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. We then review our cornerstone reform recommendation: a switch from our current system of Citizenship Based Taxation to Residency Based Taxation.
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 firstname.lastname@example.org.
Thanks for your on-going support.
DA TAXATION TASK FORCE
 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.
 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.
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 email@example.com.
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:
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: firstname.lastname@example.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.
On 1 August 2018 the US Treasury published a further set of proposed regulations implementing the transition taxes in the 2017 Tax Cuts and Jobs Act* (TCJA). On 9 August the regulations were published in the Federal Register, thus opening a 60 day comment period. We urge you to make a submission detailing how the taxes will impact the viability of your business and your family. Here’s how.
If you are an American abroad who owns a company registered abroad you will no doubt be aware of the misery Congress created for you when they passed the 2017 Tax Cuts and Jobs Act; they wacked you with 2 BRAND NEW TAXES! For those not in the know see the endnote to this notice [i] and know that our research shows these odious taxes will force many Americans abroad to close their businesses.
On 1 August 2018 the IRS issued further guidance for how to calculate the Repatriation Tax and the GILTI Tax. This reporting by The Tax Adviser blog describes the guidance at a high level. This reporting by Deloittes is more detailed. Neither account of the proposed regulations will be easily understood by those outside the tax accounting profession! Most important: there’s nothing in them that provides relief from Repat and GILTI for American business owners abroad.
Since the 2017 tax law was passed Democrats Abroad and other organisations representing American expats have been running campaigns demanding relief for American business owners abroad from the crushing burden brought by the Repat and GILTI taxes. (This Congressional outreach campaign demanding transition tax relief is still running so do take part if you have not done so already!) Many thousands of messages have been sent to Treasury, the IRS and members of Congressional tax writing committees. We know that we are making headway. We are told further changes to the laws are coming. And we need to keep pushing – by taking advantage of this open comment period to make our problems understood.
IF YOU ARE AN AMERICAN ABROAD IMPACTED BY REPATRIATION TAX AND GILTI TAX PLEASE MAKE A SUBMISSION TO THE IRS BEFORE THE 9 OCTOBER 2018 CLOSING DATE. Members of Congress who are close to the process recommend submissions include detailed descriptions of the business and how it and the American business owner will be impacted. Directions for submitting written or electronic statements or a request for a public hearing are detailed here in the Federal Register.
Address and post written submissions to:
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
Submissions can be hand-delivered Monday to Friday between 8am and 4pm at the Courier’s Desk in the IRS office at 1111 Constitution Avenue NW, Washington, DC 20224.
[i] In ushering in a new system whereby the profits of foreign corporations controlled by US companies would no longer be taxed by the U.S., Congress put into the 2017 Tax Cuts and Jobs Act a new system of taxation to tax 1) company profits generated from 1986 through 2017 that are being held offshore and 2) profits earned going forward and taxed by the jurisdiction where the business is incorporated at a lower rate than what they’d be taxed on by the US. Corporate lobbyists made sure there were lots of offsets and deductions available to corporate owners of foreign companies so that the tax liability from these 2 new “transition taxes” were almost entirely zeroed out - for corporations. Individual Americans who own companies in their countries of residence have no such deductions or offsets available to them.
Unlike corporate owners of foreign corporations, Americans abroad that own foreign corporations aren’t keeping profits in their country of residence to avoid paying U.S. tax on them; they use the profits of their businesses to provide for their families and save for the future. Many have no cash available to pay profits generated over the last 3 decades. Many cannot afford to pay tax on future profits to both the country of incorporations AND the U.S.
Congress, the IRS and Treasury will only address themselves to the serious crisis the Tax Cuts and Jobs Act has created for American business owners abroad if we continue to explain the impact and demand a fix. Please share this message and encourage the American expats you know who own companies in their country of residence to respond to Treasury’s invitation to provide comment.
The Taxation Task Force encourages Democrats Abroad Country Committees and Local Chapters to print some of these tri-fold, double-sided pamphlets about our Residency Based Taxation advocacy campaign to distribute at your events. It explains our campaign and provides languagesupporters can use to call or write to their elected representatives.
Please send questions or comments to TaxationTF@democratsabroad.org.
Thanks for your on-going support!
Democrats Abroad Taxation Task Force
Democrats Abroad was invited to be a part of a roundtable convened by Dutch politician and member of the European Parliament, Sophie In’t Veld, to discuss issues raised in a paper examining the Foreign Account Tax Compliance Act (FATCA) and its application to the international community and European affairs. Democrats Abroad does NOT involve itself in host country politics or policies and so has declined the invitation.
Democrats Abroad acts as the Democratic voice of all Americans abroad. The community of Americans abroad is as diverse in age, economic status, race, marital status, sexual identity and political persuasion as any other American community.
Uniquely, however, the community of Americans abroad also includes a cohort of U.S. citizens who have little or no connection to the United States other than by accident of birth - "Accidental Americans." Having no association or affiliation with U.S. culture or identity, nor a desire to maintain such artificial and bureaucratic ties, Accidental Americans bear the consequences of a citizenship condition that was not of their making.
Democrats Abroad acknowledges that the only remedy on offer to Accidentals currently requires them to incur significant effort and considerable, material cost to renounce their American citizenship. This is an effort no other nation on Earth imposes.
Democrats Abroad takes an interest in all Americans living abroad – those who are living abroad temporarily; those who are living abroad indefinitely; and those whose lives have always been firmly rooted in countries other than the U.S. We support policies that free and empower Americans to make responsible migration and citizenship decisions in the interest of themselves and their families. Democrats Abroad supports a citizenship renunciation remedy for Accidental Americans consistent with this view and we stand with Accidental Americans in their work to secure one.
12 mos to get Congress to exempt Americans abroad from the TCJA* “transition taxes”. Write them NOW!
Committed activism by Americans abroad has succeeded in persuading Treasury to give us a 12 month reprieve from "transition tax" payments due under the 2017 Tax Cuts and Jobs Act* (TCJA). All your letters to Treasury and Congressional leaders helped us achieve this important campaign milestone. We now focus our outreach on Congress. Please help by writing to your elected representatives and others in Congress now. Here's how.
The 2017 TCJA was drafted in such haste that a great many errors were made. The transition taxes in the law introduces will cause great harm to Americans business owners abroad. Congress is being lobbied heavily by groups like us seeking to have the errors that impact them addressed in a "corrections bill". We need an exemption from the Repatriation Tax and GILTI Tax regime in that "corrections bill"!
The "corrections bill" may be introduced some time over the summer as an attachment to a bill renewing funding for a government department or agency, or it may be introduced in the "lame duck" session after Election Day (or other). In any case, we have to use the time we have to keep our demands front of mind for Congress.
Whether you are an American business owner abroad or not, we ask that you participate in our Phase 2 campaign of outreach to members and officials in Congress demanding an exemption from the "transition taxes" in the TCJA. Please use this information and email message template to write to YOUR HOUSE AND SENATE MEMBERS as well as the key Congressional leaders.
Please let us know if you receive a communication back. Send it, or any questions or comments, to us at email@example.com.
The 15 June U.S. tax filing deadline for non-resident citizens is upon us - making this the perfect time to raise our voices and remind Congress that we’re NOT HAPPY that the Americans abroad community was completely forgotten in the 2017 "tax reform". And worse, we were subjected to yet another punitive tax provision because tax writers, once again, didn’t stop to consider the impact of complex new tax provisions on Americans abroad.
Let’s call Washington and remind Congress that we’re out here, we vote and we need their support for -
We all need to call Congress and make our voices heard.
All you need to make your voice heard on 15 June - International Tax Filing day is in this Campaign Guide.
Send any questions or comments to the DA Taxation Task Force at firstname.lastname@example.org.
On Monday 4 June the IRS made an announcement regarding new rules for Americans who must include Repatriation Taxes in their 2017 tax filing, due next Friday 15 June. On advice from international tax lawyer Monte Silver, our understanding of the impact of the change is as follows: As long as the taxpayer has less than $1m in Repatriation tax liability (which covers persons with about $6.5m in cash or $12.5m in non-cash or a mix of cash and non-cash non-repatriated profits) then they can delay their first payment by 1 year without incurring penalties (though there will be interest accruing) or having the entire liability accelerated (due and payable immediately). That gives us another year to work on a remedy before the worst of the transition taxes cut in for those who can least afford to pay.
Whilst this relief is welcome, it was a grave mistake for the 2017 Tax Cuts and Jobs Act to impose "transition taxes" on American business owners abroad. The provisions were enacted with no thought given to the impact on Americans living abroad. These taxes will cause enormous financial harm and force many Americans abroad to close their businesses.
Democrats Abroad, in association with the other Americans abroad advocacy groups, have been working for months to draw attention to this serious situation and demand a remedy. Nothing less than an amendment by Congress granting a full exemption for Americans abroad from the TCJA transition taxes will be acceptable. The law is double-taxing American business owners abroad - which does nothing to expand job growth and create economic opportunity.
It's not just unfair. It is damaging to U.S. business interests. Errors in tax policy writing like this underscore the urgent need for Congress to act decisively by passing a bill to enact a switch from Citizenship-based Taxation to Residency Based Taxation (RBT).
Under RBT Americans abroad will continue to report their U.S.-based income to the IRS, but will not report the income they earn and already pay tax on in their countries of residence. THAT'S what we have been working so very hard on. And then these new taxes came along! RBT remains the reform Americans abroad are waiting on.
Fortunately there is serious work going on in the House Ways & Means Committee on an RBT bill. We look forward to seeing our RBT advocacy work result in a bill on the floor of the House of Representatives this year. We are working hard to see that happen.
Please send questions or comments to email@example.com.
In March 2018 the IRS issued a notice on how it will implement the Passport Revocation Provision passed by Congress in 2015 as part of the FAST Act. Democrats Abroad and other groups representing Americans living outside of the U.S. provided input into the establishment of the rules and are generally pleased at the way the due process provisions protect Americans living abroad, especially those in conflict or otherwise unstable zones or in vulnerable positions.
Provisions in the code implementing the passport revocation provision also require Americans to include their Social Security numbers (SSNs) on passport and passport renewal applications or face a $500 fine. We have some concerns and questions about the use of SSNs and other and they are reflected in this submission to the House Ways & Means Social Security Subcommittee hearing on Social Security numbers and securing Americans' identities. We call on Congress to help us seek clarification from the State Department, Treasury, the IRS and Social Security Administration on: the use of SSNs; sharing of SSNs; obtaining SSNs from abroad; SSNs as federal ID; protection of expat Americans' SSNs from theft; and process for expat Americans for obtaining and challenging SS reports.
We hope for responses to our questions and will report back with comments from Congress or the agencies relevant to this inquiry.
Please send comments or questions to firstname.lastname@example.org.