Fall 2006 Issue - Scarlatelli, PA

FALL 2006
Scarlatelli, P.A.
Immigration on Trial
National debate brings opinions and prejudices to the surface
Page 5
STAFF
Publisher
Donna Scarlatelli, Esq
[email protected]
Editor in Chief
David Agnew
[email protected]
Copy Editor
Garbriela Kepecz
[email protected]
Managing Editor
Stephen Murphy
[email protected]
Commercial
Director
Carmen Collazo-Torres
[email protected]
The hiring of a lawyer is an important
decision that should not be based
solely on advertisments. Before you
decide, ask about our qualifications
and experience.
Fall
2006
Comprehensive
Immigration Reform
is vital to America
The American public is clamoring for realistic,
comprehensive immigration reform. We believe
the time is now for a visionary, bipartisan solution
for our badly broken immigration system.
majority of these undocumented immigrants are
law-abiding, hardworking people who pay their
taxes and contribute to our society.
By allowing these people an opportunity to come
out of the shadows, register with the government,
pay a hefty fine, go through the security check
process, and earn the privilege of legal status, we
can restore the rule of law in our workplaces and
communities and focus our enforcement resources
on those who mean us harm.
The Senate’s Comprehensive Immigration Reform
Act (S. 2611) faces a major challenge this fall, when Besides providing a path to citizenship with
it must be reconciled with the counterproductive, reasonable requirements for those who are
enforcement-only legislation passed in the House. already here, a realistic, comprehensive approach
Both the House and Senate have passed immigration to immigration reform, like that contained in S.
reform bills that must now be reconciled. The 2611, must include an effective guest worker
Senate Comprehensive Immigration Reform Act program that would match willing workers with
of 2006 (S. 2611) takes a realistic, comprehensive willing employers. It also must reunite close family
approach to fixing the nation’s broken system and members, some of whom have been separated
includes a new temporary worker program and for decades.
a path to permanent legal status for the current Our nation has spent the last 20 years tightening
undocumented population. Florida Gulf Coast immigration enforcement, but it hasn’t worked.
Immigration Magazine sides with the American Until our immigration laws are in sync with our
Immigration Lawyers Association and believes economic realities and provide a safe, legal, and
an enforcement-only approach that neglects orderly way for migrants to enter our country to
these essential components is destined to fail. We work and reunite with family, and for those who
strongly urge support of the Senate provisions are here to come out of the shadows and become
through the conference.
integrated with society, we cannot hope to gain
Security along our borders remains a critical control of our broken immigration system.
concern and a crucial component of comprehensive Florida Gulf Coast Immigration Magazine
immigration reform. For that reason, S. 2611 strongly urges Congress to enact realistic,
proposes a smart border security regime so that comprehensive immigration reform by preserving
we know who is coming into our country while and strengthening the provisions in S. 2611 that
facilitating the cross-border flow of people and would provide earned legalization for the current
goods that is essential to our economy. A vibrant undocumented population. We also support
economy, in turn, is essential to fund our nation’s striking or modifying those provisions in both the
security needs.
House and Senate bills that would diminish due
Yet border enforcement on its own is not enough. process and access to the courts.
To gain control of our borders and truly guarantee This is an historic opportunity to help forge a
our security, we must address the estimated 12 visionary, bipartisan solution for our badly broken
million people living here without papers. The vast immigration system.
Contents 5 Immigration on Trial
Depending on your personal politics and beliefs, immigration is either
a huge problem, or an enormous opportunity for our nation. The jury
is still out across the nation, but here are some pointed opinions.
European Perspective
6
Immigration prospects for European real estate investors - can I stay,
Scarlatelli, P.A.
T h e I m m i g r a ti o n L a w F i r m
777 S. Palm Ave, Suite 8 • Sarasota, Florida 34236
Tel: 941.917.0066 • Fax: 941.917.0058
www.greencards4u.com
can I live in the house I buy, and can I use this to obtain a visa to
immigrate to the States? The answers, alas, are not so simple.
Foreign National Financing
7
For the Foreign National, securing a home in the United States is also
a stepping stone to better things to come - securing a green card or
citizenship. Get the scoop on how you can achieve your dream.
Another Cap Hit
10
Yet another H1-B cap has been hit, providing more evidence that the
nation faces much needed reform to the H-1B visa system.
Scarlatelli, P.A.
Florida Gulf Coast Immigration Magazine
TITLE
The Immigration Law Firm
Scarlatelli, P.A.
The Immigration Law Firm
On Trial
U.S. Immigration on Trial
A nation struggles with its identity and ‘culture’
What is the American “culture”? Is it represented by a Jewish family
settling in for the Feast of the Passover? Or is it a hip-hop concert by the
touring Jamaican band? Or the local high school Kiltie band marching
down Main Street with their Scottish bagpipes blaring? Or the big Irish
family gathering under the beach pavilion? Or the Bohemian-style
“drum circle” on Siesta Key at another glorious Sunday sunset?
immigration petitions, a record high. So much for suggestions that
immigrants are lax about regularizing their status. Clearly the laxity is
at least partly federal,” Quindlen correctly reported.
Drain on system, or windfall?
Quindlen noted that while immigrants, both legal and
So just what is American “culture”? And what has immigration meant to undocumented, use government services (schools, public hospitals),
our nation’s cultural evolution? Any clear-headed, rational examination of most also pay their way through income and sales taxes. Despite the
the history and facts reveals that this is a nation created by immigration, rhetoric, no one really knows whether they wind up being a loss or a
gain for the economy.
and its future will continue to be dependent upon immigration in order
“The counterargument is that that drives down the wages of American
to grow stronger and more secure in a changing world.
citizens. It’s galling to hear that argument from members of Congress, who
have not raised the federal minimum wage for almost a decade. Most of those
Anna Quindlen, columnist with Newsweek magazine, noted in a recent politicians blame the workers for their willingness to accept low wages. Don’t
article, “We like our cheap houses and our fresh fruit. Our government hold your breath waiting for significant sanctions against those companies
likes taking taxes from workers whose existence it will not recognize.” that shut their eyes to the immigration status of their employees—and that
also make large political contributions,” wrote Quindlen.
And that statement is fairly close to the truth.
During the height of the mass immigration demonstrations in the In conclusion, Quindlen rightly noted, “There are big decisions to be
spring of 2006, Quindlen noted the signs lining the streets passionately made about the vast wave of undocumented workers in this country,
told the story of millions of immigrants. “NO HUMAN BEING IS issues that go beyond slogans and placards. But there’s no premium in
ILLEGAL.” “I AM A WORKER, NOT A CRIMINAL.” “TODAY I discussing those issues in xenophobic half-truths, in talking about what
undocumented immigrants cost the country without talking about
MARCH, TOMORROW I VOTE.” “I PAY TAXES.”
what they contribute, in talking about them as illegals when they are
The early history of our nation was a time of encouragement of
nannies, waiters, roofers and the parents of American citizens.
immigration, with a big, almost empty frontier and very few people to
populate it, the United States welcomed newcomers. But over the years, Her zinging conclusion – “WE ARE ALL IMMIGRANTS” – but
many of America’s more-established residents began to seek ways to “some of us just got here sooner.”
criticize the latest wave of immigrants, as people are prone to do when
faced with different nationalities and unknown cultures. Fear set in.
In sharp contrast to Quindlen’s thought-provoking piece, we have
Now we are facing a growing number of immigrants who came
conservatives like columnist and author Pat Buchanan, whose new
here and have not properly renewed their visas, or perhaps avoided
book “State of Emergency: The Third World Invasion and Conquest
the immigration process altogether. This has caused those critics of of America,” claims Mexico is “recapturing U.S. lands” The book is a
immigration to swell in numbers, and label the newcomers “freeloaders,” perfect example of right-wing hysteria, in which Buchanan breathlessly
despite the fact that millions of undocumented immigrants still pay claims the influx of immigrants from south of the border is a blatant
income taxes using a special identification number the IRS provides, attempt to recapture land.
as pointed out in Quindlen’s article. These people also pay into the
Social Security system, but can’t collect benefits. A recent analysis of “Chicano chauvinists and Mexican agents have made clear their intent
that situation shows that $7 billion is in a designated suspense file, with to take back through demography and culture what their ancestors lost
the vast majority of that money coming from undocumented workers. through war,” writes Buchanan.
While few people would deny that the influx of undocumented workers Much of Buchanan’s book is a wrong-headed history lesson in which
must be curtailed, the sensible side of the argument insists that this he compares the current situation in the United States to the fall of the
should be done rationally, considering all sides of the issue. Quindlen Roman Empire – a favorite of many people who criticize our nation’s
noted in her column that one man at the recent marches carried a sign current state of affairs.
Undocumented, indispensable workers
A battle for America?
reading “I AM A WORKER, NOT A CRIMINAL” and said he pays “Will the American Southwest become a giant Kosovo, a part of the
taxes through his construction job.
nation separated from the rest by language, ethnicity, history and
“All three of his children were born in the United States. Although he culture, to be reabsorbed in all but name by Mexico from whom we
said he had a hard time deciphering government forms—and don’t we took these lands in the time of Jackson and Polk?” writes Buchanan.
all?—he had applied for a green card and had been waiting for four The end result, in Buchanan’s stark prediction of our future, is that by
years. In 2004 there was a backlog of more than 6 million unprocessed the year 2050, “America will be a Third World country.... Our great
Continued on page 13
Florida Gulf Coast Immigration Magazine
Scarlatelli, P.A.
Prospects
The Immigration Law Firm
Immigration prospects for
European real estate investors
present many questions, complexities
By Donna Scarlatelli
With The Euro slightly higher in value against the dollar,
the prices of European real estate increasing in value and
the current political unrest across Europe, many Europeans
nationals are looking at our fair city and thinking it might be
a good time to invest in Florida properties. But most buyers
want an answer to a basic question before they seriously enter
into a purchasing search: can I stay, can I live in the house I
buy, and can I use this to obtain a visa to immigrate to the
States? The answers, alas, are not so simple. Nevertheless, there
are options.
Most European nationals do not have actual visas in their
passports. They use the Visa Waiver Program (VWP) to
actually waive the requirement that most foreigners must go
to the U.S. Consulate abroad and apply for a visitor visa, with
which to seek entry into the U.S.
However, for the privilege of not having to stand in a long
line at the Consulate, the European concedes some benefits of
traveling with a visa. Admission to the U.S. is for a maximum
of 90 days only; and no changes or extensions to the admission
period are permitted. Thus, those property owners are
permitted to stay here for 90 days only after which they may
leave, stay abroad for a period of time, and then reenter.
Those holders of B-1/B-2 visas are generally admitted for an
initial period of six months and can extend their stay in the
U.S. an additional six months for a period of stay up to a
maximum of one year. Furthermore, they may apply to the
U.S. Citizenship and Immigration Service (USCIS) to change
their immigration status classification to a different category,
which permits a broader scope of activity other than merely
“visit” and a considerably longer period of stay.
Therefore, it is advisable to seek the actual visa at the Consulate
to maximize flexibility. While the Consul is not keen on issuing
visitor visas to those who may use the Visa Waiver Program,
the State Department has advised its Consular Sections that
ownership of real property in the U.S. is grounds for the
issuance of such a visa.
Presentation of a property deed and an explanation that the
applicant would like the flexibility to stay more than 90 days
in his or her vacation home should be coupled with evidence
that the applicant possesses sufficient funds to stay longer than
90 days and maintains all ties to his or her home country.
Those Europeans wishing to stay longer in the U.S. will
Florida Gulf Coast Immigration Magazine
need to consider alternative and longer range immigration
strategies. Non-immigrant visas literally cover the range of
the alphabet, but there are three in particular that are most
commonly used by our European friends: the E-2, the H-1B
and the L-1 visas.
In brief, the E-2 visa is dependent on a treaty that must exist
between the US and the applicant’s country of nationality.
European countries generally have such treaties. The applicant
must be coming to the U.S. to oversee the direction and
development of a substantial commercial investment.
Real estate property alone is problematic but commercial
investments are often considered for this visa, such as the
purchasing of an existing turn-key business venture or the
establishment of new business operations.
The H-1B visa is reserved for professionals coming to work
in the US with American employers. This visa category is
a bit unwieldy since it is limited to 65,000 new visas each
federal fiscal year, and so is in high demand and short supply.
However, it is serviceable since the U.S. employer may be a
company that is owned by the European applicant himself, as
long as the applicant has the requisite university degree and
the position is one that would require such a degree.
The L-1 visa is designed for executive and managerial staff of
multi-national companies with offices abroad and in the U.S.
The visa is available for start-up business operations in the
U.S. and will be granted for an initial period of one year and
can be extended for up to seven years.
While none of these visas is automatically convertible to the
ever- desired “green card”, none of them specifically prohibits
one to pursue that permanent residence in the U.S. However,
careful and creative planning is required to remain here on a
path to citizenship.
So, despite our unfortunate and increasingly prevalent antiimmigrant sentiment in the U.S., do not despair. Statistics
show that in Sarasota and Manatee counties, almost 18
percent of the total population is foreign-born. Of that
number, more than 70 percent are Europeans (statistics from
the Grantmakers Concerned with Immigrants and Refugees
2000 census figures).
Realtors® may all tell your prospective buyers that there a
variety of means by which they may live in their properties you
will sell them and obtain their piece of the American Dream.
Scarlatelli, P.A.
Financing
The Immigration Law Firm
Foreign national financing
Securing your new residence in the United States
By Thane Richmond
In the spring 2006 issue of Florida Gulf Coast
Immigration Magazine, Donna Scarlatelli poignantly
described the process of securing Resident Alien status
as “climbing Green Card Mountain”. Many would
agree that the most rewarding accomplishments
in life require dedication and hard work. Most
American citizens view the purchase of their first home
as the single most important transaction in their lives.
For the Foreign National, securing a home in the
United States is also a stepping stone to better things to
come—securing a green card or citizenship.
The state of Florida grew by 404,000 people,
and experienced the largest numerical increase in
population growth in the year 2004-2005, according
to the U. S. Census Bureau. As Florida’s population
grows, the demand for housing increases, and the
potential for rising housing costs also increase. Many
people, who plan to live in Florida full-time in the future,
decide to purchase a Second Home in Florida today.
Foreign Nationals have also taken an increased interest
in the Sunshine State. In 2000, the United States
Census Bureau estimated foreign born persons to
comprise 16.7 percent of Florida’s population. Many of
these individuals have secured their financial future by
purchasing property. Mortgage programs for Foreign
Nationals can be quite flexible. Many
programs allow non-citizens to purchase a
second home based on documented assets,
and income earned abroad.
Foreign National Mortgage Products are
readily available for purchase of existing
homes. The approval process can be very
similar to that required of Resident Aliens,
and U. S. Citizens. Typical requirements are
as follows:
• The ability to verify employment
and income.
• The ability to verify liquid assets which
can be converted to U. S. Dollars.
• Documentation of Identification
(Passport or Visa)
• Verification of assets in the United States
for down payment and closing costs.
• An executed sales contract.
Loan details may vary depending according to the strength
of the applicant. Options for terms and down payment
requirements may also change. Choosing a plan without
a pre-payment penalty will also allow flexibility regarding
principle reductions, or payoff of the loan.
A Foreign National may purchase a second home in the
United States without a Visa, Residency or Citizenship. This
flexibility will permit the applicant to secure housing while
rates and prices are reasonable, and concentrate on issues
of Residency, and Citizenship as Immigration requirements
are met.
According to Donna Scarlatelli, riding the “Green Card
Merry-Go-Round” is a complicated process. In order to
“grab the brass ring” and secure Residency status you have
to take a chance.
Those who take a chance reap the rewards, and no reward can
be greater than the enjoyment of owning you own home.
Thane Richmond has been an active member of the Gulf Coast
Financial Community since 1999, and is a graduate of the
James Madison University Masters of Business Administration
Program. Please contact Thane Richmond for more information
on Foreign National, and Permanent Non-Resident Alien
Financing options by email at [email protected],
or by phone at 941-544.5166.
Florida Gulf Coast Immigration Magazine
Scarlatelli, P.A.
FIRPTA
The Immigration Law Firm
Globalization fuels growth in
foreign real estate ownership
Editor’s Note: This information was prepared by an IRS Task Force, with input from Thomas C. Roberge of Thomas C. Roberge & Company, Certified
Public Accountants, headquartered in St. Petersburg, Florida, and Jonathan H. (Jason) Warner, a tax attorney, with offices in Miami, Florida.
With the increasing globalization of trade and investments, foreign
ownership of U.S. real estate continues to grow. Consequently, U.S.
Realtors® and rental agents/property managers are encountering an
increasing number of situations that involve foreign persons acquiring
U.S. real estate as a part-time residence, for investment or in some cases
to conduct a U.S. business. The U.S. tax rules that apply to ownership
and dispositions of U.S. real estate by foreign persons are different in
some important respects from the rules that apply to U.S. persons.
This article discusses the U.S. federal income tax rules that U.S. real
estate professionals must know to properly deal with foreign investors
in U.S. real estate, and to avoid certain personal liabilities for improper
U.S. federal income tax compliance. The first part of this article is
published this month, and covers the rules that determine whether an
individual or entity is to be treated as U.S. or foreign. The second part
(coming in October) discusses compliance with the Foreign Investment
in Real Property Tax Act (FIRPTA) for sales by foreign persons of U.S.
real property interests (“USRPI”). The third part (coming in November)
provides the fundamentals of U.S. federal income taxation of foreign
investors with U.S. rental income.
Definition of Foreign Persons
Because a number of U.S. federal tax rules differ when a foreign person
is involved or apply only to foreign persons, it is important for a U.S.
real estate professional to understand when an individual or entity is
considered foreign for U.S. federal income or estate tax purposes.
A nonresident alien is defined for federal income tax purposes as an
individual who is neither a U.S. citizen nor a resident of the United
States within the meaning of section 7701(b) of the Internal Revenue
Code (the “Code”). An alien individual is a resident of the U.S. for
federal income tax purposes if he or she meets either of the two tests
under section 7701(b).
The first test is the “green card” test. If an alien has been admitted for
U.S. permanent residence (i.e., has a green card) at any time during the
calendar year, the alien is a resident of the United States and is taxed
on his or her worldwide income, the same as a U.S. citizen. Otherwise,
U.S. immigration status generally is not controlling or relevant for
U.S. federal tax purposes. In this respect, the U.S. differs from many
foreign countries, in which immigration and tax status are integrated, a
difference that frequently causes confusion.
more during the current calendar year. Alternatively, if the alien is
physically present for at least 31 days during the current year, the alien
may be treated as a U.S. tax resident in the current year under a threeyear look-back test in which each day of presence in the current year is
counted as a full day, each day of presence in the first preceding year is
counted as one-third of a day, and each day of presence in the second
preceding year is counted as one-sixth of a day.
If the total of such days is 183 days or more, the alien may be a U.S.
tax resident for the current year unless certain exceptions apply and
the alien files certain required information with the IRS to claim the
benefit of any relevant exception. As with the green card test, if an alien
is a U.S. tax resident under either version of the substantial presence
test, the alien is taxed on his or her worldwide income, the same as a
U.S. citizen.
If the alien is from a country that has an income tax treaty with the
United States, the treaty may act to change these results, subject to
certain required filings with the IRS to claim the treaty benefit. Also, in
the first year that an alien might be subject to the substantial presence
rule, it may be difficult to tell if the alien actually will become treated as
a U.S. tax resident for that year.
A foreign corporation is a corporation that is not incorporated in the
United States. The rules for other types of entities are more complex.
Also, if an eligible foreign entity has filed a “check-the-box” election
for U.S. federal tax purposes, its U.S. federal income tax treatment will
differ from the norm for that type of entity; for example, a foreign
corporation with a single owner may (if eligible) elect to be disregarded
for U.S. federal tax purposes, or to be treated as a partnership if it has
more than one owner. In either case, the resulting U.S. taxpayer is the
owner or owners, who themselves may be foreign or domestic for U.S.
federal tax purposes. Similarly, a foreign unincorporated entity might
elect to be taxed as a foreign corporation for U.S. federal tax purposes.
Understanding the Foreign Investment
in Real Property Tax Act
Section 897 of the Internal Revenue Code (enacted under the 1980
FIRPTA legislation) provides rules for the taxation of nonresident alien
individuals and foreign corporations on sales or other dispositions
of U.S. real property interests (including installment sales,
The second test is the substantial presence test. Under the substantial exchanges, foreclosures, and deeds in lieu of foreclosure of a U.S. real
presence test, an alien individual is a resident for U.S. federal tax property interest).
purposes if the alien is physically present in the U.S. for 183 days or FIRPTA applies to what it defines as a U.S. real property interest, which
Florida Gulf Coast Immigration Magazine
Scarlatelli, P.A.
FIRPTA
The Immigration Law Firm
includes not only interests in land, but interests in buildings, mines,
wells, crops and timber as well. Because Congress was concerned that
foreign persons would try to avoid FIRPTA by incorporating their
U.S. real estate holdings, a U.S. real property interest is defined to also
include any interest in a U.S. corporation if that U.S. corporation is a
“U.S. real property holding company,” with the result that a disposition
of its stock by a foreign investor may be subject to federal income tax
under FIRPTA.
The purchaser can rely on the certificate unless the purchaser has actual
knowledge that it is false or receives a notice from an agent involved
in the transaction stating that the certification is false (and an agent
involved in a closing who knows that a non-foreign certificate is false
is subject to a penalty if he or she fails to give the purchaser a written
notice that the certificate is false). In the case of multiple sellers,
including spouses holding property jointly, the regulations contain
rules for allocating the purchase price among the sellers for purposes of
A U.S. corporation is a U.S. real property holding company if the withholding and tax liability.
fair market value of its U.S. real property interests equals 50 percent Where multiple sellers include U.S. and foreign parties, withholding
or more of the sum of the fair market value of its U.S. real property applies (subject to receiving the non-foreign certification from the U.S.
interests, interests in real property located outside of the United States, parties) only to the amounts allocated to the foreign parties under rules
and trade or business assets. A foreign corporation may also be classified set forth in the regulations under Code Section 1445. The purchaser
as a U.S. real property holding company, but the sale of stock in a should retain the non-foreign certification for at least five years.
foreign corporation by a foreign person generally is not subject to U.S. If the seller or the purchaser obtains a qualifying statement (a
federal income tax (although other important U.S. federal income tax withholding certificate) from the IRS providing that the seller is entitled
consequences may result).
to a reduced (or zero) withholding amount or has provided adequate
Since 1985, a disposition of a U.S. real property interest by a foreign
corporation or nonresident alien individual generally is subject to a
withholding tax regime under section 1445 of the Code. Under the
withholding tax regime, any purchaser of a U.S. real property interest
from a foreign seller must withhold ten percent (10 percent) of the gross
purchase price and remit such amount to the IRS within 20 days of the
closing. The purchase price includes cash plus the fair market value of
any other property transferred to acquire the real estate. A purchaser
failing to withhold is liable for any uncollected withholding tax, as well
as penalties and interest charges.
security or made other arrangements with the IRS for payment of the
tax. The application for the withholding certificate has to be filed before
closing, and (if the seller applies for the certificate) the seller must give
the purchaser a written notice at closing stating that the application
has been filed with the IRS. The purchaser still must withhold the full
ten percent at closing, but the withheld amount may be held by the
purchaser and not remitted to the IRS until the IRS sends the purchaser
its determination on the amount required to be withheld and paid over.
The purchaser has 20 days from receipt of the notice from the IRS to
pay over the amount required by the IRS.
There are several total or partial exceptions to the Code Section 1445 If the purchaser intends to use the real property as a residence and
withholding requirement. The more commonly encountered are:
the purchase price is not more than $300,000. In order to qualify for
1. If the seller is not a foreign person. Under Code Section 1445, there is a this residential use exception, at the time of sale the purchaser (or any
presumption that every seller is a foreign person subject to the withholding member of his immediate family) must have definite plans to reside at the
tax unless proof to the contrary is provided to the purchaser. Usually, property for at least 50 percent of the number of days that the property
this proof is furnished in the form of a “non-foreign certification,” signed is to be used during each of the first two twelve-month periods following
by the (U.S. citizen, resident or entity) seller under penalties of perjury, the date of sale. So long as the foregoing requirement is met, the property
certifying that the seller is not a foreign person and setting forth the seller’s does not need to be the purchaser’s primary or principal residence.
name, address and taxpayer identification number.
However, purchasers are cautioned that they will be liable for the tax
Continued on page 13
Florida Gulf Coast Immigration Magazine
Scarlatelli, P.A.
The Immigration Law Firm
Another immigration
H1-B cap hit
20,000 filled slots underscore the need for visa reform
On July 28th, the U.S. Citizenship and Immigration Services
(USCIS) announced that, as of July 26th, it had received enough H1B petitions for “foreign workers who have earned a master’s degree
or higher from a U.S. institution of higher education” to meet the
exemption limit of 20,000 established by Congress for fiscal year
(FY) 2007. This is on top of having reached the overall H-1B cap
of 65,000 on May 6, more than four months before the start of the
fiscal year.
U.S. companies need high-skilled, specialized workers to stay
competitive in the global marketplace. Allowing foreign-born,
U.S.-educated workers to work for a U.S. company fuels the
ability of U.S. companies to stay at the forefront of scientific research
and innovation.
Both the House and Senate have introduced the Securing
Knowledge Innovation and Leadership Bill, (“SKIL Bill”, S.2691/
H.R. 5744), a measure that would provide much needed reform to
the H-1B visa system.
“Passage and enactment of the SKIL Bill would fix the broken H-1B
system,” said Carlina Tapia-Ruano, president of AILA. “History has
shown that highly educated foreign-born professionals bring great
benefits to the U.S. economy and we urge Congress to act on this
critical issue.”
Highlights of the SKIL Bill include the following:
• Exemptions for U.S.-educated foreign workers with master’s or
higher degrees from the H-1B and employment based (EB) green
card quotas so their talent can be retained in the United States.
• Creation of a flexible, market-based H-1B cap so that U.S.
employers are not locked out of hiring critical talent for over a
year at a time.
• Extension of foreign students’ post-graduation practical training
from 12 months to 24 months.
• Removal of EB immigrant spouses and children from the
annual cap, thus making more visas available for the innovative
professionals we need.
Information provided by American Immigration
Lawyers Association Online
10
Florida Gulf Coast Immigration Magazine
Optimism prevails on
immigration reform
within a year
Immigration Daily believes that the U.S. Congress is unlikely to
complete its budget negotiations before the November election and
thus, the probability of a lame duck session is high.
Therefore, one must analyze the prospects for comprehensive
immigration reform in this light. The window for immigration reform
lies in the lame duck session after the November election. Despite
the gloom in many quarters, it is not hard to see that the pieces
are already in place for a successful compromise on comprehensive
immigration reform, according to Immigration Daily.
Such successful compromise would involve a delay in benefits but
a guarantee of benefits kicking in without further Congressional
action. Even if comprehensive immigration reform dies in 2006,
Immigration Daily believes at a minimum, significant immigration
benefits (H-1B numbers, Schedule A numbers, and perhaps
retrogression relief for employment-based beneficiaries) will come
down the pike, no later than early 2nd quarter 2007.
It appears reasonable to believe that there will be significant benefits
from Congress in the next 2 to 10 month timeframe.
Friendly mortgages
available for
international buyers
LynxBanc Mortgage Corp., a subsidiary of Lloyds TSB Bank, one
of the United Kingdom’s largest, will begin offering mortgages on
Florida properties in multiple currencies.
Many purchasers of Florida homes are paid in currencies other than
dollars. Borrowing in that currency reduces their need to exchange
their home currency for dollars before paying their mortgages.
Borrowers also can take advantage of currency fluctuations by
switching between eligible international currencies up to four times
a year.
LynxBanc, based in Boca Raton, serves clients throughout Florida.
“Florida has the highest share of real estate buyers from overseas of any
state, “ says Stephen Parnell, CEO of LynxBanc. “This new mortgage
facility offers the overseas buyer a great deal of convenience.”
— REALTOR® Magazine Online
Scarlatelli, P.A.
TITLE
The Immigration Law Firm
CBO and Social Security actuaries find Senate
Immigration Bill would promote economic
growth, strengthen Social Security’s finances
Critics of the Senate immigration bill portray it as a long-term drain
on the budget and the economy. Analyses by CBO and the Social
Security Administration, however, indicate that the Senate bill would
have positive effects on the nation’s economy and also would strengthen
Social Security’s finances.
CBO has noted that the Joint Committee on Taxation, following its
normal practice, did not take these macroeconomic estimates fully
into account in estimating the bill’s effect on tax revenues. Had the
projections of the bill’s effects on the economy been fully accounted
for, the estimated revenue growth would be substantially larger than
In May, CBO estimated that the immigration bill introduced in the the official estimate and the budgetary effects of the legislation would
Senate would increase the size of the economy (the Gross Domestic almost certainly be shown to be beneficial.
Product, or GDP) by between 0.8 percent and 1.3 percent on average Somewhat similar conclusions were reached by the Social Security
from 2012 to 2016. This suggests that the nation’s economy could be
actuaries. Their analysis of the Senate immigration bill found that the
roughly $170 billion to $270 billion larger in 2016 than without the
bill’s enactment. The economy would grow more because there would increases that would result in the number of legal immigrant workers
be additional workers. The rate of economic growth is essentially would produce increases in the level of payments made into the Social
determined by the rate of growth in the U.S. labor force, the rate of Security Trust Fund, which would help strengthen Social Security for
citizens and immigrants alike. The Social Security actuaries project
growth in investment, and the rate of growth in productivity.
that the Senate-passed bill would extend Social Security solvency by
CBO’s estimate of increased economic growth was based on the Senate
two years (from 2040 to 2042) and that the Social Security Trust Fund
bill as introduced. Amendments passed on the Senate floor reduced the
balance would be improved in all of the next 75 years.
number of immigrants who would be admitted to the United States, so
the economic impact for the final Senate bill would be somewhat less.
– From AILA web site
NAR signs Mexican joint real estate agreement
The National Association of Realtors® has formally signed its first
joint reciprocal membership agreement with a foreign real estate
organization. NAR President-elect Pat Vredevoogd Combs executed
the agreement with the Mexican real estate association, Asociation
Mexicana de Professionales Inmobiliarios, at AMPI’s 50th anniversary
meeting on Oct. 5.
Because of this historic partnership, all of Mexico’s AMPI members will
become Realtors® in January. “This is an important initiative. Not only
will it create a wealth of new business opportunities for NAR’s members
in the United States and AMPI members here in Mexico, but also it
will help promote standardization of international real estate practice,”
Vredevoogd Combs said.
The agreement between the two organizations confirms the importance
of branding in real estate marketing. As official dues-paying members
of NAR, AMPI members, who will join NAR in the international
membership category, will be able to use the Realtor® logo and
registration mark.
According to a recent study by a leading international brand valuation
firm, the Realtor® brand is worth about $32,000 to every Realtor®, and
the average member with six to ten years experience realizes $4,500 a
year in incremental income due to the marketplace advantages the brand
brings to a member’s business. The value of the brand is based on the
trust NAR members have established with consumers, the study shows.
The new relationship highlights the increasing level of business
cooperation in real estate markets in both countries, as a growing
number of United States citizens opt to acquire second and retirement
homes in Mexico and residents of Mexico are buying property in the
United States more frequently.
Mexico is attractive to second home buyers from the United States,
thanks to the availability of properties near the ocean and mountains,
reasonable costs of resort properties, and lifestyle considerations.
Thanks to a favorable legal and financial infrastructure, the No. 1
foreign destination for retirees from the United States is Mexico, with
more than a million Americans living there.
To help Realtors® in the United States increase business opportunities
with AMPI members, NAR is launching a four-hour course titled
“Doing Business in Mexico,” which will begin soon in Mexico and at
the NAR annual conference in New Orleans in November. The course
will later be made available in an online version in 2007. It will help
teach Realtors® in the United States about business opportunities in
Mexico and help them connect with their AMPI counterparts.
Mexican President Vicente Fox keynoted the AMPI meeting. Expansion
of the housing sector and homeownership opportunities has been a
major focus during the Fox administration. Government policy has
promoted programs that have expanded mortgage lending, assistance to
low-income families and development of a secondary mortgage market
“NAR chose AMPI for this groundbreaking partnership, in large similar to that in the United States. As a result, more than 2.4 million
part, because its members adhere to a strict Code of Ethics like that of families have become new home owners during the six years of Fox’s
NAR. AMPI’s high standards of practice will help increase the positive term, which will end in December.
perceptions of Realtors® worldwide,” Vredevoogd Combs said.
- NAR
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Scarlatelli, P.A.
The Immigration Law Firm
U.S. Immigration on Trial
Continued from page 5
cities will all look like Los Angeles today. Los Angeles and the cities of of ‘Anglos’ out of the lands Mexico lost in 1848.”
the Southwest will look like Juarez and Tijuana.”
His conclusion – “Democracy is not enough. If the culture dies, the
Buchanan believes a plot is afoot to “reannex” the Southwest, “not country dies.”
militarily, but ethnically, linguistically and culturally through the Which brings us back to culture — what is the American culture?
transfer of millions of Mexicans into the United States and a migration That’s obviously in the eye of the beholder …
Globalization fuels growth
not withheld if their intention does not materialize in fact and they
cannot prove that the failure to so use the property was due to a change
of circumstances that they could not reasonably have anticipated at the
time of the purchase. Also, this exemption is available to individual
purchasers only, and is not allowed for purchases by corporations,
partnerships or trusts, or if the seller is a foreign partnership. A purchase
of raw land or of an existing dwelling that is to be demolished and
replaced, does not qualify for the exemption even if the purchaser
intends to construct an otherwise qualifying residence on the property.
A Form 8288, U.S. Withholding Return for Disposition by Foreign
Persons of U.S. Real Property Interests, is required to be filed by the
transferee (buyer or designated agent) of the U.S. real property interest.
In addition, Form 8288-A, U.S. Withholding Statement on Disposition
by Foreign Persons of U.S. Real Property Interest, must be attached to
Form 8288 and submitted with the required withholding. The amount
of tax required to be withheld and paid to the IRS by the transferee is
ten percent of the amount realized on the disposition of the USRPI
by the foreign transferor. Forms 8288, 8288-A and the withholding
tax must be filed (mailed) to the IRS by the 20th day after the date
of transfer unless the seller is waiting for a response from the IRS to
an application for a withholding certificate (see next paragraph) filed
before closing. In such case, upon receipt of an approved withholding
certificate or rejection letter, the taxpayer has 20 days from the date
on the certificate/letter to file Forms 8288 and 8288-A and remit the
required amount. Penalties and interest will be charged on late filed
Forms 8288 (filed after the 20th day from the date of transfer or the
response from the IRS to the withholding certificate). There is a penalty
of up to $10,000 over the tax for a willful failure to collect and pay.
In certain situations, such as when the tax due on the transferor’s gain
from the sale is less than the withholding, the foreign transferor or the
transferee can submit a Form 8288-B, Application for Withholding
Certificate for Disposition by Foreign Persons of U.S. Real Property
Interests, to request a reduction or elimination of withholding on a
transfer of a USRPI. Refer to IRC Regulation 1.1445-3 or -6 for the
different categories of withholding certificates.
Continued from page 9
If the seller of a U.S. real property interest is a domestic partnership,
trust, or estate with foreign partnerships or beneficiaries, withholding
by the buyer is not required, but the domestic partnership, trust, or
estate should withhold 35 percent of the gain allocable to the foreign
partnership or beneficiary. See Code section 1445(e).
Just because there has been withholding with regard to the sale by the
foreign seller, or the transaction was exempt from withholding, does
not mean the foreign seller is excused from filing a U.S. income tax
return and reporting any gain with respect to the sale. The sale of a U.S.
real property interest by a foreign investor is a taxable event calling for
the filing of a U.S. federal income tax return for the year of the sale.
The amount of tax withheld may be credited against the seller’s federal
income tax liability, which will reduce the amount of tax owed or may
entitle the seller to a refund.
According to a recently released Treasury Regulation, Forms 8288,
8288-A and 8288-B must contain the foreign seller’s U.S. taxpayer
tax identification number (and the buyer’s tax identification number
as well). The seller’s tax identification number also is required for
reporting the transaction on Form 1099-MISC, as the sale generally
is not eligible for the “no information” reporting exception for sale of
a taxpayer’s principal residence. Nonresident aliens generally obtain an
Individual Taxpayer Identification Number (ITIN) for this purpose),
but ITINs are no longer issued unless the applicant is filing a U.S. federal
income tax return with the application or other specific exceptions
apply. Under guidelines published by the IRS the application for the
ITIN (Form W-7) can be done at the time of closing the transaction,
with the Form W-7, proper supporting documents, and the FIRPTA
withholding documents (either Form 8288-B,or Form 8288, 8288-A
and the remittance of the amount withheld) being filed with the IRS
ITIN Unit rather than filed directly with the IRS FIRPTA Unit. The
instructions for filing are on the current Form W-7, as modified by the
above ITIN Guidelines.
Transferor’s Tax Return
Responsibility Upon Selling Real
Property Interest
The IRS generally will act on a completed withholding certificate
application within 90 days of the request. Alternatively, the regulations
permit the transferor to request an early refund of amounts already The individual transferor of the U.S. real property interest is required
withheld if the request for an early refund is combined with an to file a Form 1040NR along with Schedule D, and if required,
application for a withholding certificate.
Form 4797, Sale of Business Property, and/or Form 6251, Alternative
Continued on page 14
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The Immigration Law Firm
Contact Carmen Collazo-Torres at: 941.917.0066, ext. 221
or by e-mail at: [email protected]
Reserve space in the Winter 2007 issue today!
Globalization fuels growth
Minimum Tax, in order to meet its tax obligation. If the transferor is a
corporation, then a Form 1120F with appropriate schedules will have
to be filed. In order for a foreign individual or corporate transferor to
claim a credit against its tax liability for the amount of tax withheld by
the purchaser under Code section 1445 or obtain a refund of excess
withholding, the transferor should attach to its tax return the receipted
copy of Form 8288-A that the IRS returns to the transferor.
Continued from page 13
Foreign Property Owner’s Tax
Return Responsibility During
Ownership and Rental of Real
Property Interest
Before agreeing to manage U.S. real property for a foreign taxpayer, a
realtor or rental agent should discuss with the foreign client whether the
rental income will be taxed as investment income through withholding,
or on a net income basis as “effectively connected with a U.S. trade or
business,” without withholding (although the owner may have to file
The reporting of real property interests either on Form 8288, Form estimated tax returns).
1040NR or Form 1120-F may trigger an IRS inquiry regarding taxes Rental income from real property located in the United States and the
for rental income in situations where the nonresident has failed to gain from its sale will always be U.S. source income subject to tax in the
submit timely tax returns relating to the property.
United States regardless of the foreign investor’s personal tax status and
Under U.S. tax law, a taxpayer can depreciate the property; there are
different rates for residential and commercial properties. This annual
depreciation is deducted from income as an expense on an income tax
return. However, it will be recaptured when the property is sold.
U.S. Income Taxation of
Foreign Persons
The U.S. federal income tax differentiates two principal types of U.S.
source income of foreign persons: business income and investment
income. If a foreign person conducts a business in the United States,
the net income is taxed at the same graduated rates applicable to U.S.
citizens and residents. For example, if a foreign person is an operator of
U.S. commercial real estate, the foreign person is conducting a business
in the United States and must pay federal income tax at graduated
rates. The foreign person will file either a Form 1120F (for foreign
corporations) or a Form 1040NR (for nonresident aliens).
If a foreign person receives investment income not connected with a
U.S. business, the gross amount is taxed through withholding by the
party paying the rent proceeds to the owner at a flat rate of 30 percent
(without any deductions) unless a U.S. income tax treaty provides a
lower rate or an exemption and proper documentation if provided.
regardless of whether the United States has an income treaty with the
foreign investor’s home country.
The method by which rental income will be taxed depends on whether
or not the foreign person who owns the property is considered “engaged
in the U.S. trade or business.”
Ownership of real property is not considered a U.S. trade or business
if it consists of merely passive activity such as a net lease in which the
lessee pays rent, as well as all taxes, operating expenses, repairs, and
interest in principal on existing mortgages and insurance in connection
with the property. Such passive rental income is subject to a flat 30
percent withholding tax (unless reduced by an applicable income tax
treaty) applied to the gross income rather than the “net rent” received.
Thus, the real estate taxes, operating expenses, ground rent, repairs,
interest and principal on any existing mortgages, and insurance
premiums paid by the lessee on behalf of the foreign owner-lessor,
must be included in gross income subject to the 30 percent
withholding tax. The gross income and withheld taxes must be reported
The policy behind withholding on investment income is that a foreign
on Form 1042-S, Foreign Persons U.S. Source Income Subject to
person earning only investment income in the United States typically
Withholding to the IRS and the payee by March 15 of the following
does not have enough U.S. contacts for the IRS to collect tax due through
calendar year.
the self-assessment process. Unlike the FIRPTA requirements, a foreign
person whose entire U.S. tax liability for investment income is satisfied by The payor must also submit Form 1042, Annual Withholding Tax
withholding is not required to file a U.S. federal income tax return, although Return for U.S. Source Income of Foreign Persons, by March 15.
the party paying the income will have to file certain tax information returns If, on the other hand, the foreign investor is engaged in a U.S. trade
in connection with the withholding, as discussed below.
or business such as the developing, managing and operating a major
Continued on page 16
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FIRPTA
Globalization fuels growth
The Immigration Law Firm
Continued from page 14
shopping center, the rental income will not be subject to withholding for U.S. Source Income of Foreign Persons, and 1042-S, Foreign Person’s
and will be taxed at ordinary progressive rates.
U.S. Source Income Subject to Withholding. These are the equivalent
Expenses such as mortgage interest, real property taxes, maintenance, of Forms 1096 and 1099-MISC but are for foreign owners.
repairs and depreciation (accelerated cost recovery) may then be deducted
in determining net taxable income. The nonresident must make estimated
tax payments for the tax due on the net rental income, if any. The only
way these expenses can be deducted, however, is if an income tax return
Form 1040NR for nonresident alien individuals and Form 1120-F for
foreign corporations is timely filed by the foreign investor.
To enforce the system of withholding, the Internal Revenue Code defines
a “withholding agent” to be any person in whatever capacity (including
lessees and managers of U.S. real property) having the control, receipt,
custody, disposal or payment of income that is subject to withholding.
Thus, a real property manager who collects rent on behalf of a foreign
owner of real property is clearly considered a withholding agent.
Foreign individuals and foreign corporations may elect to have their
passive rental income taxed as if it were effectively connected with the
U.S. trade and business. Once such an election is made by attaching a
declaration to a timely filed income tax return, there is no obligation to
withhold even in a net-lease situation. Once made, the election may not
be revoked without the consent of the IRS.
A withholding agent is personally and primarily liable for any tax that
must be withheld. The liability of the withholding agent includes
amounts that should have been paid plus interest, penalties and, where
applicable, criminal sanctions. The statute of limitations does not start
until a withholding return is filed by the withholding agent. Once the
return has been filed, the statute of limitations begins to run at the later
Unless the foreign investor has properly informed the property manager of two dates: the date of actual filing of the correct return or April 15 of
that the rental income is to be treated as “effectively connected income” the calendar year in which the return should have been filed.
by submitting to the property manager with a fully completed Internal The withholding agent will remain liable if he actually knows that the
Revenue Service Forms W-8ECI, Certificate of Foreign Person’s Claim foreign owner’s statements are false. The withholding agent’s duty of
for Exemption From Withholding on Income Effectively Connected inquiry seems to be a “reasonably prudent test,” measured by all facts
With the Conduct of a Trade or Business in the United States, the and circumstances.
property manager should withhold thirty percent (30 percent) of the A nonresident who fails to submit a timely filed income tax return loses
gross rental receipts so as to avoid personal liability.
the ability to claim deductions against the rental income, causing the
A fully completed Form W-8ECI must include a valid U.S. tax
identification number for the foreign landlord (in other words, the rental
agent must withhold and remit the 30 percent tax to the IRS until this
requirement is satisfied). A real property manager who collects rent on
behalf of a foreign owner of real property is considered a withholding
agent and is personally and primarily liable for any tax that must be
withheld. The liability of the withholding agent includes amounts that
should have been paid plus interest, penalties, and where applicable,
criminal sanctions. Property managers who do not comply with these
rules will be held liable (either individually or through their company)
for 30 percent of gross rents, plus penalties and interest.
gross rents to be subject to the 30 percent tax. Generally, the nonresident
will need to retroactively file at least six years of delinquent income tax
returns, or all prior year tax returns, if they have held the rental property
for less than six years.
However, the ability to elect to treat the rental income as effectively
connected with a U.S. trade or business will be lost after 16
months from the original due date of the return, and the remaining
back years may be subject to tax under the gross income method.
Rental income from real property located in the United States and the
gain from its sale will always be U.S. source income subject to tax in the
United States regardless of the foreign investor’s status and regardless
Also, property managers need to report annual rents collected on behalf of whether the United States has an income treaty with the foreign
of foreign landlords on Forms 1042, Annual Withholding Tax Return investor’s home country.
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