US Codex
Bill
Notes

Title II — American Citizens Abroad

S. 3931 · 119th Congress · Feb 26, 2026 · Lineage

II American Citizens Abroad

Sec. 201 Report on combined tax and foreign bank and financial account reporting

(a)
Study—
(1)
In general— The Secretary of the Treasury (or the Secretary's delegate) shall conduct a study on—
(A)
combining and simplifying reporting required under section 5314 of title 31, United States Code, and sections 6038, 6038A, 6038B, 6038C, 6038D, 6039F, 6046A, and 6048 of the Internal Revenue Code of 1986; and
(B)
eliminating duplicative requests for information from nonresident United States taxpayers.
(2)
Consultation— The study conducted under paragraph (1) shall include input from the National Taxpayer Advocate and nonresident United States taxpayers.
(b)
Report— Not later than 180 days after the date of enactment of this Act, the Secretary of the Treasury (or the Secretary's delegate) shall submit to Congress a report on the study conducted under subsection (a), which shall include any actions taken by the Secretary as a result of such study and any recommendations for legislative changes necessary to effectuate the goals described in paragraphs (1) and (2) of subsection (a).

Sec. 202 Study and reports on simplification

(a)
GAO study and report—
(1)
In general— The Comptroller General of the United States shall conduct a study on the burdens of compliance with Federal tax laws applicable to individuals who are United States persons (as defined in section 7701(a)(30) of the Internal Revenue Code of 1986) living abroad.
(2)
Factors considered— The study conducted under subsection (a) shall identify problems relating to compliance of Federal tax laws for such United States persons, including burdens specific to low-income and moderate-income individuals, related to—
(A)
understanding and complying with United States tax obligations, including obligations with respect to—
(i)
the duty to file returns and pay taxes while living abroad, including in the absence of tax treaties that otherwise eliminate double taxation of income;
(ii)
the filing (including through electronic means) of Federal tax returns and any reports required under section 5314 of title 31, United States Code, in a timely, accurate, and affordable manner;
(iii)
foreign retirement plans treated as passive foreign investment companies; and
(iv)
foreign currency gains;
(B)
receiving and responding to inquiries from the Internal Revenue Service and the Financial Crimes Enforcement Network about returns and reports described in subparagraph (A)(ii), and access to services of such agencies with respect to such returns and reports;
(C)
access to financial products and services abroad, including local retirement vehicles and bank accounts;
(D)
access to affordable tax preparation services for United States income tax obligations; and
(E)
compliance burdens that are disproportionate to the amount of tax owed.
(3)
Report— Not later than 1 year after the date of the enactment of this Act, the Comptroller General shall submit to the Secretary of the Treasury and to Congress, and make publicly available, a report on the study conducted under paragraph (1).
(b)
Treasury report— Not later than 1 year after the date on which the Comptroller General submits the report under subsection (a)(3), the Secretary of the Treasury shall submit to Congress a report that describes—
(1)
actions taken by the Department of the Treasury to address any problems identified by the Comptroller General in such report; and
(2)
any legislation necessary to address such problems.

Sec. 203 Simplification of currency exchanges rules

(a)
Increase in threshold for exclusion for personal transactions—
(1)
In general— The second sentence of section 988(e)(2) is amended by striking “$200” and inserting “$1,000”.
(2)
Inflation adjustment— Section 988(e) is amended by adding at the end the following new paragraph:

“(4) Inflation adjustment

“(A) In general—In the case of any taxable year beginning after 2025, the $1,000 amount in paragraph (2) shall be increased by an amount equal to—

“(i) such dollar amount, multiplied by

“(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 in subparagraph (A)(ii) thereof “calendar year 2024” for “calendar year 2016”.

“(B) Rounding—If any amount as adjusted under subparagraph (A) is not a multiple of $50, such dollar amount shall be rounded to the next lowest multiple of $50.”

(b)
Foreign currency losses related to sales of personal residences—
(1)
In general— Section 165(c) is amended by striking “and” at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting a comma, and by adding at the end the following new paragraphs:

“(4) foreign currency losses not described in paragraph (1) or (2) with respect to qualified mortgage debt, but only to the extent of any gain recognized during the taxable year on the sale of a qualified residence (as defined in section 163(h)(5)) which is located outside of the United States or any possession of the United States and which secures such qualified mortgage debt, and

“(5) losses (not described in paragraph (1) or (2)) from the sale or exchange of a qualified residence (as so defined) which is located outside of the United States or any possession of the United States, but only to the extent of any foreign currency gain recognized during the taxable year with respect to qualified mortgage debt secured by such qualified residence.”

(2)
Qualified mortgage debt— Section 165 is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

“(m) Definitions related to qualified mortgage debt and foreign currency gains and losses—For purposes of this section—

“(1) Qualified mortgage debt—The term qualified mortgage debt means—

“(A) any acquisition indebtedness (as defined in section 163(h)(3)(B), determined without regard to clause (ii) thereof) of an individual,

“(B) any home equity indebtedness (as defined in section 163(h)(3)(C), determined without regard to clause (ii) thereof) of an individual, and

“(C) any other indebtedness (including any non-debt that functions as debt) which is related to the purchase or ownership of real estate by, or for the benefit of, individuals and which is approved under regulations or guidance provided by the Secretary.

“(2) Foreign currency loss—The term foreign currency loss means, with respect to any qualified mortgage debt, any loss which would be described in section 988(b)(2) if the transaction involving the qualified mortgage debt were treated as a section 988 transaction.

“(3) Foreign currency gain—The term foreign currency gain means, with respect to any qualified mortgage debt, any gain which would be described in section 988(b)(1) if the transaction involving the qualified mortgage debt were treated as a section 988 transaction.”

(3)
Character and source of loss— Section 165(f) is amended to read as follows:
(A)
by striking “Losses from” and inserting the following:

“(1) In general—Losses from”

(B)
by adding at the end the following new paragraph:

“(2) Special rule for amounts attributable to qualified mortgage debt—The character and source of any foreign currency loss with respect to qualified mortgage debt which is allowed under section 165(c)(4) shall be the same character and source as the character and source of the gain on the sale of the qualified residence which secures such qualified mortgage debt.

“(3) Special rule for losses from the sale or exchange of qualified residences—The character and source of any loss from the sale or exchange of a qualified residence which is allowed under subsection (c)(5) shall be the same character and source as the character and source of the gain of the qualified mortgage debt secured by such qualified residence.”

(4)
Treatment of foreign currency loss deduction— Section 62(a) is amended by inserting after paragraph (21) the following new paragraph:

“(22) Certain foreign currency losses—The deduction allowed by section 165(c)(4).”

(c)
Special rule for home mortgage refinancing transactions— Section 989 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:

“(c) Special rule for home mortgage refinancing transactions—In the case of the refinancing of any qualified mortgage debt (as defined in section 165(m)) in a nonfunctional currency—

“(1) no foreign currency gain or loss shall be recognized, and

“(2) the amount of foreign currency gain or loss on the repayment of such debt shall be determined by reference to the liability of the borrower at the time the debt was originally incurred (as determined under regulations or other guidance prescribed by the Secretary).”

(d)
Election To use average exchange rate with respect to certain foreign currency transactions— Section 989, as amended by subsection (c), is further amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection:

“(d) Election To aggregate transaction with respect to foreign earned income

“(1) In general—In the case of a qualified individual who makes an election under this subsection—

“(A) all transactions during a calendar year which involve an item of qualified income or expense shall be treated as 1 transaction, and

“(B) the amount of foreign currency gain or loss attributable to such transaction shall be determined by using the average exchange rate for the calendar year.

“(2) Qualified individual—For purposes of this subsection, the term qualified individual has the meaning given such term under section 911(d)(1).

“(3) Item of qualified income or expense—For purposes of this subsection, the term item of qualified income or expense means—

“(A) foreign earned income (as defined in section 911(b)(1)(A), determined without regard to section 911(b)(1)(B)), and

“(B) any other item of income or expense specified by the Secretary in regulations.”

(e)
Effective date— The amendments made by this section shall apply to transactions in taxable years beginning after the date of the enactment of this Act.

Sec. 204 Increase in threshold for simplified foreign tax credit rules and reporting

(a)
In general— Subparagraph (B) of section 904(j)(2) is amended by striking “$300 ($600” and inserting “$1,000 ($2,000”.
(b)
Inflation adjustment— Section 904(j) is amended by adding at the end the following new paragraph:

“(4) Inflation adjustment

“(A) In general—In the case of any taxable year beginning in a calendar year after 2025, each of the dollar amounts under paragraph (2)(B) shall be increased by an amount equal to—

“(i) such dollar amount, multiplied by

“(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 in subparagraph (A)(ii) thereof “calendar year 2024” for “calendar year 2016”.

“(B) Rounding—If any amount as adjusted under subparagraph (A) is not a multiple of $50, such dollar amount shall be rounded to the next lowest multiple of $50.”

(c)
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Sec. 205 Extension of time for persons outside of the United States to request abatement of math error

(a)
In general— Section 6213(b)(2)(A) is amended by inserting “(120 days in the case of a notice addressed to a person outside the United States)” after “60 days”.
(b)
Effective date— The amendment made by this section shall apply to notices sent after the date that is 180 days after the date of the enactment of this Act.