U.S. Immigration and International TaxationKey Concepts and Differences
by
James D. Prappas Partner
Jackson Walker L.L.P.Houston, Texas
Texas Society of Certified Public Accountants Houston CPA Society
Galveston Island Convention CenterGalveston, Texas
June 12, 2013
Definitions Visa - a visa is a permit to enter the U.S. which is
issued by the U.S. Embassy or Consulate outside the U.S. The possession of a visa does not guarantee admission to the U.S.
What is immigration status? – legal basis to be physically present in the U.S.
What is the difference? Generally a person must have a visa to enter the U.S. The status determines what activities a person may conduct in the U.S. and for how long.
Types of Visas
Temporary Visas for Work
Temporary Visas for Pleasure
Lawful Permanent Resident (LPR) , aka “Green Card”
Interplay between SSN and U.S. Immigration Law
The possession of an immigration status does not grant automatic eligibility for a SSN
A visitor for business and/or a visitor for pleasure generally are not eligible for an SSN
Applicable forms include IRS Forms 1099 and 941
What is residence for U.S. immigration purposes?
The term "residence" means the place of general abode; the place of general abode of a person means his principal, actual dwelling place in fact, without regard to intent. INA §101 (a)(15)(33)
What is a “Green Card”, lawful permanent residence?
Form I-551 is the “green card” LPR status grants a person the right to live
permanently in the U.S. LPRs have rights and responsibilities including
the requirement to file U.S. income tax returns on their worldwide income as a “resident” versus a non- resident for tax purposes
Is a “Green Card” forever?
Answer – not necessarily LPR status is granted by the USCIS A person may hold LPR status for the remainder
of his/her life while he/she lives in the U.S., but he/she can “abandon” his/her LPR status
The U.S. Citizenship and Immigration Services and/or the U.S. Customs and Border Protection (both part of the Department of Homeland Security) can determine a person has “abandoned” his/her LPR status
Exit Tax The Heroes Earnings Assistance and Relief Tax Act of
2008, PL 110-245, (June 17, 2008) introduced an “exit tax” for U.S. citizens who renounce their citizenship and long-term LPRs whose status has ended through abandonment or revocation. IRS §877A.
An LPR is a long-term resident if he has held that status for any part of 8 of 15 calendar years ending in the year he loses his status. LPR status ends when the status ceases or when the LPR began to be treated as a resident of a tax treaty country and a nonresident of the U.S. for tax purposes under a tax treaty residency tiebreaker rule. U.S. Tax Guide for Aliens, IRS Publication 519 (2011)
Exit Tax (cont.) The law covers individuals: (i) who have a net worth of $2M or more, or
(ii) who have paid an average annual tax of more than $145,000 (adjusted annually for inflation) in the five years preceding expatriation or termination of residency status; or (iii) who fail to certify on Form 8854 (Expatriation Information Statement) compliance with all federal tax obligations for the 5 years immediately preceding expatriation or termination of residency. There are exceptions for certain dual-citizens and certain minors.
A covered expatriate must pay the exit tax on all his global assets as if they had been sold on the day before expatriation at their fair market value. There is an exclusion of $600,000 from gross income and certain exclusions for IRAs, interest in nongrantor trusts, and U.S. qualified pension plans. The forms associated with expatriation are IRS Form 8854 and Form W-8CE (Notice of Expatriation and Waiver of Treaty Benefits). IRS has published a Guidance for Expatriates Under IRC Section 877A (exit tax) at http://www.irs.gov/pub/irs-drop/n-09-85.pdf
LPR status versus U.S. citizenship
An LPR has different U.S. tax issues – estate taxes and more likely to be subject to abandonment.
LPR can be subject to “removal” formerly known as deportation, e.g. “aggravated felon”
U.S. citizenship is forever unless renounced or obtained by fraud
Residence concepts and Distinctions
U.S. estate taxes concerning residence for U.S. income tax purposes which is different for U.S. immigration purposes
Residence for U.S. estate and gift tax purposes is also different for U.S. immigration purposes
Practice Pointer – integrated analysis for U.S. tax and immigration purposes prior to the person’s arrival in the U.S. can afford significant planning opportunities and tax savings
Ethical Considerations
Who is the client when there are individuals living in the U.S. on temporary work visas, LPRs aka “green cards”, U.S. citizens and other family members residing outside the U.S.?
Questions
James D. PrappasJackson Walker L.L.P.1401 McKinney, Ste 1900Houston, Texas 77010-4008713-752-4298 - Tel713-752-4221 - [email protected]
