Today (11/16/2017) the floor of the House passed the House tax reform bill. The earlier version is here .
Today also the Senate Finance committee passed the Senate tax reform bill. See link
Do not yet have the final versions of either bill but suspect that we are not helped in the bills. Will post here final versions when they become available.
Listen to the C-span clip found by BB in which Residence-based taxation is mentioned by Golding and Brady in the House tax bill debate — none of this however, appears to have been incorporated into the House or Senate bills passed on 11/16/2017
Republicans Overseas (RO) continues to press on, to make changes in the final tax package that will help us. The fight is not yet over, but it continues, right from the beginning, to be an uphill battle — and the odds don’t seem very good right now. RO says: “Again we need to focus on the Senate side since this fight is far from over.”
Personally, it makes no sense to me to blame Solomon and the handful of people at Republicans Overseas for trying to make a change and, so far, failing. Yesterday a friend reminded me that there was this Ismene, who kept telling her sister Antigone that it was pointless to even “try”: “…but you’re bound to fail…No sense in starting a hopeless task…Go then, if you are determined, to your folly, etc. etc.” Antigone responded: “When I have tried and failed, [then] I shall have failed.”
@JC: “This $60K exemption. Is the tax like on U.S. Death/U.S. Exit, where only the asset value is considered and not any loan balance against the assets?”
It’s… complicated. Outstanding mortgage liability may be deductible, but it depends on the type of mortgage used, and not all of it may be deductible. So a confiscatory outcome isn’t guaranteed, but could be entirely possible if circumstances align in unfavourable ways.
For further reading, this paper touches on the issue, and also offers a decent overview of the whole US estate tax nightmare for NRAs.
@watcher, Karen,
Does this proposed NRA estate tax apply between NRA spouses? I am concerned about US pension fund that cannot be moved.
@All
Also, for avoidance of some alarm, this miserly $60k US estate tax exemption rises to $5.49mm for anyone in a country that has an estate tax treaty with the US.
Only a handful of countries have these treaties, but Canada, Australia, Japan and the UK are on the list.
Estate tax treaties are separate from normal income tax treaties. Someone in a country that has a normal income tax treaty with the US gets no special protection from US estate taxes unless that country also has a US estate tax treaty.
without reading some 500 comments…
i knew it….glad I renounced.
@Heidi
There is no unlimited marital deduction for NRA spouses under the US estate tax. So yes, it’s a potential problem. Are you a citizen of one of the US estate tax treaty countries (UK, Switzerland?). If yes, your US estate tax exemption rises to $5.49mm, which probably defuses the problem. If no, the normal remedy is a QDOT trust for the surviving spouse — costly and restrictive, but likely better than US estate taxes.
Note that we’re not discussing a ‘proposed’ estate tax for NRAs. It’s already here and real and has been for years, just not well enforced. The only current proposal is to start enforcing it properly, albeit in some vague and unspecified manner. Given that most new enforcement would have to be done by non-US financial institutions, that may of course include yet another Big Stick of threatened withholding, but nobody knows the details (if indeed there are any beyond vague brain-fart and hot air here).
@watcher
Aren’t those treaties the status quo, but this new proposed TTFI would override them?
OK, thanks Watcher, got it.
I thought this new proposal would seek to override the treaty.
@all
All i am saying is that a residence based tax system can pass without the complication of having to rewrite treaties. and other countries losing some of their tax revenue. and if it is a worldwide residence tax system like in the UK, it stops residents from shifting assets to lower tax jurisdictions. if everything was just at source and all the wealthy shifted source income to the lowest tax places, then it would start to effect the economy of the country they live in. wealthy people living in the UK and paying the lowest tax elsewhere. there are rules to stop people even manipulating the residence status.
I am all for a TTFI passing, if they can get it together, rewrite the treaties which they said they need to do to make it work. but would it not be easier to work toward a model that fits in with the rest of the world. search on google to see which countries are using RBT and you will see that it is the majority.
@JC explained my example correctly. i am a UK resident subject to tax on my worldwide income. the treaty says the US gets first taxing right on US rental. the treaty also says that UK residents will have 15% withheld on dividends. the treaty says there is no withholding of tax on capital gains when i sell US stock. any UK source income is only taxed here. The US still gets its cut on US rental and dividends. and the UK also gets a further cut if domestic law rate is higher.
@UK Rose
Exactly, but when I asked why RO were going for TTFI for individuals, rather than RBT someone from there posted on Brock that they decided it would be ‘easier’ to pass as they could tag it to the TTFI for corporations.
‘Easier’ means renegotiation of all the tax treaties
Just checked the Democrats Abroad FB site for updates on their push for tax legislation: little interest on the site on topic of tax reform for “Americans Abroad”. Did find a November 9 post:
“Images from our last two days meeting lawmakers of both parties in both Houses of Congress, persuading them to include reforms for Americans abroad in the tax package. So far the House bill is silent. Meetings all over the Senate reveal nothing about the bill being published tomorrow. Difficult – but not over yet. #DemocratsAbroad #ResidencyBasedTaxation #Itstime
[Two comments:]
Eric W. Sedlak: RBT and same country exemption for FATCA FBAR
Jennifer Ann: if the president doesn’t pay taxes, why should we?”
Democrats Abroad have never seemed interested in fighting Fatca/CBT.
@Marie
Sadly, seems like R at home don’t really care to either.
DA wants RBT but DNC doesn’t care.
Strictly speaking couldn’t RBT be decided separately from tax reform? Someone should whisper in Trump’s ear that CBT was an Obama thing.
@Heidi
they already have RBT in place for NRA. All they have to do is take the word citizen out of the equation. of course they have to iron out what defines resident but they already have a definition in place. as far as any departure certificate. that needs to just happen once, for when people first leave. not yearly. We also need to tell the UK if we are going to live abroad permanently or work abroad full-time for at least one full tax year. then when we come back. this is how a civilised free world works.
And I still see homelander mentality has still being a big problem even intelligent ones. Some are starting to understand but the majority still don/t. I was telling a homelander distant relative about the sinister new corporation laws and yet again they are trying to use us to pay for tax cuts and pilfering assets, and she said yes but remember it is helping stop money launders and hiding assets. i tried to explain that no this has nothing to do with that at all. it is just plain confiscation.
Just to make it clear, this topic (NRA’s US estate taxes) which I never thought would grow into such a huge number of comments is NOT a proposal. It was simply an idea that Anthony Parent and Solomon Yue were exploring as perhaps a way to better the scoring for TTFI. I haven’t been off to check FB sites yet but I hope JCT finished its scoring of TTFI and the numbers turned out good. Even as I now apologise for throwing this thread off track, I’m awfully glad to have found some clarification here on how the US estate tax works. My particular thanks to Watcher for this.
@EmBee
I don’t see any cause for an apology :-). The issue of US estate taxes for NRAs hasn’t had a recent airing here, and it benefits from one because it’s not just a possible future problem but a current one that even congress admits is merely a “trap for the unwary.”
Hopefully some discussion of it here might reduce the number of the ‘unwary’, helping a few people avoid yet another US tax lobster-trap. If nothing else, at least the whole thing is now laid bare.
Finally, regarding ‘scoring’… it’s probably worth considering that TTFI and enforcing the estate tax on NRAs have absolutely no connection to each other. Congress could just as easily choose to enforce the estate tax more thoroughly as a way of either ‘paying for’ something entirely different, or perhaps merely because it likes the thought of an extra few billion a year to spend.
Not, of course, that this revenue will materialise in any real way. Behavioural responses will neuter it. And I suspect congress knows this full well, otherwise they would already have done it. Which is why I feel this is probably going to turn out to be yet another dead-end…
Timing of the vote for the House tax reform bill — “This Week” says:
http://theweek.com/speedreads/736973/house-republicans-could-pass-tax-overhaul-plan-soon-thursday
“Finally, regarding ‘scoring’… it’s probably worth considering that TTFI and enforcing the estate tax on NRAs have absolutely no connection to each other.”
@ Watcher
I think there is a territorial aspect to estate taxes and one of RO’s arguments is that if territorial is applied to corporations then it should be applied to individuals. That might be why Anthony thinks that enforcing the existing US estate tax law on NRAs would bring enough revenue to support TTFI. Whether it would or not I don’t know. Anyway, look at that nice big number they pulled out of their
asshat to justify FATCA. I’m not against any similarily big number being pulled out to eliminate CBT.@ Stephen Kish
The biggest problem in the senate is John McCain who turns against his party on a regular basis. He’s a vengeful man and has a big hate on for Trump.
TTFI Amendments out !!
RT
https://twitter.com/SolomonYue/status/930195062532612097
https://twitter.com/JCDoubleTaxed/status/930196394228326400
I’m a little lost. It took me some time to realize that “NRA” meant “Non-Resident Alien” (I had guessed “Non-Resident American”), so now… Okay, what kind of person is an NRA? A foreigner inside the USA would be a Resident Alien. A USC outside the USA is not an alien at all. So…would a German who lives in Germany be an NRA? Wouldn’t they have to have some connection with the USA to become a target of its legislation? And is the situation they’re envisioning, one in which some non-resident foreigner (like this German) dies, and somehow leaves behind a US estate? I had assumed that it would cover foreigners inheriting from US estates, but apparently that’s not what we’re talking about.
As above:
Text not yet available
IMPORTANT TTFI UPDATE:
https://www.facebook.com/groups/citizenshiptaxation/permalink/1563879473701795/
Zla’od
Technically, if a German citizen, living in Germany with no US ties has a portfolio of shares of US companies, that portfolio would be subject to US estate tax on her death. This is not really enforced now. As discussed up thread, there are ways to avoid having a US taxable estate.
Stephen Kish says “and the ‘merry-go-round’ continues” but this seems more like a roller-coaster to me. Thanks for the update, JC. McCain remains a huge stumbling block in the Senate where it’s so difficult for the Reps to maneuver around him.