Call for Expats to be included in U.S. coronavirus relief efforts, as citizenship-based tax regime faces test


The American Citizens Abroad has called on Congress, the Treasury and the IRS to include Americans who are resident abroad in any formal efforts to help U.S. citizens who have been affected by the current coronavirus pandemic. 

The call, which the Washington, D.C.-area-based ACA issued on Monday in the form of a three-page letter, reminded Congressional lawmakers as well as Treasury officials of the fact that “Americans abroad are taxed the same as Americans residing in the U.S.”  – a theme that was quickly picked up by some expat Americans on Twitter and Facebook, who, having spotted the news of the ACA’s letter, are evidently preparing to view the provision of coronavirus relief to them as a test of America’s citizenship-based tax regime.

America’s citizenship-based method of taxing has been much-criticized in recent years by Americans who live abroad, as it obliges them to file tax returns and potentially pay significant taxes to the U.S. as long as they live, unless they renounce their citizenships, which is itself a notoriously complex and expensive process. Most other countries have residence-based tax regimes. 

As noted here last month, one of the concerns of those who advocate keeping the current regime is that moving to a residence-based tax system could mean the U.S. might lose out on the tax income it how derives from its estimated 9 million expatriates around the world, unless there was some way to ensure that change-over only occur if it could be guaranteed “revenue-neutral”. 

‘Expats directly affected too’

In their letter, ACA executive director Marylouise Serrato, ACA chairman Jonathan Lachowitz, and ACA Global Foundation chairman Charles Bruce pointed out that because they are, in fact, taxed on the same basis as their Homeland-based counterparts, Americans resident abroad “will be directly affected by [the proposed U.S.] legislation and administrative actions intended to provide emergency assistance and health care response for individuals, families and businesses affected by the current coronavirus pandemic.”

“Tax legislation along the lines of the “Coronavirus Aid, Relief, and Economic Security (CARES) Act” (H.R. 748) must ensure that Americans living and working overseas are treated in the same manner as other taxpayers and that special issues arising from the fact that they live outside the U.S. are addressed, so as to avoid mistakes and unintended consequences,” the ACA letter continued. 

“Careful attention must be given to filing deadlines and related topics.

“Tax filing deadlines for Americans overseas are different in several respects from those applicable to Americans resident in the States. When making changes, great care must be taken in the drafting of the rules; if not, something will ‘fall off the table’ for Americans abroad, which, unfortunately, has happened in the past.”

The letter goes on to give examples of areas that U.S. officials will need to take into consideration when seeking to deliver “recovery rebates” and similar initiatives to expats, as the mechanics for delivering them, as well as other elements of the situation, would need to be handled very differently for U.S. citizens resident abroad. 

For example, “implementation of the draft provisions for notice to taxpayers not later than 15 days after the date of payment, by electronic funds transfer or check, might need to be modified”, since “mail to Americans living in some foreign countries can be slow and somewhat unreliable”, a problem that might also “be exacerbated by the coronavirus pandemic…

“Many Americans abroad do not have a U.S. financial account, commonly because they do not have a physical presence in the U.S…

“Because of special rules, Americans abroad, especially those using professional preparers, sometimes experience difficulties in making electronic filings…

“Additionally there can be problems with making electronic payments and obtaining electronic refunds associated with filings.” 

The letter was addressed to Treasury Secretary Steven Mnuchin, IRS Commissioner Charles Rettig, Senate Majority Leader Mitch McConnell, Finance Committee Chairman Chuck Grassley, Ways and Means Committee chairman Richard Neal, and House Speaker Nancy Pelosi.

Yesterday the ACA posted a similar statement on its website, which may be viewed by clicking here.

Both the ACA’s letter and its website posting stressed the advantages in a situation like this, for American expats who lack U.S. bank accounts, of having a State Department Federal Credit Union bank account, which ACA has helped American expats to access since 2016.  

To see a copy of the ACA’s letter, click here.

At issue in the ACA’s letter are cash payments that the U.S. government is planning to make to U.S. citizens as part of a US$2trn “coronavirus rescue package”, as some media organizations have taken to calling it. Negotiations on the details of the rescue package have been slow to resolve as a result of differences in the approaches sought by Democratic and Republican lawmakers. Earlier today Senate Majority Leader Mitch McConnell said a deal had been struck, and vowed that the legislation would be finalized today (Wednesday).”

The American Citizens Abroad is a non-profit, non-partisan organization that exists to help Americans who live overseas. It was founded in 1978 in Geneva, Switzerland, and moved its headquarters to the U.S. in 2012.

‘I’d rather have RBT’

Among the American expats who reacted to the news of ACA’s reminder to Washington officials that Americans overseas needed to be included in any coronavirus relief efforts was Suzanne Herman, a dual American/Canadian citizen who lives in Vancouver.

In a posting on an American Expatriates Facebook page, along with a link to the ACA’s statement on its website, on Tuesday, Herman wrote: “I would give up any monetary relief to have Residence-Based Taxation, would you?” Within 21 hours, her post had received 55 “thumbs up” emojis from other American expats and 22 comments, all of which echoed her sentiments. 

One commentator observed that she was “skeptical that expats would even get these checks”, noting that “stimulus checks were allegedly sent out after both 9/11 and the 2008 recession”, but that she “never saw one” herself. 

Another commentator made the point that, faced with the possible need to pay out a significant sum in the form of coronavirus relief payments to 9 million expats, Congress might at last see a reason to grant them the residence-based tax regime these expats have been asking for.

Said this commentator: “Maybe now is the time to make the change – can this actually be used to help achieve ‘revenue neutrality’ and get RBT passed NOW?”


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