Recent Changes Affecting U.S. Investor Immigrants, Citizens and Green Card Holders
Why Investor Immigrants and Business People Are Immigrating to the USA
You can fault Donald Trump for many things, but one thing that you cannot fault him for is the economy. The unemployment rate is below four percent this year and is the lowest in 50 years. The U.S. economic growth rate is above three percent, the highest it’s been since 2005. There are several reasons why this is happening and why such strong economic numbers are attracting immigrants to come to the United States.
- Firstly, Trump’s tax bill raised the exemptions from death taxes on estates from 5.49 million to 11.4 million. This attractive exclusion makes it more desirable for U.S. citizens and investors to have their assets in the U.S. and to be subject to U.S. taxes than before Trump.
- Secondly, Trump introduced a lower corporate income tax regime, from 35 percent to 21 percent, making America competitive compared to other jurisdictions – for example, Canada’s 26.5 percent tax rate. In Canada’s case, the results are pretty brutal in terms of a corporate disadvantage. Indeed, this has turned the international corporate world upside down in terms of where companies will now be locating.
- For decades now, U.S. companies have been keeping profits overseas without repatriating them to save on U.S. taxes. The new Republican tax law made it unattractive for them to maintain such profits overseas in retained earnings. Instead, the new law gave them a one-time incentive to repatriate foreign held earnings at 15.5 percent tax, as opposed to the normal 35 percent tax. This prompted many companies to bring their retained earnings home. Microsoft, for example, paid $ 13.8 billion in taxes to repatriate some of its $ 132 billion held overseas. Apple decided to pay $ 38 billion to repatriate some of its $ 250 billion in retained earnings. In short, this is causing a flood of retained earnings to return to the USA to fund new project developments, create new domestic jobs and keep the economy humming. One article indicated $ 465 billion were brought home in the first half of 2018 alone.
- The U.S. is enforcing the Foreign Account Tax Compliance Act (FATCA) thus requiring other countries to report on the bank accounts of all U.S. citizens in their jurisdictions. This is forcing U.S. citizens living abroad, many of whom have lived quietly abroad for decades without paying U.S. taxes and coming to the attention of the I.R.S., to file U.S. tax returns to avoid paying stiff penalties for failing to do so. Just to make sure all are caught, U.S. citizens are now also required to disclose all foreign bank accounts they have abroad where the amount on deposit is $ 10,000 U.S. or more through so-called FBAR filings in their U.S. tax returns. In short, foreign tax filings and tax payments are up!
- The implementation of FATCA has led to a Common Reporting Standard (CRS) regime in which some 100 countries in the world have agreed to share financial reporting yearly with each other on their respective citizens. The only major country that has not signed on to the CRS is the U.S.A. The combined effect of these initiatives has been to flood America with money from overseas, from former tax havens like Switzerland, or the Cayman Islands, where because of the CRS, holders of bank deposits would have had their financial affairs disclosed to their home jurisdictions.
Taken together, these measures, and others such as tariffs protecting aging U.S. industries, help to explain why the United States today is such a lucrative market for investor immigration. Options like the EB5 program, inter-corporate transfers into the U.S., E-2 investor visas and others, help foreign investors join in American prosperity. They also help to explain why the U.S. is currently doing so well, and why President Trump is so popular with his followers since they have jobs, food on the table and a roof over their heads.
At the same time, however, these very same measures help to explain why there is now a dramatic rise in the number of U.S. citizens who are renouncing their U.S. citizenship, over 5000 yearly in the last two years, and likely a similar amount this year. This was the point of Marino’s seminar.
Why U.S. Citizens and Permanent Residents Are Abandoning Their Status
The reasons why such individuals might consider abandoning the U.S. are as follows:
- While the estate tax exemption is currently $ 11.4 million on worldwide assets, it is likely that exemption will decline to $ 5.49 million quickly, and is at any rate scheduled to decline to $ 5.49 million by 2026. It’s best to ex-patriot now when times are good and to give your estate away before the axe falls. The exemption from estate tax for people in the U.S. on work permits or as students and the like, is only $ 60,000, but the tax is levied only on U.S. assets in those instances. In short, anyone with an estate of more than $ 5.5 million should be concerned about paying future U.S. estate taxes. Non-residents in the U.S. who have estates larger than $ 60,000 in America should also be concerned.
- The U.S. is currently carrying a $ 23 trillion debt load. That exceeds its annual GDP of just over $ 19 trillion and the debt is headed in a direction that can no longer be sustained. The track record of recent American presidents dealing with special interests and the growing debt load is bad. It brings to mind a Churchill quote that, “Each one hopes that if he feeds the crocodile enough, it will eat him last. All of them hope that the storm will pass before their turn comes to be devoured.” We can expect that the I.R.S. will develop an ever more voracious appetite to collect taxes and become ever more aggressive as time passes.
- The easiest way to escape FATCA and FBAR filings problems and to avoid U.S. worldwide taxation, is to abandon U.S. citizenship and green cards. Many prominent people, including Yul Brynner, Tina Turner, and Boris Johnson have abandoned their U.S. citizenship. Indeed, even though it is not always wise to say so, the main reason people renounce their U.S. citizenship or abandon their green card status is to avoid U.S. taxes.
As is evident from this article, as a U.S. and Canadian immigration lawyer, I have a unique vantage point from which to view developments in this area. While I do not profess any expertise in tax law, advisors like Alexander Marino who do have the expertise and help lawyers like me, make it possible for us to better understand the motivations of our clients and to help them take the proper steps to achieve their immigration goals. The tax matters I discussed in this article are matters best raised with your own tax advisors to determine how they affect you personally. As mentioned, my interest lies in the immigration aspect involved.