A long-awaited bill that would end the 144-year-old U.S. system of citizenship-based taxation has been introduced to Congress. H.R. 7358, The Tax Fairness for Americans Abroad Act of 2018, would replace the current U.S. tax regime with a territorial or residence-based tax system for individuals.
In September, Solomon Yue of Republican Overseas was on the road telling Americans abroad that a bill for territorial taxation for individuals would be introduced to Congress before the end of the year.
Representative George Holding (R-NC)
On December 21st, H.R. 7358 was submitted to the 115th Congress by Representative George Holding (R-NC). AARO Advisory Council member John Fredenberger "commend[s] Representative Holding for getting Congress to focus on expatriates with the Tax Fairness for Americans Abroad Act."
A copy of the bill can be downloaded here.
The Tax Fairness for Americans Abroad Act would "amend the Internal Revenue Code of 1986 to provide an alternative exclusion for nonresident citizens of the United States living abroad." Under this bill, Americans overseas could elect to be treated as "qualified nonresident citizens" and would be exempt from U.S. taxation on their income derived outside the United States. This would end the double filing and taxation of Americans living outside the United States while driving, says Yue, "U.S. export sector job growth." More Americans working abroad, he argues, means more American-made products exported and sold outside the U.S..
Democrats Abroad calls the bill, "a milestone for those who advocate a switch from the current U.S. system of Citizenship Based Taxation to the globally-accepted norm of Residency Based Taxation (RBT)."
AARO President Neil Kearney welcomes the news:
"AARO has been working for years with other organizations for relief for Americans abroad from the U.S. citizenship-based taxation regime. A move to a residence or territorial-based taxation system will be a large part of our advocacy work in 2019. We are heartened by the introduction of Representative Holding's bill and will study it carefully in the days to come. It is our hope that this bill will not only raise awareness of the harm citizenship-based taxation has caused Americans abroad, but that it will be a catalyst for bi-partisan territorial/residence-based taxation legislation in the next Congress via collective action by AARO and other organizations."
This article is contributed by Victoria Ferauge
