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Government research helping keep pressure on solutions to FATCA and the taxation of US citizens overseas

August 9, 2022

An important report was issued on July 15th by the Congressional Research Services (CRS) on The Foreign Account Tax Compliance Act (FATCA). Issues of how FATCA is affecting US citizens living and working overseas have been prominently highlighted. This is an important point to note as it clearly indicates that awareness of the tax and compliance issues facing US citizens overseas is growing in Congressional offices and in the offices of the US Treasury, IRS, Joint Committee on Taxation and other administrative offices.

The recent CRS report notes Congresswoman Maloney's legislation HR-5799 introduced into Congress that calls for the adoption of "Same County Exception" which is similar to ACA's proposal put forth to the US Treasury in 2013 under the name of "Same Country Exemption (SCE)."

Congresswoman Maloney recently submitted her legislation as an Amendment (1157) to the National Defense Administration Act (NDAA), a bi-partisan bill recently passed in the House of Representatives. Unfortunately, Amendment-1157 did not make it into the NDAA. However, efforts on behalf of Congresswoman Maloney to provide some relief for US citizens overseas is to be applauded. ACA supports Congresswoman Maloney's efforts and calls on the community to do so as well. It is understood that SCE does not correct all the tax and compliance issues for US citizens overseas, but it is a step forward in the right direction.

The recent CRS report on FATCA is a complement to an earlier CRS report, Tax Havens and International Tax Avoidance and Evasion, updated in 2015. The 2015 report primarily deals with corporate tax evasion but also speaks to individual tax avoidance behavior. It should be noted that the report focuses primarily on individuals residing (and investing) in "tax havens" which ACA's research and membership base clearly indicates is not representative of the majority of the overseas US citizen community.

This is why ACA's recent updated research project fielded with District Economics Group (DEG) is so important to the advocacy work for residence-based taxation (RBT). In considering proposals to ease the filing and taxation burden of US citizens overseas, the US Congress will rely heavily on reports from the Government Accountability Office (GAO), the Congressional Research Services (CRS) and other administrative offices like the US Treasury and the IRS. ACA's research needs to be a part of this catalog of data so that Congress can fully understand the community demographics and the issues. This also points to why arguing RBT on fairness alone will not win the day. The US Congress will look closely at the issue of tax evasion, and it will be an important component of everything they consider with regard to the tax and compliance issues of US citizens overseas. Decoupling taxation from US citizenship as has been suggested by some other groups is also a non-starter with Congress as it presents serious consequences for tax avoidance.

ACA's advocacy on RBT focuses on removing from US taxation any foreign-sourced income a US citizens earns. ACA focuses on a realistic approach to getting RBT implemented. Other proposals that ignore Congressional concerns over tax avoidance are non-starters.

The good news is that the US Government is paying attention to the problems and that ACA has the best private data to help support RBT. Our data is already in the hands of the Joint Committee on Taxation, the US Treasury, and key Congressional offices. ACA is advocating every day in Washington, DC for RBT. There can only be bad news if the community doesn't get firmly behind the call for hearings and for reasonable solutions to taxation of US citizens living and working overseas. Support ACA Global Foundation's efforts to get our research seen on Capitol Hill and join our write-in campaign for the call for hearings.