R. 3103—161
year period beginning 5 years before the loss of United
States citizenship for the 10-year period referred to therein.
‘‘(E) SECRETARY MAY REQUIRE RECOGNITION OF GAIN
IN CERTAIN CASES.—To the extent provided in regulations
prescribed by the Secretary—
‘‘(i) the removal of appreciated tangible personal
property from the United States, and
‘‘(ii) any other occurrence which (without recogni-
tion of gain) results in a change in the source of the
income or gain from property from sources within the
United States to sources outside the United States,
shall be treated as an exchange to which this paragraph
applies.
‘‘(3) SUBSTANTIAL DIMINISHING OF RISKS OF OWNERSHIP.—
For purposes of determining whether this section applies to
any gain on the sale or exchange of any property, the running
of the 10-year period described in subsection (a) shall be
suspended for any period during which the individual’s risk
of loss with respect to the property is substantially diminished
by—
‘‘(A) the holding of a put with respect to such property
(or similar property),
‘‘(B) the holding by another person of a right to acquire
the property, or
‘‘(C) a short sale or any other transaction.
‘‘(4) TREATMENT OF PROPERTY CONTRIBUTED TO CONTROLLED
FOREIGN CORPORATIONS.—
‘‘(A) IN GENERAL.—If—
‘‘(i) an individual losing United States citizenship
contributes property to any corporation which, at the
time of the contribution, is described in subparagraph
(B), and
‘‘(ii) income derived from such property was from
sources within the United States (or, if no income
was so derived, would have been from such sources),
during the 10-year period referred to in subsection (a),
any income or gain on such property (or any other property
which has a basis determined in whole or part by reference
to such property) received or accrued by the corporation
shall be treated as received or accrued directly by such
individual and not by such corporation. The preceding sen-
tence shall not apply to the extent the property has been
treated under subparagraph (C) as having been sold by
such corporation.
‘‘(B) 
CORPORATION
DESCRIBED.—A 
corporation 
is
described in this subparagraph with respect to an individ-
ual if, were such individual a United States citizen—
‘‘(i) such corporation would be a controlled foreign
corporation (as defined in 957), and
‘‘(ii) such individual would be a United States
shareholder (as defined in section 951(b)) with respect
to such corporation.
‘‘(C) DISPOSITION OF STOCK IN CORPORATION.—If stock
in the corporation referred to in subparagraph (A) (or any
other stock which has a basis determined in whole or
part by reference to such stock) is disposed of during the
10-year period referred to in subsection (a) and while the
H. R. 3103—162
property referred to in subparagraph (A) is held by such
corporation, a pro rata share of such property (determined
on the basis of the value of such stock) shall be treated
as sold by the corporation immediately before such disposi-
tion.
‘‘(D) ANTI-ABUSE RULES.—The Secretary shall prescribe
such regulations as may be necessary to prevent the avoid-
ance of the purposes of this paragraph, including where—
‘‘(i) the property is sold to the corporation, and
‘‘(ii) the property taken into account under
subparagraph (A) is sold by the corporation.
‘‘(E) INFORMATION
REPORTING.—The Secretary shall
require such information reporting as is necessary to carry
out the purposes of this paragraph.’’.
(d) CREDIT FOR FOREIGN TAXES IMPOSED ON UNITED STATES
SOURCE INCOME.—
(1) Subsection (b) of section 877 is amended by adding
at the end the following new sentence: ‘‘The tax imposed solely
by reason of this section shall be reduced (but not below zero)
by the amount of any income, war profits, and excess profits
taxes (within the meaning of section 903) paid to any foreign
country or possession of the United States on any income
of the taxpayer on which tax is imposed solely by reason of
this section.’’
(2) Subsection (a) of section 877, as amended by subsection
(a), is amended by inserting ‘‘(after any reduction in such
tax under the last sentence of such subsection)’’ after ‘‘such
subsection’’.
(e) COMPARABLE ESTATE AND GIFT TAX TREATMENT.—
(1) ESTATE TAX.—
(A) IN
GENERAL.—Subsection (a) of section 2107 is
amended to read as follows:
‘‘(a) TREATMENT OF EXPATRIATES.—
‘‘(1) RATE OF TAX.—A tax computed in accordance with
the table contained in section 2001 is hereby imposed on the
transfer of the taxable estate, determined as provided in section
2106, of every decedent nonresident not a citizen of the United
States if, within the 10-year period ending with the date of
death, such decedent lost United States citizenship, unless
such loss did not have for one of its principal purposes the
avoidance of taxes under this subtitle or subtitle A.
‘‘(2) CERTAIN
INDIVIDUALS
TREATED
AS
HAVING
TAX
AVOIDANCE PURPOSE.—
‘‘(A) IN GENERAL.—For purposes of paragraph (1), an
individual shall be treated as having a principal purpose
to avoid such taxes if such individual is so treated under
section 877(a)(2).
‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply
to a decedent meeting the requirements of section
877(c)(1).’’.
(B) CREDIT FOR FOREIGN DEATH TAXES.—Subsection (c)
of section 2107 is amended by redesignating paragraph
(2) as paragraph (3) and by inserting after paragraph (1)
the following new paragraph:
‘‘(2) CREDIT FOR FOREIGN DEATH TAXES.—
‘‘(A) IN GENERAL.—The tax imposed by subsection (a)
shall be credited with the amount of any estate, inherit-
H. R. 3103—163
ance, legacy, or succession taxes actually paid to any foreign
country in respect of any property which is included in
the gross estate solely by reason of subsection (b).
‘‘(B) LIMITATION
ON
CREDIT.—The credit allowed by
subparagraph (A) for such taxes paid to a foreign country
shall not exceed the lesser of—
‘‘(i) the amount which bears the same ratio to
the amount of such taxes actually paid to such foreign
country in respect of property included in the gross
estate as the value of the property included in the
gross estate solely by reason of subsection (b) bears
to the value of all property subjected to such taxes
by such foreign country, or
‘‘(ii) such property’s proportionate share of the
excess of—
‘‘(I) the tax imposed by subsection (a), over
‘‘(II) the tax which would be imposed by section
2101 but for this section.
‘‘(C) PROPORTIONATE SHARE.—For purposes of subpara-
graph (B), a property’s proportionate share is the percent-
age of the value of the property which is included in the
gross estate solely by reason of subsection (b) bears to
the total value of the gross estate.’’.
(C) EXPANSION
OF
INCLUSION
IN
GROSS
ESTATE
OF
STOCK OF FOREIGN CORPORATIONS.—Paragraph (2) of section
2107(b) is amended by striking ‘‘more than 50 per-
cent of’’ and all that follows and inserting ‘‘more than
50 percent of—
‘‘(A) the total combined voting power of all classes
of stock entitled to vote of such corporation, or
‘‘(B) the total value of the stock of such corporation,’’.
(2) GIFT TAX.—
(A) IN GENERAL.—Paragraph (3) of section 2501(a) is
amended to read as follows:
‘‘(3) EXCEPTION.—
‘‘(A) CERTAIN
INDIVIDUALS.—Paragraph (2) shall not
apply in the case of a donor who, within the 10-year period
ending with the date of transfer, lost United States citizen-
ship, unless such loss did not have for one of its principal
purposes the avoidance of taxes under this subtitle or sub-
title A.
‘‘(B) CERTAIN
INDIVIDUALS
TREATED
AS
HAVING
TAX
AVOIDANCE PURPOSE.—For purposes of subparagraph (A),
an individual shall be treated as having a principal purpose
to avoid such taxes if such individual is so treated under
section 877(a)(2).
‘‘(C) EXCEPTION FOR CERTAIN INDIVIDUALS.—Subpara-
graph (B) shall not apply to a decedent meeting the require-
ments of section 877(c)(1).
‘‘(D) CREDIT
FOR
FOREIGN
GIFT
TAXES.—The tax
imposed by this section solely by reason of this paragraph
shall be credited with the amount of any gift tax actually
paid to any foreign country in respect of any gift which
is taxable under this section solely by reason of this para-
graph.’’.
(f) COMPARABLE TREATMENT OF LAWFUL PERMANENT RESIDENTS
WHO CEASE TO BE TAXED AS RESIDENTS.—
H. R. 3103—164
(1) IN GENERAL.—Section 877 is amended by redesignating
subsection (e) as subsection (f) and by inserting after subsection
(d) the following new subsection:
‘‘(e) COMPARABLE TREATMENT
OF LAWFUL PERMANENT RESI-
DENTS WHO CEASE TO BE TAXED AS RESIDENTS.—
‘‘(1) IN GENERAL.—Any long-term resident of the United
States who—
‘‘(A) ceases to be a lawful permanent resident of
the United States (within the meaning of section
7701(b)(6)), or
‘‘(B) commences to be treated as a resident of a foreign
country under the provisions of a tax treaty between the
United States and the foreign country and who does not
waive the benefits of such treaty applicable to residents
of the foreign country,
shall be treated for purposes of this section and sections 2107,
2501, and 6039F in the same manner as if such resident were
a citizen of the United States who lost United States citizenship
on the date of such cessation or commencement.
‘‘(2) LONG-TERM RESIDENT.—For purposes of this subsection,
the term ‘long-term resident’ means any individual (other than
a citizen of the United States) who is a lawful permanent
resident of the United States in at least 8 taxable years during
the period of 15 taxable years ending with the taxable year
during which the event described in subparagraph (A) or (B)
of paragraph (1) occurs. For purposes of the preceding sentence,
an individual shall not be treated as a lawful permanent resi-
dent for any taxable year if such individual is treated as a
resident of a foreign country for the taxable year under the
provisions of a tax treaty between the United States and the
foreign country and does not waive the benefits of such treaty
applicable to residents of the foreign country.
‘‘(3) SPECIAL RULES.—
‘‘(A) EXCEPTIONS NOT TO APPLY.—Subsection (c) shall
not apply to an individual who is treated as provided
in paragraph (1).
‘‘(B) STEP-UP IN BASIS.—Solely for purposes of deter-
mining any tax imposed by reason of this subsection, prop-
erty which was held by the long-term resident on the
date the individual first became a resident of the United
States 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.
‘‘(4) AUTHORITY TO EXEMPT INDIVIDUALS.—This subsection
shall not apply to an individual who is described in a category
of individuals prescribed by regulation by the Secretary.
‘‘(5) REGULATIONS.—The Secretary shall prescribe such
regulations as may be appropriate to carry out this subsection,
including regulations providing for the application of this sub-
section in cases where an alien individual becomes a resident
of the United States during the 10-year period after being
treated as provided in paragraph (1).’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 2107 is amended by striking subsection
(d), by redesignating subsection (e) as subsection (d), and
H. R. 3103—165
by inserting after subsection (d) (as so redesignated) the
following new subsection:
‘‘(e) CROSS REFERENCE.—
‘‘For comparable treatment of long-term lawful permanent residents who
ceased to be taxed as residents, see section 877(e).’’.
(B) Paragraph (3) of section 2501(a) (as amended by
subsection (e)) is amended by adding at the end the follow-
ing new subparagraph:
‘‘(E) CROSS REFERENCE.—
‘‘For comparable treatment of long-term lawful permanent residents who
ceased to be taxed as residents, see section 877(e).’’.
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to—
(A) individuals losing United States citizenship (within
the meaning of section 877 of the Internal Revenue Code
of 1986) on or after February 6, 1995, and
(B) long-term residents of the United States with
respect to whom an event described in subparagraph (A)
or (B) of section 877(e)(1) of such Code occurs on or after
February 6, 1995.
(2) RULING REQUESTS.—In no event shall the 1-year period
referred to in section 877(c)(1)(B) of such Code, as amended
by this section, expire before the date which is 90 days after
the date of the enactment of this Act.
(3) SPECIAL RULE.—
(A) IN GENERAL.—In the case of an individual who
performed an act of expatriation specified in paragraph
(1), (2), (3), or (4) of section 349(a) of the Immigration
and Nationality Act (8 U.S.C. 1481(a)(1)–(4)) before Feb-
ruary 6, 1995, but who did not, on or before such date,
furnish to the United States Department of State a signed
statement of voluntary relinquishment of United States
nationality confirming the performance of such act, the
amendments made by this section and section 512 shall
apply to such individual except that the 10-year period
described in section 877(a) of such Code shall not expire
before the end of the 10-year period beginning on the
date such statement is so furnished.
(B) EXCEPTION.—Subparagraph (A) shall not apply if
the individual establishes to the satisfaction of the Sec-
retary of the Treasury that such loss of United States
citizenship occurred before February 6, 1994.
SEC. 512. INFORMATION ON INDIVIDUALS LOSING UNITED STATES
CITIZENSHIP.
(a) IN GENERAL.—Subpart A of part III of subchapter A of
chapter 61 is amended by inserting after section 6039E the following
new section:
‘‘SEC. 6039F. INFORMATION ON INDIVIDUALS LOSING UNITED STATES
CITIZENSHIP.
‘‘(a) IN GENERAL.—Notwithstanding any other provision of law,
any individual who loses United States citizenship (within
the meaning of section 877(a)) shall provide a statement which
H. R. 3103—166
includes the information described in subsection (b). Such statement
shall be—
‘‘(1) provided not later than the earliest date of any act
referred to in subsection (c), and
‘‘(2) provided to the person or court referred to in subsection
(c) with respect to such act.
‘‘(b) INFORMATION TO BE PROVIDED.—Information required
under subsection (a) shall include—
‘‘(1) the taxpayer’s TIN,
‘‘(2) the mailing address of such individual’s principal for-
eign residence,
‘‘(3) the foreign country in which such individual is residing,
‘‘(4) the foreign country of which such individual is a citizen,
‘‘(5) in the case of an individual having a net worth of
at least the dollar amount applicable under section 877(a)(2)(B),
information detailing the assets and liabilities of such individ-
ual, and
‘‘(6) such other information as the Secretary may prescribe.
‘‘(c) ACTS DESCRIBED.—For purposes of this section, the acts
referred to in this subsection are—
‘‘(1) the individual’s renunciation of his United States
nationality before a diplomatic or consular officer of the United
States pursuant to paragraph (5) of section 349(a) of the
Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
‘‘(2) the individual’s furnishing to the United States Depart-
ment of State a signed statement of voluntary relinquishment
of United States nationality confirming the performance of
an act of expatriation specified in paragraph (1), (2), (3), or
(4) of section 349(a) of the Immigration and Nationality Act
(8 U.S.C. 1481(a)(1)–(4)),
‘‘(3) the issuance by the United States Department of State
of a certificate of loss of nationality to the individual, or
‘‘(4) the cancellation by a court of the United States of
a naturalized citizen’s certificate of naturalization.
‘‘(d) PENALTY.—Any individual failing to provide a statement
required under subsection (a) shall be subject to a penalty for
each year (of the 10-year period beginning on the date of loss
of United States citizenship) during any portion of which such
failure continues in an amount equal to the greater of—
‘‘(1) 5 percent of the tax required to be paid under section
877 for the taxable year ending during such year, or
‘‘(2) $1,000,
unless it is shown that such failure is due to reasonable cause
and not to willful neglect.
‘‘(e) INFORMATION TO BE PROVIDED TO SECRETARY.—Notwith-
standing any other provision of law—
‘‘(1) any Federal agency or court which collects (or is
required to collect) the statement under subsection (a) shall
provide to the Secretary—
‘‘(A) a copy of any such statement, and
‘‘(B) the name (and any other identifying information)
of any individual refusing to comply with the provisions
of subsection (a),
‘‘(2) the Secretary of State shall provide to the Secretary
a copy of each certificate as to the loss of American nationality
under section 358 of the Immigration and Nationality Act which
is approved by the Secretary of State, and
H. R. 3103—167
‘‘(3) the Federal agency primarily responsible for admin-
istering the immigration laws shall provide to the Secretary
the name of each lawful permanent resident of the United
States (within the meaning of section 7701(b)(6)) whose status
as such has been revoked or has been administratively or
judicially determined to have been abandoned.
Notwithstanding any other provision of law, not later than 30
days after the close of each calendar quarter, the Secretary shall
publish in the Federal Register the name of each individual losing
United States citizenship (within the meaning of section 877(a))
with respect to whom the Secretary receives information under
the preceding sentence during such quarter.
‘‘(f) REPORTING BY LONG-TERM LAWFUL PERMANENT RESIDENTS
WHO CEASE TO BE TAXED AS RESIDENTS.—In lieu of applying the
last sentence of subsection (a), any individual who is required
to provide a statement under this section by reason of section
877(e)(1) shall provide such statement with the return of tax
imposed by chapter 1 for the taxable year during which the event
described in such section occurs.
‘‘(g) EXEMPTION.—The Secretary may by regulations exempt
any class of individuals from the requirements of this section if
he determines that applying this section to such individuals is
not necessary to carry out the purposes of this section.’’.
(b) CLERICAL AMENDMENT.—The table of sections for such sub-
part A is amended by inserting after the item relating to section
6039E the following new item:
‘‘Sec. 6039F. Information on individuals losing United States citizenship.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to—
(1) individuals losing United States citizenship (within the
meaning of section 877 of the Internal Revenue Code of 1986)
on or after February 6, 1995, and
(2) long-term residents of the United States with respect
to whom an event described in subparagraph (A) or (B) of
section 877(e)(1) of such Code occurs on or after such date.
In no event shall any statement required by such amendments
be due before the 90th day after the date of the enactment of
this Act.
SEC. 513. REPORT ON TAX COMPLIANCE BY UNITED STATES CITIZENS
AND RESIDENTS LIVING ABROAD.
Not later than 90 days after the date of the enactment of
this Act, the Secretary of the Treasury shall prepare and submit
to the Committee on Ways and Means of the House of Representa-
tives and the Committee on Finance of the Senate a report—
(1) describing the compliance with subtitle A of the Internal
Revenue Code of 1986 by citizens and lawful permanent resi-
dents of the United States (within the meaning of section
7701(b)(6) of such Code) residing outside the United States,
and
(2) recommending measures to improve such compliance
(including improved coordination between executive branch
agencies).
H. R. 3103—168
Subtitle C—Repeal of Financial Institution
Transition Rule to Interest Allocation
Rules
SEC. 521. REPEAL OF FINANCIAL INSTITUTION TRANSITION RULE TO
INTEREST ALLOCATION RULES.
(a) IN GENERAL.—Paragraph (5) of section 1215(c) of the Tax
Reform Act of 1986 (Public Law 99–514, 100 Stat. 2548) is hereby
repealed.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by this section
shall apply to taxable years beginning after December 31, 1995.
(2) SPECIAL RULE.—In the case of the first taxable year
beginning after December 31, 1995, the pre-effective date por-
tion of the interest expense of the corporation referred to in
such paragraph (5) of such section 1215(c) for such taxable
year shall be allocated and apportioned without regard to such
amendment. For purposes of the preceding sentence, the pre-
effective date portion is the amount which bears the same
ratio to the interest expense for such taxable year as the
number of days during such taxable year before the date of
the enactment of this Act bears to 366.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.