Who Is a Long-Term Resident for Exit Taxes
When U.S. lawful permanent residents (LPRs) choose to terminate their U.S. person status and give up their green card, they may be considered long-term residents (LTRs) for expatriation purposes. If a lawful permanent resident is deemed a long-term resident, then they may also be considered covered expatriates if they meet one of the three tests. This catches many green card holders by surprise because, understandably, most taxpayers believe only U.S. citizens who renounce their U.S. citizenship are subject to exit tax, but that is not the case. If a taxpayer is considered a long-term resident, then they too may become subject to exit tax if they meet the threshold requirements.
Definition of Long-Term Resident
An LPR is deemed a long-term resident of the United States if they have been a lawful permanent resident for at least eight of the past 15 years. But that does not mean they had to have maintained the status for a full eight (8) years, but rather held the status in eight of the past 15 years.
As provided by the IRS:
Long-term resident (LTR) defined.
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“You are an LTR if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year you are no longer treated as a lawful permanent resident. In determining if you meet the 8-year requirement, don’t count any year if in that year you were treated as a resident of a foreign country under a tax treaty and did not waive treaty benefits applicable to residents of that country.”
Example of a Long-Term Resident
Taxpayer comes to the United States as an LPR in October of 2019. In February of 2026, the taxpayer decides they want to terminate their lawful permanent status. Since the taxpayer held their green card within eight of the past 15 years, they are a long-term resident and may become subject to exit tax.
Not all Long-Term Residents are Covered Expatriates
Oftentimes, inexperienced counsel conflates being a long-term resident with automatically owing exit tax, but that is incorrect. Just as not all U.S. citizens who renounce their U.S. citizenship are subject to exit tax, not all long-term residents are subject to exit tax as well. Rather, they still must meet either the net worth test, the net income average tax liability test, or the tax noncompliance test.
Offshore Disclosure and Expatriation
Taxpayers who are considering giving up their green card, and those especially who are considered long-term residents, should be sure that they are in U.S. tax/reporting compliance before submitting their I-407, to avoid becoming a covered expatriate solely because they met the tax noncompliance test.
Late Filing Penalties May Be Reduced or Avoided
For Taxpayers who did not timely file their FBAR and/or other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.
Current Year vs. Prior Year Non-Compliance
Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
Hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting can be overwhelming for Taxpayers trying to sift through the false information and nonsense they find in online research. Only a handful of attorneys worldwide are Board-Certified Tax Specialists who specialize exclusively in offshore disclosure and international tax amnesty reporting.
*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
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