April Submission to Senate Finance Committee for RBT. ACA s efforts with Same Country Exemption

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1 April 2015 Submission to Senate Finance Committee for RBT Following up on the Senate Finance Committee s request for tax reform submissions, ACA continues advancing its advocacy work for Residence-based taxation (RBT) by making its recent submission. ACA submitted a proposal to the Senate Finance Committee for a workable platform for Residence-based taxation which included renewed thinking and updated data and statistics. See all the tax reform submissions made to Senate Finance with regard to international tax, many citing ACA s proposal for RBT. Help ACA advance Residence-based taxation RBT by making a donation today to our efforts to educate the legislature and advocate for RBT. Make a tax deductible donation today by following this link. ACA s efforts with Same Country Exemption This month, ACA published a press release strongly advocating in favor of instituting a Same Country Exemption for FATCA filing of accounts of U.S. taxpayers residing in a foreign country. Citing both the problem of unnecessarily burdensome reporting and the lock-out problem of Americans being turned away by overseas financial institutions because of the cost to the bank for compliance, ACA makes the case that this would be remarkably quick and easy to put in place, and that it would actually increase compliance because overseas taxpayers would have to file the 1040 or 1040NR to be able to take advantage of the exemption. A Same Country Exemption would help alleviate the problem of Foreign Financial Institutions (FFIs) and banks turning away U.S. customers. It would also simplify reporting requirements for the taxpayers as the exempted accounts would not be reportable for the FFIs and expats would not have to file Form For those who do have to file the form, there is good news.the National Taxpayer Advocate, an independent IRS unit, recently suggested simplifying reporting requirements for Americans living overseas by merging certain duplicative requirements of the FBAR and IRS Form ACA Executive Director Marylouise Serrato is quoted as saying that while ACA is very happy to see progress in this area, we cannot rest in our efforts to get these changes actually made.

2 Next steps to making ACA s "Same Country Exemption" a reality Now that the National Taxpayer Advocate has come out in support of regulatory changes to both FBAR and FATCA to ease reporting for Americans living overseas, help ACA gather the documentation it needs to go back to the table with Treasury. More info about the Taxpayer Advocate announcement. Click here for info on the Taxpayer Advocate Service. If you are an American resident overseas and have had a foreign financial institution close your financial account(s) or have been denied banking services, please send us your testimony here. More importantly we need documentation; letters, announcements, website postings, etc. from foreign financial institutions indicating that financial services are being denied due to FATCA, US legislation or because of the fact that you are an American citizen. In addition to your own personal testimony, you can send scanned copies of documents to ACA at: info@americansabroad.org. ACA will accept redacted documents (if you wish to remove your personal details; name, account numbers, etc.) Deadline for submissions: May 30 th Legislation status in the 114 th Congress of interest to Americans abroad There are several bills in the current meeting of the Legislative Branch (114 th ) that should be of interest to Americans abroad. With FATCA very much in the headlines these days, many of them naturally pertain to taxation issues. We list some of them below. ACA encourages all Americans to find out more about these bills, and voice your opinions about them to our lawmakers. American Business Competitiveness Act of 2014 (Discussion Draft). Introduced by Rep. Nunes [R-CA-22]. Major changes to the tax code, including shifting to territorial taxation for business income, reducing the tax rate on business income to 25%, and allowing for the expensing of capital assets. The interest deduction would be eliminated, as would the foreign tax credit for foreign taxes on business income, and other deductions and credits. Permanently Repeal the Estate Tax Act of 2015 [HR 725]. Introduced by Rep. Latta[R- OH-5]. Repeals federal estate and gift tax, while preserving basis step-up of assets at death. Death Tax Repeal Act [HR 173, HR 1105]. Introduced by Rep. Thornberry [R-RX-13], Rep. Brady[R-TX-8]. Repeals the federal estate and gift tax.

3 A bill to repeal the violation of sovereign nations' laws and privacy matters [S 663]. Introduced by Sen. Paul [R-KY].This bill seeks to repeal FATCA. The Flat Tax Act [HR 1040]. Introduced by Rep. Burgess [R-TX-26]. This bill proposes to allow individuals and businesses to elect to be subject to a flat tax alternative to the current tax system. Stop Tax Haven Abuse Act [HR 297]. Introduced by Rep. Doggett [D-TX-35]. This bill will strengthen FATCA, and impose certain additional compliance requirements that could negatively impact taxpayers abroad. Stop Tax Haven Abuse Act [S 174]. Introduced by Sen. Whitehouse [D-RI]. This bill will strengthen FATCA, and impose certain additional compliance requirements that could negatively impact taxpayers abroad. Mobile Workforce State Income Tax Simplification Act of 2015 [S 386]. Introduced by Sen. Thune [R-SD]. Regarding state income taxation, employees may only be taxed on wages in their state of residence and any state in which the employee is present and performing employment duties for more than 30 days. Tax Season: Special Report Tax Season & IRS Cutbacks Bring More Headaches for Expats The IRS has recently announced that it is closing this year its remaining overseas offices located in the U.S. embassies in London, Frankfurt and Paris. Where does that leave Americans who might have called or visited the offices for questions on their federal income tax? asks Debra Bruno in her article on the WSJ Expat Blog. The closing of offices is regrettable, Ms. Bruno quotes Marylouise Serrato, executive director of ACA. Ms. Serrato also states that recent changes to the Foreign Account Tax Compliance Act (FATCA) filing requirements have made the process of filing taxes from abroad a lot more complicated. US Taxes Abroad for Dummies While the April 15 th deadline for paying taxes has already come and gone, U.S. expats can rest assured knowing that they have an automatic extension until June 15 th for filing their returns (with interest dated back to April 15 th on any money due). For DIYers, this ACA article will help clarify how the system works for calculating taxes, and the forms that may need to be filed with (or at the same time as) your return. ACA encourages Americans living abroad with

4 aggregate foreign bank account holdings exceeding thresholds for the reporting requirements to consult an international tax expert. Streamlined program for entering into compliance If any U.S. citizen or green card holder non-willfully has neglected to file the appropriate forms or pay their taxes, the IRS has streamlined filing compliance procedures, described on the IRS website. The streamlined program includes: A procedure for filing amended or delinquent returns, and terms for resolving tax and penalty procedure for filing amended or delinquent returns, and terms for resolving tax and penalty obligations. For those living overseas, this IRS article details the procedures for U.S. taxpayers residing outside the United States. It states that filing Form will make the certification process easier. Signing the form certifies (1) that you are eligible for the Streamlined Foreign Offshore Procedures; (2) that all required FBARs have now been filed; and (3) that the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct. IRS recently provided guidance on how to determine if the Net Investment Income Tax Applies to You The following is a recap of the information published by the IRS and reproduced from their website. The Net Investment Income Tax went into effect on Jan. 1, The NIIT affects income tax returns of individuals, estates and trusts, beginning with their first tax year starting on (or after) Jan. 1, American taxpayers residing abroad, who can prove full-time residency in a foreign country for tax purposes pursuant to the income tax treaty between the United States and that foreign country, will not be subject to this tax; however, if you resided in the United States for part of the year, you will be subject to the NIIT. You may owe the NIIT tax if you receive income from investments and your income for the year is more than certain limits. Here are some key tips you should know about this tax: Net Investment Income Tax. The law requires a tax of 3.8% on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a

5 threshold amount based on your filing status. Income threshold amounts. You may owe this tax if your modified adjusted gross income is more than the following amount for your filing status: Filing Status Single or Head of household (with qualifying person) Threshold Amount $200,000 Married filing jointly $250,000 Married filing separately $125,000 Qualifying widow(er) with a child $250,000 Net investment income. This amount generally includes income such as: o Interest, o Dividends, o Capital gains, o Rental and royalty income, and o Non-qualified annuities. This list is not all-inclusive. Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Social Security benefits or alimony. It also does not include any gain from the sale of your main home that you exclude from your income. Refer to Form 8960, Net Investment Income Tax, to see if this tax applies to you. You can check the form s instructions for the details on how to figure the tax. How to report. If you owe the tax, you must file Form 8960 with your federal tax return. If you had too little tax withheld or did not pay enough estimated taxes, you may have to pay an estimated tax penalty. ACA DOES NOT PROVIDE TAX ADVICE. BE SURE TO CONSULT IRS AUTHORITIES AND, AS NECESSARY, CONSULT A QUALIFIED TAX ADVISER OR RETURN PREPARER.

6 IRS posting for guidance on those reporting foreign assets The IRS reminds U.S. citizens and resident aliens living abroad, that Federal law requires the majority of them to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2014 must file with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). It is due to the Treasury Department by June 30, 2015, must be filed electronically and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR). In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details. NEWS AND ACTIVITIES ACAGF Auction! ACA has held an annual live fundraising auction for over twenty years, and the funds raised have provided important support for our work on behalf of Americans living abroad. This year the auction will be online and thus truly global for the first time, organized by American Citizens Abroad Global Foundation (501c3)( ACAGF ). Bidding will be open from June 4 th to June 14 th, on the website Bidding for Good, which holds online auctions for nonprofit organizations and has an audience of over 300,000 people. The ACA Global Foundation Auction is mentioned here. ACAGF has started a campaign on various social media to publicize the auction and ask for donations. Items we ve already received include stays in luxury hotels and vacation homes in Europe, Asia and the Caribbean, meals in fine restaurants in the US, tour services in France, artwork and antique currency. If you would like to support ACAGF and also receive great publicity for your business around the world, please consider offering a voucher for an item or a service. ACAGF welcomes all donations but reserves the right of refusal.

7 ACAGF held another well-received Town Hall Evening The evening of May 6 th, ACAGF held a Town Hall Evening in Geneva, Switzerland. The topic was "Changes in the US Tax Code, Wills, Swiss Banks and other Personal Financial Challenges: for US Citizens Abroad". ACA Board member Jackie Bugnion updated attendees on the important work being undertaken by ACA Inc. and ACAGF. U.S. Embassy Consular Agent Laura Downhower gave general information about the U.S. Consular services in Geneva, Switzerland followed by the professional presentations; Stewart Hearn U.S. CPA and director at TaxPro Sàrl in Geneva, Daniel Hyde - Partner at Westleton Drake Tax Advisors, Guillaume Grisel - Lawyer with Bonnard Lawson and Jonathan Lachowitz - ACA board member and owner of White Lighthouse Investment Management. ACA looks forward to hosting additional Town Hall Evenings in 2015 so please check back to our website for updates on these events! Tools and resources promoted by the OVF Susan Dzieduszycka-Suinat, President and CEO of The U.S. and Overseas Vote Foundation is asking for support for a number of their proposals to the Knight News Challenge one in particular for Overseas Voters. She would like all of our help to build up the View count and the Applause on these five proposals: Live Globally, Vote Locally: User-friendly Overseas and Military Voter Services - Ubiquitous and Freely Available Voter Account: Democracy in the Palm of Your Hand GOVERN A Political Simulator Game Collaborative OVR Data Transfer Project: VoteWeb Voter to Voter Influence through Social Media

8 ACA IN THE MEDIA Recent ACA Press releases: ACA urges adoption of Same Country Exemption for FATCA reporting ACA commends Tax Advocate stance on FATCA and FBAR Tax-News.com (April 23, 2015) "Residence-Based Taxation Proposed For Americans Abroad" "American Citizens Abroad (ACA) has submitted a proposal to the US Senate Finance Committee individual and international tax reform working groups for the enactment of residence-based taxation (RBT) for American expatriates. It said lawmakers should enact RBT instead of the present citizenship-based taxation (CBT) because it would reduce compliance burdens for expatriates, provide more efficient taxation, and improve competitiveness... Accounting Today (April 21, 2015) "Taxpayer Advocate Recommends Merging FATCA and FBAR Reporting Rules" The National Taxpayer Advocate has recommended that the reporting rules under the Foreign Account Tax Compliance Act and for foreign bank account reports in effect be merged to simplify the duplicative disclosure requirements that make it difficult for American expatriates to have bank accounts in the foreign countries where they live. The expatriate advocacy group Americans Living Abroad [ACA, Inc.] has been pushing for relief from the onerous requirements of FATCA, which was included as part of the HIRE Act of FATCA requires foreign financial institutions to report on the holdings of U.S. taxpayers to the Internal Revenue Service, or else face stiff penalties of up to 30 percent on their U.S. source income. The older rules for foreign bank account reports, or FBARs, require taxpayers themselves to report on their holdings in overseas bank accounts. Both sets of requirements are aimed at discouraging taxpayers from hiding their assets in secret bank accounts abroad, but have also led many U.S-born expatriates to face difficulties in maintaining bank accounts, even if they haven't lived in the U.S. for years.

9 HOW TO GET INVOLVED If you are an American resident overseas and have had a foreign financial institution close your financial account(s) or have been denied banking services, please send us your testimony here. More importantly we need documentation; letters, announcements, website postings, etc. from foreign financial institutions indicating that financial services are being denied due to FATCA, US legislation or because of the fact that you are an American citizen. In addition to your own personal testimony, you can send scanned copies of documents to ACA at: info@americansabroad.org. ACA will accept redacted documents (if you wish to remove your personal details; name, account numbers, etc.) Deadline for submissions: May 30 th Help ACA advance Residence-based taxation RBT by making a donation today to our efforts to educate the legislature and advocate for RBT. Make a tax deductible donation today by following this link. Send us your testimonials on how current legislation is affecting you. These testimonials are important to our advocacy work but even more important is your work in contacting your own Congressional representative. We ask you to write to your representative today and let him or her know your thoughts and personal experience, and please send a copy to ACA as well. Do you have a testimonial about how the Foreign Earned Income Exclusion (FEIE) was a decisive element in helping you establish a company or business overseas? If you do please send it to ACA using our direct link, and read ACA's recent position paper underscoring the critical importance of FEIE, "The Section 911 Mirage". You can also support our work by writing directly to the Tax Committees responsible for tax reform and supporting ACA s proposal for Residence-based taxation (RBT). You can also write your own Representatives in Congress about Residence-Based Taxation (RBT) and your support for it. Tell them about yourself, so that they learn about a real-life overseas American. Otherwise, no one is there to tell them that we re not all tax-dodging billionaires. Lastly: if you haven t done so already, join ACA! Since 1978, ACA has been the Voice of Americans Overseas, advocating for and defending the rights of US citizens living and working abroad.

10 ACA ON THE WEB, FACEBOOK, TWITTER, AND NOW ON GOOGLE PLUS! ACA s website and its periodic News Updates are its key communication channels to ACA members and to the millions of Americans all over the world. The ACA website includes a wealth of information: descriptions of the impact of U.S. laws on the various issues citizenship, voting, Social Security, Medicare, banking and taxes as well as ACA position papers, references to ACA in the press and a multitude of links to press articles related to ACA issues. Many members and supporters follow ACA on Facebook, and this provides ACA with an opportunity to connect with them on a more regular basis. To get the most immediate, up-to-date information on ACA s work and initiatives visit American Citizens Abroad on Facebook or our website, sign up for our Twitter and now join us on Google Plus! Copyright 2015, American Citizens Abroad, Inc., All rights reserved. Our mailing address is: American Citizens Abroad, (ACA, Inc.), Rockville Pike, Suite , Rockville, MD 20852, USA americansabroad.org