Monthly Archives: November 2017

TODAY (DECEMBER 1, 2017) REPUBLICANS OVERSEAS SAID:

“RO Update on TTFI and FATCA:

The JCT (Joint Committee on Taxation) finally released the Senate tax bill score with the indication that the Senate Tax Cuts and Jobs Act would add more than $1 trillion to federal deficits over the next 10 years: http://www.washingtonexaminer.com/senate-tax-bill…/…/2642198

Unfortunately, the TTFI score was not included. Without JCT’s TTFI score, Sen. Heller’s two place-holder amendments cannot be moved to the Senate floor for debate and vote. Because Congress intends to pass tax reform using budget reconciliation (which imposes a limit on any increase in the budget deficit), no amendments without a JCT score can be included in the bill, and this, unfortunately, includes TTFI.

Republicans Overseas is very disappointed that TTFI will not be included in the current Tax Cuts and Jobs Act.

We will not stop fighting, however, and we still have a chance to make one major change in this bill process: repeal FATCA.

Senator Rand Paul’s FATCA amendment has been submitted to the Senate, and the amendment will be debated and voted on as early as Friday. FATCA has already been scored by the JCT in a previous process, so it can be included in the bill.

Please contact your senators!

The Senate vote on the tax bill was delayed while Senate Republican leaders made changes to the bill to win over several hold-outs. This delay gives us more time to contact senators and ask them to support Sen. Paul’s FATCA repeal amendment.”

The above posted in: https://www.facebook.com/republicansoverseas/

The specific problem in the U.S. tax reform bills related to U.S. person-owned incorporated businesses in Canada, Australia, France, UK, etc. appears to have been identified.

However, apart from the general solution of changing the bills’language to end U.S.-imposed worldwide taxation on individuals, WHAT IS THE ONE SENTENCE CHANGE IN WORDING OF THE TAX BILLS LANGUAGE THAT WOULD FIX THE PROBLEM IDENTIFIED IN THIS POST?

This one sentence change could be sent to the drafters and supporters-antisupporters of the bills.

IF YOU ARE INTERESTED, YOU CAN FORWARD OUR PRESS RELEASE WITH YOUR COMMENTS TO POLITICIANS AND OTHER ORGANIZATIONS IN U.S., CANADA, AND ELSEWHERE.

Tricia has some thoughts that you might include (in a comment below).

— In this press release we ask United States Congress to fix a problem in the present House/Senate tax bills that targets certain Canadian citizen/residents who own an incorporated business — and more broadly — to “stop imposing worldwide taxation on any Canadian resident”.

The press release is being sent in part to members of U.S. Congress and also to Canadian politicians who should be in the business of defending Canadian citizens from harm caused by a foreign state.

The focus of the press release is intentionally on “Canadians”. The word “American” is not mentioned. Our use in the text of the now-offensive term “U.S. person” (defined by the U.S. Internal Revenue Service) does not imply that U.S. person law applies to any Canadian resident or that any of these so-designated (by the U.S.) Canadians have ever consented to be U.S. persons.

Here is the link to the press release.

The text:

November 24, 2017
For Immediate Release

U.S. CONGRESS: DO NOT CONFISCATE OUR SMALL CANADIAN BUSINESSES AS PART OF YOUR TAX REFORM

Dear Congressperson,

On November 16, 2017 Rep George Holding, of the House Ways and Means Committee, in an exchange with Chairman Brady, urged that as part of tax reform that: The United States join the rest of the world by adopting “residence-based taxation”. This would END the U.S. current practice of imposing worldwide taxation on certain residents of other countries.

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Here is the full legislative text of the Senate Tax Reform bill that just passed the Senate Finance Committee and which now will be likely modified and later voted on by the entire Senate.

It is entitled ‘‘Tax Cuts and Jobs Act’’ which is an amendment to the 1986 IRS code.

SEE LINK See also SECTION SUMMARIES in simpler language.

Anything in this latest version that helps or harms us?

— Two different members of the tax compliance industry are now saying that the House/Senate tax bills are harmful to US persons overseas.

Previously, Max Reed, a Vancouver tax consultant, expressed the opinion that the November House tax bill is bad news for Canadian citizens deemed to be US persons who have small businesses that are incorporated: see Max Reed article:

Now a second Tax Consultant (Kevyn Nightingale) has come up with the same interpretation of the House/Senate tax bill: In part, a one-time transition tax will be imposed on US persons overseas owning small incorporated businesses.

Like Max Reed, Nightingale feels that the harm in the tax reform proposal was “…not designed to catch individuals (I think), and certainly not Americans abroad – they are collateral damage. it’s incredibly unfair.” and suggests “Americans should call their Congressmen and Senators to complain. Ask that individuals – at least those residing abroad – be exempted from this level of unfair taxation and tremendous complexity.”

Here is Nightingale’s opinion:

“Here’s my commentary on the Senate’s version of tax reform dated November 9, 2017.

The United States is doing tax reform – a good idea for many reasons. The driver is the need to bring US corporate tax rates down, to make the country competitive with others. Also, they’re going to make the US corporate system “territorial”, meaning that most income earned by foreign subsidiaries will no longer be taxable.

To make that change politically palatable, they’re also dropping personal taxes.

But the cost of this is big – trillions of dollars. So legislators have to find some way to limit the revenue loss. They do that by increasing some other taxes.

— Accumulated deferred foreign income

One thing they will do is apply an immediate tax (well, sort of immediate – it’s to be paid over 8 years) to the retained earnings of those foreign subsidiaries. And there’s some logic to this as well. Those earnings have been tax-deferred until now. If they fell into the “exempt” system in future years, US multinationals will have effectively gamed the system by keeping them offshore long enough to completely escape tax. Yes, Congress could have developed rules to tax those earnings as they were eventually repatriated, but that would have been arbitrary, complex, and invited even more gaming of the system. And immediate taxation generates revenue. So this solution is reasonable – in principle.

One problem is that if you’re an American individual, and you own shares in a foreign corporation directly, this provision will create an immediate tax in your hands.

You won’t get a foreign tax credit for the corporate tax (like a US domestic corporate parent). You won’t get a special deduction (like a US domestic corporate parent). You just have to pay tax on the retained earnings.

It’s a double whammy if you live abroad

If you live in a country where it’s common to run a small business through a corporation (say, Canada), you already have enough double-tax issues to worry about (Subpart F, filing forms 5471, FINCEN 114, etc.). This new provision will probably lead to double taxation. And even if you can pay out dividends to limit that, it probably will create extra tax in your country. The US tax probably isn’t creditable in your country (in Canada, it isn’t).

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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.”

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