Now celebrating over 35 years of service to Americans residing abroad, ACA, Inc. has held unwavering positions on several issues directly affecting citizens residing abroad: Children's citizenship, Medicare, Social Security, Taxation, Voting, and Congressional representation.
American Citizens Abroad, Inc. (ACA, Inc.) proposes that Congress adopt Residence-based Taxation (RBT) to align US personal income tax policy with the rest of the world and with the fundamental principle that taxation is justified by services rendered; Americans abroad receive governmental services and pay taxes to the country of their residence. ACA’s initial RBT proposal of March 2013 and subsequent complementary submissions have been provided to the House Ways and Means Committee and the Senate Finance Committee on several occasions, as detailed on this ACA, Inc. website. Congress is under increasing pressure to undertake fundamental tax reform, and ACA is doing its utmost to ensure that RBT is on the table.
The current Citizenship-based Taxation (CBT) puts Americans and the US economy at a competitive disadvantage. The US tax law discourages US companies from sending Americans abroad to promote US business, creates a major handicap for American entrepreneurs overseas and penalizes Americans working and living abroad. CBT is an ineffective and inefficient mode of raising taxes on Americans abroad. It brings little money to the Treasury, insignificant in the overall US budget, as most of the tax base is pre-empted by the countries of residence; under the present rules, 82% of overseas filers owe no US tax and much of the tax paid relates to clear instances of double taxation. CBT is very complex and costly to administer for both the taxpayers and the IRS. Tax filing costs from abroad are a multiple of domestic tax filing costs, even when no tax is due. CBT is grossly unfair as Americans abroad can pay taxes twice due not only to inherent incompatibilities between US and foreign tax rules but also to US legislation requiring double taxation. Americans abroad are also subject to tax on phantom capital gains due to the long-term decline in the value of the US dollar. Americans abroad are fiscally penalized with regard to foreign pension funds and are highly restricted in local investment opportunities because of US tax rules. Due to the Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank Account Report (FBAR), which are linked to CBT, overseas residents are being denied access to banking and other financial services, as well as employment opportunities. This situation is incompatible with the global economy of the 21st century and works against US economic interests in terms of job creation and increasing exports.
Under RBT Americans abroad would be taxed by the United States on the same basis as non-resident aliens, primarily through a system of withholding taxes on passive US source income and capital gains taxes on US real estate; income earned in the United States would require filing a 1040NR. Americans abroad would remain subject to US estate taxes on US situs assets, including real estate and securities.
RBT is a win-win solution for the United States and for Americans abroad. ACA’s RBT proposal provides for a positive revenue stream and would significantly lower IRS administrative costs. RBT will empower Americans abroad, boosting export performance and US presence in world markets, particularly by encouraging small and medium-sized companies to initiate international activities. It will create better employment opportunities for Americans, both domestically and internationally. Reform is essential as the negative consequences of CBT on the US economy and competitiveness are severe while the advantages of RBT are huge due to the additional export potential and related job growth in the US Now is the time for the United States to adopt RBT and put US personal income tax policy in line with the 21st century and the rest of the world.
ACA, Inc. opposes legislation such as the Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank Account Report (FBAR) which is leading foreign banks and financial institutions to deny Americans overseas the necessary banking tools to live and work as well as, opposes elements of the Patriot Act which is causing Americans overseas to lose their state-side banking services. ACA advocates for excluding bona-fide residents living and working overseas from filing foreign bank account reports such as Form 8938 and FBAR and easing Patriot Act guidance to facilitate state-side banking access for Americans overseas.
Patriot Act legislation currently contains guidance that is forcing US banks to close state-side services for Americans who no longer can provide a US mailing address. At the same time, FATCA and FBAR legislation, which require reporting of Americans clients by Foreign banks to the IRS and necessitates additional filing requirements through the FBAR form and Form 8938 (FATCA), are shutting Americans overseas out of foreign financial tools such as mortgages, bank accounts, insurance policies policies, pension funds, essential financial tools for their survival overseas.
ACA, Inc. favors the unhindered exercise of voting rights for eligible overseas Americans, whether military or civilian.
ACA has consistently supported defensive legislation and litigants engaged in the business of assuring that this fundamental right be available without excessive bureaucracy. We favor the use of clear, simple and straightforward voting and ballot request documentation, and rigorous procedures enabling confirmation that all ballots voted were properly tabulated.
All Americans should enjoy the same right to transmit US citizenship to all of their children at birth, including all children born to or adopted by a US citizen abroad.
Every year about 40,000 children are born overseas to a US citizen parent. Of these, 90% acquire US citizenship at birth while 10% do not. The right to a nationality at birth is one of the most fundamental of human rights, as it opens the door to membership in our society and all other related rights. It is obvious that 4,000 children each year deserve better treatment. ACA is continuing its support of revised legislation to make it easier to transmit US citizenship to children born or adopted abroad.
Americans abroad should not be penalized simply because they spent part of their careers abroad, or because they retire abroad and/or have a foreign spouse or adopted children. ACA supports the Social Security Fairness Act, which would eliminate the Windfall Elimination Provision (WEP).
The Windfall Elimination Provision (WEP) eliminates up to 50% of US Social Security benefits for individuals receiving foreign pensions. Self-employed Americans living abroad often must pay SECA taxes in addition to the social security taxes they pay in their country of residence. No voluntary program exists for non-self-employed Americans to contribute to the Social Security system. Foreign spouses and adopted children of Americans are often denied survivor benefits.
Americans abroad who are eligible for Medicare benefits in the US should be able to sign up without premium penalties for late enrollment upon return to the US.
Medicare benefits are not available to citizens outside the United States. Premiums are increased for those who sign up later than when first eligible, and some American health insurances require the insured to pay Part B premiums even when living abroad. This encourages citizens to travel back to the US for expensive treatments, which would cost far less in their countries of residence. TheTriCare program available to military personnel overseas has shown the feasibility of extending Medicare coverage abroad.
ACA believes that the only effective long-term solution for Americans overseas to have their voice heard is direct representation in Congress through Delegates elected by the overseas community.
The Americans Abroad Caucus, founded in 2007 in the House of Representatives, is a positive first step for Americans Abroad to have a contact point in Washington. Nevertheless, as Americans overseas represent a population that would be ranked 25th among the 50 states, this community should have right to its own representation, particularly given the special issues they face, the growing complexities of the global markets and the role that Americans overseas play in the competitiveness of the United States. ACA is in favor of proposed legislation H.R. 597 that would improve the situation for Americans residing abroad.
Last Updated September 10, 2014