Corporate Transparency Act

On January 1, 2021, the Corporate Transparency Act (the “CTA ”) became law as the U.S. Senate voted to override former President Donald Trump’s veto of the National Defense Authorization Act of 2021. The CTA requires the U.S. Treasury Department to promulgate regulations implementing the CTA by January 1, 2022. The CTA constitutes a major shift in the U.S. anti-money laundering regime by requiring newly formed and existing U.S. entities that cannot benefit from an exemption to report certain beneficial owners to the U.S. government.

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SEC Adopts New Marketing Rule for Investment Advisers

The Securities and Exchange Commission (the “SEC”) adopted, on December 22, 2020, a new Rule 206(4)-1 (the “New Marketing Rule”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The New Marketing Rule replaces both the existing Rule 206(4)-1, known as the advertising rule, and Rule 206(4)-3, known as the “solicitation rule”.

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SEC Harmonizes Exempt Offering Rules

The Securities and Exchange Commission (the “SEC”) adopted a set of amendments to “harmonize registration exemptions, eliminating complexity and facilitating access to capital and investment while preserving or enhancing important investor protections,” according to the SEC’s press release.  Click here to continue reading.

SEC Considering a Proposed Exemptive Order for Finders

On October 7, 2020, the Securities and Exchange Commission (the “SEC”) voted to propose a new, limited, conditional exemption from broker registration requirements for “finders” who help issuers raise capital in private markets from accredited investors. (See https://www.sec.gov/news/press-release/2020-248). Under Section 15(a)(1) of the Securities Exchange Act of 1934, finders and solicitors of investors are required to register as broker-dealers.  Historically, the SEC has acknowledged that finders may be exempt from broker registration under certain very limited conditions, and the SEC staff from time to time has issued “no action” letters to such effect.  However, to date the SEC has never provided general exemptions for finders.  Because the broker-dealer registration requirements are onerous, the proposed rule is welcome news for would-be finders.

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SEC Adopts Amendments to “Accredited Investor” and “Qualified Institutional Buyer” Definitions and Regulation S-K

On August 26, 2020 the SEC adopted amendments that broaden the definitions of “accredited investor” and “qualified institutional buyer” set forth in Rule 501(a) and Rule 144A, respectively, under the Securities Act of 1933, as amended (the “Securities Act”).  In a separate release on the same day the SEC adopted amendments that modernize the description of business, legal proceedings and risk factor disclosures that registrants are required to make pursuant to Regulation S-K under the Securities Act.  All amendments will become effective 60 days after publication in the Federal Register.

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Wichtige Änderungen bei der Bearbeitung von deutschen Beibehaltungsgenehmigungsanträgen mit sofortiger Wirkung

Doppelte Staatsangehörigkeit - Voraussetzungen der Beibehaltung der deutschen Staatsangehörigkeit vor der US-Einbürgerung

Die Einbürgerung in die Vereinigten Staaten von Amerika unter Beibehaltung der deutschen Staatsangehörigkeit

Durch das zum 1. Januar 2000 in Kraft getretene Gesetz zur Änderung des Staatsangehörigkeitsrechts wurde für die in den USA lebenden Deutschen, die die US-Staatsangehörigkeit erwerben möchten, die Beibehaltung der deutschen Staatsangehörigkeit erleichtert.Wichtiger Hinweis: Wer durch Geburt in den USA die US-Staatsangehörigkeit und gleichzeitig durch Abstammung von einem deutschen Elternteil die deutsche Staatsangehörigkeit erworben hat, verfügt über beide Staatsangehörigkeiten, ohne dass es eines Antrages auf Einbürgerung oder auf Beibehaltungsgenehmigung bedürfte.

Bei einem Antragsteller, der seinen gewöhnlichen Aufenthalt im Ausland (USA) hat, wird insbesondere berücksichtigt, ob er fortbestehende Bindungen zu Deutschland hat und welche konkreten Nachteile er hat oder zu erwarten hätte, wenn er nicht als US-Amerikaner eingebürgert werden würde.

Das Verfahren ist erleichtert, wenn der Antragsteller das 60ste Lebensjahr vollendet und mindestens 10 Jahre in den USA gelebt hat oder jeden Alters ist und seit über 20 Jahren in den USA lebt, da er in diesem Fall ein erhöhtes Integrationsinteresse hat und nur die Bindungen zu Deutschland nachweisen muss.Anträge werden beim zuständigen deutschen Konsulat in den USA eingereicht. Zuständig für die Erteilung von Beibehaltungsgenehmigungen für im Ausland lebende Deutsche ist das Bundesverwaltungsamt (BVA) in Köln.Antragsverfahren: Der Antrag sollte (im Original und in einfacher Kopie) zusammen mit einem Anschreiben, das die Gründe des Antrags erklärt, die Nachteile einer Nichtannahme der US-Staatsangehörigkeit aufzeigt und die Bindungen zu Deutschland beschreibt, und den notwendigen Unterlagen, an die zuständige deutsche Auslandsvertretung in den USA gesandt werden. Von dort wird der Antrag mit einer Stellungnahme vom entsprechenden deutschen Konsulat an das BVA in Köln zur Entscheidung weitergeleitet.Leider haben sich die Voraussetzungen für eine deutsche Beibehaltungsgenehmigung kürzlich drastisch geändert, weil das BVA die maßgeblichen gesetzlichen Bestimmungen nunmehr deutlich enger auslegt. Dies gilt nicht nur für neue Anträge, sondern leider auch für bereits anhängige Anträge. Aufgrund des in Deutschland grundsätzlich geltenden Prinzips der Vermeidung der Mehrstaatigkeit und vermutlich auch aufgrund einer Flut von Anträgen, hat sich das BVA entschlossen, das bestehende Gesetz ab sofort sehr eng auszulegen und nur noch in  solchen Einzelfällen eine Beibehaltung der deutschen Staatsangehörigkeit zu genehmigen, in denen der Antragsteller konkrete Nachteile nachweisen kann. „Konkrete Nachteile“ bedeutet, dass der Nachteil in zeitlichem und sachlichem Zusammenhang mit der Annahme der US-Staatsangehörigkeit stehen muss.Ab sofort werden nur noch die folgenden nachzuweisenden konkreten Nachteile akzeptiert, die der Antragsteller ohne die US-Staatsangehörigkeit hat, und die der Antragsteller überzeugend und dokumentarisch in seinem Antrag darlegen muss:Berufliche NachteileZahlreiche Stellenangebote in den USA fordern als Voraussetzung die US-Staatsangehörigkeit (z.B. Homeland Security, Post, Flughafenbodenpersonal). Bisher wurde dem Antragsteller eine Beibehaltungsgenehmigung erteilt, wenn er glaubhaft machen konnte, dass er aufgrund seiner Ausbildung und beruflichen Qualifikationen für eine solche Stelle qualifiziert ist. Nunmehr vertritt das BVA die Auffassung, dass dies nicht mehr ausreiche, weil derartige Stellenangebote nur künftige Erwerbschancen seien und keine schon verwirklichte Geschäftsbeziehung.Um einen beruflichen Nachteil vorzubringen, muss der Antragsteller nunmehr im Einzelfall nachweisen, dass der Nachteil in zeitlichem und sachlichem Zusammenhang mit der Annahme der US-Staatsangehörigkeit steht. Dies ist nur möglich, wenn z.B. der Arbeitgeber des Antragstellers schriftlich bestätigt, dass dem Antragsteller eine Position in der Firma angeboten wurde, für die er sich qualifiziert, die aber die US-Staatsangehörigkeit des Antragstellers verlangt. Sicherheitsqualifikationen in den USA beinhalten in der Regel auch die US-Staatsangehörigkeit. Alternativ könnte ein anderer US-Arbeitgeber eine solche konkrete Stelle anbieten.Aufenthaltsrechtliche NachteileDas US-amerikanische Aufenthaltsrecht erlaubt einem „Permanent Resident“ (Inhaber einer Green Card) sich bis zu 180 Tagen im Jahr außerhalb der USA aufzuhalten, ohne seinen Aufenthaltsstatus zu verlieren. Eine Rückkehrberechtigung bei längerem Aufenthalt außerhalb der USA erlaubt einen Aufenthalt bis zu zwei Jahren außerhalb der USA. Sie wird jedoch unproblematisch nur einmal erteilt und liegt im Ermessen der US-Behörde. Dieser Nachteil wird nunmehr nur noch anerkannt, wenn der Antragsteller dokumentiert, dass es konkrete Pläne des Arbeitgebers gibt, ihn für mehr als sechs Monate ins Ausland zu entsenden, oder der Antragsteller aus wichtigen nachzuweisenden privaten Gruenden die USA fuer einen laengeren Zeitraum verlassen muss.Erbrechtliche Nachteile bei einem Vermögen über $5 Millionen Sollte das Einzel- oder Ehegattenvermögen des Antragstellers über $5 Millionen liegen, wobei zur Vermoegensmasse alle Vermögenswerte in Höhe des aktuellen Marktwertes gehören, inklusive Immobilien, Inventar, Lebensversicherungen, Geldanlagen, Kraftfahrzeuge, Schmuck, Antiquitäten, 401K, sowie Witwen-/Witwerversorgungen aus Betriebsrenten, und der Antragsteller eine Aufstellung des Vermögens einreicht, aus der ersichtlich ist, dass das zu versteuernde Erbe über dem Steuerfreibetrag von $5 Millionen liegt, wäre ein vermögensrechtlicher Nachteil akzeptierbar. Dieser Nachteil wird akzeptiert, da das gemeinsame Vermögen der Ehegatten in voller Höhe, und nicht wie sonst üblich nur zur Hälfte, in die Erbmasse fließt, wenn der überlebende Ehegatte kein US-amerikanischer Staatsbürger ist. Steuerrechtliche Nachteile bestehen nur für Ehepaare und beinhalten nur ein Vermögen, das im gemeinsamen Besitz steht.Nachteile bei der Vergabe von StipendienNicht-US-amerikanische Studenten sind bei der Vergabe von Stipendien benachteiligt. Das BVA akzeptiert diesen Nachteil, wenn dieser dokumentarisch nachgewiesen werden kann.Sonstige NachteileUS-amerikanische Gerichte übertragen in Scheidungsfällen das Sorgerecht in der Regel dem US-Staatsangehörigen. Um eine bessere Chance zu haben, das Sorgerecht zu erhalten, sollte der deutsche Ehepartner daher die US-Staatsangehörigkeit annehmen, sofern er vor oder in einem Scheidungsverfahren steht. Bisher hat das BVA diesen Nachteil akzeptiert, stellt sich jetzt aber auf den Standpunkt, dass auch dieser Nachteil nur dann ein akzeptierbarer Grund ist, wenn eine Scheidung anhängig ist. Ansonsten könnten Vermögensausgleichnachteile oder Nachteile im Sorgerecht durch eine entsprechende Vereinbarung der Ehegatten zum jetzigen Zeitpunkt geregelt werden, um spätere Nachteile zu vermeiden.Jeder Einzelfall ist spezifisch und der Antragsteller hat ggf. andere wichtige Nachteile, die er nachweisen kann. Daher ist es wichtig jeden Antrag im Vorfeld zu analysieren.Weitere Dokumente: Neben dem Antrag auf Beibehaltung der deutschen Staatsangehörigkeit sollten folgende Dokumente eingereicht werden: Beglaubigte Kopie des deutschen Reisepasses (nur Fotoseite), beglaubigte Kopie der US-Aufenthaltsberechtigung, Lebenslauf, Ausbildungszeugnis, Beispiele für US-Stellenangebote und Beschreibung der Bindungen zu Deutschland.Die Bindungen zu Deutschland sollten die Namen, den Verwandtschaftsgrad und die deutsche Adresse aller Familienangehörigen beinhalten und ggf. auch enge Freunde und Geschäftspartner einschließen. Zudem können die Bindungen an Deutschland durch Nachweise über ein Bankkonto, Versicherungen, Rentenanwartschaften oder Immobilien in Deutschland belegt werden. Legen Sie dem Antrag ggf. Bankunterlagen, Auszüge aus dem Grundbuch, Grundsteuerbescheide oder Renten- und Versicherungsunterlagen bei.Bearbeitungsdauer: Momentan dauert die Bearbeitung einer Beibehaltungsgenehmigung bis zu 18 Monaten.Wichtiger Hinweis: Der Antrag auf die US-Staatsangehörigkeit sollte erst dann gestellt werden, wenn die Beibehaltungsgenehmigung ausgehändigt worden ist.Anschlussurkunde: Die Beibehaltungsurkunde ist nur für zwei Jahre gültig. Sollte der Antragsteller seine US-Staatsangehörigkeit nicht innerhalb der Gültigkeit der Urkunde erlangen, muss er eine sogenannte Anschlussurkunde beim BVA beantragen. Dieser Antrag sollte sechs Monate vor Ablauf der Beibehaltungsurkunde eingereicht werden und erfordert gesonderte Antragsformulare. Abzuwarten bleibt, ob das BVA die neue Rechtsauslegung auch für Anschlussurkunden anwendet.Gebühren: Die Gebühren (momentan EUR 255), die im Verfahren über die Erteilung einer Beibehaltungsgenehmigung zu entrichten sind, werden nach Eingang der Entscheidung des BVA mit gesondertem Schreiben angefordert. Sollte der Antragsteller seinen Antrag aufgrund der neuen Rechtsauslegung zurückziehen, fallen Gebühren von EUR 127 an. Bei einem rechtsmittelfähigen Ablehnungsbescheid fällt eine Gebühr von EUR 191 an.Wichtiger Hinweis: Die gültige Genehmigung der Beibehaltung der deutschen Staatsangehörigkeit muss vor dem Einschwörungstermin für die US-Staatsangehörigkeit ausgehändigt werden, um die deutsche Staatsangehörigkeit nicht zu verlieren! Die Beibehaltungsgenehmigung ist für zwei Jahre gültig und kann u.U. verlängert werden.Antrag auf US-Staatsangehörigkeit (N-400): Sobald die Beibehaltungsgenehmigung ausgehändigt wurde, kann der Antrag auf US-Staatsangehörigkeit beim United States Citizenship and Immigration Services (USCIS) eingereicht werden.Mit dem N-400 Antrag bei der zuständigen Behörde sollten die folgenden Unterlagen eingereicht werden: Kopien der Green Card und des deutschen Reisepasses (nur Fotoseite), zwei Fotos (siehe https://travel.state.gov/content/travel/en/passports/how-apply/photos.html), eine Kopie des Führerscheines und ein Scheck über $725 (momentane Gebuehr, die sich aendern kann) zahlbar an das „Department of Homeland Security“.Bearbeitungsverfahren: Abhängig vom US-Wohnort können Antragsteller mit Bearbeitungszeiten von 4-24 Monaten rechnen. Nach der Stellung des Antrags wird der Antragsteller aufgefordert, seine biometrischen Daten abzugeben, und dann zum Interview gebeten. Während des Interviews wird der Antragsteller, in den meisten Fällen, einer Englischprüfung unterzogen und auf seine Kenntnisse der amerikanischen Geschichte geprüft. Nach bestandenem Interview findet in den meisten Bundesstaaten eine Einschwörung statt. Bei der Erteilung der US-Staatsangehörigkeit muss der Antragsteller seine Green Card im Austausch mit der Einbürgerungsurkunde aufgeben. Danach sollte der Antragsteller sofort den amerikanischen Pass beantragen, da dieser sein neues Reisedokument für die Einreise in die USA ist.Gerne stehen wir für etwaige Fragen zu der Beibehaltungsgenehmigung und der amerikanischen Einbürgerung zur Verfügung.HILDE HOLLAND, Esq. | PartnerWUERSCH & GERING LLP100 Wall Street, 10th | New York, New York 10005212-509-4715 (direct) | 212-509-5050 (firm) | 212-509-9559 (fax)

hilde.holland@wg-law.com | www.wg-law.com 

 This article is intended to provide general information only on the matters resented.  It is not a comprehensive analysis of these matters and should not be relied upon as legal advice.

U.S. Supreme Court Tosses Out the Physical Presence Requirement for Sales Tax Nexus: What Now?

In South Dakota v. Wayfair, Inc., et al., 585 U.S. __ (June 21, 2018), the U.S. Supreme Court overruled its 1992 decision in Quill Corp. v. North Dakota which held that a state cannot require an out-of-state sellers with no physical presence in the state to collect and remit sales taxes on goods and taxable services provided to customers located in the state. The Supreme Court noted that the physical presence requirement has become unworkable in the Cyber Age. However, the court's ruling not only affects online retailers, including foreign retailers, but all sellers of taxable goods and services who make sales into a state in which they lack a physical presence.           The specific question at issue in Wayfair was whether South Dakota may require remote sellers with more than $100,000 in annual sales in South Dakota or more than 200 transactions with South Dakota residents to collect and remit sales tax in the absence of any further connection with the state. Although the Supreme Court unequivocally decided that a physical presence is not necessary to create a "substantial nexus" (taxable presence) justifying the imposition of a sales tax, the Court declined to adopt a new sales tax nexus standard. Instead, by eliminating the physical presence requirement for sales tax nexus and upholding the South Dakota law, the Court established a threshold for the constitutionality of state nexus standards, but did not provide clear guidelines as to what other state nexus standards might be constitutional. Accordingly, there is no clear nexus standard today.IMMEDIATE EFFECTS FOR REMOTE SELLERSRemote sellers should refrain from hastily registering in each state in which they transact sales. There will be an adjustment period during which the Wayfair opinion is digested by the states and taxpayers alike to understand its practical implications. A number of states will likely issue legislative or administrative guidance outlining the principles pursuant to which they expect remote sellers to collect and remit the sales tax. Some states may decide to simply issue a bulletin informing remote sellers that they are now expected to register and collect sales tax. It should also be expected that states will generally increase audit enforcement in reaction to the Wayfair decision. Because there is still no clear nexus standard, there remain various potential arguments to challenge the states' authority to impose their laws on remote sellers, increasing the need for Federal legislation in this area. Ultimately, as states are increasingly able to require remote sellers to collect and remit sales tax, remote sellers who historically have not collected sales tax will now have to implement sales tax compliance procedures and will no longer maintain a competitive advantage over traditional retailers. ANTICIPATED STATE REACTIONSThe Supreme Court's decision will likely encourage states to adopt similar laws to South Dakota's because they would be able to do so with certainty that the law will withstand constitutional scrutiny. Specifically, in considering the constitutional validity of the South Dakota law, the Court summarized that the South Dakota nexus standard (1) requires businesses whose sales exceed the safe harbor threshold of $100,000 in annual sales or 200 separate transactions to collect sales tax; (2) does not apply retroactively; and (3) is effective in a state that is party to the Streamlined Sales and Use Tax Agreement (SSUTA). South Dakota is one of more than 20 states that have adopted the SSUTA, which standardizes taxes to reduce administrative and compliance costs. SSUTA requires a single, state level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules. It also provides sellers access to sales tax administration software paid for by the state. Sellers who choose to use such software are immune from audit liability.CURRENT STATE ECONOMIC NEXUS STANDARDSIn addition to South Dakota, seven other both SSUTA and non-SSUTA states - Illinois, Indiana, Kentucky, Maine, North Dakota, Vermont and Wyoming - have adopted economic nexus thresholds similar to those adopted by South Dakota. Thus, any remote seller that exceeds the South Dakota thresholds most likely has a sales tax compliance obligation in at least these eight states.Seven additional states - Alabama, Georgia, Iowa, Massachusetts, Mississippi, Ohio and Tennessee -have adopted economic nexus thresholds that vary from those adopted by South Dakota. It remains to be seen whether these laws will be enforced as is, or modified to reflect South Dakota-style provisions. As for the remaining 31 states that impose a state sales tax, they will have to determine whether their existing laws provide a sufficient "economic nexus" basis through which to assert jurisdiction over remote sellers of taxable goods and services, or whether they must amend their laws to adopt the South Dakota standard, or attempt an even lower threshold, perhaps even with retroactive application.Six states - Alabama (effective Jan. 1, 2019), Minnesota, Oklahoma, Pennsylvania, Rhode Island and Washington State have adopted marketplace nexus provisions, under which remote sellers, as well as marketplace facilitators (such as Amazon) are subject to notice and reporting requirements or may elect and to remit sales tax if they exceed certain annual sales thresholds ranging from $10,000 to $250,000, despite a lack of physical presence in the state. Pursuant to these laws, Amazon has agreed to collect and remit sales tax on behalf of all remote sellers for sales made on its platform.POTENTIAL FOR CONGRESSIONAL ACTIONNoting the concerns regarding the complexity of multistate sales tax compliance, the Supreme Court noted that "eventually, software that is available at a reasonable cost may make it easier for small businesses to cope with these problems.... And in all events, Congress may legislate to address these problems if it deems it necessary and fit to do so." Currently, there are several pieces of legislation before Congress that address multistate tax compliance issues of online retailers, and the chances for such legislation may be improved by the Wayfair decision. These include the following:

• The Marketplace Fairness Act (MFA), as presented in its revised version by Senate legislators in 2017, would give states more power to collect sales taxes from businesses that do not have a physical location within their borders, so long as the state participates in the Streamlined Sales Tax Project (which developed the SSUTA), or implements the simplification requirements and liability provisions of the MFA. The MFA is completely voluntary for states, provides a small seller exception, and would require a minimum six month waiting period before a state can begin requiring remote sellers to collect sales tax.

• The Remote Transactions Parity Act (RTPA) of 2017, presented by legislators in the House of Representatives, authorizes states to impose sales tax collection obligations on certain remote sellers for sales, regardless of physical presence, so long as the state participates in the Streamlined Sales Tax Project, or implements the simplification requirements and liability provisions of the RTPA. The RTPA is also completely voluntary for states, provides a small seller exception, and would require a minimum six month waiting period before a state can begin requiring remote sellers to collect sales tax.

Neither the MFA nor the RTPA addresses how the legislation applies to remote sellers in foreign countries.It is likely that Congress will wait to see how the states and taxpayers respond to the Wayfair decision before it takes any action, a process that could take several years. In the meantime, remote sellers, including foreign sellers, should determine whether a sales tax nexus exists or the risk of nexus has materially changed because of the Wayfair decision. Specifically, they should consider their historical sales by state; and nexus creating activities under existing state nexus provisions (e.g., affiliate marketing programs). If they come to the conclusion that a substantial risk of non-compliance exists, the Wayfair decision should serve as a wake-up call to (1) resolve any historical exposure proactively (and anonymously through Voluntary Disclosure Agreements); (2) implement sales tax compliance software solutions and processes; and (3) implement processes for tracking sales activity to determine when they exceed sales thresholds in states that adopt economic nexus standards. For further information please contact:Maureen R. Monaghan: maureen.monagahn@wg-law.com; (212) 509-6312

U.S. Tax Reform – Significant Changes for Foreign Investors

On December 22, 2017, President Trump signed into law the comprehensive tax reform bill (the “Act”) that had been passed by Congress on December 20. The Act represents the most significant reform of the U.S. Internal Revenue Code in over 30 years. The following is a high-level summary of key features of the Act that may be of particular interest to foreign businesses and individuals investing in the United States. Unless otherwise specified, all changes became effective for tax years beginning on or after January 1, 2018. CORPORATIONSCorporate Tax Rate. The Act permanently reduces the maximum corporate tax rate from 35% to 21%, and repeals of the corporate alternative minimum tax (AMT).Shift from “Worldwide” Taxation to “Territorial” Taxation. With certain exceptions, a U.S. corporation that owns 10% or more of a foreign corporation is entitled to a 100% dividends-received deduction for the foreign-source portion of dividends from these foreign corporations. However, the Subpart F regime (which requires immediate taxation of certain passive or portfolio income of foreign subsidiaries) is largely preserved. This shift to a territorial system does not change the taxation of U.S. corporations that operate abroad through branches, nor does it exempt from taxation gain arising from the sale of shares of subsidiaries (unless they are recharacterized as dividends).Limitation on Business Interest Deductibility.  The Act replaces the traditional “thin-capitalization” rules with new rules that disallow a deduction for net business interest expense of both corporations and flow-through entities (i.e., partnerships and limited liability companies) in excess of 30% of the business’s adjusted taxable income. For taxable years beginning before January 1, 2022, adjusted taxable income is computed without regard to depreciation, amortization and depletion (i.e., similar to EBITDA). Beginning on January 1, 2022, adjusted taxable income will take into account depreciation, amortization and depletion (i.e., similar to EBIT). Disallowed interest deductions may be carried forward indefinitely.Business interest expense is defined as interest paid or accrued on indebtedness. It does not include investment interest within the meaning of Internal Revenue Code section 163(d) for individual taxpayers. For partnerships and other flow-through entities, the net interest expense disallowance is determined at the entity level (e.g., at the partnership level instead of the partner level).  Small businesses with $25 million or less of gross receipts are exempt from this limitation.  There is no grandfathering for preexisting debt.Net Operating Losses. Net operating losses (NOLs) arising after December 31, 2017 are deductible only up to 80% of the taxpayer’s taxable income. NOLs can be carried forward indefinitely, but generally cannot be carried back. ANTI-BASE EROSION AND INCOME SHIFTING PROVISIONS. Base Erosion and Anti-Abuse Tax (BEAT) Applicable to Large Multinationals. The BEAT is designed to keep U.S. corporations from shifting revenues from the U.S. to foreign jurisdictions with a lower tax rate, and affects U.S. subsidiaries with foreign parents. The BEAT is essentially a 10% minimum tax (11% for banks and registered securities dealers) calculated on the taxpayer’s income without tax deductions or other tax benefits arising from “base erosion” payments. A “base erosion payment” is generally an amount paid or accrued by a taxpayer to a related foreign person that is deductible to the taxpayer, but does not include cost of goods sold or qualified derivative payments.The BEAT applies to domestic corporations that (i) are not taxed on a flow-through basis (such as S corporations, regulated investment companies, or real estate investment trusts), (ii) are part of a group with at least $500 million of annual domestic gross receipts over a three-year averaging period, and (iii) have a “base erosion percentage” of 3% or higher for the tax year (or 2% for certain banks and securities dealers). The base erosion percentage means the percentage determined by dividing the corporation’s base erosion tax benefits by the total deductions allowed with respect to the corporation.Limitation on Deduction of Certain Related-Party Payments in Hybrid Transactions or with Hybrid Entities.  The Act disallows a deduction for any disqualified related-party amount paid or accrued in a hybrid transaction, or by, or to, a hybrid entity. A disqualified related-party amount is any interest or royalty paid or accrued to a related party if (i) there is no corresponding income inclusion to the related party under local tax law or (ii) such related party is allowed a deduction with respect to the payment under local tax law. The Treasury Department is given broad authority to issue regulations or other guidance necessary or appropriate to carry out the purposes of the provision.Hybrid transactions are transactions in which payments are treated as interest or royalties for federal income tax purposes but are not so treated for purposes of the tax law of a foreign country. A hybrid entity is one that is treated as fiscally transparent for federal income tax purposes (e.g., a disregarded entity or partnership) but not for purposes of a foreign country, or an entity that is treated as fiscally transparent for foreign tax law purposes but not for federal income tax purposes (reverse hybrid entity).Limitations on Income Shifting through Intangible Property Transfers.  The Act expands the universe of assets that are considered “intangible property” for purposes of outbound transfers to include workforce, goodwill, going-concern value, and “any other item” with a value that is not attributable to tangible property or the services of an individual. This provision makes it more difficult for a U.S. corporation to transfer intangible property abroad without incurring taxes.Repeal of Active Trade or Business Exception for Outbound Transfers. Prior law provided an exception to gain recognition for certain outbound transfers of property for use in foreign corporation’s active trade or business.  The Act repeals this active trade or business exception. As a result, U.S. corporations that transfer assets to a foreign corporation for continued use in an active trade or business will recognize gain on the outbound asset transfer. PASSTHROUGH ENTITIES AND SOLE PROPRIETORSHIPSExpanded S Corporation Shareholders. Previously, only U.S. residents could be shareholders of an S corporation. The Act now permits nonresident aliens to be beneficiaries of an Electing Small Business Trust (“ESBT”) that is a shareholder of an S corporation. The S corporation stock held by the ESBT may not, itself, be distributed to the nonresident alien without terminating the S corporation election. This provision may expand the number of corporations that elect S corporation status, as well as the ability of S corporation shareholders to engage in gift and estate tax planning.Sale of Foreign Partner’s Partnership Interest as ECI. Overturning a recent case decided by the Tax Court, the Act provides that a non-U.S. partner in a partnership recognizes gain or loss treated as “effectively connected” to a U.S. trade or business upon the sale of the partner’s partnership interest, to the extent that the partner would be treated as having effectively connected income in a hypothetical sale of all the assets of the partnership. The transferee in such a transaction must withhold 10% of the amount realized, unless the transferor certifies that it is not a nonresident alien or foreign corporation.Deduction for Passthrough “Qualified Business Income.”  The new law allows an individual taxpayer to deduct 20% of domestic qualified business income (“QBI”) from a partnership, S corporation, or sole proprietorship. This deduction, as other provisions affecting individual taxpayers, sunsets after 2025. The deduction generally would be limited to the greater of: (a) 50% of the W-2 wages paid with respect to the trade or business; or (b) 25% of the W-2 wages paid with respect to the trade or business plus 2.5% of the unadjusted basis of all qualified property. The QBI deduction is not available to most service businesses (e.g. health, law, accounting), but individuals with taxable incomes below certain threshold amounts are not subject to this exclusion, nor the foregoing W-2 limitation. For further information please contact:Maureen R. Monaghan: maureen.monaghan@wg-law.com; (212) 509-6312

U.S. Immigration Alert - Changes to U.S. Employment-Based Immigration

U.S. IMMIGRATION ALERT

Changes to U.S. Employment-Based Immigration

• New Travel Ban Effective October 18, 2017
• Changes to H-1B Program
• Postponement of International Entrepreneur Rule
• Denials of I-131 Applications Subject to International Travel
• In-Person Interviews for All Employment-Based Immigrant Visa Applications 
• Increased Administrative Processing 

In carrying out the Hire American Policy formulated in his April 18, 2017 Executive Order, the President directed the Secretaries of the Department of State (DOS), Department of Labor (DOL) and Homeland Security (USCIS), as well as the Attorney General, to propose new rules and issue new guidance to protect the interests of U.S. workers in the administration of the U.S immigration system. The response by federal agencies in carrying out this Executive Order has been swift, with USCIS working on a combination of rulemaking, policy memoranda and operational changes, the Department of State (DOS) making changes to its Foreign Affairs Manual (FAM) including new language referencing the Executive Order  regarding the adjudication of H, L, O, P and E visas, and DOL and DOS increasing their  monitoring and enforcement efforts of H-1B employers.

New Travel Ban Effective October 18, 2017

On September 24, 2017, the Trump administration issued new travel restrictions on foreign nationals seeking to enter the U.S. from eight countries which include Chad, Iran, Libya, North Korea, Somalia, Syria, Venezuela and Yemen, that goes into effect on October 18, 2017. While Iraq was not specifically included in this ban, nationals of Iraq will be subject to additional screening measures. Country-specific travel restrictions apply as follows:

Chad                Suspends the entry of immigrants and temporary visitors on business or tourist visas (B-1/B-2).

Iran                  Suspends the entry of immigrants and all nonimmigrants, except F (student), M (vocational student) and J (exchange visitor) visas, though they will be subject to enhanced screening.

Libya               Suspends the entry of immigrants and temporary visitors on business or tourist visas (B-1/B-2).

North Korea    Suspends the entry of all immigrants and nonimmigrants.

Somalia          Suspends the entry of immigrants, and requires enhanced screening of all nonimmigrants.

Syria               Suspends the entry of all immigrants and nonimmigrants.

Venezuela      Suspends the entry of certain government officials and their family members on business or tourist visas (B-1/B-2).

Yemen            Suspends the entry of immigrants and temporary visitors on business or tourist visas (B-1/B-2).

Changes to H-1B Program

President Trump specifically highlighted the H-1B visa program and directed the agencies to suggest reforms to help ensure that H-1B visas are awarded only to the most skilled and highest paid beneficiaries. Changes have already included the temporary suspension of premium processing for most H-1B petitions (although premium processes will fully resume on October 3, 2017) and petitioners have seen a surge in Requests for Evidence on H-1B cap petitions where a Level 1 wage was indicated on the Labor Condition Application.

Postponement of International Entrepreneur Rule

The International Entrepreneur Rule is a proposed regulation by USCIS to increase the presence of foreign entrepreneurship in the U.S. Under this rule, qualified foreign entrepreneurs would have been granted temporary parole to the U.S. in order to build and scale their businesses. Foreign entrepreneurs wishing to enter or remain in the country to build their business operations would need to meet certain criteria that would be reviewed on a case-by-case basis by the Department of Homeland Security (DHS). It was supposed to go into effect on July 17, 2017, but has been postponed. 

Denials of I-131 Application Subject to International Travel

In a recent trend, USCIS has begun to deny advance parole (AP) applications (Form I-131) for applicants who have traveled abroad before their applications are approved. This is in stark contrast to the previous, longstanding policy which allowed an AP applicant to travel abroad while the case was pending, as long as the individual had other valid means of being readmitted to the United States, such as a valid L-1 or H-1B visa.

In-Person Interviews for all Employment-Based Immigrant Applications

Effective October 1, 2017, all applicants and beneficiaries of an employment-based immigrant visa petition (Green Card) will be subjected to a personal interview. Previously, applicants in this category did not require an in-person interview with USCIS officers in order for their application for permanent residency to be adjudicated. Beyond these categories, USCIS is planning an incremental expansion of interviews to other benefit types.

Increased Administrative Processing

There has been a noticeable increase in visa application processing delays due to Section 221(g), otherwise known as "Administrative Processing." Such processing can be triggered by the following factors:  applicants with intended occupations in targeted fields on the Technology Alert List; applicants or "namesakes" appearing in national security and law enforcement databases, such as the Interagency Border Inspection System (IBIS); or information found on Form DS-160. Visa processing delays due to additional administrative processing can last from a couple of weeks to several months.  In most cases, Consular Posts will retain the application and the applicant's passport until the matter is resolved. It is important to note that the visa applicant will be prohibited from entering or re-entering the United States until the administrative processing has been completed. 

We will continue to closely monitor developments in visa application processing and will provide updates as necessary.

Important Changes in U.S. Immigration

U.S. IMMIGRATION UPDATE AND HELPFUL TIPS

• Increased Border Scrutiny
• Longer Visa Processing Times
• Frequent Site Visits
• Increased Visa Scrutiny and Denial

On April 18, 2017, President Trump signed the “Buy American and Hire American” Executive Order, which seeks to create higher wages and employment rates for U.S. workers and protect their economic interests by rigorously enforcing and administering U.S. immigration laws. It also directs DHS (Department of Homeland Security), in coordination with other agencies, to advance policies to help ensure H-1B visas are awarded to the most skilled or highest-paid beneficiaries. Since then, USCIS (United States Citizenship and Immigration Services) is working on a combination of rulemaking, policy memoranda, and operational changes to implement the Buy American and Hire American Executive Order. These initiatives are intended to protect the economic interests of U.S. workers and prevent fraud and abuse within the immigration system. The impact of this Executive Order can already be felt throughout U.S. immigration proceedings and border processing, including:INCREASED BORDER CONTROL AND SCRUTINYOver the last several months, U.S. entry control and scrutiny has clearly increased at U.S. borders. In particular, frequent Business Travelers are reporting increased questioning and control through CBP (Customs and Border Protection) Officers at airports and land border crossings. For your knowledge, foreign travelers coming to the United States to conduct temporary business, for example business meetings and consultations, attending conventions and conferences, or negotiating contracts, need B-1 visitor visas unless they qualify for entry under the Visa Waiver Program.In particular, business travelers are extensively questioned on their U.S. activities, engagements and possible violations deemed by CBP to be conducting “productive work”. For instance, a foreign officer of a U.S. company who admits to “supervising and controlling” U.S. employees is considered engaging in productive work and may be denied entry into the U.S. as a Business Visitor.Frequent U.S. business travelers should ensure that they are able to fully document their U.S. activities, including their continued foreign employment and maintenance of a foreign residency, and it is recommended that frequent travelers carry a letter from the foreign employer, confirming the bona fide business travel purposes of the employee, a foreign employment agreement, recent pay stubs and a copy of the traveler’s foreign lease in demonstration of his foreign abode.It is also important to note that, if an ESTA Business Visitor is denied entry into the U.S., he has the right to withdraw his/her request for U.S. entry and offer his/her voluntary departure to avoid a possible deportation from the U.S., which can have dire consequences for future U.S. travel. A Business Traveler entering under a valid B-1 visa, has the same right and can also request a hearing before an Immigration Judge which, however, may take some time, and the traveler may be put into detention pending the hearing. It is also always good practice to ask to be seen by a CBP supervisor in secondary inspection should the initial entry officer intend to deny the traveler entry into the U.S.As a general rule, all visitors and visa holders should also verify their permissible U.S. stay by downloading their I-94 Arrival/Departure records in the electronic system at https://i94.cbp.dhs.gov/ upon EACH individual U.S. entry.INCREASED ADMINISTRATIVE SITE VISITSSince 2009, FDNS (Fraud Detection and National Security) conducts site visits to employers of H-1B, L-1A/B and R-1 (Religious Workers) visa holders to verify whether the employers and employees are complying with U.S. immigrations laws and regulations. FDNS conducts site visits on randomly selected visa petitioners after USCIS has adjudicated their petitions, and on all religious worker petitioners before adjudication. Employers should be prepared to present any information originally submitted with the visa petition and should immediately provide any available documents and information at or after the site visit. If FDNS detects fraudulent activity, it will refer the case to ICE (Immigration and Customs Enforcement) for further investigation. Please note that the frequency of site visits has increased over the last year, and employers are advised to maintain requisite documentation at the visa holders work location site.INCREASED VISA AND CONSULAR PROCESSING TIMES AND SCRUTINYEffective April 2, 2017, USCIS suspended the premium processing option for H-1B visas which resulted in lengthy processing times of 4-5 months. Moreover, USCIS issuance of Requests for Evidence have increased in connection with visa petition filings, in particular L-1 visas, resulting in much longer processing times.Scrutiny on E Treaty Trader/Investor Registration applications has increased at some U.S. Consular Posts. Many U.S. Consular Posts are now requesting additional evidence after the initial filing, which has resulted in longer processing times than before. Further, during interviews at U.S. Consular Posts, the visa applicant is now extensively questioned and scrutinized on his education, experience and specialized knowledge and often has to explain why the U.S. position cannot be filled by a U.S. worker. Under the new “Putting American Workers First” doctrine, it is crucial that convincing argumentation and supporting documentation is provided to explain why the individual visa applicant is unique for the offered U.S. position and why a U.S. worker is not readily available for the position.Additionally, visa applicants with a criminal background (previous arrests, convictions, and/or citations short of pure traffic violations) should bring a Police Certificate to the interview and should expect that their application will be put into Administrative Processing (i.e. the Consulate requests approval of the visa issuance from the U.S. State Department), which will delay the visa issuance by several weeks.This increased scrutiny requires the prudent employer/visa applicant to plan visa applications far in advance in order to not be greatly affected by long delays and ensure visa issuance prior to the desired U.S. work start date or travel plans.ENSURING PROPER VISA ISSUANCE DATES AND DOCUMENTATION Since U.S. Consulates are issuing visa stamps with validity dates under the reciprocity rules, it is often confusing what the visa holder’s actual visa expiration date is.  All L-1 visa stamps should have a PED (Petition End Date) entry on the lower right corner which provides the actual visa expiration date. If no such PED is issued, the visa validity is based on statutory provisions. For instance, an L-1 visa is issued initially for a three-year duration and can then be extended in two-year increments until the statutory visa limitation is reached.Please also note that E visa stamps can be issued for a 4-5 year duration based on the country of nationality’s reciprocity rules, but the permissible stay upon EACH entry in this status is two years, and the E visa holder must download their I-94 Arrival/Departure record upon EACH entry into the U.S. in order to track their required exit date accordingly.

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This summary is intended to provide only general information on the legal matters addressed herein.  It is not a comprehensive analysis of these matters and should not be relied upon as legal advice.  If you have any questions about the matters covered in this summary, please contact:Hilde Holland:     hilde.holland@wg-law.com     Tel:  (212) 509 4715