Message from Jackie Bugnion
Hi everyone,
Last night I saw a statement of Brady published in Politico on his latest on tax reform. The last sentences is truly encouraging. The article is below. I understand “letting them pay taxes only where they live” to indicate RBT. Since the Ways and Means has announced that it will publish its legislative draft next week, the language is most likely already determined. There have been several proposals for tax reform of Americans abroad from various organisations. Let’s all get behind whatever Congress comes up with and show a united front. This is a one chance in a lifetime to improve the situation of Americans abroad. Please activate your networks in this sense.
Best,
Jackie Bugnion
This was at the end of a POLITICO e-mail, sent 25 October.
He[Brady] said the committee is considering an issue dear to U.S. citizens living abroad — letting them pay taxes only where they live — though no decision has been made.
Some additional e-mail trail, I will not disclose sender:
Just listening to Ari Fleischer on TV about the tax reform bill and he said something that I wasn’t aware of, but some of you might be: He said that once the bill comes out of W&M Committee it goes directly to a floor vote. There are no floor amendments or changes permitted. Thought this is something to look for.
Ooops I forgot to translate this into Democrat English
“Hello Heidi, you have no need to fear us. We got your uranium already and The Clinton Foundation got their money. Move on, nothing to see here and we will continue to invest in the USA as long as out friends Bill and Hillary are involved in any business dealings. Thank you”
I’m sorry, but anything that truly makes life easier for US persons abroad is fine by me. I have been skeptical of TTFI, and dream of true simple RBT. But frankly, at this point, if the US says what you do abroad stays abroad, I’ll take it.
I wonder if TTFI would do away with FBARs. After all, if they don’t need to look at your income abroad, they don’t need to look at your accounts abroad. Well, I know that’s not true — they want to make sure people aren’t spiriting funds abroad to hide them there.
FBAR is one of the levers being used to try to flip Manafort. Maybe not the ideal moment for Republican legislators to suggest disabling it.
Fred (B)
Fred (IMHO) they will NEVER get rid of FBAR. The FBAR statute in its purest form requires any person who enters the USA on business to report his/her foreign bank accounts. The original purpose of FBAR was not primarily about taxation. Treasury has considered getting rid of FBAR for Americans abroad and declined to do so. Recent events make it clear that FBAR is an effective tool of intimidation … Mr. FBAR embodies what it means to be an American.
A move to “territorial taxation” (what income is subject to U.S. taxation) has nothing to do with (1) the definition of “tax resident” (what persons are subject to the U.S. tax system) and (2) the FBAR requirements found in Title 31.
It follows from this that a move to “territorial taxation” (absent further legislative change) would in no way affect:
– FBAR rules
– the FATCA IGAs (which are based on the U.S. definition of “tax resident”)
– Chapter 4 of the IRC (Sections 1471 – 1474 which are FATCA)
– the requirement to file a tax return and other information returns
– the draconian “Exit Tax” rules
– gift tax rules
– estate tax rules (unless the estate tax is abolished)
and much more.
ONLY a move to RBT can affect the above …
Of course a move to “territorial taxation” is helpful to Americans abroad. But, (without additional changes) it is only a beginning.
What a move to “territorial taxation” would probably achieve is, that foreign source income would not be subject to U.S. taxation. I would think (but wouldn’t count on) that territorial taxation would lead to the elimination of certain information return requirements: 8938 and 8621 (which have already been eliminated for Green Card holders who make a treaty election).
But, these are just some thoughts. Who knows what the final product will look like? It’s possible to move to “territorial taxation” for individuals and retain A LOT of the pain for Americans abroad. On the other hand, a lot of the pain could be removed.
Neither RO nor ACA has proposed the elimination of CBT. The RO proposal makes CBT more tolerable for Americans abroad. The ACA proposal reinforces CBT, but allows a “buy out” for specified individuals (and is ultimately better for those who can take advantage of it).
DA has yet to make a specific proposal. But, in the DA worldview, CBT is essential to ensure that a small group of people don’t escape paying their “fair share”. For this reason, DA does NOT really support RBT – time for the loyal Democrats to stop drinking the “Kool Aid”.
The ONLY proposals for RBT are found in the some of the individual submissions to House Ways and Means (2013) and Senate Finance (2015).
But on the other hand: We don’t know what the proposed legislation will look like. It could incorporate various suggestions from various proposals and could actually be RBT. But, given the fact that there has been no organized support of RBT, I think this is unlikely.
I read somewhere (or did I just dream it) that:
“All roads lead to renunciation!”
No matter what happens now, the Democrats are going to be screaming for the blood of the fatcats they believe to be benefitting from tax cuts for the rich.
That’s American overseas who are not only rich fatcats, they are ungrateful traitorous SOB’s that will be punished as soon as they get the chance, and eventually they will.
All roads lead to renunciation.
Thanks USCA. I agree, unfortunately. Indeed the US justice system relies heavily on tax issues (from Capone to Manafort) to get people wanted for other, unprovable, misdeeds. FBARs are obviously a wonderful tool. Which is of course why only RBT makes sense, since it would keep FBARs for residents, which for better or worse is kind of a fact of modern life everywhere. But as you well illustrate, RBT has no powerful lobby for it, whereas TTFI might at least get a hearing.
I don’t doubt the sincerity of DA concerning RBT but DA has little influence on the Democratic Party. Homeland Democrats certainly have no understanding of, or sympathy for, expats. Not saying Republicans are more concerned but they aren’t the ones who came up with FATCA.
But Christmas is next month so I’ll continue to hope for something new.
@deplorable
I couldn’t care a f*** who invests in the USA, I am not an American live in a true direct democracy.
It’s probably unrealistic to expect to go from full CBT to full RBT or something similar. It’s all about control for them and any change will be good. However if they would give this a good analysis, they will see that true RBT is actually the fairer tax system and the easiest to implement since the majority of the world practices it.
Someone correct me if I am wrong but a Territorial system taxes at source within a country which is why it was said earlier that people living the US will avoid paying tax on foreign source income or by simply moving the source of the income out of the USA. NRA aliens will most likely move their source out in a lot of cases.
RBT taxes residents on their worldwide (local and foreign) income which residents, and in turn get services and are part of that countries society.
And I agree all roads lead to renunciation or at least to non-compliance.
UK Rose: meanwhile there’s also “compliance”
@UK Rose
The argument that somehow territorial taxation would allow Homeland Americans to escape taxation is not a strong argument. There might be some cases (here and there) where that would be true. But, in general, it is NOT the case that a move to territorial taxation means that the USA would lose tax revenue. In most cases the USA would never have received the tax revenue anyway.
Here is why …
The scope of income subject to taxation – what income does a country subject to taxation?
All countries impose taxation on income that has a source within their sovereign country/territory. In fact, all countries have the first right of taxation in income earned within its territory. Therefore, all countries begin with “territorial taxation”. All countries impose taxation on income earned in their country.
The question is whether a country in addition to imposing tax on income earned in the country/territory ALSO wishes to imposed taxation on income earned in other countries. Those countries that IN ADDITION to imposing tax on income earned in that country, impose taxation in income earned outside the country employ “worldwide taxation”.
The question of “what” income is subject to taxation – “territorial vs. worldwide” taxation – who is a different question from “who” is required to pay the tax.
Who is subject to taxation on income – who is a “tax resident” of a country?
All countries impose taxation on those who are “resident” (however that is defined) in the country. So, all U.S. residents are subject to U.S. taxation. Specifically, the U.S. requires their “residents” to pay tax on their worldwide income. But, the U.S. defines “tax residence” in an unusual way. The U.S. deems “U.S. citizens” to be “U.S. tax residents”. But, U.S. citizens may not (as we all know) have actual residence in the USA.
The problem is that the USA imposes “worldwide taxation” on “U.S. citizens” who do NOT have factual residence in the USA. This is (as we all know) the root of the problem.
A U.S. move to “territorial taxation” will be of some help, because it means (at least in theory) that no U.S. citizen living outside the USA would be subject to taxation on income earned outside the U.S. territory.
But, what about U.S. citizens living inside the USA?
Would U.S. factual residents (not Americans abroad) avoid U.S. taxation on income earned outside the USA under a “territorial system”?
No in most cases they would NOT avoid taxation. The reason is that they would pay the tax to the country where the income was earned/sourced. Even under the current rules, the Internal Revenue Code allows U.S. taxpayers to take a credit against any U.S. taxes owed for the foreign tax paid. Therefore, the USA would not collect tax on the income anyway.
The argument that somehow territorial taxation would allow Homeland Americans to escape taxation is not a strong argument. There might be some cases (here and there) where that would be true. But, in general, it is NOT the case that a move to territorial taxation means that the USA would lose tax revenue. In most cases the USA would never have received the tax revenue anyway.
@USCitizenAbroad: “Would U.S. factual residents (not Americans abroad) avoid U.S. taxation on income earned outside the USA under a “territorial system”? … No in most cases they would NOT avoid taxation. The reason is that they would pay the tax to the country where the income was earned/sourced.”
But isn’t that only really true if the conditions are symmetrical? That is, if the other country also has a territorial tax system, or something very similar?
Most don’t. To take a simple example, the UK does not tax dividends or capital gains on UK stocks paid to non-UK investors. Under “unilateral” territorial tax in the US, a US investor could therefore trivially avoid both US and UK dividend and capital gains taxes by investing in UK shares.
Which is why the RO proposal also calls for ‘renegotiation’ of a whole heap of treaties, something that cannot happen overnight, and is unlikely to happen at all.
I’m pretty sure that no matter what weird system emerges at the end of this process, be it good or bad, most dual citizens without US ties will be able to continue with non-compliance without any fear of penalty. Our task is to educate them that compliance is generally not the best option.
@Watcher
Agreed. Yes it is dependent on the other country levying a tax that would be used as a credit to reduce U.S. tax. It is the right of any/every country to impose taxes on income or gains it its territory.
Agree also that any renegotiation of a treaties (as per the original RO proposal) will make the U.S. extremely unattractive as a place to invest.
Will be interesting to see what is in the actual proposal. I think it is likely to be couched as something like:
“territorial taxation for Americans abroad” – which although called “territorial taxation” will be something that looks like some form of RBT.
We will find out tomorrow.
@Nonymous
The more interesting issue (assuming that the change falls short of what is desired) will be whether those who are compliant will continue to be compliant. Is there any change (other than for the purposes of renunciation) that would induce the large number of noncompliant Americans abroad to file?
@USCitizenAbroad and @Watcher
thank you for both your feedback
yes it can only work with the treaties rewritten, i was saying how it looks to someone with the treaties staying as there are. People will be be able to live in the USA and move money around the world to the lowest tax jurisdiction, or earn money around the world without paying any tax at all in some cases. Not what the republican party wants to achieve I am sure. You can live in the USA and go and work some of the time in a place with zero tax. Territorial does work for entities because buildings can’t move.
Will countries want to rewrite all their treaties? There will come a point that countries will have to start standing up to the USA. The point I was making is that adopting what the rest of the world is using (True RBT) will be easier to integrate. but I suspect if there is change it will be a hybrid of what’s been discussed.
We will find out soon enough. and as far as compliance, If there is no change, I think more and more will drop off the radar unless they have financial ties to the USA.
The Clinton Traitors need to go to jail for FBAR forms fraud and conspiracy to defraud the USA. Too bad many here are blinded to what they should actually be doing, namely force The Clintons lobby for abolishing FATCA. SIMPLE AS THAT. Satan hates the light of day. They laundered money through Canada SIMPLE AS THAT. Bill and Hillary now want FATCA gone asap. What is happening to Manafort is a GOD send for us. We need to get busy and push this narrative until the press picks up on it or Trump appoints a special prosecutor to go after the Clinton Foundation, the most corrupt “charity” on EARTH. Then go after the Pedophile Podesta , Epstein mob. Folks, forget all the nuances and picking apart CBT and FBARS. It’s all but finished. And for the Condors here, and its obvious who these are, go away and get a REAL job
@Deplorable: Kindly leave the American partisan personality-bashing out of this. Cursing the Clintons is so far removed from what this site is about, that it almost seems as though you randomly chose this site. Podesta, Epstein, the Clinton Foundation, all have ZERO to do with the things that concern us here. Clintons, Obamas, Bushes, Trumps, they’re all part of the same system, all corrupt, none more or less evil than any other, and none with any genuine interest in abolishing FATCA or CBT. So please keep your Trump worship and Clinton hate out of this. Let’s keep it on topic.
Thanks, Barbara.
Please stay on topic @ Deplorable.
Proud Deplorable’s writing style hurts my eyes but she’s around 50% on topic, the same as a lot of others here. It’s unpleasant that millions of innocent people will keep getting slaughtered because one actual genuine fatcat (or maybe more) was caught by FBAR, but surely the point is on topic. Others bash Obama, lots bash Harper’s junior brother, etc.
Let’s face it, the clinton/Obama ilk were responsible for implementing and continuing fatca. They are on topic but I don’t think Trump is the answer for Americans abroad or at home.
My entire pension funds are stuck in the USA, I cannot move them as much as I want to.
I am now taxed in my country of residence through a tax treaty. Will my country be willing to renegotiate a new one, or I am in line for double taxation through TTFI?
What the hell is wrong with RBT like the rest of the world?!
Change of some kind seemed possible, for a bit, but may have been illusory. When it gets to the pount, they simply cannot agree. And can’t get their heads round the idea of having to raise taxes in one place in order to pay for cutting taxes in another.
PAYGO PAYGO. The CUT CUT CUT tax bill!. What a joke.
“The one element more or less fixed into place is the $1.5 trillion maximum total, since it was in the budget they passed in October that enables them to use reconciliation procedures and therefore need only a simple majority in the Senate. Even that has some wiggle room. They could find additional ways to cheat the numbers in how the bill is scored. They could even go leave the current 2018 fiscal year budget behind and pass a new 2019 budget, with a different set of reconciliation instructions. But that brings them into the next calendar year, and the elections get closer and closer.
What remains is either finding pay-fors that don’t prevent them from reaching House and Senate majorities, or having smaller cuts to begin with. Eventually, they’ll have to choose one or the other (or a bit of both). At least, if they want to pass something. And they might want to make that “eventually” very soon, because the longer this goes on the greater the chance that it’s just all going to fall apart. ”
https://www.bloomberg.com/view/articles/2017-11-01/what-s-going-wrong-with-the-tax-bill
Nothing.
https://www.vox.com/2017/11/2/16596896/house-republican-tax-reform-cuts-trump-ryan-explained
A Republican or two will no doubt be along shortly to explain that TTFI/RBT/whatever is definitely still under cnsideration.
So it goes.
Link from Stephen Kish on another thread
https://waysandmeansforms.house.gov/uploadedfiles/tax_cuts_and_jobs_act_section_by_section.pdf
Archive link for those whose IPs are blocked by US government websites
https://web.archive.org/web/20171102160405/https://waysandmeansforms.house.gov/uploadedfiles/tax_cuts_and_jobs_act_section_by_section.pdf
At page 59, the sole occurrence of the word “citizen” in the entire document, in a paragraph describing current law. Neither the word “citizen” nor “individual” appears in the description of the proposed amendment.
@Eric…..my first read was we are screwed…..then you posted a glimmer…….back to screwed?