Coming to America Part 1: Integrated Tax and Immigration Strategies for a Successful Move to the US

In this two-part series, Melvin Warshaw and David Lesperance discuss the critical importance of an integrated and coordinated tax and immigration strategy for businesspeople and their families when considering and executing a move to the United States on a part- or full-time basis.

Regardless of where businesspeople decide to settle, they must navigate the intricate maze of tax and immigration matters. In the first part of this series, we delve into immigration possibilities when a businessperson considers a move to the United States, either temporarily or permanently. The second part of this series will explore the myriad of personal and business tax implications and strategies for such a transition.

Immigration Options to Live, Work, Study, or Visit the United States 

The United States classifies legal immigration/citizenship status into three categories:

• US Citizens;
• Legal Permanent Residents (LPRs): “Green Card” holders; and
• Nonimmigrant visa: Foreign nationals desiring temporary entry for varied reasons, like tourism, medical procedures, business activities, temporary employment, academic pursuits, etc.

We will now discuss the methods to achieve these statuses, including their advantages and potential challenges.

U.S. Citizens  

• A person could be a US citizen if he or she satisfies the following criteria:
  • One or both of his/her parents are US citizens (by descent);
  • Born in the United States and not the child of a diplomat or foreign military personnel; or 
  • Successfully naturalized after at least 5 (or 3 for spouses of US citizens) years as a Green Card holder.

The benefits of US citizenship include not having to worry about renewing a Permanent Resident Card (i.e., the travel document confirming Green Card status) every ten years, voting, carrying a US passport, and being able to petition certain relatives for Green Card status.

The major drawback is that as a result of US citizenship-based taxation, US citizens (even if they are not living in the United States) are subject to US taxation on a worldwide basis and have extensive financial reporting requirements.

Legal Permanent Residents or Green Card Holders   

A person can obtain Legal Permanent Residence status  (“Green Card”) through sponsorship by an employer or eligible family member, by investment, or through a successful refugee/asylum claim.

The benefits of a US Green Card are that it allows for mostly unrestricted work/lifestyle rights, a choice to transition to US citizenship after five years, and the ability to petition a spouse and unmarried children for a Green Card.

As with US citizenship, a US Green Card holder is subject to US income taxation on a worldwide basis and has extensive US international financial information reporting requirements. If a Green Card holder is found to be a Long-Term Green Card holder (8 out of 15 years), they may also be subject to the Expatriation Tax Regime if they also trigger a specific net worth, federal tax liability average, or fail to certify compliance with US tax. 

Moreover, holding a Green Card while physically present in the US creates a ”presumption” that such an individual is a US domiciliary subject to US gift, estate, and GST tax on worldwide assets subject to the same lifetime gift/estate tax exemption as any US citizen. While the authors have spent decades dealing with clients with this issue, a full discussion of the Expatriation Tax Regime is beyond the scope of this white paper but is covered by a second white paper they have co-authored.

One important point is that while Green Card status can be relinquished or administratively taken away for “abandonment,” it is not lost simply because a Permanent Resident Card has expired. We are often asked by Green Card holders whether they have lost their Green Card status when their Permanent Resident Card expires. We then ask them if they believe a US citizen loses US citizenship merely because his or her passport has expired. As the same concept applies to US Green Card holders, the answer is “No”.

Nonimmigrant Visa or Temporary Residents  

Foreign nationals can enter the United States on a temporary basis, such as for tourism, medical treatment, business, temporary work, study, or similar impermanent reasons. It is worth noting that the acquisition of a Non-Immigrant Visa does not automatically make the holder a US taxpayer. Rather, one needs to look at the specific category of visa, the amount of time spent in the United States, whether there are closer connections to another jurisdiction, and whether there is a bilateral agreement such as any US Tax Treaties with various countries.

While there are non-immigrant visas such as F-1 Student and B-2 Tourist visas, the most important Non-immigrant employment visas are:

• B-1 (Business visitor);
• H-1B (Speciality occupation);
• TN visa (e.g., US MCA professional or intra-corporate transfer worker from a NAFTA country, Canada or Mexico);
• L-1 visa (Intra-company transfer);
• E-1/E-2 visa (Treaty traders/treaty investors); or
• O-1 (extraordinary ability).

B-1 (Business Visitor)  

B-1 visitors cannot engage in productive employment nor receive remuneration in the United States but may meet with colleagues, attend conferences, and engage in similar activities. B-1s and be admitted for the period of time necessary to complete their work but for no more than six months.

Canadians and Bermudians do not need to apply for B1 visas at a US embassy or consulate prior to seeking entry. Persons from certain other countries may be exempt from this visa requirement and enter under the Visa Waiver Program (Most of Europe, Australia, Japan, Chile and others) but do need to register with the Electronic System for Travel Authorisation (“ESTA”). Note that certain countries have applied for but are not currently part of the US Visa Waiver Program. The inclusion or exclusion of a country in this program depends on various factors and agreements.

H-1B (Specialty Occupation)  

To qualify for an H1-B visa, the US job position must require theoretical and practical application of a body of highly specialized knowledge.  The H1-B is the most commonly sought visa for professional workers, with an annual cap of 65,000 visas and an additional 20,000 for applicants with advanced degrees. H-1B visas can be for up to three years, with the possibility of extensions for up to six years.

Spouses and unmarried children under age 21 of H1-B visa holders are allowed to live in the United States but are not allowed to be employed.

TN Visa (e.g., USMCA Professional or Intra-Corporate Transfer Worker)   

Pursuant to the US-Mexico-Canada Trade Agreement (NAFTA), citizens of Canada and Mexico workers in certain professions are eligible for TN visas. The Canadian or Mexican citizen must meet the degree, experience, or licensing required for specific professions or possess senior management or specialized knowledge of a foreign affiliate. The TN visa numbers have no annual cap, are granted in three-year increments, and can be renewed indefinitely. Spouses and unmarried children under age 21 are allowed to live in the United States but are not allowed to be employed.

L-1 Visa (Intra-Company Transfer)   

L-1 visas are available to individuals who have already been employed outside the United States for at least one year by an affiliate, subsidiary, parent, or branch of a US company. The work abroad and in the United States must be managerial, executive, or require specialized knowledge. Unlike the H1-B, L-1 visas do not have an annual quota limit and are generally approved for up to three years with an extension to a maximum of seven years.

In addition, unlike E1/E2 visas, there is no minimum required investment or full-time active management in the US. Further, spouses and unmarried children under age 21 are allowed both the right to live and work as derivative L-2 visa holders. 

E-1/E-2 Visa (Treaty Traders/Treaty Investors)   

The E-1 Treaty Trader visa allows foreign nationals of certain countries to engage in international trade in the United States. The E-2 Treaty Investor visa permits foreign nationals of specific countries to enter the United States for purposes of investing a “substantial amount” into an enterprise. While there is no stated investment amount, it is generally recognized to be US$120,000 or more. The specific list of eligible countries can change over time and should be consulted directly.

The Treaty Trader/Investor must own at least 50% of the US entity involved. Essential employees of traders and investors may also obtain visas. Spouses are eligible to work in the United States, but unmarried children under the age of 21 are not eligible to work. Since December 2022, persons who obtained Citizenship through Investment in Treaty countries (i.e., Grenada, Turkey, and Montenegro) must be domiciled in that country for at least three years to be eligible for E1 or E2 Visas.

O-1 (Extraordinary Ability)  

An O-1 visa is available to persons with extraordinary ability in science, art, education, business, or athletics as demonstrated by national or international acclaim. It is initially granted for up to three years and may be extended indefinitely in one-year increments. Spouses and unmarried children under age 21 are allowed entry but can’t work.

A foreign national would apply for a specific form of the O visa, such as the following:

• O-1A: science, education, business, athletics;
• O-1B: artists and workers in the motion picture or TV industries;
• O-2: workers who assist an O-1 visa holder; and
• O-3: spouses and children of an O-1 visa holder.

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Pathways to a Green Card  

The following are the various paths to the acquisition of a Green Card:

Employment

A job candidate or employee who may already have a nonimmigrant visa status can be sponsored for a Green Card by an employer with an immigrant visa. Certain applicants, such as workers with extraordinary ability, investors, and certain special immigrants, can petition on their own behalf.

Family Sponsorship

A person may be eligible to apply for a Green Card if they are a spouse, unmarried child under the age of 21, parent, or sibling of a US citizen who is at least 21 years old.

EB-5 (Investor Visa)   

An EB-5 Visa is a path to a Green Card for an applicant, spouse, or unmarried child under age 21, where they have invested (or are in the process of investing) at least $1,050,000 ($800,000 if the investment is made in a qualifying infrastructure project or targeted employment area) in a new commercial enterprise that will create at least ten qualifying jobs.

Applicants can invest directly or through a “larger investor pool via regional centers (RC).” RCs are federally approved third-party intermediaries that “connect foreign investors with developers in need of funding and take a commission.” RCs are usually private, for-profit businesses that are approved by the US Citizenship and Immigration Services (USCIS).

An EB-5 visa involves two steps: (1) an I-526, Immigrant Petition by Standalone Investor, must be filed while the applicant is outside the United States (note that the processing time ranges between 29.5 and 61 months, as of May 2023); and (2) an I-485, Application to Register Permanent Residence or Adjust Status, must be filed while the applicant is in United States to apply to change their status to a green card (note that the processing time ranges between seven to 29 months).

Wait times are dependent upon the quota for the country of birth of the applicant.

Transition to Citizenship  

At some point, Green Card holders may wish to become US citizens through naturalization.

The requirements include:

• Being at least 18 years old;
• Demonstrating continuous residency in the United States for at least five years (3 years if spouse of a US citizen) immediately before applying;
• Being physically present in the United States for at least 30 months out of the last five (or 3) years immediately before applying;
• Living for at least three months in the state or USCIS district where the application is made; 
• Being a person of good moral character;
• Demonstrating an attachment to the principles and ideals of the US constitution;
• Being able to read, write, and speak basic English;
• Having a basic understanding of U.S. history and government; and
• Taking an oath of allegiance to the United States.

Considerations in Developing a US Immigration Strategy  

There are several considerations in developing a tax-efficient immigration strategy that meets the needs of all family members and can be “sold at the breakfast table.” These considerations include the following:

• Various family members may have different needs and goals. For example, young parents will want to relocate to the US, where their children are attending primary or secondary school. Older children may be living on their own in the US for post-secondary education or working in their careers. In such cases, the parents may only want occasional access to the United States to visit children and grandchildren or to do occasional business.

• US tax ramifications vary depending on the immigration status of the individual and the amount of time that individual spends in the United States. For younger families, it is frequently the case that one parent becomes a US taxpayer through either a Green Card or triggering the Substantial Presence day count test. At the same time, the other parent does not become a US taxpayer and continues to shelter the family wealth and their ongoing foreign income from US taxation.

• The timing of each family’s goals must be considered. For example, some family members may need to start school at particular times of the year, while adult businesspeople may need time to transition their business operations.

• The familiarity with immigration status will either require periodic renewal or be permanent and will entail the possibility of the future acquisition of US citizenship.

The final immigration strategy is often a blend of various non-immigrant categories and Green Card status for some or all of the family members. Some family members may elect to apply for US citizenship status after five years as a green card holder, while others may elect not to do so for tax purposes. In fact, they may even elect to engage in a sophisticated tax plan to avoid triggering an expatriation tax regime that applies to renouncing US citizens and long-term green card holders who relinquish that status.

In the second part of this series, we will discuss tax considerations in leaving one’s home country and in coming to the United States. As you will see, the tax and immigration strategies must work together.

More from the American Exceptionalism column

• How to Successfully Expatriate from the United States – Part 1: Pre-Expatriation Planning
• Americans Moving to Portugal: It’s Not as Simple as You’ve Been Told

IMI Pros who can help with US Immigration