You will recall a Connexion article that highlighted a bill called the ‘Tax Fairness for Americans Abroad Act’ (TFAAA), proposing a move away from the current citizenship-based taxation of US citizens.
Here, we look at how it has been received and the likely next steps.
Introduced by congressman Darin LaHood (Republican – Illinois) in December 2024, the TFAAA proposes to change the way the US taxes its citizens, moving from citizenship-based taxation (CBT) to residence-based taxation (RBT).
A similar bill was proposed in 2021 and the current proposal has yet to advance beyond being introduced, but there are good reasons to hope that it will.
What is in the TFAAA?
To recap, the TFAAA provides that US citizens living abroad can elect to be treated as so-called ‘non-resident US citizens’ and would then only be taxed on US-source income leaving foreign-earned income and other income exempt from US tax (see here).
The ability to change to RBT is optional and a US citizen is able to opt to stay in the current system, it is proposed.
To qualify, an individual must have a tax home abroad, be US tax compliant for the last three to five years and file the election of RBT with the IRS and obtain a certificate of non-residency.
There is an exit tax on electing RBT with exemption for those below the $14m estate tax exemption threshold, long-term expatriates (eg. having lived overseas for three of the past five years and being US tax compliant), and those not resident in the US since age 25 or since March 2010.
What is the current status of TFAAA?
The bill was introduced to the House of Representatives and has received strong support from many American expatriate organisations including American Citizens Abroad which argues that moving to RBT will eliminate many burdens of double taxation.
The bill was presented to the House Ways and Means Committee which is the congressional committee by which all tax legislation must first be considered.
The bill has remained in this committee and, as of now, there has been no markup or vote in the House on the bill. A markup is a stage where committees review a bill, and it is debated and amended.
The absence of this process signals that the bill has not been prioritized by the committee, despite its relevance to a large community of American expatriates.
Representative LaHood gave a webinar on June 23, 2025, to Tax Fairness for Americans Abroad – a volunteer bipartisan organisation with a stated mission of ending CBT.
In this, he noted the “long overdue” measure has strong bipartisan support including from the White House and Treasury and could become a legislative vehicle before the end of the year.
With the passage of recent tax legislation, it is possible the bill may begin to get momentum in the committee and through Congress.
The TFAAA is being reviewed and scored by the Joint Committee on taxation which is comprised of members of the House Ways and Means and Senate Finance Committees. This is a necessary step before the bill can progress.
Progress possible before end of year
It is understood from Congressman LaHood that passage of the current Trump tax proposal may free up committee members to consider the TFAAA more fully as early as later this year.
With that, there are some challenges to the debate that will need to be addressed.
One of the major hurdles the bill faces is potential revenue loss.
Critics argue that a shift to RBT will lead to a reduction in revenue collected from US citizens abroad (in 2023 this number was $12 billion). This is particularly concerning as the US government is already grappling with budget deficits.
A similar measure was proposed in 2021 and never made it to a full house debate.
For the current measure to pass, it would need to first gain momentum among lawmakers who are sympathetic to the expat cause. Note there are some US legislators wholly unaware of the tax plight of Americans abroad.
Securing passage would also require minimising the ability for high-net-worth individuals to avoid taxation. Currently, wealthy Americans cannot move to a tax haven and avoid US tax – measures may be needed to ensure RBT does not allow that.
With that, by adopting RBT, the US could become a more attractive place for Americans to work abroad without the fear of punitive taxes.
In an era of increasing global mobility and the rise of remote work, this could be a way to make US citizens more globally competitive.
Further, American citizens living abroad often work in international environments and might bring innovative ideas back to the US when they return.
Taxing them based on their residency, not citizenship, could encourage them to take jobs and make investments overseas.
A change to RBT would place the US in line with the rest of the world as currently, only the US and Eritrea employ CBT.
Transitioning from CBT to RBT could be administratively costly and time-consuming.
The US tax system would need to be amended, and there are questions about how to handle US citizens who live in countries that do not have tax treaties with the US.
There is a growing global conversation about the unfairness of CBT, and more lawmakers are becoming aware of the burdens it places on American expats.
Advocacy groups like the American Citizens Abroad, Republicans Overseas and Tax Fairness for Americans Abroad continue to push for change.
For Mr LaHood’s bill to gain traction, it will likely need to align with other legislative priorities, such as broader tax reform or a new budget proposal.
However, there is still significant resistance from legislators concerned about lost revenue and tax avoidance.
If you are following this closely, it could be a long road ahead for comprehensive tax reform, but with continued advocacy, especially from the expat community, the bill’s chances could improve.
Mr LaHood noted that Americans signing up for webinars, joining groups such as American Citizens Abroad and writing to representatives will all help to build momentum to bring about the needed change.
This article was written by Ed Rieu, a US tax lawyer based in France ed@ustaxconsultingeurope.com
