How Americans abroad, 30 days after launching a grass-roots campaign, got the US Government to grant
How Americans abroad, 30 days after launching a grass-roots campaign,
got the US Government to grant initial relief from the Repatriation Tax
This newsletter focuses on a different aspect of tax - tax advocacy. Specifically, fighting to change the US tax law (or how it is implemented) in order to exempt Americans abroad (expats) from the Repatriation and GILTI taxes. This article will discuss how a month-old grass-roots campaign won initial relief from the U.S. Government, in what is expected to be a long tough war.
How does an American abroad, with no experience in politics or advocacy, and with no desire to waste years fighting windmills, even begin asking "the US" for relief?
First: Define the problem. The Repatriation and GILTI taxes created by the recent U.S. tax reform were intended for multinationals like Google and Apple, not expats running small businesses through companies in the countries in which they live. These taxes hit the expats very hard!
Second: Understand who can fix the problem. Identify the people who can actually change the law or decide how it will be enforced. In this case, U.S. tax laws originate in the House Ways & Means committee, and the U.S. Treasury and IRS interpret and enforce these laws. So one must identify and get the contact details of the decision makers in these organizations (the "Targets"). Then one must make sure the Targets understand the problem.
Third: Make sure many expats get in the face of the Targets. Accordingly, an email-based petition was launched the first week of March (www.americansabroadfortaxfairness.org). However, the petition would only be successful if many people signed it. This required building partnerships with expat entities, US CPAs expats, expat opinion leaders and tax professionals (collectively "Champions") in Israel and from around the world. Yet, what if none of the Champions know you or have any reason to trust you?
One must quickly build that trust. This can be done by: (i) publishing a few articles on the subject and becoming a thought leader, (ii) contacting local members of global expat-organizations who might know you or that you can meet, (iii) picking up the phone and speaking to a few Champions around the world, (iv) starting locally, inside your country, and building a buzz, (v) doing what you say you will do, or more, and (vi) being inclusive, not possessive, and enable others to seize the initiative.
The result - an alliance of expat organizations (such as Republicans Overseas, Democrats Abroad, American Citizens Abroad), CPAs and many other country-specific Champions emerged within a week – all with the exact same interest.
With many Champions adopting the petition and spreading it among their members globally, the Targets started receiving dozens of petitions daily – something I was not even aware of.
Fourth: Meet the people who can solve the problem and offer a solution. And when I decided to travel to DC and hopefully meet the Targets – Surprise!! They gladly agreed to meet. Understanding that the U.S. reform created various problems, they wanted to learn what the expat problem was.
Talking to experts, reading and thinking in preparation for these meetings, one understands that there are shorter term and longer term forms of relief.
The longer term solution is legislative– changing these two laws to exclude expats who were never the intended target of the law. People familiar with Washington seriously doubted that this solution would happen any time soon, given the upcoming US elections in November 2018. So meeting with Congressional tax personnel (House and Senate), one could not expect immediate results. Rather the purpose of meeting the House and Senate tax personnel could simply be to clearly describe the pain, hope for sympathetic ears, and then maybe get some pointers on how to better focus the legislative battle that lay ahead.
For shorter term relief one had to look to the executive branch– the Treasury and IRS ("T&I”).
In preparing for these meetings, the key issues became: (1) what kind of relief can one ask for and what discretion does the T&I have in implementing the law? (2) Will the T&I even care about the expat issue, since expats historically have no political power?
Prior to the meeting with T&I, it became important to know what to ask for - in this case it meant mapping out and drafting short and immediate term relief to present to the T&I, again hoping for a sympathetic ear.
At the meetings, it was evident that the T&I were aware of several problems created by the reform. In addition, T&I is responsible for issuing countless guidances, notices, revenue procedures – and of course formal regulations – all required to interpret and enforce the many new laws under the reform. Also, it was clear that T&I had some decision-making discretion. For example, one basic problem facing expats and their CPAs was when were expats required to make the first payment under the Repatriation tax? Expat CPAs, even the Big 4 abroad, were not sure. This issue has significant importance as under the law, a payment that is even one day late automatically triggers the acceleration of eight annual payments, otherwise due over eight years until 2025.
Being sympathetic to the problem, T&I agreed to exercise its discretion and set the first payment for June 15, not April 15 as the law seemed to require. On April 2, 2018, just a month after the petition launched, the Treasury formally issued the relief and expats globally rejoined. Someone was listening to them!
True, this relief is only the first of three such proposed fixes expats seek from the T&I on these two laws. However, the other two fixes have been clearly articulated and discussed during the meetings. The proposed fixes are narrow in scope, not unreasonable and can effectively extend the relief until after the elections – enough time try and change the law by legislation. Finally, expats now have breathing room - 75 days to work on those to fixes!
What can one learn from this? People acting effectively together (and not merely acting for the sake of acting) can make a difference. Stay tuned.
Monte Silver is a U.S. tax attorney living outside the U.S. His practice addresses providing solutions for these and other U.S. tax matters. However, this entire advocacy effort is voluntary and will remain so until we win the battle.