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JOINT COMMITTEE ON TAXATION

104TH CONGRESS, IST SESSION

HOUSE
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois
WILLIAM M. THOMAS, California
SAM M. GIBBONS, Florida
CHARLES B. RANGEL, New York

SENATE
BOB PACKWOOD, Oregon, Vice Chairman
WILLIAM V. ROTH, JR., Delaware
ORRIN G. HATCH, Utah
DANIEL PATRICK MOYNIHAN, New York
MAX BAUCUS, Montana

KENNETH J. KIES, Chief of Staff
MARY M. SCHMITT, Deputy Chief of Staff (Law)
BERNARD A. SCHMITT, Deputy Chief of Staff (Revenue Analysis)

(II)

LETTER OF TRANSMITTAL

JUNE 1, 1995. The Honorable Bill Archer, Chairman, Committee on Ways and Means, U.S. House of Representatives, Washington, DC. The Honorable Bob Packwood, Chairman, Committee on Finance, U.S. Senate, Washington, DC.

DEAR CHAIRMAN ARCHER AND CHAIRMAN PACKWOOD: With this letter, I am transmitting the study by the staff of the Joint Committee on Taxation (“Joint Committee staff”) of the tax treatment of expatriation as required by section 6 of H.R. 831 (P.L. 104–7). An Executive Summary of the study's findings and conclusions precedes the text of the study. I will be providing to you separately certain information obtained by the Joint Committee staff during the course of its study, which is tax return information subject to the disclosure requirements of section 6103 of the Internal Revenue Code and, therefore, which cannot be contained in the portion of the study made available to the public.

Part I of the study is an overview and background of present law and the recent legislative proposals to modify the tax treatment of expatriation. Part II is a description of present-law Federal income, estate and gift taxation of U.S. citizens, residents, and nonresidents, as well as the requirements for U.S. citizenship, immigration, and visas. Part III describes certain proposals to modify the tax treatment of expatriation: the Administration proposal included in the President's fiscal year 1996 budget proposal (introduced as part of H.R. 981 and S. 453); the Senate amendment to H.R. 831; the proposal contained in the motion to recommit H.R. 1215, offered by Representative Gephardt; and the identical bills introduced by Senator Moynihan (S. 700) and Representative Gibbons (H.R. 1535).

Part IV of the study discusses general issues raised by the proposals to modify the tax treatment of expatriation and Part V discusses the specific study issues listed in section 6 of Public Law 104–7. Part VI discusses possible alternatives to the existing expatriation tax proposals. Appendices provide the following information related to the study: (A) comparison of saving clause provisions in bilateral U.S. tax treaties; (B) summary of other countries' taxation of expatriation and immigration; (C) summary of foreign taxation of estates, inheritances, and gifts; (D) Administration proposal as submitted to the Congress on February 6, 1995; (E) discussion of issues relating to estimating the revenue effects of proposed legislation to impose tax on expatriation and current Joint Committee staff revenue estimates of the expatriation proposals; (F) study methodology; (G) exchanges of correspondence between the Joint Committee staff and the Departments of State and Treasury, the Internal Revenue Service, and the Immigration and Naturalization Service; and (H) certain State Department information on expatriation for 1994 and 1995.

Over the course of the approximately 2-month period that the Joint Committee staff prepared this study, the staff reviewed testimony, met extensively with the Administration, legal authorities, and private practitioners, and consulted at length with individuals and organizations with an interest in the various proposals to modify the tax treatment of expatriation. The Joint Committee staff corresponded with practitioners in other countries that impose tax on former citizens and residents. The Joint Committee staff met with economists regarding the potential trade and flow of capital implications of imposing tax on expatriation. Finally, the Joint Committee staff did extensive research into the present-law expatriation provisions, applicable immigration law, the Privacy Act, and the legal issues involved in the various proposals to impose tax on expatriation.

A copy of the draft study was provided to the Treasury Department for review and comment.

The Joint Committee staff wishes to thank all those who assisted in providing data and other information for the study, including the State Department, the Treasury Department, the Internal Revenue Service, the Immigration and Naturalization Service, the Law Library of the Library of Congress, and the private tax practitioners and economists with experience in expatriation and immigration issues. Sincerely,

KENNETH J. KIES,

Chief of Staff

JOINT COMMITTEE ON TAXATION

104TH CONGRESS, IST SESSION

HOUSE

SENATE BILL ARCHER, Texas, Chairman

BOB PACKWOOD, Oregon, Vice Chairman PHILIP M. CRANE, Illinois

WILLIAM V. ROTH, JR., Delaware WILLIAM M. THOMAS, California

ORRIN G. HATCH, Utah SAM M. GIBBONS, Florida

DANIEL PATRICK MOYNIHAN, New York CHARLES B. RANGEL, New York

MAX BAUCUS, Montana
KENNETH J. KIES, Chief of Staff
MARY M. SCHMITT, Deputy Chief of Staff (Law)
BERNARD A. SCHMITT, Deputy Chief of Staff (Revenue Analysis)

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