What is Territorial Tax Jursidiction?
Basically what it means is in order for you to be subject to a taxation regime, you must be in the territory or have a business connection to it. This is the way the rest of the world taxes*. However, the US imposes a wordwide, or universal taxation. This citizenship based taxation was not found in the 16th Amendment or the original income tax acts. But rather was made up out of whole cloth by the US Supreme Court in 1924 in Cook v. Tait.
Why is Territorial Taxation so bad?
A few reasons.
- One is that it undermines the soveriegnity of ever other country.
- It is incredibly complicated for both taxpayers and the IRS.
- It raises little revenue but brings big headaches.
- Congress created a penalty minefiled for those with income earned abroad.
- The US tax code is drag on the US economy; it puts US citizens at a competitive disadvantage.
Will Territorial Taxation for Individuals help me out if I live in the US?
No. It will only help you if you live outside the US.
Will Territorial Taxation for Individuals help me if I plan to leave the US?
Yes.
What are some of the feautres of the the TTFI bill?
From what we've heard so far, if you live overseas you will need to make what amounts to a Streamlined Foreign Offshore Disclosure for the past three years. And then yearly you will need to certify to the IRS that you were outside the US for the requisite amount of time (we suspect it will be 330 days).
Will TTFI repeal FATCA?
The TTFI bill will be a stand-alone. However, if passed, it makes it much easier to repeal the Foreign Account Tax Complaince Act or in the alternative, make it so the law would only be applied to US persons living within the US.
What can I do help TTFI pass?
Step one: Leave all your political baggage at the door. We all must be united Americans on this issue
Step two: Honor both the Republicans and Democrats who are taking a political risk by sponsoring the TTFI bill. Let them know you suppor them.
Step three: Get involved. Here is a helpful link to familarize yourself with the players. Also, be sure to inform everyone you knwo of the issues. If the US imposed the same obligations on domestic taxpayers as it does for expats, the tax code would be burned down. MAKE YOUR VOICE HEARD.
Step four: If we do not get the result we seek, we keep on trying.
*The nation of Eritrea claims to have universal tax jurisdiction. It is actually difficult to tell if this is done in practice. And also, we have the case of North Korea, which claims not to tax its citizens at all.
