DHS announced changes in immigration policy

From Snell & Wilmer (www.swlaw.com)

Department of Homeland Security (DHS) Secretary Janet Napolitano announced today that certain qualified foreign nationals without immigration status who were brought to the United States as children, and meet other specific criteria, will be eligible for work authorization and will be considered for relief from removal. To be eligible, individuals must demonstrate that they meet the following criteria:

  1. Came to the United States under the age of 16 years;
  2. Have continuously resided in the United States for at least five years preceding June 15, 2012 and are present in the United States on June 15, 2012;
  3. Are currently in school, have graduated from high school, have obtained a general education development certificate, or are honorably discharged veterans of the Coast Guard or Armed Forces of the United States;
  4. Have not been convicted of a felony offense, a significant misdemeanor offense, multiple misdemeanor offenses, or otherwise pose a threat to national security or public safety; and
  5. Are not above the age of 30.

Only those individuals meeting all of the above criteria will be considered for deferred action and work authorization, and such action will be decided on a case-by-case basis. It will be the responsibility of the applicant to present verifiable documentation to establish all of the criteria.

Obtaining deferred action and work authorization will not grant the applicant any immigration status or pathway toward citizenship. Grants of deferred action will be given for a period of two years, subject to renewal. 

While this directive takes effect immediately, U.S. Citizenship and Immigration Services (USCIS) and Immigration and Customs Enforcement (ICE) are expected to begin implementation of the application process within 60 days. We expect USCIS to provide further instructions regarding this process in the very near future.  More information is available at www.dhs.gov.

IRS planning more enforcements for NRA athletes, entertainers and foreign government employees

Nonresident alien (NRA) athletes and entertainers performing independent personal services or participating in the U.S. and embassy and consulate employees in the U.S. can expect more enforcement and litigation, an IRS official said May 12.

Speaking at the American Bar Association Tax Section meeting in Washington, Lindsey D. Stellwagen, Special Counsel International, Office of Chief Counsel said that although there had been a lot of publicity on IRS measures to enforce compliance on U.S. persons  with offshore wealth, her agency is also stepping up enforcement of NRAs and resident aliens (e.g. green card holders) that owe U.S. tax. She discussed the IRS programs pertaining to athletes and entertainers and the embassy project.

Foreign athletes and entertainers may pose a challenge to IRS enforcement because they come into the U.S. for a brief period of time, earn a lot of money, then leave. Such persons may be able to evade paying tax on  their U.S.-source income and enforcement may be futile if they money earned has exited the U.S. without the imposition of withholding at source.

Nonresident alien entertainers or athletes performing independent personal services or participating in athletic events in the U.S. are generally subject to a 30 percent withholding on gross income. Stellwagen explained that under the central withholding  agreement (CWA) program, such persons may be subject to reduced withholding provided that certain requirements are satisfied. The agreement is entered into by the NRA athlete or entertainer, a withholding agent and the IRS and is valid for a specific tour  or series of events. Withholding is based upon the budget provided and estimated net profits.

CPA Global Tax & Accounting PLLC can assist athletes and entertainers with the CWA program and work with the IRS to minimize the exposures.

Can the tax treaty apply to a US permanent resident working in US as a foreign government employee?

In a legal advice, the IRS Office of Chief Counsel has concluded that compensation paid to a U.S. permanent resident employed by a foreign government is not exempt from tax under the Belgium-U.S. income tax treaty.

The facts provide that a taxpayer lives and works in the U.S. as an employee of Belgium. The taxpayer, although not a U.S. citizen, is a lawful permanent resident (i.e. a green card holder).

In general, U.S. income tax treaties contain a “savings clause” that provides that a treaty will not affect the taxation by the U.S. of its residents and citizens (see e.g. Article 1(4) of U.S. Model  Income Tax treaty.) An exception to the savings clause is provided for in almost all income tax treaties, but it is not extended to persons who are permanent residents or citizens of the U.S. (permanent residents are treated as U.S. residents under Code Sec.  7701(b)(1)(A)(i)).

The memo notes that Rev Ruling 75-425 has given rise to some confusion with respect to employees of Belgium as it provided that income under the 1948 Belgium-U.S. income tax treaty exempted from tax  the compensation paid to employees who were citizens of the employing country. Prior to the publication of the ruling, however, the new 1970 income tax treaty between both countries was signed and did  not exempt such income from taxation. Rev Rul 75-425 was not updated, but was subsequently obsoleted by Rev Ruling 2007-60.