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Sec. 911. Citizens Or Residents
Of The United States Living Abroad
911(a) Exclusion From Gross Income
At the election of a qualified individual (made
separately with respect to paragraphs (1) and (2)), there shall be excluded
from the gross income of such individual, and exempt from taxation under this
subtitle, for any taxable year--
911(a)(1) the foreign earned income of such individual, and
911(a)(2) the housing cost amount of such individual.
911(b) Foreign Earned Income
911(b)(1) Definition
For purposes of this section--
911(b)(1)(A) In General
The term "foreign earned income" with respect
to any individual means the amount received by such individual from sources
within a foreign country or countries which constitute earned income attributable
to services performed by such individual during the period described in subparagraph
(A) or (B) of subsection (d)(1), whichever is applicable.
911(b)(1)(B) Certain Amounts Not Included In Foreign Earned Income
The foreign earned income for an individual shall not include amounts--
911(b)(1)(B)(i) received as a pension or annuity,
911(b)(1)(B)(ii) paid by the United States or an agency thereof to an employee
of the United States or an agency thereof,
911(b)(1)(B)(iii) included in gross income by reason of section 402(b) (relating
to taxability of beneficiary of nonexempt trust) or section 403(c) (relating
to taxability of beneficiary under a nonqualified annuity), or
911(b)(1)(B)(iv) received after the close of the taxable year following the
taxable year in which the services to which the amounts are attributable are
performed.
911(b)(2) Limitation On Foreign Earned Income
911(b)(2)(A) In General
The foreign earned income of an individual
which may be excluded under subsection (a)(1) for any taxable year shall not
exceed the amount of foreign earned income computed on a daily basis at an annual
rate equal to the exclusion amount for the calendar year in which such taxable
year begins.
911(b)(2)(B) Attribution To Year In Which Services Are Performed
For purposes of applying subparagraph (A), amounts received shall be considered
received in the taxable year in which the services to which the amounts are
attributable are performed.
911(b)(2)(C) Treatment Of Community Income
In applying subparagraph (A) with respect to amounts received from services
performed by a husband or wife which are community income under community property
laws applicable to such income, the aggregate amount which may be excludable
from the gross income of such husband and wife under subsection (a)(1) for any
taxable year shall equal the amount which would be so excludable if such amounts
did not constitute community income.
911(b)(2)(D) Exclusion Amount.--
911(b)(2)(D)(i) In General.--
The exclusion amount for any calendar year
is the exclusion amount determined in accordance with the following table (as
adjusted by clause (ii)):
For calendar year--The exclusion amount is--
1998 $72,000
1999 74,000
2000 76,000
2001 78,000
2002 and thereafter 80,000.
911(b)(2)(D)(ii) Inflation Adjustment.--
In the case of any taxable year beginning in
a calendar year after 2007, the $80,000 amount in clause (i) shall be increased
by an amount equal to the product of--
911(b)(2)(D)(ii)(I) such dollar amount, and
911(b)(2)(D)(ii)(II) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year begins, determined by
substituting `2006' for `1992' in subparagraph (B) thereof. If any increase
determined under the preceding sentence is not a multiple of $100, such increase
shall be rounded to the next lowest multiple of $100.
911(c) Housing Cost Amount
For purposes of this section--
911(c)(1) In General
The term "housing cost amount" means an amount
equal to the excess of--
911(c)(1)(A) the housing expenses of an individual for the taxable year, over
911(c)(1)(B) an amount equal to the product of--
911(c)(1)(B)(i) 16 percent of the salary (computed on a daily basis) of an employee
of the United States who is compensated at a rate equal to the annual rate paid
for step 1 of grade GS-14, multiplied by
911(c)(1)(B)(ii) the number of days of such taxable year within the applicable
period described in subparagraph (A) or (B) of subsection (d)(1).
911(c)(2) Housing Expenses
911(c)(2)(A) In General
The term "housing expenses" means the reasonable expenses paid or incurred during
the taxable year by or on behalf of an individual for housing for the individual
(and, if they reside with him, for his spouse and dependents) in a foreign country.
The term--
911(c)(2)(A)(i) includes expenses attributable to the housing (such as utilities
and insurance), but
911(c)(2)(A)(ii) does not include interest and taxes of the kind deductible
under section 163 or 164 or any amount allowable as a deduction under section
216(a). Housing expenses shall not be treated as reasonable to the extent such
expenses are lavish or extravagant under the circumstances.
911(c)(2)(B) Second Foreign Household
911(c)(2)(B)(i) In General
Except as provided in clause (ii), only housing
expenses incurred with respect to that abode which bears the closest relationship
to the tax home of the individual shall be taken into account under paragraph
(1).
911(c)(2)(B)(ii) Separate Household For Spouse And Dependents
If an individual maintains a separate abode outside the United States for his
spouse and dependents and they do not reside with him because of living conditions
which are dangerous, unhealthful, or otherwise adverse, then--
911(c)(2)(B)(ii)(I) the words "if they reside with him" in subparagraph (A)
shall be disregarded, and
911(c)(2)(B)(ii)(II) the housing expenses incurred with respect to such abode
shall be taken into account under paragraph (1).
911(c)(3) Special Rules Where Housing Expenses
Not Provided By Employer
911(c)(3)(A) In General
To the extent the housing cost amount of any
individual for any taxable year is not attributable to employer provided amounts,
such amount shall be treated as a deduction allowable in computing adjusted
gross income to the extent of the limitation of subparagraph (B).
911(c)(3)(B) Limitation
For purposes of subparagraph (A), the limitation
of this subparagraph is the excess of--
911(c)(3)(B)(i) the foreign earned income of the individual for the taxable
year, over
911(c)(3)(B)(ii) the amount of such income excluded from gross income under
subsection (a) for the taxable year.
911(c)(3)(C) 1-year Carryover Of Housing Amounts Not Allowed By Reason Of Subparagraph
(b)
911(c)(3)(C)(i) In General
The amount not allowable as a deduction for
any taxable year under subparagraph (A) by reason of the limitation of subparagraph
(B) shall be treated as a deduction allowable in computing adjusted gross income
for the succeeding taxable year (and only for the succeeding taxable year) to
the extent of the limitation of clause (ii) for such succeeding taxable year.
911(c)(3)(C)(ii) Limitation
For purposes of clause (i), the limitation
of this clause for any taxable year is the excess of--
911(c)(3)(C)(ii)(I) the limitation of subparagraph (B) for such taxable year,
over
911(c)(3)(C)(ii)(II) amounts treated as a deduction under subparagraph (A) for
such taxable year.
911(c)(3)(D) Employer Provided Amounts
For purposes of this paragraph, the term "employer
provided amounts" means any amount paid or incurred on behalf of the individual
by the individual's employer which is foreign earned income included in the
individual's gross income for the taxable year (without regard to this section).
911(c)(3)(E) Foreign Earned Income
For purposes of this paragraph, an individual's
foreign earned income for any taxable year shall be determined without regard
to the limitation of subparagraph (A) of subsection (b)(2).
911(d) Definitions And Special Rules
For purposes of this section--
911(d)(1) Qualified Individual
The term "qualified individual" means an individual
whose tax home is in a foreign country and who is--
911(d)(1)(A) a citizen of the United States and establishes to the satisfaction
of the Secretary that he has been a bona fide resident of a foreign country
or countries for an uninterrupted period which includes an entire taxable year,
or
911(d)(1)(B) a citizen or resident of the United States and who, during any
period of 12 consecutive months, is present in a foreign country or countries
during at least 330 full days in such period.
911(d)(2) Earned Income
911(d)(2)(A) In General
The term "earned income" means wages, salaries,
or professional fees, and other amounts received as compensation for personal
services actually rendered, but does not include that part of the compensation
derived by the taxpayer for personal services rendered by him to a corporation
which represents a distribution of earnings or profits rather than a reasonable
allowance as compensation for the personal services actually rendered.
911(d)(2)(B) Taxpayer Engaged In Trade Or Business
In the case of a taxpayer engaged in a trade
or business in which both personal services and capital are material income-producing
factors, under regulations prescribed by the Secretary, a reasonable allowance
as compensation for the personal services rendered by the taxpayer, not in excess
of 30 percent of his share of the net profits of such trade or business, shall
be considered as earned income.
911(d)(3) Tax Home
The term "tax home" means, with respect to
any individual, such individual's home for purposes of section 162(a)(2) (relating
to traveling expenses while away from home). An individual shall not be treated
as having a tax home in a foreign country for any period for which his abode
is within the United States.
911(d)(4) Waiver Of Period Of Stay In Foreign
Country
Notwithstanding paragraph (1), an individual
who--
911(d)(4)(A) is a bona fide resident of, or is present in, a foreign country
for any period,
911(d)(4)(B) leaves such foreign country after August 31, 1978--
911(d)(4)(B)(i) during any period during which the Secretary determines, after
consultation with the Secretary of State or his delegate, that individuals were
required to leave such foreign country because of war, civil unrest, or similar
adverse conditions in such foreign country which precluded the normal conduct
of business by such individuals, and
911(d)(4)(B)(ii) before meeting the requirements of such paragraph (1), and
911(d)(4)(C) establishes to the satisfaction of the Secretary that such individual
could reasonably have been expected to have met such requirements but for the
conditions referred to in clause (i) of subparagraph (B), shall be treated as
a qualified individual with respect to the period described in subparagraph
(A) during which he was a bona fide resident of, or was present in, the foreign
country and in applying subsections (b)(2)(A) and (c)(1)(B)(ii) with respect
to such individual, only the days within such period shall be taken into account.
911(d)(5) Test Of Bona Fide Residence
If--
911(d)(5)(A) an individual who has earned income from sources within a foreign
country submits a statement to the authorities of that country that he is not
a resident of that country, and
911(d)(5)(B) such individual is held not subject as a resident of that country
to the income tax of that country by its authorities with respect to such earnings,
then such individual shall not be considered a bona fide resident of that country
for purposes of paragraph (1)(A).
911(d)(6) Denial Of Double Benefits
No deduction or exclusion from gross income
under this subtitle or credit against the tax imposed by this chapter (including
any credit or deduction for the amount of taxes paid or accrued to a foreign
country or possession of the United States) shall be allowed to the extent such
deduction, exclusion, or credit is properly allocable to or chargeable against
amounts excluded from gross income under subsection (a).
911(d)(7) Aggregate Benefit Cannot Exceed Foreign Earned Income
The sum of the amount excluded under subsection (a) and the amount deducted
under subsection (c)(3)(A) for the taxable year shall not exceed the individual's
foreign earned income for such year.
911(d)(8) Limitation On Income Earned In Restricted
Country
911(d)(8)(A) In General
If travel (or any transaction in connection
with such travel) with respect to any foreign country is subject to the regulations
described in subparagraph (B) during any period--
911(d)(8)(A)(i) the term "foreign earned income" shall not include any income
from sources within such country attributable to services performed during such
period,
911(d)(8)(A)(ii) the term "housing expenses" shall not include any expenses
allocable to such period for housing in such country or for housing of the spouse
or dependents of the taxpayer in another country while the taxpayer is present
in such country, and
911(d)(8)(A)(iii) an individual shall not be treated as a bona fide resident
of, or as present in, a foreign country for any day during which such individual
was present in such country during such period.
911(d)(8)(B) Regulations
For purposes of this paragraph, regulations
are described in this subparagraph if such regulations--
911(d)(8)(B)(i) have been adopted pursuant to the Trading With the Enemy Act
(50 U.S.C. App. 1 et seq.), or the International Emergency Economic Powers Act
(50 U.S.C. 1701 et seq.), and
911(d)(8)(B)(ii) include provisions generally prohibiting citizens and residents
of the United States from engaging in transactions related to travel to, from,
or within a foreign country.
911(d)(8)(C) Exception
Subparagraph (A) shall not apply to any individual during any period in which
such individual's activities are not in violation of the regulations described
in subparagraph (B).
911(d)(9) Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate
to carry out the purposes of this section, including regulations providing rules--
911(d)(9)(A) for cases where a husband and wife each have earned income from
sources outside the United States, and
911(d)(9)(B) for married individuals filing separate returns.
911(e) Election
911(e)(1) In General
An election under subsection (a) shall apply
to the taxable year for which made and to all subsequent taxable years unless
revoked under paragraph (2).
911(e)(2) Revocation
A taxpayer may revoke an election made under
paragraph (1) for any taxable year after the taxable year for which such election
was made. Except with the consent of the Secretary, any taxpayer who makes such
a revocation for any taxable year may not make another election under this section
for any subsequent taxable year before the 6th taxable year after the taxable
year for which such revocation was made.
911(f) Cross References
For administrative and penal provisions relating
to the exclusions provided for in this section, see sections 6001, 6011, 6012(c),
and the other provisions of subtitle F.
(Aug. 16, 1954, ch. 736, 68A Stat. 289; Sept. 2, 1958, Pub. L. 85-866, title
I, Sec. 72(b), 72 Stat. 1660; Oct. 16, 1962, Pub. L. 87-834, Sec. 11(a), 76
Stat. 1003; Feb. 26, 1964, Pub. L. 88-272, title II, Sec. 237(a), 78 Stat. 128;
Nov. 13, 1966, Pub. L. 89-809, title I, Sec. 105(e)(3), 80 Stat. 1567; Oct.
4, 1976, Pub. L. 94-455, title X, Sec. 1011(a), (b), title XIX, Sec. 1901(a)(115),
1906(b)(13)(A), 90 Stat. 1610, 1784, 1834; May 23, 1977, Pub. L. 95-30, title
I, Sec. 102(b)(12), 91 Stat. 138; Nov. 6, 1978, Pub. L. 95-600, title IV, Sec.
401(b)(4), title VII, Sec. 701(u)(10)(A), 703(e), 92 Stat. 2867, 2917, 2939;
Nov. 8, 1978, Pub. L. 95-615, title II, Sec. 202(a)-(e), (g)(1), formerly Sec.
202(a)-(f)(1), 92 Stat. 3098-3100, as renumbered and amended Apr. 1, 1980, Pub.
L. 96-222, title I, Sec. 107(a)(3)(B), 108(a)(1)(A), (C), (D), 94 Stat. 223,
224; Dec. 24, 1980, Pub. L. 96-595, Sec. 4(a)-(c)(1), 94 Stat. 3466, 3467; Aug.
13, 1981, Pub. L. 97-34, title I, Sec. 111(a), 95 Stat. 190; Jan. 12, 1983,
Pub. L. 97-448, title I, Sec. 101(c), 96 Stat. 2366; July 18, 1984, Pub. L.
98-369, div. A, title I, Sec. 17, 98 Stat. 505; Oct. 22, 1986, Pub. L. 99-514,
title XII, Sec. 1233(a), (b), 100 Stat. 2564.)
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