Tax Fairness for Americans Abroad Act HR 7358

Yesterday afternoon, in the midst of all sorts of border wall funding related chaos across Capitol Hill, Rep. George Holding (R-NC) introduced the Tax Fairness for Americans Abroad Act HR 7358 on the floor of the U.S. House of Representatives. The bill would enact a switch from our current system of citizenship-based taxation to residency-based taxation, a move that would benefit nearly all Americans living abroad. A summary of the bill and its provisions, as well as a link to the bill itself, can be found here. Please spread the word to fellow members and on your social media platforms!

Though the bill is not perfect, it is a milestone in our expat tax advocacy work; we now have a legislative framework for refining and clarifying work in the 116^th Congress on a bill implementing residency based taxation that will satisfy our key ambitions, including: accommodating of all Americans abroad, easy to transition into, protected from abuse by tax evaders and bad actors, and revenue-neutral to the federal government.

As our statement says, we have liaised continuously with House Democrats on the development and introduction of the bill and we look forward to picking this up with them again in January.

H.R. 7358 – Tax Fairness for Americans Abroad Act of 2018

The proposal outlined below would effectively end the current citizenship-based taxation system and transition to a system that provides territoriality for individuals – often referred to as residence- based taxation. By taking this first step toward ending the onerous burdens of citizenship-based taxation, Americans will become more competitive in the international job market and free to pursue opportunities around the world.

Under this new system, qualified nonresident citizens will no longer be taxed by the U.S. on their foreign source income while they are resident abroad; however, they will remain subject to tax on their U.S. source income.

Eligibility

In order to obtain qualified nonresident citizen status, an individual must be a nonresident citizen and make an election to be taxed as such. Individuals will make an annual election to certify they remain in compliance with the eligibility requirements.

Under this proposal, a nonresident citizen is defined as in individual that:

• Is a citizen of the United States,

• Has a tax home in a foreign country,

• Is in full compliance with U.S. income tax laws for the previous 3 years, and • Either:

a) establishes that he has been a bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year, or

b) is present in a foreign country or countries during at least 330 full days during such taxable year

Tax Treatment

Once an individual meets the qualifications to become a nonresident citizen, they may elect to be taxed as a qualified nonresident citizen.

Those electing to be taxed as qualified nonresident citizens will be exempt from taxation on, and shall exclude from gross income, their foreign source income. This includes both foreign earned income (as defined in section 911(b)) and foreign unearned income (defined as income other than foreign earned income that is sourced outside the U.S).

Under this proposal a qualified nonresident citizen will remain subject to tax on any U.S. source income.

While individuals will not be taxed on gain from the sale of foreign personal property attributable to their time as a qualified nonresident citizen, they will still be taxed on any gain attributable to their time as a resident of the U.S. In other words, if an individual holds a foreign asset prior to their election of qualified nonresident citizen status and then sells said asset while they are a qualified nonresident citizen, the individual will only owe U.S. tax on the portion of gain attributable to the period prior to their change in status.

H.R. 7358 – Tax Fairness for Americans Abroad Act of 2018 Tax Fairness for Americans Abroad Act – Summary

This bill would take the first step toward ending citizenship-based taxation by essentially taxing only those individuals that are resident in the United States or have income that is connected to the United States.

Under this bill, nonresident citizens that make an election to be taxed as qualified nonresident citizens will be exempt from taxation on, and will exclude from gross income, their foreign source income. All nonresident citizens will, however, remain subject to tax on any U.S. source income.

Current Law – Citizenship-Based Taxation

Our system of citizenship-based taxation, which taxes all citizens regardless of where the income is earned or where the citizen resides, places a unique burden on American citizens. This form of taxation stands in stark contrast to the rest of the world, as nearly every other country has adopted some form of territorial or residence-based taxation, and thus only taxes the income of individuals resident in the respective country – Eritrea is the only other country that operates a citizenship-based taxation regime.

In addition to creating costly and onerous compliance requirements, citizenship-based taxation often subjects many Americans abroad to double taxation and can severely hamper their ability to save for retirement. Further, citizenship-based taxation places increased burdens on Americans working abroad, which discourages businesses from hiring U.S. citizens for jobs in foreign jurisdictions. In fact, it can often cost as much as 40% more to hire an American than their foreign counterpart.

Benefit of the Tax Fairness for Americans Abroad Act

The Tax Fairness for American Abroad Act would create a tax regime that is simpler, fairer, and more competitive for Americans around the world. This bill takes a meaningful step to address the discriminatory double taxation of Americans abroad as well as ease the burden of dual tax filing requirements. Further, this bill will ensure that Americans around the world are able to accurately plan and save for their future without the fear of punishing tax liabilities.

American citizens abroad promote U.S. businesses, support U.S. exports, and represent U.S. interests throughout communities around the globe. By leveling the competitive playing field, this bill will allow more Americans to enter into the global workforce, thus encouraging both domestic job growth and increased reliance on U.S. products and services in global operations.

The Executive Committee of Democrats Abroad Germany has developed and adopted the following rules, which shall apply to ALL chapter elections.

1. Position.

a) A Chapter Chair must be elected in accordance with these rules and the DAG By-Laws.

b) It is strongly encouraged that the Chapters elect a Chapter board as well. These positions may include a Chapter Vice Chair, for which gender balance rules shall apply, and other positions as deemed necessary for the running of the chapter.

c) Board positions elected at the same meeting as the Chapter Chair (i.e., not appointed positions) may not be removed from office except by a vote of the Executive Committee.

d) Chapters may opt to elect only a Chapter Chair, in which case the Chapter Chair shall have sole authority for appointing or removing any chapter positions that he or she may deem appropriate to create. The Chapter Chair shall retain the right of removal for appointed position holders for any reason at any time.

1. Term of office.

1. A Chapter Chair’s (and Chapter Board members, should they be elected) term of office shall begin at the time of his or her election and shall end upon the election of a new Chapter Chair or the removal or resignation of such Chapter Chair in accordance with the bylaws of DAG.

2. Subject to section 2c below, no person may serve three full terms consecutively. Any term of office of more than 15 months shall be deemed to be a full term.

3. In the event that a chapter cannot obtain a qualifying replacement for a Chapter Chair who has served two consecutive full terms, a third term may be authorized by a 2/3 vote of the DAG Executive Committee.

1. Dates of Election. Elections for Chapter Chair shall be held during the first calendar quarter of each odd numbered year, but in no case later than 7 days prior to the DAG Annual General Meeting for such odd-numbered year.

1. Eligibility to serve as chapter chair. No person may be elected to the position of Chapter Chair who:

1. at the time of the election has been a registered member of the relevant chapter (as determined by the official DAG membership database as of the date of the election) for fewer than 28 days or

2. has been removed for cause from an elected position within DAG during the 24-month period preceding the election date and has not obtained the approval of a majority of the DAG Executive Committee for his or her candidacy.

1. Election procedures.

1. Robert’s Rules of Order: Elections shall be held in accordance with Robert’s Rules of Order and these rules. These rules shall take precedence over Robert’s Rules of Order in any and all cases of conflict.

2. Announcement of Election:

1. The current Chapter Chair (or, in the absence of a Chapter Chair for a chapter, the Chair of DAG) shall via email notify the membership of the relevant chapter (as determined by the official DAG membership database for such chapter as of the date of such notice) of the election date no earlier than 60 and no later than 28 days in advance.

2. The announcement will attach a copy of these rules.

3. The announcement will include the location, directions to the location, and the date and time of the election.

4. The location of the election shall be a place reasonably accessible to the members of the relevant chapter.

5. If an election is held on a weekday, the election process shall not begin before 1930 or later than 2100 (7:30/9:00 pm) that day. If an election is held on a Saturday or a Sunday, the election may not begin before 1300 or later than 2100 (1:00/9:00 pm).

3. Nominations.

1. Any member of the relevant chapter may be nominated or may self-nominate without a second for the position of Chapter Chair so long as the nomination or self-nomination is made no later than 14 days prior to the election date. Nominations may also be made from the floor at the election, if supported by a second from among the membership. Persons nominated must agree to the nomination to be an eligible candidate. Only persons nominated in accordance with the procedure set out above shall be eligible for election.

2. Nominations or self-nominations made 14 days or more prior to the election shall be communicated by the DAG Secretary or Chair to the entire membership of the relevant chapter no later than 10 days prior to the election in the same manner as the election announcement and may be accompanied by a statement of no more than 250 words supporting the candidacy. Alternatively, a link to a statement posted on the official Democrats Abroad website may be provided. In all cases the nominated person must approve the candidate statement.

3. The notification of nomination and the candidate statement do not have to be included in the same communication, but if they are not, the message that does not contain the candidate statement may only state the name of the individual and the fact that he or she has been nominated for the position.

4. Campaigns.

1. Individual campaigns for the position of Chapter Chair are allowed and encouraged, but in no circumstance may the chapter membership be contacted using the official DAG membership database for such chapter except for the nomination notices and candidate statements set out in section 5.c. above.

2. Personal information from the official DAG membership database, including the names, email addresses, physical addresses, phone/fax/cell phone numbers or other contact details of any member of the chapter, shall not be disclosed to any candidate or any supporter of a candidate and shall be subject to all the restrictions on the use of the membership database as have been established in the bylaws or by the DAG Executive Committee.

3. Candidates may distribute flyers or campaign literature at meetings of the relevant chapter without restriction so long as the conduct of the meeting itself is not interrupted or disturbed.

5. Eligible Voters. All qualified members of a chapter shall be entitled to vote.

6. Election Day procedures.

1. All elections shall take place at the time, date and place specified in the election notice distributed pursuant to section 5.b. above. The current chapter chair shall ensure that adequate election materials are available, e.g. ballots, pens, displayable sheets for candidate names, etc.

2. A minimum of 12 members present and voting shall be required to hold an election if there is more than one candidate for Chapter Chair. Only members present at the meeting may vote; no proxies or prior/later balloting shall be allowed. If an election is held in the absence of the necessary quorum but otherwise in accordance with these rules, the Chapter Chair so elected may apply to the DAG Executive Committee for certification of the election results. As long as no member of the relevant chapter has challenged the election, the DAG Executive Committee by a 2/3 vote may certify the results of such election, in which case the election shall be deemed valid as if it had been held in the presence of a quorum.

3. If the current Chapter Chair is a candidate, the election meeting shall be temporarily chaired by an individual who is not a candidate or acting for a candidate (the “Temporary Chair”). The Temporary Chair shall be nominated by the current Chapter Chair and serve if a majority of those present approve by voice vote or hand count.

4. The Chapter Chair (or Temporary Chair, as the case may be) shall call for any nominations, including self-nominations, from the floor; however, as stated above in Rule 5(c)(1), a second from among the members present and voting must be obtained prior to the name being added to the list of eligible candidates. Votes for write-in candidates shall be invalid and shall not be counted.

5. Prior to any vote being taken, each candidate shall be allowed to address the chapter for ten minutes on her/his candidacy. A candidate not present may be represented by another member of the chapter, but that member must have been designated by the candidate, in writing/email or by telephone, prior to the election meeting and verifiable at the time of the meeting. No seconding speeches shall be allowed. The order of speeches shall be determined by lot.

6. The Chapter Chair (or Temporary Chair, as the case may be) shall name two election monitors, who shall ensure that only eligible voters obtain ballots and shall be responsible for counting all ballots. No monitor may be a candidate or a person representing a candidate. Each candidate shall be allowed to name one witness (other than himself or herself) to the counting of ballots.

7. Elections shall be conducted by written ballot with the names of all candidates who have been nominated prior to the meeting as well as a space for candidates nominated from the floor. Each ballot must be signed by the member to allow for later verification; if the signature is illegible the member must print his or her name below it.

8. A majority vote (that is, 50% plus 1 of the members present and voting) shall be required for election. If, after counting all ballots, no majority exists, the person with the lowest number of votes shall be disqualified and a new ballot conducted. This process shall continue until a candidate receives a majority of the ballots cast.

9. If there is only one candidate for Chapter Chair at the time of the vote, a voice vote may be conducted, and no paper ballots will be necessary.

10. The results of each ballot shall be announced by the election monitors; once a candidate has received a majority of the votes cast, the winner shall be announced by the Chapter Chair (or Temporary Chair, as the case may be). The results shall be certified by the signature of the Chapter Chair (or Temporary Chair, as the case may be) and the two election monitors and communicated to the Chair, or in the absence of the Chair, the Vice Chair, of DAG within 24 hours.

11. Upon the announcement of the election winner, the current Chapter Chair shall turn over conduct of the meeting to the new Chapter Chair.

12. For all contested elections, all ballots shall be retained by the Temporary Chair and made available in case of a challenge to the election.

1. Challenge to Election Results. Any challenge to the announced election results must be made by two members present and voting and the reasons for the challenge must be communicated to the Chair or Vice Chair of DAG within 72 hours of the election. The DAG Chair or Vice Chair shall investigate the challenge and report to the Executive Committee. The DAG Executive Committee shall consider the report of the DAG Chair or Vice Chair, as the case may be, and, by majority vote without the current Chapter Chair of the affected chapter voting, shall determine whether the result shall stand, someone other than the announced winner be declared the winner or a new election be held. If a new election is mandated, the DAG Executive Committee may name an observer for the conduct of the new election. The determination of the DAG Executive Committee on any challenge shall be final. The DAG Executive Committee by a 2/3 vote may annul any election where, in its judgment, improper electoral activity has occurred. This shall include, but not be limited to, the infiltration of a chapter by an outside group that the Executive Committee, in its judgment, believes does not support the DNC as per the DNC bylaws.

1. DAG Bylaws. In the event of any conflict between these rules and the DAG bylaws (not including these rules), the DAG bylaws shall prevail. Any capitalized terms used but not defined in these rules shall have the meanings assigned to them in the DAG bylaws.

16 December 2006

Amended, 19 November 2018