TAXATION 

OF 

AMERICANS 

WORKING 

OVERSEAS 

Revenue Aspects of Recent 

Legislative Changes and Proposals 

FEBRUARY, 1978 

Department of the Treasury 
TAXATION OF AMERICANS WORKING OVERSEAS 

Revenue Aspects of Recent Legislative 

Changes and Proposals 

February 1978 
CONTENTS 

Page 

I. INTRODUCTION AND SUMMARY .••.•••.•••••••••.•••••. 1 

II. STATUS OF LAW 1975 AND 1976.................... 2 

1975 law...................................... 2 

1976 amendments............................... 4 

III. FURTHER LEGISLATIVE PROPOSALS ••.•..•.••.•.•.•.. 5 

IV. GENERAL CHARACTERISTICS OF TAXPAYERS 

CLAIMING SECTION 911 •.•.•....•••••..••••••••••. 8 

Number of taxpayers • •.•••••••••...••.••••••••• 8 

Location and income level of taxpayers ••••.••• 8 

V. REVENUE EFFECT OF TAX RULES AFFECTING 

U.S. CITIZENS WORKING ABROAD .•••••••••••••••••• 10 

Tax expenditure concept ••••••••••.•••••••••••• 10 

Changes in tax liability •.•••••.•.•.•••••••••• 12 

Tax liabil ity by income class •.•••••••••••.••• 12 

Tax liability by area •••••••.••••••.•••••••••• 13 

Effective tax rates •••••••••.•••••••••••.••••• 13 

VI. TABLES DISCUSSED IN TEXT 

Summary Data on Income and Tax of 

Persons Claiming the Foreign Earned 

Income Exclusion, 1968, 1972, 1975 

and Estimated 1977 ••..•..•••....•.•...•.•.•••• 15 

Number of Returns as a Cumulative Percent 

of the Total by Size of Adjusted Gross 

Income Plus Exclusion ...••.....••...•.•.•••.•• 16 

Number of Returns Claiming the Foreign 

Earned Income Exclusion by Country, 

Estimated 1977 ................................ 17 

Effect of Various Tax Rules on Tax 

Expenditure Cost of Section 911 ••.•••••••••••• 20 
Summary Data on Income and Tax of 

Persons Claiming the Foreign Earned 

Income Exclusion Under Various 

Tax Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 

Revenue Impact by Income Class of 

Various Tax Rules Affecting the 

Foreign Earned Income Exclusion •.••••••••••••. 22 

Revenue Impact by Area of Various Tax 

Rules Affecting the Poreign Earned Income 

Exclusion ..................................... 23 

Effective Tax Rates by Income Class 

Under Various Tax Rules Affecting the 

Foreign Earned Income ·Exclusion ••.•.•••.•.•.•• 24 

VII. APPENDIX A: 

Area detail..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 

Western Europe •••••••••••••.••••••.•••••• 26 

Canada • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 3 0 

Asia other than Japan ••••••.••••••••••.•• 34 

La tin America. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 

Middle East, African OPEC countries •••••• 42 

Other Middle East, Africa •••••••••••••••• 46 

Oceania..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 

Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 

All other areas ....... • ........•.•... . ... 58 

VIII. APPENDIX B: Sources of Data and Methods •••. 62 
TAXATION OF AMERICANS WORKING OVERSEAS 

Revenue Aspects of Recent Legislative 

Changes and Proposals 

I. Introduction and Summary 

The Tax Reform Act of 1976 made several changes in the 

tax law which affect Americans working overseas (section 911 

of the Internal Revenue Code). The principal changes are: 

(1) it lowered the exclusion of income earned abroad to 

$15,000 from $20,000 or $25,000; (2) it taxed other income 

at the higher rates which would apply if the excluded income 

were also subject to tax; (3) it disallowed a credit for 

foreign taxes attributable to the excluded income. In 

addition to the changes brought about by the Tax Reform Act, 

the Tax Court ruled that allowances and expenses paid by an 

employer on behalf of an employee, such as housing, 

education, and travel expenses, were includable in the 

employee's gross income. The combination of these changes 

sharply increased the tax liability of many Americans 

working overseas, prompting an intensive campaign for 

legislative relief. 

Although the 1976 Tax Reform Act changes were scheduled 

to take effect retroactively as of 1976, they were delayed 

until 1977 and are expected to be delayed until 1978. 

Senator Ribicoff introduced a bill (5.2115) which would 

replace the present approach of a flat exclusion by special 

deductions for certain additional costs incurred as a 

consequence of working abroad. 

The impact of the 1976 changes and the Ribicoff 

proposal are analyzed in this paper, using income tax return 

data for 1975. The following conclusions can be drawn from 

the data: 

1. Of approximately 150,000 returns filed by Americans 

abroad, 44 percent were from Canada and Western Europe. The 

Middle East and African oil producing countries accounted 

for 10 percent. 

2. Taxpayers abroad tend to have substantially higher 

incomes than domestic taxpayers 47 percent had incomes in 

excess of $20,000 compared with 14 percent for domestic 
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taxpayers; 10 percent had incomes in excess of $50,000 

compared to 1 percent of domestic taxpayers. Nearly half of 

the taxpayers with incomes over $50,000 lived in Europe. 

3. The U.S. tax liability of Americans abroad is 

estimated to have increased by about $65 million as a result 

of the Tax Court decisions, raising the liability under 1975 

law from the reported $185 million to $250 million. That 

tax liability would more than double as a result of the 1976 

Tax Reform Act changes, increasing from $250 million to $569 

million. The estimated tax cost of delaying enactment of 

the 1976 Tax Reform Act for one year (i.e., retaining the 

effect of the Tax Court decisions but with an exclusion of 

$20,000 or $25,000 off the top) is $318 million. 

4. Taxpayers in the Middle East and African OPEC 

countries, although only 10 percent of the section 911 

taxpayers, would bear more than 20 percent of the tax 

increase due to the 1976 Tax Reform Act changes. The 

Ribicoff bill would reduce the additional 1976 liability by 

$115 million, with 59 percent of the relief going to 

taxpayers in the OPEC nations. 

5. The "tax expenditure" or revenue cost of the 

special tax provisions for Americans abroad (compared to no 

section 911 relief) is $498 million under 1975 law, $180 

million under the 1976 Tax Reform Act and $294 million under 

the Ribicoff proposal. These tax expenditure figures are 

much larger than previously estimated. 

II. Status of Law, 1975 and 1976 

o.s. citizens are generally taxed on their worldwide 

income and receive a foreign tax credit for foreign taxes 

paid. However, under section 911 of the Internal Revenue 

Code, citizens working overseas exclude from income a 

specified amount of income earned for services performed 

abroad. In order to qualify for the foreign earned income 

exemption, the taxpayer must be a bona fide resident of a 

foreign country for a period which 1ncludes a full taxable 

year, or be physically present in a foreign country for 17 

out of 18 consecutive months. 

1975 Law 

Under the 1975 law, the excluded amount was generally 

$20,000, which increased to $25,000 after 3 consecutive 

years of bona fide foreign residence. The excluded income 

came "off-me top1

; that is, total taxble income dropped 
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down into the lower brackets. Foreign taxes paid on the 

excluded income could be credited against any u.s. tax due 

on included foreign income, even though the excluded income 

had not been subject to double taxation. 1/ However, 

persons claiming a foreign tax credit could not also claim a 

standard deduction. 

Although allowances and expenses paid by an employer on 

behalf of an employee, such as housing, education, and 

travel expenses were includable in the employee's gross 

income under 1975 law, in actual practice such amounts were 

often not reported, or in the case of housing, not reported 

at the full local value. In 1976 the Tax Court considered 

two cases in which u.s. employees in Tokyo included in 

income the estimat ed u.s. cost of comparable housing, but 

not the additional local cost paid by their employers. The 

Court held that the full local market value of such housing 

For example, assume that a single taxpayer had $40,000 of 

income after personal exemptions and deductions but 

before the exclusion, all of it foreign earned income 

eligible for the section 911 exclusion, and that he had 

paid $6,000 of foreign tax on the $40,000. The u.s. tax 

on $40,000 would be $14,390; $5,230 on the first $20,000 

of taxable income and $9,160 on the next $20,000. Under 

1975 rules of section 911, when he took the $20,000 

exclusion he was taxed on the other $20,000 of foreign 

earned income as if it were his only income, so he owed 

U.S. tax of $5,230, not $9,160. Moreover, he could claim 

a foreign tax credit for the full foreign tax of $6,000, 

not only for the foreign tax paid on the $20,000 of 

income liable to u.s. tax. Consequently, in this 

example, the result would be no u.s. tax on $40,000 of 

foreign earned income and an excess foreign tax credit of 

$770 which could be used to offset u.s. tax on other 

foreign income. 
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was taxable income to the employee. ~/ 

1976 Amendments 

The Tax Reform Act of 1976 amended section 911 in 

several important respects. First, it lowered the exclusion 

to $15,000, except for employees of charitable organizations 

for whom it remained at $20,000. Second, the exclusion was 

changed to come "off the bottom", so that other income would 

be taxed at the higher rate brackets which would apply if 

the excluded income were also subject to tax. Third, the 

Act disallowed a foreign tax credit for taxes attributable 

to the excluded income. Fourth, the exclusion was not 

allowed on income received outside the country in which 

earned, if one of the purposes of receiving the income 

outside that country was to avoid taxation. The Act also 

made the earned income exclusion elective; once the election 

was made, however, it would be binding for all subsequent 

years and could be revoked only with the consent of the 

Internal Revenue Service. Finally, the Act provided that 

taxpayers claiming a foreign tax credit could also claim the 

standard deduction; although this provision is not an 

amendment to section 911, it primarily affects citizens 

claiming section 911. 

These changes were initially enacted to take effect 

retroactively as of January 1, 1976, but were delayed until 

~/ Philip H. Stephens, T.C. Memo 1976-13 (i 76,013 P-H Memo 

T.C.) 

James H. McDonald, 66 T.C. 223 (1976). 

In August 1977, a decision of a Court of Claims trial 

judge (Faneuil Adams, Jr. vs. u.s., Ct. Cl. Trial Div. 

No. 141-75, 8/24/77) held that an employee, again in 

Tokyo, could exclude from gross income the rental value 

of housing furnished by his employer on the grounds that 

it met the tests of Internal Revenue Code section 119 as 

being for the convenience of the employer; but that 

decision appears to be of limited application. It was 

held to be a close case, "due in vital respects to 

business and social mores peculiar to Japan", and the 

rationale is limited to high corporate executives. 
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January 1, 1977 by the Tax Reduction and Simplification Act 

of 1977. In November 1977, the House of Representatives 

voted another one year delay in the amendments to section 

911, postponing their effective date to January 1, 1978. 

The Treasury supported such a delay to allow time for 

consideration of f uture proposed changes. The Senate did 

not vote on the proposed delay before adjourning for 

Christmas, but is expected to vote on it early in the 1978 

sessions. 

III. Further Leg islative Proposals 

The clarification of prior law in the 1976 Tax Court 

decisions and the changes in section 911 under the Tax 

Reform Act of 1976 sharply reduced the benefit of the 

foreign earned income exclusion for many Americans working 

abroad. 3/ The 1976 changes are particularly onerous to 

high income taxpayers (due to taxing the nonexcluded income 

at the higher rates) who paid relatively low foreign taxes 

~/ For purposes of illustrating the impact of the 1976 Tax 

Reform Act, assume the same taxpayer as in footnote 1. 

In order to compute his u.s. tax liability, the tax on 

the excluded amount would be subtracted from the tax due 

on his taxable income including the exclusion. In this 

example, the U.S. tax on the first $15,000 of income is 

$3,520 and the tax on his entire $40,000 income is 

$14,390. Subtracting the tax on the $15,000 exclusion 

from the tax on the total yields $10,870. Under the 1976 

Act, the taxpayer is no longer allowed a foreign tax 

credit on the excluded amount. The method of doing this 

has not been finally established, but for purposes of 

this example, the foreign tax paid is reduced by the 

percentage equal to: 

u.s. tax on excluded income 

U.S. tax on worldwide taxable 1ncome 

In this example, the disallowed foreign taxes would be 

$1,470, leaving $4,530 of creditable foreign taxes. 

Hence, the individual's tax after the foreign tax credit 

is $6,340. As illustrated in footnote 1, this individual 

would have had an excess foreign tax credit of $770 under 

1975 law. Of the difference, $3,930 is due to 

exemption-with-progression, i.e., taking the exclusion 

"off the bottom"; $1,710 arises from the reduction in the 

exclusion from $20,000 to $15,000; and $1,470 is due to 

the disallowance of a foreign tax credit for foreign tax 

on the excluded income. 

us-on o. , •. 2 
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(which are of reduce d value as a credit under the 1976 

rules). The single group most adversely affected are 

Americans working in the oil exporting countrie s of the 

Middle East, where high incomes reflect high living costs, 

and the foreign tax credit o f fers little r e lief since local 

income taxes are low. 

In an extraordinary yolume f mail and meetings, U.S. 

citizens employed overseas made their complaints against the 

1976 changes known to Congress and the Administration, 

urging that those changes be repealed and proposing other 

more generous treatment. One proposal, introduced by Senator 

Ribicoff on September 21, 1977 (S.2115), and approved by the 

Senate Finance Committee, would allow U.S. citizens working 

overseas to deduct from foreign earned income certain 

additional costs incurred as a consequence of working 

abroad. Specifically, the Ribicoff bill would permit 

deductions of: (a) the costs for reasonable housing in 

excess of 20 percent of foreign earned income (net of 

housing costs and net of the deductions allowable under (b) 

and (c)); (b) education costs through grade 12, not 

including travel and room and board; and (c) an excess 

cost-of-living deduction. 

The housing deduction assumes that U.S. housing costs 

average 16-2/ 3 percent of income, which is the same as 20 

percent of income after housing expense. The cost-of-living 

deduction is equal to the excess of the foreign 

cost-of-living index over the u.s. index applied to 

"spendable income", assuming a salary equivalent to that 

earned by a GS 12-step 1 civil servant. {Spendable income 

would vary between single taxpayers and taxpayers with 

families but everyone would be assumed to earn the same 

basic salary.) The special deductions are viewed as 

adjustments to income rather than exemptions and would not 

involve any denial of foreign tax credits. 

The Ribicoff bill would also allow moving expenses to 

be deducted in full, with no disallowance of the portion 

attributable to excluded income. And it would give 

employees of charities and those living in construction 

camps an artificial housing deduction by allowing them to 

take the average deduction for the area, even when they 
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spend less. 4/ It would also broaden the rules for 

excluding from income meals and lodging, to cover camp-like 

housing not on the business premises, but taxpayers could 

not claim both that exclusion and the entra housing 

deduction. 

The Treasury would be charged with publishing tables of 

local schooling costs and cost-of-living indices, which 

would serve as ceilings for those deductions. In addition, 

for employees of multinational companies, the special 

deductions for housing, education, and cost-of-living would 

be limited to the lower of the amount spent or the amount 

reimbursed by the employer. The self-employed could deduct 

the lower of the amount spent or the average amount deducted 

in the prior year by taxpayers in the same area, as shown in 

tables to be published by IRS. Employees in camps and 

employees of u.s. charities could deduct the lower of the 

amount spent on allowable education costs and the average 

deduction shown in the IRS tables; for housing, as described 

above, they could claim an extra deduction equal to the 

average for the area if the amount spent was less. 

Other legislative proposals are expected to be 

introduced, but to date the Ribicoff bill (S.2115) is the 

only bill formally introduced, and is consequently the only 

alternative to the 1976 Tax Reform Act provisions considered 

in the following tables. Other proposals are likely to 

follow the same basic approach of special deductions, 

although the specific provisions may vary. 

!/ For example, assume two single employees in the Middle 

East earning a base salary of $25,000, one living in an 

apartment furnished by the employer which would cost 

$5,000 in the United States but locally costs $15,000, 

and the other living in a construction camp where his 

lodging and meals are valued at $5,000. The first would 

report gross income of $40,000 ($25,000 plus $15,000) and 

deduct the excess local cost of $10,000 to arrive at 

$30,000 of taxable income. The second would report gross 

income of $30,000 ($25,000 plus $5,000; section 119 must 

be waived to claim the special deduction) but would also 

deduct $10,000, arriving at a taxable income of $20,000. 
-8-

IV. General Characteristics of Taxpayers Claiming Section 

911 

Number of taxpayers (Table 1) 

As indicated in Table 1, about 140,000 taxpayers 

claimed section 911 in 1975, a jump of nearly 40 percent 

over the number of returns filed for 1972. The total 

income (adjusted gross income plus exclusion as reported in 

1975) reported on these returns increased from $2.2 to $3.6 

billion, or at average levels per taxpayer from about 

$22,000 to $26,000. 5/ Of the $3.6 billion, $2.0 billion 

was excluded foreign-earned income. 

For 1977, the estimated number of taxpayers was 

increased to approximately 150,000 by adjusting for 

under-compliance, but the estimates do not assume any 

increase in the number of eligible taxpayers. The number of 

taxpayers is probably understated for 1977, especially in 

the Middle East; but in the absence of reliable data on the 

size, location and income levels of the changes, the 1975 

data was used. Consequently, the resulting estimates should 

be viewed as conservative. About 23 percent of the returns 

(34,755) were filed by single taxpayers. The other 114,493 

returns each claimed an average of 3.2 personal exemptions. 

Reported income is projected to be about $4.2 billion in 

1977. The increase of $600 million over income reported in 

1975 reflects an assumed increase in income levels from 1975 

to 1977. The 1977 exclusion shown in Table 1 is computed 

under 1975 rules. 

Location and income level of taxpayers (Tables 2 and 3) 

Table 2 shows the estimated number of returns for 1977 

by area and the cumulative percentage by reported income 

class. About 14 percent of Americans residing abroad were 

located in Canada and 31 percent in Western Europe. The oil 

producing countries of the Middle East and Africa together 

accounted for 10 percent of the total. 

~I These figures are amounts actually reported by taxpayers 

in 1975 and do not include any increases in reported 

income which would occur if employees had also reported 

allowances and services paid for by an employer. 
-9-

Taxpayers claiming s e ction 911 tend to have higher 

incomes than domestic u.s. residents. Only 14 percent of 

all u.s. taxpayers had adjusted gross incomes of more than 

$20,000, while 47 percent of taxpayers claiming section 911 

had adjusted gross incomes plus the foreign earned income 

exclusion in excess of $20,000. About one percent of all 

U.S. taxpayers had incomes above $50,000 compared to 10 

percent of section 911 taxpayers. Nearly half of the 

section 911 taxpayers with incomes of over $50,000 were in 

Europe. 

These comparisons should not be taken at full face 

value because the higher incomes overseas often reflect 

higher living costs. But the comparisons are far from 

meaningless. The income figures cited do not include any 

imputed allowances for housing, education and home leave 

furnished by the employer. Prior to the Tax Court cases of 

1976, these allowances were often not reported as income by 

the employee or, in the case of housing, the allowance was 

reported at the estimated u.s. value when that was lower 

than the local cost. Thus, the reported incomes are net of 

much of the excess cost of living abroad. A further 

adjustment may be appropriate for other living costs 

(consumer goods, local taxes, restaurant meals, etc.). For 

example, the State Department estimates that an income of 

$20,000, net of excess housing and education costs, in Jidda 

compares to $17,200 in Washington, and $50,000 in Jidda 

compares to $44,300 in Washington. Thus, for Saudi Arabia 

the overstatement of incomes is roughly 10 percent. 

Accurate adjustment of the income statistics for each and 

every location was beyond the scope of this study. But 

while the income statistics in these tables are overstated, 

a cost of living adjustment would not nullify the point that 

Americans working overseas, as a group, have significantly 

higher incomes than Americans in general. 

Table 3 gives greater country detail. It shows, for 

example, that the largest concentrations of section 911 

taxpayers were in Canada, the United Kingdom and Germany. 

These countries alone account for 30 percent of all returns 

claiming section 911. As mentioned earlier, these numbers 

are based on 1975 data and probably understate the actual 

number of taxpayers in some areas, but it is unclear whether 

the relative concentrations have changed. 
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V. Revenue Effect of Tax Rules Affecting U.S. Citizens 

Working Abroad 

Tax expenditure concept (Table 4) 

Table 4 shows the ~tax expenditure• or revenue cost of 

the foreign earned income exclusion under 1975 law, under 

the changes enacted in 1976 and under the proposal 

introduced by Senator Ribicoff. 

The tax expenditure estimate does not take into account 

changes in behavior which would occur if section 911 were 

repealed, such as a reduction in the number of Americans 

working abroad. It is not possible to do so without more 

information on which employers would bear the added tax 

cost, and what alternative employment is available to 

employees who must bear the cost themselves. What the tax 

expenditure estimate does purport to measure is the initial 

impact to which companies and individuals must somehow 

adjust. 

The principal point to be drawn from the table is that 

section 911 results in a much larger tax expenditure than 

previously estimated. 6/ As indicated in Table 4, the 

revised estimate of the revenue cost of the exclusion is 

~I Earlier estimates showed a net revenue gain of $60 

million in 1976 if the foreign earned income exclusion 

were repealed. That estimate was based on a tabulation 

of returns filed in 1968. It failed to anticipate the 

large increase in U.S. citizens working abroad and the 

shift to high-income, low-tax areas like the Middle East, 

underestimated the increase in taxes as incomes increased 

to higher brackets, and seriously overestimated foreign 

tax credits. The revised figures are based on 1975 tax 

returns with incomes increased to 1977 levels and with 

adjustments for estimated failure to file and for 

underreporting of income in kind. 
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about $498 million under 1975 law. 7/ The Tax Reform Act of 

1976 is estimated to increase revenue by $318 million, 

reducing the tax expenditure to $180 million. Thus, the tax 

cost of postponing the effective date of the 1976 law by one 

year is about $318 million. The Ribicoff proposal is 

estimated to increase total u.s. tax liabilities by about 

$115 million less than the 1976 changes, resulting in a tax 

expenditure cost of $294 million. 

The various assumptions used in making the estimates 

are outlined in Appendix A. In general, the bias is to 

understate the tax expenditure. As mentioned above, the 

number of taxpayers was assumed not to change from 1975 to 

1977. And a crucial variable, the foreign tax credit, is 

probably overstated. ! / Even under these assumptions, the 

21 The estimates in Table 4 assume that taxable income under 

foreign tax laws is independent of how taxable income is 

defined under u.s. law, so that the foreign tax paid does 

not change when u.s. taxable income increases as a 

consequence of the Tax Court decisions (or when u.s. 

taxable income is reduced by special deductions under the 

Ribicoff proposal). If one assumes instead that the 

additional income reported for u.s. tax purposes after 

the Tax Court decisions also becomes taxed for the first 

time by foreign governments, the tax expenditure cost 

under 1975 law would be $300 million instead of $500 

million. 

!I The credit figures used in the tables assume that those 

taxpayers who did not claim any credit in 1975 (63 

percent of the total) paid the same amount of foreign tax 

as those in the same country with the same amount of 

foreign earned income who did claim a credit. If no 

foreign tax credit returns were available for that 

country, taxpayers living there were assumed to have paid 

the tax indicated by the foreign law for that income. 

These assumptions overstate the foreign taxes paid. 

Some of those who failed to claim a credit presumably paid no foreign tax, and for others the foreign tax paid 

cannot have exceeded their marginal rate of u.s. tax 

times the standard deduction. (Prior to the 1976 Act a 

foreign tax credit could be claimed only by those who 

itemized deductions.) 
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relatively low foreign tax burden of Americans working 

abroad is striking. With the exception of Canada (where the 

foreign tax liability offsets over 80 percent of the u.s. 

tax before credits) foreign taxes paid were typically about 

half the U.S. tax on foreign earned income. Special 

non-statutory arrangements, for example by contract, 

providing for relief or exemption from foreign tax may be 

responsible. Some countries do not enforce their tax laws 

with the same degree of vigilance as the United States, so 

underpayment of foreign tax liability is one explanation. 

Changes in tax liability (Table 5) 

Table 5 presents summary data on income and tax 

liabilities of persons claiming section 911 for 1977 under 

the 

the 

those 

Court 

1975 tax practice, under the 1976 changes, and under 

Ribicoff proposal. The figures in column (1) assume 

same reporting practices and tax law as in 1975, and 

in columns (2) and (3) reflect the impact of the Tax 

decisions and the 1976 Tax Reform Act, respectively. 

bottom line of Table 5 shows that tax after credits 

increased by $65 million as a result of the Tax Court 

changes, and an additional $318 million is attributable to 

the Tax Reform Act, or a total increase of $383 million 

1975 reporting practice. ~/ 

The 

over 

Tax liability by income class (Table 6) 

As the figures on Table 6 indicate, the total tax 

liability of Americans abroad would triple as a result of 

the Tax Court changes and the 1976 Tax Reform Act. 

Taxpayers who reported incomes in excess of $50,000 (before 

the effects of the Tax Court decisions) account for 40 

percent of the tax increase due to those combined tax 

changes and 32 percent of the tax relief under the Ribicoff 

bill. Those earning less than $20,000 would pay more tax 

~I The magnitude of the Tax Reform Act changes is compounded 

by being added on top of the Tax Court decisions, which 

here are taken into account as if they had happened 

first, because they were in effect a clarification of 

existing law. Bad the Tax Reform Act been enacted first, 

its revenue effect would have been much lower and the 

effect of the Tax Court decisions correspondingly 

higher. 
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under the Ribicoff bill than under the 1976 reforms because 

their excess expenses would generally be less than the 

$15,000 exclusion "off the bottom". 

Tax liability by area (Table 7) 

Table 7 shows the revenue effect of the 1976 changes 

and the Ribicoff proposal by area. The taxpayers most 

affected by the 1976 changes are in the oil producing 

countries of the Middle East and Africa, where living costs 

and incomes are high, and foreign taxes are low. Taxpayers 

in Japan and Latin America also experienced somewhat larger 

than average tax increases. Taxpayers in Canada, the 

non-OPEC countries of the Middle East and Africa, and 

Australia and New Zealand (Oceania) were the least affected. 

For taxpayers in Europe and in Asia outside Japan the tax 

increases were about proportionate (i.e., the increase in 

tax was distributed in the same proportion as the number of 

taxpayers). 

Effective tax rates (Table 8) 

As Table 8 i ndicates, section 911 as it applied prior 

to the 1976 Tax Reform Act amendments (but including the 

effect of the Tax Court changes) reduced the average 

effective rate of tax by more than ·half of what it would 

have been in the absence of any special relief for overseas 

Americans. The effective rates in Table 8 are shown as a 

percentage of adjusted gross income, with no exclusion but 

less the special deductions provided in the Ribicoff bill 

for excess housing and education costs, a cost-of-living 

adjustment and liberalized moving expense deduction; this 

adjusted income figure is taken as the closest approximation 

to "true• income (given the limitations of the data). The 

1976 amendments would sharply increase the average effective 

tax rate to about 75 percent of what the applicable rate 

would be if there were no exclusion. 

Under both the 1975 law and the 1976 amendments the 

reduction in tax is much more pronounced at the lower income 

levels where the exclusion covers most of the income 

received. Under the Ribicoff bill the average effective 

rate would be slightly lower than under the 1976 Act and 

well below the rates which would apply in the absence of any 

special tax relief for overseas Americans. The increase in 

tax rates in the $10,000-$20,000 group may indicate that the 

housing allowance imputed to this group is too high. 

2S5-0Z3 0 • 78-3 
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VI. Tables 

Tables 1 through 8 begin on the next page. 

VII. ~endices 

Area detail 

Additional detail for nine major geographic areas is 

shown in Appendix A. 

Data sources and methodology 

The sources of data, assumptions and methods of 

calculation are explained in Appendix B. 
Table 1 

Summary Data on Income and Tax of 

Persons Claiming the Foreign Earned Income Exclusion 

1968, 1972, 1975 and Estimated 1977 

{dollar amounts in millions) 

1968 : 1972 . 1975 . . . : . . : 

Number of returns 101,295 101,832 139,964 

AGI plus exclusion 1,749 2,192 3,581 

Exclusion 1,196 1,382 2,011 

AGI 553 810 1,580 

Tax before credits n.a. 159 318 

Foreign tax credit 41 77 163 

1/ 

Tax after credits- n.a. 82 150 

e/ 

1977 

-------p 

149,248 

4,209 

2,193 

2,016 

454 

255 

185 

OTrice of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1 / The personal tax credit is also taken into account for 1975 and 1977. 

- Figures reflect the personal income tax law applicable in each year 

shown. 

2/ Increase over 1975 r e flects an adjustment for estimated failure to 

- file rather than an increase in the number of eligible individuals. 

e / Estimates based on 1975 tax return data adjusted to 1977 income 

- levels. The estimates do not include Tax Court adjustments to 

income. 

I 

t-' 

V'l 

I 
Table 2 

Number of Returns as a Cumulative Percent of the Total 

by Size of Adjusting Gross Income Plus Exclusion: 

u.s. Citizens Residing Abroad and in the United States l/ 

--p 

Cumulative Percent of Returns b~ AGI Plus Exclusion 

Total : : : : 

Number 3_/: Under : $10,000 : $20,000 : $30,000 : $40,000 : Over 

of Returns : $10,000 : $20,000 : $30,000 : $40,000 : $50,000 : $50,000 

Taxpayers Residing Abroad 

Total 149,248 24 53 7l 83 90 100 

Canada 20,683 29 66 85 92 96 100 

Latin America 4/ 17,955 27 51 66 79 87 100 

Western Europe- 45,702 23 49 65 77 85 100 

Middle East and African OPEC 11 15,534 7 25 57 78 89 100 

Japan 5,251 31 60 73 78 85 100 

Oceania 6/ 9,727 26 72 87 94 97 100 

Other Miadle East and Africa 11 11,348 41 73 87 92 97 100 

Other Asia ! / 18,442 23 49 69 83 91 100 

All Other 4,606 26 55 81 87 94 100 

All u.s. taxpayers ! / 82,176,778 55 86 96 98 99 100 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

l l All figures are estimates based on 1975 tax return data adjusted to 1977 income levels. 

2/ Estimated number of returns for 1977. The increase in the number of returns over 1975 reflects an adjustment - for estimated failure to file rather than an increase in the number of eligible individuals. 

11 As reported, not including Tax Court adjustments. 

4/ Includes Mexico, Central and South America. 

5/ Includes Algeria, Libya, Nigeria, Iran, Kuwait, Qatar, Saudi Arabia, United Arab Emirates, Bahrain, Gabon, - Oman, Iraq. 

6/ Includes Australia, New Hebrides, New Zealand, Papua New Guinea, Western Samoa, Other Oceania except Caribbean - (which is included in "all other• category). 

11 Includes Middle East and African countries not included in footnote 5. 

! / Includes all Asia except Japan. 

! / From data in Statistics of Income: 1975 Individual Income Tax Returns (Preliminary). 

I 

~ 

0\ 

I 
All 

- 17-

Table 3 

Number of Returns Claiming 

the Foreign Earned Income Exclusion 

By Country, 1977 l/ 

Number of Percent of 

Country Returns the Total 

Countries 149 , 248 100 . 0 

Canada 20 , 683 13.9 

Mexico 3, 260 2.2 

Costa Rica 587 0.4 

El Salvador 238 0.2 

Guatemala 526 0.4 

Honduras 462 0.3 

Nicaragua 230 0 . 2 

Panama 440 0 . 3 

Dominican Republic 377 0.3 

Haiti 393 0.3 

Jamaica , Turks and Caicos 350 0. 2 

Trinidad and Tobago 422 0 . 3 

Argentina 45 0 0. 3 

Bolivia 344 0.2 

Brazil 4,625 3.1 

Chile 475 0.3 

Colombia 1 , 28 6 0.9 

Ecuador 702 0.5 

Peru 1 , 618 1.1 

Uruguay 162 0.1 

Venezuela 2,392 1 . 6 

Bahamas 1,297 0 . 9 

Bermuda 174 0.1 

Greenland 155 0 . 1 

Netherlands Antilles 450 0.3 

Leeward Islands 585 0.4 

Belgium 2,420 1.6 

Denmark 283 0.2 

France 3,990 2.7 

Ireland 451 0.3 
-18-

Table 3 {continued) 

Country 

Italy 

Luxembourg 

Netherlands 

United Kingdom 

West Germany 

Austria 

Greece 

Malta 

Monaco 

Norway 

Portugal 

Spain 

Sweden 

Switzerland 

Turkey 

U.S.S.R. 

Algeria 

Egypt 

Libya 

Morocco 

Tunisia 

Ethiopia 

Kenya 

Malagasy Republic 

Tanzania 

Angola 

British West Africa 

Cameroon 

Central African Republic 

Ghana 

Ivory Coast 

Liberia 

Nigeria 

Sierra Leone 

Number of 

Returns 

2,623 

312 

1,422 

12,464 

11,076 

811 

1,266 

115 

189 

1,037 

154 

2,331 

636 

3,464 

658 

117 

546 

494 

981 

116 

121 

564 

973 

189 

270 

161 

198 

197 

126 

366 

124 

492 

1,158 

159 

Percent of 

the Total 

1.8 

0.2 

0.1 

8.4 

7.4 

0.5 

0.8 

0.1 

0.1 

0.7 

0.1 

1.6 

0.4 

2.3 

0.4 

0.1 

0.4 

0.3 

0.7 

0.1 

0.1 

0.4 

0.7 

0.1 

0.2 

0.1 

0.1 

0.1 

0.1 

0.2 

0.1 

0.3 

0.8 

0.1 
-19-

Table 3 (continued) 

Number of . . Percent of 

Countrl_ Returns the Total 

Zaire 993 0.7 

Malawi 120 0.1 

Zimbabw 318 0.2 

South Africa 1,148 0.8 

Zambia 496 0.3 

Bahrain 237 0.2 

Iran 6,433 4.3 

Israel 2,303 1.5 

Kuwait 212 0.1 

Lebanon 508 0.3 

Saudi Arabia 5,13 3 3.4 

United Arab Emirates 683 0.5 

Afghanistan 151 0.1 

Bangladesh 205 0.1 

India 724 0.5 

Indonesia 3,096 2.1 

Laos 109 0.1 

Malaysia 836 0.6 

Pakistan 337 0.2 

Philippines 2,283 1.5 

Singapore 3,148 2.1 

South Vietnam 1,579 1.1 

Thailand 1,611 1.1 

China 1,201 0.8 

Hong Kong 1,771 1.2 

Japan 5,251 3.5 

Okinawa and Rrukyu 224 0.2 

South Korea 938 0.6 

Australia 5,957 4.0 

New Zealand 736 0.5 

Papua New Guinea 580 0.4 

Other Oceania 2,454 1.6 

All other countries 1,736 1.2 

Office of the Secretary of the Treasury January 18, 1978 

Office of Tax Analysis 

ll Estimates based on the number of returns filed in 1975 

adjusted for estimated failure to file but not for any 

increase in the number of eligible taxpayers. 
Table 4 

Effect of Various Tax Rules on 

Tax Expenditure Cost of Section 911 1/ 

($ millions) -

1975 practice 

1975 law (as clarified by 

Tax Court rulings) 

1976 law amendments 

Ribicoff proposal 

Office of the Secretary of the Treasury 

Office of Tax Analysis 

Tax Expe-naiture 

$563 

498 

180 

294 

Jamiary---n-, 19 78 

1/ Revenue cost compared to no section 911. All figures are estimates - based on 1975 tax return data adjusted to 1977 income levels. All tax 

liabilities are calculated on the basis of the exemptions, deductions 

and rates applicable to 1977 income. The references to 1975 and 1976 

are to changes in section 911 only. 

I 

N 

0 

I 
.. 

::: 

2 

.. 

0 

;: 

' 

.. 

Table 5 

Summary Data on Income and Tax of Persons Claiming the 

Foreign Earned Income Exclusion Under Various Tax Rules 1/ 

(dollar amounts in millions) -

19 7 s :----n;-s 

Practice 

( 1 ) 

Law 2/ 

( 2 )-

1976 Law . . Ribicoff Bill 

( 3) . . ( 4 ) 

~ Number of Returns- 149,248 149,248 

$5,015 

149,248 149,248 

AGI plus exclusion 

Exclusion 

Special deductions 

AGI 

Tax before credits 

Foreign tax credit 

4/ 

Tax after credits-

$4,209 

2,19 3 

2,016 

454 

255 

185 

O:rfice of the Secretary of the Treasury 

Office of Tax Analysis 

2,528 

2,487 

589 

323 

251 

$5,015 

1,788 

3,227 

1,034 

444 

569 

$5,015 

1,132 ~/ 

3,890 

1,001 

525 

454 

January 31, 1~ 

1/ 

2/ 

J / 

All figures are estimates based on 1975 tax return data adjusted to 1977 

income levels. Tax liabilities reflect 1977 tax rates. 

4/ 

~I 

Includes the effect of the Tax Court decisions. 

Reflects adjustment for estimated failure to file rather than an increase in 

the number of eligible individuals over 1975. 

The personal tax credit is also taken into account. 

Comprised of: excess housing $535 million (including extra deduction for 

construction camps of $66 million); cost of living $356 million; education 

$153 million; and additional moving expenses $112 million. The aggregate of 

the deductions for housing, education and cost of living exceeds by $24 

million the usable amount, which is limited to foreign earned income. 

I 

N 

~ 

I 
Table 6 

Revenue Impact by Income Class of Various Tax Rules 

Affecting the Foreign Earned Income Exclusion .!1 (dollar amounts in millions) 

Ail 

Income ; Under : $10,000 ; $20,000 : $30,000 ; $40,000 ; Over 

Classes : $10 , 000 ; $20,000 : $30,000 : $40,000 : $50,000 : $50,000 

Number - of Returns 149,248 36,463 42,527 27,466 16,862 10,454 15,476 

Tax after credits, 1975 payments 185 * 6 14 18 20 126 

}./ Revenue effect of Tax Court decisions 65 • 2 14 12 12 26 

Tax after credits, 1975 law 251 1 8 28 30 32 151 

Revenue effect of Tax Refo.rm Act of 1976: 

Increase from 1975 law 383 * 15 65 80 70 153 

Revenue effect of Ribicoff bill (5.2115): 

Change from 1976 tax -115 1 7 -26 -36 -23 -37 

Increase from 1975 law 204 l 20 26 31 34 91 

Off1ce of the Secretary of the Treasury January 31, 1978 

Office of Tax Analysis 

l/ All figures are estimates based on 1975 data adjusted to 1977 i ncome levels. Income classes are defined by income as - reported, not including Tax Court adjustments to income . 

~/ Adjusted for estimated non-compliance. 

ll Includes an imputed value of excess housing costs, education costs and home leave expenses. 

* Less than $500,000. 

I 

N 

N 

I 
Table 7 

Revenue Impact by Area of various Tax Rules Affecting the 

Foreign Earned Income Exclusion 1/ 

(dollar amounts in millions) -

Number of : 

Returns : Increase in Tax 

Percent : Due to : Due to : : Percent 

:Change in Tax cf . :Total 1976 Tax Increase : Ribl.COff Bill 

Total : of total :Tax Court:l976 Act: Total : of Total : (5.2115) 

Total, All Areas 149,248 100 65 318 383 100 -115 

Western Europe 45,702 31 10 117 127 33 -33 

Canada 20,683 14 * 3 3 1 1 

Asia other than Japan 18,442 12 6 37 42 11 2 

La tin America 17,955 12 11 47 58 15 -17 

Middle East, African OPEC 15,534 10 32 72 103 27 -68 

Other Ml.ddle East, Africa 11,348 8 2 12 14 4 3 

Oceania 9,727 6 1 8 9 2 5 

Japan 5,251 4 3 17 20 5 - 10 

All other areas 4,606 3 1 5 6 2 2 

Office of the Secretary of the Treasury January 31 , 1978 

Office of Tax Analysis 

!/ Tax liability computed under 1977 tax tables. 

* Less than $500,000. 

I 

N 

1,.) 

I 
Table 8 

Effective Tax Rates by Income Class Under Various Tax Rules 

Affecting the Foreign Earned Income Exclusion 1/ 

(dollar amounts in millions) -

All 

Income Under : $10,000 : $20,000 : $30,000 : $40 ,000 : Over 

Classes $10 ,000: $20,000: $30,000 : $40,000 : $50,000 : $50,000 

If no Section 911 

Income 3/ 3,952 141 636 736 653 519 1,266 

Tax before credits 4/ 1,382 44 162 222 230 192 533 

Tax as a percent o~income 35 .0 31.2 25.5 30.2 35 . 2 37.0 42.1 

1975 Law 2/ 

Income 3/ 3,952 141 636 736 653 519 1,266 

Tax before credits 4/ 589 1 11 56 86 87 348 

Tax as a percent of-income 14.9 1.0 1.7 7.6 13.2 16.8 27.5 

1976 Liability 

Income 3/ 3,952 141 636 736 653 519 1,266 

Tax before credits 4/ 1,033 10 60 146 178 158 481 

Tax as a percent of-income 26.1 7.1 9.4 19.8 27. 3 30.4 38.0 

Ribicoff Proposal 

Income 3/ 3 ,952 141 636 736 653 519 1,266 

Tax before credits 4/ 1,001 8 89 137 156 146 465 

Tax as a percent of-income 25.3 5.7 14.0 18.6 23.9 28.1 36.7 

Off1ce of the Secretary of the Treasury January 31, 1978 

Office of Tax Analysis 

1/ 

~I 11 

.Y 

Income classes are defined by income as reported, not including Tax Court adjustments to income. 

Including the effect of the Tax Court decisions. 

Income is adjusted gross income as defined by the Ribicoff proposal, i.e., it includes Tax Court adjustments to income 

is net of excess housing costs, education, cost of living and a special housing deduction for construction camps. Where the foreign tax is equal to or less than the o.s. tax this represents the total u.s. plus foreign liability • However, where the foreign tax exceeds the allowable foreign tax credit the total tax could be higher than shown. 

but 

I 

N 

~ 

I 
-25-

VII. APPENDIX A: REVENUE IMPACT BY AREA AND INCOME 

CLASS OF VARIOUS TAX RULES AFFECTING THE FOREIGN 

EARNED INCOME EXCLUSION 

Western Europe 

Canada 

Asia other than Japan 

Latin America 

Middle East, African OPEC countries 

Other Middle East, Africa 

Oceania 

Japan 

All other areas 

Page 

26 

30 

34 

38 

42 

46 

50 

54 

58 

Please refer to notes to Table 2, page 16 for identification 

of countries in each area. 
The Revenue Impact by Income Class of 1975 Tax Practice on u.s. Citizens Residing Abroad: Western Europe !/ 

(dollar amounts in thousands) 

All : : 

Income I Under : $10,000 : $20,000 I $30,000 : $40,000 : over Classes : $10,000 I $20,000 : $30,000 : $40,000 : $50!000 I $50,000 

AGI plus exclusi on 2/ 1,498,806 69,829 191,135 204,512 222.870 192,389 618,072 Number of returns 11 45,702 10,350 11,692 7,239 5,576 3,782 7,063 

Exclusion 659,555 58,685 151,571 121,436 106,855 74,935 146,075 

AGI 839,251 11,144 39,564 83,076 116,015 117,454 471,998 

Foreign earned income 1,221,693 58,991 154,713 166,000 193,180 165,337 483,472 

Taxable income 645,003 1,994 15,371 48,397 85,073 96,497 397,672 

Number of returns 27,805 1,235 3,349 6,800 5,576 3,782 7,063 

Tax before credits 207,153 309 2,685 9,222 18,403 24,419 152,115 

Foreign tax credit 121,988 5 23 3,175 11,808 17,468 89,510 

Number of returns 20,905 35 242 4,808 5,230 3,608 6,982 

Tax after credits 80,310 99 2,139 4,886 5,579 6,253 61,293 

Number of returns 17, 411 343 2,518 2,926 2,992 2,563 5,859 

Off~ce of the~retary-of the Treasury • January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

/ Less deficit. 

11 Adjusted for esti mated non-compliance. 

I 

N 

0\ 

I 
The Revenue Impact by Income Class of 1975 Ta x Law on u.s. Ci tizens Re siding Abroad:Western Europe ! / 

(dolla r amounts in thousands) 

All : 

I ncome Under : $10,000 : $20,000 : $30,000 : $40,000 : Over 

Classes $10,000 : $20,000 : $30 ,000 : $40,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 1 ,713 , 866 103 ,093 Z49,119 243 ,45 3 256,041 211,651 650 , 510 

Number of returns 11 45 , 702 10 ,350 11 ,692 7, 239 5,576 3 , 782 7,063 

Exclusion 767,813 90, 831 197 , 012 135,005 114 , 630 78,647 151,689 

AGI 946, 053 12,262 52,108 108,448 141,411 133,004 498 , 821 

Foreign earned income 1, 436,753 92,255 212,698 204,941 226,351 184,599 515 , 909 

Taxable income 740,391 2,031 18,484 72 , 867 110 ' 468 112,047 424,495 Number of returns 29,982 1,274 5,048 7 ,239 5,576 3,782 7 ,063 

Tax before credi ts 238,273 314 3,160 14,031 25,274 30,061 165,434 

Foreign tax credit 143,197 5 23 6,390 18 , 240 22,285 96,254 

Number of returns 20, 905 35 242 4 ,808 5,230 3,608 6,982 

Tax after credits 89,956 160 2 , 360 6,332 6,017 7 ,077 68 ,009 

Number of returns 20 , 553 553 3 , 581 4,360 3,107 2, 774 6,178 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels . Income classes are de f ined as reported income plus - exclusion based on 1975 tax practice . Tax liabilities based on 1977 ra t es. 

~I Less deficit. 

11 Adjusted for estimated non-compl i ance. 

I 

1\1 

-..l 

I 
The Revenue Impact by Income Class of 1976 Tax Reform Act on u.s. Citizens Residing Abroad: Western Europe l / 

(dollar amounts in thousands) 

--m 

Income : Under : $10,000 : $20,000 : $30,000 : $40,000 : Over 

Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 1,713,866 103,093 249,119 243 ,453 256,041 211,651 650,510 

Number of returns 11 45,702 10,350 11,692 7,239 5,576 3,782 7,063 

Exclusion 571,168 72,016 146,508 101,868 83,964 56,689 110,124 

AGI 1,142,699 31,078 102,611 141,584 172,077 154,962 540,386 

Foreign earned income 1,436,753 92,225 212,698 204,940 226,351 184,599 515,909 

Taxable income 917,511 14,654 55,655 106,003 141,134 134,005 466,061 

Number of returns 36,672 3,295 9,717 7,239 5,576 3,782 7,063 I 

1\) 

Tax before credits 382,995 2,791 14,458 34,434 52 ,951 54,580 223 , 781 f 

Foreign tax credit 169,175 2,026 7,495 13,176 25,670 25,745 95,063 

Number of returns 29,366 1,742 6,628 5,840 5,127 3,503 6,526 

Tax after credits 207,277 253 5,268 19,949 26,265 28,137 127,405 

Number of returns 29,715 692 5,939 7,009 5,461 3,729 6,885 

Offlce of the Secretary of tne--Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

~/ Less deficit. 

11 Adjusted for estimated non-compliance. 
.. .. 

"' 

~ 0 

... 

.. 

The Revenue Impact by Income Class of the Ribicoff Bill (5.2115) on o.s. Citizens Residing Abroad: Western Europe 

(dollar amounts in thousands) 

: A 

: Income : Under : $10,000 : $20,000 : $30,000 : $40,000 : Over 

Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50,000 : $50,000 

AGI plus e xclusion 2/ 1,713 ,866 103,093 249, 119 243,4u 256,041 211,651 650,510 

Number of returns l l 45,702 10,350 11,692 7,2 5,576 3,782 7,063 

Special deductions, t otal 4/ 352,743 75, 369 100,569 57,766 43.618 26,347 49,073 

Housing - 126 ,115 46,514 38,906 21 ,367 12,924 4,552 1 , 852 

Education 56,029 3,154 8,654 8,116 10,779 7,990 17,336 

Cost of living 152,643 30 ,110 47,032 24,096 15,733 11,035 24,636 

Moving expenses 34,277 7 , 763 8,769 5,429 4,182 £,837 5,297 

AGI 1,361,123 27 , 724 148,550 185,686 212,423 185,303 601,437 

Foreign earned income 1,436,753 92 , 255 212,698 204,941 226,351 184,599 515,909 

Taxable income 1,130,468 8,004 99,423 150,104 181,480 164,346 527.111 

Number of returns 39,385 4,152 11,573 7,239 5,576 3,782 7,063 

Tax before credits 379.671 1,261 19,298 35,167 51,063 53,097 219,784 

Foreign tax credit 198,785 220 10,620 19,048 31,535 30,329 107,034 

Number of returns 33,797 1, 264 9 , 792 6,605 5,404 3, 712 7,020 

Tax after credits 174,588 469 6,603 14,811 18,512 22.071 112,122 

Number of returns 29,493 1,819 6,622 6,219 4,612 3 ,528 6,693 

Off~ce of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income c lasses are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

~/ Less deficit. 

11 Adjusted for estimated non- compliance. 

4/ The total may be lower than the sum of itemized deductions because the total usable housing, education and cost of - living deductions are limited to foreign earned income. 

y 

I 

1.0 "' I 
The Revenue Impac t by Income Class of 1975 Ta x Practice on u .s . Citizens Residing Abroad: Canada .!1 (dollar amounts in thousands) 

-xn 

Income : Under : $10,000 : $20 ,000 : $30 , 000 : $40 , 000 : OVer 

Classes : $10 , 000 : $20,000 : $30 , 000 : $40 , 000 : $50 , 000 : $50 , 000 

AGI plus exclusion 2/ 444,7 39 39,107 134,833 109 ,4 57 54 , 56 4 34,478 72,301 

Number of returns 11 20,683 5,999 7' 743 3,991 1,397 698 855 

Exclusion 298 , 767 33 , 850 119' 961 78 , 716 30 , 224 16 , 245 19,770 

AGI 145,973 5 ,256 14,872 301741 24, 339 18,233 52,531 

Foreign earned income 390 ,014 34,333 122 ,422 100,770 46,787 30,041 55,662 

Taxable income 9 2,852 1,084 4,679 12,796 16,569 12,521 45,20 2 

Number of returns 8, 544 492 1,186 3 ,916 1 , 397 698 855 

Tax before credits 26 , 232 170 804 2 , 247 3,320 2,796 16,896 

Foreign tax cred it 15 , 724 0 9 1,058 1 , 96 4 2 ,14 9 10,544 

Number of retur ns 5,088 0 75 2 ,202 1 ,293 698 820 

Tax after credi ts 9, 217 99 626 687 1,098 513 6,194 

Number of returns 4,908 343 773 2 , 023 662 428 679 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based o n 19 75 data projected to 1977 levels. Income classes a r e defined as reported income plus - exclusion based on 1975 tax practice . Tax liabilities based on 1977 rates. 

/ Less defic1t. 

l l Adjusted for estimated non-compliance. 

I 

w 

0 

I 
The Revenue Impact by Income Class of 1975 Tax Law on u.s. Citizens Residing Abroad: Canada !I (dollar amounts in thousands) 

---xrr 

Income : Under : $10,000 : $20,000 : $30,000 : $40,000 : Over 

Classes : $10 , 000 : $20,000 : $30,000 : $40,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 475,026 48,796 146,862 116,475 55,726 34,661 72,506 

Number of returns 11 20,683 5,999 7,743 3,991 1,397 698 855 

Exclusion 318,968 43,447 129,644 79,464 30,357 16,263 19,793 

AGI 156,058 5,349 17,219 37,011 25,369 18,398 5 2,712 

Foreign earned income 

420 , 300 44,022 134,452 107,786 47,949 30,223 55,867 

Taxable income 99,515 1,084 4,690 18,073 17,598 12 , 686 45,383 

Number of returns 8,544 492 1,186 3,916 1,397 698 855 

Tax before credits 27,456 170 806 3,114 3,545 2,840 16,981 

Foreign tax credit 16,524 0 9 1,537 2,170 2,191 10,616 

Number of returns 5,088 0 75 2,202 1, 293 698 820 

Tax after credits 9,471 99 626 907 L111 516 6,207 

Number of returns 4,908 343 773 2,023 662 428 679 

Off1ce of the Secretary of the Treasury January 2~-1~~ 

Office of Tax Analysis 

1/ Estimates are based on 1975 data proj ected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

/ Less deficit. 

l l Adjusted for estimated non-compliance. 

I 

....... 

""' I 
The Revenue Impact by Income Class of 1976 Tax Reform Act on u.s. Citizens Residing Abroad: Canada .!/ 

(dollar amounts in thousands) 

All : : 

Income : Under : $10,000 : $20,000 : $30,000 : $40,000 : Over 

Classes : $10,000 : $20,000 : $30,000 : $40 ,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 475,025 48,796 146,862 116,475 55,726 3 4,661 72,506 

Number of returns 11 20,683 5,999 7, 743 3,991 1,397 698 855 

Exclusion 141,226 16,585 47,903 35,812 16,877 10,297 13,752 

AGI 333,800 32,212 98,960 80 , 663 38,849 24,364 58,754 

Foreign earned income 420,300 44,022 134 ,452 107, 786 47,949 30,223 55 ,867 

Taxable income 251,015 17,520 70 ,654 61,686 31,078 18,652 51 ,424 

Number of returns 17,108 3,820 6,347 3,991 1 , 397 698 855 

Tax before credits 76,623 3,174 15,648 16,577 10,136 6,834 24,253 

Foreign tax credit 60,628 2,393 13,593 14 , 756 8,377 6,189 15,321 

Number of returns 14,444 2,854 5,110 3, 746 1,294 628 812 

Tax after credits 12,970 139 949 1,092 1 , 502 512 8,775 

Number of returns 2,706 343 888 389 278 174 634 

0Tf1ce of the Secretary of ~Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

/ Less deficit. 

11 Adjusted for estimated non-compliance. 

I 

w 

"' I 
The Revenue Impact by Income Class of the Ribicoff Bill (S.2115) on U.S. Citizens Residing Abroad: Ca nada ! I 

(dollar amounts in thousands) 

All : : 

Income : Under : $10,000 : $20,000 : $30 ,000 : $40, 000 : Over 

Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50 , 000 : $50 , 000 

AGI plus exclusion 21 475,025 48,796 146,862 116,475 551126 34,661 72,506 

Number of returns 11 20,683 5,999 7,743 3,991 1,397 698 ass 

Special deductions, total I 75,894 28,482 26,441 14,149 3,618 1,444 1,761 

Housing 35,933 18,332 10,872 5,986 741 0 2 

Education 0 0 0 0 0 0 0 

Cost of living 26,143 7,311 9,779 5,187 1,829 920 1.117 

Moving expenses 15,512 4,499 5,807 2,993 1,048 524 641 

AGI 399,132 20,313 120 , 421 102,326 52,108 33,217 70,7 45 

Foreign earned income 420,300 44,022 134,452 107,786 47 ,949 30,223 55,867 

Taxable income 316,218 7,829 89,782 83,349 44, 337 27,506 63, 416 

Number of returns 17,414 2,730 7,743 3,991 1,397 698 855 

Tax before credits 85 , 484 1,298 18,070 19,250 12,152 8,386 26,328 

Foreign tax credit 68 , 846 1 , 766 15,467 17,213 10,249 7,417 17,735 

Number of returns 16,678 2,064 7,709 3,955 1,397 698 855 

Tax after credits 13,738 82 1,207 1,309 1,647 836 8,657 

Number of returns 5 , 957 378 1,981 1,503 810 533 752 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

ll Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

I Less deficit. 

11 Adjusted for estimated non-compliance. 

I The total may be lower than the sum of itemized deductions because the total usable housing, education and cost of 

living deductions are limited to foreign earned income. 

I 

w 

w 

I 
The Revenue Impact by Income Class of 1975 Tax Practice on u.s. Citizens Residing Abroad: Asia .!1 (dollar amounts in thousands) 

----xrr 

Income : Under : $10,000 : $20,000 : $30,000 : $40,000 : Over Classes : $10 , 000 : $20,000 : $30,000 : ~40 000 : $50 , 000 : $50 , 00 0 

AGI plus exclusion 2/ 510 ,121 27 , 702 81 ,855 103 , 376 100, 109 71, 846 125, 233 

Number of returns l l 18,442 4,235 4,855 3,740 2,553 1,414 1,645 

Exclusion 270,370 25,362 63,750 65,410 49,257 29 . 346 37,245 

AGI 239,751 2,340 18,105 37,966 50,852 42,500 87,988 

Foreign earned i ncome 438,938 26,139 68,339 84,621 79,566 63,409 116. 864 

Taxable income 180 , 560 667 8,036 19,898 37,836 34,936 79, 187 

Number of returns 10 , 467 351 1,434 3,070 2,553 1,414 1,645 

Tax before credits 49,938 111 1,510 3. 764 8,272 8,723 27, 558 

Foreign tax credit 30,888 0 211 1,118 4,213 6,072 19,274 

Number of returns 7 ,859 0 349 2,210 2,276 1,379 1,645 

Tax after credits 17, 201 62 1,071 2,111 3,586 2,391 7,980 

Number of returns 6,360 144 1,012 1 ,393 1, 539 967 1,305 

Of f1ce of the Secretary of tbe Treasury January 28, 1~ 

Office of Tax Analysis 

1 / Estimates are based on 1975 data projected to 1977 levels. Income c lasses are de f i ned as r eported i ncome plus - exclusion based on 1975 tax prac tice . Tax liabilitie s bas ed on 1977 rates . 

/ Less defic i t. 

l l Adjusted for estimated non-compliance . 

t 

w 

.::: 

t 
The Revenue Impact by Income Class of 1975 Tax Law on u.s. Citizens Residing Abroad: Asia 

(dollar amounts in thousands) !I 

Ali 

Income : Under : $10,000 : $20 ,000 : $30,000 : $40,000 : Over 

Classes : $10,000 : S20, 000 : SJO, 000 : $40,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 611,400 45,072 107,698 126,293 115,936 80,580 135,820 Number of returns ~/ 18 , 442 4,235 4 , 855 3.740 2,553 1,414 1.645 

Exclusion 315,368 41,993 81,407 70,974 52,217 30 ,894 37,883 

AGI 296 ,031 3,078 26,291 55,319 63,720 49,685 97,937 

Poreign earned income 540,216 43,508 94,182 107,538 95,393 72,143 127,451 

Taxable income 230,140 667 10,867 36,645 50,703 42,121 89,136 Number of returns 12,087 351 2,384 3,740 2,553 1 ,414 1,645 

Tax before credits 65,046 111 1,957 7,156 11,857 11,322 32,644 

Poreign tax credit 40 ,073 0 211 3,234 7,060 7,851 21,717 Nu.mber of returns 7,859 0 349 2,210 2,276 1,379 1,645 

Tax after credits 22 ,815 62 1,359 3,235 4 ,325 3,211 10,623 Number of returns 8,587 144 1 ,800 2,521 1,648 1 ,078 1,396 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1 / Estimates are based on 1975 data projected t o 1977 levels . Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates . 

11 Less deficit. 

~/ Adjusted for estimated non-compliance. 

I 

w 

VI 

I 
The Revenue Impact by Income Class of 1976 Tax Reform Act on U.S. Citizens Residing Abroad: Asia .!1 (dollar amounts in thousands) 

----;ur 

Income : Onder : $101000 : $201000 : $301000 : $40,000 : Over 

Classes : $10,000 : $201000 : $30,000 : $40,000 : $50,000 : $501000 

AGI plus exclusion 2/ 6111400 451072 1071698 1261293 1151936 801580 1351820 

Number of returns 11 181442 41235 41855 31740 21553 11414 11645 

Exclusion 2321150 341544 601941 51 1246 371425 211487 261507 

AGI 3791249 101527 461757 751048 781512 591093 1091313 

Foreign earned income 5401216 431 508 941182 1071538 95,393 721143 1271451 

Taxable income 30 41671 41273 26 1489 561373 65,496 51,529 1001511 

Number of returns 14 1 098 1,025 31721 31740 21553 11414 11645 

Tax before credits 1191277 804 7,102 181305 241592 211230 471243 

Poreign tax credit 571155 541 31337 81659 101877 91926 23,815 

Number of returns 111670 595 21667 31182 21277 11310 11639 

Tax after credits 591576 91 3,114 81960 13 1242 111045 23 1124 

Number of returns 111051 286 21723 31078 21272 11269 11423 

Office of the Secretary of the Treasury January 281 1978 

Office of Tax Analysis 

l/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice . Tax liabilities based on 1977 rates. 

'l.l Less deficit. 

11 Adjusted for estimated non-compliance. 

I 

w 

0\ 

I 
The Revenue Iapact by Income Class of the Ribicoff Bill (S.2115) on u.s. Citizens Residing Abroad: Asia .!1 (dollar amounts in thousands) 

-xrr 

Income Under : $10,000 : $20,000 : $30,000 : $40,000 : over 

: Classes : $10,000 : $20!000 : $30,000 : $40,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 611,400 45,072 107,698 126,293 115,936 80,z82 135,820 Number of returns 11 18,442 4,235 4,855 3 , 740 2,553 1, 1 1,645 

Special deductions, total 4/ 83,671 19,111 21,300 17,532 11,382 6,523 7,824 Housing - 23,269 9,812 7,683 4,447 1,236 91 0 Education 24,666 2 , 884 4,599 5,435 4,965 2,885 3,899 Cost of living 21,973 3,307 5,377 4,845 3,267 2,486 2,692 Moving expenses 13,832 3,176 3 , 641 2,805 1,915 1,061 1,234 

AGI 527,728 25,961 86,398 108,762 104,554 74,057 127,996 

Foreign earned income 540 , 216 43,508 94,182 107,538 95 , 393 72,143 127 , 452 

Taxable inco11e 443,068 11,699 64,057 90,087 91,538 66,493 119,194 Number of returns 17,530 3, 323 4 , 855 3,740 2 , 553 1,414 1,645 

Tax before credits 135,509 1 , 971 13,259 22,220 27 ,101 22 , 394 48,564 

Foreign tax credit 71,287 915 6,877 12,454 13,440 11,829 25.771 

Number of returns 15,765 2,154 4,574 3,563 2,450 1,379 1,645 

Tax after credits 61,171 513 5,504 9,080 13,188 10,305 22,581 Number of returns 13,062 1,203 3,454 3,184 2,369 1,299 1,553 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

~/ Less deficit. 

ll Adjusted for estimated non-compliance. 

4/ The total may be lower than the sua of itemized deductions because the total usable housing, education and cost of - living deductions are limited to foreign earned income. 

I 

w 

-.1 

I 
The Revenue Impact by Income Class of 1975 Tax Practice on U.S. Citizens Residing Abroad: Latin America .!/ (dollar amounts in thousands) 

All I 

Income : Under $10,000 : $20,000 l $30,000 : $40,000 : Over 

: Classes : $10,000 $20,000 : $30,000 : $40,000 : $50,000 : $50!000 

AGI plus exclusion 2/ 535,694 32,998 70,193 73,285 94,574 70,542 194,102 

Number of returns 11 17,955 4, 778 4,373 2,629 2,372 1,390 2 , 413 

Exclusion 272,279 30,653 60,942 48,176 48,053 31,184 53.271 

AGI 263,415 2,345 9,251 25,108 46,521 39 , 358 140,832 

Foreign earned income 459.721 30,902 61,861 63,238 86,987 63,299 153,435 

Taxable income 208,071 201 2,332 13,419 35,184 31,588 125.349 

Number of returns 9,180 144 782 2,079 2. 372 1,390 2,413 

Tax before credits 63,883 32 380 2 ,669 7,497 7,581 45.722 

Foreign tax credit 35,937 0 6 1,032 5,549 5,538 23,811 

Number of returns 7,677 0 35 1,605 2,302 1,390 2,345 

Tax after credits 26,327 17 266 1,288 1,511 1,784 21,462 

Number of returns 5,615 70 460 770 1,086 1,049 2,180 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

11 Less deficit. 

11 Adjust~d for estimated non-compliance. 

I 

w 

Q) 

I 
The Revenue Impact by Income Class of 1975 Tax Law on u.s. Citizens Residing Abroad: Latin America l / 

(dollar amounts in thousands) 

All 

Income Under $10,000 : $20,000 : $30,000 : $40 , 000 : OVer 

Classes $10,000 $20,000 : $30,000 : $40,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 645. 777 52. 729 96 ,062 89 , 495 114,147 80,908 212,438 Number of returns / 17,953 4, 778 4,373 2,629 2. 372 1,390 2,413 

Exclusion 315,324 48,945 78,344 50,643 51,318 31,335 54 ,739 

AGI 330,453 3,783 17,717 38,852 62 ,830 49,573 157,699 

Foreign earned income 569,805 50,633 87,730 79,448 106,560 73,664 171,770 

Taxable income 267,066 387 4,630 26,539 51,492 41,802 142,216 Nu.mber of returns 10,489 223 1,501 2,590 2,372 1,390 2,413 

Tax before credits 84,443 62 746 5,381 12,648 11,527 54,079 

Foreign tax credit 44,991 0 6 2,492 8,428 7,435 26,630 Number of returns 7,677 0 35 1,605 2,302 1,390 2 , 345 

Tax after credits 37,635 37 510 2,413 3 ,782 3 ,833 27,059 Number of returns 7,964 109 1,010 1, 723 1,627 1,178 2,317 

Off1ce of the Secretary of the Treasury Office of Tax Analysis January 28, 1978 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined a s reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

~/ Less deficit. 

~/ Adjuste1 for estimated non-compliance. 

I 

w 

\0 

I 
Tbe Revenue Impact by Income Class of 1976 Tax Reform Act on u.s. Citizens Residing Abroad: Latin Ame r ica,!/ 

(dollar amounts in thousands) 

All 

Income Under $10,000 : $20,000 : $30,000 : $40,000 : Over 

Classes $10 , 000 $20,000 I $30 , 000 : $40 , 000 : $50,000 I $50 1 000 

AGI plus exclusion 2/ 645.777 52.729 96 ,062 89 , 495 114 ,147 80,908 212,438 

Number of returns 11 17,955 4 , 778 4,373 2,629 2,372 1 ,390 2 , 413 

Exclusion 232,702 37,308 61,829 36,187 35,249 22,742 39,386 

AGI 413,075 15,420 34,232 53,307 78 , 899 58 , 165 173 , 051 

Poreign earned income 569,805 50 , 633 87,730 79 , 448 106,560 73 , 664 171 , 770 

TaKable income 337 , 940 6,123 15 . 311 40,981 67,561 50,395 157 , 568 

Nu.mbe r of r e turns 13,337 1,254 3,279 2,629 2 , 372 1,390 2,413 

Tax before credits 141,776 1 ,091 4, 277 13,566 26,228 21 ,129 75 , 482 

Foreign tax credit 54,718 812 1,826 5, 583 11 ,499 9,284 25 .715 

Number of returns 11,773 911 2,514 2, 421 2,302 1, 355 2,270 

Tax after credits 84,658 72 1,886 7,501 14, 292 11 , 586 49 ,322 

Number of returns 10,586 148 2,250 2,327 2,162 1,313 2, 386 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected ~ 1977 l evels . Income classes are de f i ned as r epo rted income plus - exclusion based on 1975 tax practice. Tax l i abil iti es bas ed on 1977 r a t es. 

/ Less deficit. 

11 Adjusted for es timated non-compliance . 

I 

&: 

0 

I 
The Revenue Impact by Income Class of the Ribicoff Bill (5.2115) on u.s. Citizens Resid i ng Abroad: Latin America l / 

(dollar amounts in thousands) 

AGI plus exclusion 2/ 

Nu.mber of r e turns 11 

Spec ial deductions, total 4/ 

Hous ing -

AGI 

Education 

Cost of living 

Movi ng expenses 

Pore ign e a rned i ncome 

Taxable i ncome Numbe r of r e t urns 

Tax before credits 

Poreign t ax c r ed i t 

Numbe r of re t urns 

Tax after credi ts 

Number of returns 

All 

I ncome Cl asses 

647.777 

17,955 

132,517 

75 ,589 

25,510 

19,173 

13,466 

513,260 

569 ,805 

429 , 960 

15,509 

140,288 

69,639 

14,235 

67,902 

11 , 078 

Under 

$10,000 

52.729 

4, 778 

32 , 658 

22,587 

4,160 

3, 549 

3, 584 

20,070 

50,633 

5,167 

2,332 

803 

355 

1,538 

78 

501 

$10 , 000 

$20 , 000 

96,062 

4,373 

29,194 

16,487 

4,926 

4,501 

3,280 

66,868 

87,730 

45,388 

4,373 

8,832 

5,758 

3,962 

2,284 

2 , 586 

$20 , 000 

$30,000 

89,495 

2,629 

18,648 

10,518 

2,961 

3,197 

1 ,972 

70 ,846 

79,448 

58,520 

2,629 

14,078 

8,482 

2,594 

5,113 

2,136 

$30,000 

$40,000 

114,147 

2,372 

21,498 

12 , 318 

4,626 

2,775 

1, 779 

92,650 

106,560 

81,312 

2,372 

23,428 

14,534 

2,372 

8,458 

2,087 

$40,000 

$50.000 

80,908 

1,390 

11,078 

5,605 

2,929 

1 ,502 

1,043 

69,829 

73,664 

62,059 

1,390 

20,243 

11,432 

1,390 

8,551 

1,377 

Over 

$50,000 

212,438 

2,413 

19,441 

8,074 

5,908 

3,649 

1,810 

192,997 

171,771 

177,514 2,413 

72,903 

29 , 078 

2,379 

43,417 

2,391 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

!/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus 

exclusion based on 1975 tax practice. Tax liabilities based on 1977 rales. 

~/ Less defi cit. 

11 Adjusted for estimated non-compliance. 

4/ The total may be lower t han the sum of i temized deductions because the total usable housing, education and cost of 

- living ded uctions are limited t o fore i gn e a rned income. 

I 

..,. 

..... 

I 
The Revenue 111pact by Income Class of 1975 Tax Practice on u.s. Citizens Residing Abroad: Middle East and African 

(dollar amounts in thousands) OPEC !/ 

All 

Income : Under : $10,000 : $20,000 : $30,000 : $40,000 : OVer 

Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 544,843 7,721 49,978 140,209 126 ,342 86,964 133,628 

Number of returns ll 15,534 1,045 2,856 4,908 3,198 1,749 1, 778 

Exclusion 281,620 6 , 405 40,433 88,154 68,176 37,396 41,057 

AGI 263,223 1,316 9,545 52.056 58,166 49,569 92,571 

Foreign earned income 483 , 449 6,841 45 ,184 124,239 114,304 74,345 118,536 

Taxable income 196,319 246 3,503 28,383 42,835 39,418 81,934 

Number of returns 12,344 138 847 4,634 3,198 1, 749 1, 778 

Tax before credits 51,803 38 601 5,205 8,789 9,414 27,755 

Foreign tax credit 20,849 0 121 1,205 4,157 2,986 12,380 

Number of returns 6,159 0 278 1,941 2,016 897 1,027 

Tax after credits 28,782 21 352 3,205 4,051 6,105 15,048 

Number of returns 8,558 69 560 2,787 1,991 1,580 1.571 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

~/ Less deficit. 

ll Adjusted for estimated non-compliance. 

I 

.::: 

1\l 

I 
The Revenue Impact by Income Class of 1975 Tax Law on u.s. Citizens Residing Abroad: Middle East and Afri can OPEC ! / 

(dollar amounts in thousands) 

----xn 

Income : Under : $10,000 : $20,000 : $30,000 : $40,000 : Over 

Classes : $10,000 : $20,000 : $30,000 : ~40,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 751,335 13 , 710 76,206 206,757 181,119 115,825 157,118 

Number of returns 11 15,534 1,045 2,856 4,908 3,198 1 , 749 1,778 

Exclusion 318 , 042 12,118 54,256 99,329 70,499 39,235 42,605 

AGI 433,293 1,592 21,950 107,428 110,621 76,590 115,113 

Foreign earned income 689,941 12,830 11,412 190,787 169,081 103,205 142,626 

Taxable income 360,343 246 10,382 83,510 95,289 66,439 104,476 

Number of returns 14,113 138 2, 342 4,908 3,198 1, 749 1,778 

Tax before credits 104,356 38 1,754 18,151 25,590 19,830 38,993 

Foreign tax credit 41,532 0 121 5, 725 13,151 6,249 16,286 

Number of returns 6,159 0 278 1,941 2,016 897 1,027 

Tax after credits 60,283 21 1,231 11,535 11,858 131 257 22,381 

Number of returns 11,412 69 1 , 920 3,753 2,382 1,627 1,661 

Offlce of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

11 Less deficit. 

11 Adjusted for estimated non-compliance. 

I 

.t: 

w 

I 
The Revenue Impact by Income Class of 1976 Tax Reform Act on u .s. Citizens Residing Abroad: Mlddle East and African OPEC }J 

(dollar amounts in thousands) 

All I : 

Income : Under I $10,000 : $20,000 : $30,000 I $40,000 : Over 

Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50,000 : $50 1000 

AGI plus exclusion 2/ 751,335 13.710 76,206 206,757 181,119 115,825 157.718 

Number of returns 1/ 15,534 1,045 2,856 4,908 3,198 1,749 1.778 

Exclusion 234,755 10.616 41,231 72,487 50,968 28.714 30,739 

AGI 516,581 3,094 34,975 134.270 130,151 87 ,110 126,980 

Foreign earned income 689,942 12,831 71,411 190,787 169,082 103,205 142,626 

Taxable income 442,278 1,032 22,771 110,352 114,820 76,960 116 ,343 

Number of returns 14,747 258 2,856 4,908 3,198 1,749 1, 778 

Tax before credits 184,818 225 6,921 40,346 47,754 33,453 56.120 

Foreign i,963 tax credit 50,330 140 10,135 13,613 7 , 219 17.259 

Number of returns 8,253 120 1, 538 2,551 ~.085 932 1,027 

Tax after credits 131,805 43 4,439 29. 319 33,560 25,910 38.534 

Number of returns 14,038 109 2. 777 4,672 3,129 1,644 1,707 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are baaed on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion baaed on 1975 tax practice. Tax liabilities based on 1977 rates. 

~/ Leas deficit. 

!f Adjusted for estimated non- compliance. 

I 

.t= 

.t= 

I 
Middle East and African 

The Revenue Impact by I ncome Class of the Ribi coff Bill (S.2115) on U.S. Citizens Residing Abr oad: OPEC y (dollar amounts in thousands) 

--rn 

Income : Under : $1 0,000 : $20, 000 : $30 , 000 : $40, 000 : Over Classes : $10,000 : $20 ,000 : $30, 000 : $40 , 000 : $50 , 000 : $50 , 000 

AGI plus exclusion 2/ 751 , 335 13.710 76 , 206 206,757 181,119 115.825 157.718 

Numbe r of returns l l 15 , 534 1,045 2 , 856 4,908 3,198 1,749 1, 778 

Special deducti ons, t o tal 4/ 297 . 682 16,923 44,317 94,860 72 ,181 37,238 32.163 

Housing - 144,780 7,598 18,486 46,738 41 , 40 17 , 836 12 '718 

Education 20 , 604 494 2,234 6,035 4,471 3,763 3,608 Cos t of living 54 , 193 3 , 576 9,237 17 ,410 10 , 228 6 , 845 6,897 

Moving expenses 11 , 651 784 2 142 3 681 2 , 399 1,312 1,334 Constructi on Camps 66,454 4 ,471 12:218 20:996 13,681 7,482 7,606 

AGI 459 ,458 5, 647 32,583 112.320 108 ,961 78,586 125,556 

Foreign earned income 689 , 941 12,830 71,412 190,787 169,081 103,205 142,626 

Taxable income 386,791 503 20,902 88,402 93,630 68,436 114,919 

Number of returns 14,491 282 2,576 4,908 3,198 1,749 1,778 

Tax before credits 114 , 878 82 4,060 20,107 25,118 20,760 44,751 

Foreign tax c r edit 48 ' 113 46 1,899 8,560 13,182 6,645 17,781 

Number of returns 8 , 047 126 1,374 2,518 2,069 932 1,028 

Tax after credits 64,172 * 1 , 725 10,656 11,355 13,792 26,642 

Number of returns 10, 854 22 1,456 3,562 2,489 1 , 636 1,690 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rate s. 

/ Less deficit. 

l l Adjusted for estimated non-compliance. 

4/ The total may be lower than the sum of itemized deductions because the total usable housi ng, education and cost of - living deductions are limited to foreign earned income. 

* Less tnan $500 t housand. 

---- - --

I 

..,. 

V1 

I 
Other Middle East 

The Revenue Impact by In come Class of 1975 Tax Practice on u.s. Ci tizens Residing Abroad: and Africa l/ 

(dollar amounts in thousands) -

All 

I ncome : Under : $10,000 : $20,000 : $30,000 : $40,000 : Over 

Classes : $10 , 000 : $20,000 : $30 ,000 : $401 000 : $50,000 : $50,000 

AGI plus exclusion 2/ 210,685 30,131 58.871 46,193 21,656 23,737 30,097 

Number of returns 11 11,348 4,651 3,645 1,634 557 468 393 

Exclusion 135.777 26,820 47,936 31,419 11,725 9 , 351 8,526 

AGI 74,908 3,311 10,935 14.773 9,931 14,387 21,571 

Foreign earned i ncome 184,005 26,844 48 , 514 41,434 19 , 215 20 , 949 27,050 

Taxable income 49.377 271 3,959 6,270 7,294 12, 140 19,443 

Number of returns 3 ,648 180 775 1 , 275 557 468 393 

Tax before credits 13.588 47 726 1 , 138 1,503 3,174 7,000 

Foreign tax credit 7,754 0 1 405 866 2,237 4 , 245 

Number of returns 2,321 0 69 939 453 468 392 

Tax after credits 5,221 29 605 515 536 852 2,683 

Number of returns 2,223 69 593 503 344 389 325 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice . Tax liabilities based on 1977 rates. 

!I Less deficit. 

1/ Adjusted for estimated non-compliance. 

I 

.1::: 

0\ 

I 
The Revenue Impact by Income Class of 1975 Tax Law on u.s. Citizens Residin9 Abroad: Other Middle East & Africa (dollar amounts in thousands ) 

All 

Income : Under : $10,000 : $20,000 : $30,000 : $40,000 : Over 

Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50,000 : $50,000 

AGI plus exclusi on 2/ 255,015 43,816 73,326 53,863 25 , 222 26,392 32,396 

Number of returns 11 11' 348 4,651 3 ','645 1,634 557 468 393 

Exclusion 162 ' 712 40,425 59 ,078 32 '721 12 , 204 9,569 8 '714 

AGI 92,303 3 ,391 14 , 248 21,141 13,018 16,823 23,681 

Porei9n earned income 228,336 40,528 62 ,969 49,104 22,780 23,604 29 , 349 

Taxable income 64 , 080 271 5,089 12 , 209 10,381 14,577 21,553 

Number of returns 4,395 180 1,163 1,634 557 468 393 

Tax before credits 17,702 47 904 2,235 2,348 4,101 8,068 

Porei9n tax credit 9 , 441 0 1 907 1,372 2 ,696 4,464 

Number of returns 2 ,321 0 69 939 453 468 392 

Tax after credits 7,501 29 711 1,034 874 1,319 3,533 

Number of returns 3,410 69 942 1,271 344 430 354 

OIITce-of the Secretary of the Treasury January 28, 1~78 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

~/ Less deficit. 

11 Adjusted for estimated non-compliance. 

y 

t ' 

-.l 

' 
The Revenue Impact by Income Class of 1976 Tax Reform Act on U. S. Citizens Residing Abroad: Other Middle East and Afri ca (dollar amounts in thousands) 

All : : 

Income : Under I $10,000 : $20,000 : $30,000 : $40,000 ; Ove r Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50,000 ; $50,000 

AGI plus exclusio n 2/ 25 5 ,015 43,816 73,326 53,863 25,222 26,392 32,396 Numb~r of returns 11 11,348 4,651 3,645 1,634 557 468 393 

Exclusion 124,794 33,342 47,950 22,636 7,580 7,100 6,186 

AGI 130,221 10,474 25,376 31,227 17,642 19,292 26,209 

Foreign earned income 228,336 40,529 62,969 49 , 104 22,780 23,604 29,349 

Taxable income 93,864 3 , 394 12,043 22,295 15,004 17,046 24,087 

Number of returns 6,295 1,173 2,070 1,634 557 468 393 

Tax before credits 35,072 607 3,216 6,924 5,551 7,244 11,531 

Foreign tax credit 14 1368 406 1, 183 2,785 2,798 2,604 4, 593 

Number of returns 4,627 595 1, 300 1,420 487 433 392 

Tax after credits 19,635 41 1,676 3,845 2,652 4,555 6,866 

Number of returns 3,904 69 1,365 1,292 379 433 366 

Offlce of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

!:/ Less deficit. 

11 Adjusted for estimated non-compliance. 

.!1 

I 

J: 

(X) 

I 
The Revenue Impact by Income Class of the Ribicoff Bill (S.2115) on u.s. Citizens Residing Abroad:Other Middle East & Afric3 1/ 

(dollar amounts in thousands) -

AGI plus exclusion 2/ 

Number of returns ll 

Special deductions, total 4/ 

AGI 

Housing - Education 

Cost of 11ving 

Moving expenses 

Foreign earned income 

Taxable income 

Number of returns 

Tax before credits 

Foreign tax credit 

Number of returns 

Tax after credits 

Number of returns 

All 

Income 

Classes 

255,015 

11,348 

54,910 

6,931 

12,523 

27,828 

8,511 

200,104 

228,336 

152,760 

9,373 

42,643 

17,892 

6,659 

23,121 

7,042 

Under 

$10,000 

43 , 816 

4,651 

21,511 

4,257 

3,394 

11,203 

3,488 

22,306 

40,529 

8,155 

2,676 

1 ,342 

496 

1,180 

428 

1,329 

$10,000 

$20,000 

73,326 

3 ,645 

17 . 532 

1,827 

4,166 

8,857 

2,734 

55,793 

62,969 

38,544 

3,645 

7,662 

2,679 

2,642 

4,323 

3,014 

$20,000 

$30,000 

53,863 

1,634 

8,793 

319 

2,374 

4,875 

1, 226 

45,069 

49,104 

36,138 

1,634 

8,444 

3,534 

1,490 

4,615 

1,445 

$30,000 

$40,000 

25,222 

557 

3,316 

528 

950 

1,420 

418 

21,906 

22,780 

19,269 

557 

5 ,644 

2,909 

487 

2,634 

447 

$40,000 

$50,000 

26,392 

468 

1,851 

0 

858 

642 

351 

24,542 

23,604 

22,295 

468 

7,782 

3,295 

468 

4,402 

433 

OVer 

$50,000 

.32,396 

393 

1,908 

0 

781 

832 

295 

30,488 

29,349 

28,360 

393 

11,770 

4,979 

392 

6, 719 

374 

OrfTce of-tnesei:retary of the Treasury ~nuary-28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

/ Less deficit. 

l l Adjusted for estimated non-compliance. 

4/ The total may be lower than the sum o f itemized deductions because the total usable housing, education and cost of - living deductions are limited to foreign earned income. 

I 

.<=: 

1.0 

I 
The Revenue Impact by Income Class of 1975 Tax Practice on u.s. Citizens Resi ding Abroad: Oceania .!/ (dollar amounts in thousands) 

Ail 

Income Under $10,000 l $20,000 : $30,000 : $40,000 : Over 

Classes $10,000 $20,000: $30,000: $40,000: $50,000: $50 ,000 

AGI plus exclusion 2/ 196,355 20,079 74,896 39,893 24,958 15,025 21,504 

Number of returns ll 9 , 727 2,571 4,506 1,436 640 300 274 

Exclusion 136,013 17,574 66,436 26,527 12,633 6,865 5,978 

AGI 60,342 2,505 8,460 13,366 12,325 8,160 15,526 

Foreign earned income 171,732 17,574 671771 34,322 20,493 12,407 19,165 

Taxable inco111e 39,379 407 2,609 7,025 8,752 6, 713 13 , 874 

Number of returns 3,480 317 592 1,357 640 300 274 

Tax before credits 10 ,405 62 445 1,367 1,883 1,684 4,964 

Fo reign 4,974 tax credit 0 22 177 459 851 3,465 

Number of returns 1,416 0 35 576 283 261 261 

Tax after credits 4,847 24 326 964 1,308 777 1,448 

Number of returns 2, 196 139 521 692 461 177 206 

Office of the Secretaryof tlie Treasury - ---- -- January 28, 1978 

Office of Tax Analysis 

1/ Estimates are baaed on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - e xclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

l.l Leas deficit . 

11 Adjusted for estimated non-compliance . 

I 

\Jl 

0 

I 
The Revenue Impact by Income Class of 1975 Tax Law on u.s. Citizens Re sidi ng Abroad: Oceania 1/ 

(dollar amounts in thousands) -

All 

Income Under : $10,000 : $20,000 : $30,000 : $40 , 000 : Ove r 

Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50, 000 : $50 , 000 

AGI plus exclusion 2/ 23 6, 768 30,458 93 ,975 45,467 27 , 869 16,415 22,584 

Number of returns l / 9 . 72 7 2,571 4 , 506 1,436 640 300 274 

Exclusion 161 , 655 27 , 953 80 ,112 27,229 13,077 7,153 6,130 

AGI 75 ,113 2,505 13,863 18 , 238 14,792 9,261 16,454 

Foreign earned income 212 , 146 27 , 953 86,850 39 ,896 23,404 13,797 20,245 

Taxable income 50,175 407 4,056 11,878 11,219 7,814 14.802 

Number of returns 4 , 467 317 1,500 1 ,436 640 300 274 

Tax before credits 12,898 62 658 2,257 2,476 2,023 5,420 

Foreign tax credit 6 , 430 0 22 648 868 1,172 3. 720 

Number of returns 1 , 416 0 35 576 283 261 261 

Tax after credits 5, 726 24 413 1,352 1,492 796 1,650 

Number of returns 3,029 139 1 , 033 1 , 004 461 177 215 

Office of the Secretary of the Treasury January 28 , 19 78 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 l evels . Income classes are de fined as r e ported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rate s. 

/ Less deficit. 

l l Adjusted for estimated non-compliance . 

I 

1.11 

..... 

I 
The Revenue Impact by I ncome Class of 1976 Tax Re form Act on u.s. Citizens Resid i ng Abroad : Oceania .!/ (doll ar amounts in thousands ) 

All : 

Income : Unde r $10,000 : $20 ,000 : $30, 000 : $40,000 : Ove r Classes : $1 0,000 $20 , 000 : $30,000 : $40 , 000 : $50,000 : $50, 000 

AGI plus exclusion 2/ 236,768 30,458 93,975 45,467 27,869 16,415 22,584 

Number of re tur ns ll 9, 727 2 ,571 4,506 1,436 640 300 274 

Exclus ion 122,996 21,035 61,616 20,642 9,850 5,382 4,471 

AGI 113,772 9,423 32,359 24,825 18,019 11,033 18,113 

Foreign earned i ncome 212,146 27,953 86,849 39,896 23,404 13,797 20,245 

Taxable income 80,198 4 , 868 161372 18,465 14,446 9,586 16,461 

Number of returns 7 , 281 912 3 , 719 1,436 640 300 274 

Tax before credits 28,140 881 4 , 428 5,947 5,193 3,919 7. 771 

Foreign 678 2,550 2,448 tax credi t 12,777 1 ,694 1,823 3,583 

Nu.mber of returns 4 ,335 595 2,235 734 283 227 261 

Tax after credits 14,091 48 1 , 241 3,240 3,383 2,041 4 , 137 

Number of returns 4,753 139 2,018 1,396 640 294 266 

Office of the Secretary of the Treasury Ja nuary 28 , 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes a r e defi ned a s r e ported income plus - exclus ion based o n 1975 tax pract ice . Tax liabilities ba s ed o n 19 77 r a t es . 

/ Less deficit. 

11 Ad j usted for e s timated no n- compliance . 

I 

V1 

1\J 

I 
The Revenue Impac t by Income Class of the Ribicoff Bill (S.2115) on u.s. Citizens Residing Abroad: Oceania 

(dollar amounts in thousands) .!/ 

- -----m 

Income : Under : $10,000 : $20,000 : $30 , 000 : $40,000 : Over 

Classes : $10,000 : $20,000 : $30,000 : $40 1000 : $50,000 : $50,000 

AGI plus exclusion 2/ 236,768 30,458 93,975 45 , 467 27,869 16,415 22,584 

Number of returns 11 9,727 2,571 4,506 1 , 436 640 300 274 

Special deductions, total i l 41,017 15,011 16,716 4,738 2,055 1,330 1,166 

Housing 18,952 8,506 7,630 2,083 637 95 0 

Education 3,979 731 1,096 378 530 654 590 

Cost o( living 10,841 3,882 4,611 1,214 408 357 370 

Moving expenses 7,295 1,928 3,380 1,077 480 225 206 

AGI 195,751 15,447 77,258 40,729 25,814 15,085 21,418 

Foreign earned income 212,146 27,953 86,849 39,896 23,404 13,797 20,245 

Taxable income 157,470 7,290 60,167 34,368 22,241 13,637 19 , 766 

Number of returns 9,177 2,021 4,506 1,436 640 300 274 

Tax before credits 41,255 1,243 12,706 8,489 6,313 4,440 8,064 

Foreign tax credit 20,142 751 6,919 3,795 2,242 2,417 4,018 

Number of returns 6 ,121 1,405 3,106 804 283 261 262 

Tax after credits 19,483 160 4,969 4,436 3,955 1,968 3,994 Number of returns 4,841 435 2,402 959 495 282 268 

Office of tne secretary of the Treasury -------;,-ariuary 28, 1978 

Office of Tax Analysis 

!/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

~I Less deficit. 

ll Adjusted for estimated non-compliance. 

4/ The total may be lower than the sum of itemized deductions because the total usable housing, education and cost of - living deductions are limited to foreign earned income. 

I 

VI 

w 

I 
The Revenue Impact by Income Class of 1975 Tax Practice on u.s. Citi ze ns Resi d i ng Abroad: Japan !I (dollar amounts in thousands) 

All 

Income Unde r $10,000 : $20,000 : $30,000 : $40,000 : Over 

Class es $10, 000 $20 , 000 : $30 ,000 : $ 40 ,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 152 , 066 12,034 23 , 088 20,634 11,235 17,150 67,925 

Number of returns / 5,251 1,652 1,514 697 278 340 770 

Exclusion 70 , 161 10 , 498 17,424 14 , 367 5,126 5, 787 16 ,958 

AGI 81, 906 1 ,535 5,663 6,267 6,110 11,363 50 , 967 

Foreign earned income 127 , 525 10 , 582 17,496 19,455 9,945 12,790 57,257 

Taxable income 65 , 798 487 2 ,522 3 ,191 4 ,962 9,439 45,198 

Number of returns 2 ,690 185 454 663 278 340 770 

Tax before credits 21 ,859 86 456 529 1,129 2,4"1 17,217 

Foreign tax credit 12,786 0 1 345 761 1, 338 10,341 

Number of returns 1,941 0 34 588 244 305 770 

Tax after credits 8 ,604 61 380 69 318 1,042 6 , 734 

Number of returns 1, 712 110 351 104 208 241 698 

Off1ce of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1 / Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax l i abilities based on 1977 rates. 

!I Less deficit. 

ll Adjusted for estimated non-compliance. 

I 

U1 

~ 

I 
The Revenue I11pact by Income Class of 1975 Tax Law on u.s. Citizens Residing Abroad : Japan y 

(dollar amounts in thousands) 

--xri . Income Under I $10,000 I $20,000 I $30,000 I $.0,000 I OVer 

Classes : $10,000 : $20 1000 : $30,000 : $•0,000 : $50,000 : $50 1 000 

AGI plus exclusion 2/ 197,646 21,152 39,148 28,784 14 ,169 20,683 73.710 

Number of returns ~/ 5,251 1 ,652 1,514 697 278 340 770 

Exclusion 92,169 19,347 27,998 14,432 6,032 6,802 17,559 

AGI 105,477 1,805 11,151 14,353 8,137 13,881 56 ,150 

Foreign earned income 173,105 19,700 33,557 27,605 12,879 16,323 63,041 

Taxable income 85,965 565 4,807 11 ' 267 6,990 11,957 50,381 

Number of returns 3,232 224 923 697 278 340 770 

Tax before credits 28,344 97 855 2 ,367 1,746 3,420 19,859 

Foreign tax credit 15,698 0 1 1,790 1,282 1,773 10 ,853 

Number of returns 1,941 0 34 588 244 305 770 

Tax after credits 12.065 65 684 451 414 1,586 8,865 

Number of returns 2 ,522 149 770 327 208 316 752 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus 

- exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

~/ Less deficit. 

ll Adjusted for estimated non-compliance. 

I 

VI 

VI 

I 
The Revenue Impact by Income Class of 1976 Tax Reform Act on u.s. C1tizens Residing Abroad: Japan .!/ (dollar amounts in thousands) 

-- ·-m 

Income : Under : $10,000 : $20,000 : $30,000 : $40 , 000 : Over 

Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 197,646 21,152 39,148 28,784 14,169 20,683 73.710 

Number of returns 11 5,251 1,652 1,514 697 278 340 770 

Exclusion 73.991 18,799 22,234 10,573 4,379 5,126 12,880 

AGI 123,655 2,353 16,914 18,211 9,790 15,556 60,830 

Foreign earned income 173,105 19,700 33,557 27,605 12,879 16,323 63,041 

Taxable income 102,764 565 9,739 15,125 8,642 13,632 55,060 Number of returns 3,823 224 1,514 697 278 340 770 

Tax before credits 44,218 133 2,941 5,460 3,500 5,700 26,483 

Foreign tax credit 14 , 655 0 557 1,765 1,149 1,516 9,668 Number of returns 3,241 0 1,263 697 244 306 731 

Tax after credits 28,868 98 2,102 3,569 2,302 4,123 16,674 Number of returns 3,739 149 1,514 697 278 340 761 

Office of the Secretary of the Treasury -------- January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

y Less deficit. 

11 Adjusted for estimated non-compliance . 

I 

V1 

0'1 

I 
The Revenue Impact by Income Class of the Ribicoff Bill (5.2115) on u.s. Citizens Residing Abroad: Japan !I (dollar amounts in thousands) 

-xrr 

Income : Under : $10,000 : $20,000 : $30 , 000 : $40,000 : Over 

Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50,000 : sso,ooo 

AGI plus exclusion 2/ 197,646 21,152 39,148 28,784 14,169 20,683 73 '710 

Number of returns l l 5,251 1,652 1,514 697 278 340 770 

Special deductions, total !/ 69,869 19,833 22,591 11,031 3,895 4,632 7 ,887 

HousLng 31,948 12,628 10,248 5,241 1,687 1,542 601 

Ed uca tion 5,510 394 1,820 745 303 598 1,649 

Cost of living 33, 132 9,950 9,570 4,520 1,796 2,237 5,059 

Hoving expenses 3,938 1,239 1,136 523 209 255 578 

AGI 127,777 1,319 16,557 17,754 10,274 16,050 65,823 

Foreign earned income 173,105 19,700 33,556 27,605 12,879 16,323 63,041 

Taxable income 107,831 476 9,382 14,668 9,126 14,126 60,054 

Number of returns 3,828 229 1,514 697 278 340 770 

Tax before credits 36,860 80 1,678 3, 366 2,595 4,412 24,730 

Foreign tax credit 17,754 0 927 2,465 1,397 1,850 11,116 

Number of returns 3,317 0 1,266 697 244 340 770 

Tax after credits 18,636 48 470 775 1 ,148 2,500 13,694 

Number of returns 2,801 75 688 697 243 340 758 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

!/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

~/ Leas deficit. 

11 Adjusted for estimated non-compliance. 

4/ The total may be lower than the sum of itemized deductions because the total usable housing, education and cost ot - living deductions are limited to foreign earned income. 

I 

V1 

-.1 

I 
The Revenue Impact by Income Class of 1975 Tax Practice on u.s. Citizens Residing Abroad: All other countries 

(dollar amounts in thousands) 

: Income Under $10,000 $20 , 000 $30,000 $40,000 : Over Classes $10,000 $20,000 $30,000 ~40,000 $50 ' 000 : sso, 000 

AGI plus exclusion 2/ 115 . 626 8,431 23 , 469 33.446 11,736 15,432 23 ,114 Number of returns 11 4,606 1,182 1,343 1,192 291 313 285 

Exclusion 68,424 7,647 19,427 21 , 093 6,501 7, 623 6,134 

AGI 47,202 785 4,042 12,353 5,234 7,809 16,980 

Foreign earned income 98,921 8,226 19,791 27.722 10,273 14 '326 18,584 

Ta xable income 32' 724 60 1 , 693 6, 710 3,792 5,393 15,076 Number of returns 2,387 74 351 1,073 291 313 285 

Ta x before credits 9,268 9 299 1,246 807 1,213 5,693 

Foreign tax credit 4 , 295 0 v 365 487 697 2,746 Number of returns 1,452 0 0 625 256 313 258 

Tax after credits 4,558 2 241 696 268 457 2,894 Number of returns 1,456 34 282 606 140 179 215 

Office of the Secretary of the Treasury Office of Tax Analysis January 28, 1978 

!f Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

11 Less deficit. 

11 Adjusted for estimated non-compliance. 

!I 

I 

Vl 

CX) 

I 
The Revenue Impact by Income Class of 1975 Tax Law on u.s. Citizens Residing Abroad: All Other Countries !./ 

(dollar amounts in thousands) 

. --xrr 

Income : Under : $10,000 : $20 ,000 : $30,000 : $40,000 : OVer 

Classes : $10,000 : $20,000 : $30,000 : $40,000 : $50,000 : $50,000 

AGI plus exclusion 2/ 128,545 11,396 27,141 37,113 12,411 16,458 24,026 

Number of returns l l 4,606 1 ,182 1,343 1 , 192 291 313 285 

Exclusion 75,673 10,428 22,092 22 , 667 6,660 7 , 630 6,195 

AGI 52.872 968 5,049 14,446 5,751 8,827 17,831 

Foreign earned income 111.839 11,191 23,463 31 ,390 10,948 15,352 19,496 

Taxable income 37,247 60 1,887 8,653 4,308 6 ,411 15 ,927 

Number of returns 2,625 74 470 1,192 291 313 285 

Tax before credits 10,543 9 332 1,595 941 1,551 6 ,115 

Foreign tax credit 4 , 995 0 0 490 617 848 3,040 

Number of returns 1,412 0 0 585 256 313 258 

Tax after credits 5,092 2 262 889 272 644 3.022 

Number of returns 1,780 34 322 884 140 185 215 

Office ot the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

11 Less deficit. 

! 1 Adjusted for estimated non-compliance. 

I 

VI 

\0 

I 
All other 

The Revenue Impact by Income Class of 1976 Tax Reform Act on u.s. Citizens Residing Abroad: countries .!1 (dollar amounts in thousands) 

All 

Income Under $10,000 : $20,000 : $301000 : $40,000 : Over 

Classes $10,000 $201000 : $301000 l $401000 : $501000 : $501000 

AGI plus exclusion 2/ 128,545 11,396 27,141 37,113 12 ,411 16,458 24,026 

Number of returns 11 4,606 1,182 1,343 1,192 291 313 285 

Exclusion 54,677 8,329 17 ,415 15,161 4,897 4,687 4,187 

AGI 73,867 3,066 9,726 21 ,952 7,513 11,771 19 ,839 

Poreign earned income 111,839 11,191 23,463 31,390 10,948 15,352 19 ,496 

Taxable income 55,798 1,317 4,962 16,159 6,071 9,355 17 ,935 

Number of returns 3,381 313 987 1,192 291 313 285 

Tax before credits 20,829 222 1,328 4,896 2,301 3,592 8,490 

Foreign tax credit 10,532 165 571 2,592 1,463 1,642 4,099 

Number of returns 2,214 239 393 790 256 313 223 

Tax after credits 9,700 6 590 2,088 786 1 ,892 4,338 

Number of returns 2,183 34 598 884 215 260 192 

Office of the Secretary of the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

'l/ Leas deficit. 

11 Adjusted for estimated non-compliance, 

I 

0\ 

0 

I 
The Revenue Impact by Income Class of the Ribicoff Bill (8 . 2115) on u.s. Citizens Residing Abroad: All Other Countries l/ 

(dollar amounts in thousands) 

Ali 

Income : Under : $10,000 : $20,000 : $30,000 : $40,000 : Over 

Classes : $10,000 : $20,000 : $30,000 : $40 , 000 : $50,000 : $50,000 

AGI plus exclusion 2/ 128,545 11,396 27,141 37,113 12,411 16,458 24,026 

Number of returns 11 4,606 1,182 1,343 1,192 291 313 285 

Special deductions, total !/ 23 ,335 6,380 7,356 5,429 1,285 1,295 1,590 

Housing 5,188 2,521 1,723 943 1 0 0 

Education 4,371 644 895 1,292 321 601 618 

Cost of living 10,441 2,373 3,807 2,299 744 459 759 

Moving expenses 3,454 886 1,007 894 218 235 214 

AG! 105,210 5,016 19,785 31,685 11,126 15,163 22,436 

Foreign earned income 111,839 11,191 23,461 31,390 10,948 15 ,352 19,496 

Taxable income 84,999 1,702 14,444 25,891 9,684 12,747 20,531 

Number of returns 4,008 584 1,343 1,192 291 313 285 

Tax before credits 24,597 275 2,918 6,112 2,805 4,008 8,479 

Foreign tax credit 12,580 103 1,258 3,005 2,000 1,997 4,218 Number of returns 2,580 274 621 858 256 313 258 

Tax after credits 11,304 82 1,417 2,892 753 1,952 4,208 

Number of returns 2,904 198 1,066 923 215 260 242 

Office of the-secretary~the Treasury January 28, 1978 

Office of Tax Analysis 

1/ Estimates are based on 1975 data projected to 1977 levels. Income classes are defined as reported income plus - exclusion based on 1975 tax practice. Tax liabilities based on 1977 rates. 

11 Less deficit. 

11 Adjusted for estimated non-compliance. 

4/ The total may be lo~er than the sum of itemized deductions because the total usable housing , education and coat of - living deductions are limited to foreign earned income. 

I 

0\ 

.... 

I 
-62-

APPENDIX B 

Definitions, Data Sources, and the Tax Calculator 

I. Introduction 

The estimates presented in the tables were derived 

using a tax calculator model which provides estimates of 

U.S. tax revenues by country and income class from the 

taxation of Americans working abroad under various tax rules 

affecting the foreign earned income exclusion. The basic 

sources of the data used are tabulations of tax returns 

filed for 1975 by u.s. taxpayers claiming section 911. A 

special study was made based on a sample of Forms 2555 with 

selected data from the accompanying Forms 1040. Another 

tabulation was made of foreign tax credits claimed on Forms 

1116 by persons also filing a Form 2555. Separate 

calculations were done for single and non-single taxpayers 

for 71 countries representing 95 percent of the taxpayers, 

with the remaining 5 percent divided among four hypothetical 

areas based roughly on local living costs and taxes. Other 

data sources, definitions of variables and assumptions used 

in deriving the estimates are discussed below. 

II. Definitions, Data Sources and Assumptions 

In order to facilitate a clear explanation of the tax 

calculator, the discussion of definitions, data sources, and 

assumptions is divided into four sections; the first 

corresponds to the reporting practice under the 1975 rules 

for section 911, the year for which the returns were filed; 

the second to the 1975 rules as clarified by the Tax Court 

decisions; the third to the 1976 legislative changes in 

section 911; and the last section to the Ribicoff Bill 

(S.2115) as introduced on September 21, 1977. The equations 

used in the calculator are presented in the second section. 

1. Variable definitions, data sources and assumptions 

(a) 1975 reporting tractice. The 1975 data were 

adjusted to more accurate y reflect 1977 income levels and 

the number of eligible filers. Rather than construct a 
-63-

fictitious file of additional u.s. citizens claiming section 

911 in 1977, the estimates assume no change in the number or 

location of these taxpayers since 1975. However, an 

adjustment was made for estimated failure to file; 15 

percent (about one out of seven) of the eligible taxpayers 

having no u.s. income tax after foreign tax credits were 

assumed not to file a return. Income levels were assumed to 

increase by the same percentage as per-capita personal 

income in the United States from 1975 to 1977 (14.1 percent, 

based on per-capit a personal income figures for, 1975 and 

1976 in Survey of Current Business, May 1977, and a 

preliminary estimate for 1977 supplied by the Bureau of 

Economic Analysis). Adjusted gross income (AGI), 

deductions, taxable income, tax before credits, the foreign 

tax credit and U.S. tax after credits were then recomputed 

based on the adjusted data. The u.s. tax was computed 

throughout on the basis of 1977 tax tables. 

2. 1975 tax law. The income reported in 1975 was 

assumed to include any foreign service premiums, 

cost-of-living allowances and the u.s. equivalent of 

employer-furnished housing. It was assumed to exclude 

employer paid housi ng costs in excess of the u.s. base, 

education allowances, and home leave travel. Estimates of 

housing costs in various locations were supplied by the 

State Department. Higher figures were substituted for some 

areas on the basis of current publications and information 

from taxpayers. Education costs were estimated on the basis 

of figures supplied by the State Department. Home leave 

travel estimates were based on economy air fares as of 

August 1977. These three items -- housing, education and 

home leave -- were aaded back to income as the estimated 

effect of the Tax Court decisions of 1976 . 

Excess housing costs, including utilities and taxes, 

were assumed to be the excess of local housing costs over 20 

percent of foreign earned income less all housing expense 

and less education costs and home leave travel. This amount 

was added to the reported incomes of all taxpayers with 

incomes above $10,000 and to the incomes of half of the 

taxpayers with incomes of less than $10,000. The arbitrary 

reduction by 50 percent in the under $10,000 income class 

reflects the likelihood that housing allowances are less 

common in this group. For other income classes the estimate 

tends to overstate the extent to which housing values were 

underreported. It assumes that in cases where housing 

costs ara significantly higher than in the United States, 

a housing allowance or furnished housing is the rule rather 
-64-

than the exception. This is probably a fair assumption for 

most employees of multinationals, educational and charitable 

organizations, and international institutions, but not for 

employees of local foreign companies or the self-employed. 

However, data were not available on the latter two groups. 

Education expenses were attributed to half of all 

dependents over two persons; e.g., if a return claimed six 

dependents, they were assumed to represent two parents, two 

school children whose school costs were furnished by the 

employer and two others (school children whose schooling 

costs were not subsidized, pre-school or college age 

children, or other dependents). In particular cases this 

will over or understate the case, but on average it was 

assumed to be a fair approximation of the effect of taxing 

education costs. 

Borne leave travel was estimated as a minimum of one 

annual round trip to Washington, D.C. for each tax return. 

For tax returns with more than one personal exemption it was 

assumed (for lack of a better assumption) that one-half the 

number of exemptions took an annual round trip to 

Washington. 

On the basis of adjusted reported income, i.e., 

reported income plus the Tax Court additions to income 

(housing, education and home leave), the exclusion, taxable 

income, tax before credits, foreign tax credit and tax after 

credits were recomputed. All of the above quantities, with 

the exception of the foreign tax credit, are straightforward calculations. As a result of the increase in reported 

incomes due to the Tax Court changes, the allowable foreign 

tax credit would also increase, but data on total foreign 

taxes paid were not available for each return. Estimates of 

foreign taxes paid were based on the effective rates drawn 

from the Form 1116 of those section 911 taxpayers who 

claimed a foreign tax credit in 1975. Only about 37 percent 

of the taxpayers claiming 911 in 1975 claimed a foreign tax 

credit, but they lived in 38 countries l/ which accounted 

These countries are Canada, Argentina, Brazil, Colombia, 

Dominican Republic, Ecuador, Guatemala, Jamaica, Mexico, 

Panama, Peru, France, Greece, Ireland, Italy, 

Netherlands, Norway, Spain, Sweden, Sw4tzerland, United 

Kindgom, West Germany, South Africa, Hong Kong, 

Indonesia, Iran, Israel, Japan, Lebanon, the Philippines, 

Singapore, Thailand, Australia, Venezuela, the Bahamas, 

Austria, Belgium, and Denmark. 
-65-

for 78 percent of all taxpayers claiming section 911. It was 

assumed that all section 911 taxpayers in those countries 

paid the same tax on the same taxable income. For 

additional countries, 2/ accounting for another 12 percent 

of section 911 taxpayers, the effective foreign tax rates 

were derived from a publication of the Price Waterhouse 

accounting firm. 3/ All other countries, ·accounting for the 

remaining 10 percent of section 911 taxpayers, were grouped 

into four hypothetical composite areas based roughly on the 

level of living costs, as reflected in indices prepared by 

the State Department, and the estimated ratio of foreign 

income tax to the U.S. tax. 

The data used to calculate effective foreign tax rates, 

including the figures taken directly from Form 1116, tend to 

overstate foreign taxes paid when applied to all taxpayers. 

Taxpayers who did not claim a foreign tax credit in 1975 

presumably paid an amount of foreign tax less than the u.s. 

tax on the standard deduction. Conversely, for individuals · 

who claimed a foreign tax credit in 1975, the credit was 

more valuable than the standard deduction, so it is fair to 

conclude that they paid higher foreign taxes on average than 

all section 911 taxpayers taken together. A comparison of 

foreign taxes paid as reported on Form 1116 and the foreign 

tax tables calculated by Price Waterhouse indicated that the 

latter figures further overstate the actual foreign taxes 

2/ These countries are Bahrain, Bermuda, Bolivia, Chile, 

Costa Rica, Egypt, Ethiopia, Honduras, India, Iraq, Jordan, 

Kenya, Kuwait, Libya, Netherlands Antilles, New Zealand, 

Nigeria, oman, Papua New Guinea, Portugal, Qatar, Saudi 

Arabia, Taiwan, Trinidad and Tobago, United Arab Emirates 

and Zaire. 

ll Price Waterhouse Information Guide, Individual Taxes in 

80 Countrie~, New York, January 1977. 
-66-

paid by section 911 taxpayers. 4/ Thus, the foreign tax 

credit figures used in this paper have a general bias toward 

overstatement. 

3. 1976 Tax Reform Act. The individual's tax 

liability was calculated two ways; first, it was assumed 

that the taxpayer elected the exclusion (not exceeding 

$15,000) and second, it was assumed that the taxpayer 

elected not to take the exclusion. Tax after credits 

under these alternatives were compared and taxpayers were 

assumed to choose the alternative which minimized their tax ~iability. If the taxpayer elected the exclusion, his tax 

before credits was the difference between his tax on taxable 

income including the exclusion and his tax on the exclusion. 

No foreign tax credit was allowed on foreign taxes 

attributable to excluded income. The method used was to 

reduce foreign taxes available for credit by the ratio of 

the u.s. tax on net excluded income to u.s. tax on total 

income (including the excluded amount). The remaining 

amount of foreign tax could be credited against U.S. tax 

subject to the ordinary limitations. 

4. Ribicoff proposal. The Ribicoff proposal allows 

deductions for excess housing costs, education expenses, 

moving costs, and a cost of living differential. 

The excess housing cost was calculated as discussed 

above (p.63). In addition, the Ribicoff bill provided 

special treatment for construction camp housing. Individuals 

living in such camps could either exclude the full value of 

their meals and lodging or claim the average excess housing 

cost deducted by persons in the same area, as indicated on 

tables to be published by the IRS from each year's returns. 

Only fragmentary information could be obtained on the number 

of affected persons. It was assumed that 7,000 persons 

would be eligible, that they live in the high cost areas of 

the Middle East and North Africa, and that the U.S. value 

The calculations that go into those tables accurately 

reflect the local laws, and take into account statutory 

concessions to employees who are foreign nationals. 

There are several possible explanations why the foreign 

taxes paid by section 911 are often lower, e.g., 

contractual or other administrative relief from foreign 

tax, higher deductions than assumed, more untaxed income 

in kind, and evasion of foreign tax. 
-67-

of their meals and lodging is $5,000 a year. Since the 

estimated average housing deducti on in that area was $9,300, 

the construction camp workers were assumed to choose to 

include in income the actual value of their meals and 

lodging and claim the average excess housing deduction. 

According to the printed bill, deductible education 

expenses were limited to tuition, books and fees. The State 

Department composite figure for "away from post" school 

costs, net of travel, but including room and board ($4,950 

for 1977-78) was assumed to represent 50 percent room and 

board, and the other half was considered an allowable 

education expense deduction. 

To estimate the deduction for moving expenses, one 

fourth of the taxpayers were assumed to move each year and 

the additional deduction was estimated to amount to $3,000, 

based on the assumption that two out of the three moves were 

to a foreign location, that the average moving expense was 

$6,000 and that 75 percent of the cost was attributable to 

excluded income. 

The cost of l i ving deduction was estimated from the 

State Department local indices, excluding housing and 

education costs. 5/ Based on a salary of $21,400 

(approximately a grade GS-12-1), spendable income (excluding 

income for housing and education) was assumed to be about 

$10,000 for single taxpayers and $12,000 for non-single 

taxpayers. The excess of the foreign cost of living over 

the u.s. cost (based on the State Department indices) times 

the spendable income was allowed as a cost of living 

deduction. 

III. The Tax Calculator 

All the quantities discussed below are at 1977 income 

levels. The 1977 levels were obtained by increasing the 

1975 data by 14.1 percent (the increase in per-capita 

personal income between 1975 and 1977). To adjust for 

failure to file, an additional 15 percent blow-up was 

~/ u.s. Department of State, "Indexes of Living Costs 

Abroad and Quarters Allowances•, published quarterly by 

the Bureau of Labor Statistics. 
-68-

applied to incomes and the number of returns where tax after 

credits was zero. Definitions of the acronyms used in the 

following equations are given on pages 76-78. 

1. 1975 Tax Practice 

Adjusted gross income is 

AGI = RI + EX 

and taxable income 

TI = AGI - EXEMP - D 

where personal exemptions are 

EXEMP = (NOEXEMP)$750 

and personal deductions are 

D = ID (if appplicable) or 

D = $2,300 for single taxpayers 

or 

D = $3,200 for non-single taxpayers. 

Tax before credits is 

TBC = USRATE (TI) 

and tax after credits is 

TAC = TBC - PC - FTC 

where the general tax credit is the greater of 

PC = $35 (NOEXEMP) or 

PC= .02 (TI), up to $180. 

The foreign tax credit is 

FTC = LIMIT 

( 1 ) 

( 2 ) 

(3) 

(4) 

( 5 ) 

( 6 ) 

( 7 ) 

(8) 

( 9 ) 

(10) 
subject to 

FTC < FORTAX and 

FTC < TBC 

-69-

where the foreign tax credit limitation 

is approximated by 

LIMIT = FEI-EX (TBC} AGI 

and foreign taxes paid are 

FORTAX = FORRATE (FEI} 

2. 1975 Tax Law 

Excess housing was defined as 

(11} 

(12} 

(13} 

(14} 

BOUS = ACBOUS- .1667 (RI - UNEARN- CLADJ} {15) 

where unearned income is 

UNEARN = DIV + INT + GAIN + GAIND 

and the cost of living adjustment is 

CLADJ = p{COL} 

where p adjusts the cost of living {COL} to 

foreign earned income class. In order to 

construct COL, income subject to the cost of 

living index was assumed to be $10,000 for 

single individuals and $12,000 for non-single 

individuals. Therefore, cost of living was 

calculated as 

and 

COL= INDEX ($10,000) for single 

individuals 

COL= INDEX ($12,000} for non-single 

taxpayers. 

{16) 

{ 17} 

(18} 

(19} 
-70-

Education expenses were defined as 

ED = KIDS (EOCOST} 

where the number of school age children were 

assumed to be 

KIDS = 1/2 {NOEXEMP - 2} 

and half the children were assumed to be in 

grade school and half in high school for the 

purpose of calculating EDCOST. 

Home leave was assumed to be 

HL = 1/2 {NOEXEMP){AIRFARE). 

The additions to income as a result of the 

Tax Court decisions were calculated as 

TCADD = HOUS + ED + BL 

The exclusion was recalculated as 

(20} 

(21) 

(22) 

(23} 

TCEX = EX + TCADD (24) 

subject to TCEX ~ $20,000 or $25,000. (25) 

Adjusted reported income is 

TCRI = AGI + EX + TCADD 

and adjusted gross income is 

TCAGI = TCRI - TCEX 

Taxable income is 

TCTI = TCAGI - EXEMP - 0 

where EXEMP is defined by equation 

{3) and D by equations (4} thru (6) 

Tax before credits is 

{26) 

(27} 
~71-

TCTBC = OSRATE (TCTI) 

and Tax after Credits as 

TCTAC = TCTBC - PC - FTC 

where PC is defined by equation (9) 

The foreign tax credit was calculated as 

TCFTC = TCLIMIT 

subject to 

TCFTC < FORTAX and 

TCFTC < TCTBC 

where the foreign tax credit limitation was 

approximated by 

TCLIMIT = (FEI + TCADD- TCEX)(TCTBC) TCRI - TCEX 

and FORTAX is defined as in equation (14). 

3. 1976 Tax Reform Act 

The exclusion is 

(28) 

(29) 

(30) 

(31) 

(32) 

(33) 

TRAEX = $15,000 (or TCEX, if TCEX < $15,000) ( 34) 

and adjusted gross income 

TRAAGI = TCRI - TRAEX 

Taxable income including the exclusion is 

TRATI = TCRI - EXEMP - D 

where EXEMP is defined in equation (3) 

and D by equations (4) through (6) 

The tax on the exclusion is 

TAXEX = OSRATE (TRAEX} 

and the tax on taxable income including the 

exclusion is 

(35) 

(36) 

(36) 
-72-

TAXTI = USRATE (TRATI) 

Tax before credits is 

TRATBC = TAXTI - TAXEX and 

Tax after credits is 

TRATAC = TRATBC - PC - TRAFTC 

where PC is defined by equation (9), 

and TRAFTC is the foreign tax credit. 

The foreign tax credit limitation is 

and 

TRALI~ = FEI + TCADD - TRAEX 

TCRI - TRAEX 

TRAFCT = TRALIM 

subject to 

TRAFTC < AFORTAX 

(TRATBC) 

where AFORTAX = FORTAX (1 - TAXEX/TAXTI) 

and 

TRAFTC < TRATBC 

Since taxpayers had the option of electing 

not to take the exclusion, the alternative foreign 

tax credit limitation was calculated as 

TRALIMO = FEI + TCADD 

TCRI 

and the foreign tax credit 

TRAFTCO = TRALIMO 

subject to 

TRAFTCO < FORTAX and 

TRAFTCO < TAXTI 

(TAXTI) 

(37) 

(38) 

(39) 

(40) 

(41) 

(41) 

(42) 

(43) 

(44) 

(45) 

(46) 
-73-

Tax after credits is 

TRATACO = TAXTI - PC - TRAFTCO (47) 

where PC i s defined by equation (9). 

Tax after credits calculated by 

equations (39) and (47) are compared, 

and the taxpayer is assumed to elect the 

option which minimizes his tax after credits. 

4. The Ribicoff Proposal 

Excess housing is 

RHOUS- ACHOUS- .1667 (RI + HL- COL- UNERN) . (48) 

Workers in construction camps (assumed to be 

approximately 46 percent of taxpayers in the Middle East) 

were given a choice of taking the average excess housing 

deduction (RHOUS) in the area or the u.s. value of their 

local housing (assumed to be $5,000), whichever is greater. 

Education costs excluding airfare and room and board 

are 

RED= l/2 (EDBASE). (49) 

Moving expenses were assumed to be about $6,000 and 

one in every 4 taxpayers was assumed to move a year, two 

out of three moves were to a foreign location and 75 

percent of the cost was attributable to excluded income, 

so that 

MOVE = 750. (50) 

Adjusted gross income is 

RAGI = TCRI - RHOUS - RED - MOVE - COL 

and taxable income is 

RTI = RAGI - EXEMP - D 

where EXEMP is defined in equation (3) and D by 

equations (4) to (6). 

(51) 

(52) 
-74-

Tax before credits is 

RTBC = USTAX (RTI) (53) 

and tax after credits 

RTAC = RTBC - PC - RFTC (54) 

where PC is defined in equation (9). 

The foreign tax credit limitation is approximated by 

RLIM FEI + TCADD - RDED (RTBC) = TCRI - RDED 

where 

RDED = RBOUS + RED + MOVE + COL. 

The foreign tax credit equals 

RFTC = RLIM 

subject to 

RFTC < FORTAX 

RFTC < RTBC. 

5. Tax Expenditure 

(55) 

(56) 

(57) 

(58) 

(59) 

Assuming that section 911 is repealed, adjusted gross income is 

EAGI = TCRI 

and taxable income is 

ETI = EAGI - EXEMP - D 

where EXEMP is defined in equation (3) 

and D by equations (4) to (6). 

Tax before credits is 

ETBC = USRATE (ETI) 

and tax after credits is 

(60) 

(61) 

(62) 
-75-

ETAC = ETBC - PC - EFTC 

where PC is defined by equation ( 9) • 

The foreign tax credit limitation is 

ELIM = FE! + TCADD(ETBC) TCRI 

a nd the foreign tax credit is 

EFTC = ELIM 

subject to 

EFTC < FORT AX and 

EFTC -

< ETBC 

Tax e x penditures are calculated as follows : 

(a) for the 1975 law 

TE75 = ETAC - TCTAC 

( b) for the 1976 Tax Reform Act 

TE76 = ETAC - TRATAC 

and 

(c) for the Ribicoff Proposal 

TERIB = ETAC - RTAC 

(63) 

( 64) 

(65) 

(66) 

(67) 

(68) 

(69) 

(70) 
1975 Tax Practice: 

AGI 

RI 

EX 

TI 

EXEMP 

D 

TBC 

US RATE 

TI 

TAC 

PC 

FTC 

NOEXEMP 

LIMIT 

FORT AX 

FORRATE 

FEI 

EXEMP 

1975 Tax Law: 

BOUS 

ACHOUS 

UN ERN 

CLADJ 

DIV 

INT 

GAIN 

GAIND 

COL 

INDEX 

ED 

KIDS 

-76-

Definitions 

Adjusted gross income 

Reported income = adjusted gross income 

plus the exclusion 

Exclusion 

Taxable income 

Personal exemptions 

Personal deductions, which may be 

itemized (ID) or standard 

Tax before credits 

o.s. tax rate 

Taxable income 

Tax after credits 

General tax credit 

Foreign tax credit 

Number of exemptions 

Foreign tax credit limitation 

Foreign taxes paid 

Foreign tax rate 

Foreign earned income 

Deduction for personal exemptions 

Excess housing 

Actual housing (State Department 

estimates) 

Unearned income 

Cost of living adjustment (based on 

State Department indices) 

Dividends included in AGI 

Interest income 

Net capital gains 

50% of capital gain distributions 

Cost of living in a given country 

Cost of living index for a given country 

(State Department data) 

Total education expense 

Number of school age children 
-77-

Definitions {continued) 

1975 Tax Law (continued): 

EDCOST 

TCADD 

HL 

AIRFARE 

TCEX 

TCRI 

TCAGI 

TCTI 

TCTBC 

TCTAC 

TCFTC 

TCLIMIT 

1976 Tax Reform Act: 

TRAEX 

TRAAGI 

TRATI 

TAX EX 

TAXTI 

TRATBC 

TRATAC 

TRALIM 

TRAFTC 

AFORTAX 

TRALIMO 

TRAFTCO 

TRATACO 

Ribicoff Proposal: 

RHO US 

RED 

Education cost including tuition and 

fees, room and board and travel (State 

Department data) Additions to income due to the Tax Court 

decisions 

Borne leave travel expense 

Cost of economy air ticket 

Exclusion 

Reported income including the Tax Court 

changes 

Adjusted gross income 

Taxable income 

Tax before credits 

Tax after credits 

Foreign tax credit 

Foreign tax credit limitation 

Exclusion under the Act 

Adjusted gross income 

Taxable income including the exclusion 

u.s. tax on the exclusion 

U.S. tax on taxable income (including 

exclusion) 

Tax before credits 

Tax after credits 

Foreign tax credit limitation 

Foreign tax credit 

Foreign taxes available for a credit 

Foreign tax credit limitation option 

for no exclusion 

Foreign tax credit -- option for no 

exclusion 

Tax after credits -- option for no 

exclusion 

Excess housing deduction 

Education Expense Deduction {Tuition, 

books and fees) 
-78-

Definitions (continued) 

Ribicoff Proposal (continued): 

ED BASE 

MOVE 

RAGI 

RTI 

RTBC 

RTAC 

RLIM 

RDED 

RFTC 

Tax Expenditure: 

EAGI 

ETI 

ETBC 

ETAC 

ELIM 

EFTC 

TE75 

TE76 

TERIB 

Education expenses including room and 

board, books and fees but not travel 

(State Department data) 

Moving expense deduction 

Adjusted gross income 

Taxable income 

Tax before credits 

Tax after credits 

Foreign tax credit limitation 

Total deductions for excess housing 

costs, cost of living, education and 

moving expenses 

Foreign tax credit 

Adjusted gross income 

Taxable income 

Tax before credits 

Tax after credits 

Foreign tax credit limitation 

Foreign tax credit 

Tax expenditure, 1975 law 

Tax expenditure, 1976 Tax Reform Act 

Tax expenditure, Ribicoff Proposal 

t1, S, CQVERl\oMEJ.'T PRI!'.'TINO On ICt: lOTI 0 • U)•02S 
Department of the Treasury 

Office of the Secretary 

Washington, D.C. 20220 

0Cfir.ialllusinP•1 Pe nah\· fur Pri,•ate e SJOO 

PoM.tjle anrf f'pe' Paid 

Departmt>nt of the Treasury 

TREAS·S51 

First Class 00