Mid-summer is by no means the most dynamic time of the year on Capitol Hill but we are expecting a few interesting things to happen for Americans abroad in the time between the end of Congress’s Fourth of July recess and its August recess.
Americans Abroad Caucus co-chair Representative Carolyn Maloney (D-NY12) is expected to re-introduce the two bills of interest to Americans abroad:
- Commission on Americans Living Abroad Act, which would form a standing commission to review laws that have adverse impacts for Americans abroad and to prevent new laws from being enacted that inadvertently harm non-resident Americans; and
- Overseas Americans Financial Access Act, which exempts from all FATCA reporting the accounts of Americans abroad in the countries where they live.
Work on legislation to enact Residency Based Taxation (RBT) is currently in the hands of Ways and Means Committee staffers, i.e. lawyers who have been briefed by our RBT champions on the House Ways and Means Committee, Democrats Abroad, and all of our colleague organizations advocating for expat tax reform. They are taking a fresh view of the policy aims, have undertaken preliminary work on the 2019 bill and are making it a “high priority August recess project”. In our view this is really great and important.
Because the bill that results - developed on the basis of advice from all the Americans abroad tax reform activists - will end up being a W&MC work product. Reform proposals often run into serious roadblocks when they reach the Ways and Means Committee staffers. Having the bill originate with W&M gives it a much better chance of getting through to the Committee review process which is a critical step along the path.
We will keep calling and emailing and pushing for updates on the legislation as it develops. As always, RBT activists keen to see a great bill emerge should focus their outreach efforts on their members of Congress. This campaign tool will help.
This week (commencing Monday 15 July) the Senate is expected to hold votes to ratify updates to existing tax treaties with Japan, Spain, Switzerland and Luxembourg. As you may know, the Senate has not voted on any tax treaties since Senator Rand Paul took office in 2006. Sen. Rand is expected to withhold his vote on these treaties, but they are expected to generate enough support for ratification.
Democrats Abroad has not reported on the changes to those treaties, but it may interest our members and other Americans living in these four countries to understand the changes that may affect them. Those interested should contact the country committee chair to discuss.
National Taxpayer Advocate
After 18 years in the position Nina Olson is retiring as the IRS National Taxpayer Advocate. Ms. Olson has published an annual report to Congress known as The Purple Book which includes recommendations for improving service to taxpayers. She has included non-resident taxpayers in her assessment of IRS services, including calling repeatedly for reforms to FATCA and FBAR reporting. The 2019 Purple Book, published in February of this year, was no exception.
Our analysis of the recommendations suggests the following items are noteworthy for American taxpayers abroad:
#14 - Provide additional time for non-resident taxpayers to make adjusted claims due to math errors
#12 - Reconcile FBAR and FATCA reporting and eliminate duplication - this has been included amongst Olson's recommendations since at least 2014.
#40 - Allow for a period of notice and comment prior to the signing of new FATCA IGAs (in recent weeks the U.S. signed its most recent FATCA IGA with the Seychelles)
#46 - Require the IRS to address comments made by the National Taxpayer Advocate on proposed rules before enacting them
Ms. Olson’s last day as National Taxpayer Advocate is Wednesday July 31, 2019. Her successor has not as yet been appointed. We thank her for her service and wish her well.
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DEMOCRATS ABROAD TAXATION TASK FORCE
Happy Fourth of July!
Best wishes for glorious celebrations of our nation's 243rd birthday, filled with delicious BBQs, refreshing beverages and fabulous fireworks.
And when the celebrations are over if you are interested in turning your mind to work by Democrats Abroad and the rest of the expat tax reform coalition to persuade Congress to enact a switch from our current system of Citizenship-based Taxation to Residency-based Taxation (RBT), then you might want to see our RBT Frequently Asked Questions doc. We have updated it for progress achieved through June of 2019 and are hereby publishing it for your reference.
Please send comments or questions - or FURTHER questions for us to add to this document! - to email@example.com.
DEMOCRATS ABROAD TAXATION TASK FORCE
Thanks to all who participated in the Congressional CallStorm organized by Democrats Abroad to mark the 2019 International Tax Filing Day. With the help of all you expat tax activists we continue to build the profile of Americans abroad struggling to comply with double taxation and to bring our problems to the attention of members of Congress in both parties and across both chambers. We need the support of all those interested in expat tax reform in order to make it happen. Thanks again for your support.
Tax Treaties at last on the Congressional agenda
You may be aware that since Senator Rand Paul took office in 2006 he has blocked all tax treaties from coming to the floor of the U.S. Senate for a vote. During this time tax treaties between the U.S and Hungary, Luxembourg, Switzerland, Chile, Spain, Poland, Japan and Portugal (at least) have been stuck in limbo, not to mention reforms made to the Model U.S. tax treaty. We recommend that all Americans abroad who vote in Kentucky to contact Sen. Paul and urge him to lift his holds on these treaties.
This week the Senate Foreign Relations Committee is expected to begin consideration of the treaties with Hungary, Chile, Spain, Japan and Portugal. Double taxation treaties address a range of matters that impact U.S. citizens living abroad, most especially the treatment of savings and retirement plans that receive beneficial tax treatment in our countries of residence but no favorable treatment under the U.S. tax system. When U.S. tax treaties are silent on this matter they leave payments made from foreign pensions, including those to which we may be legally mandated to contribute, subjected to double taxation.
It’s perhaps too early to anticipate those eight treaties moving closer to a floor vote in the Senate, but reporting suggests Sen. Paul is meeting with Treasury Sec. Steven Mnuchin to discuss his privacy concerns. We are following this issue and look forward to reporting back.
Americans abroad on Capitol Hill
Democrats Abroad gives an enormous shout out to our colleagues at Association of Americans Resident Overseas (AARO) and Federation of American Women’s Clubs Overseas (FAWCO) for their amazing week of meetings on Capitol Hill about expat tax reform. DA’s Tax Task Force was pleased to brief some members of their delegation and share with them an extensive list of members of Congress for them to meet (including names of key aides to speak to). We have since de-briefed with them and, to put it very briefly, they learned that: a) our concerns and recommendations are getting through to Congressional tax writers, and b) there remain a few outliers who either CONTINUE to harbor major misunderstandings about the demographics of Americans abroad or have concerns that RBT will open the flood gates to mass exploitation by wealthy Americans using real or faux off-shore residency to move assessable income to low-tax or no-tax countries.
Yes, we’ve heard it all before but at least these prejudices are well outside the mainstream.
Big, big THANK YOU to AARO and FAWCO for hitting it hard and fighting the good fight for a switch from citizenship-based taxation to residency-based taxation, financial account reporting reform and more. Heroic work by excellent colleagues (who, like us, are volunteers and) who share our goal of persuading Congress to fix the Internal Revenue Code and other laws and regulations that cause serious personal and financial harm to Americans living abroad.
Treasury announces more changes to GILTI regs
It’s been almost 18 months since Americans who own companies registered abroad were shocked to learn of two new taxes in the 2017 Tax Cuts and Jobs Act (TCJA) that could destroy not only their businesses but also their life savings. Regulations implementing the Repatriation Tax and GILTI Tax announced last year failed to provide material relief to Americans abroad. Last Friday June 14th Treasury issued “final regulations” on GILTI, Subpart F income and tax credits. You can read about them here (IRS and Treasury advice) or here (The Tax Adviser tax blog).
Democrats Abroad does not provide personal advice on tax matters.
Tax advice should be obtained from a qualified tax professional (accountant, lawyer, adviser or return preparer) who understands both the U.S. tax system and the tax system of the country where the taxpayer lives (including any applicable tax treaty).
If you need tax advice Democrats Abroad recommends the Tax Return Preparer Directory published by our colleagues in expat tax advocacy, American Citizens Abroad. Click here to reference their directory.
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DEMOCRATS ABROAD TAXATION TASK FORCE
The 2019 deadline for U.S. citizens living abroad to file their taxes is Monday June 17 (as the usual international tax filing deadline of June 15 falls on a Saturday this year).
In order to draw attention to International Tax Filing Day Democrats Abroad is hosting a Congressional CallStorm. We invite U.S. citizens who support expat tax reform to participate in this campaign on Thursday June 13 (neither Friday June 14th nor Monday June 17th are House and Senate sitting days) and call their members of Congress asking for relief.
Everything you need to participate in the CallStorm is in this guide for campaign participants.
Date for calls: Thursday June 13, 2019
Date for written and electronic messages: Through the month of June
Who to contact: your two Senators and your member of the House of Representatives. If you don't know who they are advice for finding them and their contact details are in the guide.
What to say: scripts for calls and sample language for emails, letters and postcards are in the guide. If you can add your personal story about why expat tax reform is important to you that would be even better. Specifically, we are asking for -
- A switch from our current system of citizenship based taxation to residency based taxation, in which we’d still be required to report US-based income to the IRS, but not the income we make in and pay tax on abroad
the Overseas Americans Financial Access Act, which would exempt us from disclosures of the financial accounts we hold in our countries of residence which we use to pay bills and save for the future
Further details on our tax advocacy ideals, strategy and asks are in the guide.
Thanks in advance for your support. As noted in the guide, our work with the House tax writing subcommittee is making serious progress, but we need to build support for expat tax reform right across Congress. To do that we need all who are seeking relief from the burden of complying with two tax jurisdictions to call your elected representatives and ask for it.
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Democrats Abroad Taxation Task Force
Democrats Abroad is enormously grateful for the long-standing support that Rep. Dina Titus has extended to the Americans abroad community. She's always in our corner and never refuses an opportunity to show her concern for our problems - with the U.S. tax system and otherwise - and to push for common-sense reforms to address them.
In response to our outreach about the Ways and Means Members Day Hearing, Rep. Titus has published this statement calling upon the Ways & Means Committee to ease the financial burdens placed upon Americans abroad by the U.S. citizenship-based taxation system. Thank you, Rep. Titus, for noting that Americans abroad have been for too long neglected by Congress and for calling upon Congress to work together to provide us with relief.
Please also see this statement from Rep. Jamie Raskin (D-MD08) telling the Ways & Means Committee we need a switch from citizenship-based taxation to residency-based taxation.
It's not too late for rank and file members of Congress to join their voices to those of Reps Raskin and Titus in raising with the Ways and Means Committee the serious problems facing Americans abroad in complying with the filing obligations of two tax jurisdictions. Please reach out to your representative and ask him/her to contact Ways & Means Committee Chairman Richie Neal and Ranking Member Kevin Brady about the urgent need for expat tax reform. This guide will help you do so.
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Democrats Abroad Taxation Task Force
Further to our report from last week, we are delighted that Rep. Jamie Raskin (D-MD08), a former member of Democrats Abroad-France, has responded to our request to provide a submission to the June 4 House Ways & Means Committee Members' Day Hearing about the urgent need for expat tax reform. We send our sincere thanks to the Congressman for his on-going support for our community and for legislation to address the serious personal and financial harm we suffer due to citizenship-based taxation. Click here to read Rep. Raskin's submission.
As you will know from DA's previous tax advocacy reports, we now have a bi-partisan team from the House Ways and Means Committee working on the development of a proposal to enact residency-based taxation. But there's much more work to do to persuade the other 40 members of that committee that this reform is urgently needed and can be sensibly implemented. We continue our outreach to those important members, educating them on the harm citizenship based taxation causes ordinary, middle-class American families and persuading them to act urgently on our behalf.
We are counting on all Americans abroad supporting residency-based taxation to reach out to their elected representatives and reinforce our work. Please call, write or message your members in Congress and tell your personal story about why a switch to residency based taxation is so important to you. If you have trouble getting started then please refer to this guide to find your representatives and to add your voice to the cause. It's imperative that members across Congress, in both houses, on all committees and of all political stripes hear from their overseas constituents about the urgent need for a switch to residency based taxation.
Thanks for your help. Please contact us on email@example.com with comments or questions.
Democrats Abroad Taxation Task Force
DemsAbroad asks friends of Americans Abroad in Congress to raise RBT at the W&MC Members' Day Hearing
On Tuesday June 4th the House Ways and Means Committee will hold its Members' Day hearing enabling members of the House to comment on matters within the Committee's jurisdiction. Democrats Abroad has reached out to members who are important friends of the Americans abroad community asking them to make submissions to the hearing about the need for Residency Based Taxation. We have written to Rep Carolyn Maloney (D-NY-12), the Democratic co-chair of the Americans Abroad Caucus, Rep Dina Titus (D-NV-01) and Rep Jamie Raskin (D-MD-08), a former member of Democrats Abroad France.
As we noted in our last report, we are delighted that there is now a bi-partisan team of Ways & Means Committee members working on a proposal to introduce residency based taxation. We, in collaboration with the other organisations advocating for expat tax reform, continue to reach out to the all-important members of the Ways and Means Committee to profile the importance of this urgently needed reform. It's great to have other members of Congress assisting us in this important work.
We will report back on the hearing.
In the mean time, it is our understand that an important meeting will take place the week of Monday 3 June between the Beyer-Holding team working on the residency based taxation proposal with legislative counsel.
Also, the week of Monday 10 June a delegation of members from Association of Americans Resident Overseas and the Federation of American Womens Clubs Overseas will be on Capitol Hill making the case for residency based taxation (as well as likely discussing other matters important to Americans abroad). We have assisted them with their Congressional outreach and wish them the best in their meetings.
You don't have to go all the way to Washington DC to make your views heard - on the matter of residency-based taxation or anything else that may interest you. Advice for finding your elected representatives and calling or writing to them are included in this guide. All (courteous and sincere) outreach is helpful.
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Americans abroad who support expat tax reform have taken another step forward on the road to Residency Based Taxation (RBT).
Further to our report on the DA tax advocacy Capital Hill meetings of May 14-16, on Tuesday May 21 a group of Democrats Abroad global leaders who vote in the Virginia 8th Congressional district were scheduled to meet with Rep. Don Beyer, their member of Congress, to discuss expat tax reform (plus to a few other issues uniquely impacting Americans abroad).
Unfortunately the Congressman was called away to a briefing by Trump administration officials on the escalating tensions with Iran. But the Beyer constituents had a productive exchange with his Legislative Director and learned that the Beyer team has scheduled a meeting about RBT with the Ways and Means Committee Legislative Counsel as a forerunner to a meeting with Rep. George Holding’s team about our keynote reform.
We, in collaboration with the other organizations advocating for expat tax reform, have made the progress we were hoping for, i.e. bringing the Beyer team into active engagement with the Holding team on the development of RBT legislation. But now begins the in-the-weeds work with Beyer’s team on the Holding RBT legislative design elements. The DA Taxation Task Force, in collaboration with our colleague organizations representing Americans abroad, will continue our work with the Beyer and Holding teams on this important reform.
As noted in our last post, we expect the Beyer and Holding teams to create, in partnership, a consensus view on draft RBT legislation, send it to the Joint Committee on Taxation to be scored and to Ways and Means Committee Legislative Counsel to be structured into a bill which we can then build support for right across both parties and both chambers. Of course, nothing related to Congressional lawmaking is as simple or as linear as that. There will be zig zags, delays and pitfalls along the way, but there are many groups advocating actively for progress on RBT and working hard to keep the process moving forward.
What can you do to progress RBT?
The best thing you can do to progress RBT is to reach out to your elected representatives to remind them of the importance of this reform to you and your family and to ask for their support. Personal stories are the most effective. Include as much detail as you feel comfortable sharing. Call, write or send electronic messages to your House member and Senators. All outreach to those counting on your electoral support is helpful. If you get a boilerplate response that scarcely relates to the message you sent, write again demanding more. If you get an interesting response that you think would be useful for us to know about in progressing our work, please end it through to us. We will follow up with your member.
We understand that a bill establishing a Commission on Americans Abroad and the Overseas Americans Financial Access Act, establishing an exemption from all FATCA reporting for the foreign financial accounts of Americans abroad in their countries of residence, are soon to be re-introduced in the House of Representatives. We will let you know when those bills drop and what you can do to demonstrate your support for them.
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Democrats Abroad Taxation Task Force
Democrats Abroad was on Capitol Hill again on May 14-16 for meetings with Congress about legislation to enact a switch from our current system of Citizenship Based Taxation to Residency Based Taxation (RBT). Across the three days we held 18 meetings, 12 of which were with members of the all-important Congressional tax-writing subcommittees and so featured detailed discussion of the design elements of an RBT bill. Of course, we always discuss the circumstances faced by Americans abroad being subjected to taxation in two (or more) jurisdictions and the personal and financial cost of maintaining U.S tax compliance. The research data and case studies we present are critical to our efforts to underscore the urgent need for reform.
Twelve of the meetings were with House members; six were in the Senate. Ten meetings were with Democrats; eight meetings were with Republicans.
Further to our previous reports, we continue to engage closely with Rep. George Holding’s team who lead the work to develop legislation to enact RBT in the 115th Congress. They continue to demonstrate commitment to introducing a bill that can generate bi-partisan support in both houses. Our work this year has focused on building support for the RBT proposal amongst other Ways and Means Committee members who can partner with Holding through the arduous legislation-writing process.
It is our view (and the view of others) that Rep. Don Beyer (D-VA 8th district), is an ideal partner in fighting for RBT given his service on the Ways and Means Committee and his years of experience living abroad. We understand discussions have occurred between Holding and Beyer and we continue to encourage Rep. Beyer as well. When we met with the Congressman in March his support for RBT was in evidence. When we met on Thursday with the Rep. Beyer’s Legislative Director (3rd time in 12 months) he voiced reasonable concerns. The benefits of the 2017 Tax Cuts and Jobs Act (TCJA) were highly skewed towards large corporations and the wealthy; many Ways and Means Democrats have this same concern about RBT - in addition to the concern that RBT will be exploited by wealthy Americans to use real or faux offshore residency in order to move assessable income out of the reach of the IRS. We describe the anti-avoidance provisions in the RBT proposal to address the latter and use our research on the Americans abroad community to address the former. Unlike the TCJA, the key beneficiaries of RBT will be predominantly middle-class Americans living abroad, as they vastly outnumber overseas earners making more than the Foreign Earned Income Exclusion.
Perhaps the most persuasive arguments in support of RBT, however, come from the stories and case studies of affected Americans abroad. This week (May 20, 21) the global leaders of Democrats Abroad are in Washington DC and, following on from our annual general meeting held in DC May 17-19, they will be on Capitol Hill talking to Congress about issues impacting Americans abroad. By a wonderful coincidence, there are four DemsAbroad leaders participating in the 2019 DemsAbroad Congressional Door Knock who vote in Virginia’s 8th District, the seat held by Rep. Don Beyer. We have arranged a meeting for them with Rep. Beyer and expect them to present compellingly about the personal and financial burden Citizenship Based Taxation places on them, including how it makes creating financial security in retirement so incredibly difficult. We are hopeful that this week we will move another step closer to having bi-partisan support for RBT legislation in the House.
What happens next?
While the proposal introducing RBT could take a number of different paths to becoming a bill, we understand that hearings may be required to document the tax problems of Americans abroad and discuss a legislative remedy. We expect that the bi-partisan Ways and Means Committee RBT leaders would create a consensus view on the RBT design elements, incorporating advice from Legislative Counsel serving the Ways and Means Committee. The resulting RBT proposal would go to the Joint Committee on Taxation to be scored (i.e. to quantify the impact the legislation would have on the federal budget). In an ideal world the bill would be “revenue neutral” (as then it could be more easily welcomed as an amendment to another piece of tax legislation that has more momentum in getting to the floor for a vote). The Ways and Means Committee Legislative Counsel would put the proposal into the language of a draft RBT bill; the draft bill could then be shared with members of the House and Senate in order to attract co-sponsors.
Democrats Abroad and the other organizations representing Americans abroad have been meeting with elected representatives about expat tax reform for years. We have a ready list of members who we believe will support an RBT bill enacting legislation that predominantly benefits ordinary, middle-class Americans abroad and includes robust anti-avoidance mechanisms to protect the law from abuse.
So, the work is far from over.
In our meeting with the Committee’s Legislative Counsel we were advised a bill could be introduced as early as the beginning of 2020. Of course, election year politics bring their own surprises, distractions and legislative priorities, which makes it difficult to know what timeline is realistic.
Democrats Abroad’s tax advocacy work will continue to focus on generating bi-partisan Ways and Means Committee support for an RBT bill and on Congressional outreach to both parties and both houses to continue to build the profile of this important reform. In our meetings with Congress we also discuss the need for: an exemption from all FATCA reporting for the accounts of Americans abroad in their countries of residence; relief for Americans abroad from the “transition taxes” in the 2017 TCJA; reforms to the administration of FBAR, including changes to the enormously out-of-proportion penalties for non-willful non-compliance; establishment of a Commission on Americans Abroad; repeal of the Windfall Elimination Provision; and a more reasonable renunciation mechanism for “Accidental Americans”.
Shortly Democrats Abroad will also be reaching out to those who have declared their candidacy to be the Democratic Party nominee for president of the United States to seek their positions on issues such as taxation, voting and immigration as they uniquely impact Americans abroad.
We will continue to report out on our initiatives, and developments in our work and the work of the other amazing organizations representing Americans abroad. We are grateful for their camaraderie and their commitment to improving the lives of all in the Americans abroad community.
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Democrats Abroad Taxation Task Force
 Under a system of Residency Based Taxation Americans living and working abroad would will be required to continue to declare their U.S.-sourced income to the IRS but would not be required to declare and pay tax on the income generated in another country.
 The balance of the meetings were with “friends of DA” i.e. members of Congress who support our work on behalf of the Americans abroad community and who we engage with regularly in order to keep them up to speed on our work.
 The Select Revenue Measures Subcommittee of the House Ways and Means Committee and the Tax Policy Subcommittee of the Senate Finance Committee.
The Democrats Abroad Taxation Task Force is back on Capitol Hill on 14, 15 and 16 May putting tax reform for Americans abroad at the center of discussions with Congress. We have meetings scheduled with members in both Houses of Congress and on both sides of politics. We will be discussing the need for residency based taxation and the design elements of the proposed legislation to enact it.
We need those determined to see this important reform enacted to reach out to their members of Congress this week and next week to demand it. Please consult this grassroots campaign guide for background on our advocacy work and for sample language you can use to call or write to Congress.
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