Concerned about Facebook co-founder Eduardo Saverin “renounc[ing] his U.S. citizenship just in time to avoid a large tax payment” on gains from Facebook’s impending IPO, Senators Chuck Schumer and Bob Casey have proposed legislation that would penalize Saverin and others who “expatriate for a substantial tax purpose.”
Under the Ex-PATRIOT (Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy) Act,” any expatriate with either a net worth of $2 million or an average income tax liability of at least $148,000 over the last five years will be presumed to have renounced their citizenship for tax avoidance purposes.” The person must convince the IRS otherwise or face a two-part penalty. First, the expatriate would pay a 30% capital gains tax on his future U.S. investments. Second, in Schumer’s words, the expatriate “could not set foot in this country again.”
Schumer insists that the Ex-PATRIOT Act is “not targeting one person,” explaining that the Act affects “all people who have done this over the past 10 years.” However, Schumer’s public statements suggest that Saverin is at least his primary media target. The senator has made liberal use of references to Facebook and its co-founder: he described the Act as “a status update,” tweeted that Saverin “‘defriended’ [the] US to avoid taxes,” and warned that “Mr. Saverin’s social network is about to get a lot smaller.” These statements make Schumer sound less like a contemplative senator and more like the impulsive Governor William J. LePetomane. As the fictional governor can attest, singling out individuals is unlikely to win the Ex-PATRIOT Act many supportive harumphs.