Americans Abroad Granted Some Relief from the GLTI & Repatriation Tax

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Published: 8 June 2018

AARO member Monte Silver announced in an email earlier this week that after the hard work of many organizations and individuals, the US Treasury Department and IRS have granted some relief to Americans professionals and business owners abroad who are subject to the Repatriation taxes. (See this AARO report for more information.)

Relief is not repeal, but Silver says that it is, nonetheless, "meaningful relief." He writes:

A US living abroad who is an individual US shareholder of a controlled foreign corporation shall incur no acceleration of the 8 year payment plan, or other penalties, for failing to make the June 15, 2018 payment, if the total tax due from the expat under the Repatriation tax (i.e. in all the eight years) is less than $1,000,000.

In other words, business owners and professionals subject to these taxes must still file and make the 965(h) election by June 15, 2018 (or October 15, 2018 if a valid extension has been filed), but are not required to make a payment on that date if the total amount of tax due is under 1,000,000 USD.

Links to other articles on-line:

The Financial Times article Expat Americans given on-year reprieve on US repatriation tax

American Citizen's Abroad (ACA) press release The Internal Revenue Service Has Offered Penalty, Filing Relief to Many Who Are Subject to the New Transition Tax on Foreign Earnings

Accidental Americans in the News

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Published: 23 April 2018

The challenges facing "accidental" Americans in dealing with U.S. tax regulations have been hitting the American news recently. 

Accidental Americans are generally defined as individuals who have acquired U.S. citizenship through a parent, but who have not lived in the United States. They are subject to the same tax regulations as Americans living in, or who grew up in, the United States. 

Bloomberg News featured this article on how accidental Americans have been taking action in France, which includes a legal action against FATCA. 

And this week, NBC Nightly News produced an introductory feature on the challenges accidental Americans face when it comes to dealing with U.S. regulations. 

The Tax Reformer Cometh...

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Published: 24 September 2017

At the initiative of Republicans Overseas, the Republican National Committee recently adopted a White House-approved resolution supporting the change from citizenship-based taxation (CBT) to residence-based taxation (RBT) via RO’s proposed Territorial Taxation for Individuals (TTFI). RO reports having "champions and sponsors in both the House and the Senate" and having found "tax loopholes that TTFI would close, thereby making TTFI revenue-positive".

RO has initiated a letter-writing campaign under which overseas Americans would write to the President about eliminating citizenship-based taxation.

At the same time, Democrats Abroad has launched a survey on taxation of overseas Americans and will shape its future advocacy efforts on its results.

It appears obvious that now is the time for Washington to hear from the 9 million Americans that make up its global constituency – the people subject, unlike the citizens of any other modern country in the world, to double taxation, in the country of their residence and in that of their citizenship.

There are many views as to how this situation can be corrected and there are advantages and disadvantages for someone in each of them (but whoever suggested that everything about paying taxes was "good"?).

The AARO board, with the clear support of the AARO membership, has consistently supported a move to residence-based taxation, making the hiring of Americans overseas more attractive to international companies, and reducing the need for burdensome and costly financial reporting requirements on individuals and banks, both to the IRS and under the Foreign Account Tax Compliance Act (FATCA).

In the run-up to serious Congressional efforts to achieve tax reform, we:

• encourage readers to write now to their legislators (find them at senate.gov and house.gov) to tell them how this double liability affects them, personally.
• encourage readers to participate in the Democrats Abroad survey (which takes around 5 minutes to complete) – deadline September 30.
• encourage readers to contribute to the Republicans Overseas campaign (sample letter to President Trump provided, to be adapted to individual circumstances) – deadline September 30.

There is at this time no legislation proposing a move to residence-based/territorial taxation, but tax reform is clearly "in the air".  Congress and the Administration must not be allowed to neglect considering the special circumstances of the equivalent of the 12^th state in terms of population: the 9 million Americans living and working abroad.

The Latest Expat Tax Advocacy Efforts

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Published: 22 September 2017

Guest blogger post.

It’s hard for a lot of Americans to look beyond their borders. Consequently, issues like expat tax reform get lost in the daily static. Bipartisan cooperation in America feels more uncommon than ever. So when Democrats and Republicans do converge on an issue, you can be sure it’s a consequential one.

The Problem

According to the State Department, there are nearly eight million Americans who live in other countries but who maintain a residence in the U.S. This voting bloc is large enough to sway a close election. And most of America’s elections are close these days.

Simply put, eight million Americans is not a trivial number of people. For the sake of reference, there were only 10 states in 2015 which had populations greater than ten million persons.

So what’s on the mind of overseas Americans these days?

Because America does not stand with the rest of the world in imposing residence-based taxes, American expats must struggle with incompatible foreign tax codes and ponderous domestic requirements.

Worse, the IRS no longer has a physical presence abroad. [Editor’s note: AARO has been critical of the decision to close all IRS overseas offices.] So, when things get complicated with expatriates’ taxes — and something almost always does — their only recourse is to flock to overburdened and understaffed telephone lines to get it straightened out. On top of that, tax filing for Americans overseas can be excessively costly and time-consuming.

The word “degrading” comes to mind. Most seasoned adults recognize paying taxes as a privilege and an obligation of living in an advanced democracy, but the process of paying them should be as straightforward as it is consistent for all Americans.

The Latest Efforts

One of the easiest solutions America could adopt to solve this problem is to switch to residence-based taxes.

The trouble is, too few people even recognize this is a problem. Folks in Congress have their hands full and most voting Americans don’t even participate in presidential elections, much less weigh in on an issue which literally feels like a world away.

Nevertheless, this issue enjoys bipartisan support among Americans abroad. Active public awareness and petition campaigns are underway as we speak from both “sides” of the American political aisle overseas.

If you are or have ever been a tax-paying American expat, Democrats Abroad would like your help shedding light on the ways our tax regulations are burdensome and borderline discriminatory.

Expat tax reform is also largely supported on the Right. Like Democrats Abroad, Republicans Overseas is actively encouraging anybody with firsthand experience or even just strong opinions to join their letter-writing campaign and sign their petitions. They will deliver all the letters they receive to President Trump in early October of 2017.

Making the world a better place requires us to become worldlier citizens. Nobody who wishes to broaden their horizons should see their efforts held back by outdated bureaucracy.

Kate Harveston is a journalist and freelance writer. Find more of her writing on her blog, Only Slightly Biased. 

Editors note: AARO works with many organizations in our advocacy efforts. To learn more about our position on taxation and financial reporting, see our position paper on the issue.