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How do I avoid a “throwback tax” if I become a permanent resident through EB-5?

I have been handling my U.S. investments through a foreign trust, but am now considering relocating to the U.S. via the EB-5 program. Will I face a “throwback tax” if I become a green-card holder or citizen, and how will this be calculated? Would I face the same tax exposures if I came to the U.S. via the E-2 program instead of via EB-5?

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    Julia Roussinova

    Immigration Attorney
    Answered on

    Once you are admitted to the US on an immigrant visa upon your I-526 approval, you will be subject to taxation on worldwide income as are all lawful permanent residents and US citizens. You will also be subject to certain tax reporting, such as FBAR and FATCA reporting. I would work with a US estate planning/tax attorney to do some planning for you before you become a lawful permanent resident. You will be subject to US income taxation on E-2 visa if you are residing in the US.

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    Mark AM Catam, Esq

    Immigration Attorney
    Answered on

    Once you become a permanent resident (green card) through EB-5, you will be treated as a “resident alien” (vs. nonresident alien) for U.S. tax purposes. Individuals classified as resident aliens are taxed on their worldwide income derived from any source. Tax rates are graduated and income is determined in the same manner as for US citizens. On the other hand, E-2 temporary visas may also be classified as a resident alien for U.S. tax purposes. The determination is fact-based and will largely depend on the number of days that you have spent in the U.S. on your E-2 visa in a given year. Since taxation is in itself an issue outside immigration law, it is prudent that you consult with a tax attorney or tax expert.

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    BoBi Ahn

    Immigration Attorney
    Answered on

    I''m not a tax attorney, however, the general understanding is that you become taxable for your worldwide income only after you become a U.S. permanent resident or when you have >183 days of physical presence in the U.S. There is no such "throwback tax" provision that I am aware of.

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    Charles Foster

    Immigration Attorney
    Answered on

    While immigration lawyers are well aware of many of the tax consequences, these types of tax questions should be addressed to an accounting firm or attorney that specializes in the representation of foreign nationals who are in the process of acquiring Lawful Permanent Residency. Having said that, generally, you would not have the same consequences if you came to the U.S. on an E-2 non-immigrant visa. When you qualify through the EB-5 program, you are qualifying for Lawful Permanent Resident status, which in and of itself subjects you to worldwide taxation. There are also other issues with respect to acquiring Lawful Permanent Residency and the consequences should you renounce your Lawful Permanent Residency after more than 7 years. On the other hand, should you live and work in the United States in E-2 non-immigrant status, your worldwide income is not necessarily subject to worldwide taxation, but it may be depending upon the number of days that you are residing physically in the United States. Again, you should consult with your tax advisor.

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    A Olusanjo Omoniyi

    Immigration Attorney
    Answered on

    Generally, foreign trusts (or offshore trusts) were in the past used for tax planning and asset management strategies. Since 1954, the US started considering these trusts abusive and are now highly regulated under the throwback tax rules. Advisably, consult tax advisors and preferably tax attorney who handles estate planning on how to mitigate the resulting throwback tax burdens on your trust as the laws on foreign trusts keep shifting.

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