It was an exciting week, especially for a newbie, like me. Our week started on Sunday evening with a get-together to make sure all the meetings were covered, that there were no conflicting appointments, and that, when possible, someone from each organization (AARO, ACA, and FAWCO) was in on each meeting. It was also the first occasion for some of us to put faces on the people we'd been emailing. To start, Julie, who was our scheduler for this week, did a wonderful job and continued to do so throughout the week as the calendar of appointments needed tweaking.
My main job, as a newbie, was to attend as many meetings as I could and to quietly take notes. I did pipe up occasionally, but it is better in a meeting with one staffer and 3 or 4 of us for only one of us to be presenting our issues. I am still not finished with my notes for the last day, but I did want to write my impressions this morning.
First, we have many topics of interest. This year, we agreed to try to limit ourselves to presenting only taxation, banking and voting issues. FATCA, which is now an acronym well-known to Americans living overseas, is the link between taxation and banking, thus bundling taxation, banking and FATCA into a single major sore point. (If you don't know, FATCA, stands for Foreign Account Tax Compliance Act and just click on the link if you really want the details.)
ACA has written a proposal for residence-based-taxation and AARO and FAWCO support this proposal, so that was the main issue at most meetings. Everyone in Washington is talking about tax reform and the president mentioned it, himself, in the State of the Union speech on Tuesday. It's on everyone's mind, but reform will not even begin to be discussed until after the whole business of "the sequester" is over. What residence-based-taxation means is that we Americans who live and work outside the United States would be taxed in the same way as non-resident aliens. Income earned on assets in the US and income earned in the US would be subject to a withholding tax, between 15% and 30%, depending on tax treaties with countries. So, the US would get that tax revenue and the resident abroad would be able to take tax credits in his or her home country. It would be so simple. There are points to deal with how to define a resident overseas (not military or State Department employee who has US-sourced income, nor residents of determined tax havens, nor short-term stints abroad (study programs, sabbaticals, etc.). Accounts in the home country would not be subject to FATCA regulations and there would be no more problems of non-reciprocity of retirement accounts. Accounts in countries where one may have left accounts whilst moving around would still be considered foreign accounts. And there were questions about the treatment of accounts in home countries of US-resident aliens, but it seems that, as now, for residents in the US, alien or citizen, all accounts elsewhere would be foreign. (Victoria Ferauge has just written a piece on the FATCA meeting at OECD this week in Paris. There may be hope.)
FATCA is half of the banking problem. Foreign banks will have to comply with I.R.S. regulations to report on the accounts of US tax-persons (citizens, green-card holders). If there is an inter-governmental agreement, the reporting will be done through the governments and if not, the banks will report directly to the I.R.S. This opens up a Pandora's box of problems: reporting complications for the US-tax persons, reporting costs for the banks, information security concerns.... The easy solution for banks is to simply get rid of US-tax persons' accounts, especially investment accounts. The result is that we are being shut out of accounts and business partnerships and jobs that involve signatory authority. It affects personal lives and business. It affects business development for US companies trying to export abroad. If residence-based-taxation were to become the norm, as it is in every other country (except Eritrea, North Korea, and the Philippines), FATCA would no longer apply to our local accounts because we would no longer be US-tax persons.
The other half of the banking problem is in the Patriot Act, which requires banks and brokerages to "know your customer". They seem to interpret to mean the customer must live in the US. Therefore they are shutting out their customers who now live abroad and they haven't allowed such customers to open accounts for years. Some are closing US-held retirement accounts arbitrarily, subjecting the customer to early-withdrawal penalties and taxes. There is a letter from the State Department and another from the treasury saying that this is a misinterpretation and we can have accounts in the US, but the banks are still making the commercial decision against us. So, if you can't have an account in your home country and you can't maintain an account in the US, you are in a real bind. Of course, the FATCA regulations may yet apply to US banks if there is reciprocity between countries.
The proposal was very well-received in both chambers by both parties and by the heads of the key committees. It's a good start.
HR597, a bill to establish a commission how Federal laws and policies affect Unites States citizens living in foreign countries. We are encouraging all to write their representatives to support this bill, especially if the representative is on one of these committees:
We also reported that overseas voting was improving. Unfortunately, many voters did not receive their ballots in time, again, and we expressed concern that this kind of problem could get worse if the postal service does away with Saturday pick-up, sorting, and delivery as scheduled. The Election Assistance Commission may not survive cutbacks and there is no indication of what might take its place or how its work could be taken over by other entities.
There was a meeting at the State Department to discuss citizenship issues. There are what they call efficiency bills, slight modifications to existing legislation, to allow single US-citizen mothers to be able to transmit citizenship more easily, but no change is in the works for single fathers. The whole issue of how unwed parents transmit will not be overturned as it would negate the citizenship of all those who had acquired citizenship under it.
We each had 6, 7, 8 meetings a day for four days. There were some left-over meetings to go to on Friday that I was unable to attend for a grand total of 82 meetings. I was very glad to be part of it and hope to be able to go next time, not as a newbie, but as someone ready to present our interests. It would be nice, some day, to be able to say there are no issues. Wishful thinking.