Residence-Based Taxation in America: Why the Law Has Not Yet Been Adopted (and What Is Happening Now)

Residence-based taxation in America has been on the political agenda since late 2024, but the legislative process is moving more slowly than many Americans living abroad had hoped. Why is this taking so long, and what is currently happening behind the scenes? This article provides an up-to-date overview.

Since the Residence-Based Taxation for Americans Abroad Act was introduced at the end of 2024, we have received many questions about residence-based taxation in America. The central question is always the same: why has there not yet been a clear breakthrough?

The answer is less straightforward than many would like. A proposal such as Residence-Based Taxation (RBT) must not only be politically desirable, but also legally sound, fiscally responsible, and practically workable. That requires extensive review and coordination. Especially in a Congress that is simultaneously dealing with several major tax-related issues, progress on complex legislation is rarely fast.

The proposal is far-reaching — and therefore closely scrutinized

On December 18, 2024, Congressman Darin LaHood introduced the Residence-Based Taxation for Americans Abroad Act (H.R. 10468). The bill would represent a fundamental shift in U.S. tax policy by allowing Americans who permanently live outside the United States to be taxed differently from those residing in the U.S., through an opt-in or election-based system.

Because this would be a structural change to the current citizenship-based taxation system, every aspect of the proposal is being carefully reviewed. Congressional staff and external experts are examining definitions, exceptions, administrative feasibility, and anti-abuse provisions. The objective is clear: a law that works for ordinary families and individuals living abroad, without unintentionally creating opportunities for aggressive tax planning.

In addition, policymakers are assessing how RBT would interact with existing frameworks such as FATCA requirements, FBAR reporting obligations, and the role of financial institutions. Banks and other institutions must be able to implement any new system within existing compliance regimes.

The “score” is critical: no progress without a budget estimate

In Washington, the so-called legislative score plays a decisive role. This is the official estimate of the budgetary impact of a bill. For tax legislation, that estimate is prepared by the Joint Committee on Taxation (JCT), typically over a ten-year budget window.

As long as an official score has not been issued — and as long as concerns about potential loopholes remain unresolved — it is difficult to build sufficient political support. Without a score, there is effectively no timeline. This does not mean the proposal is stalled; rather, it reflects ongoing technical work to refine and strengthen the bill.

Congress faces competing priorities and strict procedural rules

Even when there is substantive momentum, residence-based taxation cannot simply be added to a larger legislative package. Congressional procedures impose strict limitations on how and when tax proposals can move forward.

In 2025 and 2026, additional pressure has come from other major tax initiatives, including broad tax packages and expiring tax provisions with fixed deadlines. These efforts draw on the same policymakers, staff, and committees responsible for evaluating RBT.

What is happening now

Although the process may appear slow from the outside, significant work is continuing behind the scenes. Current developments include:

• Preparation for the 119th Congress

  The original bill was introduced late in the 118th Congress and could not complete the legislative process. The focus has now shifted to updating and reintroducing the proposal in the new Congress.

• Coordination between the House and the Senate

  The team around Senator Todd Young is working with Congressman LaHood’s office on a parallel Senate track, including substantive alignment and potential adjustments. This coordination has also been reflected in recent updates from external advocacy organizations following the issue closely.

• Work on the score and anti-abuse provisions

  Congressional staff and experts are addressing concerns raised by the Joint Committee on Taxation, such as the risk that very high-net-worth individuals could attempt to relocate “on paper” only. The goal is a fair and realistic legislative score without unexpected budgetary consequences. The importance of this budgetary estimate, and the concerns associated with it, have also been explained in detail by Tax Fairness for Americans Abroad.

• Building support and coalitions

  Organizations representing Americans abroad are publishing analyses, explainers, and technical memos to inform lawmakers and staff about the real-world impact of the current system and the potential effects of residence-based taxation.

Multiple organizations remain actively engaged in monitoring the process, contributing technical input, and helping to build broader understanding among policymakers.

The bottom line: slow does not mean stalled

The key takeaway is straightforward. Progress on residence-based taxation in America is slow because the process must be thorough. The absence of headlines does not mean the issue is being ignored. The legislative machinery is moving , at Washington’s pace.

Americans Overseas’ concerns

At the same time, we believe it is important to be clear about our concerns. We have seen similar processes before. Under political pressure, legislation can start out looking promising and solution-oriented. Over time, however, layers of exceptions may be added — often out of concern about revenue loss, abuse, or anti-money-laundering risks — leaving only a narrow group that ultimately benefits.

That is our primary concern. For this reason, Americans Overseas continues to monitor developments closely and to participate actively in relevant discussions. As an organization with extensive practical experience and hundreds of firsthand accounts from Americans living and working abroad, we consistently bring these realities into the conversation.

Is there reason for hope? Yes.

But this remains a long process, and it is still unclear what the final outcome will look like — and who will ultimately benefit from it.

As always, we will continue to keep you informed.

Get informed with Americans Overseas

We, the founders of Americans Overseas, were born in the Netherlands and received our American citizenship through our (American) mother.

When we first learned about the U.S.–Netherlands tax treaty around 2013, we felt disbelief (“this can’t be true”), anger (“how can they do this?”), fear (“will I get fined or have problems?”), and panic (“what should I do?”).

Unfortunately, it is true that there is a U.S. tax obligation for Dutch citizens who acquired American nationality by birth. There was no information from local authorities, the U.S. consulate referred us to the IRS, and the IRS itself was impenetrable.

That is why we started this initiative: to help others with reliable information, to prevent unnecessary panic, and to offer free, no‑obligation assistance. When needed, we can connect you with a network of affordable professionals (accountants) who can help you meet your U.S. tax obligations.

Contact us for more information