New IRS Relief Program for Expatriates Renouncing U.S. Citizenship (9/12/19)

The IRS recently announced a relief program for persons renouncing U.S. citizenship with respect to their tax compliance, including Section 877A, here, titled "Tax responsibilities of expatriation."  See IRS web page titled "Relief Procedures for Certain Former Citizens," here.

I have not practiced in the area of taxation involving U.S. citizenship renunciations.  I know the general rules and enough when presented with a need to either do some serious additional study or refer the client to someone who is an expert.  So, I have nothing personally to offer on the subject addressed in this new relief program.  The key point of this posting is to alert readers of the potential opportunity to take advantage of the relief program.

I do point readers to two articles written by attorneys who do practice in the area:

• Alan Winston Granwell, Andrea Darling de Cortes, William M. Sharp, New IRS Procedure Provides Favorable Path for Non-Compliant Expatriates to Become Tax Compliant (Holland & Knight Alert 9/11/19), here.
• Kevin Packman, Is the New IRS Expatriation Initiative Really Better than an Existing Program and Law? (Mondaq 9/10/19), here.
• Virginia La Torre Jeker, J.D., Ground-Breaking Development: IRS “Amnesty” Relief for Certain Expatriates! (US Tax Talk 9/6/19), here.

Interestingly, both articles are by attorneys in the same firm, Holland & Knight.

Here are the Highlights from the first article:

• New Procedure. On Sept. 6, 2019, the Internal Revenue Service (IRS) announced an important new procedure to enable certain non-compliant U.S. citizens who relinquish their U.S. citizenship to become U.S. tax compliant.
• Primary Targets. "Accidental Americans" who were unaware of their U.S. tax obligations.
• Eligibility and Filings. In general, 1) past compliance failures were non-willful, 2) past tax liability not in excess of $25,000 for the five years prior to, and the year of, expatriation and 3) less than $2 million in net assets as of expatriation date. Eligible taxpayers must file U.S. tax returns, including all required schedules, international information returns and Foreign Bank Account Reports (FBARs), for the five years preceding and the year of expatriation.
• Benefits and Takeaway. Qualifying taxpayers become compliant without having to pay any past due U.S. taxes, penalties or interest and avoid classification as a "covered expatriate," a designation that could result in extremely detrimental tax consequences. For qualifying expatriates, the new procedure provides a taxpayer-friendly pathway to U.S. tax compliance, thereby avoiding potentially detrimental U.S. tax consequences and adverse reputational risk.

The same article has the following Background (footnotes omitted):

U.S. citizens are subject to taxation on their worldwide income based on citizenship and not residency, which is the common standard globally. The U.S. worldwide taxation regime and associated tax compliance is complicated and burdensome for U.S. taxpayers, particularly those living abroad. Thus, for many "Accidental Americans," the enactment in 2010 of the Foreign Account Tax Compliance Act (FATCA), may have been the tipping point in their decision to expatriate. After FATCA was enacted, expatriations increased significantly.