U.S. Treasury sought comments about the Sec. 965 transition tax. The deadline for comment was October 9, 2018. You can read the comments here. A particularly noteworthy comment was posted by James Gosart:

To: United States Department of the Treasury

Subject: Proposed Regulations under Section 965 [REG 104226-18]

The transition tax is a killer for small American owned overseas businesses. I am a small business owner of a consulting company in Hong Kong. Around the world, I’m sure there are thousands of small American business owners like me.

I formed the company in 2011 after spending more than 25 years based in China and Asia as an expat employee of a major US corporation. During the 7 years the company has been in operation, I have helped US companies and investors with their China and Asia strategies, ultimately growing their businesses in Asia and contributing to US based employment. My company paid corporate taxes annually in Hong Kong. I have now relocated to the US and I’m in the process of shutting the business down.

The new transition tax is so burdensome and complex that there is no way I would start such a business today.

Read more

Origin Of Internal Revenue Service

The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses. The income tax was repealed 10 years later. Congress revived the income tax in 1894, but the Supreme Court ruled it unconstitutional the following year.

16th Amendment

In 1913, Wyoming ratified the 16th Amendment, providing the three-quarter majority of states necessary to amend the Constitution. The 16th Amendment gave Congress the authority to enact an income tax. That same year, the first Form 1040 appeared after Congress levied a 1 percent tax on net personal incomes above $3,000 with a 6 percent surtax on incomes of more than $500,000.

In 1918, during World War I, the top rate of the income tax rose to 77 percent to help finance the war effort. It dropped sharply in the post-war years, down to 24 percent in 1929, and rose again during the Depression. During World War II, Congress introduced payroll withholding and quarterly tax payments.

Read more

Senate Committee on Finance
Attn. Editorial and Document Section
Rm. SD-219
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

Dear Chairman Hatch, Ranking Member Wyden, and all Members of the Committee:

Part A – Introduction

I am based in Toronto, Canada and work with U.S. citizens living outside the United States who are  required to comply with the tax laws of both the United States AND their country of residence. U.S. citizens living in Canada (the majority of who are dual Canada U.S. citizens) are required to comply with the tax laws of both Canada and the United States. Dual citizens in general and “U.S./Canada dual citizens in particular, live in a world where compliance with U.S. tax laws is somewhere “between difficult and impossible”. The difficulty is first because of the potential for double taxation and second because the U.S. Internal Revenue Code imposes far more punitive taxation on U.S. citizens living outside the United States than it does on U.S. citizens living inside the United States.

Read more