ExpatBriefing: 'Refined' US Residency-Based Tax Proposals Released

Wednesday October 04, 2017.

By Fiona Moore, for ExpatBriefing.com 04 October, 2017

American Citizens Abroad, an advocacy group for American expats, has released "refined" proposals for residency-based taxation for American citizens receiving income from overseas.

The organization had released proposals for RBT back in 2016. Under the current citizenship-based taxation (CBT) system, Americans abroad remain subject to US taxation as though they were still US residents. Under RBT, only US residents – whether Americans or foreigners – would be subject to US income, estate, and gift taxation, while Americans resident abroad would be taxed under essentially the same rules applicable to nonresident aliens.

ACA is proposing that, as part of a general tax reform package, an election should be provided to citizens who are long-term nonresident citizens to be taxed as nonresident aliens if they meet certain conditions – for example, a minimum three-year period of residence abroad.

In a September 29 statement, ACA said its proposals have come a long way since 2016 as a result of input from ACA members and supporters, data from the revenue-estimating work being done with District Economics Group (DEG), and soundings with congressional members and committee staffs.

Its newly released refined proposals include proposals to alter the treatment of Social Security income, distributions from individual retirement plans, and other deferred compensation arrangements, and several special transition rules. Another subject addressed is how to treat individuals engaged in short-term work abroad.

The ACA stated: "An area that will be a key concern of the tax-writing committees is 'leakage' or the potential for abuse of an RBT system purely for the purpose of tax avoidance. ACA has done its homework on this issue, considering how to tighten up rules for those qualifying for RBT, while acknowledging the needs of short-term and contract workers who need RBT to get a foothold in new markets and compete overseas."

Marylouise Serrato, Executive Director, ACA, added: "ACA knows what legislators and the tax-writing committees are concerned with in a move to RBT. ACA appreciates that having a path forward to address those concerns is critical to the scoring and passage of any RBT legislation."

ACA has been working with DEG on revenue estimates since late May 2017. "We are in a good place now having painstakingly constructed a baseline, which includes a number of pieces that did not exist before this exercise. This is highly informative and will be extremely useful, in the hands of members, in finalizing a proposal," commented Charles Bruce, ACA's Legal Counsel.

ExpatBriefing: 'Refined' US Residency-Based Tax Proposals Released

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