If you expatriated after June 3, 2004, the special rules for former U.S. citizens and former U.S. long-term residents have changed. Under the new rules, the process of IRS ruling requests has been eliminated. You may be subject to the expatriation rules if:

Dual citizens and certain minors who have had no substantial contact with the United States are not subject to the new rules. However, they still must provide the certification required in (3).

Under the new rules, tax-based (instead of immigration-based) rules are applied for determining when you are no longer a U.S. citizen or long-term resident for U.S. federal tax purposes. You will continue to be treated as a U.S. citizen or long-term resident for U.S. federal tax purposes until you give notice of expatriation or termination of U.S. residency to the Secretary of State or the Secretary of Homeland Security and file Form 8854 with the Internal Revenue Service. See Publication 519, U.S. Tax Guide for Aliens, for more information. At the time this publication went to print, Form 8854 was not available. When it is available, it will be posted at www.irs.gov.

If a corporation is an expatriated entity or a partner in an expatriated entity, the corporation's taxable income cannot be less than its inversion gain for the tax year. For more information, see section 7874 of the Internal Revenue Code.

Changes have been made to the bona fide residence and income source rules for individuals with income from U.S. possessions. Regulations will be issued that clarify the following rules. However, they were not final at the time this publication went to print. When additional guidance is issued, it will be made available on the Internet at www.irs.gov.

Under certain situations, foreign-source income attributable to a U.S. office or fixed place of business is treated as effectively connected with a U.S. trade or business. This applies to rents, royalties, dividends, and interest. For tax years beginning after October 22, 2004, income equivalent to that foreign-source income that is attributable to a U.S. office or fixed place of business is also treated as effectively connected with a U.S. trade or business.

The following changes relate to withholding on payments to foreign persons. For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

In general, you cannot claim a foreign tax credit for withholding tax on income or gain from certain property. This rule applies to income or gain paid or accrued after November 21, 2004. See Foreign Taxes for Which You Cannot Take a Credit in Publication 514, Foreign Tax Credit, for more information.

Unused foreign taxes arising in tax years beginning after October 22, 2004, can be carried back only 1 year (instead of 2 years). The carryover period has been extended from 5 years to 10 years for unused foreign taxes that could, under the old rules, be carried to any tax year ending after October 22, 2004. See Publication 514, Foreign Tax Credit for Individuals, for more information.

The extraterritorial income (ETI) exclusion provisions have been repealed, generally for transactions after 2004, subject to a transition rule. Under the transition rule, taxpayers may claim 80% and 60% of the otherwise-applicable pre-repeal ETI exclusion for transactions during 2005 and 2006, respectively. The general repeal of the ETI exclusion provisions does not apply to transactions in the ordinary course of a trade or business under a binding contract if such contract is between the taxpayer and an unrelated person (as defined under the ETI exclusion provisions) and such contract is in effect on September 17, 2003, and at all times thereafter.

Foreign corporations that elected to be treated as domestic corporations may, under certain circumstances, revoke such election before October 22, 2005, without recognition of gain or loss.

For more information, see the 2004 Form 8873, Extraterritorial Income Exclusion, and instructions.

The following changes relate to withholding on payments to foreign persons. For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

For tax years beginning after 2004, if you claim the foreign tax credit for foreign taxes on an accrual basis and your foreign income tax liability is denominated in any currency other than your functional currency, you can elect not to translate your foreign income taxes (and any adjustments thereto) using the average exchange rate for the tax year to which the taxes relate. If you make this election, use the exchange rate in effect on the date you paid the taxes. This election is effective for the year you make it and all subsequent years unless you revoke it with IRS consent. For details, see Publication 514, Foreign Tax Credit for Individuals.

For tax years beginning after 2004, the amount of AMTFTC you can use to offset your alternative minimum tax is generally increased to 100% of your pre-credit tentative minimum tax. For tax years beginning before 2005, the amount of AMTFTC was generally limited to 90% of your pre-credit tentative minimum tax.

Beginning in 2005, if you are a nonresident alien and a resident of Japan, you generally cannot claim the following benefits. The new U.S.-Japan income tax treaty, which became effective on January 1, 2005, does not allow them.

However, if you choose to have the old U.S.-Japan treaty apply in its entirety for 2005, you may be able to claim these benefits on your 2005 Form 1040NR.