Contents
Green Card Exit Tax
What is a Long-Term Lawful Permanent Resident
When it comes to the process of formally terminating their U.S. person status, there are two main categories of individuals who may be deemed as covered expatriates. The first category is for U.S. citizens and the second category is for long-term lawful permanent residents. Taxpayers are considered Long-Term Lawful Permanent Residents when they have maintained their Lawful Permanent Resident status in at least eight of the past 15 years. It is important to note, that the Internal Revenue Service does not take the position that the Taxpayer must be an LPR for 8 full tax years. Rather, the IRS takes the position that as long as the taxpayer held the green card at any point during the tax year for eight of the past 15 tax years, then they would meet the long-term resident status. As a long-term lawful permanent resident, the taxpayer is required to file Form 8854 — and depending on whether they meet either the net worth test, the net income average tax liability test, or the five-year tax compliance test will determine whether or not they are covered expatriate.
Let’s take a look at how the statute works.
Long-Term Resident (LTR) General Definition
The main tax form for U.S. Citizens and Long-Term Residents to complete at expatriation is the IRS Form 8854.
The definition of long-term resident is summarized well for the instruction of Form 8854 as follows:
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“For purposes of this subsection, the term “long-term resident” means any individual (other than a citizen of the United States) who is a lawful permanent resident of the United States in at least 8 taxable years during the period of 15 taxable years ending with the taxable year during which the event described in paragraph (1) occurs.”
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What Does the Consulate Say?
Here is an example of Guidance from the Consulate (in Hong Kong):
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You are a long-term resident if you have been a lawful permanent resident (green cardvholder) during any part of at least 8 years during the period of 15 years ending with the year that includes your expatriation date.
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When does the LPR Status End?
As provided by the Form 8854 instructions:
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“For purposes of this subsection, the term “long-term resident” means any individual (other than a citizen of the United States) who is a lawful permanent resident of the United States in at least 8 taxable years during the period of 15 taxable years ending with the taxable year during which the event described in paragraph (1) occurs.”
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Therefore, the last year included in the taxable year would presume that even a single day in that year would qualify until the filer’s voluntary abandonment occurs.
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