I purchased several properties a few years ago when I was on a working visa in the U.S. Now I do not have a status in the U.S. and I want to use EB-5 to apply for a green card. Meanwhile, I am considering selling these old properties and taking advantages of Opportunity Zone policies to reinvest. Is there a way to combine these two together? Could you please advise what the tax implication are for a foreigner?
If you are out of status and have accrued unlawful presence in the U.S., you must first consult an experienced immigration attorney to determine if you are subject to a three- or 10-year bar and whether you may consular process if/when I-526 is approved. It is very much likely you cannot adjust status in the U.S. through EB-5 if you are out of status.
You will need the following professionals to advise you, in regards to your goals: an immigration attorney, business attorney on Opportunity Zones in order to defer capital gains, and an international tax attorney.
Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service. You should speak with a tax lawyer.
The Opportunity Zone investment policies are available to anyone who has properties within the Opportunity Zone. There are no immigration status requirements. However, considering you are not in status in the U.S., it is virtually certain that you will not qualify to file an EB-5 petition.
Opportunity Zone (OZ) or, more correctly, the Investing in Opportunity Act (IIOA) was signed into law on Dec. 22, 2017, as part of President Trump's tax reform initiative. The law allows taxpayers to defer and reduce taxes on any capital gains by investing in qualified projects within qualified Opportunity Zones within 180 days of the sale or exchange that generates the taxable gain. The IRS has published a list of approved Opportunity Zones and there is a possibility you might be able to combine these two programs. It is still very early in the process of attempting to integrate these two programs and it will be necessary to ensure funds must invest at least 90 percent of their capital in a qualified OZ property and funds must track increases to the basis of qualified OZ business property to meet the "substantial improvement" requirement. At this time it is still too early to determine how and whether these programs will be able to align.
You have some very good questions there. If hopefully you bought your properties through an LLC then you will not be subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRTPA) withholding tax. Otherwise, on the disposition of the asset you will be subject to the capital gains tax for direct foreigner ownership at 30 percent. Capital gains tax for U.S. residents and companies is much lower (0, 15 or 20 percent, depending on your income level). You can certainly take the proceeds of your sale of property and invest in EB-5 and an Opportunity Zone. Foreign investors, including trusts, may benefit from the tax benefits of Opportunity Zones. That said, before taking any further steps I strongly advise you to get in touch with an experienced tax attorney and an experienced immigration attorney. You said that you have no status in the U.S. now. If I were you I would visit a recommended immigration attorney right away. This stuff can get really complicated and a small inadvertent error could have very dear consequences.
If you do not have status in the United States, that creates a major problem. If you've been out of status for longer than six months, when you depart the U.S. to apply for your immigrant visa you'd become subject to a three-year bar. If you're out of status for more than a year when you depart the United States to apply for an immigrant visa based upon an approved EB-5 petition, you would become subject to a 10-year bar. For other purposes, you can take advantage of the Opportunity Zone policies if there's not any way to further your ability to obtain permanent residency.
You could sell the properties to fund your EB-5 investment. You would then need to invest in a company that would eventually create 10 full-time jobs. You could potentially operate the company in one of these properties and, if located in a TEA, qualify for the reduced EB-5 investment amount.
This is a great and individualized question. You need to retain the services of both an EB-5 and tax attorney in order to receive proper guidance.
If you are out of status, there is very little we, as immigration attorneys, could do. Depending on when and how you became out of status, you may also have three-year or 10-year bar issue. Although the Opportunity Zone is a new economic development program, it is not intended as giving an amnesty of illegal status, particularly under this president.
You should immediately consult with a qualified investment immigration lawyer. Do not delay because if you are out of status, you are incurring unlawful presence that could result in an immigration bar.
Before answering your specific question, preliminary concerns must be addressed. First, for the tax implication, you may want to consult with a CPA. Second, because you are out of status in the U.S., you cannot adjust your status while you are in the U.S. You must leave the U.S. in order to receive your visa in your home country. However, if you depart the U.S. to receive your EB-5 visa abroad, you may be subject to a bar. A bar means you cannot come back to the U.S. for a certain period of time because you overstayed your visa or stayed in the U.S. (violated immigration laws). Depending on your specific violation, you may be eligible to apply for a waiver of said violation. Third, as to your investment, I think you should consider your immigration status before you make your investment move. However, if you find appropriate, you may sell your properties and invest in a regional center or direct investment based on your situation.
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