American expats who own their own small businesses outside of the U.S. are being strongly urged to take an online Democrats Abroad survey about their experiences under the so-called GILTI regulations that came into force in Janury, 2018 – particularly if they've found them to be burdensome – as the deadline is this Friday (Aug. 20).
The Democrats Abroad Taxation Task Force has said that it urgently needs more responses, if it is to be able to "help give Congress the data they need to fix the GILTI tax issues that small business owners living abroad face."
With enough responses, the results of the 12-page survey, which may be accessed by clicking here, would help the Democrats Abroad persuade Washington lawmakers of the need to fix the GILTI regulations, the DATTF says.
(Importantly, those taking the survey should be aware that it has been designed to be taken, not merely looked at, so that at a certain point part of the way through it, it isn't possible to progress to the next page without completing the survey to that point, one survey-taker has told us.)
In 2019, a similar survey of U.S. expats by the Democrats Abroad, on more general tax issues, drew responses from some 9,885 individuals living in 123 countries across six continents, who in total represented all 50 U.S. states. Possibly because of the strength of this response, its findings have been reported regularly ever since, not just by the Democrats Abroad but by journalists and other organizations.
Carmelan Polce, chair of the Democrats Abroad's Taxation Task Force, says as many Americans abroad as possible who own small businesses registered as companies in the countries they live in should complete the survey, because the Dems Abroad is currently "talking to Congress about GILTI tax relief for American business owners abroad, [and] asking for reforms to be included in the legislation they are working on this year."
She adds: "It is clear that Congress, the Joint Committee on Taxation and the committees and subcommittees that have oversight of taxation and of small businesses lack data on the experience of ordinary American business owners abroad and GILTI tax.
"For this reason, a strong response on the part of expat American small-business owners to the survey "can help us provide this data.
"It will help persuade Congress of the need for GILTI reforms to be included in legislation being written this year."
'Global intangible low-taxed income'
As this publication and others have been reporting for the past three years, the GILTI (global intangible low-taxed income) regs – along with such other new taxes also created by President Trump’s 2017 Tax Cuts and Jobs Act (TCJA) in 2017 as the Transition Tax – have created such major problems for small business owners that many have said that they will have had to close their businesses, or have done so already, while others have been struggling to survive.
Monte Silver, an American tax attorney resident in Israel, whose law firm is considered to be a small business and therefore subject to these new regulations, argued from the beginning that these new taxes were legally flawed, and has filed two legal challenges against them in U.S. District Court in Washington, DC – the first in January 2019, against the so-called Transition Tax element of the TCJA, and the second, last year, against the GILTI provisions.
Both matters are still ongoing.
Under GILTI, each U.S. person (defined as a U.S. corporation or citizen) who is a U.S. shareholder of any "controlled foreign corporation" (CFC) must include their share of GILTI income in their personal U.S. tax return, where they calculate their “gross income” for the tax year.
In his GILTI challenge, Silver is arguing, among other things, that the regulations are "procedurally invalid" because in drafting them, the U.S. government failed to take into account their effects on small businesses before bringing them into force – which, Silver pointed out in his legal filing, it is required to do under something called the Regulatory Flexibility Act (RFA).
In an article published here in 2019, the difficulties some American expat owners of small, non-U.S. businesses were described in detail by a small business owner identified only as "Jethro" .
He ended his piece by noting, glumly, that no matter what he did, as long as he stayed in business, owing to the taxes introduced by the Tax Cuts and Jobs Act, "going forward, neither I nor my company can begin to compete with our local rivals here in Europe, owing to our need to comply with these myriad U.S. tax demands, which our non-American competitors [don't] have."
It wasn't immediately known whether he has remained in business since then, or given up.
As reported, the American Citizens Abroad has also been sounding the alarm over the TCJA tax changes, and in June, wrote to seven top U.S. Treasury officials, including Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig, to urge them to "revisit" them, in addition to making such other needed changes as switching the U.S. to a residence-based tax (RBT) regime.
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