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"Possible Measures Against Expatriation for Tax Purposes"

In recent years, Senate Democrats have proposed legislation, originally titled the Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy, i.e., the Ex-PATRIOT Act that would impose a capital gains tax on U.S. investments for those who renounce their citizenship to avoid taxes and bar the ex-pats from returning to the U.S. If passed, the IRS would presume that those with either a net worth of $2 million or an average income liability of at least $148,000 over the last five years who renounce their citizenship are doing so to avoid taxes. Ex-pats who meet specified requirements would have an opportunity to prove otherwise to the IRS. If the motives were found to be legitimate, no penalties would be applied. On the other hand, if the IRS rules that an individual gave up their passport for tax purposes, he or she could then face taxes of 30% on future investment gains, regardless of where they reside. Further, so long as the ex-pats avoid their tax responsibilities, they would not be allowed to return to the U.S. As these measures have not passed so far, under the current system, ex-pats have been able to avoid being liable for such taxes and still return to the U.S. for 60 days per year. However, should a new version of the Ex-PATRIOT Act pass, these new measures could close the loophole and the door.

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