Checkout Of The U.S. Anytime, But Your Money Can't Leave

President Bush recently signed the Heroes Earnings Assistance and Relief Act of 2008, aka, the HEART bill.

Hidden in the bill is new taxation on those who renounce their citizenship. The bill specifically calls for taxation on the net unrealized gain in their property, as if the property had been sold. Call it the "Hotel California" Tax, checkout any time you want, but a good chunk of your money can't leave. The first $600,000 in estimated net worth is exempt, then the tax kicks-in at regular rates. Thus, this tax creates the potential for huge taxable phantom gains, with huge cash flow ramifications.

The bill also applies to foreigners who are living and working in the United States legally with green cards. When they decide to go home, the tax kicks-in for them, also. The green card aspects of the tax, have double ramifications. First, at a time when immigrants are a political hot potato, this tax creates incentives for them to remain in the United States. Secondly, the tax will discourage high income, highly skilled foreigners from entering the country in the first place.

From the bill, JCX-44-8,:

In general, the provision imposes tax on certain US citizens who relinquish their US citizenship and certain long-term US residents who terminate their US residency. Such individuals are subject to income tax on the net unrealized gain in their property as if the property had been sold for its fair market value.