Long-term Resident Starts When Conditional Green Card Issued, Not When Condition Removed

We do lots of expatriation work. We get a recurring question: how do you calculate whether an EB-5 investor is a long-term resident for exit tax purposes? Do you start from the date when the conditional green card is issued? Or when the condition is removed?

Answer: the date on which the individual was "admitted" to the United States (if coming from outside the United States) or the date on which the individual's status was "adjusted" (if present in the United States; the subject of a later Friday Edition). The date on which the condition was removed is irrelevant.

Common sense gives the answer. Proving it takes a long chain of authority, from the Internal Revenue Code (Title 26) to the Immigration and Nationality Act (Title 8) and back. Here is my attempt. I'm not entirely happy with it, but it's the best I can do right now.

Please, if you know immigration law, email me and help me tighten up the logic.

Tax law: "long-term resident" --> "lawful permanent resident"

Start with tax law, and in particular start with the expatriation tax provisions: IRC §§877 and 877A.

The exit tax rules of IRC §877A tell us to go to IRC §877(e)(2) to find the definition of "long-term resident." IRC §877A(g)(5) says:

IRC §877(e)(2) tells us there are two elements to being classified as a "long-term resident:" status and time.

Let's look at what it takes to be a lawful permanent resident. Then we will identify the starting date for being a lawful permanent resident.

Lawful permanent resident: go to immigration law

IRC §877(e)(1) and IRC §877A(g)(2)(B) use the words "lawful permanent resident of the United States (within the meaning of section 7701(b)(6))."

IRC §7701(b)(6)(A) tells us how "lawful permanent resident" status is created (emphasis added):

"Immigration laws" means Title 8, United States Code

The words "in accordance with the immigration laws" in IRC §7701(b)(6) send us to the "immigration laws."

I could find nothing in the Code or Regulations that defines "immigration laws" for Title 26 (Internal Revenue Code) purposes. The legislative history (the conference report and the Joint Committee's Blue Book) says nothing on the point.

Therefore, I invoke common sense as authority: "immigration law" in the Internal Revenue Code means everything found in the Immigration and Nationality Act, at Title 8, United States Code. If you make the leap with me, you will find that 8 U.S.C. §1101(a)(17) confirms common sense.

Immigration law and tax law: matchy-matchy (ish)

When we look at immigration law, we find nearly the same language as IRC §7701(b)(6)(A):

Tax law: IRC §7701(b)(6)(A):

Immigration law: 8 U.S.C. §1101(a)(20):

"Lawfully admitted for permanent residence" therefore exists for someone who:

• Is an "immigrant."
• Has been "lawfully accorded the privilege of residing permanently" in the United States.

An EB-5 investor is an immigrant

Aliens (noncitizens of the United States) are either "immigrant" or "nonimmigrant."

"Immigrant" is the remainder after you remove the listed nonimmigrant classes of aliens. 8 U.S.C. §1101(a)(15):

The presumption is that every alien (noncitizen) is an immigrant until proven to be a nonimmigrant. 8 U.S.C. §1184(b) says:

Each exception covers a nonimmigrant class. EB-5 is an immigrant class.

An EB-5 investor is an immigrant. 8 U.S.C. §1153(b)(5)(A), which creates the employment creation classification (commonly called "EB-5"), underscores this by making immigrant visas available "to qualified immigrants seeking to enter the United States" to invest and create jobs.

How to get lawfully admitted

This is the path for someone applying for an EB-5 visa from abroad. People already in the United States use a different path (adjustment of status).

If you want classification as an EB-5 investor, 8 U.S.C. §1154(a)(1)(H)(i) tells you to start with a petition:

The government approves the petition if it finds the facts true and the investor eligible. 8 U.S.C. §1154(b).

Getting the petition approved is just the first hurdle. Now you need a visa. Maybe Uncle Sam thinks you are a bad person. Maybe you are a stellar EB-5 investor and Uncle Sam loves you, but all of the available EB-5 visas have been taken, so no soup for you.

Let's assume the visa is issued. Now you have an immigrant visa. 8 U.S.C. §1101(a)(16):

Finally, the moment of truth: you enter the United States. You are admitted to the United States. 8 U.S.C. §1101(a)(13)(A):

Result: the investor has been admitted to the United States and is an immigrant.

"Admitted" includes the right of permanent residence

8 U.S.C. §1186b(f)(1) confirms the connection between the 8 U.S.C. §1153(b)(5) classification and permanent residence (emphasis added):

Congress here states that the 8 U.S.C. §1153(b)(5) classification (EB-5) produces "the status of an alien lawfully admitted for permanent residence." The condition ("create a bunch of jobs in the next two years or else") does not change the status. It is only a way of holding it.

The regulations name the moment: the investor "acquires conditional permanent residence through admission to the United States with an immigrant visa." 8 C.F.R. §216.2(a).

Therefore, we can say that an EB-5 investor admitted to the United States has the privilege of residing permanently in the United States.

The condition matters at the other end. If the investor fails the condition, the government can end his status. When that ends his tax status under IRC §7701(b)(6)(B) is a separate question.

Start the clock for "long-term resident"

Someone who holds the status of lawful permanent resident "in at least 8 taxable years during the period of 15 taxable years . . ." is a long-term resident. IRC §877(e)(2).

The EB-5 investor acquires lawful permanent resident status upon admission to the United States at the port of entry, without regard to the two-year condition imposed. (I assume that our friendly Federal friend at the airport acts "lawfully" when admitting him.) That's what I use as the starting date for calculating long-term resident status.