Monday, April 22, 2013

EB-5 Primer: Understanding the Tax Consequences of U.S. Residency



The accents are for the most part different these days, but the issues are the same: wealthy entrepreneurs from troubled nations writing and calling me as they scramble to relocate their hard–earned assets before corrupt politicians steal what is not theirs.  Twenty years ago the financial exodus was occurring in Brazil, Russia, and the UK.  These days, it’s more than likely a client in China, Vietnam, or a Venezuelan finally pulling the trigger after years of sitting on the fence.   (I should also note that the past month did trigger a fresh round of inquiries from Russians with fast–disappearing assets in Cypriot banks.)  Soon, I believe, as the true measure of the Euro zone crisis becomes impossible to whitewash, a new exodus of European cash will be next.

As a U.S. Atty., one would think that the majority of these folks contact me to discuss U.S. immigration options.  At this stage of globalism, that is not the case.  The very high net worth clients I counsel are generally sophisticated enough to distinguish between immigration objectives and sound financial planning...and know that the two do not necessarily go hand-in-hand.   These days, I would estimate that 75% of those who contact me are looking for a solution designed to protect their investments and assets from expropriation, inflation, and devaluation, most often the result of corrupt politicians and their home country. 

The more problematic clients are those who are looking at U.S. immigration options, most of whom find me after being ill-advised by a swarm of commission-starved U.S. developers, U.S. attorneys, and foreign migration agents who are far more concerned with profiteering than with protecting the client and finding the best solution for his or her particular needs.  At least once a week I will tell a client that if I were secure to U.S. residency for someone with his or her foreign assets and income, I would be committing malpractice.  IMHO, that is exactly what is happening in China on a daily basis, primarily through EB-5 "force feeding" by the increasingly fractured and greedy migration agency system required by the GOC.

So, more often than not, instead of directing that very high net worth client toward EB-5 – even my beloved, hand-crafted Lake Point EB-5 – I advise them on the implications of becoming a U.S. tax resident and help them relocate assets to an appropriate tax free jurisdiction – pricey Singapore and ever-reliable Bahamas are my favorites these days – so they can park their assets, quit stressing out about the local financial chaos in their home country, then take a deep breath and intelligently consider U.S. immigration from an intelligent and informed standpoint.

It is striking to me that, by my estimates over the past 2-3 years, 3 out of 4 EB-5 investors have given zero consideration to the issue of global taxation as it relates to their U.S. residency.   As a result, many of these folks – especially those from the Far East and Russia, as my Middle Eastern, Latin American, and European clients are generally more informed about U.S. tax laws – have no idea that after they get their conditional green card, the sale of the family farm back home will generate capital gain tax liability in the U.S.; that the earnings of their profitable factory in a third country are considered taxable in the U.S.; that U.S. estate taxes can devour foreign assets after the death of a new U.S. resident who did not plan ahead.

It is, therefore, CRITICAL for a prospective U.S. resident having a substantially high net worth to examine these issues BEFORE they immigrate to the U.S. There are many folks I can help and guide on the subject of pre-U.S. immigration tax planning, and then there are some folks who require a level of expertise which goes far beyond my own.  When that is the case and the stakes are particularly high, I send them all to Steve Cantor, who is the best in the business.

Don’t get me wrong...I would love to see you invest in our Lake Point EB-5…but I would much prefer to see you do so with the peace of mind which comes from advance planning and guidance on the impact of U.S. tax residency on your assets.

Sunday, April 21, 2013

Jose Latour Wins ALM International Law Recognition

Those of you who have known me over the years know that in the past decade my law practice focus has gradually shifted from a comparatively tame investment-based U.S. immigration focus toward a rather complicated, frequent-flyer-mile-racking, odd fusion of:

1) EB-5 project structuring for private and public U.S. clients;
2) International asset management for high net worth foreign clients;
3) Analytics and sourcing of public funds/grants for U.S. projects and;
4) Private equity sourcing and international joint venture structuring.

It has become increasingly difficult to describe "what I do" succinctly (as if I could ever do anything "succinctly"...(-:)

But fortunately for me, the good folks who publish Corporate Counsel and The American Lawyer magazines have managed to squeeze this chorizo-esque mishmash of practice areas into the category of "International Law & International Trade", and I am humbled to receive this peer-driven award.  A big "Thank You!" to my unknown colleagues out there who's quiet faith in me made this happen...

 Press Release for Jose's American Law Media Award

Monday, April 15, 2013

The Inexcusable I-526 Limbo

When even a Senator can't get the Director of USCIS to "unstick" inexcusable I-526 adjudication delays, it's time to write the White House.  Let's see if Mr. Obama is serious about his "Invest in America" agenda...or whether USCIS inaction will lead to an exodus of EB-5 investment capital and ghosts of jobs that never were...



Dear Mr. President:

I am a former Reagan FSO who has practiced investment immigration law for over 20 years.  I am also co-owner of American Venture Solutions Regional Center, a USCIS-approved EB-5 Regional Center in Florida, the only EB-5 Regional Center owned & managed by a Forbes 400 group.  The EB-5 program has been the most successful foreign direct investment (FDI) initiative in the history of the U.S.  Unfortunately, USCIS delays are costing local communities tens of millions of dollars in FDI because of drastic adjudication delays in EB-5 investor petitions.

EB-5 investors, promised 8 month adjudication timelines by USCIS, are now waiting in excess of 14 months with no end in sight.  In December I was promised in writing that our first two long-delayed investor's cases would be adjudicated "within 30 days".  To date, three more inquiries have resulted in polite responses, saying essentially "we are sorry, we are indeed behind."

Since last year, Florida Senator Bill Nelson has done his best to get answers for our investors...only to receive the same response I received.  Senator Nelson has even personally spoken to USCIS Director Mayorkas several times regarding the "stuck" EB-5 cases and millions in job-creating capital the delays are causing Florida but to no avail.  As a result, hundreds of frustrated foreign investors are saying "give us our $500,000, we do NOT want to invest in a country which breaks its promises."  And for every investor who comes to that conclusion, that's ten American jobs which will never be.

Numerous approved EB-5 Regional Centers are losing or close to losing their EB-5 investors as a result of these inexplicable delays.  Their pending I-526 petitions are exceedingly simple adjudications, with a single focus: "can the investor document full the legitimacy of their source of funds?"  The rest - the Regional Center and its project --has been approved and adjudicated by USCIS already.  Instead of getting these funds to work in creating American jobs, USCIS continues to prioritize the adjudication of pending I-924 applications from more Regional Centers, the vast majority of which invariably fail to raise EB-5 capital.  If we can't meet our end of the EB-5 bargain for the investors risking their capital, an even smaller percentage of Regional Centers will actually be able to raise EB-5 investment funds...which is the critical component of the program.  We need the investors visas approved for funds to break escrow and American jobs to be created.  That, Mr. President, should be USCIS resoundingly clear adjudication priority.

Mr. President, your Invest in America efforts have sparked a new interest in FDI in the US, and EB-5 is a big part of that.  But these efforts are foundering over a very simple matter.  If we want to create jobs with EB-5 at-risk capital, you need to directly order USCIS to approve these long-past-due I-526 investor petitions immediately, before our national credibility is destroyed and tens of thousands of US jobs vanish in the wake of an impenetrable bureaucracy.

Respectfully,

Jose E. Latour
 


 ALSO:

Take a look at Ron Klasko's incisive analysis of the inactivity in 526 processing:

Ron Klasko First Quarter Review of EB-5 Processing on ILW