Immigration to the U.S. and Tax Planning This article is the first in the series dealing with immigration to the U.S. and tax planning. A person who is neither a United States citizen nor resident can take certain actions that significantly impact the exposure to U.S. tax. Nowhere is the impact as significant as the decision to become a U.S. resident for tax purposes. Why is this so? As to U.S. income tax, a person who is neither a U.S. resident, green card holder or Citizen (called "Alien" in this article) is generally subject to U.S. income tax in only one or two circumstances: (1) the Alien has income from business conducted within the U.S., or (2) the Alien has certain U.S.-source passive investment income, such as interest, dividends or capital gains. However, once the Alien becomes a U.S. resident for tax purposes, the person is subject to U.S. income tax on worldwide income, possibly including income earned through foreign companies and trusts. A person becomes subject to U.S. tax on worldwide income in three ways: becoming a U.S. citizen or green card holder, or staying too many days in the U.S. Assuming that the Alien is not applying for a green card, avoiding U.S. tax residency means counting days. In other words, counting days that one is present in the U.S. during calendar year, so as to avoid meeting the "Substantial presence" test. Is it possible for an Alien to meet the Substantial Presence test and remain a nonresident Alien. Yes, in a few ways, one of which involves entering the U.S. on specific types of visas. Specifically, days present in the U.S. under certain visa categories are not counted toward the "Substantial Presence" test. Estate Tax is a substantial tax imposed by the U.S. on the value of a person's "estate" (property) at the time of death. As with income tax, the manner in which Estate tax is imposed significantly depends on the person's residence/citizenship status. A person who is neither a U.S. citizen nor domicile at the time of death is subject to Estate Tax only on certain property located in the U.S. at the time of death (U.S. Situs" property). On U.S. citizens and domiciles, the tax is imposed on the worldwide "Estate". The term 'domicile" is crucial. Domicile is not the same as the income tax term of "residence". A person becomes a domicile in a country where the move to that country displays the intention of the person to remain in that place indefinitely. Thus, in concept, a person can become a U.S. domicile a day after a move to the U.S., if the intention was to move to the U.S. for an indefinite person of time. Unlike the objective tests of residency (citizenship, green card, and presence tests are binary), the test for domicile is determined by "intent" of the person, and this is a fact and circumstance issue. Obtaining a green card coupled with a move to the U.S. is likely to cause a person to be considered a US domiciliary for Estate tax purposes. Thus a person with substantial wealth outside the US, who is interested in establishing a long term presence in the U.S. is advised to consider: (1) whether there are

alternative visa categories available and practical which allow for U.S. presence but do not establish the "intent", or (2) plan the move to the U.S. in a way that reduces the risk of having the domicile shift from the home country to the U.S. This article does not constitute legal advise. Please contact us if you have further questions. Monte Silver. Monte Silver is a U.S. lawyer based in Israel specializing in U.S. tax matters. He formerly worked for the Internal Revenue Service and the U.S. Tax Court.