January 16, 2008

Mr. John Buckley

Chief Tax Counsel

House Ways & Means Committee

1102 Longworth House Office Building

Washington, DC 20515

Fax: 202-225-2610

Mr. Allen Littman

Legislation Counsel

Joint Committee on Taxation

1015 Longworth House Office Building

Washington, DC 20515

Fax: 202-225-0832

Re:     AICPA Comments and Recommendations on Revision of Tax Rules on Expatriation (Section 204) of H.R. 3997, Defenders of Freedom Tax Relief Act of 2007, as passed by the Senate on December 19, 2007, and (Section 305) of H.R. 3997, Heroes Earnings Assistance and Tax Relief Act of 2007, as passed by the House on December 18, 2007

Dear Mr. Buckley and Mr. Littman:

On behalf of the American Institute of Certified Public Accountants (AICPA), the national professional association of more that 350,000 CPAs throughout the country, we would like to provide you with our comments on possible drafting corrections and policy issues regarding the expatriation tax provision (Section 204) of H.R. 3997, Defenders of Freedom Tax Relief Act of 2007, as passed by the Senate on December 19, 2007, and (Section 305) of H.R. 3997, Heroes Earnings Assistance and Tax Relief Act of 2007, and as passed by the House on December 18, 2007.

The AICPA acknowledges that Congress is interested in enacting new rules for individual expatriates and the members and staff in Congress have been studying this issue and working with the AICPA and other organizations on this for several years.

We are pleased to see legislation [H.R. 3997 as passed by the Senate on December 19, 2007, and as passed by the House on December 18, 2007, as well as H.R. 3056, HR. 3996, and S. 2345] adopting a withholding approach and many other recommendations provided in our March 2002 and March 2007 comments to Congress. In addition, we are pleased to see that both the House and Senate most recent versions of H.R. 3997: provide a prospective effective date for section 2801, refer to the section 2503(b) applicable annual exclusion for the section 2801(c) exception for certain gifts, and provide marital and charitable deductions in new Chapter 15. We also appreciate the opportunities we have had to speak with you on this issue over the past year.

In an effort to make this legislation more effective and administrable, we point out additional concerns and technical drafting points that we hope will be addressed as this legislation moves forward. We would be happy to discuss further any of these or other issues.

Specifically, our attached comments address the following:

1. Exception for United States real property interests in proposed section 877A;
2. Modification of proposed section 2801(e)(3)(B)[1] covering gifts by expatriates to foreign trusts;
3. Coordination of proposed legislation with United States treaties;
4. Equivalency of proposed section 877A(a)(3)(A) exemption amount with section 2010(c) exemption amount;
5. Threshold amount for the exception under proposed section 2801(e)(2);
6. Repeal of section 877 after enactment of proposed section 877A;
7. Uniformity of exceptions for section 877 and proposed section 877A;
8. Exemption for a covered expatriate’s principal residence in proposed section 877A(a)(2)(A);
9. Clarification of time period in proposed section 877A(h)(1);
10. Clarification of proper “adjustments” in proposed section 877A(a);
11. Guidance regarding election out of step-up on residency begining date;
12. Alleviation of double taxation; and
13. Delay of effective date of proposed section 877A until regulations are issued.

We look forward to continuing to work constructively with Congress and the Administration to achieve the most effective legislation in this area. We would welcome the opportunity to discuss the proposed legislation or to answer any questions you may have. Please contact us if you have any questions or if we can be of assistance to your office. I can be reached at Jeffrey.Hoops@ey.com; or you may contact Evelyn Capassakis, Chair, AICPA Expatriation Tax Task Force, at evelyn.capassakis@us.pwc.com; or Eileen Sherr, AICPA Technical Manager, at esherr@aicpa.org.

Sincerely,

Jeffrey R. Hoops

Chair, Tax Executive Committee