Tax Policy and Administration:

Information Concerning Tax-Motivated Expatriation

GGD-00-110R: Published: May 1, 2000. Publicly Released: Jun 19, 2000.

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Pursuant to a congressional request, GAO provided information on tax-motivated expatriation, focusing on: (1) the Internal Revenue Service (IRS) procedures relevant to the enforcement of tax-motivated expatriate rules related to income, estate, and gift taxes; (2) IRS' procedures for using the private letter ruling process; and (3) Immigration and Naturalization Service (INS) and Department of State procedures for preventing tax-motivated expatriates from reentering the United States.

GAO noted that: (1) IRS' enforcement of tax-motivated expatriate rules has focused on collecting and publishing data on recent expatriates, establishing a process for expatriates to request letter rulings--that is, an IRS determination that they are not tax-motivated expatriates--and maintaining a database of certain information concerning expatriates; (2) IRS does not yet have a systematic compliance effort aimed at enforcing income, estate, or gift tax laws related to tax-motivated expatriation; (3) according to IRS officials, expatriates are subject to IRS' normal enforcement programs for nonresident aliens; (4) in December 1999, IRS initiated a project to assess compliance among expatriates who have self-reported information concerning their income tax liability and assets as required; (5) the project is scheduled to conclude by July 2000; (6) IRS' private letter ruling process provides expatriates with the opportunity to overcome the treatment of being tax motivated under the law; (7) expatriates in certain categories described by statute can request a review of the facts and circumstances of their expatriation in order to avoid the tax consequences of being treated as a tax-motivated expatriate; (8) as of December 15, 1999, IRS had issued 113 rulings concerning expatriation; (9) State and INS have not implemented procedures to prevent former U.S. citizens who are tax-motivated expatriates from reentering the United States; (10) according to INS officials, this inaction has resulted primarily from the lack of any existing mechanism for the Attorney General to obtain the taxpayer information from IRS necessary to carry out the programs; (11) IRS and INS have now identified and agreed upon such a mechanism, and INS has recently drafted proposed regulations; (12) these draft regulations have been reviewed by IRS and State and are currently under review by the INS Office of General Counsel, which is then to send them to the Department of Justice for review; and (13) according to INS officials, the proposed regulations will also be subject to public comment.

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