On May 17, 2006, President Bush signed into law the Tax Increase Prevention and Reconciliation Act of 2005, which, among other things, reduces tax relief available to expatriates under Section 911 by (1) substantially reducing foreign housing expenses which up to now could be excluded from taxable income and (2) adding back income excluded under Section 911 in the determination of the marginal tax rates applicable to non-excluded income, also referred to as the stacking provisions.
The combined result of these amendments is a much higher overall tax burden for U.S. citizens living in Japan, who are subject to both Japanese and U.S. taxes. Furthermore, this places Americans among the highest-cost employees in the world, while today's globally competitive market demands that companies seek out more cost-effective employees.
The overall effect is that the Section 911 amendments not only place U.S. citizens and businesses at a competitive disadvantage in key foreign markets but they also result in a strong economic disincentive both for Americans to enter or remain in the international marketplace, and for U.S. companies to hire Americans in their overseas operations.
The increased tax burden as a result of these changes fall especially hard on those individuals having relatively lower incomes and higher housing costs, such as entrepreneurs, teachers, and families who require larger living spaces.
A disincentive to hire Americans abroad will result in a decrease in the numbers of Americans with international experience and perspective, and accordingly the number of Americans in positions of global leadership; effectively undermining America's continued global leadership by a lack of international experience and involvement.
In response to these developments, the ACCJ has issued the following press releases and letter to all members of Congress expressing its concern:
The ACCJ is also working with its fellow AmChams around the world to urge Congress to repeal the Amendments to Section 911 and increase American competitiveness in the global marketplace, not unfairly burdening those U.S. citizens and companies who are doing so much to expand the success of Americans and American businesses internationally.
What can I do? Make your voice heard
Do recent Amendments to Section 911 concern you? If you would like your voice heard on this issue, fax your Congressman and the Chairs of the Senate Finance Committee Senators Chuck Grassley and Bill Thomas. Please see the following template letters and supporting documents:
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