Repeal Update
Current Status : No activity
Palazzo & Co, CPA is committed to preserving and protecting the Expat’s foreign earned income exclusion. Currently the exclusion is safe. On two occasions in the past two years we have successful defeated a repeal of the exclusion. Read below to see what your Expat CPA has done for you.
Original Post: May 17, 2003.
TO: US EXPATS
SUBJECT: REPEAL OF THE FOREIGN EARNED INCOME EXCLUSION
FORWARD: TO ALL EXPATS AND CORPORATE TAX AND HR MANANGERS
In Brief - (REPRINTED FROM IAS GLOBAL WATCH)
As part of the process to implement tax cuts within a limited budget, lawmakers have proposed the repeal of the foreign earned income and housing exclusions available to certain US citizens and residents working outside the US. The repeal of these exclusions would have a significant impact on the US tax costs of international assignments.
"The Bottom Line"
It's recognized that Section 911 affects US citizens and residents working in low-tax and high-tax countries alike, and that the repeal of the exclusion could place foreign individuals on international assignments (or permanent posts outside their home countries) at a competitive advantage over US citizens and residents working outside the US.
BACKGROUND
On May 15th the Senate approved the Economic Growth Bill and $441B tax package. Within the package it contained a provision that will repeal Section 911 of the tax code, which you know as your foreign earned income exclusion. Bottom line - this means in the near future all your foreign earned income will become taxable and there will no longer be an $80,000 income exemption.
The previous Economic Growth Bill passed by the House did not contain this provision and it is now going into the House/Senate Conference to reconcile the differences in dollars, language and the such. Congress hopes to have this worked out by Memorial day.
Initially the original proposal would have repealed the exclusion effective January 1, 2005 but during committee the Senate adopted an amendment to accelerate the effective date by one year, to January 1, 2004.
NUTS & BOLTS
The reason I'm notifiying everyone of this is that there may be one last chance to repeal this provision. Senator Breaux of Lousisiana has already tried one amendment to repeal the provision and it failed to pass by a narrow vote of 51 to 49. He's not alone in his opposition of the proposal. The Associated General Contractors of America, the largest and oldest national construction trade association representing over 35,000 firms has petitioned the Senate Finance Chairman to repeal the provision as well.
The AGC has done the following - "Delivered a letter to Sen. Charles Grassley opposing the proposed tax increase on Americans working overseas, signed by some of the largest construction and engineering companies in the industry...They stated section 911 of the tax code, levels the playing field between Americans working abroad and their foreign counterparts...allows Americans to compete fairly for overseas jobs...Repealing section 911 denies US companies utilizing US workers the same opportunities as their foreign counterparts, restricts their ability to bid fairly on jobs, and ultimately damages the US economy...they urged the Senate to strike this provision from the tax bill and help stimulate the economy by leveling the playing field for Americans all over the world."
SPEAK UP OR PAY UP!
The vast majority of Americans and elected leaders don't have a clue what Sect. 911 is and what it does for Americans and the Economy. Proof of this is that the so called economists and congressional beancounters think they are going to make a windfall in revenue by taxing 100% of the US citizens foreign earned income. What they don't see is by leaving Sect. 911 alone and striking the proposal from the bill it will do more for the economy financially and in job growth. But by repealing the exclusion they will lose billions more.
For individuals the income exclusion helps States as well as the US Gov't by employing US citizens in assignments around the world. Financially, these taxypayers make good money and they spend a majority of the money in the US. This money generates jobs in the US, sales tax revenue, demand for products, new businesses and much more. In qualitative terms it opens up local communities in the US to a global perspective and allows US citizens to interact around the world building friendships and improving other countries quality of life. In a sense, each US Expat is like a diplomat representing America doing probably more good then our own State Department. Because Expats are not political the rest of the world actully sees the true values and principles of what makes America great. And many foreigners emulate the US Expats they meet.
On the other hand the income exclusion helps US companies compete with foreign companies for not only US contracts but foreign as well. This generates corporate profits and taxes that our States and USG can use to fund its budgets. Repealing this exclusion will hurt the competivieness of US companies and it will also reduce their revenue, recruitment and employment of US citizens overseas. If they have to rely on greater numbers of foreign workers to replace and backfill the US positions that can no longer be filled billions of dollars will now be going to foreign workers and back to their countries and not one penny will be spent in the US.
TAKE ACTION
This proposal was inserted into the bill by staffers (not our elected leaders) because they thought it would not get any attention or debate. For the most part they were right. But many of us are hoping it's not to late to reverse the pending damage it will do. And now you can help regardless of which political party you identify with you need to contact your US Senators and Congressman and tell them you disapprove of the repeal of Section 911 and you do not agree with the taxation of US citizens working overseas. You need to act now by calling, faxing, and emailing. Get your family, friends and co-workers to do the same. If we can not get this proposal taken out of the Economic Growth Bill then all your earnings for 2004 will be taxable. If you choose to leave your overseas assignment you will have to come back to the US and work just as hard not only finding a job but if your lucky finding employment getting paid much less to support yourself and family. The bill is good the proposal is bad. The proposal is a lose lose situation for everyone.
Be sure and copy all of your emails sent to your Congressman
BOTTOM LINE
The repeal of the Sect. 911 and the foreign earned income exclusion is bad for you, your family, your company and America. Don't delay because we only have days to convince your Congressman that this is a bad move on their part and for them to stand up and be accountable. Keep in mind most of them probably didn't even know what they were voting on so it's up to you now to educate them on how you feel and how it will affect you, your community, their State and America.
Good luck!
Steven
WEBSITE FOR MORE INFORMATION ON THE ECONOMIC GROWTH BILL.
