U.S. United States immigration options for investors
Unplanned Expatriation: Lawful Permanent Residents’ Deportation Risks for Filing U.S. Federal False Tax Returns
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. 
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.
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,
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.
“Expatriation” Implies Leaving the U.S., But Many More Want to Come to the U.S.: Tax Consequences
U.S. citizens and long-term residents who are considering renouncing their citizenship or abandoning their lawful permanent residency (“LPR”) are increasingly undertaking more sophisticated life and tax planning before “taking the plunge”!
Many (in my experience – all) of these “expatriates” eventually want to be able to visit the U.S. and in some cases possibly come back to live permanently. Many simply apply for and obtain a B1/B2 visa.
To appreciate how many more persons want to immigrate to the U.S. compared to emmigrate from it, see an earlier post: The Number of Citizens Leaving (Renouncing) Versus Coming (Naturalizing) is Just a Speck
This is the other “side of the coin” so to speak, since individuals contemplating coming to the U.S. often should undertake pre-immigration tax planning. One means for non-U.S. citizens to become LPRs and eventually U.S. citizens, is through the EB-5 visa program.
Immigration attorney Ms. Teodora Purcell has written prior guest posts, including: When is the loss of US nationality effective? [Guest Post from Immigration Lawyer]
The next post on this site will be a complete article by Ms. Teodora Purcell explaining in more detail the EB-5 visa program and recent developments.
As to the tax implications of immigration to the U.S. (as opposed to emigration from it), I wrote the tax chapter in the latest edition of the American Immigration Lawyers Association (“AILA’s) treatise – Immigration Options for Investors & Entrepreneurs US$199.
That treatise is heavily focused on “EB-5 investors” and the tax discussion is titled: Key U.S. Tax Considerations for EB-5 (& Other) Visa Applicants.
Ms. Teodora Purcell’s contact information is set out below:
Teodora Purcell | Attorney at Law
FRAGOMAN
11238 El Camino Real, Suite 100, San Diego, CA 92130, USA
Direct: +1 (858) 793-1600 ext. 52424 | Fax: +1 (858) 793-1600
TPurcell@Fragomen.com