Tax Advocacy Update as we enter the 2018 Midterm Election Congressional Recess

Last week the U.S. Senate followed the U.S. House of Representatives into recess until after the 6 November midterm elections. Here are some updates on the advocacy work of the DemsAbroad Taxation Task Force as we leave the regular session of the 115th Congress behind and anticipate the “lame duck” session.

· The Residency Based Taxation (RBT) proposal being championed by Rep George Holding (R-NC) has been at a standstill since August. We are told that further work on the scoring analysis by the Joint Committee on Taxation (JCT) awaits 1) further releases of regulatory guidance by Treasury on the implementation of the Tax Cuts and Jobs Act, specifically the 2 new “transition taxes” it introduced that impact American business owners abroad (Repatriation Tax and GILTI Tax), and 2) new definitions for what qualifies as a Passive Foreign Investment Company (PFIC), which are subject to highly punitive tax treatment.

Our hope is that these matters will be resolved in time for JCT to complete its cost analysis and for House Ways & Means Committee staffers to produce a RBT bill to be introduced in the “lame duck” session. We understand that there will be a Tax Cuts and Jobs Act “technical corrections” bill between Election Day and the end of the calendar year, but we do not expect a fix for the “transition taxes” to be a part of that bill.

We liaise continuously with key members of the House and with our colleague organisations who are also working in support of RBT. If there is any progress made on the RBT proposal we will surely pass it along.

· Treasury released guidelines for implementing the transition taxes in the Tax Cuts and Jobs Act on 1 August 2018 and opened a 60 day comment period for submissions in response to the guidance. Indications suggest Treasury was inundated with comments from individual and corporate owners of businesses abroad. Thanks to all who made submissions in response to our call for comments. The IRS has very abruptly announced it is holding hearings on the regulations this coming Tuesday 22 October, with witnesses invited to speak for 10 minutes. We anticipate a lively exchange of comments and hope thereafter that the IRS embraces the need for relief for American individuals who own foreign businesses. We will forward any developments.

· Democrats Abroad has been to Capitol Hill twice since the end of the August recess for meetings with members of Congress about expat tax reform. Our outreach, at this point, is concentrated on a) Democrats on the important House Ways & Means Committee, b) members of the House Americans Abroad caucus or who have a connection to the Americans abroad community, and c) members who are friends of Democrats Abroad or have themselves lived outside the U.S. As Congressional Democrats were fully and completely locked out of the 2017 tax reform process we are finding ourselves spending a lot of time educating members about the new taxes on Americans abroad introduced in the 2017 Tax Cuts and Jobs Act. We use it to reiterate our support for a switch from Citizenship Based Taxation to Residency Based Taxation (RBT), with the goal of finding Democrats who will act as RBT bill co-sponsors when the bill is finally produced.

Important Democrats Abroad tax reform position papers we leave behind at meetings on Capitol Hill are here and here. Our discussions about the issues are often fruitful and encouraging. On Capitol Hill, however, attention has well and truly shifted to the midterm elections. House offices are manned by a skeleton staff - aides having been re-deployed to electoral efforts in the district - and meaningful responses to policy queries are not forthcoming.

The most high potency outreach to Congress, however, is from you to your elected officials. And there’s no better time to generate attention from candidates for office than when they are asking for your vote. Our expat tax reform campaign guide provides language for phone calls and written messages of all kinds and we encourage you to consult it for support to communicate with your member of the House of Representatives or Senators.

Lastly, the other very very important thing you can do to support and progress the tax advocacy work of Democrats Abroad and others to enact a switch to Residency Based Taxation IS TO VOTE. A strong, blue, voter abroad turnout is critical to making our concerns a priority for members of Congress. If you haven’t yet voted for many states it is not too late; go to votefromabroad.org to request a ballot. If you have voted, thanks so much for expanding the profile of voters living abroad and for helping to build that blue wave.

Please contact us at any time with questions or comments.

Democrats Abroad Taxation Task Force

taxationtf@democratsabroad.org