LaHood’s Tax Proposal for Americans Overseas: Still in Limbo

In early 2024, Representative Darin LaHood introduced the Residence-Based Taxation for Americans Abroad Act(H.R.10468), a legislative proposal aiming to replace the United States’ system of citizenship-based taxation with a residence-based taxation model for Americans living abroad.

The bill drew considerable attention from expatriate communities and advocacy organizations because it addressed one of the biggest long-term frustrations for Americans overseas: the obligation to remain in the U.S. tax system even when they live, work, and pay tax in another country. Yet despite the attention and support, the proposal has not moved forward. For now, it remains stalled.

This matters because millions of Americans abroad still face annual filing requirements, reporting obligations, professional fees, and ongoing uncertainty. For many, the issue is not only whether U.S. tax is actually owed, but whether the entire compliance framework remains fair and workable.

What is citizenship-based taxation and why does it affect expats?

Unlike most countries, the United States taxes on the basis of citizenship rather than residence (Citizenship Based Taxation).That means U.S. citizens living abroad are generally still required to file U.S. tax returns and may need to report their worldwide income, even if they have not lived in the United States for many years. Eritrea is the only other country commonly cited as using a similar approach. 

In practice, this system affects a wide range of people:

• long-term American expats
• dual nationals
• Americans married to non-Americans
• entrepreneurs and freelancers abroad
• digital nomads
• Accidental Americans who may not even realize they are considered U.S. taxpayers

There are already mechanisms designed to reduce double taxation, such as the Foreign Earned Income Exclusion and foreign tax credits. But these do not remove the obligation to file, and they do not eliminate the complexity, cost, or risk of mistakes. Many Americans abroad owe little or no U.S. tax, yet still face extensive reporting obligations and potentially severe penalties if they miss forms or deadlines.

What is residence-based taxation for Americans abroad?

Residence-based taxation, often referred to as RBT, would change the basic framework. Instead of taxing Americans based on nationality, the U.S. would tax people based primarily on where they actually live.

That shift is significant. Under a residence-based model, qualifying Americans abroad would no longer be taxed by the United States on their foreign-source income simply because they hold U.S. citizenship. U.S.-source income would remain taxable, but foreign earnings would generally fall outside the U.S. system. This is the core principle behind LaHood’s proposal. 

For many expats, that would represent a structural solution rather than another partial fix. The current system relies on exclusions, credits, treaty interactions, and careful filing. RBT would instead reduce the need for those workarounds by changing who is taxed in the first place.

Key features of the Residence-Based Taxation Act (H.R.10468)

If passed, the Residence-Based Taxation for Americans Abroad Act would allow qualified Americans overseas to opt into a new tax framework.

The proposal includes the following core features:

• Foreign-source income would be excluded from U.S. taxation.
• U.S.-source income, such as income from U.S. property or investments, would remain taxable.
• High-net-worth individuals would be subject to a one-time departure tax on global assets.
• Long-term expats who have been tax compliant for five consecutive years could avoid that departure tax.
• Applicants would need to certify full compliance under penalty of perjury. 

The improvement document adds an important nuance: the departure-tax threshold referenced in the proposal is framed as more relevant to higher-net-worth taxpayers, and this issue is one reason the bill has generated both support and criticism. 

In other words, the bill is not simply a blanket exemption for all Americans abroad. It is designed as a conditional system, one that still emphasizes transparency, compliance, and continued taxation of U.S.-source income.

How would RBT affect double taxation for U.S. expats?

One of the main reasons Americans abroad support residence-based taxation is that it could fundamentally reduce the problem of double taxation.

Under the current system, many expats rely on the Foreign Earned Income Exclusion, the Foreign Tax Credit, and sometimes tax treaties to avoid being taxed twice on the same income. These tools help, but they do not solve every situation. Different income types are treated differently, local pension systems may not align neatly with U.S. rules, and business structures abroad can trigger additional U.S. reporting or tax consequences.

This is why many expats describe the problem not only as one of tax liability, but of compliance burden. Even when double taxation is reduced on paper, the compliance process itself remains expensive and stressful.

RBT would approach the issue more directly. If foreign-source income is no longer taxable in the United States for qualifying Americans abroad, the need to constantly offset foreign tax with U.S. credits and exclusions would be reduced. That is why supporters see the bill as a more durable answer than the current patchwork system. 

How does the current system work for expat taxes?

For readers arriving at this topic through broader searches about expat taxes or U.S. citizen living abroad taxes, it is important to understand that the current system remains fully in place.

Today, Americans abroad may still need to:

• file a U.S. income tax return, usually Form 1040
• report foreign bank accounts through FBAR filing where required
• claim the Foreign Earned Income Exclusion or Foreign Tax Credit where available
• disclose certain foreign assets or entities depending on their circumstances

That means that even if the RBT proposal sounds promising, it does not currently change anyone’s filing obligations. Americans abroad must still deal with the existing expat tax rules unless and until Congress actually passes new legislation.

Will FBAR filing requirements change under RBT?

FBAR filing is one of the most burdensome parts of U.S. compliance for many Americans abroad, and it is also one of the most searched expat-tax topics in the improvement brief. 

FBAR would disappear under the proposed legislation, and the improvement document specifically treats this as unresolved rather than settled. That distinction matters. At this stage, it would be premature to suggest that residence-based taxation would automatically eliminate foreign account reporting obligations.

So the careful answer is this: as long as current law remains in place, FBAR filing obligations continue to apply where relevant. And even under a future RBT model, reporting requirements might not disappear entirely. Americans abroad should therefore not assume that proposed tax reform means they can stop reporting foreign accounts.

What does this mean for Accidental Americans?

This issue is especially important for Accidental Americans.

Accidental Americans are people who are considered U.S. citizens, often because they were born in the United States or acquired citizenship through a parent, but who may have little or no practical connection to the country. Many discover their status only after a bank asks FATCA-related questions or blocks access to normal financial services.

For this group, the current system can feel particularly disproportionate. They may owe no U.S. tax, yet still face years of filings, compliance costs, and difficult decisions about whether to regularize their status or even renounce citizenship. Residence-based taxation is often seen as especially relevant for them because it could offer relief without forcing them to give up U.S. nationality.

At the same time, the proposal still appears to rely on compliance as a condition for relief. That means Accidental Americans should not assume that a future law would automatically solve everything without action on their part.

Is RBT an alternative to renouncing U.S. citizenship?

For some Americans abroad, especially those frustrated by years of compliance costs, renouncing U.S. citizenship has seemed like the only realistic exit.

That is why this bill matters beyond tax policy alone. It raises the possibility that some Americans abroad could keep their U.S. citizenship while no longer being taxed on foreign-source income simply because they live abroad. The improvement document explicitly notes that the link between RBT and renunciation is important and currently underdeveloped.

Still, renunciation and RBT are not the same thing. Renunciation is a legal and personal decision with long-term consequences. RBT, by contrast, would be a legislative reform that keeps citizenship in place while changing the tax framework for those who qualify.

For people considering expatriation, the key point is this: the proposal may eventually create an alternative, but it has not done so yet. Anyone weighing renunciation should assess their current position under existing law rather than making decisions based on a bill that remains uncertain.

What about digital nomads and Americans with complex residency patterns?

The improvement brief also highlights digital nomads as a growing group with strong interest in residence-based taxation. 

That makes sense. Americans who live across multiple jurisdictions often struggle even more with the current system because they may face overlapping filing questions, changing local tax rules, and uncertainty about where they are considered resident at any given time.

RBT could potentially simplify matters for some of these taxpayers, but it may also raise practical questions about how residence is defined for people without a stable long-term base. For that reason, digital nomads should view the proposal as potentially helpful, but not necessarily simple.

Where does the bill stand now?

The bill has not been incorporated into major legislation and that its progress has been blocked by both political and procedural barriers. It specifically notes two obstacles:

• there is no official cost estimate, or score, from the Joint Committee on Taxation or Congressional Budget Office
• some provisions may raise problems under the Byrd Rule, which limits what can be included in certain budget-related legislation 

The improvement brief adds useful context by noting that the bill expired with the end of the 118th Congress and would need to be reintroduced in the 119th Congress. It also notes that reintroduction had been expected but had not yet occurred as of the reference point used in that document. 

In practical terms, that means the proposal remains politically relevant but legislatively unresolved.

A short timeline of the political reality

To place the proposal in context, the improvement document suggests a brief timeline:

• Earlier debates around U.S. tax reform largely left expat taxation unresolved.
• In 2024, H.R.10468 was introduced by Representative LaHood.
• With the end of the 118th Congress, the bill expired and would need to be introduced again.
• It was not included in the so-called “Big Beautiful Bill.”
• Reintroduction has been discussed, but no final breakthrough has occurred.

That history helps explain why many Americans abroad are interested, but cautious. This is not the first time reform has been discussed, and it is not yet a change people can rely on.

Support, concerns, and political reality

Supporters of the bill include advocacy groups such as American Citizens Abroad and Tax Fairness for Americans Abroad, both of which see the proposal as a necessary modernization of the U.S. approach to taxing citizens overseas. The argument in favor is straightforward: Americans abroad should not face years of costly compliance simply because they live outside the country. 

At the same time, there are clear concerns. Critics worry that the bill could be framed as benefiting wealthier taxpayers or creating opportunities for tax avoidance. Others raise concerns about the effect on U.S. tax revenue. These objections are part of the political reason the bill remains difficult to advance, even though the current system is widely criticized among Americans abroad.

What should U.S. expats do in the meantime?

This is the most practical question for readers, and it is one of the most useful additions proposed in the improvement brief. 

For now, Americans abroad should assume that the existing system still applies. That generally means:

• continue filing where required
• continue meeting FBAR and related reporting obligations where applicable
• use existing tools such as the Foreign Earned Income Exclusion or Foreign Tax Credit where relevant
• seek advice if you have never filed or are unsure of your status
• do not assume future reform will erase past non-compliance

This is especially important for people who are only now discovering that they may be considered a U.S. taxpayer. Waiting for Congress is rarely a compliance strategy.

Final thought

LaHood’s proposal remains one of the clearest recent attempts to move the United States away from citizenship-based taxation and toward a residence-based model for Americans abroad. That is why it continues to attract attention.

But the proposal is still in limbo. It has not changed the law, and it has not removed the current filing and reporting burden on Americans overseas.

For now, the most realistic approach is to stay grounded: follow current rules, understand your position, and keep a close eye on developments. Reform may still come, but it is not here yet.

This article reflects the status described in the underlying source material and legislative commentary available at the time of writing. Tax legislation and political negotiations can change quickly.

Position of Americans Overseas

Americans Overseas takes a careful and measured position. The organization recognizes that tax reform could benefit millions of expatriates, but it also stresses that caution is necessary until more is known about how any proposal would actually work in practice.

Americans Overseas therefore continues to advocate for fair and realistic reform, while also urging people to deal with their current obligations now rather than waiting for legislation that may or may not arrive.

As an advocacy organization for Americans required to file U.S. tax returns, Americans Overseas recognizes the potential benefits of tax reform for millions of expatriates. However, the group remains cautious about the details of the proposed bill and its long-term implications. In previous years, several attempts have been made to ease the burdens on Americans abroad. Americans Overseas welcomes these developments, but to truly speak of progress, we need more information about the feasibility and conditions. We don’t want to give people false hope.

One thing is clear: in all the proposals, the U.S. is seeking transparency and information, and if you want to qualify for relief, you must, perhaps logically, you have to be tax compliant.

Americans Overseas continues to advocate for fair and achievable reforms that address the needs of expatriates without creating undue economic consequences. In the meantime, the organization urges Americans living abroad to remain compliant with existing laws and regulations, as any future reforms would likely require adherence to current rules as a condition for participation.

Contact us for more information

Read more:

• Wall Street Journal: Trump’s pledge to end double taxation for Americans Overseas – political stunt or real change?
• Trump’s Unlikely Promise: Ending Double Taxation for Americans Living Overseas

Sources: 

• Proposal: Residence-Based Taxation for Americans Abroad Act
• Wall Street Journal: Trump Pledged to Cut Taxes for Expats. This Republican Wants to Make It a Reality.
• Residence-based taxation legislation introduced by Representative LaHood in the 118th Congress