New group formed to lobby DC lawmakers to switch U.S. to residence-based tax regime

News of the creation of the Residence-Based Taxation Coalition was unveiled yesterday, in a statement distributed to the world's media.

Today, Marylouise Serrato and Charles Bruce, the executive director and legal counsel, respectively, of the Washington, D.C.-based American Citizens Abroad (ACA), are expected to share more details about the group during a presentation they're giving as part of the so-called 2021 Expats Virtual Financial Summit, a free, four-day event that's taking place online. 

Their comments on the new organization were set to be posted online after the presentation was completed, and may then be viewed by clicking here. 

The ACA is one of the organizations that comprise the new RBT Coalition, although it is independent of the ACA.

According to the RBT Coalition's statement yesterday, its sole purpose will be "to focus on the need for tax reform for Americans who are living and working overseas, and to support enactment of residence-based taxation".

The statement continued: "The RBT Coalition will present widely-accepted arguments, research and documentation in favor of residence-based taxation, making information available to the U.S. government, the media and the public. All materials will be approved by [the group's] members."

The companies and organizations that have signed up to the RBT Coalition so far, in addition to the ACA, include the Association of Americans Resident Overseas (AARO); Americans Overseas; Bright!Tax; Dunhill Financial; the National Taxpayers Union (NTU); the Swiss American Chamber of Commerce; and White Lighthouse Investment Management. Membership is open to other companies and organizations who share a desire to see the current U.S. system of citizenship-based taxation replaced, "and will grow, as groups come forward to identify themselves with this effort," the RBT Coalition statement said.

'Stronger together'

In recent years, the entities that now comprise the RBT Coalition have, in their own ways, advocated for tax reform for Americans overseas, the organization points out. But coming together in the way that is now doing, it says, will clearly demonstrate to Washington's decision-makers "that support for a change from the current Citizenship-Based Taxation (CBT) regime, which taxes U.S. citizens living abroad on all their income  – including both U.S. and foreign-earned or -sourced income – to a residence-based regime, [which would tax] only [that] income [a U.S. expat taxpayer] earned or sourced in the U.S., comes from a variety of organizations and interests."

It adds: "The RBT Coalition brings together groups that have traditionally advocated for Americans overseas, as well as tax advocacy organizations, members of the business community, tax and investment professionals, 'think tanks', and others."

'Data, information, background'

The RBT Coalition stressed that it has no plans to present Congress or the new Biden administration with any "specific tax reform platforms or proposals" but rather, would, after agreement by its members, provide "those responsible for tax reform" instead "with the data, information, background, and details as to why residence-based taxation should be enacted."

"RBT Coalition members will bring a wealth of knowledge not only on the tax and compliance issues of Americans living and working overseas, but also information on the demographic and financial make-up of the community."

Outlook for change
under Biden admin 

To no one's surprise, a little more than a week into the new administration, there's little doubt that it's planing to make immediate and significant changes to the American tax regime.

For this reason, the RBT Coalition says it's confident that all the "detailed information and work" developed by its participating members "will be invaluable to those in Washington, DC who will be working on such legislation, as well as regulatory reform".

It adds: "Tax reform for Americans abroad has often been overlooked [in the past] in major tax legislation passed by the U.S. Congress.

"[For this reason], the RBT  Coalition’s work will be key, given the U.S. Congressional legislative priorities in 2021."

More information on the RBT Coalition may be found on its website, www.rbtcoalition.org, or by emailing it at This email address is being protected from spambots. You need JavaScript enabled to view it..

Why the U.S. has a
citizenship-based regime 

The reason the U.S. is, famously, the only country in the world besides Eritrea that has a citizenship-based tax regime dates back to the early months of the American Civil War, when it was enacted in order to prevent wealthy people from ducking their military and civic obligations by fleeing the U.S. during a time of crisis, as the Wall Street Journal noted in 2012.

That was the year when the subject of America's CBT regime hit headlines after news broke that Facebook co-founder Eduardo Saverin had renounced his U.S. citizenship before the company went public, thereby enabling him to avoid the significant "exit tax" that comes with U.S. citizenship for wealthy Americans. 

"In 1864, the tax was expanded to include income from all sources, no matter where generated," the WSJ article continued.

"Scholars say this happened as the proud sense of being a citizen of the U.S. – with all its opportunities and obligations – first flowered out of the battlefields.

"That model of citizenship-based taxation has remained in the U.S. law ever since, even as the rest of the world has gravitated to a different model, one that simply considers where the taxpayer is living at the moment." 

2012 was also when Americans around the world were beginning to discover that as a result of the Foreign Account Tax Compliance Act, signed into law in 2010 by President Obama, their financial life would never be the same again, even though FATCA had yet to come into force (this happened in 2014).

Because the law, which was aimed at ensuring Americans didn't use overseas banks to avoid U.S. income taxes, obliges non-U.S. financial institutions to report to the U.S. authorities on all of their "U.S. person" account-holders, with significant penalties for institutions found not to do so, the first thing many institutions did was to simply stop allowing Americans to maintain accounts – and asking those who had them to take their assets elsewhere. The problem of banks and financial institutions being unwilling to have American expats as clients, including, in some cases, overseas operations of American companies, continues to be a major problem for Americans.   

To read the WSJ article on the history of America's CBT, click here.