Category: Immigration

ALERT: Fraud Scheme Targets Foreign Nationals

GT Law

Foreign nationals are advised to be aware of a reported fraud scheme that is currently being perpetrated in the United States.

Individuals purporting to be officers of U.S. Citizenship and Immigration Services (USCIS) are reportedly telephoning foreign nationals to falsely claim a discrepancy or problem in such individuals’ immigration records and pressure victims to pay a “penalty” to rectify the issue. Victims are told to wire funds to an address the caller provides.

The perpetrators may possess personal information about the victim and may ask victims to provide or confirm immigration information, including an I-94 number, an alien registration number or a visa control number.

Foreign nationals who receive such calls should not forward any funds as instructed by the caller or disclose any personal information. Those targeted by the scheme should contact law enforcement, the Federal Trade Commission Bureau of Consumer Protection, and an attorney.

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Prospects for Comprehensive Immigration Reform: The House of Representatives Kicks the Can Down the August Recess Road

GT Law

The U.S. House of Representatives left town last week for the long August recess without passing one immigration-related bill. House Republicans made it quite clear that the Senate- passed S. 744, The Border Security, Economic Opportunity, and Immigration Modernization Act, would never be taken up by the House.

To date, the House has five immigration bills reported out of either the Judiciary or Homeland Security Committee. The Comprehensive Immigration Reform bill that the House Gang of 8 (now 7) has been working on for the past 18-plus months has not be introduced and the common wisdom is that it will not be the vehicle that will be used in the House.

None of the five bills have been brought to the floor for a vote. When the House returns in September, there is a feeling that the bills might be brought up in the following order:

  1. The Border Security Results Act (H.R. 1417) was introduced on April 9, 2013 by House Homeland Security Chairman Michael McCaul and approved by the House Homeland Security Committee on May 20, 2013 by voice vote. H.R. 1417 requires results verified by metrics to end The Department of Homeland Security’s ad hoc border approach and to help secure our nation’s porous borders.
  2. The Strengthen and Fortify Enforcement Act (H.R. 2278), also know as The SAFE Act, was approved by the House Judiciary Committee on June 18, 2013. The SAFE Act seeks to improve the interior enforcement of our immigration laws by preventing the Executive Branch from unilaterally halting federal enforcement efforts. To this end, the bill grants states and localities the authority to enforce federal immigration laws.
  3. The Legal Workforce Act (H.R. 1772) was introduced on April 26, 2013 by Rep. Lamar Smith and approved by the House Judiciary Committee on June 26, 2013. This bill discourages illegal immigration by ensuring that jobs are made available only to those who are authorized to work in the U.S. Specifically, the bill requires employers to check the work eligibility of all future hires though the E-verify system.
  4. The Supplying Knowledge Based Immigrants and Lifting Levels or STEM Visas Act (H.R. 2131), also known as The SKILLS Visa Act, was introduced by Rep. Darrell Issa on May 23, 2013. The SKILLS Visa Act changes the legal immigration system for higher-skilled immigration and improves programs that make the U.S. economy more competitive. The SKILLS Visa Act was approved by the House Judiciary Committee on June 27, 2013.
  5. On April 26, 2013, House Judiciary Committee Chairman Bob Goodlatte introduced the Agricultural Guestworker Act (H.R. 1773), also known as The AG Act. The Committee approved this bill on June 19, 2013 in a voice vote (20-16). This bill attempts to provide farmers with a new guest worker program to ease access to a lawful, agricultural workforce that employers may call upon when sufficient American labor cannot be found.

The members of the Republican leadership in the House have not been clear about the timing strategy for a potential conference with the Senate. It is not very likely, however, that a conference will occur until the end of 2013, if at all.

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White House Highlights the Need For Educated Immigrant Entrepreneurs and Employees

GT Law

The Office of Science and Technology Policy (“OSTP”) highlighted the need for immigration reform in a recently published blog post. Over 40 percent of Fortune 500 companies, including GE, Ford, Yahoo and Google, were founded by immigrants or children of immigrants. According to the OSTP, the recently passed bipartisan Senate bill would enact some of the President’s key priorities for retaining the skilled workers.

Specifically, the bill would remove visa caps for immigrants with a PhD or Master’s degree in Science, Technology, Engineering and Math (“STEM”). A recent article from Forbes.com highlighted the continuing need for STEM graduates. The median pay for STEM graduates with less than three years of work experience was $88,700. However, STEM jobs remain unfilled because of the lack of qualified candidates.

The Senate bill would also create a new startup visa for Immigrant Entrepreneurs. Qualified Entrepreneurs would have to invest no less than $100,000 in a U.S. business, create no fewer than three jobs and generate at least $250,000 in annual revenue from business conducted in the United States. A “Qualified Entrepreneur” would be an individual who has a significant ownership interest in a U.S. business entity, is employed in a senior executive position of that U.S. business entity, submits a business plan to USCIS and has a substantial role in the founding or early stage development of such entity.

Additionally, the bill would eliminate the existing backlogs for employment-based visas. This change would permanently expand the availability of visa numbers for high-skilled workers by exempting relatives of these skilled workers from the annual cap. These are important, necessary and critical changes to our broken immigration system. All eyes are now focused on the House to see if these important immigration reform steps will be passed into law and how the new bill would impact the EB-5 program.

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What the SEC’s Elimination of the Prohibition on General Solicitation for Rule 506 Offerings Means to the EB-5 Community

Sheppard Mullin 2012

As we previously reported, on July 10, 2013, the SEC adopted the amendments required under the JOBS Act to Rule 506 that would permit issuers to use broad-based marketing methods such as the Internet, social media, email campaigns, television advertising and seminars open to the general public.  These types of methods are referred to in U.S. securities laws as “general solicitation,” and they have until now been prohibited in most offerings of securities that are not registered with the SEC. This is an important development to the EB-5 community because EB-5 offerings very often rely on Rule 506 as an exemption from offering registration requirements.

In addition, the SEC amended Rule 506 to disqualify felons and other “bad actors” from being able to rely on Rule 506.  This is also an important development for the EB-5 community, which has developed a heightened sensitivity to the potential for fraud in the wake of the Chicago Convention Center project.

Please note that these new rules are not yet effective.  See “When do the new rules become effective?” below.

Overview

Companies intending to raise capital through the sale of securities in or from the United States must either register the securities offering with the SEC or rely on an exemption from registration.   Failure to assure an available exemption for unregistered securities can result in civil and criminal penalties for the participants in the offering and rescission rights in favor of the investors.

For EB-5 programs, a widely used exemption from registration is Rule 506 of Regulation D, under which an issuer may raise an unlimited amount of capital from an unlimited number of “accredited investors” and up to 35 non-accredited investors.  Historically, this exemption has prohibited general solicitation or advertising in connection with the offering, including publicly available web sites, social media, email campaigns, television advertising and seminars open to the general public.

The other commonly used exemption, Regulation S, has been less restrictive on general solicitation, but is not available for investors already present in the United States and does not preempt state securities law registration/exemption obligations, which often prohibit general solicitation.  Rule 506 does preempt such state laws (except as to notice filings and filing fees).  For many EB-5 programs and investors, there is no available exemption other than Rule 506 that does not also prohibit general solicitation.

In connection with the passage by Congress of the Jumpstart Our Business Startups (JOBS) Act in April 2012, Congress directed the SEC to remove the prohibition on general solicitation or general advertising for securities offerings relying on Rule 506, provided that sales are limited to accredited investors only and that the issuer takes reasonable steps to verify that all purchasers of the securities meet the requirements for accredited investors. The SEC initially proposed a rule to implement these changes in August 2012, but did not pass final rules on the changes to Rule 506 until now.

What changes were made to Rule 506?

The final rule adds a new Rule 506(c), which permits issuers (that is, the partnerships or other organizations actually issuing partnership interests and the like in exchange for EB-5 capital) to use general solicitation and general advertising  for the offer their securities, provided that:

  • All purchasers of the securities are accredited investors as defined under Rule 501; and
  • The issuer takes “reasonable steps” to verify that the purchasers are all accredited investors.

Who is an accredited investor?

Under Rule 501 of Regulation D, a natural person qualifies as an “accredited investor” if he or she is either:

  • An individual net worth (or joint net worth with a spouse) that exceeds $1 million at the time of the purchase, excluding the value of a primary residence; or
  • An individual annual income of at least $200,000 for each of the two most recent years (or a joint annual income with a spouse of at least $300,000 for those years), and a reasonable expectation of the same level of income in the current year.

What are reasonable steps to verify that an investor is accredited?

What steps are reasonable will be an objective determination by the issuer (or those acting on its behalf), in the context of the particular facts and circumstances of each purchaser and transaction.  The SEC indicates that among the factors that issuers should consider under this facts and circumstances analysis are:

  • the nature of the purchaser and the type of accredited investor that the purchaser claims to be;
  • the amount and type of information that the issuer has about the purchaser; and
  • the nature of the offering, such as the manner in which the purchaser was solicited to participate in the offering, and the terms of the offering, such as a minimum investment amount.

The final rule provides a non-exclusive list of methods that issuers may use to satisfy the verification requirement for purchasers who are natural persons, including:

  • For the income test, reviewing copies of any IRS form that reports the income of the purchaser for the two most recent years and obtaining a written representation that the purchaser will likely continue to earn the necessary income in the current year.
  • For the net worth test, reviewing one or more of the following types of documentation dated within the prior three months and obtaining a written representation from the purchaser that all liabilities necessary to make a determination of net worth have been disclosed:
    • With respect to assets: bank statements, brokerage statements and other statements of securities holdings, certificates of deposit, tax assessments, and appraisal reports issued by independent third parties; and
    • With respect to liabilities: a consumer report from at least one of the nationwide consumer reporting agencies;
  • As an alternative to either of the above, an issuer may receive a written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney, or certified public accountant that it has taken reasonable steps within the prior three months to verify the purchaser’s accredited status.

Simply relying on a representation from the purchaser, or merely checking a box on an accredited investor questionnaire, will not meet the requirement for objective verification. EB-5 Regional Centers should consider this carefully if they intend to make “accredited investor” determinations.

What actions must an issuer take to rely on the new exemption?

Issuers selling securities under Regulation D using general solicitation must file a Form D. The final rule amends the Form D to add a separate box for issuers to check if they are claiming the new Rule 506 exemption and engaging in general solicitation or general advertising. An issuer is currently required to file Form D within 15 days of the first sale of securities in an offering, but the SEC promulgated proposed rules to require an earlier filing.  See “Are there any other changes contemplated for Rule 506?” below.

Will the new rule affect other Rule 506 offerings that do not use general solicitation?

Not directly. The existing provisions of Rule 506 remain available as an exemption. This means that an issuer conducting a Rule 506 offering without using general solicitation or advertising is not required to perform the additional verification steps.

Who is excluded from using the Rule 506 exemption?

Under the new rule regarding “bad actors” required by the Dodd-Frank Act, an issuer cannot rely on a Rule 506 exemption (including the existing Rule 506 exemption) if the issuer or any other person covered by the rule has had a “disqualifying event.”  The persons covered by the rule are the issuer, including its predecessors and affiliated issuers, as well as:

  • Directors and certain officers, general partners, and managing members of the issuer;
  • 20% beneficial owners of the issuer;
  • Promoters;
  • Investment managers and principals of pooled investment funds; and
  • People compensated for soliciting investors as well as the general partners, directors, officers, and managing members of any compensated solicitor.

What is a “disqualifying event?”

A “disqualifying event” includes:

  • Felony and misdemeanor criminal convictions in connection with the purchase or sale of a security, making of a false filing with the SEC or arising out of the conduct of certain types of financial intermediaries. The criminal conviction must have occurred within 10 years of the proposed sale of securities (or five years in the case of the issuer and its predecessors and affiliated issuers).
  • Court injunctions or restraining orders in connection with the purchase or sale of a security, making of a false filing with the SEC, or arising out of the conduct of certain types of financial intermediaries. The injunction or restraining order must have occurred within five years of the proposed sale of securities.
  • Final orders from certain regulatory authorities that:
    • bar the issuer from associating with a regulated entity, engaging in the business of securities, insurance or banking, or engaging in savings association or credit union activities, or
    • are based on fraudulent, manipulative, or deceptive conduct and were issued within 10 years of the proposed sale of securities.
  • Certain SEC disciplinary orders relating to brokers, dealers, municipal securities dealers, investment companies, and investment advisers and their associated persons.
  • SEC cease-and-desist orders related to violations of certain anti-fraud provisions and registration requirements of the federal securities laws.
  • Suspension or expulsion from membership in or association with a self-regulatory organization (such as FINRA, the membership organization for broker-dealers).
  • U.S. Postal Service false representation orders issued within five years before the proposed sale of securities.

What disqualifying events apply?

Only disqualifying events that occur after the effective date of the new rule will disqualify an issuer from relying on Rule 506. However, matters that existed before the effective date of the rule and would otherwise be disqualifying must be disclosed to investors.

Are there exceptions to the disqualification?

Yes. An exception from disqualification exists when the issuer can that show it did not know and, in the exercise of reasonable care, could not have known that a covered person with a disqualifying event participated in the offering.  The SEC can also grant a waiver of the disqualification upon a showing of good cause.

When do the new rules become effective?

Both rule amendments will become effective 60 days after publication in the Federal Register.  Publication normally occurs within two weeks after final rules are adopted.

Are there any other changes contemplated for Rule 506?

In connection with the foregoing final rules, the SEC separately published for comment a proposed rule change intended to enhance the SEC’s ability to assess developments in the private placement market based on the new rules regarding general solicitation. This proposal would require issuers to provide additional information to the SEC, including:

  • identification of the issuer’s website;
  • expanded information about the issuer;
  • information about the offered securities;
  • the types of investors in the offering;
  • the use of proceeds from the offering;
  • information on the types of general solicitation used; and
  • the methods used to verify the accredited investor status of investors.

Though this proposed rules is not specifically directed to EB-5 offerings, the SEC could use such information to enhance the monitoring it is already doing of EB-5 programs.

The proposed rule would also require issuers that intend to engage in general solicitation as part of a Rule 506 offering to file the Form D at least 15 calendar days before engaging in general solicitation for the offering. Then, within 30 days of completing the offering, the issuer would be required to update the information contained in the Form D and indicate that the offering had ended.

The proposed rule has a 60-day comment period.

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Department of State Releases August 2013 Visa Bulletin

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EB-2 category for individuals chargeable to India advances by more than three years.

The U.S. Department of State (DOS) has released its August 2013 Visa Bulletin. The Visa Bulletin sets out per country priority date cutoffs that regulate the flow of adjustment of status (AOS) and consular immigrant visa applications. Foreign nationals may file applications to adjust their status to that of permanent resident or to obtain approval of an immigrant visa at a U.S. embassy or consulate abroad, provided that their priority dates are prior to the respective cutoff dates specified by the DOS.

What Does the August 2013 Visa Bulletin Say?

The cutoff date in the EB-2 category for individuals chargeable to India has advanced by three years and four months in an effort to fully utilize the numbers available under the annual limit. It is expected that such movement will generate a significant amount of demand from individuals chargeable to India during the coming months.

EB-1: All EB-1 categories remain current.

EB-2: A cutoff date of January 1, 2008 is now in effect for individuals in the EB-2 category from India, reflecting forward movement of three years and four months. A cutoff date of August 8, 2008 remains in effect from the July Visa Bulletin for individuals in the EB-2 category from China. The cutoff date remains current for individuals in the EB-2 category from all other countries.

EB-3: There is continued backlog in the EB-3 category for all countries, with minor forward movement for EB-3 individuals from the Philippines and no forward movement for EB-3 individuals from the rest of the world.

The relevant priority date cutoffs for foreign nationals in the EB-3 category are as follows:

China: January 1, 2009 (no forward movement)
India: January 22, 2003 (no forward movement)
Mexico: January 1, 2009 (no forward movement)
Philippines: October 22, 2006 (forward movement of 21 days)
Rest of the World: January 1, 2009 (no forward movement)

Developments Affecting the EB-2 Employment-Based Category

Mexico, the Philippines, and the Rest of the World

In November 2012, the EB-2 category for individuals chargeable to all countries other than China and India became current. This meant that EB-2 individuals chargeable to countries other than China and India could file AOS applications or have applications approved on or afterNovember 1, 2012. The August Visa Bulletin indicates that the EB-2 category will continue to remain current for these individuals through August 2013.

China

As with the July Visa Bulletin, the August Visa Bulletin indicates a cutoff date of August 8, 2008 for EB-2 individuals chargeable to China. This means that EB-2 individuals chargeable to China with a priority date prior to August 8, 2008 may continue to file AOS applications or have applications approved through August 2013.

India

From October 2012 through the present, the cutoff date for EB-2 individuals chargeable to India has been September 1, 2004. The August Visa Bulletin indicates forward movement of this cutoff date by more than three years to January 1, 2008. This means that EB-2 individuals chargeable to India with a priority date prior to January 1, 2008 may file AOS applications or have applications approved in August 2013. The August Visa Bulletin indicates that this cutoff date has been advanced in an effort to fully utilize the numbers available under the EB-2 annual limit. It is expected that such movement will generate a significant amount of demand from individuals chargeable to India during the coming months.

This significant advancement in the cutoff date for EB-2 individuals chargeable to India will quite possibly be followed by significant retrogression in the new fiscal year. Consequently, AOS applications filed in September 2013 may be received and receipted by U.S. Citizenship and Immigration Services; however, adjudication could be delayed. Applications for interim benefits, including employment authorization and advance parole, should be adjudicated in a timely manner notwithstanding any possible retrogression of cutoff dates.

Developments Affecting the EB-3 Employment-Based Category

In May, June, and July, the cutoff dates for EB-3 individuals chargeable to most countries advanced significantly in an attempt to generate demand and fully utilize the annual numerical limits for the category. The August Visa Bulletin indicates no additional forward movement in this category, with the exception of the Philippines, which advanced by 21 days.

China

The July Visa Bulletin indicated a cutoff date of January 1, 2009 for EB-3 individuals chargeable to China. The August Visa Bulletin indicates no movement of this cutoff date. This means that EB-3 individuals chargeable to China with a priority date prior to January 1, 2009 may file AOS applications or have applications approved through August 2013.

India

Additionally, the July Visa Bulletin indicated a cutoff date of January 22, 2003 for EB-3 individuals chargeable to India. The August Visa Bulletin indicates no movement of this cutoff date. This means that EB-3 individuals chargeable to India with a priority date prior to January 22, 2003 may file AOS applications or have applications approved through August 2013.

Rest of the World

The July Visa Bulletin indicated a cutoff date of January 1, 2009 for EB-3 individuals chargeable to the Rest of the World. The August Visa Bulletin indicates no movement of this cutoff date. This means that individuals chargeable to all countries other than China, India, Mexico, and the Philippines with a priority date prior to January 1, 2009 may file AOS applications or have applications approved through August 2013.

How This Affects You

Priority date cutoffs are assessed on a monthly basis by the DOS, based on anticipated demand. Cutoff dates can move forward or backward or remain static. Employers and employees should take the immigrant visa backlogs into account in their long-term planning and take measures to mitigate their effects. To see the August 2013 Visa Bulletin in its entirety, please visit the DOS website here.

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Defense of Marriage Act’s Demise (DOMA) – What it Means for Canadian Residents with U.S. Ties

Altro Levy LogoLast week, the US Supreme Court issued an historic and landmark ruling in the case of US v. Windsor. It has been hailed in the media as the demise of the Defense Of Marriage Act (“DOMA”), and celebrated as an extension of more than 1,000 federal benefits to same-sex couples.

In US v. Windsor, Edith Windsor brought suit against the US government after she was ordered to pay $363,000 in US estate tax upon the death of her wife Thea Spyer. Edith and Thea were legally married in Canada in 2007, but the US federal government did not recognize their marriage when Thea passed away in 2009. Under DOMA gay marriage was not recognized, even if it was legal in the jurisdiction where it was performed. This lack of recognition meant that Edith could not take advantage of the marital deduction that would have allowed her to inherit from her wife without paying US estate tax.

In its ruling on June 26th, the US Supreme Court ruled that the US federal government could not discriminate against same-sex married couples in the administration of its federal laws and benefits as previously dictated by DOMA. Same-sex couples, who are legally married in one of the 13 states that recognize gay marriage, or a country like Canada, now have access to the same federal protections and benefits as a heterosexual married couple.

Tax Benefits

The demise of DOMA will bring with it a multitude of changes under US tax law. We will not attempt to enumerate all of them here, though we will provide a brief overview of key changes for our Canadian and American clients.

i. US Estate Tax

The case of US v. Windsor was based on the US estate tax, which is imposed by the US federal government on both US citizens and residents, as well as non-residents who own US assets worth more than $60,000 USD. Currently US citizens and residents with less than $5.25 Million USD in worldwide assets do not owe US estate tax on death. Canadians with worldwide assets of $5.25 Million USD or less receive a unified credit under the Canada-US Tax Treaty that works to eliminate any US estate tax owed on their US property.

Under federal law a US citizen may pass his entire estate to his US citizen spouse tax-free upon death. Up until last week this rollover was unavailable to same-sex couples.

Canadian same-sex couples should now benefit from the Canada-US Tax Treaty provisions that provide a marital credit to the surviving spouse. This allows for a doubling up of credit against any potential US estate tax due on US property. Now a Canadian same-sex spouse can inherit a worldwide estate worth up to $10.5 Million USD and should see little to no tax on US assets due upon the death of the first spouse.

ii. Gift Tax

The US imposes a tax on gifts if they exceed $14,000 USD per recipient per year. There is an exemption for gifts between spouses, which are generally not taxable.

Gifts made in the US between non-US citizen non-resident spouses are taxable, but the annual exemption is $139,000 USD instead of $14,000 USD. Canadian spouses who gift each other US property, US corporate stocks, etc. may gift up to $139,000 USD per year without incurring US gift tax.

These exemptions have now been extended to same-sex couples, expanding their ability to use gifting for tax and estate planning.

iii. US Income Tax

Many Canadians move to the US each year, in part because of the lower personal tax rates. In the US spouses are allowed to engage in a form of income splitting by filing a joint income tax return. By filing jointly, married couples are also generally able to take advantage of further credits and deductions not afforded to individual or single filers. Being able to file jointly can be highly tax advantageous.

Previously, same-sex couples had to file either separately or as head of household. Now they have the option of filing jointly as spouses, and gaining access to the aforementioned income splitting, credits and deductions.

Couples may file up to three years of amended US Income Tax returns if they believe that they would have been entitled to a larger tax return by filing jointly in those years.

iv. Other Tax Benefits

In the US most individuals receive health insurance through their employer at least up until they qualify for US Medicare at age 65. Previously, if the employer sponsored health insurance plan covered the same-sex spouse as well, then it was considered a taxable benefit. Such coverage will now also be tax-free for same-sex couples.

Retirement Benefits

Among the many benefits now extended to same-sex couples are a variety of “Retirement Benefits.”

i. Social Security and Medicare Benefits

With the end of DOMA, same-sex couples may now qualify for retirement, death, and disability Social Security benefits based on their spouse’s qualifying US employment history. For example, same-sex couples that do not have the required US employment history to qualify for US Social Security benefits on their own may now qualify for spousal Social Security benefits based on their spouse’s qualifying employment history. These spousal Social Security benefits are typically equal to 50% of the Social Security benefits received by the spouse with the qualifying employment history.

Additionally, spouses can qualify for US Medicare based on only one spouse’s qualifying US employment. This allows access to premium-free, or reduced-premium, health coverage in retirement.

Previously these important retirement benefits were not available to same-sex spouses.

ii. Individual Retirement Accounts

Important changes to the rights and recognition of spouses under US retirement savings plans result from the end of DOMA. Same-sex couples will now be recognized under 401(k), 403(b), IRA, Roth IRA, and similar plans. Spouses will be required to give their consent for any non-spouse beneficiary designations for these accounts. They will be treated as spouses for purposes of determining required distributions. For example, an inheriting same-sex spouse will not have to begin IRA distributions until age 70 ½, whereas previously he would have had to begin required distributions immediately as would any non-spouse beneficiary.

Immigration

One of the biggest questions after the US Supreme Court’s ruling on DOMA was whether there would be immediate changes to US immigration policy. Previously the US government did not recognize same-sex couples for immigration purposes. This meant that a US citizen spouse could not sponsor his husband for immigration to the US as a permanent resident (a.k.a. green card holder).

Last week, shortly after the ruling on DOMA, Alejandro Mayorkas, the director of US Citizenship and Immigration Services (“USCIS”) announced at the American Immigration Lawyers Association annual conference that the USCIS would begin issuing green cards to qualifying same-sex couples.

As of Friday, June 29, 2013, USCIS began issuing green cards to same-sex spouses. USCIS has stated that it has been keeping a record of spousal green card petitions denied only due to a same-sex marriage for the past two years. It is expected to reopen and reconsider these spousal sponsorship petitions that were previously denied due to same-sex marriage.

Conclusion

The demise of DOMA is exciting news for Americans, and Canadians with US ties. It provides same sex couples a wealth of new tax and estate planning opportunities, not to mention new opportunities for retirement and immigration planning. It is not too early to review your current planning, and take advantage of these changes.

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What Windsor Means for Same-Sex Married Couples Seeking U.S. Immigration Benefits

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On June 26, 2013, the Supreme Court ruled in United States v. Windsor that Section 3 of the 1996 Defense of Marriage Act (“DOMA”) is unconstitutional. This Section of DOMA prohibited the U.S. government from conferring any federal benefits to same-sex couples who were married in any jurisdiction in the world.

horshoe ring

What does the Windsor decision mean for same-sex couples seeking immigration benefits?

On the immigration front, DOMA has been the main obstacle prohibiting married same-sex couples from accessing any immigration benefits that would otherwise flow to a spouse. For example, a U.S. citizen may sponsor a spouse who is a foreign national for permanent residence, and that foreign national spouse is considered an “immediate relative” of a U.S. citizen and exempt from annual numerical limitations on immigrants. Before Windsor, this option of “immediate relative” sponsorship did not exist for same-sex couples. Same-sex spouses also were not able to qualify for derivative nonimmigrant visas, or to qualify as dependents in an employment-based immigrant visa or adjustment of status process. Windsor has permanently shifted this landscape, with same-sex married couples being recognized as married and therefore able to access immigration benefits, provided they can demonstrate eligibility under the law for the specific benefits sought.

What marriages are valid under Windsor?

Generally, if a couple’s marriage is valid where it is performed, it is valid for purposes of immigration law. If you and your foreign national spouse were married in one of the 12 U.S. states that recognize same-sex marriage or in a foreign country that recognizes same-sex marriage, such as Canada, your green card sponsorship and application process should be treated exactly like the application of a different-sex couple. In fact, Edie Windsor, the plaintiff in Windsor, married her wife in Canada. To determine the validity of the marriage, U.S. Citizenship and Immigration Services (“USCIS”) focuses on the place where the marriage took place, not the location where one or both spouses live. This same principle is applied by other agencies within the Department of Homeland Security as well as at U.S. Embassies and Consulates.

Recent Guidance from the Federal Government

We expect government agencies to implement the Windsor decision swiftly. This means that immediately we will see changes at the various federal agencies that process applications for immigration benefits and visas. Secretary of Homeland Security Janet Napolitano issued a statement following the Court’s decision. She directed USCIS “to review immigration visa petitions filed on behalf of a same-sex spouse in the same manner as those filed on behalf of an opposite-sex spouse.” Recent Department of Homeland Security guidance is now clear that family-based immigrant visas will no longer “be automatically denied as a result of the same-sex nature of your marriage.” Following the Court’s decision, Secretary of State John Kerry stated that the Department of State (DOS) will work with the Department of Justice and other agencies “to review all relevant statues as well as benefits administered” by DOS. We expect to see guidance from U.S. Consulates in the coming weeks.

Conclusion

Same-sex couples who are married now have equal access to immigration benefits. The scope of the Windsor decision extends to same-sex spouses of individuals pursuing employment-based immigration benefits, such as green card and nonimmigrant visa sponsorship. We will continue to monitor developments in the law and provide guidance on immigration options for LGBT families.

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I-94 Automation and the I-9 Process: Making the Immigration Form I-9 More Complicated

Sheppard Mullin 2012

This spring U.S. Customs and Border Protection (CBP) began implementation of a phased in Form I-94, Arrival/Departure Record, automation process. The Form I-94 is issued to all visitors entering the U.S. and assists CBP in tracking temporary non-immigrants, visa overstays, and other relevant information concerning foreign nationals entering the U.S. The new program created a paperless admission process with the ultimate goal of eliminating the paper I-94 card for foreign travelers. The automation enables CBP to organize admission data for sea and air entries easily and accessibly, saving an estimated $15.5 million per year in related costs (not from a reduction in paper). While the effort to move to an electronic system should be commended, the new system may make life a bit more complicated for employers sponsoring foreign workers due to the requirements of the Form I-9, Employment Eligibility Verification Form process. Travelers, with the exception of asylees and refugees who will continue to receive paper Form I-94 cards, will now receive an admission stamp together with a tear sheet providing instructions on how they may access and print their electronic Form I-94 by visiting www.cbp.gov/I94.

How will I-94 automation impact the Form I-9 Employment Eligibility Verification process?

For those employees entering the United States to work for a sponsoring employer, current Form I-9 instructions state that the individual must present his/her foreign passport and I-94 card for recording List A document information. With the new system, however, workers will need to go online to retrieve their I-94 numbers and present employers with their foreign passport and I-94 printout from the CBP Website. Based on our conversations with U.S. Citizenship and Immigration Services (USCIS), it appears that the Service will accept either the paper I-94 card or the printout of the I-94 for Form I-9 purposes in combination with the employee’s foreign passport. Employers collecting an I-94 printout should record it as an “I-94” for Form I-9 purposes, with the issuing authority as “CBP” and the document number and expiration date taken from the printout itself.

In addition, CBP will issue Form I-94 cards to refugees, asylees, and parolees with preprinted numbers on the documents that have been crossed out. CBP officials will hand write the valid admission number on the I-94 card. When completing a Form I-9 for an employee with a paper Form I-94 with a crossed out number, be sure to record the handwritten admission number in Section 2 of the Form I-9 if that employee presents his or her I-94.

Making the process more confusing, the new Form I-9 requires employees to know which government agency issued the I-94 number: USCIS or CBP. If CBP issued the employee’s I-94 number, the employee must complete Section 1 of the Form I-9 with an I-94 number instead of an Alien Registration/USCIS Number and must complete the Form I-9 with their admission number, foreign passport number and country of issuance. Generally, CBP will issue the Form for visitors entering through a land or sea port of entry. However, if USCIS is the government entity that issued the I-94 admission number “N/A” should be entered by the employee for the foreign passport number and country of issuance and the employee should record his/her Form I-94 admission number in Section 1 of the Form I-9. USCIS will issue the Form when there is a change, amendment, or extension of an employee’s status in the United States.

Issues with the Automated System

Some employers have already encountered issues with this new system, as not all new hires have been able to access their I-94 information from the online system. After speaking with CBP officials, it appears that this mainly is occurring when employees enter the country and then begin work almost immediately after entry. CBP is working to correct the problem. In the meantime, employers processing Form I-9 paperwork for new foreign national hires with electronic I-94 documents should use caution when completing the Form and should document the reason for any delays in processing if they are due to errors with the new government system. Completing the Form I-9 paperwork should not be delayed under any circumstance, as late completion could expose a company to liability. In addition, employees with issues accessing their I-94 information should call CBP at 1-877-221-5511 and inquire into their case status and the reason for the delay. Calls to USCIS inquiring into what employers should do in this situation were met with the same response.

If CBP is unable to provide the information for a new hire, the employee may want to consider adding a note to the Form I-9 in Section 1, explaining “No I-94 number available due to a government system issue.” The employee should be reminded to call CBP and continue to check the I-94 website. After the employee’s information is loaded to the system and the employee receives the I-94 number, Section 1 should be amended to include the I-94 number with the appropriate initial and dating. In Section 2 of the Form I-9, the employer should record the foreign passport information and the I-94 stamp information. In the “document number” field, the employer should indicate “I-94 number pending.” Upon receipt of the I-94 printout, the Form should be amended to include the appropriate I-94 number and should be initialed/dated by the employer.

Hopefully the issue of lag time between the entry of data and employee’s first day of work will be remedied by CBP in the coming weeks, but until then be sure that your company has a policy for addressing the situation and that the policy is applied consistently to all foreign national workers.Jennifer Biloshmi also contributed to this article.

Jennifer Biloshmi also contributed to this article.

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Comprehensive Immigration Reform Proceeds to Senate Floor, Heated Debate Expected to Follow

GT Law

On June 11th, the U.S. Senate voted to move the “Border Security, Economic Opportunity, and Immigration Modernization Act” (S. 744), the comprehensive immigration reform bill drafted by the “Gang of Eight,” to the floor for debate, where it is expected to face dozens of amendments in the coming weeks. The final vote to begin debate on the landmark legislation was 84 in favor and 15 against. Below are some of the key issues that this bill faces on its way to a final vote in the Senate:

Border Security: Senator John Cornyn (R-TX) has signaled support for implementing border security triggers – including a 90% apprehension rate of illegal border crossings – before putting undocumented immigrants on the path to permanent residency. Senator Cornyn’s amendment would also introduce a biometric exit system as well as a nationwide electronic employment eligibility verification program. The measure has already stirred opposition from Democratic senators and immigration advocates, who liken it to a “poison pill” that will indefinitely delay the citizenship prospects of the estimated 11 million undocumented immigrants already in the United States.

Senator Marco Rubio (R-FL), a member of the “Gang of Eight,” has also indicated that he may not be able to support the legislation in its current form without strengthened border security measures. To this end, Senator Rubio and his colleague, Senator Tom Coburn (R-OH) may propose an amendment that would transfer the responsibility for drafting, but not enforcing, a border security plan from the U.S. Department of Homeland Security (DHS) to Congress. Several other drafters of the bill, including Senator Charles Schumer (D-NY), expressed a willingness to include border security triggers so long as they are “both achievable and specific.”

Taking a more expansive approach, Senator Rand Paul (R-KY) plans to offer an amendment that would require Congress to draft and enforce a border security plan, as well as to vote on border security every year for the first five years after the bill takes effect. Democratic senators and immigration advocates oppose this measure, citing unpredictability and partisanship as future hurdles to implementing a path to citizenship.

Taxes: Senator Jeff Sessions (R-AL) plans to re-introduce two amendments that would require families to provide a valid Social Security number to receive a child tax credit and deny the earned-income tax credit to immigrants with temporary legal status, respectively. Both measures previously failed in committee on a party-line vote.

Senator Orrin Hatch (R-UT) is also expected to offer an amendment that would require immigrants to demonstrate that they have paid back taxes and remained current on present obligations as they progress toward citizenship. Senator Hatch may also introduce a measure that would ban immigrants who are legal permanent residents from receiving Affordable Care Act subsidies for five years.

Guns: Senator Richard Blumenthal (D-CT) may offer two amendments restricting access to guns for undocumented immigrants. One of the provisions would eliminate the loophole that allows certain immigrants to purchase firearms, while another would require the Attorney General to alert the Secretary of Homeland Security when an undocumented immigrant or temporary visitor to the U.S. attempts to buy a firearm. Currently, both categories of individuals are legally barred from purchasing firearms.

Same-Sex Benefits: Senator Patrick Leahy (D-VT) is weighing whether to revive an amendment that he reluctantly declined to introduce in committee due to the opposition of his Republican colleagues. The measure would permit U.S. citizens in state-recognized same-sex marriages to apply for permanent residency on behalf of a same-sex spouse, a benefit that is currently afforded to heterosexual couples only.

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What Are the EB-5 Permanent Residence Requirements?

GT Law

For investors seeking lawful permanent residence through the EB-5 program, the first step in the process is to file Form I-526, Immigration Petition for Alien Entrepreneur, together with accompanying evidence in support of the program’s requirements with USCIS.  USCIS evaluates and adjudicates I‑526 petitions by reviewing these criteria:

1. A New Commercial Enterprise Has Been Established.  An EB-5 investor must evidence that their investment was into an “enterprise” that is “new.”  So what is a “new commercial enterprise?”  It is any for-profit activity established after November 29, 1990 formed for the ongoing conduct of lawful business including, but not limited to, a sole proprietorship, partnership (whether limited or general), holding company, joint venture, corporation, business trust, or other entity which may be publicly or privately owned.  This definition includes a commercial enterprise consisting of a holding company and its wholly-owned subsidiaries, provided that each such subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business, but it does not include a noncommercial activity such as owning and operating a personal residence.

In the regional center context, the new commercial enterprise is the fund where the alien invests.  Usually the fund takes the form of a Limited Partnership or Limited Liability Company.  In the direct, non-regional center context, the new commercial enterprise is the business where the alien invests and the business that creates the jobs for U.S. workers.

2. Investment of the Requisite Amount of Capital.  An EB-5 petition must be supported by evidence that the petitioner has invested the minimum required capital.  In the regional center context, if the project creating the jobs is located in a “targeted employment area” then the minimum amount of investment is $500,000.  In the direct investment context, if the new commercial enterprise is located in a “targeted employment area” then the minimum amount of investment is $500,000.  A “targeted employment area” is either: (1) an area of high unemployment that has at least 150% of the national unemployment rate; or (2) a rural area outside of a Metropolitan Statistical Area with a population of less than 20,000.  If the new commercial enterprise (in the direct context) or project (in the regional center context) is located outside of a targeted employment area, then the minimum amount of investment is $1,000,000.

USCIS expects the investor’s funds to be irrevocably committed to the enterprise.  The funds must be “at risk” and used by the new commercial enterprise to create employment.

3. Lawful Source of Capital.  Funds used for the EB-5 investment must be earned lawfully.  The investor must show the full source of the $500,000 or $1,000,000 investment and then trace those funds from the investor abroad into the new commercial enterprise.  Common sources of funds are salary earnings, distributions from businesses or investments, sale of property, mortgage of personal assets owned by the investor, or gifts from third parties.  If the investor receives a gift as the source of funds, the giftor must fully trace his or her funds that ultimately became the investment.  Funds earned or obtained in the United States while the investor was out of status are not deemed to be lawfully acquired.

4. Active Involvement in the New Commercial Enterprise.  The investor is expected to participate in the management of the new commercial enterprise either through day-to-day management or by assisting in the formulation of the enterprise’s business policy.  The investor cannot have a purely passive role in regard to the investment.

In the regional center context, investors in an EB-5 enterprise organized as a limited partnership usually have the rights and duties accorded to limited partners under the state’s Limited Partnership Act.  The same is true for a limited liability company.  This level of involvement is sufficient for EB-5 purposes.  In the direct investment context, the investor can manage the enterprise or formulate policy for the business by acting as a member of the Board of Directors or exercising voting control over the business.

5. Employment Creation.  The new commercial enterprise must create not fewer than ten (10) full-time positions for qualifying employees for each EB-5 investor.  In the direct investment context with no regional center affiliation, the 10 jobs created must be full time (35+ hours per week), permanent, and for W-2 employees of the new commercial enterprise.  Independent contractors do not count.  Additionally, the positions must be filled by qualifying employees, meaning a United States citizen, a lawfully admitted permanent resident, or other immigrant lawfully authorized to be employed in the United States including, but not limited to, a conditional resident, a temporary resident, an asylee, a refugee, or an alien remaining in the United States under suspension of deportation. This definition does not include the alien entrepreneur, the alien entrepreneur’s spouse, sons, or daughters, or any nonimmigrant alien.  At the time of the I-526 petition, if the positions are not yet created, the comprehensive business plan must contain a full description of the hiring plan to show the positions that will be created and when those positions will be filled.

In the regional center context, to show that the new commercial enterprise meets the statutory employment creation requirement, the petition must be accompanied by evidence that the investment will create full-time positions for not fewer than 10 persons either directly or indirectly through revenues generated from increased exports resulting from the Pilot Program.  According to USCIS, indirect jobs are those jobs shown to have been created collaterally by the project as a result of capital invested in a commercial enterprise affiliated with a regional center. The number of indirect jobs created through an EB-5 investor’s capital investment is based upon a business plan and a detailed economic analysis.  The EB-5 petition must contain evidence, in the form of an economic report, to show that 10 indirect jobs will be created for each investor in the project.

If these requirements are met, the I-526 petition should be approved.  If the investor and his family are abroad, they will apply for immigrant visas at a U.S. Consulate abroad.  When they enter the U.S. on the visas, they will become conditional permanent residents of the United States.  If the investor and his family are in the U.S., they may be eligible to adjust their status to conditional permanent residents.  Conditional permanent residence is granted for two years, and at the end of two years, the investor and his family must file Form I-829 to remove those conditions.  At that time, the investor must show the new commercial enterprise was sustained during the period of conditional permanent residence, their investment was sustained during the period of conditional permanent residence, and the 10 jobs were created.

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