ACA on Capitol Hill: Building the Case for Residence-Based Taxation

American Citizens Abroad spent the last two weeks of July on Capitol Hill advocating for residence-based taxation (RBT).

ACA Executive Director, Marylouise Serrato met with our principal legislative champions, Representative Darin LaHood and Senator Todd Young. She met with long time supporters of the community, Congressman Beyer and Congresswoman Titus. She also visited Representatives whom ACA identified as natural supporters of RBT given their positions on taxation and their legislative efforts, explaining the need for RBT, discussing the Residence-Based Taxation for Americans Abroad Act, and presenting ACA’s research supporting reform.

ACA also met with House and Senate offices whose constituents had participated in our advocacy campaigns. These meetings covered issues ranging from taxation and financial access to overseas voting and Medicare access. This is why constituent engagement matters: when ACA members use ACA's Advocacy Campaigns to write to Congress, they help open doors by giving firsthand testimony and adding a personal face to the issues. ACA follows up, answers questions and builds relationships with those offices. Our July outreach—from Nevada and Ohio to Florida and Virginia—helped identify and cultivate new supporters for RBT.

ACA also attended a reception to meet the new incoming U.S. State Department staff  including Managing Director, John Ballard and American Citizens Services & Crisis Management Director, Colin Furst. These relationships are important to U.S. citizens overseas. ACA has a well-established relationship with the U.S. State Department and we regularly meet with them to educate them on the issues U.S. citizens are having overseas and concerns they have with the U.S Embassies and Consulates and with Citizen Services.

Although the U.S. State Department cannot advocate for legislative and regulatory fixes, they monitor, report, and relay to the Administration and Congress problems that ACA reports to them– from immediate safety to long-term needs like regulatory burdens and hurdles that create barriers and hardships on the community living and working overseas. They do this either directly through U.S. Citizen Services or via U.S. Ambassadors. 

Making the strategic case for RBT

In our meetings, ACA’s message went beyond the tax and compliance burdens facing individual Americans abroad. We emphasized that residence-based taxation is a strategic investment in the U.S. economy, America’s global interests and American citizens. ACA has reinforced this messaging to the Administration.

Americans abroad promote U.S. exports, create commercial relationships, build cultural and diplomatic ties, and serve as informal ambassadors for the United States. Tax rules that make it harder for Americans to live and work abroad undermine those national advantages and put individual workers AND U.S. exporters at a disadvantage.

This broader economic and strategic message resonates with lawmakers and can attract bipartisan support. Both sides of the aisle want to empower U.S. citizens to advance U.S. interests worldwide.

In all the meetings ACA emphasized its longstanding relationships with the House Ways and Means Committee, the Senate Finance Committee, and the Joint Committee on Taxation (JCT). Following the August recess, ACA plans to return to these offices with new research including new data and also new testimonials from ACA members all supporting RBT.

Every office ACA visited stressed the importance of credible, independent data. Congress needs reliable estimates of the affected population, the proposal’s revenue consequences and the effectiveness of its safeguards. ACA is the only organization representing Americans abroad that continues to commission professional economic research of this kind.

Progress on taxpayer assistance

ACA was also pleased that, on July 30, the Senate Finance Committee approved the Taxpayer Assistance and Service Act (TAS) by a bipartisan vote of 26–1. The bill contains more than 60 provisions intended to improve tax administration, taxpayer rights and IRS customer service.

Several provisions address reforms ACA has recommended to the Senate Finance Committee, including improvements relevant to taxpayers with international filing obligations.

The TAS Act is not a substitute for RBT. Nevertheless, congressional recognition of the administrative and penalty problems confronting international taxpayers is meaningful. It reinforces ACA’s central message: the existing system does not work properly for Americans abroad and requires fundamental reform.

What sets ACA apart—and why your support matters

ACA has built the evidence Congress needs

Before Congress can enact RBT, the tax-writing committees and Joint Committee on Taxation will want answers to difficult questions:

• How many Americans will elect RBT?
• What will the proposal cost over ten years?
• How can Congress prevent abuse by wealthy or highly mobile taxpayers?
• How should established overseas residents be treated?
• What transition rules and safeguards will be required?

ACA has invested in finding those answers. We commissioned professional economic studies in 2017 and 2022 and are currently finishing a new research study  to support the current legislative effort.

ACA has a permanent Washington presence

ACA is a Washington-based, nonpartisan 501(c)(4) advocacy organization and registered lobbyist. Its advocacy infrastructure includes:

• Professional staff focused on the concerns of Americans abroad;
• Relationships with Washington lobbying firms and policy consultancies;
• A research organization, ACA Global Foundation;
• A political action committee, ACA-PAC;
• Direct constituent-contact campaigns; and
• A long record of testimony and submissions to Congress, Treasury, the IRS and the National Taxpayer Advocate.

Tax reform requires sustained engagement. ACA is built to maintain that engagement through changes in congressional leadership, administrations and legislative priorities.

ACA focuses on legislation that can pass

ACA has consistently treated revenue neutrality and effective anti-abuse safeguards as essential to legislative success. An RBT bill perceived as creating opportunities for offshore tax avoidance will not attract the bipartisan support necessary for enactment.

ACA’s economic modeling—many elements of which were reflected in Congressman LaHood's RBT bill, H.R. 10468—examined an RBT framework that included:

• An elective system;
• Treatment of electing citizens as nonresidents for income-tax purposes;
• Continued U.S. taxation of U.S.-source income;
• Appropriate treatment for established overseas residents;
• Residence-duration requirements for new emigrants;
• Transition rules for certain high-net-worth taxpayers;
• Protections against abuse involving tax havens; and
• Preservation of current law for individuals who do not elect RBT.

Congress will ultimately determine the details. ACA’s role is to demonstrate that meaningful reform can be fair, administrable and fiscally responsible.

ACA addresses more than double taxation

Many Americans abroad owe little or no residual U.S. income tax because of foreign tax credits or the foreign earned-income exclusion. Yet they still face serious and often discriminatory burdens, including:

• Duplicate tax filings and substantial professional fees;
• Punitive treatment of locally regulated pensions, mutual funds and small businesses;
• FATCA and FBAR reporting;
• Banking and investment discrimination;
• Inability to use ordinary financial products in their countries of residence; and
• Severe penalties for innocent reporting mistakes.

ACA’s approach addresses actual double taxation, but it also confronts the compliance costs, financial restrictions and legal risks created by citizenship-based taxation.

ACA will be needed after an RBT bill passes

Enactment will not be the end of the process. Successful implementation will require continued work on:

• Treasury regulations and IRS forms;
• Definitions of residence and U.S.-source income;
• FATCA and FBAR coordination;
• Trust, pension, PFIC and business rules;
• Transition arrangements;
• Rules for returning to the United States;
• Tax-treaty interactions; and
• Correction of unintended consequences.

ACA’s regulatory experience and permanent institutional structure position it to remain engaged throughout implementation and well into the future.

Legislation, regulations and congressional leadership will continue to change. ACA will remain in Washington to protect the interests of Americans abroad.

Help ACA finish the job

RBT will not be achieved through a single meeting, letter or legislative session. It requires credible research, professional advocacy, constituent engagement and a sustained presence in Washington.

Your donation supports all four.

Help ACA build the evidence, relationships and political support needed to make residence-based taxation a reality.  You can do this by donating to the ACA-PAC, ACA, Inc, or ACA Global Foundation.