Last month Congress passed a bill revising tax rules which apply to Americans who renounce their citizenship or for foreign nationals who have been residents of the US for eight of the previous 15 years and who relinquish their "green card''.

The move came after 18 months of intense debate and political maneuvering before President Clinton signed the bill.

Under Internal Revenue Code Section 877 if a US citizen relinquishes citizenship and is shown to be done primarily to save taxes, for ten years thereafter that person would continue to be taxed on their US source income and US situs assets as if they still were a US citizen.

With proper planning the above tax was readily avoided. Personally, the only individuals I ever met who gave up their citizenship did so solely for tax purposes.

With the exception of a few years in the late 1980's when the tax rate was as low as 27 percent, the tax rates for the very wealthy hovered in the 40 percent to 50 percent range.

After the disallowance of tax shelters in the mid-1980's, tax planning for the wealthy (individuals with an annual income over $120,000) became difficult.

When coupled with a maximum estate tax rate of 55 percent, the only meaningful tax planning available for some US individuals was to surrender their citizenship.

The newly-enacted Code Section 877A which imposes an "exit tax'' on individuals relinquishing their citizenship or "green card'' is not unique and currently in use in Australia and Canada.

Under the new law, individuals giving up citizenship or residency will be taxed on all unrealised gains on almost all the global property they own. This includes trust interests, but US real estate and holdings in specific retirement plans would be exempted, as well as the first $600,000 of gains. As with most US tax legislation, the actual bill is short on details which will eventually be announced by the Treasury Department.

Will this stop US individuals from surrendering their citizenship? I doubt it.

Because of the old rule, all US individuals I have been involved with who gave up their citizenship actually disposed of their US assets (and paid the capital gains tax of 28 percent) before doing so.

Once they did so, they did not wish to continue filing US returns for ten years thereafter.

So your choice is between paying a 28 percent capital gains tax now or having 55 percent of your estate go to the US government.

If you have made a lot of money to date -- and expect to continue to do so in the future -- the choice is rather easy.

This legislation is retroactive to February 6, 1995. Why? Rumour has it that an heir to a company that specialises in "canned fish'' gave up their US citizenship in March, 1995 and a vow was made not to let them off the "hook.'' Are there ways to either avoid, minimise, or defer this new tax? That is dependent, of course, on your individual circumstances. Is this something that you should consider? Possibly. There are many US citizens married to Bermudians who are long-term residents of the Island.

Besides the annual US tax return filings, they are going to have their estate taxed by both the Bermudian and US authorities. For individuals who aren't receiving a salary (and excluding $70,000 from income tax), their entire income is subject to US income tax. In some instances, a joint tax return is not made -- why drag a spouse's income into the US tax net? -- and a higher tax is being paid. Some individuals aren't receiving Social Security nor do they have Medicare coverage.

If you have children who are US citizens or have other relatives who are US citizens, you can always change your mind in the future, but with some difficulty.

What are some of the positives and negatives? POSITIVES No US income tax.

No US estate tax.

Certain interest income from US sources can be received free of tax.

Capital gains on the sale of US stock will be free to tax.

NEGATIVES Dividend income from US sources will be subject to a 30 percent withholding tax.

Social Security cheques will be subject to a 30 percent withholding tax.

Physical presence in the US will have to be limited to 122 days or 183 days a year (or you will be deemed to be a resident alien subject to US tax on your global income).

Estate and gift tax considerations must be made if you still have a US spouse.

The decision will not be an easy one and this column has only covered a few of the areas that need to be fully explored before a conclusion is reached.

You should, of course, check with your own US tax consultant about how this new legislation will affect you since tax advice varies with individual circumstances.

James Paul Sabo, CPA, is the President of Expatriate Tax Services, PO Box 617, Bernardsville, New Jersey and is associated with Gulfstream Financial Ltd. in Bermuda.