For decades, the United States has been one of the very few countries in the world that taxes its citizens based on citizenship rather than residency. The other is Eritrea. Every other developed nation taxes people based on where they live.
That may be about to change.
The Residence-Based Taxation for Americans Abroad Act, introduced by Congressman Darin LaHood in December 2024 and championed with Senate companion support from Senator Todd Young, represents the most serious legislative attempt in years to end the double taxation of Americans living outside the United States. It has explicit presidential endorsement. It has bipartisan conceptual support. And as of May 2026, it is moving — slowly, but genuinely.
Here is what the bill proposes, where it currently stands, why it has taken this long, and what it means for your tax obligations right now.
Why this is happening now
The frustration driving this legislation is not new. Americans abroad have faced the compliance burden of citizenship-based taxation for generations. Filing US tax returns every year regardless of where you live, reporting foreign bank accounts through FBAR, navigating FATCA requirements that have caused foreign banks to close accounts held by US citizens entirely — these are uniquely American problems that no other developed country imposes on its citizens living abroad.
What is new is the political alignment. President Trump publicly pledged to end double taxation for Americans abroad during the 2024 campaign. That pledge gave the LaHood bill a level of executive backing that previous versions of similar legislation never had. The 2018 Tax Fairness for Americans Abroad Act, introduced by Congressman Holding, and subsequent attempts by Democrats Abroad, never reached this level of presidential support.
The result is a bill with genuine momentum for the first time, even if the legislative timeline remains uncertain.
What the bill actually proposes
The Residence-Based Taxation for Americans Abroad Act would fundamentally shift how the US taxes its citizens overseas. The core change is replacing citizenship-based taxation with residence-based taxation: Under current law, a US citizen living in Germany, Spain or elsewhere in the world pays US tax on their worldwide income the same as someone living in Chicago. Under the bill, that same person would pay US tax only on income that actually originates in the US. Any foreign salary, dividends or other would not fall under US tax.
The specific provisions of the bill as introduced include several key elements.
Qualifying expats would stop owing US tax on foreign income. Americans who meet the residency requirements — essentially, those who have established a genuine tax home outside the United States — would no longer be required to report foreign-source income to the IRS. The current system of worldwide income taxation would apply only to US residents.
FBAR and FATCA relief for qualifying expats. The bill includes provisions that would reduce or eliminate the foreign account reporting burden for qualifying Americans abroad. FATCA, which has caused significant banking access problems for US citizens overseas since its implementation around 2014, would be substantially modified for those who qualify under the residence test.
Departure tax provisions. The bill would create a separate deemed-sale tax for certain individuals who elect into the new residence-based taxation system. This is different from the existing exit tax, which applies when someone renounces U.S. citizenship or relinquishes long-term resident status for U.S. tax purposes. Under the bill, Americans abroad would not need to renounce their citizenship to elect residence-based taxation. However, certain higher-net-worth individuals could be subject to a one-time tax on unrealized gains at the point of election, unless an exception applies. The bill includes exceptions designed to protect many accidental Americans and long-term expats who have genuinely built their lives outside the US.
Anti-abuse safeguards. Provisions are included to prevent wealthy US residents from establishing nominal foreign residency purely for tax purposes without genuinely relocating.
Where things stand as of May 2026
The bill is progressing, but slowly. Understanding why requires understanding the legislative process it faces.
The primary bottleneck has been the Joint Committee on Taxation, which must produce a revenue estimate — known as a “score” — before the bill can be formally reintroduced into the legislative process. The JCT spent most of 2025 consumed by analysis of the One Big Beautiful Bill Act and its implementation. The LaHood bill has been waiting for that process to clear.
In addition to the scoring delay, the bill’s sponsors have been actively revising the legislation in response to stakeholder comments received after the December 2024 introduction. Those comments identified technical issues, particularly around the treatment of certain trust structures and the FICA and self-employment tax provisions, that triggered concerns about the Byrd Rule, which governs what can be included in budget reconciliation legislation. The sponsors have been working to address those issues in an updated version.
The most recent public update as of April 2026 describes the bill as progressing slowly but surely, with the offices of Representative LaHood and Senator Young continuing to address technical issues identified by the JCT and advocacy organizations.
Notable signals of momentum include a public call from former IRS Commissioner Tom Rettig and former IRS Counsellor Tom Cullinan for an end to double taxation of Americans abroad, published in September 2025. The Tax Foundation’s president and CEO called the double taxation of Americans abroad a result of bad policy and called for its repeal in August 2025. These are not fringe advocacy voices. They are mainstream tax policy figures whose endorsements carry weight with the Ways and Means Committee.
What this means for your tax obligations right now
The single most important thing to understand about the LaHood bill is that it is not law. Until it passes and is signed, every current US tax obligation for Americans abroad remains in full effect.
You are still required to file a US tax return if your income exceeds the filing threshold. You are still required to file FBAR if your foreign account balances exceed $10,000 in aggregate. FATCA reporting obligations at the institutional level continue as before. The FEIE and Foreign Tax Credit remain the tools available to reduce double taxation under the current system.
Waiting to file or adjusting your behavior in anticipation of the bill passing would be a significant mistake. The timeline for legislation of this complexity is genuinely uncertain. The JCT scoring process alone could take months beyond any current estimate. Even once the bill is formally reintroduced, it would need to pass both chambers before being signed into law, a process that typically involves further revisions.
The right posture is to stay informed, file correctly under the current rules, and speak with an advisor about how any enacted version of the bill would affect your specific situation if and when that becomes relevant.
How the bill compares to what came before
The 2024 LaHood bill is the direct successor to the 2018 Holding bill and is substantially more comprehensive. The 2018 version raised the issue and established the political framing but lacked the Senate companion legislation, presidential endorsement, and technical detail that the current bill has. The 2024 version was developed with close attention to JCT technical requirements, incorporates provisions for departure tax relief that earlier versions lacked, and includes FBAR and FATCA reform elements that address some of the most damaging practical consequences of the current system.
Whether this version succeeds where earlier ones failed depends significantly on whether the JCT scoring and Byrd Rule issues can be resolved in a way that allows the bill to move through reconciliation, and whether the political will that drove the 2025 legislative cycle remains focused enough to prioritize it.
What to watch for
Three developments would signal that the bill is gaining real traction.
First, the JCT completing its revenue estimate. Once a score is published, the bill can move forward formally. The absence of a score has been the primary structural bottleneck.
Second, formal reintroduction of the revised bill. The sponsors have indicated they are working on an updated version addressing the technical issues raised in 2025. Reintroduction would signal that those issues are sufficiently resolved to proceed.
Third, a Ways and Means Committee hearing specifically on expat taxation. A hearing would indicate that the committee is actively considering the bill rather than treating it as a background priority.
OTM will continue following these developments. If the bill advances significantly, we will update this article and communicate directly with clients about what it means for their specific situations.
Frequently asked questions
Does the LaHood bill mean I can stop filing US taxes if I live abroad?
Not yet and not automatically. The bill has not been enacted. Under current law, all existing filing obligations apply. If and when residence-based taxation is enacted, the specific qualifying conditions — which will almost certainly include a residency test and potentially a transition period — would determine who qualifies and when the change takes effect.
Would the bill eliminate FBAR for Americans abroad?
The bill includes FBAR and FATCA-related relief provisions for qualifying expats who elect into the new residence-based taxation system. In practical terms, FBAR obligations would no longer apply to electing individuals while the election applies. The bill also provides FATCA-related relief by allowing electing individuals with a certificate of nonresidency to be treated as not being specified U.S. persons for certain FATCA purposes. For everyone else, the current FBAR and FATCA rules would remain unchanged.
What happens to expats who have renounced or are considering renouncing citizenship?
The bill does not address the existing exit tax that applies when someone renounces US citizenship – that remains unchanged. What the bill does is potentially make renunciation unnecessary for many Americans abroad. If residence-based taxation is enacted, Americans who qualify and elect into the new system would pay US tax only on US-source income; removing the primary motivation that drives many expats to consider renunciation in the first place. Whether to wait before making any decision about citizenship depends on individual circumstances and the timeline of any enacted legislation.
Does the bill affect Social Security for Americans abroad?
The FICA and self-employment tax provisions are among the technical issues still being resolved. The current expectation, based on public statements from the sponsors, is that qualifying expats would stop earning US Social Security credits on foreign income earned after the bill’s effective date, but would retain the credits already accumulated.
Should I change how I file this year in anticipation of the bill passing?
No. File correctly under the current rules. Adjusting your behavior in anticipation of legislation that has not yet passed creates compliance risk without any legal basis. If and when the bill is enacted, the transition provisions will determine what changes and when.
OTM is following the progress of the LaHood bill closely and will update clients as developments occur. If you have questions about how your current situation would be affected by residence-based taxation, or if you want to understand your current obligations under the existing system, book a consultation and we will walk through both.
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