Historically, Immigration and Nationality Law has been a neglected stepchild, garnering relatively little attention. That has changed over the years as the world shrinks in size and as we, in our role as part of the international community, come to realize that practice in all aspects of law can have immigration and visa consequences. The practicing bar at large is awakening to the significance of this area.
Hopefully, this brief newsletter will serve as a rminder that Immigration and Nationality Law can have a significant impact on your area of practice and on your clients.
Outlined below are a few “practice alerts” as to substantive areas of immigration law which have applicability to various other areas of your practice. We also furnish an outline of the current immigration system set forth in the Immigration Act of 1990 (IMMACT90) and highlight some of the restrictions effected by the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (“IIRAIRA”).
IMMIGRATION AND NATIONALITY LAW AND YOUR SPECIALTY
Briefly enumerated below are some aspects of Immigration Law which might have direct impact upon your area of practice:
1. Citizenship Acquisition
Tax legislation in recent years has made the marital deduction unavailable to a non-United States citizen spouse (even a permanent resident or “green card” holder) and added restrictions to the use of the Q-DOT trust mechanism as an alternative tool for tax planning to such deduction. Accordingly, directly relevant to estate planning is the issue of naturalization (obtaining U.S. citizenship), its consequences and its implications with regard to such spouse’s previous nationality. U.S. nationality law allows for the possibility of dual citizenship.
Where naturalization to U.S. citizenship is determined to be an objective in estate planning, the practitioner must keep in mind the substantial delays currently being experienced in processing these applications. After the Immigration and Naturalization Service was severely criticized for conducting flawed background checks of applicants, it instituted new procedures which have delayed processing times. This development, coupled with new restrictions on various federal benefits programs which has resulted in the number of applications soaring, has created a logjam which can mean delays of from one to two years (or more, depending on the jurisdiction) in processing naturalization applications. Note that under IMMACT90, applicants for naturalization can file up to three months in advance of the date they qualify for U.S. citizenship.
2. Loss or Renunciation of Citizenship and Expatriation
Where estate planning requires the termination of any connection to the United States, the body of law applicable to loss of nationality, formal renunciation of U.S. citizenship, and expatriation are directly relevant. The Courts have stricken a number of statutory grounds for loss of U.S. citizenship as being constitutionally beyond the power of Congress to enact.
When considering this as part of an estate planning strategy, it is important to note that renunciation of U.S. citizenship for tax avoidance reasons may have very serious consequences under the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (“IIRAIRA”). Under IIRAIRA, “any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is excludable.” The bar to admission applies to former citizens who seek entry even just to visit the United States and is permanent, although waivers may be granted in meritorious cases. This amendment applies only to individuals who have renounced United States citizenship on or after the effective date of the Act, September 30, 1996.
The basis for determining whether or not the renunciation was for the purpose of tax avoidance will closely track the IRS rules in this matter, including the presumptions applied by the IRS under the Health Insurance Portability and Accountability Act, signed into law on August 21, 1996. Under these rules, an individual is presumed to have a principal purpose to avoid such taxes if:
o The average annual net income of such individual for the period of five taxable years ending before the date of the loss of U.S. citizenship is greater than $100,000, or
o The net worth of the individual as of such date is $500,000 or more.
After 1996 these dollar amounts will be increased by a cost-of-living adjustment, rounded to the nearest $1,000.
There are also a number of exceptions to the presumption of tax avoidance under the IRS rules, It is the IRS, not the Consular Post, that will determine whether the exemptions apply, and whether tax avoidance was the motivation for the loss of citizenship.
A U.S. citizen who renounces citizenship for the purpose of avoiding Federal income, estate or gift taxes will be taxed as a citizen on both U.S. source income and income “effectively connected” with a U.S. trade or business for ten years after expatriation. Any “long term resident” of the United States who ceases to be a lawful permanent resident or who commences to be treated as a tax resident of another country under a treaty tie-breaker provision will receive similar tax treatment. A “long term resident” is a non-U.S. citizen who has been a lawful permanent resident of the United States in at least eight of the 15 years preceding the loss of residence or assumption of tax residence in another country.
1. Who is a resident for tax purposes?
The Deficit Reduction Act of 1984 created a statutory definition of the term “resident alien” for tax purposes. Included are two tests, one based upon visa status and the other based upon “substantial presence” in the U.S.
Pursuant to I.R.C. Section 7701(b)(1)(A)(i), an alien who has been granted the immigration status of U.S. permanent residence is a resident for U.S. tax purposes, without exception. Absence from the U.S. for the entire year does not prevent the absolute determination that the person is a resident for tax purposes unless the status of permanent residence has been terminated under the immigration laws. I.R.C. Sec. 7701(b)(5). Permanent residence status can be relinquished in appropriate cases, although as noted above, green card holders who give up resident status for the purpose of avoiding taxes may be subject to special rules under the Health Insurance Portability Act of 1996.
Under the “substantial presence” test, an individual is a resident for tax purposes if he has been physically present in the U.S. for 183 days or more within the calendar year. I.R.C. Sec. 7701(b)(3)(A)(ii). Alternatively, one is deemed “substantially present” in the U.S. if he has been “cumulatively present” in the U.S. over the last three years for a sufficient number of days. Cumulative presence is calculated by means of a complex formula, set forth in the statute. An exception to the cumulative presence rules is provided for an individual alien who is able to show that his “tax home” and family connections remain in a foreign country. Teachers, students and certain employees of foreign government agencies are generally exempt from the resident alien rules.
2. Social Security, Double Taxation, Dual Residences, etc.
Provisions of the Social Security Act and of a number of tax treaties impact on U.S. tax liability with regard to the payment of Social Security withholding (FICA), double taxation and other related areas. There may be alternative visa classifications available to particular applicants which would result in a more tax-advantageous situation.
3. Renunciation of U.S. Citizenship
As noted above with respect to estate planning issues, renunciation of U.S. citizenship now carries with it very severe consequences if it is determined that the renunciation was accomplished for the purpose of avoiding taxes. Accordingly, extreme caution must be exercised when contemplating such a move as a part of a tax planning strategy.
1. Employer Sanctions
Current Immigration Law obligates employers to determine the visa status of prospective and current employees to ensure that they are legally permitted to be employed. The paperwork and record keeping requirements (the execution of Form I-9) apply to all workers, not just to foreigners, and there is an on-going obligation to monitor the status of nonimmigrant workers. Employers can be subject to both civil and criminal penalties for disregarding these legal requirements.
Government audits of an employer’s I-9 records are becoming more commonplace in the current enforcement-minded climate, and the penalties assessed can be substantial. Accordingly, prudent employment practice dictates that employers conduct their own “in house” audit with immigration counsel to ensure that they are complying with the paperwork and record keeping requirements of the law.
2. Anti-Discrimination Provisions
The immigration law, as amended, provides for its own remedy structure to file claims against an employer who has improperly discriminated in employment or hiring based upon alienage, citizenship or nationality. This provision and its remedies are independent of any other statutory remedies provided by Federal or State Law.
The Immigration Act of 1990 provided that it is an unfair immigration-related employment practice for an employer to intimidate or retaliate against an individual who exercises his rights under the Immigration Reform and Control Act. A request for more or different document beyond those required by law, if done with the intent to discriminate, is also an unfair employment practice. In view of the potential for liability, it is prudent to have immigration counsel instruct Human Resource personnel regarding the permissible screening and hiring practices with respect to issues of alienage, so as to avoid potential claims of unfair immigration-related employment practice.
Grounds for Removal from the United States
Aliens, even permanent resident aliens, can be subject to deportation and/or exclusion (now merged into “removal proceedings”) if convicted of certain criminal offenses, sometimes even relatively minor ones. Any tactical decision made in a criminal case for an individual who is not a citizen of the United States, must take into account these provisions to protect against unforeseen results.
Particularly onerous consequences befall individuals whose convictions would be designated as “aggravated felonies.” Harsh penalties put in place by IMMACT90 have been made particularly severe by subsequent legislation (the Antiterrorism and Effective Death Penalty Act of 1996 and the Illegal Immigration Reform and Immigrant Responsibility Act of 1996). It is now possible that even long term legal residents with family and other substantial equities in the United States, may have no relief from deportation available to them if they are convicted of certain crimes — even where no jail time is served. Also note that the long?used provision permitting the trial court to rule that conviction of certain crimes shall not be a ground for the subject’s deportation (“Judicial Recommendation Against Deportation” or “JRAD”) is no longer available to ameliorate these harsh consequences.
CORPORATE AND COMMERCIAL LAW:
1. Mergers and Acquisitions/Purchase and Sale of Businesses
The immigration law requires employers to maintain documentation as to the employment eligibility of all employees and specifies the documentation required (Form “I-9”) and the periods of time such documentation must be kept. Failure to comply with the documentation requirement is punishable by stiff civil and criminal fines for paperwork violations and for “knowing” employment of unauthorized alien workers.
The penalties involved may be asserted against the purchaser of a business. Accordingly, in the purchase or sale of a business, special care must be taken to provide for the transfer of this critical documentation and, perhaps, for indemnification by the seller. In representing an acquiring company in a stock or asset merger or acquisition, a complete in-house audit of the I-9 forms to evaluate the company’s compliance with employer sanctions law should become a routine part of pre-transaction “due diligence.” A failure to provide for such documents in a business transfer may have serious consequences for counsel.
2. Business Formation
Issues of alienage may arise when a new business is being formed and may have an impact on the type of legal vehicle which is chosen. For example, under the Internal Revenue Code, no shareholder of a subchapter “S” corporation may be a non-resident alien.
3. Entrepreneurs and Investors
The immigration law provides for the availability of permanent residence in the United States based upon a substantial investment in a new business enterprise which will create employment for at least ten “qualified workers” (U.S. citizens, permanent residents and certain other individuals who are authorized to work). Furthermore, the amount of the required total investment may be reduced to $500,000 in certain “targeted employment” areas which have an employment rate statistically higher than the national average. The current designation includes parts of New York City as targeted areas under this provision of law.
In addition, certain entrepreneurs or companies can qualify for long-term temporary visas in the United States (under the “E” visa provision) based upon substantial trade and/or investment in the United States if the country of nationality is one that has an appropriate Treaty of Trade and Commerce with the United States.
4. Intra-Company Transferees
A number of businesses and investors may qualify to bring owners, senior management and specialized personnel to the United States as a result of creating and developing an investment in the United States through a multi-national structure. Nonimmigrant visas might be available under the “L” classification and immigrant visas under the “Priority Worker” provision.
1. Prenuptial Agreements, Separation and Divorce
There are a number of immigration consequences where prenuptial agreements, separation agreements and divorces occur, particularly if one party is a U.S. citizen or permanent resident alien and the other party is not. Onerous provisions under the Immigration and Marriage Fraud Act and technical provisions with reference to the relationship between the parties and their children can affect the immigration and visa consequences of one or more of the parties and must be taken into consideration when any of these matrimonial events is being negotiated.
The Immigration Act of 1990 allows spouses of non?U.S. citizens who have obtained conditional residence based upon their marriages to secure full permanent residence if the alien can show that the marriage was entered into in good faith and in cases where battering (or extreme cruelty) by the spouse took place. Grounds alleged in divorce pleadings may be reviewed by the government in subsequent proceedings before the Immigration and Naturalization Service.
2. New Affidavits of Support
Pursuant to IIRAIRA, petitioners in family-based immigration cases must now sign an Affidavit of Support which is a legally binding contract, obligating the sponsor to support the immigrant at a minimum of 125% of the U.S. poverty guidelines. This is important in the family law context, because the contract survives even the divorce of the parties, and may be enforced against the sponsor by the immigrant, as well as by the federal government, a state or any other entity that may be asked to provide a “means-tested benefit” (i.e. Supplemental Security Income, Medicaid, etc.) to the immigrant. The sponsor’s obligation continues until the immigrant either naturalizes or earns 40 “qualifying quarters” as defined in Social Security law (generally ten years).
Sponsors also have a continuing obligation to inform the INS and the state where the immigrant resides within 30 days of any change of address or may be subject to fines which may run to several thousand dollars. Because the obligations placed upon petitioning relatives have become significantly greater, cases may arise where the interests of a petitioning relative and the immigrant are in conflict, requiring that they have independent representation, or at the minimum, be counseled respecting financial obligations which may exceed those imposed by state law.
3. Adoption, Residence and Citizenship
Advice and planning with regard to the adoption of foreign children and custody agreements, must take into account the immigration law which provides an intricate set of special rules with regard to eligibility for visas of adopted children. The law also has a complex statutory structure to determine the citizenship status of children born out of the United States to one or more U.S. citizen parents.
We have had the privilege of handling matters in the area of immigration and nationality law referred by many distinguished law firms, and generally do not charge for telephone time to reply to your inquiries. Please feel free to call us, should you have any question in our area of the law.
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