Will the IRS Come for the Pope? America’s Tax Net Reaches the Vatican

The newly elected pope may now be the most famous American abroad. He also faces absurd U.S. tax hassles that already needlessly complicate the lives of millions of Americans living overseas.

Under current U.S. law, the U.S. Treasury could require him not only to declare personal income and employer benefits but also all financial accounts over which he has ultimate authority—potentially encompassing all Vatican accounts!

That’s because the United States—lone among democratic countries in the world—requires all its citizens to report their worldwide income and financial assets to the U.S. government even if they live and work in other countries and have no U.S. income. Called citizenship-based taxation, this system has confounded other Americans abroad for years, running up huge accounting fees and even ruining people’s lives. Now it risks entangling the new pope, who holds American and Peruvian citizenship, and the entire Holy See.

Tax Fairness for Americans Abroad last week quickly flagged the absurdity of the situation—and of U.S. double taxation in general—in an opinion editorial for The Wall Street Journal following the pope’s election. The article has since been shared around the world.

Trump pledged to “end double taxation”

As a presidential candidate, Donald Trump promised to “end double taxation” for Americans overseas by moving the United States to the international norm of taxing citizens based on residence and source. With the full support of Tax Fairness for Americans Abroad, Rep. Darin LaHood (Rep., Ill.) last year promptly introduced the Residence-Based Taxation for Americans Abroad Act, which would allow Americans living overseas to opt out of U.S. taxation and related financial compliance obligations so they can lead normal lives.  

But Congress and the White House have been focused on extending the tax breaks under the Tax Cuts and Jobs Act via a reconciliation bill currently making its way through Congress. The LaHood bill may be excluded from the reconciliation bill because of a so-called “Byrd rule” that bans reconciliation bills from including any language that could have an effect on social security, as certain provisions of the LaHood bill related to Americans who own businesses abroad would.  

Tax Fairness for Americans Abroad hopes the election of an American pope and the prospect of the Internal Revenue Service and Financial Crimes Enforcement Network hounding the Pope Leo XIV and the Vatican will spur the White House to prioritize making good on President Trump’s campaign pledge to end the double taxation of Americans abroad, along with unfair and burdensome financial compliance obligations (FATCA, FBAR) that don’t make any sense for and needlessly complicate the lives of Americans who live in other countries.