Territorial Tax for Individuals (TTFI) proposal: not dead yet

From a press release on the Republican Overseas website:


Republicans Overseas solution is to offer dual citizens and Accidental Americans 3-year tax compliance without FATCA and Report of the Foreign Bank and Financial Accounts (FBAR) penalties. In comparison, citizenship renunciation requires 5-year tax, FATCA and FBAR compliance with FATCA and the FBAR penalties, $2,350 renunciation fee, and exit tax on net worth in excess of $2 million. Some overseas Americans were not happy with this solution because they want total amnesty. Unfortunately, this is unrealistic.

To connect TTFI with TTFC, there is a transition tax for TTFI qualified non-resident taxpayers. We negotiated to increase net worth exemption from initial offer of $5 million to $10 million. We successfully argued if a TTFI qualified non-resident taxpayer bought a house 30 years ago in Paris for $250,000, today the house could be more than $5 million on paper. We don’t want him to sell his house, which can’t be replaced, to pay for his TTFI transition tax.


As a result, now we have two triggers for TTFI transition tax exemption: first, a TTFI non-resident taxpayer has the average annual net income tax no greater than $165,000 for last three years and second, the net worth of the individual as of the date of TTFI introduction is less than $10 million. This will cover most middle-class Americans abroad.

TTFI also is about allowing American overseas minors to keep their citizenships.


In Toronto, I shared my promise to Daniel Kuettel regarding saving his daughter’s citizenship. Mr. Kuettel who is a veteran and one of plaintiffs in the FATCA court challenge, already renounced his citizenship in order to get his mortgage refinanced. His teen daughter wants to open a college savings account. The daughter needs Kuettel to co-sign the account. That will subject Kuettel to FATCA reporting and putting a future mortgage renewal in jeopardy again. Many overseas Americans supported naming TTFI as the “Taxation of Americans Abroad to Save Citizenship Act” as it would save families like the Kuettels from feeling obligated to renounce their US citizenship.


TTFI legislation introduction is delayed


At the present, our progress has been delayed because JCT has been carefully analyzing our TTFI proposal. Acceptance of TTFI will be a big change in the way that Americans abroad are taxed. It is important that we succeed, both for current and future Americans abroad. For current overseas Americans, there are some outstanding issues relating to the transition to TTFI, mainly relating to retirement plans. JCT is currently considering these final issues and we patiently await their scoring of TTFI, which we expect soon.


So there it is. Despite Republican setbacks in the House of Representatives, the TTFI proposal is still alive.  Let's keep the hope alive! As tax reform with punitive items such as GILTI, the transistion tax and downward attribution have only made the compliance costs for the American overseas even worse.