Business Without Borders – International Business and Tax Planning Blog

Posts Tagged ‘citizen’

It seems that every day there is some announcement about U.S. immigration policy or immigration reform. It also seems that with every such announcement, immigration lawyers are flooded with inquiries by the documented and undocumented, as well as their U.S. citizen friends, seeking ways to take advantage of this perceived newfound benefit. Unfortunately, some “immigration advisors” also get those inquiries and seek to take advantage of what to them is a golden opportunity to reap great financial rewards from those who can ill afford the loss. The desperate, the poor and uninformed are easy prey for those notarios, “immigration advisors,” or others involved in the unauthorized practice of law.

The most recent rumor is the specter of amnesty for those illegally in the U.S.  The truth of the matter is there is no amnesty.  The policy announcements made by the Obama Administration in August only concern a slight change in the attitude of the government to the priorities and process to be considered by the immigration service in seeking the deportation of undocumented individuals from the United States who have been convicted of crimes.  The August announcement in no way confers a right upon any non-citizen to either remain in the United States, obtain permission to work, bring other relatives to the United States, or any other independent immigration benefit.  If you know of anyone who is either undocumented or simply a non-citizen, who is here legally and is seeking a change of their status, encourage them to either seek the advice of an experienced immigration lawyer or to contact a legitimate non-profit service organization that can properly evaluate that individual’s status and advise her or him as to the best path to follow for the particular immigration benefit sought. The detention facilities of the USCIS are filled with unwary individuals who have paid thousands of dollars to unscrupulous so-called “immigration advisors” who take advantage of the poor or uninformed and often leave them worse off than before they sought the advice of that so-called “immigration advisor.” Do not let someone you care about become a victim who looses more than just money; they can forever be barred from remaining in or returning to the U.S.

As a general rule, U.S. citizens and U.S. tax “residents” are subject to U.S. federal income tax on their respective worldwide income irrespective of source.  An individual who is neither a U.S. citizen nor resident is generally subject to U.S. income tax only with respect to certain types of U.S. source income that is either FDAP (fixed, determinable, annual or periodical) or ECI (effectively connected with a U.S. trade or business.)

The key determinant of U.S. federal income tax liability is, therefore, residence of the taxpayer.

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Generally speaking, if you are a “Qualified Individual” (generally a United States citizen or resident) and you  live and work outside of the U.S., then you can exclude all or part of your foreign wages from U.S. income tax. Here’s how it works:

• You must work and reside outside the U.S.
• You must qualify under the Bona Fide Resident or Physical Presence tests.
• You can exclude up to $91,400 (indexed for inflation) annually in foreign wages.

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In the U.S., a party can be sued either in the federal courts or in the courts of one of the fifty states.  The federal courts generally have jurisdiction in matters that (1) involve an issue of federal law – called federal question jurisdiction, or (2) if the parties are citizens of different states and the matter in controversy exceeds $75,000 – called diversity jurisdiction.  In a recent case decided by the United States Supreme Court – Hertz Corp. v. Friend, the Court finally put an end to a open issue concerning in which state or states a corporation is a citizen.

The federal diversity jurisdiction statute provides that “a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.”  28 U.S.C. §1332(c)(1).  The Supreme Court has now held that a corporation has its principal place of business in the state where its “nerve center” is located.

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