U.S. Taxation of Americans Working Abroad

Responding to legislation in 2006 that significantly raised taxes on Americans working abroad, the Asia Pacific Council of American Chambers of Commerce (APCAC) is leading an effort with the active commitment of several AmChams to support a coalition called the Alliance for a Competitive Tax Policy (ACTP).

In the interest of supporting Americans who are working abroad to sell U.S. products, APCAC and ACTP urge Congress to reverse the specific provisions of the 2006 Tax Increase Prevention and Reconciliation Act (TIPRA), which raised taxes on working Americans overseas. APCAC and ACTP also urge Congress to enact tax reform measures that will make the U.S. tax code more competitive with the rest of the industrialized world.

Section 911 of the Internal Revenue Code provides a limited tax exemption for foreign-earned income of American citizens to partially offset the fact that all other industrialized countries waive taxes on income earned abroad by their citizens.

The Asia Pacific Council of American Chambers of Commerce (APCAC), and several Asia-based American Chambers of Commerce (AmChams), have formed a coalition called the Alliance for a Competitive Tax Policy (ACTP). The effort is also supported by AmChams in the Middle East, Europe and South America.

There are an estimated four million Americans living abroad. These Americans are on the sales teams and the front lines of the competitive world marketplace and deserve fair tax treatment. For the sake of America’s workers abroad, and for America’s strength in the increasingly global marketplace, we urge Congress to repeal changes made in the Tax Increase Prevention and Reconciliation Act (TIPRA) which increased taxes on working Americans overseas, and to work to bring the U.S. tax system into line with the rest of the industrialized world.

Bipartisan legislation, entitled the Working American Competitiveness Act, has been introduced in the Senate by Senator Jim DeMint (R-SC) as S. 1140, and in the House by Congressman Gregory Meeks (D-NY) as H.R. 1798. A similar bill was recently introduced by Congressman Scott Garrett (R-NJ). The bills would eliminate the unfair taxation of Americans working abroad by removing the limitation on the foreign-earned income exclusion.

Recommendations:
a. Co-sponsor and support the Working American Competitiveness Act ( H.R. 1798 / S.1140 )
b. Support efforts to remove the provisions of TIPRA which raised taxes on Americans working abroad.
c. Oppose any attempts to abolish or further limit the Section 911 exclusion.
d. Support fundamental reform of the U.S. tax system to make our tax policies more competitive with our international trading partners.

Additional Background Information

Click here to view:

View IRS Notice-2008-107: Housing Cost Amounts Eligible for Exclusion or Deduction for 2008.

View APCAC’s press release on the Alliance for a Competitive Tax Policy.

View Executive Summary: Economic Analysis of the Foreign Earned Income Exclusion

Download Economic Analysis of the Foreign Earned Income Exclusion, PricewaterhouseCoopers, Nov 7, 2005 pdf file, 37 pages, plus appendices.