Bloomberg Opinion, December 11, 2020
A Letter From 9 Million U.S. Expats to Janet Yellen
By Andreas Kluth
ACA letter to the editor comments posted to Andreas Kluth’s article A Letter From 9 Million U.S. Expats to Janet Yellen. ACA welcomes new thinking on the tax issues facing Americans overseas and provides its opinion on Kluth’s recommendations to Treasury.
"As Executive Director of American Citizens Abroad (ACA), our organization agrees absolutely with this view of the unfair and unwise conditions placed on overseas Americans. How to go about changing this is the question of the hour. Amending the Internal Revenue Code to switch from citizenship-based taxation to residency-based taxation, not so-called “legislative regulations”, is the most straightforward and unassailable approach. Having talked with so many Members of Congress, committee staffers, Treasury Department people, we know this is achievable, provided it's revenue neutral, tight against abuse and nobody is worse off than they are now. To succeed, we need to put everything on the table in order that Members can be assured that they are not taking a wrong step. Hearings will do just this. The numbers can be nailed down, as ACA, with District Economics Group, began to do with its landmark study. Crafting legislative language, interestingly, is not that terribly difficult given that most of the legislative language ("tissue") is already in the law in the form of rules for foreign individuals (nonresident alien individuals). We just need to move the population of "real-live" US citizens resident abroad into the same category as NRAs. Two things which were missing in the past, are now present or within reach. There has to be a big tax bill to which this legislation can be attached; and everybody knows that there is going to be one, or more likely several, pieces of big tax legislation coming down the chute. Secondly, the affected individuals must believe in their own cause and believe in the possibility of making this change. And ACA and others are beating the drum to make this happen.
As for other approaches, can RBT be achieved simply by Treasury Department writing regulations? We think not. It's possible to nip around the edges of the problem by, for example, making sensible changes in the Passive Foreign Investment Company rules for true residents abroad. And for sure it's possible to lighten up the FATCA rules which, for Americans abroad, make every-day-banking a nightmare. ACA has and continues to push for a “Same Country Exemption” which would be greatly helpful. This could be done by the Treasury Department alone, as it would be an interpretative, not legislative, regulation. But we believe there would be a large revenue loss unless the new rules are carefully drafted. It’s not the case that revenue loss would be “close to zero”.
ACA is optimistic about major changes in these tax rules. We are in Washington, DC, on Capitol Hill, in the meeting rooms at the Treasury Department, and in the revenue estimators' offices pushing every which-a-way. Want to know more, contact us, and by all means pitch in."