TAX CUTS & JOBS ACT HAS A NASTY SURPRISE FOR BUSINESS OWNERS ABROAD
A great many flaws exist in the Tax Cuts & Jobs Act due to inadequate consultation and hasty drafting. One of those flaws causes enormous harm for Americans abroad who own businesses in their countries of residence.
If you are an overseas American with a business abroad, click here to reach out to Washington and demand a remedy!
The new tax law ushers in a system of Territorial Taxation for Corporations. The new system has 2 troubling components.
- Repatriation Tax: In transitioning to the new system, overseas subsidiaries of U.S. corporations who have profits that have not been repatriated to the U.S. parent company will be subjected to a Repatriation Tax on profits going back to 1986. The profits will be deemed to have been repatriated to the U.S. parent, even if there is no movement of cash or on paper, and then taxed at a discounted corporate rate, after certain offsets and credits for tax paid to the country of incorporation. If the offshore company is owned by a U.S. Person living abroad, rather than a U.S.- based corporation, the deemed profits are afforded no offsets nor credits for tax already paid. Clearly, this is an error in drafting.
- Global Intangible Low-Tax Income (GILTI) Tax: Disregard the name entirely because it is a misnomer. Going forward foreign businesses owned by U.S. based corporations and individuals and U.S. Persons living abroad will, again, be subjected to U.S. corporate tax on their profits, less about 10%, whether or not the profits are repatriated to the U.S.. As with the Repatriation Tax corporate owners of foreign businesses are afforded deductions (50%) and offsets (80% of foreign taxes paid) (in many instances the result will be no taxes owing) that U.S. Persons owning foreign businesses are not afforded. The U.S. Person owner of a foreign business will be paying tax twice on the same dollar of income. Clearly, this is another grievous error in drafting.
Last week a Democrats Abroad delegation spoke to members of the Senate Finance Committee and House Ways and Means Committee about, amongst other things, the need for an urgent remedy for this policy flaw. Congress is working on an Omnibus appropriations bill to approve spending for this year that must be passed no later than 23 March. This matter is on, we understand, a lengthy list of Tax Cuts and Jobs Act problems that need to be addressed. Sadly, we also understand that very few of them will be addressed in the appropriations bill.
Demanding a remedy
Democrats Abroad and a number of others are demanding an urgent remedy for this policy flaw. Our proposal:
Americans abroad with interests in foreign corporations should be exempt from the Repatriation Tax and from the GILTI regime for any given year so long as two conditions are met.
- We meet the conditions required for exemption under IRC Section 911 (bona fide non-resident for tax purposes), and
- We are individual U.S. shareholders.
In the absence of Congressional action, we will urge the Treasury and IRS to take the following actions:
- Issue an immediate notice stating that for Americans abroad, the first payment under IRC Section 965 (transition tax on untaxed foreign earnings) is due the earlier of October 15, 2018, or the issuance of further guidance.
- Issue a further notice in line with our proposal.
As in all matters requiring the attention of lawmakers and regulators, robust outreach from affected parties is essential. Repatriation Tax declarations are to be made in 2017 filings, so time is of the essence.
Time to take action!
The script for this letter has been prepared by third party taxation advocates, in collaboration with Democrats Abroad’s Taxation Task Force. Democrats Abroad supports the collaborative, non-partisan campaign behind this grassroots advocacy initiative and believes it is essential for addressing this problem urgently.
Letter Campaign Contacts
Department of Treasury
Mr David Kautter
Assistant Secretary of the Treasury – Tax Policy
Mr Chip Harter
Deputy Assistant Secretary (International Tax Affairs)
Mr William Paul
Acting Chief Counsel, IRS
Assistant to Mr Paul
Leni C Perkins
Office of IRS Chief Counsel (Repatriation Tax)
Taxation Task Force
House Ways & Means Committee
Chief Tax Counsel, Ways & Means Committee
Tax Counsel, International Matters, House Ways & Means Committee
Tax Policy, Leading Democrat Richard Neal, House Ways & Means Committee
Senate Finance Committee
Chief Tax Counsel - Republicans, Senate Finance Commitee
Chief Counsel- Democrats, Senate Finance Committee
We also encourage calling your representatives in Congress, whether they be a Democrat or Republican. On this page you’ll find contact information for your Senator or Representative, along with useful tips for making effective calls to Congress.
Demand a remedy for the Repatriation and GILTI Taxes!
Please contact us at any time with questions: email@example.com
Chair, Democrats Abroad Canada
Ride with us by bus to Washington, DC. Let President Trump know on Saturday, March 24th that we stand with the brave kids and families of Parkland, FL. Show your support for gun control now and vow that #NeverAgain shall students die for the lack of common sense in gun legislation.
Register now for the DA Canada Delegation Charter Bus. Round-trip ticket is $150 CAD. We have places for 56 persons. Ten places are reserved for US citizen high school students to ride free. Bus pick-ups in Ottawa, Toronto, Burlington and Fort Erie.
The bus leaves Ottawa on Friday, March 23rd, mid-afternoon, then heads to Toronto for a 8:00-9:00 pm pick-up. We are also scheduling stops in Burlington and Fort Erie. Thereafter, we will travel overnight in a Coach Canada deluxe charter bus to Washington, DC, rolling up to Pennsylvania Ave on Saturday, March 24th. After attending the rally and march, we will leave DC Saturday night and travel overnight back to Ontario, Canada. The round-trip cost is $150 CAD on a first come first service basis.
"At the Democratic National Committee Meeting last week, a resolution was passed to support The March for Our Lives. Ken Sherman, DNC member in attendance, was so moved by the energy in the room, he notified us from the floor of the meeting that he will sponsor the first 10 US citizen high school students to join us! We are most grateful for his generosity and so looking forward to having these special guests and families on the bus."
Please sign up today! If you have one high school child you'd like to bring and have considered for sponsorship, we plan to provide one free ride per family, up to 10 families! Please email firstname.lastname@example.org with any questions.
Register Today! Ride with us by bus to Washington, DC. Let President Trump know on Saturday, March 24th that we stand with the brave kids and families of Parkland, FL. Show your support for gun control now and vow that #NeverAgain shall students die for the lack of common sense in gun legislation. The bus leaves Ottawa on Friday, March 23rd, late afternoon, then heads to Toronto for a 8:00-9:00 pm pick-up. Stops are schduled in Burlington and Fort Erie. Thereafter, we will travel overnight in a Coach Canada deluxe charter bus to Washington, DC, rolling up to Pennsylvania Ave on Saturday, March 24th. After attending the rally and march, we will leave DC Saturday night and travel overnight back to Ontario, Canada. The round-trip cost is $150 CAD on a first come first service basis. Please sign up today! If you have one high school child you'd like to bring and have considered for sponsorship, we plan to provide one free ride per family, up to 10 families! Please email email@example.com with any questions.
The US Consulate General in Vancouver will be returning to Victoria to host a "Pop-Up Consulate" for US citizens and DA Victoria will be hosting a Voter Registration event at the same time.
We'll be helping US citizens register to vote and to request their ballots for the 2018 Midterm Elections. Every overseas voter may vote in the upcoming elections! But overseas voters need to send in the form to request a ballot every calendar year in which they wish to vote. Voter registration is always nonpartisan; we provide voter registration support to every US citizen who requests help.
If you'd like to volunteer to help with DA Victoria's voter registration events, please email us at: firstname.lastname@example.org
PLEASE NOTE: Appointments for the Pop-Up Consulate may still be available. Please call the US Consulate in Vancouver at 604-685-4311 x340 or email them at: VancouverACS@state.gov
Consulate staff will be accepting passport applications, passport renewals, "Consular Report of Birth Abroad" applications and notary services. An appointment is required and there are fees for these services.
Know other US citizens living in the area? The Pop-Up Consulate and the voter registration help is available for all US citizens, so please pass this information on to any other US citizens you know.
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