Many pilots keep reminding me that if I don't want the "enhanced" option of the LOA, I can take the current CBA. One problem with that. Should the LOA pass, the benefits of the CBA are drastically altered. Hear me out, please. Under the LOA, a new term which few pilots fully understand is added to the language should you choose the current CBA package. That is tax equalization. We have all heard the company and the NC say this is good. I claim it's a necessary tool to help companies defray the enormous costs of providing their employees full expatriate packages. Unfortunately, that's not the case with this LOA.

Every US citizen, upon establishing residency abroad(~1 year) is entitled to the foreign earned income exclusion. This is not a "one time good deal" for the SFS folks. It's the right of every pilot who will be living in HKG or CDG, period. That exclusion basically states that the first $82,400 you earn, is done so, tax free. Go ahead and figure how much that is worth to you. With tax equalization, the pilot still qualifies for the exclusion, and PW will complete your taxes with the exclusion. Only the money saved due to the exclusion goes to the company, of course they claim it goes to"stay-at-home(Hypothetical) income. That sounds better than saying they are keeping it. Next, the pilot must pay taxes as though they live in the US. We pay, but guess what? The IRS doesn't collect that, because it's not really owed as far as they're concerned. So the amount you got for the exclusion approximates(based on individuals write-offs) what you will have to pay. PW files and the company gets that money as well. Lastly, foreign taxes paid are a direct write-off on your US returns. Yes, if that amount is provided, that is additional taxable income. Nonetheless, I submit anyone based in CDG would owe $0 for federal income taxes.

I have done a cursory look at the numbers as they pertain to me living in HGK, and I would also owe little, if any, federal taxes. The total of the exclusion, paying taxes, "as though I live stateside," and not getting the write-off for foreign taxes, equates to over $55,000! Yes, "the LOA also provides tax equalization, which could be worth five figures alone depending on your seat and base." True statement, but worth it to whom? My tax obligation in HKG would be no more than $38,000, the company wants to "give" us $2700/month($32,400/yr) in housing allowance. Tax equalization is HUGE indeed, for the company. We are subsidizing our own foreign taxes and housing allowance!

Finally, under the company's question and answer segment on their explanation of tax equalization, someone asked "how does the overseas assignment affect my state and local income taxes?" The company's response was "...as determined under the laws of the tax jurisdiction the overseas employee was relocated from." Currently, SFS pilots are considered to have relocated from the place where household goods were picked up and shipped from. I haven't heard any clarification on this. So a pilot may have to pay state taxes to boot...brilliant! Then, the company would surely pay $0 and claim they are paying foreign taxes and giving us a $2700 housing allowance, when in fact, the pilot is paying.