EB-5 Investors & the Perils of U . S . Estate and Gift Taxes
Making an EB-5 investment is an important decision for anyone interested in the EB-5 program . Investors are routinely warned to perform due diligence on the professionals and regional centers they choose , and to consult with trusted advisors on all aspects of projects they are considering , but in my EB-5 practice it is alarming to witness how few EB-5 investors obtain income , estate , and gift tax advice from qualified U . S . tax professionals . Most immigration attorneys , both verbally and in their written fee agreements , recommend that their clients seek tax counsel , even though clients rarely do so . The United States imposes income tax on the worldwide income of its citizens and green card holders , even if they reside overseas . EB-5 investors who receive their green cards through the program — or through any other means — automatically subject themselves to classification as a U . S . domicile and the tax requirements that come with it . Taxes collected by the United States government , at both the state and the federal level , go toward providing important public services in the country . Tax dollars help pay for infrastructure , public safety , health services , and notably education , which is an important benefit for investors and their children . Without taxes , the United States would not be able to fund programs that make the country so appealing to foreign investors in the first place . Nonetheless , there are steps investors can take , with tax advisors , to ensure that they are paying the appropriate amount of tax for their situation . EB-5 investors are well-advised to seek out comprehensive tax planning advice to ensure that they achieve their immigration goals while avoiding unnecessary taxes . by Mark Ivener and Gary Wolfe
Domicile
A U . S . domicile is a non-U . S . citizen who relocates to the United States with the intention to reside permanently in the country . EB-5 investors who receive both conditional and permanent green cards subject themselves to classification as U . S . domiciles , and are hence subject to U . S . estate and gift tax on their worldwide estates . If EB-5 investors receive green cards , under IRS audit procedures , it may be construed as evidence of intent to permanently reside in the United States , subjecting them to U . S . estate and gift tax on their worldwide assets .
Classification as a U . S . domicile may invite increased scrutiny by the IRS — what industry insiders refer to as an audit trap — so it is important that EB-5 investors and their advisers understand which tax classification applies to their specific cases to avoid unnecessary trouble and costs . Additionally , classification as a U . S . domicile is especially important because it affects the amount of taxes that a tax subject is required to pay . Avoiding U . S . domicile status may seem inviting to the tax-conscious EB-5 investor , since non-U . S . domiciles living in the country are only subject to U . S . estate and gift tax in certain circumstances . Furthermore , a non-U . S . domicile would not have a U . S . estate and gift tax on non-U . S . assets ( ie . worldwide assets ), or be subject to U . S . estate tax on life insurance proceeds , and certain bank accounts and portfolio debt . However , because the very nature of the EB-5 program is to establish investors as permanent residents , and therefore U . S . domiciles according to the IRS , can EB-5 investors simultaneously protect their immigration benefits and minimize their tax liability ?
Is the EB-5 investor a U . S . domicile ?
Although the EB-5 program was first established in 1990 , it has only picked up steam in the last decade , making it a newer program , so U . S . estate and gift tax law has not yet definitively addressed EB-5 tax issues . While the classification of a U . S . domicile applies to a variety of resident visas , rarely is the topic approached in an EB-5-specific context . Given the U . S . government ’ s huge deficits and need for new sources of revenue , it is likely this issue will be addressed as more foreign investors pour funds into U . S . real estate , companies , and investment portfolios .
38 EB5 Investors Magazine