🙏 Should the Pope Pay U.S. Taxes? A New Spotlight on Residency-Based Taxation

A new Vatican chapter and a renewed push for residency-based taxation

🕊️ A Taxable Pope? Welcome to U.S. Citizenship-Based Taxation

When American-born Cardinal Robert Francis Prevost was elected Pope Leo XIV in May 2025, he didn’t just inherit the papal tiara. He also inherited something far less holy: the continued obligation to report and potentially pay US taxes on his Vatican income. That’s because the United States is one of the only countries on Earth that taxes its citizens no matter where they live.

The election of an American pope prompted swift action in Congress. A small group of lawmakers introduced the Holy Sovereignty Protection Act, which would exempt U.S.-born popes from federal taxation. The justification? Someone leading over a billion Catholics probably shouldn’t be bogged down with FBARs, FATCA forms, and IRS penalties.

As this unexpected tax conversation unfolded, some observers noted that this situation highlights a broader issue: if lawmakers believe the pope deserves relief, shouldn’t similar relief also apply to the millions of Americans quietly living and working abroad?

😵 The Bigger Problem for Ordinary Expats

U.S. citizens living abroad face a uniquely complex tax landscape. Even if they owe no U.S. tax thanks to foreign tax credits or the Foreign Earned Income Exclusion, they’re still required to file returns, disclose foreign bank accounts, report certain investments, and navigate a system that was never designed for globally mobile lives.

Many expats feel that it’s not just inconvenient — it’s unjust. They often feel treated as if they are suspected of wrongdoing simply for living abroad. The compliance costs are high, and the risks of penalties can be extremely steep even when no tax is due. These frustrations have led to a growing conversation about alternatives.

🌍 A Different Path: Residence-Based Taxation (RBT)

Advocates for reform have long argued that residency-based taxation would offer a more reasonable and fair approach. Under this model, U.S. citizens living abroad would be taxed only on their U.S.-source income, just as non-citizens are. This shift could dramatically reduce compliance burdens and align U.S. policy with the tax systems of nearly every other developed country.

The concept of RBT is not new. The United States has taxed its citizens on their worldwide income since the very beginning of the income tax system. This approach was upheld by the Supreme Court in Cook v. Tait, which confirmed Congress’s authority to impose taxes on U.S. citizens even when they live permanently abroad and earn income from foreign sources.

Over the decades, the core framework of citizenship-based taxation (CBT) has remained in place. Some relief measures, such as the Foreign Earned Income Exclusion and the Foreign Tax Credit, have been introduced to mitigate double taxation. However, these measures do not eliminate the underlying burden of filing — or the risk of costly penalties.

🏛️ The LaHood Proposal: A New Attempt to Modernize the System

One of the most comprehensive modern attempts to shift to RBT is the Residence-Based Taxation for Americans Abroad Act (H.R. 10468), introduced by Representative Darin LaHood in late 2024. This bill would allow eligible U.S. citizens residing abroad to elect to be treated as nonresident aliens for tax purposes.

Electing individuals would be taxed only on U.S.-source income and exempt from taxation on foreign-source income. To prevent abuse, the bill includes a departure tax for certain high-net-worth individuals, but it carves out exceptions for long-term residents abroad and those below the estate tax threshold. Notably, it does not treat electing individuals as if they have renounced citizenship, and it sidesteps the formal expatriation tax regime.

The proposal also includes relief from some of the most burdensome reporting requirements — including FATCA, FBAR, Form 8938, and Form 5471 — and allows electing individuals to continue claiming U.S. treaty benefits.

Although the bill must be reintroduced in the current Congress, it remains the most fully formed legislative blueprint for reforming expat taxation. Its status is currently stalled pending a revenue score from the Joint Committee on Taxation.

🔄 Shifting Political Winds: Trump’s Support and Broader Interest

The issue of residency-based taxation received new attention during the 2024 presidential campaign, when then-candidate Donald Trump pledged to end what he described as “double taxation” on Americans living overseas. His campaign acknowledged the dual burden faced by expats and signaled a willingness to reform the system. This marked the first time a sitting or former president publicly endorsed such a shift.

While the Trump Administration’s support has energized proponents, interest in RBT is not confined to one political party. Lawmakers on both sides of the aisle have expressed concern over the burdens CBT imposes on American citizens abroad. Advocacy groups like American Citizens Abroad, Democrats Abroad, and Tax Fairness for Americans Abroad continue to highlight the difficulties faced by the expat community.

Still, not everyone agrees. Some critics worry that a move to RBT could be exploited by wealthy individuals seeking to minimize U.S. tax liability. Others caution that the change could shrink the tax base or complicate enforcement. With budgetary concerns always looming, this is a topic that often gets put to the back burner by lawmakers.

💬 The Pope’s Tax Break as a Conversation Starter

When lawmakers introduced a bill to exempt Pope Leo XIV from U.S. taxation, many expat advocates saw an opportunity to elevate the broader discussion. If policymakers agree that an American living abroad — even one as prominent as the pope — should not be subjected to U.S. tax burdens, does that not raise questions about how everyday expats are treated?

Groups like American Citizens Abroad argue that the pope’s situation offers a “messaging opportunity” to revisit the entire framework. The Holy Sovereignty Protection Act, while unlikely to pass as written, has helped draw attention to the inconsistencies of CBT and renewed focus on possible alternatives.

🔎 Looking Ahead

As of early-2026, RBT has not been enacted, and U.S. citizens abroad are still subject to citizenship-based taxation. The path forward likely depends on how Congress responds to scoring estimates, procedural hurdles like the Byrd Rule, and broader political dynamics.

For now, those affected by CBT must remain compliant while watching closely for signs of change. Whether the pope’s election becomes a turning point or just a footnote in the ongoing debate remains to be seen. But for many Americans abroad, the conversation about fairness, burden, and reform is far from over.

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