As each year passes our list of expat tax issues grows. As followers of expat tax matters know, there was nothing good for Americans living abroad in the Tax Cuts and Jobs Act of 2017. Not only did the law fail to address any of the tax problems Americans abroad endure, it also placed a further serious - and for many existential - tax burden on Americans who own small to medium sized businesses overseas. For these reasons you could say 2018 was the most challenging year yet for expat tax reform activists, many of whom invested enormous energy advocating on behalf of the Americans abroad community during the 2017 tax writing process.Read more
Democrats Abroad welcomes the introduction of H.R. 7358, the Tax Fairness for Americans Abroad Act. H.R. 7358 is not a perfect bill and, coming on the eve of adjournment, it cannot be given serious consideration or debate. That said, it is a milestone for advocates of a switch from the current U.S. system of Citizenship Based Taxation to the globally-accepted norm of Residency Based Taxation (RBT), and raises to attention important issues that Congress must address with hearings in the 116th Congress.Read more
Democrats Abroad has written to Senator Sheldon Whitehouse (D-RI) and Representative Lloyd Doggett (D-TX), sponsors of the 2017 Stop Tax Haven Abuse bill, in relation to measures in the bill involving offshore account disclosure. Americans abroad face serious problems obtaining everyday banking products and services in their countries of residence (as well as in the United States ) arising from foreign financial account disclosure requirements. In our letter we have outlined our concerns about the 2017 bill and, in anticipation of its re-introduction in the 116th Congress, have offered a range of recommendations for anti-abuse mechanisms to curb tax evasion PLUS protect the ordinary and entirely legitimate financial accounts held by Americans abroad in the countries where we live and work. This is our letter.
More Treasury Regulations proposed for implementing the 2017 Tax Cuts and Jobs Act (TCJA)
On Thursday 13 December 2018 Treasury published proposed guidance on the Base Erosion and Anti-Abuse Tax in the 2017 TCJA. An easing of rules governing the way foreign financial institutions and U.S. banks should deal with foreign account disclosure laws also factors into the proposed regulations. Reporting on the proposed rules is here, here and here.
Democrats Abroad is pleased that Treasury, in providing relief for U.S. corporations abroad, has also given consideration to foreign financial account reporting; this is an issue that significantly impacts U.S. citizens abroad. We strongly urge Treasury to not only consider regulatory changes to benefit companies that operate outside the U.S. but also to consider further changes that would benefit ordinary American citizens who live and work outside the country.
Democrats Abroad Taxation Task Force
 Provisions in the USA PATRIOT Act requires holders of U.S. financial accounts to have a U.S. address. Americans living abroad without one are not able to open or retain accounts back home.
Democrats Abroad has reached out to Democratic members of Congress expect to lead in the House of Representatives on key committees to request hearings early in the 116th Congress examining laws and regulations that harm and discriminate against Americans living outside the U.S. Our letter is here. We expect to follow up on this letter once the 116th Congress is seated and especially during a Congressional Door Knock to be held in conjunction with the Democrats Abroad 2019 Annual Global Meeting to be held the first half of the year.
Further more detailed information about the matters raised in this letter and other grievous discriminations against U.S. citizens abroad that Democrats Abroad has and will continue to bring to the attention of our elected representatives please see the Democrats Abroad 2016 Platform which is posted here.
Democrats Abroad has written to Senator Orrin Hatch, Chairman of the Senate Finance Committee, Senator Ron Wyden, Ranking Democrat on the Senate Finance Committee, Rep Kevin Brady, Chairman of the House Ways and Means Committee and Rep Richard Neal, Ranking Democrat of the House Ways and Means Committee, asking for our transition tax reform recommendations to be included in any technical corrections bill moved in the lame duck session to remedy serious problems arising from the 2017 Tax Cuts and Jobs Act rushed through Congress in December of last year. Click here to download the letter.
Our letter goes on to ask for their support for an urgent switch from citizenship based taxation to residency based taxation (RBT).
The Democrats Abroad Taxation Task Force is very much looking forward, in the next year, to reaching out to the 116th Congress, so many members of which have the overseas vote to thank for their seats. We will make a special effort to engage with them and continue to persuade the all-important tax writing committees about the need for urgent action on expat tax reform.
Last week the U.S. Senate followed the U.S. House of Representatives into recess until after the 6 November midterm elections. Here are some updates on the advocacy work of the DemsAbroad Taxation Task Force as we leave the regular session of the 115th Congress behind and anticipate the “lame duck” session.
· The Residency Based Taxation (RBT) proposal being championed by Rep George Holding (R-NC) has been at a standstill since August. We are told that further work on the scoring analysis by the Joint Committee on Taxation (JCT) awaits 1) further releases of regulatory guidance by Treasury on the implementation of the Tax Cuts and Jobs Act, specifically the 2 new “transition taxes” it introduced that impact American business owners abroad (Repatriation Tax and GILTI Tax), and 2) new definitions for what qualifies as a Passive Foreign Investment Company (PFIC), which are subject to highly punitive tax treatment.
Our hope is that these matters will be resolved in time for JCT to complete its cost analysis and for House Ways & Means Committee staffers to produce a RBT bill to be introduced in the “lame duck” session. We understand that there will be a Tax Cuts and Jobs Act “technical corrections” bill between Election Day and the end of the calendar year, but we do not expect a fix for the “transition taxes” to be a part of that bill.
We liaise continuously with key members of the House and with our colleague organisations who are also working in support of RBT. If there is any progress made on the RBT proposal we will surely pass it along.
· Treasury released guidelines for implementing the transition taxes in the Tax Cuts and Jobs Act on 1 August 2018 and opened a 60 day comment period for submissions in response to the guidance. Indications suggest Treasury was inundated with comments from individual and corporate owners of businesses abroad. Thanks to all who made submissions in response to our call for comments. The IRS has very abruptly announced it is holding hearings on the regulations this coming Tuesday 22 October, with witnesses invited to speak for 10 minutes. We anticipate a lively exchange of comments and hope thereafter that the IRS embraces the need for relief for American individuals who own foreign businesses. We will forward any developments.
· Democrats Abroad has been to Capitol Hill twice since the end of the August recess for meetings with members of Congress about expat tax reform. Our outreach, at this point, is concentrated on a) Democrats on the important House Ways & Means Committee, b) members of the House Americans Abroad caucus or who have a connection to the Americans abroad community, and c) members who are friends of Democrats Abroad or have themselves lived outside the U.S. As Congressional Democrats were fully and completely locked out of the 2017 tax reform process we are finding ourselves spending a lot of time educating members about the new taxes on Americans abroad introduced in the 2017 Tax Cuts and Jobs Act. We use it to reiterate our support for a switch from Citizenship Based Taxation to Residency Based Taxation (RBT), with the goal of finding Democrats who will act as RBT bill co-sponsors when the bill is finally produced.
Important Democrats Abroad tax reform position papers we leave behind at meetings on Capitol Hill are here and here. Our discussions about the issues are often fruitful and encouraging. On Capitol Hill, however, attention has well and truly shifted to the midterm elections. House offices are manned by a skeleton staff - aides having been re-deployed to electoral efforts in the district - and meaningful responses to policy queries are not forthcoming.
The most high potency outreach to Congress, however, is from you to your elected officials. And there’s no better time to generate attention from candidates for office than when they are asking for your vote. Our expat tax reform campaign guide provides language for phone calls and written messages of all kinds and we encourage you to consult it for support to communicate with your member of the House of Representatives or Senators.
Lastly, the other very very important thing you can do to support and progress the tax advocacy work of Democrats Abroad and others to enact a switch to Residency Based Taxation IS TO VOTE. A strong, blue, voter abroad turnout is critical to making our concerns a priority for members of Congress. If you haven’t yet voted for many states it is not too late; go to votefromabroad.org to request a ballot. If you have voted, thanks so much for expanding the profile of voters living abroad and for helping to build that blue wave.
Please contact us at any time with questions or comments.
Democrats Abroad Taxation Task Force
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 email@example.com.
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 firstname.lastname@example.org.
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: email@example.com
* 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.