Residence-based taxation is the reform millions of Americans abroad have waited on for a decade, and 2026 was supposed to be the year it finally moved. It hasn’t, yet. The Residence-Based Taxation for Americans Abroad Act, first introduced by Rep. Darin LaHood, R-Ill., in December 2024 as H.R. 10468, expired when the 118th Congress ended. LaHood and Sen. Todd Young, R-Ind., have spent the past year rewriting it. The updated bill still hasn’t been reintroduced.

The United States taxes its citizens on worldwide income no matter where they live, a system shared only with Eritrea.

An American in Lisbon or Lagos files a full US return every year, reports foreign accounts through the FBAR, and navigates FATCA rules that have pushed foreign banks to close accounts held by US citizens. The bill would let qualifying Americans abroad elect nonresident status and pay federal tax only on US-source income. Foreign-source income would fall out of the US net.

What the bill would actually do

The election would not strip anyone of citizenship. Someone who opts in keeps the passport, the vote and the right to return. What changes is the tax base.

Under the proposal, a qualifying American abroad would:

• Elect nonresident status and be treated as a nonresident alien for income tax purposes.
• Pay US tax only on US-source income such as dividends from US stocks, US rental income and US pension distributions.
• Apply to the IRS for a certificate of non-residency to hand foreign banks, exempting the account holder from certain FATCA reporting.

Higher-net-worth filers could face a one-time departure tax on unrealized gains at the point of election. The bill carves out exemptions for long-term expatriates and accidental Americans, people who acquired US citizenship at birth but built their lives elsewhere.

Why it keeps slipping

The bottleneck is the Joint Committee on Taxation. Congress needs a revenue score, the official estimate of what a bill costs the Treasury over 10 years, before residence-based taxation can be formally reintroduced. The JCT spent most of 2025 consumed by the One Big Beautiful Bill Act. The LaHood-Young rewrite has been waiting behind it.

The sponsors have also been closing technical gaps. Staff have worked to keep very wealthy Americans from relocating on paper to dodge tax, the kind of loophole that would blow up the score and cost bipartisan support. Independent modeling from American Citizens Abroad and the District Economics Group put the cost near revenue-neutral, roughly $4.5 billion over 10 years, though a conservative JCT estimate could land higher.

Where it stands now

American Citizens Abroad anticipated reintroduction in the first quarter of 2026. Tax Fairness for Americans Abroad said the sponsors expected to reintroduce as early as possible in the new year. Neither happened on schedule. As of the most recent reporting, the bill is described as progressing slowly but genuinely, with the JCT score still pending and the revised text not yet filed.

The measure was left out of the OBBB, which passed July 4, 2025. That law permanently extended the 2017 individual tax rates and dropped the Section 899 “revenge tax,” but it did nothing to end citizenship-based taxation.

Because the bill’s Social Security provisions run afoul of the Senate’s Byrd Rule, residence-based taxation cannot ride through budget reconciliation. It needs regular order and bipartisan votes, which means securing a Democratic co-lead is now the practical test of momentum.

What it means for Americans abroad

Nothing has changed for the filer. Every US tax obligation remains in full effect. Returns are still due, the FBAR still applies at $10,000 in aggregate foreign accounts, and the Foreign Earned Income Exclusion, set at $132,900 for 2026, and the Foreign Tax Credit remain the only tools for cutting a double tax bill. Adjusting behavior in anticipation of a bill that isn’t law would be a costly mistake.

The last time Washington gave Americans abroad anything on this front was the March 2026 renunciation fee cut, from $2,350 to $450. Democrats Abroad called that a single symptom addressed, not the disease. The disease is the tax system itself. The absurdity has its own emblem now: because citizenship-based taxation follows Americans everywhere, the IRS could audit an American pope.

Whether residence-based taxation reaches the House floor in 2026 turns on two events: a JCT score the sponsors can live with, and a Democratic co-sponsor willing to put a name on it. Until both land, the bill is a draft, and the roughly five million Americans abroad keep filing.