News

Submission in response to IRS Notice on Transition Taxes on Foreign Earnings

Letter submitted by Democrats Abroad to the Office of Associate Chief Counsel (International)
Attention: Leni C. Perkins, Internal Revenue Service, IR-4579 

Dear Ms Perkins,
re: Guidance Notice 2018-26- Transition Tax on Foreign Earnings

Democrats Abroad is grateful to the Department of Treasury and the Internal Revenue Service for publishing the above captioned Guidance Notice and for inviting comment on it from taxpayers and taxpayer groups. Democrats Abroad joins other organizations representing Americans abroad in our serious concern about the impact that new taxes in the Tax Cuts and Jobs Act will have on non-resident Americans who own businesses abroad.

In 2017 the U.S. Congress included Territorial Taxation for Corporations (TTC) in the group of tax reforms built into the Tax Cuts and Jobs Act (TCJA). We understand that TTC was implemented in order to capture tax on corporate profits long kept out of reach of the U.S. Treasury and to help level the international tax playing field for U.S. multinational corporations. These TCJA provisions are our concern:

The 15.5% Repatriation Tax - imposed on undistributed (and therefore untaxed by the U.S.) business profits from 1986 through 2017. Business owners declare those undistributed business profits on their 2017 personal tax filing. It is a retroactive imposition of tax that is not related to the realization of revenue that might be used to pay the tax.

GILTI Tax regime – mandatory declaration of undistributed business profits on personal tax filings of business owners abroad, taxed at the highest personal marginal tax rate and without access to two critical offsets afforded corporate owners of businesses abroad: 1) a 50% deduction and 2) credits for taxes already paid on the profits to the business’s jurisdiction of incorporation. As with the Repatriation Tax, the GILTI tax is imposed on profits where there may be no realization of revenue to use to pay the tax.

Clearly, TTC was enacted to strengthen U.S. multinational corporations. TTC’s “transition tax” provisions were never meant to beleaguer ordinary, hard-working Americans living and owning companies abroad. In fact, the Repatriation Tax and the GILTI tax regime will have an enormously harmful financial impact on non-resident Americans who own businesses abroad.

Many of these business owners fear that this additional tax burden will force them to close their businesses. In addition to the new transition tax burden American business owners abroad will bear, they will also be subjected to even greater tax filing/compliance costs. The new rules for calculating the “transition taxes” are exceedingly technical and organizing accurate filings will be very time-consuming and complex. U.S. expat tax professionals hired to prepare these filings will be passing on to American business owners abroad the additional cost of their time and labor, enlarging the financial burden the new TCJA taxes place on the taxpayer.

Further, while U.S. corporations establish subsidiary businesses abroad in order to expand the operations and profitability of the U.S.-based parent company, U.S. citizens abroad establish businesses in their countries of residence in order to build a life and future abroad. We believe strongly that a remedy is needed to exempt these taxpayers from a potentially crushing new tax liability - one that Congress never intended.

We believe Americans overseas with interests in foreign corporations should be exempt from the Repatriation Tax and from the GILTI Tax regime for any given year so long as:
(1) they meet the conditions required for exemption under IRC Section 911, and
(2) they are individual U.S. Shareholders.

This solution both achieves the U.S. Congress's goal of capturing corporate tax it has been long-denied, and recognizes that the profits of businesses owned by Americans living abroad were never meant to be repatriated to the U.S. because they are needed to sustain the underlying business entities and the American expatriate families who rely upon them.

We will work, in concert with our colleague organizations representing Americans living abroad, to persuade Congress that American business owners abroad should be exempted from these transition taxes. Revision of the policy for implementing the TCJA “transition taxes” is necessary to ensure that Americans abroad remain positioned to manage and grow their businesses and take care of their families. We thank you for this opportunity to provide comment and we thank the men and women of the U.S. Treasury and IRS for their honorable service to the nation.

Sincerely,

Julia Bryan
International Chair, Democrats Abroad
[email protected]


Important updates on FATCA and on provisions in the Tax Cuts and Jobs Act that impact Americans abroad

On Monday 2 April there were two important developments related to expat taxation:

1. Supreme Court denies reviewing FATCA lawsuit

The Supreme Court announced on Monday 2 April that it will not review the decisions of the lower courts on the FATCA constitutional challenge.  The denial of certiorari means that the issue did not rise to the level, at this time, that merits the Court's review. 

If the Court had heard the case (Crawford et al v U.S. Treasury) then the question of whether FATCA violates 4th, 5th and 8th Amendment protections of the U.S. Constitution, as well as whether the Intergovernmental Agreements that implement FATCA are enforceable without Senate ratification, would have been addressed.  Many would have welcomed an answer to these questions.  

However, the Court's decision makes no difference at all to our work advocating for relief for Americans abroad from the enormous burden brought by FATCA.  We continue our support of H.R. 2136 - the Overseas Americans Financial Access Act - which would eliminate all FATCA disclosure of the accounts of Americans living abroad in our countries of residence.  We will continue to ask members of the House to support the bill and encourage our friends in the Senate to introduce a parallel bill.

2. IRS issues guidance on Transition Tax filing extension

Further to our recent communications about the imposition of further tax burdens on Americans abroad built into the 2017 Tax Cuts and Jobs Act, on Monday 2 April the IRS issued guidance affirming that 15 June 2018 is the deadline for filing and payments due in relation to the Repatriation Tax for taxpayers with a 15 June filing deadline (as opposed to the 17 April 2018 filing deadline).  This provides some relief for the non-resident owners of businesses abroad who face not only the Repatriation Tax but also a new GILTI tax regime as a result of the switch to a system of Territorial Taxation for Corporations enacted by Congressional Republicans in December.  

We strongly encourage Americans abroad whose businesses fall under the definition of Controlled Foreign Corporations (consult your accountant or tax advisor) to take part in our grassroots campaign demanding relief from these "transition taxes" for Americans abroad.  Take the time to draft a few sentences that explain how your business will be impacted.  Many businesses abroad will not survive if forced to bear this additional tax burden and Congress needs to hear that.

Please push this campaign out to your friends and over your social media channels.  The flow of letters has dropped off materially since the campaign was launched 2 weeks ago; this is not the time to let up!  Let's keep up the pressure on lawmakers and regulators.  You can participate in the campaign even if you are not the owner of a business.

As always, please send any questions or comments to [email protected] and thank you for your on-going support for our tax advocacy work.

 

Democratically yours,

DA TAXATION TASK FORCE

Julia Bryan - ex-officio (Czech Republic)

Jennifer Cederwalls (Sweden)

DeeDee Gierow (Sweden)

Rebecca Lammers (UK)

Carmelan Polce - Chair (Australia and New York)

Michael Ramos (Australia)

Joe Smallhoover (France)

Orlando Vidal (UAE)


Taxation Task Force - Report of March 2018 Congressional Door Knock

During the week commencing Monday March 5th, 2018  the Dems Abroad Taxation Task Force led a hardy delegation of Democrats Abroad through the halls of Congress to talk about expat tax reform. Our Leave Behind Pack profiles our discussion agenda nicely.

So here are our takeaways.

· Residency Based Taxation – is generating some genuine action! In the office of Rep George Holding (R-NC) we received a short description of an RBT proposal hewn from discussions with a range of Americans abroad organisations. It needs development in order to generate support from, for example, those frightened by the prospect of inadequate anti- tax avoidance provisions. We learned this in subsequent discussions = Congressional reality check! So our work to persuade Congress that RBT is a justified policy shift that can be implemented responsibly has taken yet another step forward.

· Tax Cuts and Jobs Act transition taxes - the “Repatriation Tax” and the accompanying GILTI Tax regime is being brought to lawmakers’ attention by many frightened and angry business owners abroad, thank goodness. The good news is that, despite the new provisions being exceedingly complex and difficult to explain, the need for a “fix” is well understood. The bad, sad, sorry news is that it is on a long list of TC&JA flaws that will not be fixed in the short term.

Congress must pass an Omnibus appropriations bill no later than 23 March and the halls of Congress are filled with people pleading for urgent remedies for parts of the law that hurt themselves or their industry. The vast majority will go away empty-handed. But SEE BELOW for what to do next about Repatriation and GILTI Taxes.

· FATCA Reform – we continue to talk about HR 2136, the “Overseas Americans Financial Access Act” as a remedy for the problems caused by FATCA, whose problems we no longer need to explain. We did, however, find ourselves briefing Congress on the FATCA judicial challenge. Despite Senator Rand Paul being a plaintiff in the lawsuit challenging FATCA on constitutional grounds, awareness of the case, Crawford et al v US Treasury, is very low.

As you may know from previous Task Force reports, the Crawford plaintiffs have asked the Supreme Court to review the decision of the lower courts to reject the case for lack of standing. The parties have now filed their pleadings to the Supreme Court. You can find them here.

For the sake of clarity, Democrats Abroad would be pleased for the U.S. Supreme Court to review Crawford et al on its merits and, once and for all, resolve the question of whether FATCA is constitutional in regards to the fourth amendment (unreasonable searches and seizures), fifth amendment (equal protection) and eighth amendment (excessive fines), as well as the Intergovernmental Agreements.

· WEP repeal – we continue to promote sponsorship of HR1205, the “Social Security Fairness Act” which would eliminate the impact of the Windfall Eliminations Provision (WEP). The law has 176 co-sponsors and robust awareness. We will keep pushing.

We also keep pushing HR 2710, the act that would establish a Commission on Americans Abroad and perhaps prevent the establishment of laws and regulations that unintentionally hurt Americans abroad. Which brings us back to the newest law that, because of hasty drafting and inadequate consideration, has unintended adverse consequences for some Americans abroad -

REPATRIATION/GILTI TAX: HURTS BUSINESS OWNERS ABROAD - ACTION REQUIRED!

Because Congress will not act urgently to enact a remedy, a diverse group of Americans abroad organisations is asking the Treasury/IRS to delay the law’s implementation. If you are a business owner abroad you are encouraged to participate in this grassroots campaign urging Treasury/IRS to issue a Notice that:

1. Delays Repatriation Tax payment until the IRS issues adequate guidance.

2. Provides an exemption from the Repatriation/GILTI tax for Section 911 (non-resident) Americans.

The email-writing campaign outreach is to relevant directors at Treasury and the IRS plus the leaders of the Senate Finance Committee and House Ways and Means Committee. You should also send this message to your elected representatives in both Houses regardless of their committee assignments. Please contact us with any questions.

BACK TO THE DOOR KNOCK

We also discussed –

· Accidental Americans and the need for relief from the tax burdens inherent in renouncing US citizenship.

· Disenfranchised Americans born abroad – there are still 13 states which deny the UOCOVA right to vote to citizens who are born abroad and have never lived in the state. It shocks me how little concern this raises in many Congressional offices where aides respond that it is an issue that should be taken up with the state.

· Americans Abroad Caucus – we’re not even certain the caucus has been re-certified in the 115th Congress and it is more than half over! This caucus is suffering from neglect and may need an urgent re-boot.

A big thank you to Chip Seward, Becca Young, Jeffrey Cheng, Ken Sherman, Connie Borde and Martha McDevitt-Pugh for door knocking Congress with the DA tax team last week. You guys were great!

A big thank you also to those who contributed to the Door Knock preparation and materials.

Thanks again to all of who continue to support the work of the Taxation Task Force.

Please contact us at any time with questions.

DA Taxation Task Force

[email protected]

Julia Bryan - ex officio (Czech Republic)

Jennifer Cederwall (Sweden)

DeeDee Gierow (Sweden)

Rebecca Lammers (UK)

Carmelan Polce - Chair (Australia and New York)

Michael Ramos (Australia)

Joseph Smallhoover (France)

Orlando Vidal (UAE)


Democrats Abroad on Capitol Hill talking Expat Tax Reform. Again.

Last week the Taxation Task Force led a hardy delegation of Democrats abroad through the halls of Congress to talk about expat tax reform.  Our Leave Behind Pack profiles our discussion agenda nicely.

 

Leave Behind Pack Cover

Click here to download the pdf file


Letter Writing Campaign to Exempt Americans Abroad from Repatriation & GILTI Taxes

THE LETTER POSTED BELOW IS FROM OUR PHASE 1 CAMPAIGN WHICH WAS FABULOUSLY SUCCESSFUL IN PERSUADING TREASURY AND THE IRS TO GIVE AMERICAN BUSINESS OWNERS ABROAD A REPRIEVE FROM REPATRIATION TAX FILING!!  WE NOW HAVE 12 MONTHS TO PERSUADE CONGRESS TO ENACT A FULL EXEMPTION FOR AMERICAN BUSINESS OWNERS ABROAD FROM THE "TRANSITION TAXES" IN THE TAX CUTS AND JOBS ACT.

DO NOT SEND THE OUT-OF-DATE COMMUNICATION BELOW. 

INSTEAD YOU CAN SUPPORT OUT CAMPAIGN BY SENDING THE COMMUNICATION AIMED DIRECTLY AT CONGRESS AT THIS LINK.

 

 

Time to take action!

If you are the owner of a foreign business impacted by the Repatriation and GILTI Taxes we need you to send this email right now (copy and paste this text):

Read more

Demand a Remedy for the Repatriation and GILTI Taxes

TAX CUTS & JOBS ACT HAS A NASTY SURPRISE FOR BUSINESS OWNERS ABROAD

A great many flaws exist in the Tax Cuts & Jobs Act due to inadequate consultation and hasty drafting. One of those flaws causes enormous harm for Americans abroad who own businesses in their countries of residence.

If you are an overseas American with a business abroad, click here to reach out to Washington and demand a remedy!

Read more

March Congressional CallStorm for Expat Tax Reform

GUIDE FOR CALLING CONGRESS AT THE TIME DA IS ON THE HILL TALKING TAX REFORM

On 22 December 2017, despite the efforts of every single organization advocating on behalf of Americans abroad, the Tax Cuts and Jobs Act became law without including any provisions aimed at easing the tax filing and foreign financial account reporting burdens borne by we who live outside the U.S.

Our campaigns did not fail. We know we moved the ball down the field. We fight on.

In the words of President Barack Obama, “Change is hard and it takes time.”

So we are returning to Capitol Hill to carry on our campaign to educate lawmakers about the personal and financial hardships caused by FATCA and by inordinately complex and manifestly unjust tax code provisions uniquely harming Americans abroad. We will continue to push hard for tax reform for Americans abroad but we cannot do it without your help.

Democrats Abroad will be in Washington DC March 6-8, 2018 for meetings with members of both houses of Congress from both parties. We need you to back up our efforts by calling your elected representatives demanding tax reform for Americans abroad. All you need to do that is in the guide below.

March_TTF.jpg

Click here for PDF version

 


How to Fix 23 Tax Problems for Americans Abroad with 3 Solutions

23_tax_problems_cover.jpg

Click here for PDF Version

 

INTRODUCTION

Democrats Abroad has documented here the scope of tax problems that uniquely impact Americans living abroad. We hope that by profiling the wide range of U.S. tax code and other provisions that have – however unintended – severe adverse consequences for Americans abroad that we might persuade Congress to act on our behalf and resolve them.

The list includes 23 discrete matters and, to our disappointment, it has recently grown due to provisions in the 2017 Tax Cuts and Jobs Act. As is the case with most of the provisions that vex Americans abroad, the Repatriation Tax and GILTI provisions in the new law were enacted without due consideration for the impact they would have on non-resident filers.

Other examples include: the financial account reporting provision in the Bank Secrecy Act, which includes exorbitant and out-of proportion penalties for non-compliance and requires updates generally; SEC regulations and the USA PATRIOT Act which make both investing in the U.S. and investing abroad extremely difficult for Americans living abroad without a U.S. address; and the Windfall Eliminations Provision, which unintentionally denies fully entitled Social Security benefits to Americans abroad who have pensions in their country of residence. Saving and investing for the future is extremely difficult for Americans abroad because of these provisions.

Thus, we are burdened with an unfair, unreasonable and unjust compliance burden that causes financial and personal hardship and that will require remedies across myriad areas of the tax code and other laws, plus within existing U.S. double taxation treaties and the model U.S. tax treaty. We do not believe Congress has the time or political will to implement these remedies and so instead recommend three solutions that would eliminate the problems enumerated herein:

1. A switch from our current system of Citizenship-Based Taxation to Residency-Based Taxation.
There is evidence to suggest that Residency-Based Taxation can be implemented on a revenue-neutral basis[1]. A switch from Citizenship-Based Taxation to Residency-Based Taxation would resolve most of the tax problems outlined herein.

2. A same country exemption for Americans abroad to eliminate FATCA reporting on financial accounts in their country of residence.
H.R. 2136, the Overseas Americans Financial Access Act would provide Americans abroad from relief from the unintended adverse consequences of the Foreign Account Tax Compliance Act (FATCA). FATCA was enacted to discourage and apprehend those using foreign bank accounts to commit financial crimes and not to cause personal and financial pain to ordinary Americans abroad who use accounts in their countries of residence to pay bills and save for the future.[2]

3. Replace the Windfall Eliminations Provision with the Social Security Fairness Act (H.R. 2710).
Filing from abroad alone is inordinately complex and costly. The forms required to declare income generated abroad are highly detailed, preparing them is extremely difficult and it very often requires the support of professional tax return preparers with specialist knowledge of overseas filing.[3] Our recommendations address the filing costs for Americans abroad which far exceeds the costs incurred by U.S. based tax filers.

 

TAX CODE PROVISIONS THAT DISCRIMINATE AGAINST AMERICANS ABROAD - AND PROPOSED REMEDIES

In our examination of the provisions in the Internal Revenue Code that govern tax filing and reporting for non-resident Americans we have identified these areas that require remedies in order to address their perhaps unintended but certainly adverse consequences.

Note: A switch from Citizenship-Based Taxation to Residency-Based Taxation would resolve most of these issues for Americans living abroad.

1. US Capital Gains Tax Exclusion – harmonization of capital gains treatment for properties owned by citizens living abroad with the treatment of properties owned by citizens living in the US.

2. Artificial Capital Gains/Losses due to Currency Fluctuations – elimination of artificial capital gains and losses when no currency has been exchanged by allowing the currency of the country of residence to be the functional currency for tax reporting purposes.

3. Applying foreign credits to NIIT – allow Americans abroad to apply foreign income tax credits in calculating Net Investment Income Tax.

4. Marital deduction for bequests to foreign surviving spouses – reinstate the marital deduction for bequests to surviving foreign spouses in the calculation of estate tax.

5. Declaration of foreign long term savings plan income – tax the income from foreign long-term savings plans at the time the money is withdrawn from the plan.

6. Taxation of welfare payments – tax imposed on foreign government invalidity, unemployment and social welfare payments to disabled and disadvantaged Americans abroad only by the country making the payments, i.e. the country of residence.

7. Tax-free transfer of foreign retirement plan assets – render tax-free the transfer of assets from foreign retirement plans deemed qualified plans under international tax treaties to retirement plans in the taxpayer’s new country of residence, be it the US or another country.

8. Revise punitive PFIC rules – For citizens residing abroad revise the punitive Passive Foreign Investment Company rules and reporting requirements that apply to non-US pension plans, foreign mutual funds and other investment savings vehicles that prohibit Americans abroad from using them to save efficiently for retirement.

9. Taxation of non-US non-qualified pension plans – simplify the reporting structure for non-US, non-qualified pension plans that would alleviate the onerous need for Form 3520 filings for non-employer funded pension schemes.

10. Reforms to the FEIE and FHE – maintain the Foreign Earned Income Exclusion, merge it with the Foreign Housing Exclusion and eliminate the ceiling. This would completely eliminate double taxation of the earned income of non-resident taxpayers.

11. Repeal WEP – Replace the Windfall Elimination Provision (WEP) which drastically reduces the Social Security payments owed to Americans also receiving foreign pension payments with the Social Security Fairness Act to restore rightful Social Security payments to Americans abroad.

12. 15.5% Repatriation Tax – Provide an exemption for small to medium sized business owners from the 15.5% Repatriation Tax. Meant as a tax break for American companies retaining profits abroad, it forces small to medium size business owners to declare profits set aside for future capital investment.

13. GILTI tax regime - Harmonise the tax treatment of Global Intangible Low Tax Income and Foreign Intangible Direct Income across all types of foreign corporations owned by U.S. persons or entities by giving pass through-type S corporations owned by Americans living abroad access to the same offsets and deductions afforded to C corporations controlled by U.S multinationals.


IMPROVING TAX FILING AND REPORTING FOR AMERICANS ABROAD

Although these reforms would lose their importance for most Americans abroad after a switch from Citizenship-Based Taxation to Residency-Based Taxation, they would be enormously helpful for those who do not elect to file as non-resident US citizens for tax purposes.

14. Optional simplified earnings declaration – provide non-resident taxpayers who owe no US federal income tax with the option of a one-sentence, handwritten or printed declaration of earnings, accompanied by a tax return or assessment from the taxpayer’s country of residence

15. Expand the criteria for determining the threshold for who has to file – add a provision so that foreign earned income that can be excluded under current rules does not need to be included when determining your gross income for filing purposes.

16. Make electronic tax return filing possible for non-resident taxpayers declaring foreign tax credits - Allow taxpayers using the free, fillable IRS electronic forms to exclude the attachments eliminating the need for the taxpayer to file the return by post.

17. Translated IRS publications and forms – provide translated versions of IRS publications and tax forms commonly used by non-resident, non-English speaking US citizens.

18. Harmonize International Tax Treaties – align all international tax treaties with the US Model Income Tax Convention of November 15, 2006, especially (but not exclusively) as they apply to private pensions, social welfare benefits, annuities, alimony, child support and pension plans.

19. Promote the Streamline Filing Compliance (Offshore) Procedures (SFCP) – expand awareness of the SFCP, a tax compliance restoration program introduced in 2014 for Americans who non-wilfully are not compliant with their tax filing and reporting obligations.

20. Improve communication – encourage the IRS to do even more to expand communication with Americans living abroad, starting with the establishment of non-resident taxpayer support hotlines operated by officials schooled in matters unique to non-resident filers and including the reopening of overseas IRS offices and the restoration of offshore services lost due to cuts in IRS funding.

21. Protect American Citizens Services – ensure that proposed cuts to State Department funding do not result in further reductions in American Citizen Services provided by U.S. consulates and embassies, which often include advice about tax filing deadlines and local tax return services.

22. Reform the Foreign Account Tax Compliance Act (FATCA) – enact HR 2136 to exempt from FATCA reporting, by both the U.S. citizen abroad and their financial account provider, the financial accounts of law-abiding overseas resident U.S. citizens in their bona fide country of residence.

23. Reform the Foreign Bank and Financial Accounts Report (FBAR) reporting requirement for U.S. Citizens in their bona fide country of residence – as follows

o Redress the enormous, out of proportion penalties – civil and criminal – imposed by the IRS for non-willfully neglecting to file forms;

o Adjust for inflation the $10,000 aggregate threshold amount that triggers a FBAR filing requirement, which has not been adjusted since the Bank Secrecy Act was enacted in 1970;

o Eliminate the duplication of information disclosed on the FBAR and FATCA reports;

o Exempt U.S. citizens from reporting foreign financial accounts that are not reportable by financial institutions in their country of residence;

o Address the vulnerability of FBAR data security inherent in electronic filing; and

o Remove the burden imposed on filers who are computer illiterate or with no access to computers by eliminating recently introduced mandatory electronic FBAR reporting.

REGULATIONS CONSTRAINING BANKING, INVESTMENT AND RETIREMENT SAVINGS FOR AMERICANS ABROAD

Note: A switch from Citizenship-Based Taxation to Residency-Based Taxation would resolve most of these issues for Americans living abroad.

Investment options for Americans abroad are increasingly limited and fraught. Due to SEC regulations and legislation designed to protect consumers in the market for financial products, a provider of financial fund products must be registered to sell and market their products in a foreign jurisdiction. Although U.S. brokerage firms have over time turned a blind eye to this requirement, more recently, in an atmosphere of increased disclosure and oversight, many have elected to prohibit clients residing abroad from buying U.S. mutual funds in order to avoid the registration requirement. Exchange-Traded Funds are a legal work-around for Americans abroad interested in a mutual fund-type investment exposure, however even Exchange-Traded Funds may not be an option for individuals whose foreign and/or U.S. bank and brokerage accounts have been closed.

Features of the U.S. tax code impacting investments, savings plans and retirement savings uniquely penalize Americans residing abroad in the following ways:

· Punitive taxation of retirement savings plans which qualify and are taxed under local laws but are not qualified plans for U.S. tax purposes;

· Punitive taxation of foreign government sponsored retirement savings plans that are not qualified plans for U.S. tax purposes;

· Capital gains tax laws that do not take into account currency fluctuations, thereby creating assessable capital gains upon the sale of assets even if no currency was exchanged;

· The inability to claim the foreign tax credit against taxes owing under the Affordable Care Act, the 3.8% Net Investment Income Tax;

· Inflexible regulations involving Social Security and Medicare contributions particularly disadvantage (double-tax and other) self-employed Americans abroad.

· The Windfall Elimination Provision which drastically reduces the Social Security payments owed to Americans also receiving foreign pension payments;

· The Social Security benefit taxation regime for taxpayers who are Married Filing Separately provides no exclusion for spouses. Americans married to foreign nationals normally file as Married Filing Separately and as such cannot receive the exclusion afforded Americans married to Americans who file jointly;

· Social Security contributions required of self-employed Americans abroad are taxed (15.5%) even if they are already making contributions to an aged pension contribution scheme in their country of residence;

· Welfare payments made by foreign governments to Americans who are disabled, unemployed or disadvantaged are subject to US tax though they are normally not taxed abroad.

U.S. BANKING ALSO CONSTRAINED

The USA PATRIOT Act, ratified after the terrorist attacks of 9/11, established new “Know Your Customer” rules for US financial institutions. As a result, banks and financial institutions are no longer willing to hold or open accounts for customers whose only address is outside of the United States. This has constrained the banking, saving and investment activities of Americans abroad. A sensible reform would be to exempt American citizens living abroad from this provision even if they have only a non-US address.

 



[1] https://www.americansabroad.org/files/586/

[2] https://www.finance.senate.gov/download/att-2-democrats-abroad-2014-fatca-research-report

[3] https://www.democratsabroad.org/can_we_please_stop_paying_twice_tax_reform_for_americans_abroad

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SURVIVING A TAX SCAM-SOAKED HOLIDAY SEASON

Thursday December 28, 2017

Dear Leaders and Colleagues,

The Taxation Task Force will start off our last message to you for this exhausting year with an enormous THANK YOU for supporting our campaigns and advocacy initiatives.  We will be publishing a timeline of the year-that-was that demonstrates the many and various ways Democrats Abroad leaders and members worked to bring our tax filing and financial account reporting problems to the attention of our elected representatives.  It’s something you can refer to when discussing the importance of our organisation to the Americans abroad community.  

Further, we can assure you that due to this enormous outreach there wouldn’t be a member of Congress on Capitol Hill who doesn’t know that there is a laundry list of ways in which the U.S. tax code discriminates against Americans abroad and that the Americans abroad community is determined to make them change that.

Thank you again for all you did to make this happen.

See below for our further notes to you on:

- the end of the tax reform legislative process;

- the response of companies so far to the new tax code;

- the remarks published by Rep Dina Titus in the Congressional Record about the need for tax reform for Americans abroad;

- the FATCA Repeal lawsuit making application to be heard by the Supreme Court;

- the tax reform clean-up bill coming in the next few months; and

- the new Taxation Task Force strategic plan.

Or just go enjoy your holiday knowing that we Democrats have an enormous opportunity to regain control of both houses of Congress in 2018 using the horrific tax scam the GOP has just perpetrated on every American bar those amongst the financial elite. 

We look forward to working with you next year to advocate strongly on behalf of Americans abroad and to generate the biggest turnout ever of overseas voters for Democratic candidates in elections right across the country.

Democratically yours,

DEMOCRATS ABROAD TAXATION TASK FORCE

[email protected]
Julia Bryan -ex-officio (Czech Republic)
DeeDee Gierow  (Sweden)
Rebecca Lammers (UK)
Carmelan Polce – Chair (New York and Australia)
Michael Ramos (Australia)
Joseph Smallhoover (France)
Orlando Vidal (UAE)

 

Post Script:  It is with great sadness that we learned this week of the passing of Stanley Grossman of DA UK, a valued member of the FBAR/FATCA Task Force from its inception in 2011 through 2015.  There will be many memorials for Stanley, as he certainly deserves.  We on the Task Force will remember him very dearly for many things, including his passion, commitment, humour and enormous determination.  No one pushed harder than Stanley for us to explore every advocacy avenue possible to promote our tax reforms for Americans abroad. 

What a sad year for us, in February losing our darling Joe Green, who was the founding chair of our tax advocacy team, and now Stanley.  We will build on their work as a tribute to them and are grateful for your help in doing so.

 

Tax Reform in 2017 is done

At this stage there has been no shortage of reporting on the Tax Cuts and Jobs Act of 2017.  You can read about what’s in it here and perhaps establish how it will impact you here.  Or not, since the provisions of the tax code impacting Americans abroad set up a different set of rules for us.  American Citizens Abroad, our colleague organisation fighting for reforms to laws and regulations that harm Americans abroad, has published a preliminary statement on the act as it generally impacts Americans abroad.

Through our lobbying on Capitol Hill we have identified a group of lawmakers who we think will go to bat for us when we try again in 2018 to reform the way Americans abroad are taxed.  We hope you will again work beside us.

How corporate America is celebrating tax reform

The GOP has lined up a few American companies to profile their use of the tax cuts they’ll be enjoying from now on (the media companies will also be celebrating the Trump repeal of Net Neutrality and the banks will also be celebrating the Trump destruction of the Consumer Finance Protection Bureau).  But increased wages and worker bonuses are far in the minority.  Many more companies are using all that cash, as expected, to buy back shares.  No wage increases.  No staff bonuses.  Big paybacks to share holders.   

Rep Dina Titus goes on Record supporting tax reform for Americans abroad

Rep Dina Titus (D-NV) has been a great friend of Democrats Abroad for many years.  We have always receive a warm reception in her office and she has supported our work to reform tax, voting, citizenship and other matters that seriously impact Americans abroad.  We are delighted and grateful for her statements in the Congressional Record drawing attention to the need for tax reform for Americans abroad.

FATCA Repeal lawsuit promoters make application to the Supreme Court

As noted earlier this year, the lawsuit brought by Citizens United lawyer Jim Bopp on behalf of 7 Americans including Senator Rand Paul challenging the constitutionality of the Foreign Account Tax Compliance Act was rejected by the Sixth Circuit court of appeal for lack of standing.  The lawsuit proponents are now asking the U. S. Supreme Court to hear the case.  The Taxation Task Force does not believe their request will be granted but we will, again, be watching the case very closely.

A 2018 Tax Bill to fix the 2017 Tax Bill

A very small team of Republican tax writers worked behind closed doors for just a few months to prepare the bill just voted by Congress into law.  It is no surprise, therefore, that those at the IRS charged with implementing the bill have a lot of work to do before the provisions can be implemented.  Further, tax lawyers, policy analysts and return preparers warn the bill contains changes to business deductions that could result in a lot of aggressive tax structuring and unintended consequences.  These will require the GOP Congress to pass another bill to fix the mistakes.   Incompetence by the GOP tax writers may result in another opportunity for Democrats Abroad and other groups representing Americans abroad to lobby further for reforms, including Residency Based Taxation.  We will certainly keep you apprised.

We go back to the drawing board

The Taxation Task Force will be taking a well-earned break over the holidays but we are already thinking about what our 2018 tax advocacy strategy should look like.  We’re going back to the drawing board, starting with a clean sheet of paper and re-building our program of initiatives – including both grassroots campaigns and Capitol Hill advocacy.

We have already welcomed a new member, Rebecca Lammers of DA UK, who has a background in social media and communications.  That may give you some insights into what we are planning next.

Questions or Comments

As always, we welcome your questions and comments.  Please contact us on [email protected]


Year in Review

Democrats Abroad Taxation Task Force 2017 Year in Review

The DA Taxation Task Force ("Task Force") has had a frantic but productive year.

For the first time in over three decades Congress would be working on a complete overhaul of the tax system. We saw this is our best chance for really pushing our case for Residency Based Taxation as well as continuing our work on a Foreign Account Tax Compliance Act ( FATCA) fix.

  • April 25 - Rep Carolyn Maloney, co-chair of the House Americans Abroad Caucus, introduces HR2136 “The Overseas Financial Access Act” which calls for the exemption of FATCA reporting by Overseas Americans.
  • May 15 – The House Oversight and Government Reform Committee holds a hearing on FATCA.  While Democrats Abroad's request to provide testimony at the hearing was rejected, we did make this submission to the Committee, and and a further submission in response to a request by the chair to provide three recommendations for remedying FATCA’s adverse consequence.
  • May 18-19 - Congressional Door Knock that occurred just after then 2017 Global meeting in Washington DC (this is our presentation on Tax Advocacy to the Global Meeting) included discussions about FATCA.  This statement was included in the Door Knock Leave Behind Pack.
  • May 27 – Rep Carolyn Maloney re-introduces HR 2710 to establish a Commission to study the impact of Federal laws and regulations on Americans living abroad.
  • June - DA’s 2017 Residency Based Taxation campaign is launched with a Congressional CallStorm asking members of Congress for support for Residency Based Taxation
  • July 17- The DA submits to the Senate Finance Committee our recommendations for reforms to tax laws that have grave financial and personal impacts for Americans abroad, including a switch from Citizenship Based Taxation to Residency Based Taxation. You can find the submission here.
  • September – Task force launches the Non-Resident Taxpayer Research Project, a survey of the tax filing and reporting experience of Americas living abroad.
  • September 29 –Task Force holds global Tax Advocacy Webinar to update members on the tax reform process and DA’s plans to advocate for Residency Based Taxation. These are the presentation slides.
  • October 3 – DA makes a further submission to the Senate Finance Committee calling for Residency Based Taxation. You can find the submission here.
  • October 10 – DA publishes the results of the Non-Resident Taxpayer Research Project: Can We Please Stop Paying Twice?
  • October – Task Force organizes another Congressional outreach campaign and CallStorm calling for Residency Based Taxation, ahead of a Capitol Hill Door Knock by the Task Force.
  • October 17-18 - Task Force goes to Washington as work on tax legislation is heating up, to meet with both Democrats and Republicans and advocate for Residency Based Taxation. We distributed our “Can We Please Stop Paying Twice?” research report, a one page Report Summary, and a document Making the Case for Residency Based Taxation.
  • November 7-9 - Task Force returns to Capitol Hill to lobby for Residency Based taxation, meeting with both Senators and House members in about 40 offices and distributing further documentation on how Residency Based Taxation might be implemented.
  • November - Task Force organizes a November Congressional outreach campaign for activists to push for Residency Based Taxation to be included in the package of tax reforms.
  • December – Task Force organizes a last ditch Congressional outreach campaign for activists to call their members of Congress asking them to reject the disastrous, all-for-the-rich tax bill drafted by Congressional Republicans with no input invited from Congressional Democrats.
  • December 19th Congresswoman Dina Titus, (D-NV1), submitted an extension of Remarks into the Congressional Record slamming the GOP Tax Scam and calling out congress for not addressing the issues of double taxation and filing difficulties for Americans abroad.
  • December 21: Rep Jamie Raskin, (D-MD8), submits an extension of remarks into the Congressional Record condemning the GOP Tax Scam and admonishing Congress for not addressing the issue of Citizenship Based Taxation which has inflicted so much damage to Americans living abroad.

By December 21stThe Republican Tax Scam was passed by both houses and was ready to be signed by Donald Trump.

On December 22nd Donald Trump signs the GOP tax bill, HR1 Tax Cuts and Jobs Act, in to law.

At the start of 2018 the Taxation Task Force will be building a new tax advocacy strategy, incorporating both grassroots activism and Capitol Hill advocacy. 

We would like to thank all of you who supported our efforts by making endless calls to your Members of Congress. Your calls have definitely made a difference! The offices we visited confirmed they have seen an uptick in the number of emails and calls they have received about the tax problems faced by Americans abroad. 

We have another opportunity to persuade Congress to address the urgent need for a switch from Citizenship Based Taxation to Residency Based Taxation - in the “fix up” bill it will need to pass to address problems with the Act passed in such haste. But we have a lot of work to do.  We look forward to your on-going support.

DA Taxation Task Force
[email protected]
Julia Bryan – ex-officio (Czech Republic)
DeeDee Gierow (Sweden)
Rebecca Lammer (UK)
Carmelan Polce – Chair (New York and Australia)
Michael Ramos (Australia)
Joe Smallhoover (France)
Orlando Vidal (UAE)