Monday, March 4, 2013

Congress Again Gunning for Expats

US Capitol Building
Photo is public domain
In the latest round of attacks against expats, the US "do-nothing" Congress is nonetheless very, very concerned about making life more difficult for expats abroad. In a fairly angry post on, user Eric provides details of the latest bills targeting expats.

Corporate Tax Dodging Prevention Act

Bernie Sanders, the otherwise great Senator from Vermont, introduced the Corporate Tax Dodging Prevention Act. It sounds reasonable. but one of the provisions requires that non-US corporate income be attributed back to the US owner and be taxed as ordinary income. What does that really mean? It means that if you are a homelander and start a business in the US, you'll pay a 15% tax on corporate dividends only when those dividends are paid. I, on the other hand, would be forced to pay a quarter of the income of the corporation, regardless of whether or not dividends are ever paid.

In other words, if I start a company abroad, I'm screwed financially unless I move back to the US. Since I'm going freelance in May, it's crap like this which keeps me awake at night.

Cut Unjustified Tax Loopholes Act

There's also the Cut Unjustified Tax Loopholes Act, proposed by Sheldon Whitehouse and Carl Levin. It gets head-poundingly complicated, but it appears that Americans starting businesses abroad could be subject to new, expensive, paperwork for their businesses which, if you screw up, is a minimum of a $10,000 fine per offense.

Job Preservation and Economic Certainty Act of 2013

The Job Preservation and Economic Certainty Act of 2013, also put forward by Whitehouse and Levin, is a protectionist measure. Amongst other things, it means that if you're an American living abroad, offering your goods and services to the world is fine, but offering them to the US will get a whole lot more expensive.

Bring Jobs Home Act

The Bring Jobs Home Act means that US companies in the US will get a tax break for the elimination of any business unit ... located outside the United States and hiring someone at home.

This one might actually pass as it has a number of co-sponsors. I do wonder how that's going to impact my freelancing career. I have a lot of work I can get here in Europe, but I hate the thought of passing up consulting opportunities in the US just because Congress doesn't like the fact that I live in France.

As far as I can tell, these bills don't appear to be an intentional assault against the finances of Americans living abroad. Instead, they're a side-effect of the typical Congressional ignorance of the fact that many Americans live outside the US. In the US, most businesses are small businesses and that's pretty much the same outside the US, too. So when Congress tries to pass laws like this, they seem to think it's huge, multinational corporations playing tax games when, in reality, they're killing a bunch of small businesses started by Americans abroad.

If Congress was deliberately doing this, I could almost deal with that, but knowing that they're hurting many Americans abroad as an act of gross negligence is just painful. It's like a giant, rolling over in its sleep and crushing everything beneath it.


  1. Curtis. I have no idea of how much you are likely to earn from your business. But if it's substantial, it may be worth your while trotting over to Luxembourg or the Channel Islands and asking some tax-haven professional for help.

    I used to be in that line of business, but am long retired and not up to date with what's available in the way of legal - yes, legal - tax dodges. I'll be glad to answer general questions about trusts and Offshore companies, but I can't help with any details. Just to give you (and anybody else) a hint of what *might* be suitable, check out my January blog posting "Lunching with the stars".

    All the best.

  2. American ex-pats, particularly small business owners, have little other choice than to get rid of their US citizenship.

    It has nothing to do with patriotism -- its purely a matter of survival.