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Congressman Holding’s “Tax Fairness for Americans Abroad Act of 2018, (TFAA)” a major first step for tax reform.  Congressman Holding’s legislation (introduced in the 115th Congress in December 2018) proposes a residency-based approach to taxing Americans living and working overseas.  The basic principle of the bill mirrors the thinking behind ACA’s residency-based taxation (RBT) approach, that is, separating foreign-source and US-source income and excluding from US taxation specified foreign-source income earned when a US citizen is a qualified resident abroad. The toggle switch determining whether an individual is taxable on US income – and not on foreign income – is residency. The bill excludes from US taxation income earned unrelated to the United States for qualified non-resident US citizens.

A summary outline of the bill, prepared by Rep. Holding’s office, can be found here. Along with a more detailed summary prepared by ACA here.

 

How we got to where we are today. Congressman Holding has long been a proponent of tax reform for Americans living and working overseas.  ACA, together with other overseas organizations, regularly met and provided Congressman Holding with input, data and suggestions on tax law changes, informing and otherwise educating him and his staff on the critical tax and compliance problems facing Americans living and working overseas.

Important tax compliance advocacy and research work by ACA was key in the educating process of both Congress and the tax writing committees.   

  1. ACA’s side-by-side comparative showing how and where changes needed to be made to the current Citizenship-based taxation regime to make it Residency-based.
  2. ACA data and research by contractor District Economic Group (DEG) to provide data and revenue estimates for ACA’s side-by-side which includes critical baseline data on the asset composition and size of the overseas community, is vitally important to development of the legislative proposals. 

 

What is happening now.

As reported in early December of 2019 in Politico, Congressman George Holding of North Carolina is retiring at the end of 2020.  ACA regrets that Congressman Holding will be leaving Congress and thanks him for his work on behalf of US citizens living and working overseas. Although Congressman Holding was the leading champion for RBT, there are other Representatives in Congress who support tax reform for Americans overseas.  

Meeting with the new Congress and Administration. Once the new Administration and Congress begin work in January 2021, ACA will once again begin walking the halls of Congress -- although this may continue to take the form of "virtual" calls due to COVID lockdown, and meeting with long time supporters of RBT as well as cultivating and educating new supporters.  ACA is following up with offices identified through the write-in campaign - educating them on the issues and advocating for hearings.  

ACA will also be reveiwing the new Committee assignments in key offices such as; Joint Committee on Taxationm, Senate Finance and House Ways & Means and meeting with new staffers, as well as, new assignments at the Treasury, the IRS and the State Department. 

Calling for hearings. ACA was the first organization to make a call for hearings. On December 29, 2017, ACA called upon Congress to hold hearings on tax reform for Americans abroad.  Hearings by the US House Ways & Means Committee addressing the wide-range of tax issues facing US citizens living and working overseas is the next step in the legislative process.  In September of 2019 ACA launched the "Americans Abroad Fight for Tax Fairness!" write-in campaignto support efforts for Congressional hearings, making it easy and simply for supporters to send an appeal to their Representatives in Congress, along with the members of the House Ways & Means Select Revenue Committee - the tax writing committtee - to hold hearings on the tax and compliance issues for Americans living and working overseas. So far over 18,000 messages supporting hearings have been sent to Congressionals offices. 

Hearings need to be held so that the committee can hear about the wide range of tax compliance issues facing the overseas Americans community from stakeholders and citizens.  With knowledge from hearings the tax writing committees and legislators can look at specifics of the legislation for refinement.  Specific treatment of items like Social Security income, income associated with the new “transition tax” and GILTI, and different types of PFIC income, will need more consideration and details will need to be worked out to determine how these income streams will be taxed under a new residency-based regime. 

Webcasts. ACA held a series of Webcasts to educate and update the community and Congress on Congressman Holding's legislation. ACA will continue to produce webinars as our advocacy work continues.  Check our events page for updates on this.

Refinements to TFAA and potential new legislation. Congressman Holding’s bill was written as a "marker bill" with somewhat general language in order to start a conversation on the issue of tax reform for Americans overseas. However, the tax-writing committees will need to run through the code, item by item, to determine how income streams will be treated for taxation.  Again, hearings are key to making refinements.  Only by understanding the breath of problems and issues can Congress understand how to treat these in legislation.

Even though Congresman Holding is leaving office, his "marker bill" is still with the tax writing committee offices and with other legislative offices interested in tax reform.  Once hearings are held, refinements to the TFAA bill can be made or new legislation can be written and introduced. 

Data and research. A key piece of knowledge for Congress is ACA’s revenue estimates our side-by-side comparative.  ACA’s work includes data on the makeup of the community of Americans overseas, their tax filing status and asset makeup, as well as demographic data.  ACA will continue to use the data we have developed and share this with offices we meet with and stakeholders that we bring on board.  ACA, through ACAGF, will field additional research projects to help provide more data on the community. This research will certainly be presented at hearings.

Working with stakeholders.  ACA is working alongside other groups advocating for tax reform; Association of Americans Resident Overseas (AARO), Democrats Abroad, Republicans Overseas (RO) and various US Chambers of Commerce, notably the Asia Pacific Chambers of Commerce (APCAC), Americans for Tax Reform (ATR), National Taxpayer Union (NTU), etc. ACA will continue to bring in new stakeholders in order to grow the consortium of advocates for tax reform.

 

What can you do today to support ACA’s efforts. 

 

Join ACA's "Americans Abroad Fight for Tax Fairness!" write-in campaign calling for hearings!

 

DONATE to ACA and ACAGF! Two ways to donate today, you pick! 

First, American Citizens Abroad Global Foundation (ACAGF, which focuses on education and research) is continuing to raise monies for additional analysis leading to improved database and detailed revenue estimates. Detailed revenue estimates on different pieces of the “Tax Fairness for Americans Abroad Act of 2018” and similar proposals are extremely important because they help refine and reshape the legislation. It is important that stakeholders, like ACA, representing Americans abroad, be able to delve deeply into the numbers to provide offices with the data needed to draft or refine legislation. Donations to ACAGF are tax deductible*. Donate today.

Second, ACA, which advocates (lobbies) for legislation is raising funds to do just this – lobby for enactment of a residency-based taxation regime. It will pound the pavement and walk the hallways of the Capital, meeting with Members, Members staffs and staffs of the committees, like Joint Committee on Taxation, House Ways and Means Committee, and Senate Finance Committee. It will hold meetings with other “players” to educate and get everyone pushing in the same direction. It will work to activate others that, in turn, will lobby in favor of legislation. The effort needs to be as well-organized and executed as the corporate effort. Donations to ACA for lobbying are not tax deductible*.Donate today.

*Tax-deductible funds raised by ACAGF will not be used for lobbying. 

Click to see ACA's past efforts on RBT:

ACA Explains "Tax Fairness for Americans Abroad (TFAA)" - Residency-based tax bill

RBT November 2018 Update

RBT and the 2018 Midterms. What’s Next?

Tax Cuts and Jobs Act (TCJA). What Happened? What’s Next?

RBT 2017 Update