By Ken Rankin

Washington — The American Institute of CPAs has joined with a coalition of major U.S. business groups in urging Congress to rethink a provision of the Senate-passed Jumpstart Our Business Strength Act, which critics say could backfire on American workers in this country and abroad.

Under current law, Internal Revenue Code Section 911 allows Americans working overseas to exclude up to $80,000 in income annually from U.S. taxes, and their employers may provide them with an unlimited tax-free housing allowance on top of that break.

The JOBS Act, which passed the Senate earlier this year despite a filibuster by Democrats, would combine the housing expense and foreign earned income tax exclusions and cap the total tax benefit for U.S. workers abroad at $80,000.

Although the JOBS Act is
intended to increase employment prospects for Americans, AICPA Tax Executive Committee chair Robert A. Zarzar told congressional leaders that reducing the tax break for U.S. workers overseas “will almost certainly result in less employment for Americans abroad.”

This, in turn, would impact on U.S. exports, and destroy jobs in this country as well, he argued.

Zarzar’s concerns are underscored by the findings of a study by Chase Econometrics that concluded that a drop in employment levels among Americans abroad could have serious consequences for the job market for workers in this country.

According to that study, every 10 percent drop in American workers overseas would result in a 5 percent reduction in U.S. exports. According to the researchers, the decline in U.S. income due to a 5 percent drop in real exports would “raise domestic unemployment by 80,000 and reduce federal receipts on personal and corporate income taxes by more than $6 billion — many times the value of increased taxes on overseas workers.”

The accounting profession’s objections to the JOBS Act’s Section 911 provisions were echoed by a 31-member multinational business and political coalition that includes such heavy hitters as the U.S. Chamber of Commerce, the Business Roundtable, the American Bankers Association and the National Association of Manufacturers.

In a separate letter to congressional leaders, the coalition warned that the reduction in the Section 911 exclusion “could shift tens of thousands of jobs now held by U.S. citizens working abroad to foreign nationals and significantly increase the financial burden on U.S. multinationals, reducing their ability to keep pace with their foreign competitors.”

The AICPA and other critics of the proposed new limits on Section 911 exclusions argued that there are valid reasons for giving Americans a tax break when they work abroad.

The United States is the only major industrialized nation that does not exempt the foreign-earned income of its citizens who are working abroad from taxation. The exclusions in the current law are designed to level the playing field for both American workers and American employers.

In addition to equalizing the tax treatment for Americans and their foreign counterparts competing for the same overseas jobs, the Section 911 housing exclusion is intended to “recognize the hardships involved in employment abroad, including higher, and frequently duplicative, housing costs and irretrievable expenses and losses resulting from cross-border sales and purchases of housing,” Zarzar explained.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access