Tax News & Views International Weekly: Taxing Overseas

Last week, the ranking Republican and Democrat on the Senate Finance Committee released legislation to “make an array of commonsense fixes” to the procedure and administration of the Internal Revenue Service. The provisions, approved by the National Taxpayer Advocate, include changes meant to speed up the processing of returns and enhancing online accounts so that taxpayers can access data about their returns and potential refunds.

The legislation also included a section on changes for Americans living abroad, an issue that has circulated around Capitol Hill for years, but has yet to make headway into legislation. It may seem like a niche topic, but for those who are affected it is a big deal.

The primary goal of many interest groups representing citizens living in foreign countries is to reverse the U.S. policy of enforcing worldwide taxation on citizens, no matter where they live. This means that they need to comply with both foreign and U.S. tax laws, which many claim is an onerous burden which virtually no other countries try to impose.

President Trump promised to end worldwide taxation during the 2024 presidential campaign, although this priority didn’t make it into the One Big Beautiful Bill Act that he and the Republican Party pushed through Congress last year.

Many expatriates have also criticized the tax-related information reporting requirements they or financial institutions they use must comply with, including the Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank Account Report (FBAR) required under the Bank Secrecy Act. This web of reporting rules can often make it very difficult for ordinary citizens to hold bank accounts outside of the U.S.

The bipartisan legislation from the Senate Finance Committee would take some steps to simplify this—but only so many. An earlier discussion draft would have streamlined FBAR and FATCA reporting requirements so they could be submitted with an annual tax return. The latest version only asks the U.S. Department of the Treasury and the Government Accountability Office to study and report on potential fixes for FBAR, and doesn’t address FATCA at all.

The other changes would ease some tax and reporting requirements, while also making it easier for citizens to deal with the tax consequences of currency exchanges.

While this may only be the first step, it’s a sign that these issues are moving into the mainstream.

Noteworthy Items This Week

US Firms Likely to See Relief From Global Minimum Tax Dilemma – Michael Rapoport, Bloomberg Tax ($):

Countries are likely to search for new incentives and build on existing ones, according to tax observers. Such incentives would benefit companies and attract investment in ways that won’t be affected by the 15% minimum requirement, and also help offset any minimum taxes the companies have to pay.

“Incentives will be created or given that will wipe out these reported liabilities,” said Itai Grinberg, a Georgetown University law professor and former Biden administration official who was the Treasury Department’s lead negotiator on the OECD’s 2021 deal that agreed on the global minimum tax.

In the wake of the exemption agreement in January, “it is probably just a matter of time” before most of what companies have had to pay essentially gets given back to them, Grinberg said.

3 Key Areas Where Tax Administrations Are Using AI – Natalie Olivo, Law360 Tax Authority ($):

Specialists have noted that while AI can help tax administrations carry out a variety of functions, the technology can also amplify existing risks involving algorithmic bias and taxpayer privacy unless authorities place proper guardrails around it.

Emily Wielk, a senior policy analyst at the Bipartisan Policy Center in Washington, D.C., said even before tax administrations used advanced technologies to flag returns, there were patterns of bias — whether explicit or implicit — around certain taxpayers, such as low-income filers. There are concerns that if AI is being trained on the same processes that humans manually use to select audits, those biases could be reproduced in the code's algorithms, she said.

Learning From Learning Resources – Mindy Herzfeld, Tax Notes ($):

The strike-down of the IEEPA tariffs is unlikely to offer comfort to those seeking a way out of the confusion and uncertainty created by the administration’s trade agenda; the president has several other tools available to adopt and raise tariffs. The Supreme Court’s decision, however, now makes it more likely that these actions will be subject to litigation concerning their scope and the president’s authority to invoke them. For followers of international tax policy, the decision has implications for negotiations over the taxation of the digital economy. And the strong language used by the Court in enunciating the importance of Congress’s taxing powers could affect future grants of tax rulemaking authority to Treasury.

See Eide Bailly's coverage of the Supreme Court's monumental tariff decision here and here.

Int'l Tax In February: Check On US Tariffs Prompts Reactions – Molly Moses, Law360 Tax Authority ($):

It's not clear what impact the Supreme Court's ruling will have on the deal reached between Trump and Indian Prime Minister Narendra Modi last month, which included a reduction in tariffs on Indian goods from 50% to 18%. Even before the high court's ruling, questions remained about how the interim agreement will materialize and influence future negotiations.

The goal of the India talks is a bilateral trade agreement, whereas with many other countries the goal is a less formal agreement on reciprocal trade, one expert said.

While Trump has said on social media that Modi committed to stop purchasing oil from Russia as part of the deal, language on that commitment was absent in the joint statement published by the countries.

America First, Global Tax Deal Clash in Irreconcilable Conflict – Somesh Jha, Bloomberg Tax ($):

Countries can impose their own domestic minimum tax—known as the qualified domestic minimum top-up tax—on profits earned within their borders, regardless of where a multinational is headquartered.

Over 40 countries, including historically low-tax jurisdictions such as the United Arab Emirates and Barbados, have adopted the measure. The US has accepted this part of the OECD deal.

The success of the new deal will depend heavily on how widely countries adopt that tool, said Raffaele Russo, former head of the OECD’s base erosion and profit-sharing project, who currently works as a partner with law firm Chiomenti.

“It’s an insurance,” said Manal Corwin, director of the OECD’s Center for Tax Policy and Administration, “against any of the concerns, particularly relating to level playing field.”

Public Domain Superhero of the Week

Every week, a new character from the Golden Age of Comics, who’s fallen out of use.

This week’s entry: Strongman

Debut Year: 1955

Debut Publication: Strongman #1

Origin Story: An orphan raised in a circus, he eventually used his stage persona to fight crime.

Superpowers: The self-described strongest man alive, he doesn't need superpowers--but knowledge of stage magic and an encyclopedic memory also help.

Eide Bailly's International Tax Team and our affiliates at HLB, The Global Advisory and Accounting Network, stand ready to assist with your worldwide tax needs.

Tax News & Views International Weekly: Taxing Overseas

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Alex Parker