Taxation

The Democrats Abroad Taxation Task Force (TTF) was formed to 1) research U.S. tax policy as it affects Americans living outside the U.S. and 2) consider, develop and execute initiatives aimed at enacting reforms that resolve adverse impacts.

Democrats Abroad has published a "laundry list" of tax code provisions that discriminate against Americans abroad.  The list is here:  smarturl.it/HowToFix23

We fear Congress is too divided to find remedies for each of the many and myriad tax problems we have identified.  But we are determined to demand it of them.

We are committed to Residency Based Taxation as a remedy, requiring little effort by Congress, that addresses the vast majority of the tax problems faced by Americans abroad.

Further, we will continue to promote the elimination of FATCA reporting for the accounts of Americans abroad, the repeal of the Windfall Elimination Provision, an exemption for American business owners abroad from the transition taxes in the 2017 Tax Cuts and Jobs Act and a citizenship remedy for "accidental Americans."

We support tax reforms that help reduce inequality, boost opportunity for all Americans and raise enough revenue, predominantly from those with the greatest ability to pay, to meet public needs.

Democrats Abroad Taxation Task Force

TaxationTF@democratsabroad.org

DA Taxation Leadership:

Carmelan Polce
| Taxation Task Force Chair
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    News

    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

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    September 2018 Tax Advocacy Door Knock Report

    The Taxation Task Force had 2 full days of meetings in Washington DC the week of Monday 17 September.  Thanks so much to Rebecca Lammers (DA UK), Tim Lawler (DA Spain), David Miller (DA Denmark), Chip Seward (DA France) and Julian Becker (DA UK) for dashing back and forth across the wet and windy Capitol and for making such valuable contributions to our outreach. 

    The meetings had the purpose of furthering our efforts to explain how the Internal Revenue Code seriously discriminates against Americans living abroad because many tax laws are regulations have been enacted over time without due consideration for the harm they can do to Americans living outside the U.S.[1] We then review our cornerstone reform recommendation: a switch from our current system of Citizenship Based Taxation to Residency Based Taxation.[2]

    Last week’s meetings were focused on House Democrats who, as we know, have been totally and completely locked out of all tax policy writing in the 115th Congress.  As the Residency Based Taxation (RBT) proposal being championed by Rep George Holding (R-NC) advances towards bill language it will be important for Democrats to understand the serious problems this critical reform will address for Americans abroad so they can support it.

    As you will appreciate, achieving bi-partisan support on anything is a major ask these days so these discussions are very important.  Our outreach is concentrated on the influential Dem members of the Ways & Means Committee, members of the Americans Abroad Caucus and members of Congress who have lived abroad or who have strong ties to some of us who do.  We hope that within this group we will find co-sponsors for a RBT bill when it is ready.  All Congressional outreach is important. Use this guide to call or write to your members of Congress asking them to support RBT.

    The question we get most frequently is “When will the Residency Based Taxation be made public?”.

    There are still 2 consequential matters left to by resolved.  Once they are resolved the Joint Committee on Taxation can complete its work to "score" the proposal so we know what it will cost (the ambition is for it to be revenue-neutral) and the proposal can be converted into the language of a bill.  Bills that enact major reforms to existing law are often not terribly easy to read, as they need to make references to all the areas of the existing Internal Revenue Code that require changes to enact the new law.  Hopefully we'll get a really good summary of the law in the introduction to the bill that incorporates all the provisions most important to those of us who will be impacted, including: eligibility; transitioning provisions; maintaining Non-resident Taxpayer status; programs for becoming tax compliant; and anti-avoidance mechanisms.

    REPATRIATION AND GILTI TAX REFORM UPDATES

    Ways & Means Committee members tell us that relief for American business owners abroad from the "transition taxes" in the Tax Cuts and Jobs Act (Repatriation Tax and GILTI Tax) rests in the hands of Treasury.  As noted here, there are two sets of guidelines still to come from Treasury on the implementation of Repat and GILTI.  We need to remind Treasury that we are eagerly awaiting their action to arrange relief for American business owners abroad.  Here is support for "transition tax" activists who want to reach out to Treasury and to Congress.

    Lastly, we are going back to Capitol Hill NEXT WEEK for more meetings with House Democrats about the RBT proposal.  If you're looking for an opportunity to reach out to YOUR Representative about the need for a switch from Citizenship based taxation to Residency based taxation then now would be a great time.

    Please send comments or questions to taxationtf@democratsabroad.org.

    Thanks for your on-going support.

    Democratically yours,

    DA TAXATION TASK FORCE

     

    [1] Sadly, we have fresh evidence of this recurring dynamic: the transition taxes (Repatriation Tax and GILTI Tax) built into the 2017 Tax Cuts and Jobs Act will cause enormous financial harm to American business owners abroad. The law, of course, was raced to a vote in record speed and includes a large number of design flaws caused by rushed and non-partisan drafting. 

    [2] Further, we ask for support for FATCA reform in order to eliminate the reporting of accounts of Americans abroad in their countries of residence, a range of FBAR reforms especially eliminating FATCA and FBAR duplicative reporting, the elimination of the Windfall Eliminations Provision and a citizenship renunciation solution for Americans abroad. We also ask them to join the Americans Abroad Caucus and invite them to meet with us when they travel abroad.

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    ADDITIONAL Repatriation Tax Guidelines - Still no relief. Write to Congress and Treasury today.

    Following on from guidelines published on August 1, Treasury has issued yet another set of guidelines to tax advisers on the Repatriation Tax passed in the GOP 2017 Tax Cuts and Jobs Act.  You can read reporting on the guidelines here or read the guidelines themselves here, but don't expect to find in them ANY RELIEF for American business owners abroad.  

    We continue to hear from members who own non-US companies about the financial (and psychological) havoc these new taxes are wreaking on their businesses - and their families.  We carry those tragic stories and case studies with us when we meet with lawmakers about tax reform, so please keep sending us messages about how you, your family and your company are experiencing the new taxes RUSHED into place in the 2017 Tax Cuts and Jobs Act.  

    More importantly, however, please keep sending messages to your members of Congress!!  Your Senators and Representative need to hear from you.   You can use the language in this updated campaign guide to reach out to your elected representatives.   The guide also includes a list of members of Congress and key aides driving tax policy writing.  You can write to them as well but nothing is as effective as outreach to your elected representatives.

    REMINDER:   The Open Comment period on Treasury's August 1, 2018 Repatriation Tax and GILTI Tax guidelines closes on Tuesday, October 9, 2018.  Transition Tax campaigner Monte Silver has prepared this advice to assist those who wish to make a submission to Treasury.   We urge all owners of foreign companies, whether they live in the US or outside the US, to make a submission.  

    IMPORTANT:  There are 2 further sets of Repatriation and GILTI Tax guidelines coming from Treasury!  We don't know as yet whether those guidelines will include relief for individuals who are shareholders in foreign corporations.  Hearing from those gravely impacted by these "transition taxes" reminds Treasury that relief is desperately needed.

    Please send comments and questions to taxationtf@democratsabroad.org.

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    September 2018 Residency Based Taxation Campaign Guide for Congressional Outreach - call now!

    Summer 2018 is ending with House Republicans announcing Tax Cuts 2.0. It's a bill that makes permanent the 2017 Tax Act’s temporary cuts to individual tax rates, expands tax-free savings options and adds incentives for investing in start up businesses. It does not, at this point, include a provision to enact Residency Based Taxation (RBT).  Call or write Congress and demand one!

    Those working on the RBT bill that was meant to be a component of Tax Cuts 2.0 told us last week that it was incomplete* and so we are disappointed but not surprised by the announcement.

    Democrats Abroad will be on Capitol Hill next week to keep up the pressure on lawmakers. We will be making the case for these reforms critical to the Americans abroad community:

    • Residency Based Taxation;
    • an exemption from the “transition taxes” in the 2017 tax law to prevent the destruction of many thousand of companies owned by Americans living abroad;
    • HR 2136, the “Overseas Financial Access Act” – to eliminate the foreign financial accounts of Americans living abroad from reporting under FATCA;
    • HR 1205, the “Social Security Fairness Act” - to repeal the Windfall Elimination Provision that prevents Americans abroad with pensions in their countries of residence from claiming the full amount of Social Security payments owed to them;
    • a remedy for Accidental Americans who want only to shed unwanted U.S. citizenship without lengthy procedures and undo penalties.

    You can support our work by calling your elected representatives this week and asking for their support. ALL YOU NEED IS IN THIS CAMPAIGN GUIDE.

    Send questions or comments to the Taxation Task Force:  taxationtf@democratsabroad.org

    * New Passive Foreign Investment Company (PFIC) definitions are coming from Ways & Means Committee staffers and new Transition Tax regulations are coming from Treasury. These will dovetail with provisions in the RBT bill.   

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