What if Your Spouse Doesn't Want to Study? Visa Requirements for U.S. Tax Practitioners

By:
Luciana Zamith Fischer
Published Date:
Nov 1, 2016

In a globalized world, where investment and trade continues to flow across borders, investors and companies find it difficult to understand the complexities imposed by countries based on notions of sovereignty and national security. The United States is one of the world's premier destinations for tourism and investment. It is particularly common to see real estate investors seeking residence or retirement in the United States, businesses expanding to the country, and people engaging in activities likely to be regulated by immigration law.

U.S. immigration and tax laws are extremely complex, and these complexities and inconsistencies must be clearly understood in order to advise clients. In designing a proper strategy, it is important to understand a client’s short-term and long-term goals when immigrating to the United States. '

The focus of tax practitioners is to determine their clients’ residence under U.S. tax laws—see 26 USC section 7701(b)(1)(A). This often involves an analysis of the days a client was physically present in the United States during the past three years. Therefore, in devising a strategy for their clients, tax practitioners should focus their analysis on whether someone is a “Resident Alien” (RA) or a “Nonresident Alien” (NRA) pursuant to the IRC.

Immigration law has a different definition for the term “residence.” Under the Immigration and Nationality Act (INA), a person becomes a lawful permanent resident when he or she has “been lawfully accorded the privilege of residing permanently in the United States as an immigrant in accordance with the immigration laws [. . .]”. (See 8 USC section 1101(a)(20).) It is only upon receiving a green card that a foreign national becomes a “resident” under immigration laws. Therefore, there is a large distortion between tax and immigration laws: Someone who meets the substantial presence test because of days spent in the United States as a tourist might be considered a resident for tax purposes, but not for immigration purposes.

Some clients—wishing to spend more time in the United States without the impact of U.S. taxation on their worldwide income—have chosen to pursue F-1 student visas, hoping to take advantage of the five-year lifetime exemption from the substantial presence test. While this strategy may be appropriate for some individuals and families who truly have an intent to temporarily remain in the United States to study, others will become tired of study, begin to find investment or entrepreneurial opportunities, or will simply find that their lifestyles do not comport with the strict needs of a full course of study. For those individuals, it is important to contemplate other options beside the F-1 visa. The realization that they may not be able to pursue their entrepreneurial endeavors in the U.S. without a proper work visa—or that they will be in violation of their status in the country if they do not comply with a full course of study—might have a serious impact on their lives and their families’ lives.

Proper pre-immigration tax planning must be considered in the context of the immigration options available to the individual and his or her family who wish to move, temporarily or permanently, to the United States. Identifying issues is a crucial aspect of client representation. This article is intended to provide tax practitioners with a basic understanding of immigration law to better assist their clients, focusing particularly on options available for entrepreneurs and investors.

There are a few non-immigrant visa options for those who seek to come to the United States to acquire or start new businesses:

1. Treaty Traders and Investors: The E-2 visa allows investors to pursue entrepreneurial opportunities in the country and is only available for citizens of countries that enjoy a treaty of commerce with the United States, a list of which is available here. The visa requires an investment in a bona fide commercial enterprise. The amount of investment must meet the substantiality and marginality test: The business must be well capitalized to show a present or future capacity to generate income; the capital must be irrevocably committed and “at risk” in the business sense; it must consist of the investor’s personal assets—one must pay special attention to investments involving borrowed funds or corporate funds; and the investor must show the lawful source of the capital invested. (See 8 CFR section 214.2(e).) Proper tax planning is required for clients who wish to minimize the days in which they are present in the United States, or to create efficient tax strategies to minimize U.S. taxation on their worldwide income during their temporary stays in the United States.

2. Intra-Company Transferees: The L-1A visa allows executives and managers of a company with operations abroad to come to the United States, in an executive or managerial capacity, to start up operations. The initial visa petition is granted for one year, wherein the foreign national will be provided some latitude to ramp up the business. Renewal of the L-1A visa will require the business to be active and operating; therefore, a sound and well-developed business plan will be necessary for the entrepreneur to prove that—after one year of his or her L-1A admission—the business will have hired employees, fulfilled contract orders, be generating a revenue stream and demonstrating a systematic provision of goods or services to its customer base. Within one year, the entrepreneur will also have to demonstrate the hiring of professional staff or subordinate employees to relieve him or her of the “hands-on” tasks of the business, allowing the entrepreneur to focus primarily on managerial or executive duties. Due consideration must be given to the business’s organizational chart, which will establish the hierarchical duties of managers and executives and their subordinate staff. It must also be noted that the L-1A visa will only be a viable strategy for entrepreneurs who can demonstrate their role as a manager or executive of the company’s business operations abroad for at least one of the prior three years, as well as the qualifying relationship between the business’ foreign operations and its U.S. operations. (See 8 CFR section 214.2(l).)

Provided that the right structure can be created for the U.S. business and operations are maintained abroad, an entrepreneur will be allowed to work, intermittently or on a full-time basis, to spearhead the growth of the business operations in the United States. Proper tax planning will be essential to the entrepreneur seeking an efficient tax structure for the business, as well as an assessment of U.S. taxes on his or her worldwide income. Pre-immigration tax planning will also be important to entrepreneurs, who might later choose to pursue a green card strategy once they have created a viable business in the United States.

More complex options might be available to investors and entrepreneurs who do not qualify for the aforementioned visa strategies—perhaps because they are not citizens of a treaty country, or because they do not have, or do not wish to maintain, their businesses abroad. These options might also be applicable to those who are interested in a more permanent immigration strategy: the green card.

1. Individuals who can demonstrate great success in their past endeavors: A few options are available to those who have risen to the very top of their fields of endeavor and can demonstrate sustained national or international recognition for their achievements.

a. Extraordinary Ability Petitions. Individuals who can demonstrate extraordinary ability in the sciences, arts, education, business, or athletics may self-petition for a green card because a job offer is not required for this classification. The individual will need to evidence intent in coming to the United States to continue work in the field of extraordinary ability. Furthermore, to demonstrate “extraordinary ability,” one must establish eligibility under at least three of the regulatory criteria set forth under 8 CFR section 204.5(h). To evaluate whether the foreign national might have a claim of extraordinary ability, he or she must be able to answer yes to at least three of the following questions:

i. Have you received any nationally or internationally recognized prizes or awards for excellence in your field of endeavor?
ii. Are you a member of an association that requires outstanding achievements of its members, as judged by national or international experts?
iii. Is there published material, in major media or trade publications, about you and relating to your work?
iv. Have you ever participated, either individually or as part of a panel, as a judge of the work of others in your field of endeavor?
v. Have you made an original contribution of major significance in your field of endeavor?
vi. Have you authored scholarly articles in your field? Have they been published in professional or major trade publications or other major media?
vii. Have you had your work displayed in artistic exhibitions or showcases?
viii. Have you performed in a leading or critical role for an organization or establishment of distinguished reputation?
ix. Have you commanded a high salary or other significantly high remuneration, in comparison to others in your field?
x. Have you enjoyed commercial success in the performing arts?

b. National Interest Waiver Petitions. Individuals who might not be able to demonstrate eligibility under three of the aforementioned categories—but who substantially rise above others in their fields of endeavor and whose expertise would serve the national interest of the United States—may also self-petition for a green card by evidencing the following:

i. Education: Individuals must be able to evidence:

  • A U.S. master’s degree or above or its foreign educational equivalent; or
  • A U.S. bachelor’s degree (or its foreign equivalent), followed by at least five years of progressive experience in the field of endeavor.

ii. The three-prong test created under In re New York State Department of Transportation:

1. Substantial Intrinsic Merit: The individual’s area of proposed employment must have substantial intrinsic merit. NYSDOT dealt with the question of whether a civil engineer who would be working in the maintenance of New York bridges merited a national interest waiver. The decision explained that the field of endeavor—engineering of bridges and their proper maintenance—was immediately apparent.

2. National in Scope: The proposed benefit of the individual’s employment must benefit more than a particular region of the country. This requires an interstate commerce argument. The NYSDOT decision explained that New York bridges connected the state to the national transportation system; therefore, their proper maintenance and operation serve the interests of other regions of the country.

3. Substantially above others: The individual must show that he or she will serve the national interest to a substantially greater degree than the majority of colleagues in the field of endeavor. This can be established by showing that the individual has a degree of influence in the field that distinguishes him or her from others, and that the individual has a past record of specific prior achievements that indicates the future benefits to the national interests of the United States. In the context of entrepreneurship, this could be shown by the entrepreneur’s plans to create jobs for U.S. workers or otherwise enhance the welfare of the United States. It would be important to show the entrepreneur’s past achievements; to distinguish him or her from others in the field; and to create credibility as to his or her prospective ability to benefit the United States.

2. Investment and Job Creation: Known as the EB-5 Program, the law establishes three principal requirements:

a. A minimum of $1,000,000 must be invested in a new commercial enterprise (NCE). This minimum is lowered to $500,000 if the NCE is located in a targeted employment area of the United States—meaning an area qualifying as rural or experiencing unemployment of at least 150% of the national average unemployment rate.

b. The investor must place his or her personal assets at risk and establish the lawful source of the capital invested.

c. The investment must result in the creation of at least 10 permanent full-time jobs.

Within the EB-5 Program, there are two types of investments:

a. Direct investments: This is a path in which investors may own and operate a business in the United States and apply for a green card based on said investment. The aforementioned requirements apply: the minimum investment amount, the lawfulness of funds, and the 10-minimum job creation. With direct investments, the investor may be the sole owner of the business; he or she may enter into partnership with other EB-5 or non-EB-5 investors; or he or she may participate in fund structures as limited investment partners. The critical aspect of direct investments is that, for every EB-5 investor, 10 direct jobs must be created.

b. Indirect investments: This is known as the “regional center” investment. In 1992, while seeking to further stimulate the economy, Congress created the Regional Center program, which allows investors and investment funds to prove job creation based on a multiplier effect—that is, the direct, indirect, and induced jobs resulting from the construction and operations of the job creating entity (JCE). While the structure of a regional center would be too costly for a single investor, investment funds greatly benefit from the regional center structure by pooling a larger number of EB-5 investors, allowing more flexibility in evidencing job creation.

Advising Clients on EB-5 Investment Funds

a. The benefit of investing in an EB-5 fund is that foreign nationals can take a more passive approach to their investment because they do not have to be engaged in the day-to-day management of the business. This might be a suitable strategy for those who can afford this type of investment and have not yet defined their plans in the United States, or those who might not qualify under other immigration options.

b. It is, however, extremely important for investors and their respective advisors to conduct due diligence on the investment. EB-5 funds often involve complex investment structures and are similar to private equity investments. They involve little liquidity and low investment returns; therefore, investors must carefully evaluate the strategies used by each fund to mitigate investment and immigration risks. Investors will need experienced counsel to guide them in this process.

Throughout the world, individuals and their families have chosen to look beyond the boundaries of their own citizenship, seeking global investment opportunities, a lifestyle that provides them with freedom of mobility, job opportunities, and better education for their children. Some emigrate to escape persecution, conflict, or violence; others emigrate for family reunification. Immigration is a complex and dynamic legal field that often involves life-changing decisions by the families involved. Today’s immigration laws, policies, and regulations require complex, strategic approaches that are unique to each case. Clients demand undivided attention and creativity, depth of experience, and strategic approaches to find unique solutions to the most complex immigration matters. Even the simplest immigration matters might involve unforeseen complexities. Such, for example, is the case of U.S. citizens living abroad from an early age, unaware of the need to report their income in the United States, and who now wish to immigrate with their families to reside in the country. A case that appears to be simple on its face might uncover complexities that require the combined expertise of immigration counsel and tax practitioners. Immigration law plays a crucial part in representing foreign nationals in various areas of taxation. A basic understanding of immigration law will help the reader to identify certain issues that might prove crucial in client representation.


lucianaLuciana Zamith Fischer is a partner at Hunter Taubman Fischer & Li’s (HTFL) Miami, Florida’s office, where she manages the firm’s immigration law practice. Her clients include large and small companies, and she advises them in all aspects of employment-based immigrant and nonimmigrant visas. Ms. Fischer also represents internationally recognized individuals pursuing lawful permanent residence through Extraordinary Ability (EB-1) Petitions, National Interest Waivers (NIWs), and Investment/Job Creation (EB-5). Born and raised in Brazil, Ms. Fischer’s background affords her practice the great benefit of her Latin culture and language skills. She is fluent in Portuguese and Spanish, and has a singular ability to relate to clients’ concerns and expectations immigrating to the United States. Ms. Fischer is a member of the Florida Bar and the American Immigration Lawyers Association. She graduated with honors from the University of Florida, where she received her bachelor's degree in political science and economics. She is also a graduate of the University of Minnesota Law School, where she was an editor for the Minnesota Journal of International Law. She can be reached at Lfischer@htflawyers.com or 786-391-3849.

 
Views expressed in articles published in Tax Stringer are the authors' only and are not to be attributed to the publication, its editors, the NYSSCPA or FAE, or their directors, officers, or employees, unless expressly so stated. Articles contain information believed by the authors to be accurate, but the publisher, editors and authors are not engaged in redering legal, accounting or other professional services. If specific professional advice or assistance is required, the services of a competent professional should be sought.