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The United States taxes on the basis of citizenship. This means it taxes American citizens on their worldwide income regardless where they live. An American citizen living in London, or Toronto, or Tokyo, or Johannesburg, generally must file U.S. tax returns and pay U.S. tax, even if he or she does not live in or travel to the U.S. Taxation is not based on any physical presence test. The source of the income makes no difference either: income exclusively earned and additionally taxed abroad is also subject to U.S. reporting. Moreover, Americans abroad are commonly taxed twice, for example on some types of investment income and certain retirement-savings vehicles. In some cases, where an individual was born in the U.S. to foreign parents on a student or temporary work visa who then returned to their home country, those subject to the tax law and its penalties may not have not been aware of their status as an American birthright citizen.



Congressman Holding has taken the first step with introduction of his legislation, Tax Fairness for Americans Abroad Act of 2018 (TFAA). 

Congressman Holding’s legislation 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. As can be seen in the bill language, the toggle switch determining whether an individual is taxable on US income – and not on foreign income – is residency. A summary outline of the act can be found here.

The Tax Fairness for Americans Abroad Act of 2018 is critical first step in getting legislation for tax reform for Americans abroad passed.  Much work still needs to be done; hearings need to be held and more refinements to the legislation must be made.  Key concerns that the House Ways & Means Committee and legislators will be focused on will be the cost of legislation.  Ideally it should be as close as possible to revenue neutrality, meaning that it doesn’t cost the Treasury in lost revenue, and insuring that it is tight against abuse. More education to Congress on the community of Americans abroad and their needs must be done.  All this is key in order to attract co-sponsors for legislation and insure its passage. 



ACA has been deeply involved in the push to develop a legislative propose for residency-based taxation.  ACA is advocating 24/7 with leadership in both parties and the tax-writing committees and sharing our knowledge and data, our baseline “vanilla” approach to RBT and our revenue estimates for RBT -- the analysis prepared by District Economics Group (DEG), a Washington, DC-based economic consulting group. ACA has called on Congress to hold hearings on the subject of tax reform for US Citizens overseas and believes this will be a key early step in the 116th Congress.  ACA will continue to push for hearings and help those offices working on the Tax Fairness for Americans Abroad Act of 2018 in developing refinements to the legislation. ACA’s knowledge and data on the subject matter will be invaluable to this process. ACA will be pounding the pavement and walking the hallways of the Congress to drum up support with Members, Member’s staff and the Committees working on RBT tax reform. ACA can do this because we have a dedicated presence in Washington, DC.  We are available to Congress 24/7. ACA’s position as a non-partisan organization allows us to work both sides of the aisle. This is important when educating and cultivate co-sponsors.  ACA is an independent voice on the subject and respected in Congress for bringing solutions to problems that are in the best interests of the community without political bias. 



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. The Joint Committee on Taxation and other tax-writing offices on Capitol Hill will not release detailed estimates – in effect their working papers. Also, is important that stakeholders, like ACA, representing Americans abroad, be able to delve deeply into the numbers so as to be creative as possible and to avoid needless mistakes. Donations to ACAGF are tax deductible. This effort will cut off at the point when we think that a sufficient amount has been raised. We’ve already, over about 8 months last year, raised $85,000. 

Second, ACA, which advocates (lobbies) for legislation, such as TFAA, 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. As part of last year’s “tax reform” law, TCJA, corporations spent millions lobbying for territorial taxation for US corporations. Individual Americans abroad will not be able to spend as much on this effort, but ACA will be able to raise and wisely expend significant amounts. The effort needs to be as well-organized and executed as the corporate effort. Enactment of residency-based taxation will not happen by itself. We all need to put our shoulder to the wheel. This effort will cut off at the point when we think that a sufficient amount has been raised. Donations to ACA for lobbying are not tax deductible. At this time no ceiling on this effort is anticipated. ACA will register as a lobbyist, as it must do under applicable rules. Tax-deductible funds raised by ACAGF will not be used for lobbying.

Visit ACAGF’s website and donate today in support of additional economic and revenue analysis. Visit ACA’s website and donate today in support of the lobbying effort. Importantly, participate in ACA as a member; keep abreast of developments; pitch in with contributions and as importantly – most important of all – your efforts.

Write your Representatives in Congress!  Don’t under estimate your voice in Congress.  Write to your Representatives in the House and Senate and let them know that you support RBT tax reform and support ACA’s efforts. Your Representatives in Congress are the persons who represent the state and district in which you last lived prior to moving abroad.  This is also your official voting address.  ACA does not provide form letters as they are not as effective as your own personal letter and message to your Representative.  You can find your Representatives here: