Two rulings from the US Court of Appeals for the Federal Circuit, handed down on 31 August 2026, have closed off a treaty-based defense that Americans living overseas had been using to avoid the 3.8% Net Investment Income Tax (NIIT), according to Forbes contributor Virginia La Torre Jeker, a US international tax attorney. Both decisions reversed earlier, taxpayer-friendly rulings from the US Court of Federal Claims.
In Christensen v. United States (No. 24-1284), US citizens living in France had sold shares of a French company, paid French tax on the gain, and argued that the US–France income tax treaty allowed them to credit that French tax against their NIIT liability. The Federal Circuit rejected the argument. In the companion case, Estate of Bruyea v. United States (No. 25-1563), a US citizen living in Canada made the same treaty-credit argument over roughly $263,500 of NIIT owed on Canadian real-estate gains — and lost on the same grounds.
The NIIT is a 3.8% tax on net investment income above set thresholds ($200,000 for single filers, $250,000 for joint filers, neither indexed for inflation), enacted in 2010 and effective since 2013. It sits in a separate part of the tax code, IRC Chapter 2A, and under the Federal Circuit’s reading, foreign tax credits — which offset only Chapter 1 tax — cannot be used to reduce it. Jeker’s reporting notes the ruling was treated as consistent with prior case law involving the US treaties with Italy and South Korea.
The practical effect, per Jeker’s analysis, is that Americans and other US-taxable investors in France, Canada and comparable high-tax treaty jurisdictions may now owe the full 3.8% NIIT on top of the foreign tax they have already paid, with no treaty relief available — and that taxpayers whose still-open returns relied on the treaty-credit argument could face IRS reassessment.
This is a US federal tax-law development rather than any change to French tax rules: nothing about France’s own taxation of the underlying gains has changed. The story concerns how the United States, not France, now treats Americans who hold French investments or live in France while remaining US taxpayers.
References
Forbes – International Investors Lose Key Defense Against The 3.8% Investment Tax
