American Jobs Creation Act - October 22, 2004:
The American Jobs Creation Act was signed into law by President Bush on October 22, 2004, and contains many changes which affect the 2005 and future tax years. Here is a brief summary of these changes:
1. Forms TDF 90.22.1 are required to be filed by U.S. persons who have bank, brokerage or other financial account signing authority outside of the U.S. The act increases penalties for non compliance
with this rule to $10,000 per occurrence, regardless of willfulness.
2. Rules for the treatment of U.S. citizens and long term green card holders have been revised. (See this link for the overall rule regarding tax
expatriation.)
The act introduces significant changes to the tax expatriation provisions effective to persons who renounce U.S. citizenship or give up a
green card after June 3, 2004. Changes include:
- Objective standards replace the subjective standards to determine whether the expatriated individuals are subject to continued U.S.
taxation.
- An expatriated individual will continue to be treated as a US resident until the individual gives notice of an expatriating act or
termination of residency to the Secretary of State or the Secretary of Homeland Security, and provides a statement under Section 6039 (G).
- The net worth test will increase to US$2 million from US$622,000, but it will not be adjusted for inflation. The average tax liability
figure of US$124,000 referred to above will be indexed for inflation.
- An individual subject to continued U.S. taxation will be required to file a tax return for the 10 years following expatriation
regardless of whether any US federal income tax is due. The penalty for noncompliance is US$10,000.
- An expatriated individual subject to continued U.S. taxation who is present in the U.S. for more than 30 days in any given calendar
year during the 10-year period following expatriation will be subject to full US federal taxation in that year.
3. The Rules for the
Calculation of Alternative Minimum Tax have been changed to eliminate the 90% limitation on AMT foreign tax credits.
4. Foreign Tax Credit calculations will be changed effective for 2007 taxation years. The changes include a reduction of income
categories to two (general limitation and passive) from the current nine. This will allow for a more liberal application of foreign tax credits. In addition, the new provisions in the act extend the
foreign tax credit carry forward period to 10 years and reduce the carry back period to one year. (Previously, excess FTC could be carried back two years and forward five years. )
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