ACA proposes that Congress adopt Residence-based Taxation (RBT). ACA’s proposal, RBT and Tax Reform has been presented to Congress and key legislative offices such as; Joint Committee on Taxation, House Ways and Means Committee and the Senate Finance Committee. Congress is under increasing pressure to undertake fundamental tax reform and ACA’s proposal, our work on the subject inclusing revenue estimates for residency-based taxation is being used in the legislative development process.
The enactment of recent tax evasion legislation; the FATCA legislation, the increased enforcement of FBAR, the Patriot Act, and foreign government tax legislation such as the European Alternative Investment Fund Managers Directive (AIFMD), has in some cases, resulted in the denial and/or closure of both retail and investment financial accounts for Americans resident overseas. ACA has brought this issue to the attention of Congress but also provided a practical solution with its ACA-Member/SDFCU account that provides US-based banking services for Americans overseas.
In addition to the newly implemented FATCA form 8938 for financial and bank account reporting, the US Treasury requires that Americans also file a separate bank reporting form, the Foreign Bank Account Report or FBAR or FinCEN-114.
Most all-foreign financial accounts are reportable on form FinCEN-114 however, only certain investment and bank accounts are reportable on a FATCA form 8938.
ACA advocates for the simplification in these two bank account reporting systems to reduce confusion and risk of error in filing. This is in line with recommendation by the Taxpayer Advocate to insure that the legislative goals are achieved without unduly burdening filers with double reporting.
ACA also advocates for increased vigilance by the IRS on data security for Americans abroad who are filing sensitive information on their bank account numbers, bank addresses and balances via the internet and directly through foreign bank and foreign government exchanges with the United States IRS and Treasury (IGA agreements).
ACA developed and presented to Congress, the IRS and Treasury a proposal for Same Country Exemption to alleviate the problem of “lock-out” whereby some Foreign Financial Institutions (FFIs) refuse to do business with Americans because of FATCA reporting. Same Country Exemption would exclude the reporting of accounts owned by Americans abroad where the account is with a Foreign Financial Institution in the same country where the individual is a resident. This would alleviate the filing burden for FATCA on Americans as well as the identification and disclosure of these accounts by the Foreign Financial Institution.
ACA, Inc. favors the unhindered exercise of voting rights for eligible overseas Americans, whether military or civilian.
All Americans should enjoy the same right to transmit US citizenship to all of their children at birth, including all children born to or adopted by a US citizen abroad.
Americans abroad should not be penalized simply because they spent part of their careers abroad, or because they retire abroad and/or have a foreign spouse or adopted children. ACA supports the Social Security Fairness Act, which would eliminate the Windfall Elimination Provision (WEP). Americans abroad should also have dedicated support from the Social Security Administration for accessing their benefits.
Medicare benefits should be extended to those Americans eligible who live outside the United States. Americans abroad that are eligible for Medicare benefits in the US should be able to sign up without premium penalties for late enrollment upon return to the US.
Americans working overseas should be allowed to credit foreign taxes paid against the supplement 3.8% NIIT tax. The NIIT tax directly funds the Affordable Care Act which Americans overseas cannot access.
ACA believes that the best long-term solution for Americans overseas in having their voice heard is direct representation in Congress through Delegates elected by the overseas community. The overseas American community should have right to its own representation, particularly given the special issues they face, the growing complexities of the global markets and the role that Americans overseas play in the competitiveness of the United States.