[Senate Treaty Document 106-13]
[From the U.S. Government Publishing Office]



106th Congress 
 1st Session                     SENATE                     Treaty Doc.
                                                                 106-13
_______________________________________________________________________

                                     



 
           PROTOCOL AMENDING THE TAX CONVENTION WITH GERMANY

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              Transmitting

 PROTOCOL AMENDING THE CONVENTION BETWEEN THE UNITED STATES OF AMERICA 
    AND THE FEDERAL REPUBLIC OF GERMANY FOR THE AVOIDANCE OF DOUBLE 
  TAXATION WITH RESPECT TO TAXES ON ESTATES, INHERITANCES, AND GIFTS 
SIGNED AT BONN ON DECEMBER 3, 1980, SIGNED AT WASHINGTON, DECEMBER 14, 
                                  1998




  September 21, 1999.--Protocol was read the first time, and together 
  with the accompanying papers, referred to the Committee on Foreign 
     Relations and ordered to be printed for the use of the Senate

                                ______

                    U.S. GOVERNMENT PRINTING OFFICE
69-112                      WASHINGTON : 1999



                         LETTER OF TRANSMITTAL

                              ----------                              

                               The White House, September 21, 1999.
To the Senate of the United States:
    I transmit herewith for Senate advice and consent to 
ratification the Protocol Amending the Convention Between the 
United States of America and the Federal Republic of Germany 
for the Avoidance of Double Taxation with Respect to Taxes on 
Estates, Inheritances, and Gifts signed at Bonn on December 3, 
1980, signed at Washington, December 14, 1998. The Protocol 
provides a pro rata unified tax credit to the estate of a 
German domiciliary for purposes of computing U.S. estate tax. 
It allows a limited U.S. ``marital deduction'' for certain 
estates of limited value if the surviving spouse is not a U.S. 
citizen. In addition, the Protocol expands the United States 
jurisdiction to tax its citizens and certain former citizens 
and long-term residents and makes other changes to the treaty 
to more closely reflect current U.S. treaty policy.
    I recommend that the Senate give early and favorable 
consideration to this Protocol and give its advice and consent 
to ratification.

                                                William J. Clinton.
                          LETTER OF SUBMITTAL

                              ----------                              

                                       Department of State,
                                     Washington, September 2, 1999.
The President,
The White House.
    The President: I have the honor to submit to you, with a 
view to its transmission to the Senate for advise and consent 
to ratification, the Protocol Amending the Convention Between 
the United States of America and the Federal Republic of 
Germany for the Avoidance of Double Taxation with Respect to 
Taxes on Estates, Inheritances, and Gifts, Signed at Bonn, 
December 3, 1980, signed at Washington, December 14, 1998 
(``the proposed Protocol'').
    The proposed Protocol modifies the tax treatment of certain 
transfers of property by gift or upon death. The Protocol 
provides a pro rata unified tax credit to the estate of a 
German domiciliary for purposes of computing U.S. estate tax. 
It allows a limited U.S. ``marital deduction'' for certain 
estates of limited value if the surviving spouse is not a U.S. 
citizen. In addition, the Protocol expands the United States' 
jurisdiction to tax its citizens and certain former citizens 
and long-term residents and makes other changes to the treaty 
to more closely reflect current U.S. treaty policy.
    Article 1 of the proposed Protocol replaces subparagraph 
3.c) of Article 4 of the Convention, which addresses fiscal 
domicile. The revised provision extends, from five to ten 
years, the period of time during which a citizen of one state 
can be domiciled in the other state without becoming subject to 
the primary taxing jurisdiction of the other state.
    Article 2 amends paragraph 4 of Article 10 of the 
Convention, which addresses deductions and exemptions. The 
Convention gives the spouse of a decedent or donor of one state 
a 50-percent exemption for property subject to tax in the other 
state. The proposed Protocol provides that the United States 
need not provide this exemption if the decedent was a U.S. 
citizen or was a former U.S. citizen or long-term resident who 
lost his or her citizenship or residency status for tax-
avoidance reasons.
    Article 3 of the proposed Protocol adds paragraphs 5 and 6 
to Article 10 of the Convention, which deals with deductions 
and exemptions from estate, inheritance, and gift taxes. 
Paragraph 5 provides a pro rata unified credit to the estate of 
a German domiciliary for purposes of computing the U.S. estate 
tax. Under this provision, a German domiciliary is allowed a 
credit against U.S. estate tax ranging from the amount 
ordinarily allowed to the estate of a nonresident under the 
Internal Revenue Code ($13,000) to the amount of credit allowed 
to the estate of a U.S. citizen under the Internal Revenue Code 
($211,300 in 1999), based on the extent to which the assets of 
the estate are situated in the United States.
    Paragraph 6 provides a U.S. estate tax marital deduction up 
to the Internal Revenue Code's applicable exclusion amount 
($650,000 in 1999) when the surviving spouse is not a U.S. 
citizen. Certain 1988 changes in U.S. law deny a marital 
deduction when the surviving spouse is not a U.S. citizen. This 
provision is intended to provide relief from these changes in 
the case of estates of limited value.
    Article 4 of the proposed Protocol replaces paragraph 1 of 
Article 11 of the Convention, which deals with credits. The 
revised provisions expands the description of persons who may 
be taxed by the United States to allow the United States to 
apply its estate and gift tax provisions to former citizens and 
long-term residents who lost their status as such for tax-
avoidance reasons.
    The Department of the Treasury and the Department of State 
cooperated in the negotiation of the proposed Protocol. It has 
the full approval of both Departments.
    Respectfully submitted,
                                                    Strobe Talbott.


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