U.S. Expats after paying FBAR Fines and OVDI Refugees
A few weeks ago I read Steinbeck’s novel “The Grapes of Wrath”. It takes place during the “great depression” of the 1930s. During this depression there were many bank foreclosures and real estate values fell. Although our current hardships are not as bad as the depression of the 30s, it is interesting that in some states, real estate values have fallen more than they did during the 30s. Some properties are simply being abandoned. Abandoned properties bring down the value of other properties in the neighborhood. The downward cycle continues and continues. Interestingly, the City of Cleveland, has started to simply demolish properties – the idea is that if the properties no longer exist, their existence will not bring down the values of surrounding properties. Real estate is a huge contributor to the overall economy.
Hence, as goes real estate, so goes the economy.
U.S. politicians recognize that a surplus of real estate and falling real estate prices present a major challenge to economic “turn around”. How does one get the real estate market to turn around? Answer: Let those “foreigners” bail the U.S.out.
Senator Charles Schumer notes that:
“Many people want to come and live in the United States,” said Sen. Charles Schumer (D-N.Y.), who introduced the legislation Thursday along with Sen. Mike Lee (R-Utah). “They will be here spending money and paying taxes, and the most important thing is they’ll sop up the extra supply of homes we have right now compared to demand, and that’s what’s dragging our economy down.”
There are two problems:
1. Finding buyers – why not look at buyers from outside the United States?
2. Finding buyers at the right price – why not require them to pay a minimum price in relation to appraised value? The downward pressure on prices must be reversed.
Consider the following discussion:
“The influence of foreign investors and their potential to help the housing market hasn’t been lost on legislators, it is reported that Senators are introducing a bill that would grant visas to any non-U.S. citizen who spends at least $500,000 on residential real estate in the United States, which they believe will help fuel demand.
“A new provision to an immigration bill already being considered by the U.S. Senate was proposed last week by Senators, Chuck Schumer of New York, and Mike Lee, of Utah that would grant residence visas to foreign buyers spending a minimum of $500,000 to buy residential property in the U.S.
The ‘Resident Visa’ provision to the immigration bill was written with the purpose of boosting and energizing the slow U.S. Housing market by encouraging foreigners to purchase U.S. real estate. If accepted, this provision would compliment other foreign visa actions proposed in the bill that would encourage more spending and capital investment by foreigners in the United States.
There are some stipulations. Here are some of the highlights:
At least $250,000 must be spent on a residence and the balance would be allowed for residential rental/investment properties.
Foreign buyers must pay for their purchases with cash, pay U.S. taxes and spend a minimum of 180 days in the U.S.
Foreign buyers granted visas would not be able to work in the U.S without obtaining a work visa via the normal and proper channels.
Foreign buyers would be able to bring their spouse and any children under the age of 18 with them.
The ‘Residence Visa’ would expire when the property/properties are sold.”
Tax Consequences of A Resident VISA
Current tax consequences
The most significant provision is that the buyers must “pay U.S. taxes”. In addition, it seems clear that these “new immigrants” would be subject to the FBAR and new FATCA provisions. The FBAR provisions have caused great difficulties for immigrants to the U.S.
Future Tax Consequences
What happens if the new immigrant ceases to live in the U.S.?
This could get very nasty. The act of giving up their “green card” means that they may have to pay an “exit tax” – 877A Tax Bomb For Expatriates – to the U.S. This (if the person has more than 2,000,000 in assets, could mean a huge tax payable to the U.S.)
Conclusion
My advice: If this bill becomes law, I would think very carefully about becoming a resident of the U.S.A. The IRS will be your new friend for life! As you know you must consider:
The IRS: Your Health, Your Wealth and Your life
Some additional articles on this issue are at:
