immigration

Part II: Who is a “long-term” lawful permanent resident (“LPR”) and why does it matter?

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A post in August 2014 explained the basic rule of who is a  “long-term resident” as that technical term is defined for tax purposes in IRC Section 877 (e)(2).  There is much confusion about how the tax law defines a “lawful permanent resident” (“LPR”) versus Chart - USCs Who Renounce Compared to LPRs who Abandonhow immigration law defines what is almost the same concept.  The statutes are different and have definitions in two separate federal codes (Title 26, the federal tax provisions and Title 8, the immigration law provisions).

See   –

Who is a “long-term” lawful permanent resident (“LPR”) and why does it matter?

Posted on August 19, 2014

This follow-up comment is to highlight some key concepts about why it matters if you become a “long-term” resident as that term is defined in the tax law.

  • A LPR can reside for substantially shorter periods in the U.S. (shorter than the apparent 7 or 8 years identified in the statute), and still be a “long-term resident” per IRC Section 877 (e)(2) depending upon the facts of any particicular case.Table 4  Country of Brith of LPRs 2012

 

  • There are far more LPRs who abandon their status (formally) than U.S.  citizens who formally take the oath of renunciation.  See the table above reflecting those who have formally renounced U.S. citizenship versus those who have formally abandoned their LPR status.

 

  • Plenty of LPRs informally abandon their LPR status for immigration purposes by moving and living permanently outside the U.S.

 

 

  • There are plenty of timing issues for LPRs surrounding how and when they have “abandoned” their LPR status for purposes of IRC Section 877 (e)(2).  See –

Timing Issues for Lawful Permanent Residents (“LPR”) Who Never “Formally Abandoned” Their Green Card, Posted on August 15, 2015

 

 

 

Unplanned Expatriation: Lawful Permanent Residents’ Deportation Risks for Filing U.S. Federal False Tax Returns

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One sure way to “get expatriated” as a lawful permanent resident (even if that was not the plan) is to file a false federal tax return, statement or provide false information to the government.  U.S. citizens cannot be deported for filing false tax returns, due to Constitutional rights.  world-map.png

Kawashima vs. Holder, (2012), is a story of a Japanese family that lived legally in the U.S. with lawful permanent residency status.  According to the L.A. Times,

“Akio and Fukado Kawashima came to Southern California in 1984 as lawful Japanese immigrants determined to succeed in business. They operated popular sushi restaurants in Thousand Oaks and Tarzana and recently opened a new eatery in Encino.

But after they underreported their business income in 1991, they paid a hefty price. The Internal Revenue Service hit them with $245,000 in taxes and penalties. The couple pleaded guilty and paid in full. A decade later, the Immigration and Naturalization Service decided to deport them. . . “

The crucial mistake was the filing of a false return as defined under IRC Section 7206(1):

(1) Declaration under penalties of perjury . . . Willfully makes and subscribes any return, statement, or other document . . . made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter . . . “

The Supreme Court ruled in this case that the false return that generated a revenue loss of at least US$10,000 for the government was properly classified by the government as an “aggravated felony.”  In other words, the tax returns were materially false (which the taxpayers had plead to previously) and created an unpaid tax liability of at least US$10,000.  The Supreme Court cited the immigration law (Title 8) and found such an offense to be a violation of Section 1227(a)(2)(A)(iii) as an:

(iii) Aggravated felony

Any alien who is convicted of an aggravated felony at any time after admission is deportable.

The false tax return which created a tax liability of a relatively low threshold of US$10,000 therefore carries potentially sever consequences.Europe Map

See a prior post that briefly discusses IRC Section 7206(1), see, What could be the focal point of IRS Criminal Investigations of Former U.S. Citizens and Lawful Permanent Residents?

While most USCs residing overseas will never be concerned about deportation (which should generally not be available to the government, due to constitutional rights of the U.S. citizen) LPRs filing tax returns will indeed want to consider carefully the implications of ” . . . any [and all tax and other] return[s], statement[s], or other document[s] . . . ” submitted to the federal government.

Also, prior posts discussed the law and risks associated with filing or sending false documents, information or returns to the Internal Revenue Service (“IRS”) –

See,Take Caution when Completing a “Tax Organizer” Provided by Your Tax Return Preparer, posted July 19, 2014;

*Is the new government focus on U.S. citizens living outside the U.S. misguided or a glimpse at the new future?* posted March 6, 2014, Will the Justice Department and Criminal Investigation Division of the IRS Turn Their Sights on USCs or LPRs living Overseas? posted March 19, 2014,Asia Map - including Russia

The relevance of the Kawashima case to readers of this blog, is how a “long-term resident” may inadvertently find they will trigger the “mark-to-market” tax on their worldwide assets and later cause their U.S. beneficiaries to be subject to what is currently a 40% tax on the receipt of certain gifts and inheritances.  See, prior posts on LPR status – Who is a “long-term” lawful permanent resident (“LPR”) and why does it matter?, posted August 19, 2014.

Some prior news coverage of the Kawashima v. Holder case here:

Legal immigrants face deportation for filing false tax return

The Supreme Court rules against a couple who pleaded guilty and paid in full, saying the crime was an ‘aggravated felony’ subject to automatic deportation. Tax lawyers say the decision is ominous.

February 26, 2012|By David Savage and Catherine Saillant, Los Angeles Times