USA Individual Tax Guide

United States

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* EY Law LLP practices US business immigration law. It is an Ontario limited liability partnership and a member firm of Ernst & Young Global Limited.

The immigration section of this chapter was written in late 2021. The recent election of a new federal administration and the COVID-19 pan demic may lead to several additional immigration policy and legislative changes. Please ensure to contact our EY Law immigration professionals for the most up-to-date information.

A. Income tax

Who is liable

Territoriality. US citizens and resident aliens are subject to tax on their worldwide income, regardless of source. US citizens and

resident aliens may exclude, however, up to USD108,700 (for 2021) of their foreign-earned income plus certain housing expenses if they meet specified qualifying tests and if they file US tax returns to claim the exclusion.

A nonresident alien is subject to US tax on income that is effec tively connected with a US trade or business and on US-source fixed or determinable, annual or periodic gains, profits and income (generally investment income, including dividends, royalties and rental income). US-source investment income is taxed on a gross basis at a flat rate of 30%. Income effectively connected with a US trade or business is taxed after subtracting related deductions at the graduated rates listed in Rates. Portfolio interest and, generally, capital gains from the sale of stock in a US company are exempt from the 30% tax. Moreover, an election to tax rental income on a net basis is available. However, gains from sales of US real property interests are usually considered to be effectively connected income, and special complex rules apply.

Definition of resident. Residence for income tax purposes gen erally has no bearing on an individual’s immigration status. Generally, foreign nationals may be considered resident aliens if they are lawful permanent residents (“green card” holders; see Section G) or if their physical presence in the United States meets the substantial presence test. Under the substantial presence test, a foreign national is deemed to be a US resident if the individual fulfills both of the following conditions:

• The individual is present in the United States for at least 31 days during the current year.

• The individual is considered to have been present in the United States for at least 183 days during a consecutive three-year test period that includes the current year, using a formula weighted with the following percentages:

Current year 100.00%

First preceding year 33.33%

Second preceding year 16.67%

For example, 122 days of presence during each of the three consecutive years causes a foreign national to be considered a US resident under the substantial presence test.

Among several exceptions to the substantial presence test are the following:

• Days present as a qualified student, teacher or trainee, or if a medical condition prevented departure, are not counted.

• An individual might claim to be a nonresident of the United States by virtue of having a closer connection (such as a tax home) to a foreign country.

• Bilateral income tax treaties may override domestic US tax rules for dual residents.

The Internal Revenue Service (IRS) has issued regulations that require individuals to file statements with the IRS setting forth the facts that prove their claims for these exceptions.

In certain circumstances, it may be beneficial for an individual to be considered a resident of the United States for income tax purposes. An individual may make what is known as a first-year

election to be treated as a resident in the year of arrival if certain conditions are met.

Income subject to tax. In general, gross income must be segre gated into the following three separate baskets:

• Earned income, which is generally salary and earnings from active trades or businesses

• Portfolio income, which is generally investment income, includ ing interest, dividends, certain royalties and gains from the disposition of investment property

• Passive income, which is generally income from traditional taxshelter investments including real estate

Examples of items that are not included in taxable income are gifts, unrealized appreciation in the value of property, interest received on municipal bonds, certain amounts received (for example, death benefits paid) under US qualified life insurance contracts, certain employer-paid education costs, employer-paid retirement planning services, and qualified distributions from Roth individual retirement accounts (IRAs) or education savings accounts.

Employment income. In addition to cash payments, taxable salary generally includes all employer-paid items, except medical insur ance premiums, pension contributions to a US qualified plan and, for qualifying individuals on short-term assignments of one year or less, meals and temporary housing expenses.

Education allowances provided by employers to their employees’ children are taxable for income and social security tax purposes.

In general, a nonresident alien who performs personal services as an employee in the United States at any time during the tax year is considered to be engaged in a US trade or business. An excep tion to this rule applies to a nonresident alien performing ser vices in the United States if all of the following conditions apply:

• The services are performed for a foreign employer.

• The employee is present no more than 90 days during the tax year.

• Compensation for the services does not exceed USD3,000. These conditions are similar to those contained in many income tax treaties, although the treaties often expand the time limit to 183 days and increase or eliminate the maximum dollar amount of compensation.

If an employee does not fall under the above statutory exception or under a treaty exception, all US-source compensation received in that year is considered effectively connected income (not just the amount exceeding the USD3,000 limitation or the dollar limitation under a treaty). This income includes wages, bonuses and reimbursements for certain living expenses paid to, or on behalf of, the employee.

Compensation is considered to be from a US source if it is paid for services performed in the United States. The place where the income is paid or received is irrelevant in determining its source. If income is paid for services performed partly in the United States and partly in a foreign country, and if the amount of income attributable to services performed in the United States cannot be accurately determined, the US portion is determined on a work day ratio basis. Fringe benefits that meet certain requirements are

sourced to the person’s principal place of work. These benefits include moving expenses, housing, primary and secondary education for dependents and local transportation.

Effectively connected income retains its character even if received before or after a US trade or business ceases operations. Conse quently, wages for services performed in the United States, but received during a year in which a nonresident alien reports no US workdays, are taxed at the graduated rates instead of the flat 30% rate.

States often follow the federal tax treatment in determining if a nonresident alien’s income is subject to state taxation; however, certain states tax income of a nonresident regardless of federal tax treatment or treaty relief.

Self-employment income. In general, a nonresident alien who per forms independent personal services in the United States at any time during the tax year is considered to be engaged in a US trade or business.

Although subject to tax at the graduated rates, compensation paid to a nonresident alien for performing independent personal ser vices in the United States is subject to a 30% withholding tax. A nonresident alien must file a US tax return to claim a refund or to pay any additional tax due. If compensation is exempt from US tax under an income tax treaty, a nonresident alien may request exemption from withholding by preparing Form 8233, Exemption from Withholding on Compensation for Independent Personal Services of a Nonresident Alien Individual, and then giving it to the withholding agent (payer). In addition, many US income tax treaties contain separate provisions affecting the taxation of inde pendent personal services income.

Investment income. Dividends, interest income and capital gains are considered portfolio income and are generally taxed at the ordinary rates (however, see Capital gains and losses , and Dividends ). Certain types of interest income, including interest on certain state and local government obligations, are exempt from federal tax, but may be subject to alternative minimum tax (AMT; see Rates).

Net income from the rental of real property and from royalties is aggregated with other income and taxed at the rates set forth in Rates. Foreign rental properties considered to be qualified busi ness units have an additional filing requirement of Form 8858 from 2018 onward.

Directors’ fees. In general, directors’ fees are considered to be earnings from self-employment (see Self-employment income).

Deferred compensation and participation in foreign pension plans. The United States has very complex rules regarding the taxation of deferred compensation. If a plan of deferral does not meet the requirements of the law, significant penalties and interest may be charged. Complex rules apply to the taxation related to participa tion in a non-US retirement plan. In many cases, continued par ticipation in the home country plan may result in income that is taxable in the United States. Certain income tax treaties attempt to address this issue.

Income from certain foreign corporations. Under a complex set of rules, US citizens and residents with ownership interests in “controlled foreign corporations” may be subject to US tax on certain categories of income, even if the income has not been distributed to them as a dividend. Beginning in 2018, the catego ries of income subject to current taxation are expanded. Individuals who were subject to these rules in 2017 were required to calculate a “transition tax” when filing their 2017 tax returns. The transition tax affected certain taxpayers in 2018 with fiscal year-ends. Taxpayers may have elected to pay the transition tax in eight annual installments.

Taxation of employer-provided stock options

Qualified stock option plans. Under incentive stock option (ISO) rules, options provided to employees under qualified stock option plans are not subject to tax at the time the option is granted nor at the time the employee exercises the option and buys the stock. However, at the time of exercise, the difference between the exer cise price and the fair market value of the stock at the date of exercise is considered a tax preference item for AMT purposes (see Rates). Tax is levied at capital gains tax rates when the employee sells the stock (see Capital gains and losses). The employee’s basis in the stock is the amount paid for the stock at the time the option is exercised. Consequently, the employee recognizes a capital gain or loss in the amount of the difference between the sale price and the grant price. For purposes of deter mining whether the capital gain is long-term or short-term, the holding period begins on the date after the option is exercised, not on the date the option is granted. Stock purchased under an ISO may not be sold within two years from the grant date and within one year from the exercise date. If the stock is sold before the expiration of the required holding period, any gain on the sale is treated as ordinary income.

Non-qualified stock option plans. A stock option provided to an employee under a non-qualified plan is taxed when it is granted if the option has a readily ascertainable fair market value at that time. An option that is not actively traded on an established mar ket has a readily ascertainable fair market value only if all of the following conditions are met:

• The option is transferable.

• The option is exercisable immediately and in full when it is granted.

• No conditions or restrictions are placed on the option that would have a significant effect on its fair market value.

• The fair market value of the option privilege must be readily ascertainable.

The above conditions are seldom satisfied. Consequently, most non-qualified options that are not traded on an established mar ket do not have a readily ascertainable fair market value and are not taxable at the date of grant.

The exercise of a non-qualified stock option triggers a taxable event. An employee recognizes ordinary income in the amount of the value of the stock purchased, less any amount paid for the stock or the option. When the stock is sold, the difference between the sale price and the fair market value of the stock at the date of exercise, if any, is taxed as a capital gain.

Capital gains and losses. Net capital gain income is taxed at ordi nary rates, except that the maximum rate for long-term gains is limited to the following:

• 0% for married individuals filing jointly, with a maximum tax able income of USD80,800 (USD40,400 for single individuals)

• 15% for married individuals filing jointly, with a maximum taxable income of USD501,600 (USD445,850 for single indi viduals)

• 20% for married individuals filing jointly, with taxable income of more than USD501,600 (USD445,850 for single individuals)

Net capital gain is equal to the difference between net long-term capital gains over net short-term capital losses. Long-term refers to assets held longer than 12 months. Short-term capital gains are taxed as ordinary income at the rates set forth in Rates.

Investors who hold “qualified small business stock” may be enti tled to exclude from income part or all of the gain realized on disposition of the stock.

Once every two years, US taxpayers, including resident aliens, may exclude up to USD250,000 (USD500,000 for married taxpay ers filing jointly) of gain derived from the sale of a principal residence. To be eligible for the exclusion, the taxpayer must generally have owned the residence and used it as a principal residence for at least two of the five years immediately preceding the sale. However, if a taxpayer moves due to a change in place of employment, for health reasons or as a result of unforeseen circumstances, a fraction of the maximum exclusion amount is allowed in determining whether any taxable gain must be report ed. The numerator of the fraction is generally the length of time the home is used as a principal residence, and the denominator is two years. The repayment of a foreign currency mortgage obliga tion may result in a taxable exchange-rate gain, regardless of any economic gain or loss on the sale of the principal residence. In certain cases, part of the gain on the sale of a principal residence may not be eligible for exclusion. To the extent the taxpayer has “non-qualified use” of the property, that portion of the gain (determined on a time basis over the total holding period of the property) is not eligible for exclusion from income. A complex set of rules applies to determine whether a particular use of the property, such as renting out the property or leaving it vacant, is considered a “non-qualified use.”

Capital losses are fully deductible against capital gains. However, net capital losses are deductible against other income only up to an annual limit of USD3,000. Unused capital losses may be car ried forward indefinitely. Losses attributable to personal assets (for example, a personal residence or an automobile) are not deductible.

Dividends. Dividends received by individuals from domestic cor porations and “qualified foreign corporations” are taxed at the same special rates as those applicable to net capital gains, for both the regular tax and the alternative minimum tax. See Capital gains and losses for the tax rates.

To qualify for the 15% (or 0% or 20%) tax rate, the shareholder must hold a share of stock for more than 60 days during the 120-

day period beginning 60 days before the ex-dividend date. Other dividends are taxed at ordinary rates.

Deductions

Deductible expenses. Certain types of deductions, including amounts related to producing gross income, are subtracted to arrive at adjusted gross income. Alimony payments to a former spouse and contributions to health savings accounts are among the most commonly claimed deductions in this category. See new rules below for post-2018 divorce agreements. Alimony (but not child support) must meet certain criteria, and must be included in the recipient’s gross income, to be deductible by the payer. Child support payments are neither deductible by the payer nor includ ible in the income of the recipient. A tax of 30% generally must be withheld (and remitted to the IRS) from alimony paid by a US citizen or resident to a nonresident-alien former spouse. Certain US income tax treaties may reduce the 30% withholding tax rate (see Section E).

For divorce agreements executed after 31 December 2018 (or modified after that date to reflect the new tax rules), alimony payments are not deductible, and alimony received is not taxable.

Complex rules determine eligibility for other deductions from gross income. For example, depending on the taxpayer’s income level, interest of up to USD2,500 on qualified educational loans, and individual retirement account (IRA) contributions of up to USD6,000 (USD7,000 if age 50 or older at the end of 2021) may be deducted.

After adjusted gross income is determined, a citizen or resident alien is entitled to claim the greater of itemized deductions or a standard deduction. The amount of the standard deduction varies, depending on the taxpayer’s filing status. For 2021, the standard deduction is USD25,100 for married individuals filing a joint return, USD18,800 for a head of household, USD12,550 for a single (not married) individual and USD12,550 for a married taxpayer filing a separate return.

Itemized deductions include the following items:

• Unreimbursed medical expenses to the extent that they exceed 7.5% of adjusted gross income

• Income, general sales and property taxes of US states and localities, but limited to USD10,000 in total

• Foreign income taxes paid if a foreign tax credit is not elected

• Certain interest expenses, generally home mortgage interest and investment interest expenses, with new limitations with respect to home mortgage interest

• Casualty losses to the extent they are attributable to specified natural disasters

• Gambling losses to the extent of gambling winnings

• Charitable contributions made to qualified US charities

A nonresident alien may not use the standard deduction instead of actual itemized deductions. Also, the types of itemized deductions a nonresident alien may claim are limited to charitable contribu tions made to qualified US charities, and state and local taxes

imposed on effectively connected income (limited to USD10,000). A nonresident alien may not claim an itemized deduction for medical expenses, taxes (other than state and local income taxes) or most interest expenses.

Business deductions. Self-employed individuals are entitled to the same deductions as employees, which after the 2017 Tax Cuts and Jobs Act are very limited. However, they may also deduct directly related ordinary and necessary business expenses. Special rules may apply to limit business deductions if a taxpayer’s business activity does not result in a profit for three of five years. In this situation, the activity may be classified as a hobby, and the expenses are deductible only if they qualify as itemized deduc tions. Self-employed individuals may establish, and may deduct contributions paid to, their own retirement plans, subject to spe cial limitations.

Beginning in 2018, taxpayers may be entitled to deduct up to 20% of their “qualified business income,” when calculating tax able income. This 20% deduction is calculated under a complex set of rules. There are many limitations to this deduction, includ ing whether the taxpayer operates a qualified business and whether the individual’s taxable income is below the overall limit of USD164,900 (USD329,800 for married filing joint return). In general, qualified business income does not include income from performing services as an employee.

Rates. The applicable US tax rates depend on whether an individ ual is married or not and, if married, whether an individual elects to file a joint return with his or her spouse. Certain individuals also qualify to file as heads of households.

Unmarried nonresident aliens are taxed under the rates for single individuals. Married nonresidents whose spouses are also non residents are generally taxed under the rates for married persons filing separately.

The tax brackets and rates for 2021 are set forth in the tables below. The income brackets in these tables are indexed annually for inflation. The following are the tables.

Married filing joint return

Taxable income

Not over USD19,900

Amount of tax

10% of the taxable income

Over USD19,900 but USD1,990 plus 12% of not over USD81,050 the excess over USD19,900

Over USD81,050 but USD9,328 plus 22% of not over USD172,750 the excess over USD81,050

Over USD172,750 but USD29,502 plus 24% of not over USD329,850 the excess over USD172,750

Over USD329,850 but USD67,206 plus 32% of not over USD418,850 the excess over USD329,850

Over USD418,850 but USD95,686 plus 35% of not over USD628,300 the excess over USD418,850

Over USD628,300 USD168,993.50 plus 37% of the excess over USD628,300

Married filing separate return

Taxable income

Not over USD9,950

Amount of tax

10% of the taxable income

Over USD9,950 but USD995 plus 12% of not over USD40,525 the excess over USD9,950

Over USD40,525 but USD4,664 plus 22% of not over USD86,375 the excess over USD40,525

Over USD86,375 but USD14,751 plus 24% of not over USD164,925 the excess over USD86,375

Over USD164,925 but USD33,603 plus 32% of not over USD209,425 the excess over USD164,925

Over USD209,425 but USD47,843 plus 35% of not over USD314,150 the excess over USD209,425

Over USD314,150 USD84,496.75 plus 37% of the excess over USD314,150

Head of household

Taxable income Amount of tax

Not over USD14,200

10% of the taxable income

Over USD14,200 but USD1,420 plus 12% of not over USD54,200 the excess over USD14,200

Over USD54,200 but USD6,220 plus 22% of not over USD86,350 the excess over USD54,200

Over USD86,350 but USD13,293 plus 24% of not over USD164,900 the excess over USD86,350

Over USD164,900 but USD32,145 plus 32% of not over USD209,400 the excess over USD164,900

Over USD209,400 but USD46,385 plus 35% of not over USD523,600 the excess over USD209,400 Over USD523,600 USD156,355 plus 37% of the excess over USD523,600

Single individual

Taxable income Amount of tax

Not over USD9,950

10% of the taxable income

Over USD9,950 but USD995 plus 12% of not over USD40,525 the excess over USD9,950

Over USD40,525 but USD4,664 plus 22% of not over USD86,375 the excess over USD40,525

Over USD86,375 but USD14,751 plus 24% of not over USD164,925 the excess over USD86,375 Over USD164,925 but USD33,603 plus 32% of not over USD209,425 the excess over USD164,925

Over USD209,425 but USD47,843 plus 35% of not over USD523,600 the excess over USD209,425 Over USD523,600 USD157,804.25 plus 37% of the excess over USD523,600

The above rates are used to compute an individual’s regular fed eral tax liability. In addition, higher income taxpayers (income over USD250,000 for married filing jointly and USD200,000 for single) are subject to a 3.8% tax on their “net investment income.” The definition of “net investment income” is broad and essentially includes all income other than income from a trade or business. Compensation from personal services is generally excluded from this tax.

The United States also imposes alternative minimum tax (AMT) at a rate of 26% on alternative minimum taxable income, up to USD199,900, for all filers except USD99,950 for married filing separately and at a rate of 28% on alternative minimum taxable income exceeding USD199,900 for all filers except USD99,950 for married filing separately (long-term capital gains and qualified dividends are generally taxed at lower rates of 15% or 20%; see Capital gains and losses and Dividends).The primary purpose of AMT is to prevent individuals with substantial income from using preferential tax deductions (such as accelerated depreciation), exclusions (such as certain tax-exempt income) and credits to substantially reduce or to eliminate their tax liability. It is an alternative tax because, after an individual computes both the regular tax and AMT liabilities, the greater of the two amounts constitutes the final liability.

Some states, cities and municipalities also levy income tax. City or municipal income tax rates are generally 1% or lower. However, the top 2021 rate for residents of New York City is 3.876%. State income tax rates generally range from 0% to 12%. Therefore, an individual’s total income tax liability depends on the state and the municipality where the individual resides or works. For a list of maximum state and certain local tax rates, see Appendix 1.

Credits. Tax credits directly reduce income tax liability rather than taxable income and therefore provide a dollar-for-dollar benefit. Most credits are limited, depending on the taxpayer’s income level. Credits include a maximum USD14,440 credit for quali fied adoption expenses, a USD2,000 child tax credit for depen dents under 17 years of age (and who have a social security number), a USD500 credit for certain other dependents, and two alternative higher education credits, with maximums of USD2,000 and USD2,500, respectively. For 2021, the child tax credit is increased to USD3,600 for children 5 and under and USD3,000 for children age 6 to 17 if the income threshold is met.

Relief for losses. In general, passive losses, including those gen erated from limited-partnership investments or rental real estate, may be offset only against income generated from passive activities.

Limited relief may be available for real estate rental losses. For example, an individual who actively participates in rental activity may use up to USD25,000 of losses to offset other types of income. The USD25,000 offset is phased out for taxpayers with adjusted gross income of between USD100,000 and USD150,000, and special rules apply to married individuals filing separate tax returns.

Disallowed losses may be carried forward indefinitely and used to offset net passive income in future years. Any remaining loss may be used in full when a taxpayer sells the investment in a transac tion that is recognized for tax purposes.

B. Other taxes

Net worth tax. No federal tax is levied on an individual’s net worth. However, some states and municipalities impose a tax on an individual’s net worth.

Estate and gift tax. US estate and gift taxes are imposed at graduated rates ranging from 18% to 40% on the value of property transferred by reason of death or gift. In general, citizens and residents are entitled to a unified exemption of USD10 million (indexed for inflation; USD11,700,000 for 2021) on these taxes. No exemption is available to non-US citizens or residents for gift tax purposes, and an exemption of only USD60,000 is available to non-US citizens or residents for estate tax purposes. A third transfer tax, known as the generation-skipping transfer (GST) tax, operates under a complex set of rules.

In general, transfers between spouses who are US citizens, or from a non-US citizen to a US citizen spouse, are not subject to estate or gift taxes. However, transfers from a US citizen to a non-US citizen spouse may be subject to estate or gift tax.

Like US income tax rules, US estate and gift tax rules differ, depending on whether a foreign national is considered to be a resident or nonresident alien. However, the distinction between residents and nonresidents differs from that under US income tax rules. For estate and gift tax purposes, a nonresident is a foreign national who is not a US citizen and whose domicile is outside the United States at the date of death or gift. A person’s domicile is defined generally as the place the individual regards as his or her permanent home—that is, the place where he or she is living with no present intention of leaving.

Application of US estate and gift tax rules may be modified if a nonresident alien is a resident of a country that has entered into an estate and gift tax treaty with the United States. The United States currently has estate and/or gift tax treaties with the following jurisdictions.

Australia France Japan Austria Germany Netherlands Canada Greece South Africa Denmark Ireland Switzerland Finland Italy United Kingdom

Gift tax. US citizens and resident aliens are subject to gift tax on transfers of all property, tangible and intangible, regardless of the location of the property. Tax is imposed on the fair market value of property on the date of the gift, at graduated rates determined by the individual’s cumulative lifetime transfers.

Each year, a donor is entitled to exclude from taxable income gifts of present interests valued at up to USD15,000 (for 2021) for each recipient. A husband and wife may elect to treat gifts made by one spouse as being made one-half by each spouse if both spouses are US citizens or residents. This gift-splitting election on joint gifts increases the annual exclusion to USD30,000 (for 2021) for each recipient. Gifts in excess of the annual exclusion are subject to taxes ranging from 18% to 40%. However, a credit may be used to offset this liability.

A US citizen or resident is exempt from gift tax on annual trans fers (other than gifts of future interests in property) of up to USD159,000 for 2021) to a non-US citizen spouse.

Foreign nationals who are not domiciled in the United States must generally pay gift tax on transfers of real property and tangible personal property located in the United States. Intangible property, including stocks and bonds, is generally exempt. The gift tax rates for nonresidents are the same as those for citizens and residents. These nonresidents are allowed to give up to USD15,000 (for 2021) annually to each recipient with no gift tax consequences, but they may not split gifts with their spouses.

US citizens or resident aliens (as defined for income tax pur poses) are required to report gifts or bequests from foreign corpo rations or partnerships in excess of USD16,649 (for 2021), in aggregate, but they are generally not subject to tax. However, the IRS has not required gifts from nonresident aliens or foreign estates to be reported unless the aggregate gifts exceed USD100,000. Substantial penalties may be imposed for failure to report such gifts or bequests.

Estate tax. The estate of a US citizen or resident includes all property, tangible and intangible, regardless of location.

Property transferred at death from a US citizen to a non-US citi zen spouse is generally not excluded from the decedent’s gross estate, unless the property is placed in a qualified domestic trust or the surviving spouse becomes a US citizen before the estate tax return is due. To be considered a qualified domestic trust, a trust must satisfy the following conditions:

• At least one trustee of the trust must be a US citizen or a domestic corporation, and no distribution (other than a distribu tion of income) from the trust may be made unless the US trustee has the right to withhold the US tax on that distribution.

• The trust must meet the requirements prescribed by Treasury Department regulations.

• The executor must make an irrevocable election to be treated as a qualified domestic trust on the estate tax return.

Estate tax is levied on the property in the trust if any of the fol lowing events occurs:

• The trust ceases at any time to meet the above requirements.

• The corpus is distributed prior to the surviving spouse’s death, except in cases of hardship.

• The surviving spouse dies.

For US tax purposes, the estate of a nonresident includes only property deemed to be located in the United States. This gener ally includes tangible, intangible and real property located within the United States at the time of death. For this purpose, shares of US domestic corporations, US property owned through certain trusts and certain debt obligations of US residents are considered to be property located in the United States. In addition, in some instances, US property held by a partnership or limited liability company may be considered to be property located in the United States, but the law in this area is unclear. The estate tax rates are the same as those for citizens and residents. An estate tax return must be filed if the value of a nonresident alien’s gross estate exceeds USD60,000.

Expatriation tax. Before 17 June 2008, the United States did not have an exit tax. However, former US citizens and former longterm permanent residents were subject to reporting requirements

and potentially to US income tax under a complex set of rules generally in effect for 10 years following expatriation.

Effective from 17 June 2008, certain individuals known as “cov ered expatriates” are immediately taxed on the net unrealized gain in their property exceeding USD600,000 (indexed for infla tion; USD744,000 for 2021) as if they sold the property for fair market value the day before expatriating or terminating their US residency. In general, “covered expatriates” are US citizens, or long-term residents (“green card” holders [see Section G] for any part of 8 tax years during the preceding 15 years) who either have a five-year average income tax liability exceeding USD124,000 (indexed for inflation; USD172,000 for 2021) or a net worth of USD2 million or more, or who have not complied with their US tax filing obligations for the preceding five years. This treatment applies to most types of property interests held by individuals.

The above rules also affect the taxation of certain deferred com pensation items (including foreign and US pension plans, deferred compensation plans, and equity-based compensation plans), interests in and distributions from non-grantor trusts and certain tax-deferred accounts, such as so-called 529 plans, Coverdell education savings accounts and health-savings accounts. In many cases, the present value of the interest in the deferred compensation items and other tax-deferred accounts is subject to immediate taxation, but taxpayers can elect to defer the tax on pension and deferred compensation plans that have US payers until distributions are actually made. The USD600,000 (USD744,000 for 2021) threshold discussed above does not apply to deferred compensation items, non-grantor trusts or taxdeferred accounts.

At the election of the taxpayer, subject to approval of the IRS, payment of the exit tax may be deferred if adequate security is provided. Such deferral is irrevocable, carries an interest charge and requires the taxpayer to waive any treaty rights with respect to the taxation of the property.

US citizens or residents receiving gifts or bequests of more than USD10,000 (indexed for inflation; USD15,000 for 2021) from covered expatriates are taxed at the highest gift or estate tax rate currently in effect (40% in 2021). Under the general US rules of gift taxation, tax is assessed on the donor. However, the rule described above imposes tax on the US citizens or residents receiving the gifts. This rule does not have a time limit. The tax on gifts or bequests from a covered expatriate to a US citizen or resident may be assessed at any time such a gift or bequest is received after the expatriation of the covered expatriate.

C. Social security taxes

Social security tax. Under the Federal Insurance Contributions Act (FICA), social security tax is imposed on wages or salaries received by individual employees to fund retirement benefits paid by the federal government. The following two taxes are imposed under FICA:

• Old-age, survivors and disability insurance (OASDI)

• Hospital insurance (Medicare)

For 2021, the OASDI tax is imposed on the first USD142,800 at a rate of 6.2% on the employee and 6.2% on the employer. Medicare tax is imposed, without limit, at a rate of 1.45% on the employee and 1.45% on the employer. In addition, higher income employees (but not their employers) pay an extra 0.9% Medicare tax. The income threshold varies by tax return filing status. Married couples filing jointly pay the extra tax on their combined wages in excess of USD250,000, single taxpayers and heads of households on wages exceeding USD200,000, and married taxpayers filing separately on wages exceeding USD125,000. Selfemployment income (see below) is added to the amount of wages when determining the threshold.

FICA tax is imposed on compensation for services performed in the United States, regardless of the citizenship or residence of the employee or employer. Consequently, absent an exception, non resident alien employees who perform services in the United States are subject to FICA tax, even though they may be exempt from US income tax under a statutory rule or an income tax treaty. Certain categories of individuals are exempt from FICA tax, including foreign government employees, exchange visitors in the United States under J visas, foreign students holding F, M or Q visas, and individuals covered under social security totaliza tion agreements between the United States and other countries. These agreements allow qualifying individuals to continue paying into the social security system of their home countries, usually for a period of five years.

Totalization agreements are currently in effect with the following jurisdictions.

Australia Germany Norway Austria Greece Poland Belgium Hungary Portugal Brazil Iceland Slovak Republic Canada Ireland Slovenia Chile Italy Spain Czech Republic Japan Sweden Denmark Korea (South) Switzerland Finland Luxembourg United Kingdom France Netherlands Uruguay

An agreement with Mexico has been signed, but it is not yet in force.

Self-employment tax. Self-employment tax is imposed under the Self-Employment Contributions Act (SECA) on self-employment income, net of business expenses, that is derived by US citizens and resident aliens. The following two taxes are imposed under SECA:

• Old-age, survivors and disability insurance (OASDI)

• Hospital insurance (Medicare)

For 2021, the OASDI tax is imposed on the first USD142,800 of the net earnings of a self-employed individual at a rate of 12.4%. Medicare tax is imposed, without limit, at a rate of 2.9%. In addi tion, higher income individuals pay an extra 0.9% Medicare tax. The income threshold varies by tax return filing status. Married couples filing jointly pay the extra tax on their combined selfemployment income in excess of USD250,000, single taxpayers

and heads of households on self-employment income exceeding USD200,000, and married taxpayers filing separately on selfemployment income exceeding USD125,000. Wage income (see above) is added to the amount of self-employment income when determining the threshold.

Self-employed individuals must pay the entire tax (unlike an employee who pays half the tax while the employer pays the other half of the tax) but may deduct 50% (not including the extra 0.9% Medicare tax) as a trade or business expense on their federal income tax return. No tax is payable if net earnings for the year are less than USD400. If a taxpayer has both wages subject to FICA tax and income subject to SECA tax, the wage base subject to FICA tax is used to reduce the income base subject to SECA tax. SECA tax is computed on the individual’s US income tax return. Nonresident aliens are not subject to SECA tax unless they are required to pay the tax under a totalization agreement (see Social security tax).

Federal unemployment tax. Federal unemployment tax (FUTA) is imposed on employers’ wage payments to employees. FUTA is imposed on income from services performed within the United States, regardless of the citizenship or residency of the employer or employee. It is also imposed on wages for services performed outside the United States for a US employer by US citizens. The 2021 tax rate is 6% on the first USD7,000 of wages of each employee. Most states also have unemployment taxes that are creditable against FUTA tax when paid. Self-employed individu als are not subject to FUTA tax.

D. Tax filing and payment procedures

The US system of tax administration is based on the principle of self-assessment. US taxpayers must file tax returns annually with the IRS and with the state and local tax authorities under whose jurisdiction they live if those governments impose income or net worth taxes.

On the federal return, taxpayers must report income and deductions and must compute the tax due. Taxes are generally collected by employer withholding on wages and salaries and by individual payment of estimated taxes on income not subject to withholding. Normally, tax due in excess of amounts withheld and payments of estimated tax must be paid with the return when filed. The taxpayer may also claim a refund of an overpayment of tax on the annual return. Substantial penalties and interest are usually imposed on a taxpayer if a return is not filed on time or if tax payments, including estimated payments, are not made by the applicable due dates.

Tax returns may be selected for an audit at later dates by the IRS or state auditors. Failure to provide adequate support for amounts claimed as deductions on the return may result in the disallowance of deductions and in a greater tax liability, on which interest and/ or penalties are levied from the original due date. In general, taxpayers must maintain supporting documentation for at least three years after a return is filed.

US citizens and resident aliens file Form 1040, US Individual Income Tax Return. The due date for calendar-year taxpayers is normally 15 April. Extensions to file tax returns may be obtained by filing a request with the IRS. However, an extension to file a return is not an extension to pay tax. To prevent interest and pen alties from being charged on unpaid tax, a calendar-year taxpayer should pay any tax due by 15 April.

Nonresident aliens with reportable US gross income must gener ally file Form 1040NR, US Nonresident Alien Income Tax Return. This return is required even if a taxpayer has effectively connected income but no taxable income or if income is exempt under a tax treaty. Nonresident aliens are not required to file Form 1040NR if they are not engaged in a US trade or business during the tax year and if any tax liability on US-source investment (port folio) income is satisfied by the 30% (or lower treaty rate) with holding tax.

If required, Form 1040NR is due on 15 April for nonresident aliens who earn wages subject to withholding; otherwise, the due date is normally 15 June. Extensions to file the return (but not to pay tax due) may be obtained by filing a request with the IRS.

An employer (US or foreign) is responsible for withholding US income and social security taxes from nonresident alien employees.

For years in which a foreign national is both a resident alien and a nonresident alien, two returns are generally prepared, attached to each other, and filed simultaneously. One return reports income and deductions for the resident period, and the other reports income and deductions for the nonresident period. The income from the nonresident period that is effectively connected with the taxpayer’s US trade or business is combined with all income from the resident period for computation of the tax on income subject to graduated tax rates. The includible income and deductions are different for both portions of a dual-status year. For a cash-basis taxpayer, income is taxable when received. Therefore, foreignsource income earned while a taxpayer was a nonresident alien is taxable if it is received while the individual is a resident alien. Conversely, non-effectively connected foreign source income earned while a taxpayer was a resident alien is not taxed if it is received when the taxpayer is a nonresident alien. As a result, to avoid US tax on wages or a bonus for services performed outside of the United States, a foreign national transferring to the United States generally should receive the amount before arriving in this country.

Two elections are available to married aliens that enable them to file one tax return and qualify for the lower married filing joint return tax rates. The first election may be made by an individual who, at the close of the year, was a nonresident alien married to a US citizen or resident. The second election is available to an indi vidual who, at the beginning of the year, was a nonresident alien and who, at the close of the year, was a resident alien married to a US citizen or resident. Under these elections, both spouses must make the election to be entitled to file the joint return. Under both elections, the nonresident alien spouse or part-year resident spouse is treated as a US resident for the entire year.

In addition to the income tax return filing requirements discussed above, the United States has information reporting rules, which affect certain US residents and citizens, and certain nonresidents. The rules cover interests and signature authority in foreign bank and other financial accounts and assets, including foreign pension plans, foreign corporations, foreign trusts and foreign partnerships. The reporting rules are extremely complex, and penalties (both civil and criminal) for failure to comply with the reporting requirements can be significant.

E. Double tax relief and tax treaties

A foreign tax credit is the principal instrument used by US indi viduals to avoid being taxed twice on foreign-source income— once by a foreign government and again by the United States. In general, the foreign tax credit permits a taxpayer to reduce US tax by the amount of income tax paid to a foreign government, subject to certain limitations.

The foreign tax credit is generally limited to the lesser of actual foreign taxes paid or accrued and US tax payable on foreignsource income. Separate limitations must be calculated for two principal categories of income. These categories are passive category income and general category income, which includes earn ings from personal services. Under the separate limitation rules, foreign taxes paid on a particular category of income are avail able for credit against US tax imposed on foreign-source taxable income only in that category. A foreign tax credit is allowed against AMT liability (see Section A). Unused credits may be carried back 1 year and carried forward 10 years. There are addi tional categories of income that are less common, including income resourced under a treaty and foreign branch income.

Special rules apply to nonresident aliens who are residents of countries that have income tax treaties with the United States. For example, a treaty may reduce or eliminate the 30% tax rate appli cable to dividends, interest and royalties. Treaties may also limit or eliminate the taxation of visitors who work in the United States on short-term assignments or may provide exemption from tax for teachers, professors, trainees, students and apprentices.

Even if a treaty provides for exemption from, or a reduction of, the 30% tax, this does not mean that the reduced rate applies auto matically. Nonresident aliens must first claim their treaty benefits. For example, income tax withholding applies unless nonresident alien employees file statements with their employers (foreign or US) stating why they qualify for exemption from US tax under an income tax treaty clause. Similarly, foreign students, teachers and researchers must each complete Form 8233 and file it with their US institution or employer. Treaty benefits for other types of income, including royalties or interest, are obtained by filing the appropriate W-8 form.

If applicable, the withholding agent must notify the nonresident alien of the gross amounts paid and taxes withheld by 15 March of the following year. This is done on Form 1042-S, Foreign Person’s US-Source Income Subject to Withholding. This form, when attached to the nonresident alien’s US income tax return (Form 1040NR), provides proof of amounts withheld to the IRS.

The United States has entered into double tax treaties with the following jurisdictions.

Australia Indonesia Portugal

Austria Ireland Romania

Bangladesh Israel Russian Federation

Barbados Italy

Slovak Republic

Belgium Jamaica Slovenia

Bulgaria Japan South Africa

Canada Kazakhstan Spain

China Mainland Korea (South)

Sri Lanka

Cyprus Latvia Sweden

Czech Republic Lithuania Switzerland Denmark Luxembourg Thailand Egypt Malta Trinidad Estonia Mexico and Tobago

Finland Morocco Tunisia France Netherlands Turkey Germany New Zealand Ukraine Greece Norway United Kingdom Hungary Pakistan USSR* Iceland Philippines Venezuela India Poland

* The United States honors the USSR treaty with respect to Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan and Uzbekistan.

F. Nonimmigrant visas

In general, foreign nationals who wish to be admitted to the United States generally must first obtain authorization, and in many instances, must obtain visas from a US consulate or embassy. The activities to be performed in the United States determine the type of visa or authorization that individuals need to enter the United States. Visas are endorsed in passports and indicate that evidence of a legally sufficient purpose for admis sion was presented to a US consular official.

US immigration laws clearly distinguish between foreign nation als seeking temporary admission (nonimmigrants) and those intending to remain in the United States permanently (immi grants).

At US ports of entry, foreign nationals are inspected or ques tioned by Customs and Border Protection (CBP) officials to determine their eligibility to enter the United States and the dura tion of their initial periods of stay. Nearly all nationals admitted to the United States for temporary periods receive instructions to access an electronic Form I-94 online (https://i94.cbp.dhs.gov/ I94/#/recent-search). The I-94 record indicates both the individual’s status in the United States and the last date on which the individual may remain in the United States. The online portal also allows individuals to check their travel history from and to the United States, as captured by US authorities.

Different nonimmigrant visas authorize a variety of activities in the United States, including visiting, studying and working. The categories are identified by combinations of letters and numbers that authorize the particular visas, for example, B-1 visitors for business or the work authorized L-1 intracompany transferee.

Every nonimmigrant category permits a maximum length of stay and a range of permissible activities. The most commonly used categories of nonimmigrant visas are described in detail below. Nonimmigrant visas allow visa holders to be admitted to the United States for a temporary period ranging from a few days to several years, depending on the visa category. In general, holders of nonimmigrant visas must intend to remain in the United States for a temporary period, not exceeding the validity of their I-94 document. Without this intent, and with notable exceptions, the applicant may be considered to be an intending immigrant, and must apply for an immigrant visa (see Section G).

With some notable exceptions, while a nonimmigrant is in the United States, he or she may apply to change to another nonimmigrant category or to extend the length of the authorized stay. However, most nonimmigrant visa categories have maximum stay limitations. Some categories of nonimmigrants may also become eligible for permanent residence or “green card” status (see Section G).

Business- and work-related nonimmigrant visas. A business that requires the immediate services of a particular employee ordinar ily brings the employee to the United States first in a nonimmigrant category. If the employee wishes to remain in the United States on a permanent basis, the immigrant application process may begin while the employee is in the United States.

Several business-related nonimmigrant visa categories are described below.

Visitor for business—B-1. B-1 status is issued to people temporarily visiting the United States to engage in business on behalf of foreign employers. B-1 holders may not be employed by or receive salary from US employers, but, among other activities, they may negotiate contracts, sell company products, develop business leads and attend conferences and business meetings on behalf of their foreign employers. A temporary business visitor may accept reimbursement for incidental expenses such as travel expenses. A B-1 visitor must retain unrelinquished domicile in the foreign country to where he or she intends to return at the conclusion of his or her temporary US stay.

In general, business visitors with B-1 visas may enter the United States for periods of up to six months. However, B-1 status can be granted for a shorter period, often not exceeding 30 days, unless the business visitor can justify a longer period of admis sion. Applications for an extension beyond the initial entry period can be sought from the United States Citizenship and Immigration Service (USCIS).

The B-2 visa category is available for individuals who are travel ing to the United States for tourism purposes, and not for busi ness.

An individual may receive a combined B-1/B-2 multiple-entry visa from a US consulate. This allows the visa holder to enter the United States in either B-1 business visitor status or B-2 tourist status, depending on the purposes of his or her travel on a par ticular trip.

The B-1 visa category is heavily scrutinized because of its misuse in the past. Prior to commencement of travel, business visitors must determine the purpose and duration of the trip, their nation ality and the nature of the activities that they will engage in to ensure that the activities are permissible under “business travel.” It is the individual’s activities in the United States (as opposed to any tax classifications or period of stay) that determine whether the travel may be appropriately designated as “business.” As of 29 November 2016, nationals of China Mainland holding a 10-year B1/B2, B1 or B2 (visitor) visa are required to complete an Electronic Visa Update System (EVUS) enrollment to be admitted into the United States. Travelers who are subject to EVUS requirements but do not have valid enrollments will not be able to obtain a boarding pass or enter through a land port of entry. For more information, visit https://www.cbp.gov/contact.

Visa Waiver Program. The Visa Waiver Program (VWP) allows nationals of the following jurisdictions to visit the United States for business, as generally described above, or pleasure for up to 90 days without first obtaining B visas from US consular posts overseas.

Andorra Hungary New Zealand Australia Iceland Norway Austria Ireland Poland Belgium Italy Portugal

Brunei Japan San Marino

Darussalam Korea (South) Singapore Chile Latvia Slovak Republic Czech Republic Liechtenstein Slovenia Denmark Lithuania Spain Estonia Luxembourg Sweden Finland Malta Switzerland France Monaco Taiwan Germany Netherlands United Kingdom Greece

The above list is updated occasionally; readers should check the Department of State website (https://travel.state.gov/content/ travel/en/us-visas/tourism-visit/visa-waiver-program.html) for the current list before traveling.

All VWP travelers are required to obtain a travel authorization through the Department of Homeland Security’s Electronic System for Travel Authorization (ESTA) before traveling to the United States. ESTA is an automated system used to determine the eligibility of visitors to travel to the United States under the VWP. ESTA is accessible online at https://esta.cbp.dhs.gov/esta/ for citizens of VWP countries.

Travelers are encouraged to apply as soon as travel is planned, and it is strongly suggested that they apply no later than 72 hours before travel to the United States. An approved ESTA travel authorization is valid for multiple entries into the United States and is generally valid, unless revoked, for up to two years or until the traveler’s passport expires, whichever comes first. ESTA is not a guarantee of admission to the United States at a port of entry. ESTA approval only authorizes a traveler to board a carrier for travel to the United States under the VWP. Readers should

review the US Department of State website for the most up-todate information about ESTA.

Visa waiver status is strictly limited; an extension of stay or a change in status is not authorized. However, in an emergency situation, a local USCIS office may grant a 30-day extension. Business necessity is not generally considered an emergency situation for these purposes. In addition, visa waiver applicants who are found to be not admissible to the United States may be expeditiously removed without trial, or right to confer with coun sel. At a minimum, machine-readable passports are required to take advantage of the VWP. Nationals of the Czech Republic, Estonia, Greece, Hungary, Korea (South), Latvia, Lithuania, Malta and the Slovak Republic require passports with an integrated chip containing the information from the data page. Citizens of Taiwan require passports with an integrated chip containing information from the passport data page and a nation al identification number. Please consult the US Department of State’s website (https://travel.state.gov/content/travel/en/us-visas/ tourism-visit/visa-waiver-program.html) for current passport requirements.

Under the Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015, travelers in the following catego ries are no longer eligible to travel or be admitted to the United States under the VWP:

• Nationals of VWP countries who have traveled to or been pres ent in Iran, Iraq, Sudan or Syria on or after 1 March 2011 (with limited exceptions for travel for diplomatic or military purposes in the service of a VWP country)

• Nationals of VWP countries who are also nationals of Iran, Iraq, Sudan or Syria

These individuals are still able to apply for a visa using the regu lar appointment process at a US embassy or consulate. For those who require a US visa for urgent business, medical or humanitar ian travel to the United States, US embassies and consulates stand ready to handle applications on an expedited basis.

On 31 January 2020, in response to the COVID-19 pandemic, President Trump announced the suspension of the entry of and issuance of visas to immigrants or nonimmigrants who were physically present in China Mainland during the 14-day period before their entry or attempted entry into the United States. The list of jurisdictions was expanded to include Brazil, Iran, Ireland, the United Kingdom and the Schengen Area (Austria, Belgium, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden and Switzerland).

On 25 January 2021, President Biden signed a proclamation continuing the suspension of entry of certain travelers who were physically present in the 14-day period before their entry or attempted entry into the United States and expanding restrictions to include travelers from South Africa.

Exceptions to the travel restrictions include the following:

• United States citizens and lawful permanent residents, and their spouse and/or minor children

• Parents of United States citizens and lawful permanent resi dents who are unmarried and under the age of 21

• Siblings of United States citizens and lawful permanent resi dents (provided both are unmarried and under the age of 21)

• Foreign diplomats traveling to the United States on A or G visas

• Air and sea crew traveling to the United States on C, D, or C1/D visas.

For the full list of exceptions, see the proclamations at https:// www.whitehouse.gov/briefing-room/presidentialactions/2021/01/25/proclamation-on-the-suspension-of-entry-asimmigrants-and-non-immigrants-of-certain-additional-personswho-pose-a-risk-of-transmitting-coronavirus-disease/.

On 27 May 2021, the Secretary of State made a national interest determination regarding categories of travelers eligible for exceptions related to the spread of COVID-19. Travelers subject to these proclamations due to their presence in Brazil, China Mainland, India, Iran, Ireland, South Africa, the United Kingdom and the Schengen area may nonetheless qualify for a national interest exception (NIE) if they meet one or more of the follow ing criteria:

• Travelers seeking to provide vital support or executive direction for critical infrastructure

• Those traveling to provide vital support or executive direction for significant economic activity in the United States

• Journalists

• Students and certain academics covered by exchange visitor programs

• Immigrants

• Fiancés

The Department of State also continues to grant NIEs for quali fied travelers seeking to enter the United States for purposes related to humanitarian travel, public health response and national security. These travelers and any others who believe their travel to be in the United States’ national interest should also review the website of the nearest US embassy or consulate for instruction on how to contact them.

Specialty occupations—H-1B. The H-1B category covers foreign nationals employed in specialty occupations that require a theo retical and practical application of highly specialized knowledge, as well as a bachelor’s degree or the equivalent in the field.

Before applying for an H-1B visa, an employer must file a Labor Condition Application (LCA) with the Department of Labor (DOL) and certify that, among other things, the foreign national will be paid at least the prevailing wage for the proffered posi tion. On 15 March 2019, the DOL issued policy guidance regarding LCA posting requirements. A prospective employer must also provide notice of filing the application by posting a hard copy notice, electronic notification or, when applicable, notification to the company’s bargaining representative. If post ing by hard copy notice, the employer must post notice of filing

the application in two conspicuous locations at the employment site for at least 10 consecutive business days.

If the employer meets the requirements, the holder of the H-1B status is entitled to a maximum six-year stay in the United States. In specified circumstances, extensions beyond the sixyear limit may be available. Each year, only 65,000 H-1Bs are made available. In addition, regulations allow a further 20,000 H-1Bs to be issued to persons having a master’s or higher degree from qualifying US post-secondary institutions. Readers should consult with the USCIS to confirm that the H-1B cap has not been changed by Congress or has not been reached for the cur rent fiscal year. Beginning in April 2020, the USCIS imple mented an H-1B Cap Registration Lottery Selection Process whereby employers were permitted to register the biographical and educational information for candidates they intended to sponsor in filing an H-1B petition. The USCIS received nearly 275,000 registrations between 1 March and 20 March 2020 for the 2021 fiscal year, of which 46%, or 126,500, hold advanced degrees from US institutions. The USCIS uses a computergenerated random selection process (lottery) to select the necessary amount of registrations to meet the numerical limits. If the USCIS does not receive sufficient H-1B petitions through the registration process, the department will hold additional lotteries.

Special, less onerous procedures and a specific quota apply to, and are set aside for, citizens of Chile and Singapore, stemming from free-trade agreements between those countries and the United States.

On 19 November 2018, a new ETA Form 9035, Labor Condition Application (LCA), was implemented by the DOL. The new LCA form requests that the employer disclose the following:

• Estimated number of workers that will perform work at the intended place of employment

• Whether the worker subject to the LCA will be placed with a secondary employer at the place of employment

• If the worker is placed with a secondary employer, the legal business name of the secondary employer

These revisions were made to improve transparency about the number of H-1B workers being sent to worksites, the locations at which H-1B workers will be placed and the entities with which H-1B workers will be placed.

Spouses and children of H-1B visa holders are eligible for H-4 status. Historically, such dependents were not authorized to work in the United States. However, beginning 26 May 2015, certain H-4 spouses may apply for employment authorization. H-4 spouses are eligible for employment authorization if the H-1B employee is the beneficiary of an approved I-140 employmentbased petition (the I-140 is an employer-sponsored “green card” [see Section G] petition that is filed with USCIS) or has been granted H-1B status beyond the six-year H-1B maximum based on a Program Electronic Review Management (PERM) labor certification (see Section G) or an I-140 filed at least 365 days before requesting an extension of status beyond the six-year H-1B maximum.

Specialty occupations—Trainees—H-3. H-3 status may be issued to foreign nationals to enter the United States for up to two years to receive training and to develop skills that will be used in their careers abroad.

Trainees must participate in structured training programs at US companies. The programs must incorporate theoretical and practical instruction, and may not consist solely of on-the-job training. The training must be unavailable in the foreign national’s home country, and the skills acquired must apply to work outside the United States.

For short-term training assignments (typically up to three months), an H-3 visa may not be required (for someone who falls under the VWP or who does not require a US visa), because in some instanc es the US immigration authorities recognize the “B-1 in lieu of an H-3” visa, which allows individuals to apply at a consulate (or in the case of the VWP, at the port of entry) for admission for the purpose of short-term training.

Spouses and unmarried children of H-3 visa holders are eligible for H-4 status, but are not permitted to work in the United States.

Treaty traders and treaty investors—E-1 and E-2. Foreign nation als who are citizens of countries that have treaties of friendship, commerce and navigation with the United States (see list below) may be admitted to the United States to invest in businesses or to engage in international trade under two categories of treaty-based visas, called E visas. The most common application process for these visas requires submission of documentation and attendance at an interview at a US consulate abroad.

The E-1 treaty trader category permits foreign nationals to enter the United States to engage in substantial trade in goods, services or technology with treaty countries. The US enterprise for which the foreign national works must be majority-owned by treatycountry nationals (either companies or individuals). An E-1 treaty trader must be employed in a supervisory or executive capacity or in a capacity that requires skills essential to the company.

The E-2 treaty investor category enables investors who are nation als of treaty countries and who invest substantial amounts of money in active US businesses to remain in the country to develop, direct and oversee the businesses. Managers, executives or employees with essential skills from treaty countries are also admissible on E-2 visas.

For E visa purposes, the nationality of an enterprise is deter mined by the nationality of the entity owning at least 50% of the enterprise.

Spouses and unmarried children under 21 years of age, regardless of nationality, may receive derivative E visas to accompany the principal visa holder. Spouses of E visa holders may apply for employment authorization following his or her entry into the United States. This document allows them to be employed with any employer in the United States.

Agreements between the United States and the following jurisdictions authorize treaty trader (E-1) and/or treaty investor (E-2) classifications for nationals of these jurisdictions (for a current

list of treaty jurisdictions, please consult with the Department of State).

Albania (b) France Norway

Argentina Georgia (b) Oman

Armenia (b) Germany Pakistan

Australia Greece (a) Panama (b)

Austria Grenada (b) Paraguay

Azerbaijan (b) Honduras Philippines

Bahrain (b) Ireland Poland

Bangladesh (b) Israel Romania (b)

Belgium Italy Senegal (b)

Bolivia Jamaica (b) Serbia Bosnia and Japan Singapore

Herzegovina Jordan Slovak Republic (b) Brunei Kazakhstan (b) Slovenia

Darussalam (a) Korea Spain Bulgaria (b) (South) Sri Lanka (b) Cameroon (b) Kosovo Suriname Canada Kyrgyzstan (b) Sweden

Chile Latvia Switzerland Colombia Liberia Taiwan Congo (b) Lithuania (b) Thailand Costa Rica Luxembourg Togo

Croatia Mexico Trinidad and Czech Republic (b) Moldova (b) Tobago (b) Denmark Mongolia (b) Tunisia (b) Ecuador (b) Montenegro Turkey Egypt (b) Morocco (b) Ukraine (b) Estonia Netherlands United Kingdom Ethiopia New Zealand (d) Yugoslavia (c) Finland North Macedonia

(a) Limited to E-1 status. (b) Limited to E-2 status. (c) The United States takes the view that the treaty in force at the time of dissolu tion of the Socialist Federal Republic of Yugoslavia applies to its successors. (d) Beginning 10 June 2019, certain New Zealand nationals can request a change of status to the E-1 nonimmigrant trade classification and the E-2 nonimmi grant investor classification.

E-3 for Australians. The E-3 is a visa category available to nationals of Australia (E-3D visas are available to their children and spouses), limited to 10,500 per fiscal year. The E-3 status allows nationals of Australia to be admitted into the United States to work temporarily in a “specialty occupation” for an initial period of 24 months. The application for an initial E-3 visa can be made directly to a US consular mission abroad and requires a Labor Condition Application. The requirements for qualification for the new E-3 visa are very similar to the requirements for the H-1B category. After arrival in the United States, the spouse of an E-3 visa holder may apply directly to the USCIS for employ ment authorization in the United States. The spouse does not need to be a national of Australia to be eligible for employment authorization.

Intracompany transferees—L-1. The L-1 visa allows foreign com panies with affiliated operations in the United States to transfer needed personnel to their US facilities. L-1 visas may be issued to foreign nationals who are employed abroad in executive or

managerial positions, or who hold positions involving special ized knowledge in the company’s procedures, processes, services and/or products.

On 15 November 2018, the USCIS issued a Policy Memorandum (PM) clarifying the requirement that the qualifying organization must have employed the principal L-1 beneficiary at the related foreign entity abroad for at least one continuous year during the three years preceding the time of petition filing. The PM explains the following:

• The L-1 beneficiary must be physically outside of the United States during the required one continuous year of employment.

• The petitioner and the beneficiary must meet all requirements, including the one year of foreign employment, at the time the petitioner files the initial L-1 petition.

Specifically, the PM states that while a qualifying foreign entity employs a beneficiary abroad, brief trips to the United States for business or pleasure in B-1 or B-2 status tolls the one continuous year of employment abroad. If the beneficiary made brief trips to the United States that year for a total of 60 days, the beneficiary would need to accrue at least an additional 60 days of qualifying employment to meet the one-year foreign employment requirement.

On arrival in the United States, the beneficiary must assume an executive, managerial or specialized knowledge position with the US affiliate, parent, subsidiary or branch office.

Managers and executives may be issued and retain L-1A status for up to seven years; L-1B specialized-knowledge personnel may remain in the United States in that status for up to five years.

For startup operations, L-1 visas are granted initially for a oneyear “new office” period. For visa extensions, startup companies must prove at the end of the year that they are “doing business” in the United States and have made progress toward becoming viable operating entities that need the services of managers, executives or personnel with specialized knowledge. If, at the end of the first year, the startup company is unable to prove that this progress has been made, it may be possible for the individual to receive an extension of an additional year to continue to grow the business.

L-1B specialized knowledge visa holders may not work primarily at a worksite other than that of the petitioning employer if either of the following conditions will apply:

• The work to be carried out will be controlled by a different employer.

• The off-site arrangement will provide labor for hire, rather than service related to the specialized knowledge of the petitioning employer.

The L-2 category is set aside for immediate family members (spouse and child) of the L-1 beneficiary. An L-1 visa holder’s spouse who holds L-2 status may apply for employment authori zation following his or her entry into the United States. This document allows them to be employed with any employer in the United States.

Over the past several years, USCIS service centers have shown a clear trend toward higher scrutiny of L-1 petitions, resulting in greatly increased rates for requests for additional evidence and

denials. This increased scrutiny has been applied across the board with L-1 petitions, but has been most evident for petitions involving startup companies and for personnel possessing specialized knowledge.

Starting in December 2018, CBP officers at preclearance offices and land ports of entry began refusing to adjudicate extension/ renewal blanket and individual L-1 petitions for readmission for Canadian citizens.

North American Trade Agreement Professionals—TN. Canadian and Mexican citizens are eligible to apply for TN status in the United States pursuant to the North American Free Trade Agreement (NAFTA) of 1993 between Canada, Mexico, and the United States. TN status provides a Canadian or Mexican foreign national with temporary authorization to work for a US employer at a professional level. The professional must be coming to the United States to engage in one of the professions expressly enu merated in Appendix 1603.D.1 of the NAFTA and have the appropriate degree and/or experience to perform the duties of the profession. In addition, the work must be pre-arranged to be performed for a US entity.

TN status may be granted for up to a three-year increment. No maximum limit is imposed on the amount of time that a foreign national may apply for and obtain TN status if the foreign nation al can demonstrate an intention to depart the United States before the end of the authorized period of stay. Spouses and children of a foreign national with TN status may qualify for derivative or “TD” status in the United States. TD status allows a spouse or child to attend school but not to work.

Canadians may apply for admission to the United States by pre senting the TN application materials in person at designated air or land ports of entry. Before traveling to the port of entry, Canadians have the option of applying for pre-approval by submitting a petition to the USCIS. Mexican nationals must apply for a TN visa at the US consulate. As part of the consular application process, Mexican citizens may present a Form I-797 (petition approval notice) from the USCIS; alternatively, Mexican citizens may submit the TN supporting documents directly to the US consulate for adjudication. Mexicans may then present the visa at the port of entry to be admitted to the United States with TN status. If a Mexican or Canadian TN applicant is already in the United States, it is generally possible to apply with the USCIS for change of status or extension of status.

On 1 October 2018, President Trump announced an agreement with Canada and Mexico to replace the existing NAFTA with a new agreement called the United States-Mexico-Canada Agreement (USMCA), which went into effect on 1 July 2020. However, the countries retained existing NAFTA language on TN visas.

Extraordinary ability—O-1 The O-1 visa category is for persons of extraordinary ability in the sciences, arts, education, business or athletics. Separate tests for demonstrating extraordinary abil ity exist for the following categories of individuals:

• Foreign nationals in the motion picture and television industries

• Other foreign nationals

Most foreign nationals must prove their claim of extraordinary ability by providing evidence of sustained national or international acclaim. They may enter the United States only to work in their fields, and US immigration authorities must determine that their entry substantially benefits the United States. O-1 petitions are submitted to the USCIS for adjudication, and in some in stances must be accompanied by proof of consultation with ap propriate US labor unions (particularly those representing individuals in the arts, entertainment or athletics).

The O-3 category is set aside for spouses and minor children of O visa holders. No employment authorization is available to holders of O-3 category visas.

Performing artists and athletes—P. The P visa category is reserved for certain performing artists and athletes. This visa status contains the following subcategories:

• P-1: internationally recognized entertainers and athletes. The P-1A classification is for persons who are coming to the United States in order to perform at a specific athletic competition as one of the following:

— An internationally recognized athlete

—

—

—

Part of an internationally recognized group or team

A professional athlete

An athlete or coach, who is part of a team or franchise located in the United States and a member of a foreign league or association

The P-1B classification is for individuals coming to the United States to perform as a member of an internationally recognized entertainment group. The P-1S classification is for “Essential Support Personnel” who are an integral part of the performance of a P-1 nonimmigrant, and who perform support services that cannot be readily performed by a US worker. Initial approvals for P-1S petitioners are limited to the period of time necessary to complete the event, not to exceed one year, regardless of the initial authorized stay approved for the related P-1A nonimmi grant.

• P-2: reciprocal exchange artists and entertainers who will per form under a reciprocal exchange program between an organi zation in the United States and an organization in another country. The P-2S classification is available for “Essential Support Personnel” who support the P-2 artist or entertainer.

• P-3: culturally unique artists and entertainers coming temporarily to perform, teach or coach as artists or entertainers, individually or as part of a group. The P-3S classification is available for “Essential Support Personnel” who support the P-3 artist or entertainer.

• P-4: family members of P-1 to P-3 visa holders.

Employment visas as part of a course of study. Several nonimmigrant visa categories, which are outlined below, apply spe cifically to business trainees, researchers and students.

Exchange visitors—J-1. Visas for exchange visitors (J-1 visas) enable certain sponsoring institutions with exchange programs to bring students, researchers, business and industrial trainees, and others to the United States to participate in training programs administered by the Department of State’s Bureau of Educational and Cultural Affairs and the Office of Exchange Coordination

and Designation. The following J-1 categories, each having their own specific rules, exist:

Post-secondary students

Secondary students

Short-term scholars

Summer work travel applicants

Interns

Trainees

Teachers

Professors and research scholars

Alien physicians

Au pairs

Other categories

Subject to the Department of State’s approval, a company may establish its own training program or work with an organization already recognized for sponsoring training programs. A trainee may be engaged in any productive employment that provides knowledge of specific firm practices in the United States or of US business procedures in general. J-1 trainees are typically authorized to remain in the United States for up to 18 months, but the validity period for the other J-1 categories listed above may differ. Some program participants are required to return to their home country for two years before they become eligible to reenter the United States.

J-1 regulations focus on the distinction between work (that is, gainful employment) and legitimate training. Prospective J-1 training sponsors must submit detailed descriptions of their train ing programs and of their goals and objectives.

Derivative J-2 visas may be issued to a spouse or unmarried child under age 21, and J-2 spouses may apply for employment authori zation, which allows them to be employed with any US employer.

Academic students—F. Students enrolled in academic institutions may be allowed to work on campus during their studies and during school vacations. Students also may be authorized to engage in practical training at a US employer during their studies or for one year after graduation. Students seeking post-graduation practical training must obtain school approval and employment authorization documents from the USCIS before they begin working. Some F-1 holders may obtain a 17-month extension (up to 29 months total) to their work authorization if they have com pleted a degree in science, technology, engineering or mathemat ics and if they have accepted employment with employers enrolled in the USCIS’s E-Verify electronic employment verifi cation program. Students should consult with their Designated School Officials and/or the USCIS before requesting an exten sion of their work authorization.

Non-academic students—M Students who have completed a course of non-academic education may engage in practical train ing for up to six months, depending on the length of the educa tional program.

G. Immigrant visas

Permanent resident or immigrant visas, which are commonly referred to as “green cards,” are issued to those intending to reside

permanently in the United States. Immigrant visa holders may live and work in the United States with few restrictions. After a period of physical presence and continuous residence of either three or five years (depending on the basis on which the individual obtained the green card), immigrant visa holders may, but are not required to, apply for US citizenship.

Nine preference categories of immigrant visas are available to foreign nationals. Four categories are based on family relation ships, and five are based on US employment (see details below).

Immigrant visas based on family relations or US employment are subject to the visa being available. The Department of State pub lishes current immigrant visa availability information in a monthly Visa Bulletin. The Visa Bulletin indicates when statuto rily limited visas are available to prospective immigrants based on their individual priority date. The priority date is generally the date when the applicant’s relative or employer properly filed the immigrant visa petition on the applicant’s behalf with the USCIS. If a labor certification is required to be filed with the applicant’s immigrant visa petition, the priority date is when the labor certi fication application was accepted for processing by the DOL. Availability of an immigrant visa means that eligible applicants are able to take one of the final steps in the process of becoming US permanent residents. Availability of the visas change from month to month and generally are more restrictive for nationals of China Mainland, India, Mexico and the Philippines.

Immigrant visas may also be obtained in accordance with the diversity immigration visa program (visa lottery). Under this program, 50,000 diversity visas are available annually to nationals of many, but not all, foreign countries. Such individuals may qualify for diversity visas if they have completed at least a high school education or its equivalent, or if they have worked at least two years in occupations that require two or more years of train ing or experience. Each diversity visa applicant may file only one application per year; multiple applications void all previous applications. Foreign nationals are chosen at random and are eligible to receive diversity visas only in the fiscal year in which they are selected. In most cases, persons qualify on the basis of the jurisdiction in which the applicant was born. However, a person may be able to qualify in two other ways. Under the first alterna tive, if a person was born in a jurisdiction whose natives are ineligible but his or her spouse was born in a jurisdiction whose natives are eligible, such person can claim the spouse’s jurisdiction of birth, provided both the applicant and spouse are issued visas and enter the United States simultaneously. Under the sec ond alternative, if a person was born in a jurisdiction whose natives are ineligible, but neither of his or her parents was born there or resided there at the time of his or her birth, such person may claim nativity in one of the parents’ jurisdiction of birth, provided the natives of such jurisdiction qualify to apply for the program.

Potential applicants should check the availability of diversity visas with respect to their nationality before applying. For addi tional information, see https://travel.state.gov/content/visas/en/ immigrate/diversity-visa/entry.html. Currently, natives of the

following jurisdictions are not eligible to apply under the visa lottery.

Bangladesh El Salvador Peru

Brazil Haiti Philippines

Canada Honduras United Kingdom

China Mainland India (except Northern (including Jamaica Ireland) and its Hong Kong) Korea (South) dependent

Colombia Mexico territories*

Dominican Nigeria Vietnam Republic Pakistan

* The United Kingdom includes the following dependent areas:

Anguilla

Bermuda

British Virgin Islands

Cayman Islands

Falkland Islands

Gibraltar

Montserrat

Pitcairn

Turks

Caicos

Natives born in the Gaza Strip are chargeable to Egypt for the visa lottery for 2022 and should use Egypt as their jurisdiction of birth.

Persons born Macau and Taiwan are eligible. Please consult with the US Department of State for a current list and lottery instruc tions.

Categories of employment-based immigrant visas. The five categories of immigrant visas described below may allow foreign nationals to immigrate to the United States on an employmentrelated basis.

First preference—priority workers. Foreign nationals who fall into one of the following categories are classified as priority workers; no labor certification (see Steps for obtaining employment-based immigrant visas) is required for these workers:

• Foreign nationals with extraordinary ability in the sciences, arts, education, business or athletics who satisfy the following conditions:

— They have received sustained national or international acclaim or awards of excellence.

— Their achievements are recognized through extensive docu mentation, such as evidence of original contributions of major significance in the field.

— They intend to work in their area of ability. No offer of employment is required.

• Professors and researchers who have received international recognition as outstanding in a specific field who satisfy the following conditions:

— They have at least three years’ experience in teaching or research in their field.

— They have been offered tenure or tenure-track teaching or research positions.

— They have made original scientific or scholarly research contributions in the field.

• Multinational executives and managers who have been employed in executive or managerial capacities with their sponsoring employers abroad for at least one year in the three years preceding their admission into the United States and who intend to continue to work for those US employers, subsidiaries or affiliates in an executive or managerial capacity.

Second preference—professionals holding advanced degrees and aliens of exceptional ability. Foreign nationals holding advanced degrees (or the equivalent) and aliens of exceptional ability may be issued immigrant visas. Labor certifications are required for these individuals. Individuals whose US job positions require these certifications and who fulfill the following conditions may qualify:

• They have earned an advanced degree: master’s degree or bach elor’s degree plus five years’ progressively more responsible experience in the field.

• They have “exceptional ability” in the sciences, arts or busi ness. “Exceptional ability” means “a degree of expertise sig nificantly above that ordinarily encountered in the sciences, arts or business.”

Foreign nationals may also petition for a National Interest Waiver (NIW) through the second preference category, in which they request a waiver of the labor certification requirement. To quali fy, an individual must demonstrate exceptional ability and that his or her permanent employment in the United States would greatly benefit the national interest. The foreign national must meet specified criteria demonstrating experience and excellence in his or her field and the anticipated contribution to the United States.

Third preference—skilled workers, professionals holding a US baccalaureate degree and other workers. Individuals in certain categories may be issued immigrant visas on job-related bases. Labor certifications are required for these individuals. The fol lowing are the categories:

• Skilled workers, not temporary or seasonal, with a minimum of two years’ training or experience

• Professionals with baccalaureate degrees (does not include threeyear baccalaureate programs)

• Other workers, including unskilled laborers, who are neither temporary nor seasonal

Fourth preference—special immigrants. Foreign nationals classi fied as special immigrants (including religious workers, certain medical doctors who have continuously practiced medicine in the United States since 1978 and long-time US government workers abroad), may be issued immigrant visas on job-related bases. These individuals do not require labor certifications.

Fifth preference—immigrant investors. Foreign nationals investing at least USD1 million in a US commercial enterprise that preserves or provides full-time employment for at least 10 US workers may be issued immigrant visas. Investment of as little as USD500,000 in targeted employment areas may qualify an investor for this sta tus. Although no offer of employment or labor certification is required, strictly passive investments do not qualify. Approximately 10,000 visas are allocated to this category each year. The immi

grant visa quota mechanisms include protections to ensure that immigrants from all countries have an opportunity to utilize the category.

Steps for obtaining employment-based immigrant visas. To obtain permanent residence under an employment-based immigrant visa is a two or three-step process. The following are the steps:

• A labor certification application (for second and third prefer ence categories only)

• An immigrant visa petition

• An application for permanent residence status

Labor certification. Obtaining a labor certification approval is very complex, and it is highly advisable to seek legal counsel.

For certain employment-based immigrant visa categories, labor certification is the first step in the process of immigrating to the United States. The employer submits an application to the DOL to certify that an adequate test of the labor market for qualified and available US workers has been undertaken and that the immi grant’s employment will not adversely affect wages or working conditions in the United States. Labor certifications are issued in accordance with regulations for the permanent employment of aliens in the United States under the Program Electronic Review Management (PERM) process.

To obtain labor certification, an employer must make good faith efforts to recruit US workers for the position by following detailed and specified recruitment procedures.

A labor certification is not issued if the labor market test results in a US worker applicant who is qualified and available for the position, even if the foreign national is more qualified than the US worker applicant.

The employer must also offer a salary that is equal to or greater than the prevailing wage paid to workers with comparable job duties in the region that the position is being offered.

Schedule A: Pre-certified occupations. For certain positions requir ing labor certification, the labor market test is not required. The DOL has established certain pre-certified positions and acknowledges that hiring foreign nationals for these jobs does not adversely affect US workers or wages. These jobs, referred to as Schedule A positions, currently include the following two major groups of occupations:

• Group 1: Physical therapists and professional nurses

• Group 2: Aliens of exceptional ability in the performing arts, sciences and arts, including college and university teachers, who are outstanding in their fields

Multinational executives and managers: Exempt labor certification. Foreign nationals applying for lawful permanent resident status under the employment-based, first preference, multinational manager or executive category do not require a labor certification.

Immigrant visa petition. After the labor certification petition is approved (if required), the second step to obtain an immigrant visa, and ultimately permanent residence, is filing an immigrant visa petition. The prospective employer must petition the USCIS

to classify the foreign national under a recognized employmentbased preference classification. The employer must prove that the foreign national is qualified for the position and that the employ er has the ability to pay the offered wage.

Application for permanent residence status. A foreign national wishing to obtain permanent residence status must apply either for an immigrant visa or for adjustment of status as a lawful permanent resident within a preference classification. Applications for adjustment of status to lawful permanent resi dence may be filed after the immigrant visa petition is approved or, under certain circumstances, may be filed concurrently with the immigrant visa petition. The principal foreign national and his or her spouse and unmarried children younger than 21 years of age must each file separate applications.

Alternatively, immigrant visas are issued overseas at US embas sies and consulates in the immigrants’ home countries. Applicants not physically present in the United States must ordinarily remain outside the country during the immigrant visa processing peri ods. In most cases, foreign nationals who have entered with visas may apply for permanent residence in the United States by filing an application for adjustment of status (see Adjustment of status in the United States).

Processing overseas at a US consulate. The USCIS immigrant visa petition approval is forwarded to the National Visa Center, which collects biographic information, as well as certificates of birth, marriage and divorce. Foreign nationals must also submit police certificates from all places where they have resided for longer than six months since the age of 16. After the National Visa Center has collected the required information and documents, the application is transmitted to the US consulate handling immigrant visas in the country where the foreign national resides. The consulate then provides instructions for a medical examination and in-person interview.

Adjustment of status in the United States. Foreign nationals who have maintained lawful nonimmigrant status in the United States may be allowed to apply for permanent residence through an adjustment of status application. If a foreign national violates his or her nonimmigrant status, he or she may still be eligible to file for an adjustment of status in the United States under certain circumstances; however, that determination is made on an indi vidual basis.

After filing an adjustment of status application, an applicant ordinarily remains in the United States. In many cases, departing without prior USCIS permission cancels the application. Consequently, the applicant should apply to the USCIS for an advance parole. Advance parole grants permission to re-enter the United States and prevents the USCIS from concluding that an adjustment of status application has been abandoned. An excep tion also exists for travel in H or L status under certain circum stances. Advance parole applications should be filed well in advance of the intended travel date.

Applicants for adjustment of status (including family members) may apply for and obtain an Employment Authorization Document

permitting them to be employed by any employer pending the finalization of the adjustment application.

Categories of family-based immigrant visas. Under existing rules, many but not all family relationships may qualify an individual for lawful permanent residence status. Qualifying relationships allow the sponsorship of family members, including immediate relatives, such as the following:

• Spouses of US citizens

• Minor unmarried children under age 21 of US citizens

• Parents of US citizens who are at least age 21

• In limited circumstances, spouses of deceased US citizens

In addition, family preference categories allow for the submis sion of an immigrant petition on behalf of certain groups. However, these groups have historically experienced severe back logs as a result of annual demand exceeding annual quotas. The following are the groups:

• Unmarried sons or daughters of US citizens

• Spouses or minor children of foreign nationals lawfully admit ted for permanent residence

• Unmarried sons or daughters of foreign nationals lawfully admitted for permanent residence

• Married sons or daughters of US citizens

• Brothers or sisters of US citizens who are at least age 21

Loss of permanent residence status. Foreign nationals may lose their US permanent residence status in several ways. The most common means is through abandonment, either by intent or by an act deemed to indicate intent to abandon residence, such as con tinuous absence from the United States over a long period of time or failure to file US federal income tax returns as a resident of the United States. Permanent residents may also lose their status if they commit a prohibited act, including conviction for certain crimes. Permanent residence may also be rescinded if an applica tion is found to have been fraudulent.

Absence of less than six months from the United States by a perma nent resident usually does not constitute abandonment if the foreign national returns to an unrelinquished US domicile. However, an absence of one year or longer generally does constitute abandon ment, unless the individual has a re-entry permit. Consequently, permanent residents who remain outside the United States for longer than six months should consider obtaining re-entry permits. A re-entry permit may allow an otherwise eligible individual to reenter the United States after up to two years of continuous absence.

Obtaining a re-entry permit requires a statement that the foreign national intends to leave the United States only temporarily. The application for a re-entry permit may be denied if the permanent resident has been living overseas with only occasional visits to the United States, if he or she expresses no intent to return to a US residence within a fixed period of time, or if he or she has no ties to the United states, such as real or personal US property.

H. Family and personal considerations

Family members. The spouse and minor children of a nonimmigrant visa holder may accompany the nonimmigrant to

the United States for the duration of the principal foreign nation al’s visa. Specific nonimmigrant visas are issued to accompanying family members (see Section F). Under many derivative visa categories, spouses and children of the primary visa holder may attend school during the family’s stay in the United States with out a separate student visa. Spouses of L, E and some H-1B visa holders may apply for permission to work in the United States, and spouses of J visa holders are usually granted work authoriza tion in case of economic necessity. Spouses of holders of other types of visas and dependent children seeking to work must qualify independently for a working visa. Same-sex spouses are eligible for dependent status and benefits if the marriage is legally recognized in the jurisdiction in which the marriage occurred. In addition, unmarried partners who are not otherwise eligible for derivative visas as a principal applicant’s spouse (for example, unmarried cohabiting partners and domestic partnerships) may be eligible for extended B-2 visitor for pleasure visas, which allows them to accompany a nonimmigrant to the United States.

The spouse and children of potential immigrants may file accompanying applications for permanent resident status. They are issued permanent residence simultaneously if the principal foreignnational immigrant is granted permanent residence and if they are not individually ineligible to receive immigrant visas.

Change of address after entering the United States. All non-US citizens remaining in the country for 30 days or more must report any change in address within 10 days after the change by filing Form AR-11 with the USCIS. The AR-11 form can be filed online.

Appendix 1: State and local tax rates

The table below presents the maximum state and certain local individual income tax rates for 2020. The rates are applied to taxable income unless otherwise noted. Other local taxes may be imposed.

State

Highest marginal rate

Alabama 5%

Alaska None Arizona 4.5%

Arkansas 5.9%

California 12.3%

Colorado 4.55%

Connecticut 6.99%

Delaware 6.6%

District of Columbia 8.95%

Florida None Georgia 5.75%

Hawaii 11%

Idaho 6.5%

Illinois 4.95%

Indiana 3.23%

County tax 2.86% (highest rate) Iowa 8.53%

Kansas 5.7%

Kentucky 5%

Louisiana 6%

Maine 7.15%

Maryland 5.75%

County tax 5.62% (highest rate)

Massachusetts 5% (12% on certain capital gains)

Michigan 4.25%

Minnesota 9.85%

Mississippi 5%

Missouri 5.4%

Montana 6.9%

Nebraska 6.84%

Nevada None

New Hampshire 5% on interest and dividends

New Jersey 10.75%

New Mexico 5.9%

New York 10.9%

New York City 3.876%

North Carolina 5.25%

North Dakota 2.9%

Ohio 3.99%

Oklahoma 5%

Oregon 9.9%

Pennsylvania 3.07%

Philadelphia

Resident 3.8398% on compensation and net profits

Nonresident 3.4481% on compensation and net profits

Rhode Island 5.99%

South Carolina 7%

South Dakota None

Tennessee 0% on interest and dividends as of 2021

Texas None

Utah 4.95%

Vermont 8.75%

Virginia 5.75%

Washington None

West Virginia 6.5%

Wisconsin 7.65%

Wyoming None