Updates November 22, 2021:
1. I have also written a post on the SEAT site which compares (in a general way) the Beyer Bill of 2021 to the Holding Bill of (2018). Any attempt to solve this problem through amending the FEIE actually has the effect of strengthening citizenship based taxation.
2. With respect to the 402(b) exclusion:
Update 1 Nov. 22: The exclusion of 402(b) plans is I believe an accident. But it demonstrates why these problems can't be solved by patching existing legislation. "The Beyer "Tax Simplification For Americans Abroad Act": A First Look "https://t.co/tSGYunrqmQ via @expatriationlaw
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 22, 2021
Update – Podcast November 24, 2021
The Beyer "Tax Simplification For Americans Abroad Act": A First Look https://t.co/2hf03S4gga via @expatriationlaw pic.twitter.com/Qv4RNjNOiX
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 21, 2021
On November 19, 2021 a post on the Democrats Abroad site introduced Congressman Beyer’s “Tax Simplification For Americans Abroad Act”. The Bill has been introduced as HR6057. I just saw this a few hours ago. Therefore, this post is necessarily a summary of my first impressions. It is likely that this will evolve and be updated over the next few days.
For those who do not want to read this relatively long post, the following excerpt provides an executive summary:
The Beyer Bill does NOT end US “citizenship-based taxation” and does NOT enact “residence-based taxation” as understood in the rest of the world. That said, the Beyer bill is intended to provide administrative (less to do) and substantive (less to pay) relief to middle class Americans abroad as long as they are not “entrepreneurs abroad” who carry on business through a CFC. “Entrepreneurs abroad” continue to be presumptively GILTI. If I am reading this correctly, GILTI income appears to NOT be included in the expansion of the scope of 911. Furthermore, the bill appears to provide conflicting directives on some “foreign pensions” (specifically excluding 402(b) pensions from the proposed new 911 exclusion while generally allowing foreign pensions generally to be excluded). It is my understanding that many Australian residents treat employer Superannuations as 402(b) pensions under the Internal Revenue Code.)
Like all “carveouts” the proposal purports to provide relief to a narrowly defined group of Americans abroad. In addition (this cannot be overemphasized) the bill retains US citizenship-based taxation. It should be clearly understood that ANY attempt to provide relief through expanding the FEIE (including the 2018 Holding bill) necessarily assumes the continuation of citizenship-based taxation.
This post is composed of the following four parts:
Part A – The General Purpose
Part B – General Impressions
Part C – The relevant modifications to IRC 911 Foreign Earned Income Exclusion
Part D – Tentative conclusion
* Appendix – The text of 911 with the proposed changes