Have your say! Tell the Senate Finance Committee how international taxation affects you…

Martin Falbisoner, CC BY-SA 3.0 , via Wikimedia Commons

Choose and download one of the following templates immediately below – pick the template that that best fits your circumstances as an American / Accidental American living outside the United States. Read further below for more information.

  1. General Template
  2. Template for those running small business outside of the U.S.
  3. Template for Accidental Americans
  4. Template for long term emigrants from the U.S.
  5. Template for temporary or recent U.S. expats
  6. Template for Renunciants
  7. Template for those born outside the U.S.

On 25 March 2021 the Senate Finance Committee held a hearing on “How U.S. International Tax Policy Impacts American Workers, Jobs, and Investment .” You can read more about the hearing and the experts providing testimony in our previous post. As mentioned in that post, there is an opportunity to give the Committee your feedback on the impact of U.S. International Tax Policy on the lives of Americans who live outside of the U.S.

SEAT has submitted a statement to the Committee. You can read it here. We encourage you to provide your own personal statement. Unless Congress hears from actual Americans living overseas, they will certainly continue to ignore the effects of U.S. international tax policy on the lives of US citizens around the globe. If you don’t know how to get started, you can download one of our templates and edit it to fit your personal situation. Your submission must be received no later than 7 April 2021 – so don’t delay!

How You Can Submit A Statement

SEAT has prepared five templates to assist you in drafting your submission to the Committee. Download the one that most closely matches your circumstances and edit the file to add your name and address as well as any further detail you’d like to provide the Committee on how U.S. extraterritorial taxation is affecting you personally. Personal stories have much more impact than form letters, so we encourage you to edit the templates. It is very important that the Committee receive a large number of submissions, so even if you don’t want to add your own story, please make a submission.

  1. General Template
  2. Template for those running small business outside of the U.S.
  3. Template for Accidental Americans
  4. Template for long term emigrants from the U.S.
  5. Template for temporary or recent U.S. expats
  6. Template for Renunciants
  7. Template for those born outside the U.S.

Once you’ve downloaded and edited one of the templates listed above, send it via email to Statementsfortherecord@finance.senate.gov. Be sure you have followed the submission guidelines at https://www.finance.senate.gov/hearings/how-us-international-tax-policy-impacts-american-workers-jobs-and-investment and in our previous post. Specifically, your submission must be a single spaced Word document not to exceed 10 pages with your full name and address on the front page. It must be received by the Committee no later than 7 April 2021.

For more information on the hearing and why you should submit a statement, listen to this podcast with John Richardson, Laura Snyder and Karen Alpert:

9 thoughts on “Have your say! Tell the Senate Finance Committee how international taxation affects you…

  1. First: I was born in The United States and my parents never have been U.S. citizens and I cannot control where I was born.

    Second: I don’t live in The United States, nor do I work there.

    Third: I already pay my income tax in the country where I live and my income is generated from businesses in the country where I live ever since January 1991.

    Fourth: I have been employed in the country where I live since January 1991, before that I’ve lived in the United States and was employed there since July 1986 till December 1990. I have filed my income tax in The United States every year in April in that period.

    Fifth: I do not have any bank accounts, credit card accounts, loans, mortgages, stocks or any other financial investments in The United States since December 1990, nor have I any social or any other benefits in The United States.

    Sixth: I do not own any real estate or own any other property in The United States.

    Seventh: The country where I live is my home now, and I don’t intend to return to the United States permanently only for vacation or to visit relatives and friends.

    So what my question boils down to is this: Why do I owe the IRS taxes? I’m already paying my taxes in the country where I live and my income isn’t that grand. If I have to pay my taxes to the IRS besides the taxes I’m already paying now in my home country I don’t have any funds left to make my monthly payments of my apartment I would lose my home and have nothing to eat. What is the point of FATCA? That legislation was passed during the civil war, we live in the 2020’s now and not in the 1860’s time have changed big time since then.

    Get a grip IRS, axe the FATCA act!

  2. I emailed this as an attachment for this Senate hearing “How U.S. International Tax Policy Impacts American Workers, Jobs, and Investment”. From what was stated this probably won’t be included, but may be forward to a department or committee where it will be noticed. We can only try to have our voices heard with hopefully some action to address this!

    From Sherry Cook, formerly a dual US-Australian citizen but now only an Australian citizen, having had to renounce her US citizenship to protect her Australian retirement income:

    It is extremely unfair to have US/US dual citizens living overseas taxed on their world wide income as they are not able to avail themselves of any US services that those tax dollars pay for!! As I commented to my Australian accountant handling my Streamline process (to renounce my US citizenship), the US government wouldn’t care one bit if I ran out of money in my old age and that they would “flick me off like a dead fly” if I did. I can’t receive any Social Security income as I didn’t work long enough in the US and pay into this long enough to qualify for it. As a result, I also lost several thousand dollars which I had previously paid into Social Security after I finished high school and worked for a few years before moving to Australia, when I was 24, for professional employment (which I couldn’t get at the time in the US). Almost all of the US tax that I found out I owed came as a result of my Australian retirement funds (called superannuation in Australia) which I contributed into during and after my employment as a teacher in Australia and which is considered taxable by the IRS under the current system. This is despite paying 15% tax on the earnings of these funds to the Australian tax system (which is a flat tax by the Australian tax system unlike the one to the IRS which is based on the tax bracket you are in). Additionally, the whole process of going through the Streamline process with an accountant was extremely expensive, but considerably less money than I would be paying long term if I had retained my US citizenship, just to be able to call myself a US citizen!

    As I was born and raised in the US, I still have a strong cultural heritage and personal history from that country which I feel as well as having family and friends there. It is very sad and totally unfair that I was forced, from a financial aspect, to renounce my citizenship, as I don’t want my life financially adversely impacted with potentially a life in poverty in my old age (I am currently 70 years old) as a result of this totally unfair international tax policy.

    1. Thanks, Sherry. We have now added a template for those who have been forced to renounce their US citizenship in order to have a normal financial life.

  3. Doing my taxes abroad. Found your site while searching for tax info. Thank you for your efforts in fighting for this. Sent my statement.

  4. Many thanks to the team at SEAT for your leadership on this.

    I used some language from one of your templates and crafted a lengthy statement including commentary on some specific issues which many of us are probably facing. I probably got some of the technical details wrong, but hopefully someone will read it and understand the constant and unreasonable pressure we are under….

    ============

    I am a citizen of the United States of America, duly registered to vote in the 3rd Congressional District of Pennsylvania. I live outside the United States, in Japan, where I am a tax resident and where I am subject to full taxation on my worldwide income.

    I moved to Japan in May 2001, immediately after graduating from college. I have lived and worked in Japan for my entire adult life, and am married to a Japanese citizen, with whom I have two young sons. While I am proud to be an American and enjoy visiting the United States once a year to see family and friends, I have made my life in Japan and this is my permanent home. This makes me an emigrant from America, just the way my ancestors left England and Scotland to build a new life in the colonies / states.

    Since my employment income is generated in Japan and denominated in Yen, as are all of my living expenses, I need to organize my financial and retirement planning in Japan. I am employed at a life insurance company. I own my home in Tokyo. I am trying to save and invest for my children’s education expenses and for my own retirement. I need to have life insurance, medical insurance, and auto insurance. I have a defined contribution pension here in Japan.

    The problem I have is that the U.S. tax laws make it very difficult for me to live the same kind of life that my friends and neighbors live. You see, they are subject only to the Japanese tax system and can organize their finances appropriately. As a U.S. citizen, I am subject to the tax system here in Japan and the U.S. tax system. Those systems are not compatible. Most attempts at responsible financial/retirement planning here in Japan are frustrated by the need to comply with U.S. tax laws. How can this be fair? How can the United States impose taxation on the non-US income and assets of a person who is a tax resident of another country – often with no economic connection to the United States? Not only that, but the compliance costs are egregious. My annual accounting fees have frequently been higher than the ultimate amount of my U.S. Federal tax liability.

    Honorable Senators, are you aware of some of the practical problems which result from the U.S. system of citizenship-based taxation?

     Did you know that “non-U.S. citizen spouses” are treated differently than U.S. born spouses? In order to take advantage of lower tax rates for individuals who are “Married Filing Jointly,” I can make an irrevocable election to include the income of my “alien” spouse on my return. That means that we have to track and report all of her income in the same way as that of a U.S. citizen. However, since she is a “non-U.S. citizen spouse,” I am limited in my ability to transfer assets into her name as a gift or as a part of my estate after my death. That is incredibly unfair.

     Have you thought about the impact of the rules requiring all individual taxpayers to use the US dollar as their “functional currency” for tax reporting? Imagine what would happen if I bought a Japanese Government Bond with a face value of JPY 100,000 when the exchange rate was JPY 110 to the dollar. My basis in the investment is $909. If the bond pays 1% interest, I would receive a coupon payment of JPY 1,000 ($9) and pay U.S. Federal income tax on that income. But, what if the exchange rate is JPY 90 to the dollar when the bond matures? The bond would now be valued at $1,111 for U.S. tax purposes, and I would have to pay capital gains tax on a phantom gain of $202. In this situation, I am effectively barred from buying a savings bond in my home country.

     Did you know that the same issue applies to home ownership? But, it’s worse. U.S. citizens who reside in the United States can often sell their principal residence without owing any tax on the capital gain. However, due to the US dollar “functional currency” rule, we overseas residents are required to calculate the change in value of the home in US dollars. The currency calculation is also applied to the mortgage balance, with devastating consequences if there is a forgiveness or extinguishment of the debt balance.

     Did you know that local pension programs might get caught up in onerous reporting requirements designed to apply to “foreign trusts”? Did you know that there is a special excise tax on purchases of foreign life insurance? These things aren’t “foreign” to me. They are necessities to protect my family and responsibly prepare for retirement.

     Do you know what happens if I were to invest in a mutual fund in Japan? A foreign mutual fund is categorized as a “Passive Foreign Investment Company” (PFIC), even if it is just the local version of a Blackrock or a PIMCO fund that is also sold in the United States. Each mutual fund must be treated as a PFIC and filed on a separate Form 8621, requiring reams of computations by my expensive tax accountant. As a result, these mutual funds are also subject to punitive taxation on “excess distributions,” which do not apply to the equivalent US-based financial product.

     Do you know how hard it is for us U.S. citizens to open financial accounts? US-based financial institutions generally won’t open accounts for us because we have no address in the United States. Financial institutions in our home countries often decline to do business with us due to the complex FATCA reporting requirements.

     Can you imagine the fear we constantly feel because of the excessive penalties that could be applied if we make an honest make in our tax compliance? For FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (FBAR), the penalty for misfiling is the GREATER OF 50% of the maximum balance of the account in question or $100,000. For Form 8938, which is similar to, but different than the FBAR, the penalty is $50,000 per mistake. For Form 8621 related to mutual funds, the penalty is $10,000 per form per year. Imagine if you reported your mutual fund dividends on Schedule B of the 1040 the same way U.S. residents do but didn’t realize that you were actually supposed to report them as a PFIC on Form 8621. What if this happened to you for multiple mutual funds over a multi-year period? The penalties would be astronomical! Even if you are trying to be fully-compliant, you can easily get caught up in an issue like this.

     Now, you may ask, don’t you get foreign tax credits that prevent double taxation? Nope. It doesn’t work out so well. For example, the 3.8% Net Investment Income Tax (the Obamacare surtax) cannot be reduced by foreign tax credits. Also, I can’t get credit on my Japan tax return for taxes paid to the U.S. because I don’t have any non-Japan workdays, so from Japan’s perspective, all of my income is effectively connected to Japan. Logically, Japan thinks I shouldn’t have any non-Japan tax liability, and foreign tax credits are generally not available. (By the way, in case you are curious, I pay taxes and fees supporting the healthcare system here in Japan, so I don’t benefit from Obamacare or other programs for U.S. residents which are supported by the Net Investment Income Tax.)

     How about the US-Japan Tax Treaty? Surely that must eliminate the double-taxation? After all, the full name of the treaty is the “Convention between the Government of the United States of America and the Government of Japan for the Avoidance of Double Taxation.” Nope. This is unbelievable, but the United States inserted a provision in Article 4 Paragraph 3 of the treaty (the so-called “savings clause”), which reserves the right of the United States to tax its citizens based on citizenship, effectively overriding the other provisions of the treaty which would otherwise provide some margin of relief for U.S. citizens. For example, Articles 17 and 18 state that pension distributions are to be taxed based on residency, but that does not apply to U.S. citizens, so I will pay double tax once I retire and begin to draw a pension.

    Luckily, I am an ordinary company employee. I don’t own my own business. If I did, there would be additional issues, such as the “GILTI” tax which was intended to apply to subsidiaries of multinational corporations, but also applies to the undistributed profits of a small business owned by an overseas U.S. citizen in their country of residence. Sole proprietors have similar issues with the application of “self-employment tax” in a way that is duplicative with local taxes in their country of residence.

    I do not live “offshore.” I do live in Japan, where I am responsible for paying tax on my worldwide income at rates of up to 55%. Yet, because I am a U.S. citizen, I am subject to the U.S. extraterritorial tax regime, which means the United States imposes taxation on my non-US income even though I am already fully taxed on that income in the country where I reside, and do not live in the United States. There is no other advanced country in the world that imposes such extraterritorial taxation.

    I would like to make two general observations about the hearing on March 25.

    1. The hearing focused on U.S. multinational corporations. But here is the reality: U.S. tax rules treat individuals living outside the United States, the same way they treat U.S. multinationals doing business outside the United States. Although, I am a flesh and blood individual person, not a single participant recognized how individuals are affected by these rules. Yet, the focus of the hearing was supposed to be about individuals. How did this happen?

    2. I was shocked that there was no witness who had personal experience with a company or individual running a business with interests outside the USA. Not a single one! This is crazy. I respectfully suggest that subsequent hearings include witnesses who have experienced running businesses outside the United States and/or actually living outside the United States. To put it another way: Subsequent hearings should deal with the reality on the ground and not the theory in the cloud.

    Please understand that any and all changes to the taxation of U.S. corporations will have a huge impact on the taxation of U.S. individual citizens living outside the United States and running small businesses outside the United States. Individuals are NOT immune to the effects of raising the U.S. corporate income tax rate and/or doubling the GILTI tax.

    More generally (whether or not one is a small business owner), the U.S. extraterritorial tax regime makes it difficult for me to save, invest, participate in pension plans and generally behave in a financially responsible way. This is because all of these essential activities are taking place in my country of residence and not in the United States. My retirement investments are foreign to the United States, but local to me. As a tax resident of both the United States and my country of residence, I get the worst of both tax systems.

    This is extremely unjust. For many years, Americans abroad have been attempting to get both Treasury and Congress to address these issues.

    The time has come for the United States to abandon its extraterritorial tax regime and join the rest of the world in adopting a system of residence-based taxation.

    The good news is that the fixes are extremely simple. I plead for you to take the following actions:

    1. The definition of “individual” in Treasury Regulation, 26 Section 1.1-1 should be modified to include only “residents.” U.S. citizens who are tax residents of other countries would continue to be liable to pay U.S. Federal Income Tax on any income which is effectively connected with the United States, as all non-resident aliens do, by using Form 1040-NR instead of Form 1040.

    2. All FATCA and FBAR reporting requirements (both for Foreign Financial Institutions, and on the FBAR and Form 8938 for individual taxpayers) should be modified to exclude financial accounts held by individuals in their country of residence.

    3. The GILTI tax should not apply to small businesses owned by U.S. citizens in their country of residence.

    The tax compliance industry of lawyers and accountants will hate these suggestions because they remove red tape which drives billions of dollars of business to their industry. But the reality is that by solving these issues for ordinary U.S. citizens who live in other countries, the United States would sacrifice a relatively small amount of tax revenue, while freeing up IRS resources to focus on other larger priorities.

    Thank you for reading my entire statement.

  5. Sent my statement today. Thanks for bringing this nonsense to my attention and your help is getting feedback to the right authority.
    Good luck

  6. Thanks for sharing these example templates. I shared a statement today edited with my situation. Really appreciate all those who are advocating on this topic.

  7. We are down to the last 48 hours before the deadline for submissions to the Senate Finance Committee. To quote from the post:

    “Once you’ve downloaded and edited one of the templates listed above, send it via email to Statementsfortherecord@finance.senate.gov. Be sure you have followed the submission guidelines at https://www.finance.senate.gov/hearings/how-us-international-tax-policy-impacts-american-workers-jobs-and-investment and in our previous post. Specifically, your submission must be a single spaced Word document not to exceed 10 pages with your full name and address on the front page. It must be received by the Committee no later than 7 April 2021.”

    Here is what is happening …

    To put this in perspective, in order to punish probably (at most) 100 Multi-National Corporations, the Government of the United States plans to punish millions of Americans abroad by deeming them to be “Multi-nationals.” You are NOT a Multinational. You are NOT a tax cheat. You are NOT GILTI of anything. You are just a normal human being who is attempting to live your life free of the constraints imposed by the Government Of The United States.

    Since we started this campaign, there have been at least four significant developments:

    1. Treasury Secretary Yellen has issued a plea for the rest of the world to join the United States is raising taxes on Corporations. In other words, Secretary Yellen appears to be asking the world to NOT compete against the United States in its quest to increase taxes on US corporations. Secretary Yellen has expressed no concern for the individuals directly affected by these proposals.

    https://www.youtube.com/watch?v=eR-2jA1gtOQ&t=1326s

    2. Senator Wyden has released his plan to (among other things) raise GILTI taxes and increase the corporate tax rate. Senator Wyden has expressed no concern for the individuals directly affected by these proposals.

    https://www.eidebailly.com/insights/blogs/2021/4/040521wydenintltaxproposal?utm_source=feedotter&utm_medium=email&utm_campaign=taxblog

    3. The House Ways And Means Committee has is proposing policies that are more or less the same as the Wyden Senate Finance Committee proposals.

    https://www.eidebailly.com/insights/blogs/2021/4/040621nealwmschild

    Representative Neal has expressed no concern for the individuals directly affected by these proposals.

    4. The New York Times has started its campaign of public support for raising GILTI taxes and the general tax rate on corporations. The New York Times has expressed no concern for the individuals directly affected by these proposals..

    It’s important to understand that all of these provisions (although they talk only about corporations) will directly affect INDIVIDUAL Americans abroad!!! Maybe it doesn’t affect you directly. But, it affects people you know. It affects the opportunities available to your children.

    SEAT has worked hard in raising awareness of this and attempting to encouraging individuals to make their voices heard. Even, if Congress doesn’t listen yet (and they may not) we will have established yet one more instance of their failure to listen. Therefore, the higher the number of submissions, the greater the long term effect. It’s important to prove that they don’t care, that they won’t listen, that they won’t respond.

    So, I ask you again – please take the time to send in your submission.

    As a general principle (and I am sorry if you don’t like this image), but …

    America has built a fiscal prison, brick by legislative brick. Sure, you can physically leave the United States (as long as you your passport hasn’t been revoked because of delinquent taxes), but you are NOT free to integrate into a new society and control your destiny. This prison has been built, brick by legislative brick. It is getting worse and worse with no discussion of relief.

    Some Americans are divided politically. But, what must be understood is that ALL Americans are under attack from these policies. Even Homeland Americans are under attack. (They just don’t know it – but they will find out if they try to live outside the United States.)

    Support for freedom and fairness in government has been expressed by both Democrat and Republican presidents. Let me close by quoting first a Democrat President and then a Republican President – both speaking OUTSIDE the United States in Berlin Germany.

    In 1963, President Kennedy speaking before the Berlin Wall, made his famous speech which included:

    “Freedom has many difficulties and democracy is not perfect. But, we have never had to put a wall up to keep our people in …”

    http://www.youtube.com/watch?v=yBQvKXIDiuc&t=2m16s

    In 1987, President Reagan speaking at the Berlin Wall said:

    “Mr. Gorbachev: Tear down this wall.”

    http://www.youtube.com/watch?v=GCO9BYCGNeY&t=1m10s

    Conclusion:

    The US policy of citizenship-based taxation is a fiscal prison – a wall – that has been built one legislative brick at a time. It is now enforced by FATCA. It’s up to to make your voice heard – to tell the Government of the United States that the time has come to “Tear Down This Wall”.

    What Americans abroad is far stronger than what divides Americans abroad!

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