Taxation

What is the problem?

The United States taxes on the basis of citizenship. This means it taxes American citizens on their worldwide income regardless of where they live. An American citizen living in London, or Toronto, or Tokyo, or Johannesburg, generally must file U.S. tax returns and pay U.S. tax, even if he or she does not live in or travel to the U.S. Taxation is not based on any physical presence test or whether the individual ever lived in the United States. The source of the income makes no difference either: income exclusively earned and additionally taxed abroad is also subject to U.S. reporting. The worldwide norm is to tax citizens based on their residence and where their income is earned. This is the concept of Residence-Based Taxation (RBT). ACA’s RBT approach calls taxing an individual on US-source income only and not on foreign-source income due to the US citizen being officially resident outside of the United States. 

CBT is incompatible with the global economy of the 21st century where the tax policy of most industrialized nations is based on residency and not nationality. CBT works against US economic interests in terms of job creation and increasing exports. CBT results in double taxation, inability to maintain foreign financial accounts, inability to invest in the country of residence, and complex and costly tax filing. ACA tracks and advocates some of the worst problems that CBT imposes on US citizens overseas.  Highlighting these to Congress helps us support why RBT is needed.

Enacting tax reform for U.S. citizens overseas.  What are we doing about it?

President-elect Trump has promised to address double taxation of U.S. citizens overseas. On December 18, 2024, Congressman Darren LaHood introduced legislation, "Residence Based Taxation for Americans Abroad Act" (H.R.10468). ACA provided a Technical Explanation of the bill. Congressman LaHood's bill builds on Congressman Holding’s “Tax Fairness for Americans Abroad Act 2018,” and we’re pleased to note that it mirrors much of ACA's RBT modeling Side-by-Side Analysis dated 2022 and studies. 

To succeed, RBT legislation will require bipartisan and comprehensive advocacy. ACA, as a leading bipartisan advocate for U.S. citizens overseas, together with its research arm (America Citizens Abroad Global Foundation) and Political Action Committee (ACA-PAC), is working with the community, coalitions like Residence-Based Taxation Coalition, the political parties, and all the other advocacy groups to enact RBT.

Congressman LaHood's legislation is currently being scored" for a revenue number to determine how much it will cost before being re-introduced into Congress.  ACA has been pivotal in providing Congressman LaHood's office with suggestions and data.  ACA's research studies, based on our RBT modeling, and mirrored in current legislation demonstrates that adoption of Residence-based taxation can be achieved at no cost to the US Treasury and be tight against abuse.  We anticipate new bill language and a score soon.

The National Taxpayer Advocate continues to highlight the problems of overseas filers and included these in her more serious problems section of her annual report to Congress and this helps support efforts for RBT Most Serious Problems 2025 - Taxpayer Advocate Service

Tax legislation is still on the table for 2026 and there are opportunities for Residence-based taxation to pass into law. 

What ACA is doing to make this happen:

What have we achieved so far and why they are important steps.

In 2014 ACA developed modeling side-by-side comparative for RBT which has been updated as tax policy has evolved over the years. This has been beneficial to those developing legislation. This is important because ACA modeling is the basis of much of the past and current thinking on RBT legislation.

In 2017 and 2022 ACA Global Foundation produced two research studies to determine the size and make-up of the community of US citizens living and working overseas as well as, ran a cost analysis for ACA’s RBT roadmap which indicated that RBT can be made revenue-neutral (no cost the US Treasury) to implement. This is important because our research can fill in the gaps in official government data (YES they don't know it all!) ACAGF's research work  highlights were there will be concerns over tax abuse and how to address them, demonstrates that RBT is achievable in a cost-efficient way. It demonstrates how it can be achieved while addressing the major concerns for legislators.

In 2018 Congressman Holding’s Tax Fairness for Americans Abroad Act of 2018 (TFAA) was a major step in the process for tax reform.  Congressman Holding introduced RBT legislation into Congress in December 2018.  ACA provided a technical explanation of the bill ACA Explains "Tax Fairness for Americans Abroad (TFAA)" - Residency-based tax bill 

December, 2024 Congressman LaHood introduces the Residence-based taxation for Americans Abroad Act. ACA's updated RBT modeling shows current law and where ACA modeling differs from Congressman LaHood's legislation (differences are in bold text) side-by-side analysis

In July and August 2025 ACA held multiple meetings on Capitol Hill and can confirm a bicameral effort for reintroducing Rep. Darin LaHood’s residency-based taxation bill for the 119th Congress this year. Senator Todd Young’s office is coordinating with Rep. LaHood’s office bicameral support for RBT legislation, to update the December 2024 "Residence-Based Taxation for Americans Abroad Act" (H.R.10468) and introduce complementary bills in the coming months that move the U.S. to a system of residency-based taxation.

August/September 2025 ACA highlights in the media and on Social Media Congressman Hurd's introduction of the Holy Sovereignty Protection Act (H.R. 4501) exempting the new American Pope from taxation on foreign income and new VISA programs that will allow foreigners to exempt their foreign income from US taxation (Platinum Card). Tax policy that's good enough for the Pope and foreign investors is good enough for all U.S. citizens. This is important because it demonstrates that Congress and the Administration are aware that current tax policy is a problem.  

On October 21, 2025, members of ACA heard from our Washington, DC based lobbyist, the BGR Group, about efforts in support of Residence-Based Taxation (RBT). As reported by the BGR Group:

  • Staff in both Congressman LaHood and Senator Young’s offices have met with JCT and are in active discussions with them.
  • JCT is actively scoring the legislation, and refinements to the bill are being made.
  • JCT and both Congressional offices are paying close attention to elements of the bill that could result in tax loopholes - these need to be closed.
  • The goal is to get the legislation to be revenue neutral (not costing the U.S. Treasury) or as close to neutral as possible.
  • BGR has long standing relationships with both Congressman LaHood and Senator Young. 
  • There is bi-partisan support for tax reform.  Democrat champions in Congress, including Congressman Beyer and Congresswoman Titus - Chair of the Americans Abroad Caucus, have introduced legislation calling for reforms.
  • BGR is working alongside ACA and its management team to meet with Congressional offices to socialize the legislation.
  • ACA will have an opportunity to review the revised legislative language and provide comment.
  • ACA will share results of its revenue estimates research to inform offices, staying on top of developments and using every opportunity to share its views.

November 2025 ACA Global Foundation (ACAGF) commissioned a new research study to help educate Congress and the Administration with RBT modeling and revenue estimates. ACA will use this research in its meetings with Congressional offices and with the tax writing committees, in particular, the Joint Committee on Taxation (JCT). This is important as Congressional offices will rely on government numbers but will welcome private, professional research that supports RBT. 

2021 - 2025 Three other bills addressing the tax and compliance issues facing US citizens overseas have been introduced in Congress. This is important because these legislative efforts demonstrate to Congress and the Administration that tax and compliance problems for U.S. citizens overseas are not "niche" issues and that Congressional concern is widespread. 

January, 2026 UPDATE

ACA updated our UK Chapter Members and the community at large in January, 2026 with where things currently stand with the Tax Fairness for Americans Abroad Act, Congressman LaHood's RBT legislation.  You can read our complete summary The big question on everyone's mind ... what's happening with the residency-based taxation (RBT) legislation? - American Citizens Abroad

The National Taxpayer Advocate releases her report to Congress with an extensive write-up on the problems for overseas taxpayers.  Many of the recommendations made by the NTA reflect ACA's input and suggestions. National Taxpayer Advocate 

February, 2026 UPDATE

ACA published thought piece on the importance of RBT for U.S. trade and National Security issues: Residence-based taxation (RBT) is a strategic investment in the U.S. economy, global interests, and American citizens - American Citizens Abroad

New ACA op-ed published in Real Clear PolicyACA Executive Director: "Americans Abroad Deserve Tax Parity", by Marylouise Serrato in Real Clear Policy - American Citizens Abroad

ACA publishes its member survey results shows wide-spread (90%) support for RBTResults of ACA’s fall 2025 membership survey on taxes, compliance and other policies. - American Citizens Abroad

 

How can you help?

 

 

Where can I find out more?

In this Section

The Child Tax Credit and Earned Income Credit

Currency Fluctuations and Phantom Gains

The Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credits Foreign Earned Income Exclusion (FEIE)

The 2017 Tax Cuts and Jobs Act (TCJA): Transition Tax and GILTI Regimes

The Net Investment Income Tax (NIIT)

The Pitfalls of Passive Foreign Investment Companies (PFIC)

US Passport Revocation

US Taxes Abroad (update for tax year 2025)

Analysis of Revenue Effects of Residents-Based Taxation

US Businesses Overseas

Tax Fairness for Americans Abroad Act (Holding Residence based taxation bill)

CBT vs. RBT Comparative

Residence Based Taxation for Americans Abroad Act H.R.10468 (LaHood BT Bill)

Side-by-Side Analysis (LaHood RBT Bill)

Technical Explanation (LaHood Bill)