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Podcast – Why Foreign Investors Consider the EB-5 Visa? | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published October 23, 2020

Podcast - Why Foreign Investors Consider the EB-5 Visa? | LEGAL THOUGHTS

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Reyna Munoz, Tax Legal Assistant of Coleman Jackson, P.C.   The topic of discussion is “Why Foreign Investors Consider the EB-5 Visa?” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Immigration Thoughts

  • My name is Coleman Jackson, and I am an attorney at Coleman Jackson, P.C., a taxation, litigation, and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Why Foreign Investors Consider the EB-5 Visa?
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Reyna Munoz, Immigration Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our law firm’s Public Relations Associate, Mayra Torres will be asking the questions and I will be giving the answers as she and I will be discussing: “Why Foreign Investors Consider the EB-5 Visa?”

Reyna Munoz Introduces Herself to the Audience:

  • Hi everyone, I am Reyna. I the Tax Legal Assistant at the tax, litigation and immigration law firm of Coleman Jackson, P.C.  Right here in Dallas, Texas.
  • Hi Attorney; today we will be discussing the EB-5 Foreign Investor’s Visa:
    • Its history;
    • Its application process, procedure, and processing times; and
    • its advantages to the foreign investor in coming to the U.S. to start a business and bring their families to live and work in the United States permanently.

Question 1:

  • Attorney could you give a brief history and description of the EB-5 Investor’s Visa?

Attorney Answers Question 1:

  • Good morning Reyna. Thanks for your question.
  • EB-5 Investor Visa is the fifth employment-based preference visa enacted into U.S. Immigration Law in 1990 and is codified in 8 U.S.C. That is the Immigration and Nationality Act of the United States.   The fundamental purpose of the EB-5 Investor Visa Program stated by Congress when it became law in the 1990s were to grow or spur economic growth within the United States.  The fifth employment-based preference visa is designed to afford wealthy foreign investors the opportunity to live and raise their families in the U.S. in return for building a new commercial for-profit enterprise or invest in an existing U.S. for-profit enterprise employing up to ten additional full-time employees.   Let me repeat, the EB-5 Investor’s Visa category is aimed at qualified wealthy foreigners seeking to obtain permanent legal residence in the United States, investing in a new for-profit commercial enterprise that will benefit the United States economy and create at least 10 full-time jobs in the United States per investor. The program is currently administered by USCIS. The at-risk capital investment required per EB-5 investor is currently $1.8 million, but the at-risk capital investment amount is reduced to $900,000 if the investment is made in a rural community or high unemployment area, known as a Target Employment Area (TEA). These minimum EB-5 Visa investment amounts came into force in 2019. This in a nutshell is the stated Congressional purpose the fifth employment-based preference visa which is commonly known as the EB-5 foreign investors visa and anecdotally known in some circles as the “Gold Visa”.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 2:

  • What are the qualifications for obtaining the EB-5 Visa and have there been any significant changes these qualification since Congress enacted the Statute?

Attorney: Coleman Jackson

ANSWER 2:

  • Yes, absolutely there are very strident criteria that the foreign investor must meet. The immigration statute sets forth strict guidelines as to:
    1. What constitutes an at-risk investment,
    2. What constitutes a commercial for-profit enterprise,
    3. What constitutes employment of full-time employees,
    4. What constitutes a capital investment to begin with; and
    5. What constitutes a minimum required capital investment.
  • The Immigration Nationality Act (INA) defines all of these terms in excruciating detail. And yes, there have been changes in the implementation of the Statute since it became law in 1990.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • Attorney, that sounds a little complex. I hope you can explain some of those technical terms more fully.
  • Question 3:

But for now, this is my next question:

You mentioned that changes have occurred in the law since 1990.  It might be best to describe those changes first; I mean, when did these changes occur, what were the changes to the EB-5 Visa,  and what impact did these changes have on the EB-5 Visa program?

Attorney Answers Question 3:

  • That is very good. Yes, I can talk about the changes to the EB-5 Program before drilling down on some of these technical terms.
  • On November 21, 2019, the EB-5 Program underwent its first major change since the program began in 1990. In July 2019, the Department of Homeland Security published changes to the EB-5 Investor Visa Program in the Federal Register. The modifications or changes were dubbed the, “EB-5 Modernization Regulations for the Immigrant Investor Program (or the regulations)”. The new regulations increased the minimum investment amount from $1,5 million to $1.8 million and to $900,000 from $500,000 in a TEA designated area.  Moreover, the regulations switched the TEA designation authority or designation decision making process from the individual states and gave it exclusively to the United States Citizenship and Immigration Services, (USCIS).  The policy aim given for making these regulation changes to the EB-5 implementation regulations was to get back to the true Congressional intent for enacting the immigration statute in the first place; that is, the goal was to grow the U.S. economy and create American jobs through foreign investors investing substantial at-risk capital in return for a clear path to U.S. citizenship. Some thought the program had gotten away from its original Congressional goal.

 Interviewer: Reyna Munoz, Tax Legal Assistant

  • QUESTION Attorney can you now circle back and explain these terms that you mentioned earlier:
    1. What constitutes an at-risk investment,
    2. What constitutes a commercial for-profit enterprise,
    3. What constitutes employment of full-time employees,
    4. What constitutes a capital investment to begin with; and
    5. What constitutes a minimum required capital investment.
  • Question 4:

What does these terms mean as they relate to the EB-5 Foreign Investor Visa Program?

Attorney Answers Question 4:

  • Okay, very well! I will briefly describe each of these terms:
  • The term commercial for-profit enterprise under the Statute is understood to mean any lawful for-profit business enterprise. The business cannot be a hobby or non-profit enterprise of any kind.  The goal of the enterprise must be to make money!  The legality of the business enterprise will be determined under federal law and not merely state or local law.  For example, some types of business activities could be lawful in a state and unlawful under federal law.  For example, a commercial for-profit marijuana enterprise; which is a lawful business enterprise in some States, is currently unlawful under federal law.
  • The commercial for-profit enterprise is structured under the applicable state law where it organizes in the form of a partnership, or limited liability company, corporation, joint venture; and even, a sole proprietorship. Let me point out here that for tax purposes a corporation owned by none-United States citizens cannot make a Chapter S Corporation election because it’s not permitted under U.S. tax law. But otherwise, the commercial enterprise may be structured under State law in whatever for-profit business structure that suits the foreign investors requirements or goals.
  • Full-time employments as defined in the EB-5 Visa Statute means is the employment by the enterprise of U.S. workers who are U.S. citizens, Green Card Holders, or workers otherwise authorized to work in the United States. The workers cannot be members of the foreign investors family or otherwise related to the foreign investor. The workers must work at least 35 hours per week to be considered full-time employees.  There are certain particulars, such as, temporary, and seasonal workers, and such transient workers that I won’t go into right now.
  • Basically, what I have briefly described is how the term full-time employment has been interpreted by USCIS adjudicators
  • I am going to combine my answer to the terms “at risk investment” and  “capital investment” together since they are both dealing with the foreign investor’s investment and what it means to make an investment  under the EB-5 Visa Statute.
  • The foreign investor must make a capital investment in the minimum amount required by USCIS. USCIS has implemented rules defining a capital investment as the contribution of-
    • cash;
    • plant, property and equipment;
    • inventory;
    • stocks, bonds, and other securities owned by the foreign investor;
    • tangible personal property; and
    • At risk debt to the foreign investor
  • This is what is meant by at-risk capital investment. Intangible property, such as, patents, trademarks,  knowledge and know-how are not considered capital assets for EB-5 investment purposes.
  • Let me turn to the last technical term that I originally mentioned; which is ‘required minimum capital investment’ under the EB-5 Statute. What does it mean?
  • The new regulations that I mentioned before that were implemented by DHS in 2019, increased the minimum investment amount from $1.5 million to $1.8 million and to $900,000 from $500,000 in a TEA designated area. That means each foreign investor must make a minimum at-risk capital investment in these minimum amounts in a new enterprise within the United States which either creates or saves 10 U.S. jobs to qualify for the EB-5 visa.
  • The required minimum investment must be converted into United States Dollars and valuated at fair market value. It must meet the statutory minimum capital investment thresholds in U.S. dollars after any currency valuations and conversions.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • Question 5:

Attorney can the foreign investor execute a letter of intent to contribute the required minimum capital investment contingent upon approval of the EB-5 application?  After all, USCIS might not approve the application.

Attorney: Coleman Jackson

ANSWER 5:

  • I mentioned before the statute requires that the foreign investor invest at-risk capital into the new enterprise. The investor must go beyond a mere expression of intent to invest the required capital.  Actual commitment of the capital is required; for example, indicial needs to be sent to the USCIS that the foreign investor has deposited the monies into a bank account exclusively controlled by the business (this could also be accomplished by putting the money in a trust account on behalf of the business); the foreign investor could also show the USCIS actual commitment of capital to the new business by title transfers of assets into the business for the exclusive use of the business.  The idea is that commitment of the capital to the new enterprise must be legally enforceable and either in the ownership and control of the business or a trustee with instructions to turn the money over to the business.  The at-risk requirement simply means that the investor must be exposed to a possible lost of the committed capital; there can be any guarantees made by the business to return the capital investment in the event the business stumbles and fails.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 6:

  • What if the USCIS denies the petition? Can the foreign investor insist return of invested capital if the EB-5 petition is denied?

Attorney: Coleman Jackson

ANSWER 6:

  • I mentioned that the capital could be placed in the hands of a trustee. If this approach is used the trustee must be a bank or some form of financial institution that is unrelated to either party to the transaction.  The terms and conditions of that relationship would be governed by the escrow agreement that the parties entered into. The parties to the escrow agreement could agree to return some or all of the committed capital in the event the EB-5 petition is denied by USCIS.  The escrow agreements or other agreements that the investor might execute with other parties in the transaction must all be arms-length and compliant with the EB-5 Statute.  Let me just leave it here for now; the investor must strictly comply with the Statute and be aware of how USCIS field adjudicators are instructed in the USCIS Field Manual when evaluating EB-5 visa applications.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 7:

  • Well okay Attorney; sounds like it’s very technical and requires a lot of due diligence on the part of the foreign investor and all parties involved in the process.
  • Question 7:

My last question is this!  How does a foreign investor actually request an EB-5 visa?

Attorney: Coleman Jackson

ANSWER 7:

  • The foreign investor files USCIS Form I-526 to request classification under the fifth employment-based preference category. Currently the Form I-526 is filed at the Dallas, Texas USCIS lock box regardless of the actual location of the new commercial enterprise.  The USCIS from time to time changes the actual filing location depending upon workload and other factors.
  • Reyna, thanks for these questions this morning with respect to why foreign investors might want to consider the EB-5 visa. There are many other relevant factors at play with respect to operating a business in the United States that we have not addressed here. In addition to the immigration laws discussed, there are also federal taxation and foreign assets and account laws that might be implicated as well in foreigners immigrating to the United States.
  • I have written numerous blogs on the EB-5 foreign investor’s visa, International Taxation Issues and Foreign Assets and Accounts over the past several years. Anyone interested in knowing more about these topics should visit our blog site

Attorney’s Concluding Remarks:

THIS IS END OF “LEGAL THOUGHTS” FOR NOW

  • Thank you for giving us the opportunity to inform you about “Why Foreign Investors Consider the EB-5 Visa?”
  • We might discuss other aspects of the EB-5 foreign investor’s visa, its requirements, and international tax issues affecting foreign investors in follow up podcasts or blogs in the near future.  If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C.  Subscribe to our podcast and stay tune!  We are here in Dallas, Texas and want to inform, educate, and encourage our communities on topics dealing with taxation, litigation, and immigration.  Until next time, take care.

Podcast – Exclusion from Gross Income | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published October 7, 2020

Exclusion from Gross Income

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.   The topic of discussion is “Income from Discharge of Indebtedness.” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
LEGAL THOUGHTS
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation, and immigration law firm based in Dallas, Texas
  • Our topic for today is: “Income from Discharge of Indebtedness.”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our public relations associate, Mayra Torres will be asking the questions and I will be responding to her questions on this important tax topic: ““Income from Discharge of Indebtedness.”

Interviewer:  Mayra Torres, Public Relations Associate

  • Good morning everyone. It is a pretty chilly Autumn morning today! My name is Mayra Torres and I am the public relations associate at Coleman Jackson, P.C. We are a taxation, litigation and immigration law firm based right here in Dallas, Texas.
  • Question 1:  Attorney:  Is all income taxable in the United States?

Attorney Answers Question 1:

  • Good morning Mayra. Wow that is a broad question this morning! Let me begin with Internal Revenue Code Section 61 where gross income is defined in U.S. Tax Law. That is where we must begin our discussion of taxable income in U.S. tax law. Gross income is defined in Internal Revenue Code Section 61 as all income from whatever source derived.
  • The Internal Revenue Code contains a laundry list of types of income that are taxable, but IRC Section 61 specifically states that the list is not intended to be exhaustive or complete. The types of income specifically included on the gross income laundry list are:
    1. Compensation for services, including fees, commissions, fringe benefits, and similar items;
    2. Gross income derived from business;
    3. Gains derived from dealings in property;
    4. Interest;
    5. Rents;
    6. Royalties;
    7. Dividends
    8. Alimony and separate maintenance payments;
    9. Annuities;
    10. Income from life insurance and endowment contracts;
    11. Pensions;
    12. Income from discharge of indebtedness;
    13. Distributive share of partnership gross income;
    14. Income in respect of a decedent; and
    15. Income from an interest in an estate or trust
  • Repeat: This list of taxable gross income is not exhaustive. Gross income under U.S. Tax Law is extremely broad and envision taxation of increments of wealth constituted in whatever shape or form.

Interviewer:  Mayra Torres, Public Relations Associate

  • Attorney that is a lot. Let me see whether we can narrow down our discussion to this!
  • QUESTION 2: Is any income excluded from gross income for U.S. tax purposes?

Attorney Answers Question 2:

  • Mayra, that indeed is a good strategy because as I have said the concept of gross income in U.S. tax law is a global concept. Gross income includes income derived from whatever source derived.
  • As for income that is excluded from gross income for tax purposes. Let me just limit our discussions to income from discharge of indebtedness since this could potentially be a looming problem as the economic impact of Covid-19 continues to hammer many families in their pocketbooks. Internal Revenue Code Section 108(a) states that gross income does not include any amount which would otherwise be includible in gross income by reason of the discharge of indebtedness of the taxpayer if
    1. The discharge occurs in a title 11 bankruptcy case;
    2. The discharge occurs when the taxpayer is insolvent;
    3. The indebtedness discharged is qualified farm indebtedness;
    4. In the case of a taxpayer other than a C corporation, the indebtedness discharged is qualified real property business indebtedness; or
    5. The indebtedness discharged is qualified principal residence indebtedness which is discharged-
      • Before January 1, 2021 , or
      • Subject to an arrangement that is entered into and evidenced in writing before January 1,2021.

Interviewer:  Mayra Torres, Public Relations Associate

  • Okay, you have listed about five categories there. Right now, could you please explain the last one you mentioned in the list in more detail.
  • Question 3: Explain what qualified principal residence indebtedness is and how it works and all?

Attorney Answers Question 3:

  • Mayra, the term principal residence indebtedness means the debt financing the taxpayer’s principal residence or place where the taxpayer resides most of the time. This is the main residence of the taxpayer.
  • The mortgage on the taxpayer’s main residence must meet both of these prongs or conditions:
    1. the mortgage must have been taking out to purchase, build, or substantially improve the taxpayer main home; and
    2. the mortgage must secure the taxpayer’s main home
    3. Let me just add that the taxpayer cannot have but one main residence which turns on all the facts and circumstances. The debt can be a second mortgage obligation if it meets requirements one and two.

Interviewer:  Mayra Torres, Public Relations Associate

  • Question 4:
  • Attorney how much of this qualified principal residence indebtedness is eligible for exclusion from the gross income of the taxpayer?

Attorney Answers Question 4:

  • Well, first of all let me say, the list of exclusions have a pecking order that taxpayers must be aware of; for example, the discharge of debt in a Chapter 11 Bankruptcy proceeding preempts all other exclusions under Code Section 108. And the insolvency exclusion that I mentioned awhile ago takes precedence over the farm debt exclusion and the qualified real property exclusion; and the principal residence indebtedness exclusion takes precedence over the insolvency exclusion unless the taxpayer makes the proper elections.
  • Now, let’s go back to your original question Mayra; please repeat your question again so that we can be clear on this.

Interviewer:  Mayra Torres, Public Relations Associate

  • Sure, no problem, Attorney! Thanks for pointing out the pecking order of the various exclusions.My original question was…
  • Question 5: How much of the qualified principal residence indebtedness that is forgiven by the lender is excluded from the gross income of the taxpayer?

Attorney Answers Question 5:

  • Okay, let me make four very important points as it relates to the amount of the exclusion of cancellation of debt income of certain qualified principal residence indebtedness:
    • Number 1: the exclusion of residence indebtedness only applies, for the most part, to debt discharged after 2006 and before 2021 or at least the taxpayer needs to have a written discharge agreement in place by December 31, 2020
    • Number 2: the maximum amount of forgiven debt that the taxpayer can treat as qualified principal residence indebtedness is $2 million dollars or $1 million if filing married filing separate; and
    • Number 3: The discharged debt must be directly related to decline in the market value of the taxpayer’s main home or directly due to the taxpayer’s disrupted or poor financial condition.
    • Number 4: The exclusion amount is limited to the part of the discharged loan that is qualified principal residence indebtedness. That simply means that the exclusion is limited to the portion of the discharged debt that meets the definition of qualified principal residence indebtedness that I discussed at the beginning of this discussion.

Interviewer:  Mayra Torres, Public Relations Associate

  • Question No. 6: Attorney, how does a taxpayer actually take the qualified principal residence debt exclusion? I mean is this on the tax return they file or what?

Attorney Answers Question 6:

  • Yes, the taxpayer must attach tax Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness to their annual income tax return filed with the IRS and comply with appropriate instructions explaining their tax position.
  • Mayra, do you have any further questions with respect to types of income excluded from gross income? So far, we mostly have talked about qualified principal residence debt exclusion. And there are many aspects of this topic that we have not explored. I mean we could talk more about debt extinguished through repossessions and foreclosures. Any specific additional questions at this time on this debt cancellation topic?

Mayra’s Concluding Remarks

  • Attorney,Attorney thank you for answering my questions. I do have more questions involving the exclusion of canceled debt from U.S. taxation, but I can put them off to some other time.
  • Our listeners who want to hear more podcast like this one should subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever they listen to our podcast. Everybody take care!  And come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., which is located right here in Dallas, Texas at 6060 North Central Expressway, Dallas, Texas 75206.
  • English callers: 214-599-0431 and Spanish callers:  214-599-0432.

 Coleman Jackson, Attorney’s concluding remarks:

 THIS IS THE END OF “LEGAL THOUGHTS” FOR NOW

  • Thanks for giving us the opportunity to inform you the exclusions of cancellation of debt income from U.S. taxes. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C.  Stay tune!  Watch for a new Legal Thoughts podcast in about two weeks.  We are here in Dallas, Texas and want to inform, educate, and encourage our communities on topics dealing with taxation, litigation and immigration.  Until next time, take care.

EB-5 FOREIGN INVESTOR’S VISA OVERVIEW, PROCESS, HISTORY AND ADVANTAGES

By:  Coleman Jackson, Attorney & Certified Public Accountant
October 20, 2020

EB-5 FOREIGN INVESTOR’S VISA

General Overview of the EB-5 Investor Visa: The fifth employment-based preference for immigrant investors is codified in 8 U.S. Code.  The fundamental purpose of the EB-5 Investor Visa Program was enacted by Congress to grow or spur economic growth within the United States.  The fifth employment-based preference visa is designed to afford foreign investors the opportunity to live and raise their families in the U.S. in return for building a new commercial for-profit enterprise or invest in an existing U.S. for-profit enterprise employing up to ten additional full-time employees.  The statute sets forth strict guidelines as to what constitutes an at-risk investment, what constitutes a commercial enterprise and what constitutes employment of full-time employees. Again, in return for the investment the principal foreign investor, their spouse and children (under 21 years of age) could reside in the United States, attend school in the United States, work in the United States, and apply for citizenship and retire in the United States.

 

EB-5 Investor’s Visa category is aimed at qualified wealthy foreigners

In a nutshell: The EB-5 Investor’s Visa category is aimed at qualified wealthy foreigners seeking to obtain permanent legal residence in the United States, investing in a new for-profit commercial enterprise that will benefit the United States economy and create at least 10 full-time jobs in the United States per investor. The program is currently administered by USCIS. The investment required per EB-5 investor is currently $1.8 million, although this limit is reduced to $900,000 if the investment is made in a rural community or high unemployment area, known as a Target Employment Area (TEA). These minimum EB-5 Visa investment amounts came into force in 2019.  On November 21, 2019, the EB-5 Program underwent its first major change since the program began in 1990. In July 2019, the Department of Homeland Security published changes to the EB-5 Investor Visa Program in the Federal Register.  The modifications or changes were named, “EB-5 Modernization Regulations for the Immigrant Investor Program (regulations)”. The new regulations increased the minimum investment amount from $1,5 million to $1.8 million and to $900,000 from $500,000 in a TEA designated area.  Moreover, the regulations switched the TEA designation authority or designation decision making process from the individual states and gave it exclusively to the USCIS.  The policy aim given for making these regulation changes to the EB-5 implementation regulations was to get back to the true Congressional intent for enacting the immigration statute in the first place; that is, the goal was to grow the U.S. economy and create American jobs through foreign investors investing substantial at-risk capital in return for a clear path to U.S. citizenship.

EB-5 Method and Processing:

EB-5 Method and Processing

 Foreign investors can take one or two Paths to make the required at-risk capital investment.  One Path is for the foreigner to establish a new commercial enterprise or invest into an existing for-profit enterprise by creating or joining a sole proprietorship, limited liability company, partnership, corporation or some other form of for-profit enterprise already organized and operating within the United States.  If the foreign investor takes this first prong of the stand-alone enterprise path by creating a business that complies with the statute; they must have or employ the skills and expertise to run an entrepreneur type business or startup company.  The second prong of the stand-alone path is for the foreign investor to invest a going concern that is already organized and established in the United States.  The Regional Center path is another way that the foreign investor can participate in the EB-5 visa program.  This is alternative path is the investment path that many foreign investors take in making an EB-5 investment.  Regardless of whether the investor create an enterprise or invest capital in a Regional Center, the enterprise must be a for-profit business; it must be in business to make a profit.  The enterprise cannot be non-profit enterprise.  There is a sequence of steps in the EB-5 immigration process for an EB-5 investor to earn a permanent green card. In the event the EB-5 investor selects to invest the required capital in a Regional Center approved by the USCIS, the EB-5 participant files an I-526 petition requesting conditional residency. USCIS and the State Department will determine whether the EB-5 participant qualifies for the conditional EB-5 visa. Due diligence during this part of the process includes a detailed review of the EB-5 investor’s sources of funds, family history and other representations concerning the EB-5 investor, his spouse and qualified unmarried children under the age of 21. The petition also includes a complete description of the EB-5 investment and any economic models, proforma financials, and personnel budgeting used to determine job creation. If approved, the EB-5 investor requests a conditional green card through an interview at the consulate or a status adjustment (if he or she is already in the US on another visa). If approved, the EB-5 investor receives a conditional green card valid for two years. In the final 90 days of the two-year conditional residency period, investor EB-5 files petition I-829 to remove conditions from the green card. This petition demonstrates that the EB-5 investor’s capital was fully invested and at risk during the two-year period and that the 10 necessary skilled jobs were created. Upon approval of petition I-829, the EB-5 investor and his qualified family members become legal permanent residents and may, ultimately, choose to become US citizens after five years.

Steps on the EB-5 Regional Center Path: Steps on the EB-5 Regional Center Path

  1. First Due Diligence: The potential EB-5 investor requests information about the CMB Regional Centers and the current EB-5 offerings. As soon as a confidentiality agreement is signed, the prospective EB-5 investor receives the Private Placement Memorandum, Subscription Agreement, Limited Partnership Agreement and Warranty Agreement. The foreign investor must do its due diligence in selecting a qualified, proven, and USCIS authorized Regional Center.  Due diligence requires careful examination of the structure of the Regional Center and its management, financials, projects, success stories and overall reputation.
  1. EB-5 investor chooses CMB: The EB-5 investor executes the signature documents and returns them to the CMB. The EB-5 investor then transfers his registration fee to a custody account established by the partnership on behalf of the investor where the funds are held by the custodian bank. The release of funds from the deposit may only occur in accordance with the terms of the Guarantee Agreement. The CMB Administrative Placement Agent reviews the EB-5 investor’s subscription for suitability and compliance with securities laws. Once processed, the EB-5 investor is formally accepted as a limited partner in the partnership.
  1. Petition I-526: Once the EB-5 investor is accepted as a limited partner in a CMB EB-5 partnership, the investor’s immigration attorney files petition I-526 with USCIS.
  1. Consulate Interview: If petition I-526 is approved, the EB-5 investor requests a conditional green card through an interview at the consulate or a status adjustment (Form I-485), if he or she is already in the US on another visa. If petition I-526 is denied, the investor’s capital contribution would be returned to the partner in accordance with the terms of the articles of association.
  1. Conditional Permanent Residence: Once the EB-5 investor is approved for a visa and a visa is available, the investor and qualified family members receive conditional green cards that are valid for two years. The EB-5 investor must enter the United States within 180 days, if not already in the United States. This entry into the United States begins the period of 24 months of conditional permanent residence.
  1. Petition I-829: Between the months 22-24 of the EB-5 investor’s conditional permanent residency period, the investor’s immigration attorney files petition I-829 to remove the conditions from the green card and be able to receive his ten-year green card.
  1. Return on Capital: Once all investments in the partnership have been repaid, the limited partners can vote to settle the partnership and distribute the balance of each capital account in accordance with the Partnership Agreement. The foreign investor must be sure to understand the terms and conditions of the Regional Center with regards to return of capital and all other financial terms and practices of the Regional Center.

Processing time: On average 24 months for you to get the temporary green card that is valid for 2 years, where you must apply for a new permanent visa. After that, the government will evaluate two things: if the capital was really invested in the project and at least ten jobs were generated in that time. If the investor meets the requirements, the investor receives the permanent visa in a few months.

Steps on the EB-5 Stand-Alone Business Path: EB-5 Stand-Alone Business Path  

  1. First Decide How To Structure the Enterprise:As I said before, when the foreign investor chooses to build a stand-alone business, the immigrant can choose between investing in a business that already exists in the USA, an option chosen by the vast majority of foreign investors, or by creating the business itself from the ground-up, which requires a larger number of documents and takes more time and entrepreneur skills on the part of the foreign investor; its management team and outside attorneys, accountants, bankers, risk management professionals, realtors and other expertise. The amount of the minimum investments does not change, whether the investor buy into an existing enterprise or structure an enterprise from scratch. The foreign EB-5 Visa investor will need to invest$1.8 million in at-risk capital into the business. This amount is reduced to $ 900,000 if the EB-5 project is located in a Target Employment Area (TEA). To be designated as a TEA, the EB-5 project must be located in a rural area or in a location that has high unemployment. The designation of a Target Employment Area is requested through petition I-526 from investor EB-5’s.  And remember the TEA designation is now being made exclusively by USCIS.  The states no longer are authorized under the 2019 Regulations to make TEA determinations.
  1. What does the term TEA mean: A high TEA unemployment rate is defined in the statute as a location or area with an unemployment rate of at least 150% of the U.S. national average. A TEA area could be located in the middle of a major metropolitan area if the unemployment rate meets or exceeds this threshold. However, the area with high unemployment should be located in a municipality or metropolitan area that has a population of 20,000 or more. An EB-5 project may be designated TEA if the main location of the project is located in an area of ​​high unemployment at the time the EB-5 investment is made. The following resources might be helpful in acquiring sufficient evidence for the TEA designation:
  • The US National Bureau of Statistics (US Bureau of Labor Statistic) Office of Local Unemployment Statistics (LAUS) in recent published technical bulletins;
  • Letters from federal, state and local public agencies presenting evidence of a rural or high unemployment area;
  • Other statistical documentation, such as Census data
  1. Stand-Alone Enterprise Path Processing:The processing steps 3, 4, 5, 6 and 7 that applies to the Regional Center Path that I discussed above also applies to the Stand-Alone Business Path if the foreign investor chooses to take the stand-alone business Path rather than investing in a USCIS approved Regional Center. These particular steps are primarily the same; except, for the involvement of an USCIS approved Regional Center and the particulars related to that.

Substantive Requirements of all EB-5 Foreign Investors Regardless of the Investment Path: Requirements of all EB-5 Foreign Investors  

  1. The interested investor must first of all prove the legality of the funds. This is a critical requirement and the investor must be able prove the chain-of-ownership and chain-of-possession of all of the at-risk-capital.
  • According to USCIS, the EB-5 investment must preserve or create a minimum of 10 full-time positions for workers in the United States who qualify. Such job creation or preservation must occur within two years of the investor’s conditional permanent residency and entry into the United States. Jobs created in EB-5 projects are defined as direct, indirect or induced. In the context of direct investment, the EB-5 visa applicant must prove that the EB-5 capital resulted in updating direct jobs for employees who work directly in the business in which the investment was made. In the context of the regional center, the candidate can count on direct, indirect and induced jobs in relation to the job creation requirement.
  1. Investing in a company: Foreign investors must engage in due diligence as to who is involved when investing, what they are investing in, where they are investing and why they are investing their capital. Due diligence is a must do exercise in EB-5 investing.  Proving the legality of the investor’s income is just the beginning of the due diligence process.  In the event, the interested foreign investor chooses to invest in an existing company, the investor should look for those that are licensed to receive funds under the EB-5 visa program. Some American developments that provide EB-5 investor opportunities are enterprises in engaged in such activities as resorts, luxury condominiums, restaurants, shopping centers, among others types of enterprises. The foreign investor could also decide to open and operate a startup from scratch.  Where to invest depend upon the investor’s goals and objectives.
  1. Investing in a Regional Center Project: Here, the required investment in the approved Regional Center may be less and the number of jobs required to be generated or created are affected by the pooling of the investment of several foreign investors. Perhaps there is strength in numbers.  But investment decisions must be made by individual investors taking all due diligence measures when counseling with professionals that are properly registered, licensed and controlled by the securities regulators and debt regulators in the United States.

Regulation Changes Implemented in 2019 and Some Impacts:

EB-5 Regulation Changes

The new rules of the EB-5 visa program were implemented by DHS on November 21, 2019 and the highlights of the changes were as follows:

  1. Increase of the investment value from $1,000,000 to $1,800,000 in any area within the American territory, and from $500,000 to$900,000 in less privileged areas – those known as Targeted Employment Areas – TEA. It also established that the values ​​will be revised every 05 years based on inflation: The change was established by the US Congress, with the objective of making a monetary correction and equalization with the same type of visa in other countries, since the previous value was the same since the visa was conceived in 1990. In addition, the objective was to match the other visas of investors in other countries such as Portugal, which is 1 million euros, in the United Kingdom it is 2 million of pounds.
  1. The designation of Targeted Employment Areas – TEA has come to be through the combination of continuous and adjacent registered areas in which the new commercial company is conducting and developing its business. These areas are expected to have high levels of unemployment – 150% above the national average, and should be cities and municipalities with populations over 20,000 inhabitants, and which are outside the areas of large metropolises. The United States Department of Homeland Security-DHS will decide who determines whether a certain area is classified as a TEA, eliminating the participation of state agencies. Therefore, the administration of the process and tasks such as receiving investment requests and determining areas of economic stress passed from the state to the federal level, through the Department of Homeland Security, which makes the process a little longer. This is because the local authority has a great interest in making this financial contribution to their area, where acceptance of the investment took about a month. Moving to the federal level, it may take a little longer.
  1. The beneficiaries of the main applicant may individually submit the last form I-829 of the EB5 visa process that transforms the permanent resident card from provisional to permanent. If there are problems with the visa transformation of the main applicant, the dependents can individually submit the last form.
  1. The fourth change is regarding direct EB-5. Until then, the investor of the program through direct investment had to open his own business and actively manage it to comply with the rules of generating the 10 jobs required for a minimum period of 2 years. With this change, the investor will not need to directly manage the business. The mere fact of being a rights holder through a limited partnership contract model or a participation in a new company incorporated through a limited company will meet the requirements of the active participation program in the new commercial company.

According to the United States Department of Homeland Security – DHS, the recent changes in the regulation of the EB-5 foreign investor visa program were implemented in order to combat harmful practices that were being manipulated by some operators of the program due to loopholes and flaws in its regulations.

One of the harmful practices to which they refer to is the inclusion of areas of large cities as being less privileged within the American territory, the well-known Targeted Employment Areas – TEA.

The U.S. government immigration agency announced on January 29, 2020 a change to the EB-5 visa, which gives foreigners who invest in the country the right to permanent residence. The change will be in the queue for analysis of visa investment processes, which will give priority to requests from Brazilians as of March 31, 2020. Today, the processes of all nationalities are analyzed in a general queue in the order of entry, with the response time for Brazilians between 35 to 40 months. With the measure, a single queue for each country will be created, and the deadline should fall significantly.

The processes will begin to analyze the requests from countries that do not have their quotas already occupied, such as Brazil. This change in the criteria will potentially favor, a lot, Brazilians who intend to come as investors in the EB-5 visa for the United States. The case being analyzed and answered faster will most likely lead to faster green card processing, that is, a life with less stress in the United States without the traditional anxiety about waiting and waiting for the process to work.

In 2018, Brazil was the American country that accounted for the most emissions from the EB-5 visa, also known as “Golden Visa”. There were 388 green cards awarded to Brazilians who want to invest and live in the USA. The increase was 37.5% compared to 2017 and 1,041.2% compared to 2015. In 2019, worldwide, Brazil ranked 6th among countries with the largest number of participants in the EB-5 program, becoming the country with the highest number of emissions on the American continent.

The intention of this program is to benefit local workers, boost the economy and help communities in need, attracting foreign capital investment in the United States. The EB-5 is still the most considerable path for those who want to get a green card. It is highly sought after by those who want to not only live in the USA, but invest and have a thriving business.

Historical Profile of those applying for the EB-5 foreign investor’s visa:

Historical Profile of those applying for the EB-5 foreign investor’s visaInternationally, the application for this type of visa historically has been led by Chinese, but the number of Brazilians has grown steadily in recent years. The applications appear to be from Brazilians; generally speaking, who are entrepreneurs and people of considerable wealth who no longer want to live in Brazil. From 2012 to 2018, there was an increase of more than 15 times in demand. In 2012, 24 Brazilians applied for the EB-5 foreign investor’s visa. Until 2015, it was stable, with 34 applications. Then, with the crisis in Brazil, it increased: 150 in 2016, 282 in 2017 and finally 388 in 2018.
 

Potential Advantages of Becoming an EB-5 Foreign Investor: Advantages of Becoming an EB-5 Foreign Investor

  1. Path to Green Card;
  2. Path to U.S. Citizenship;
  3. Path to Financial and Physical Security;
  4. Path to Reuniting with Family, Colleague and Friends who Have Already Moved to the United States;
  5. Path to Great Education and Schooling for the Entire Family;
  6. Path to building strong international businesses;
  7. Path to dream and give to the community

 

Follow our law firm’s blogs and listen to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or where ever you listen to your podcast for updates concerning these topics and other taxation, litigation and immigration information you can use!

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 | Portuguese (214) 272-3100

 

Foreign Doctors and Other Healthcare Workers Opportunities to Work & Live in the United States

October 9, 2020
By Coleman Jackson, Attorney
Foreign Doctors and Other Healthcare Workers Opportunities to Work & Live in the United States

Covid-19 has revealed a lot of short comings in the health care system in the United States.  An overwhelming majority of negative health outcomes have affected the minority communities throughout the country.  The social injustices and the long tail of racial injustice and its impact on the health and well being of our follow citizens are glowing clearly down whatever dark path Covid-19 takes as it sweeps across America’s urban areas and rural areas and whatever other path this mysterious virus goes down.  One thing is clear its impact is not equal on all of America.

America needs to do better.  She must do much better by its citizenry.  One place to start is making sure that a sufficient supply of quality healthcare workers is available to serve all America regardless of what they look like or how much money they have in the bank.  Quality healthcare involves much more than universal health insurance and access to understaffed hospitals and clinics.  There must be qualified, compassionate, skilled healthcare providers who are willing and able to serve communities throughout America staffing the hospitals, clinics and medical offices.

Health Care Worker Visa

If there is a shortage in health care workers, can health insurance coverage alone solve the problems laid bear by Covid-19? There were a woefully insufficient number of healthcare workers in under served communities throughout the United States long before Covid-19 arrived on our shores.  Health insurance does not solve this problem.  Legislation enacted on November 12, 1999, 220 Public Law No. 106-95, 113 Statute 1312 Section 5 suppose to have made it easier for certain foreign physicians and other healthcare workers seeking to work and reside in the United States to enter the United States in the second employment-based preference category, known as the,  EB-2 Visa under the national interest waiver.  Now the EB-2 NIW is not the only visa that health care workers may use to work in the United States, for example, the H1-B, J-1, EB-1 and the traditional EB-2 are all visa types that might afford foreign health care workers the opportunity to live and work in the healthcare field within the United States.  But the EB-2 NIW was designed to make it easier and shorten the time for foreign healthcare workers to come to the United States to live and work indefinitely in the healthcare industry.

The EB-2 NIW- Who Qualifies for the EB-2 National Interest Visa?   All kinds of doctors, nurses and other healthcare workers may qualify; so long as, they agree to work full time in a field designated by the U.S. Department of Health and Human Services (HHS) as a health professional shortage area or in a Veterans Administration Hospital; and a federal agency or a state department of public health has determined that the healthcare workers’ service is in the public interest.  These are the two prongs of the 1999 legislation establishing the EB-2 National Interest Waiver.  They must be satisfied by obtaining a certification from the federal or state agency, such as the Veteran’s Hospital (VA) on the federal level or State Public Health Agency on the State level.  Local health agency certification will prove to be insufficient and also private organization attestation of the public interest will prove to be insufficient to satisfy this requirement.  A certification by the State Department of Public Health tend to be persuasive evidence of “public interest” when it comes to satisfying the National Interest Waiver certification requirement.  Keep in mind that an NIW is generally considered an easier path to the second preference employment-based EB-2 visa.  NIW healthcare workers must still satisfy all of the requirements for the traditional EB-2 visa in addition to the NIW requirements.

EB-2 Visa
The EB-2 NIW- Does the EB-2 National Interest Visa applicant need to obtain a U.S. Department of Labor certification?  The EB-2 NIW is exempt from labor certification requirements under the 1999 legislation.  The physician or other healthcare worker must certify that they will work full time in a healthcare shortage area or VA hospital for five years.  The healthcare worker must present credible evidence that their work will advance a critical national goal and that their work will benefit the public interest of the United States.  In this time of Covid-19, this certification by the foreign healthcare worker could possibly be easier that ever before to meet due to increased coronavirus related sickness, hospitalizations and exhaustion and depletion of health industry capacity that was already strained in some rural and underserved areas of thee U.S. long before Covid-19 hit the American shores.

The EB-2 NIW- What is the process of applying and how long does it generally take from the filing of the application and working at an American hospital, clinic or other healthcare facility?First of all, the petitioner applying for an EB-2 NIW does not need a hospital or other institution to file the petition nor do they need a job offer.  The foreign healthcare worker can self-petition for an EB-2 NIW. The petitioner must first file USCIS Form I-140 with supporting documentation showing the following:

  • All identification evidence required for the traditional EB-2 visa;
  • Written evidence that the two prongs of the National Interest Waiver showing that the healthcare worker will work full time in an underserved healthcare area, or in a Veterans Administration Hospital facility;
  • Credible Credentialing evidence that shows or demonstrates that the physician or other healthcare worker has the educational, licensing, experience and other professional indicia required by Immigration and Nationalization Act Section 212(a)(5) (B) to work in the intended State of the United States in which they intend to work;
  • All evidence required for USCIS Form I-485 Adjustment Application in the event an Immigrant Visa is immediately available. The immigrant must review theVisa Bulletin published each month by the U.S. Department of State in making the determination as to when to file Form I-485, Adjustment of Status Application; and
  • Other credible evidence as required for healthcare workers in the State.

 

healthcare workers spouse and family visa

As for the processing times at the USCIS, currently processing times are over one year; but, processing times varies based on all facts and circumstances and during Covid-19 the process could take a few months if the foreign healthcare worker shows that their skills are in the public interest and that they are willing to serve at medical facilities with acute shortages or in underserved communities in rural and intercity America.  It should be noted that although an adjustment of status application (Form I-485) can be filed when an immigrant visa is available and can even be filed concurrently with the I-140; the USCIS is not expected to approve the adjustment application until the healthcare worker has actually served in the underserved medical area for at least five years.    Where to file for EB-2 NIW?  Outside of the United Sates the foreign worker files the appropriate forms and supporting documents with the U.S. Consulates Office in their home country; whereas, inside the United These the petitioning foreign healthcare worker files the appropriate forms and supporting documents with USCIS who handles immigration processing inside the country.  Premium or expedited processing could be available to speed up the processing of the I-140 petition; but the availability of premium processing is changed by the government from time to time upon short notice.

The EB-2 NIW- What about the healthcare workers spouse and family? The foreign workers spouse and children under the age of 18 may be admitted to the Unites States in the E-21 and E-22 immigrant visa status.  Their spouse and children can enroll and attend school in the United States.  During the pendency of the adjustment of status application, the spouse is eligible to file for Form I-765, Employment Authorization Application for approval to work in the Unites States.  The spouse and the children can maintain this status and live in the United States indefinitely; so long as, the principal foreign worker maintains the EB-2 NIW immigration status.  Let’s just note that the foreign worker and their spouse and children can travel freely inside and outside of the United States, so long as, they maintain the second preference employment-based visa immigration status.  Once the individual family members adjustment of status application is approved (they get their Green Cards) and they can reside and work in the United States permanently and they can apply for U.S. citizenship after holding the Green Card status for five years.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 | Portuguese (214) 272-3100

 

Podcast – Who is a Resident Alien Under United States Tax Law? | LEGAL THOUGHTS

Published July 9, 2020

Podcast - Who is a Resident Alien Under United States Tax Law? | LEGAL THOUGHTS

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.   The topic of discussion is “Who is a Resident Alien Under United States Tax Law?” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation, and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Who is a Resident Alien Under United States Tax Law?”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our public relations associate, Mayra Torres will be asking the questions and I will be responding to her questions on this important tax topic: “Who is a Resident Alien Under U.S. Tax Law?”

Interviewer:  Mayra Torres, Public Relations Associate

Question 1:

Good morning, Coleman. This is Mayra. I do have a couple of questions for you when it comes to umm… a resident alien under U.S. tax law. Who or what is considered a Resident Alien under U.S. Tax Law?

Attorney Answers Question 1:

  • S. tax law defines the term Alien in the following ways:
    1. Nonresident Alien; and
    2. Resident Alien
  • I am going to go into further details on both; but our main focus in this podcast will be on the Resident Alien. Anyone who is interested to learn more about how a nonresident alien is impacted by U.S. tax law can subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever they get their podcasts.
    1. Nonresident Alien is defined in Internal Revenue Code Section 7701(b)(1)(B) as any individual who is not a citizen of the United States and who do not meet either the Green Card Test or the Substantial Presence Test for Resident Alien.
    2. Internal Revenue Code Section 7701(a)(9) includes only the 50 States and the District of Columbia in determining whether an alien is a nonresident alien. The law does not include U.S. possessions, territories, or U.S. airspace. For example, Guam is not included in making the determination as to whether an alien is a nonresident alien.
    3. I am now going to focus this podcast strictly on the question: Who is a Resident Alien in U.S. Tax law?
    4. There are two test or measures used in U.S. tax law to determine whether an alien is a resident alien under U.S. tax laws as follows:
      • Green Card Test: Under this test an individual is a Resident Alien (should be simply U.S. Resident, but as I mentioned the law still says resident alien, nevertheless) Under the Green Card test an individual is a U.S. resident if the individual was a lawful permanent resident of the United States at any time during the calendar year.
      • An individual is a Green Card Holder if they have become a Lawful Permanent Resident under the immigration laws of the United States 8 United States Code.
      • For U.S. tax purposes lawful permanent residence status continues unless the status is rescinded administratively or rescinded by a U.S. federal Court, such as, in a deportation proceeding by an Immigration Court.
      • An LPR can also abandon their Green Card Status by following the appropriate procedures or any Consular Officer or Border Protection Officer possibly could argue that the LPR status has been abandoned under circumstances described in U.S. Immigration Laws. U.S. tax regulations Section 301.7701(b) sets forth the Internal Revenue Codes positions concerning the Green Card test in determining whether an Alien is a Resident of the United States based on the Green Card test.
  • Now let us turn to the second test used by the IRS in determining whether an alien is a Resident Alien of the United States. The second test is known as the Substantial Presence Test. Under the substantial presence test, an individual is a Resident Alien or U.S. Resident if they are physically present within the United States on at least:
    1. 31 days during the current calendar year; and
    2. a total of 183 days during the current year and the two preceding years, counting each day of physical presence in the current year as one whole day, each day of presence in the first preceding year as one-third of a day., and each day of presence in the second preceding year as one-sixth of a day. Fractional days derived from these computations are not counted towards substantial presence.
  • I know this may sound very complicated to non-tax lawyers or Certified Public Accountants; the Substantial Presence Test is explained in excruciating detail in Internal Revenue Regulation Section 301.7701(b)-1(c)(1). And both the Green Card Test and Substantial Presence Test is codified in 26 United States Code Section 7701.

Interviewer:  Mayra Torres, Public Relations Associate

Question No 2:

I am just curious, are there any exceptions to this Substantial Presence Test. I mean, you are always saying the law is complicated and that there are often exceptions to the rules. What about now… are there any folks exempt from the Substantial Presence Test?

Attorney Answers Question 2:

  • The following individuals are exempt from the Substantial Presence Test pursuant to Internal Revenue Code Section 7701:
    1. International Students
    2. Professional Athletes
    3. Diplomats and their immediate family members
    4. Teachers on the J Visa immigration status and their immediate family members.
    5. Full time Employees of international organizations and their families that have been appropriately designate by the Secretary of the Treasury in consultation with the Secretary of State of the United States.
    6. Regular commuters from Mexico and Canada are not generally considered meeting the substantial presence test.
    7. There might be a few other exceptions; but these are the ones I can recall right now. I might add that even within these exceptions there are further particulars that I am just not going to get into right now.
    8. The actual application of the substantial presence test is very complex, and anyone impacted by these issues should consult with qualified tax professionals in their area.

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

Well alright then. What are some of the United States tax consequences to an individual meeting either the Green Card Test or the Substantial Presence Test?

Attorney Answers Question 3:

  1. S. residents who meet either the Green Card Test or the Substantial Presence Test must comply with all U.S. tax laws (I am using this term for resident aliens because I think it sounds more humane and welcoming).
  2. S. residents are generally taxed in the same manner as U.S. citizens. They are taxed on their worldwide income the same as U.S. citizens.
  3. S. residents must report their income by filing the appropriate federal tax return complying with all the reporting requirements applicable to U.S. citizen taxpayers.
  4. S. residents are allowed exclusions from gross income with respect to certain income earned, such as, certain compensation paid by foreign employers, nontaxable dividends, gains from sale of home and other types of income specifically excluded from gross income for U.S. taxation purposes.

Interviewer:  Mayra Torres, Public Relations Associate

Question No. 4

  • S. residents are taxed just like U.S. Citizens pretty much. I get that. But what about that $600 per week people are receiving under the CARES Act?
  • Can resident aliens (foreigners who satisfy the Green Card Test or Substantial Presence Test) receive that $600 per week too? And what about people who don’t have their papers? How and where do resident aliens apply.

Attorney Answers Question 4:

  • Yes, individuals who satisfy the Green Card Test or the Substantial Presence Test can qualify to receive the weekly $600 emergency increase in unemployment compensation benefits under the CARES Act because Subtitle B Section 6428.2020(2)(b)(d) says that nonresident alien individuals do not qualify.
  • Remember I spoke earlier about an alien can be either (1) a nonresident alien or (2) a resident alien for U.S. tax purposes. If an alien satisfies the Green Card test or the Substantial Presence Test they are classified as Resident Aliens (I like to use the term U.S. Resident) for tax purposes. And yes, undocumented individuals can satisfy the Substantial Presence Test and be treated as Resident Aliens for tax purposes. They typically should apply for an Individual Tax Identification Number otherwise called an ITIN to comply with U.S. tax laws.
  • There is no mention of Resident Aliens being unqualified to receive the $600 emergency increase in unemployment compensation benefits in the CARES Act. In Texas, these individuals (U.S. Residents) apply for this federal emergency increase of $600 with the Texas Workforce Commission at the same time they file an Unemployment claim based on loss of employment as the result of Covid-19. I think Resident Aliens or U.S. Residents qualifies to receive the weekly $600 under the CARES Act.

Attorney’s Concluding Remarks:

This is the end of Legal Thoughts for now!

  • Thanks for giving us the opportunity to inform you about who is a resident alien of the United States under U. S. tax law. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Stay tune! We are here in Dallas, Texas and want to inform, educate, and encourage our communities on topics dealing with taxation, litigation, and immigration. Until next time, take care.