Sunday, November 08, 2009

How To Legally Avoid Pelosi-Care: Become An Expat

Sherman Oaks, California

Pelosi-Care has passed the House of Representatives, but, if it becomes law in its present form, you would be able to avoid its coverage mandates and penalties by living outside the United States.

At the start of the weekend, blog chatter focused on the civil and criminal penalties proposed in H.R. 3962, the Affordable Health Care for America Act. If you refuse to be covered by an acceptable health insurance plan, you are subject to an additional tax, a fine or imprisonment, according to an analysis released Thursday by Congress’ Joint Committee on Taxation.

But expatriates would be exempt.

Every "individual" is required to be covered "by acceptable coverage at all times." Every parent is also required to insure each of his or her dependent children. Proposed Internal Revenue Code sections 59B(a), (d)(1).

A 2.5% tax is imposed on each individual who "does not meet the requirements" of coverage "at any time during the taxable year." Proposed Internal Revenue Code sections 59B(a). Failure to pay this tax can result in various monetary fines or in imprisonment. See Internal Revenue Code Section 6662(a) (20% penalty), Section 6663 (75% penalty), Section 6702 ($5,000 penalty), Section 6651 (½% penalty per month, up to 25%); Section 7203 (fine of up to $25,000 or one year imprisonment); Section 7201 (fine of up to $250,000 or up to five years imprisonment).

The bill specifies certain classes of people who are exempt from the requirement to obtain health insurance coverage. Dependents (e.g., adult children who are in college or otherwise not financially independent) are exempt. Proposed I.R.C. section 59B(c)(1). Conscientious objectors – which I assume means Christian Scientists and adherents of other faiths that reject modern medicine – are also exempt. Proposed I.R.C. section 59B(c)(5).

Most importantly to Knife Tricks, expats are exempt. Or, to be precise, expats – defined as U.S. citizens who are outside the country for at least 330 days in a 12-month period -- are "treated for purposes of this section as covered by acceptable coverage during such taxable year." Proposed I.R.C. section 59B(c)(3). A similar exemption applies to people who reside in U.S. territories like Guam or American Samoa. Proposed I.R.C. section 59B(c)(4).

None of these provisions is law yet. The health care debate now moves across the Capitol to the Senate. (And language hidden elsewhere in the bill's 1,990 pages may impact these exemptions.)

Hopefully, the Democrats' attempt to fundamentally alter the U.S. health care system -- on pain of tax, fine and imprisonment -- will fail. But, if these exemptions remain intact, it’s comforting to know that a one-way international airline ticket provides escape.

NEXT POST: Why it's important that expats be exempt.

UPDATE: Links to bill fixed.

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Blogger Ted said...

I don't want to avoid it. There is a provision in the ACA which covers emergency care overseas. I can afford basic medical treatment but serious problems are expensive. Or if I were to be air lifted home, I want something in place when I arrive. My income levels aren't that high, so this law is good for me.

11:47 PM  

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