– PRESS RELEASE –
American Citizens Abroad (ACA) Statement on Recent Supreme Court Ruling: Moore vs. U.S.
Washington, DC
June 24, 2024
The Tax Cuts and Jobs Act (TCJA) Repatriation Tax and GILTI Tax were created to tax corporate profits kept for a long time out of the reach of the U.S. Treasury and to help level the international tax playing field for U.S. multinational corporations. They were never meant for the undeclared profits of small and medium-size businesses owned by Americans abroad. The taxes have had a serious financial impact on American small business owners abroad. In addition to the added tax burden, they have been subjected to even greater tax filing costs due to the enormous complexity of the rules for calculating these taxes on unrealized profits. The complexity of the rules is an indication, itself, of the fact that these taxes were never meant for the profits of small to medium size businesses. Many have been forced to restructure, sell or close their businesses.
In Moore v. US, the Supreme Court ruled 7-2 that the “mandatory repatriation tax” under the Tax Cuts and Jobs Act (TCJA), which imposed a one-time tax on U.S. taxpayers owning shares in foreign corporations, does not violate the Constitution. The decision upheld the legality of this tax provision, affirming its constitutionality under the powers granted to Congress regarding taxation and revenue generation. The decision in the Moore case, although never specifically addressing the situation for US citizens living and working overseas, will continue to impose the repatriation/transition tax regime on US citizens living and working overseas. However, something still can be done to alleviate the concerns and issues of small US businesses overseas. The U.S. Treasury should issue regulations to exempt businesses under a particular size. ACA testimony to the IRS in 2018 called for the application of a de minimis ruling which would remove these small businesses from the mandatory repatriation tax regime aca-comm-testimony-irs-965-regs-22-oct-2018.pdf (nationbuilder.com). The renegotiation of the expiring provisions of the TCJA now gives Congress an opportunity to make restitution to the owners of small to medium size businesses registered abroad who were never the target of the new TCJA taxes.
ACA continues to advocate for the adoption of Residence-based taxation (RBT) as the ultimate corrective measure to tax issues such as the one highlighted in the Moore case and many others affecting the community. Hearings need to be held on behalf of the 4 to 6 million US citizens living overseas. Congress has this opportunity to hold hearings and should not pass it up. ACA is currently meeting with the members of the House Ways & Means Committee Republican Tax Working Groups to reinforce the need for hearings. ACA continues to call on the community to support hearings so that the Congress can better understand the complexity, cost and serious issues facing overseas taxpayers. ACA’s website hosts several write-in campaigns and one specific to the call for hearings Tax Fairness for American Abroad (americansabroad.org)
Contact:
Marylouise Serrato
marylouise.serrato@americansabroad.org
+1 202 322 8441
