U.S. Foundation Employment and Payment of Foreign Nationals and Students
Over the past decade or so, economies have become more global and the tools for communicating news from around the world have become more effective and timely in reporting global events via the internet, video and text messaging, Twitter, and Facebook, to name but a few of these tools. Foundations similarly are now faced with the challenges and opportunities of engaging an international community of stakeholders in their philanthropic endeavors. The relationships that a foundation forms with nonresidents and non-U.S. institutions have many potential implications for the foundation, the nonresident, and the non-U.S. institution. For purposes of this discussion, we will set aside the traditional issues faced by tax-exempt organizations, e.g., the private foundations and international grantmaking and the equivalency determination/expenditure responsibility paradigm. Instead, we will focus on some of the visa and immigration questions.
Question: The Foundation has a foreign office or affiliate (may be an independent charity) outside the United States. There is a particularly talented individual that we in the U.S. want to hire from the foreign office. What do we need to do?
Answer: The Foundation will need to obtain an employment visa for the individual question. There are multiple types of employment visas, and the Foundation will need to identify the one that best meets their needs and the needs of the individual in question. Essentially, U.S. immigration law divides into non-immigrant visas and immigrant visas. Non-immigrant visas generally include temporary workers; the types that many may be familiar with are H-1B visas for “(s)pecialty occupations in fields requiring highly specialized knowledge;” L visas for intracompany transferees; O visas, for “(f)oreign nationals with extraordinary ability in Sciences, Arts, Education, Business or Athletics”; TN visas, for the employment of professionals from Canada or Mexico pursuant to NAFTA, among others. The U.S. Citizenship and Immigration Service (USCIS) provides a good summary discussion of the processes associated with these types of non-immigrant worker visas. USCIS also provides extensive information on immigrant visas and becoming a permanent resident of the U.S.; that is a more detailed discussion than what can be covered here, and foundations will want to consult with immigration counsel if they need to address issues related to immigrant visas.
Question: Can a Foundation use a B-visa to employ a nonresident under the circumstances described above?
Answer: No. The B visa category is for temporary visitors for business (B-1) or pleasure (B-2). The “business” in this context is for the business of the individual’s employer from his/her home country. The State
Department Foreign Affairs Manual (FAM) makes clear that the B-1 visa type is not a visa that supports employment within the United States. Specifically, 9 FAM 41.31, note 7(a) provides: “the issuance of a B-1 visa is not intended for the purpose of obtaining and engaging in employment while in the United States.” The State Department advises consular officials that when assessing an individual’s application and eligibility for a B visa, the consular official must evaluate the individual’s demonstration that they:
(a) Have a residence in a foreign country, which they do not intend to abandon;
(b) Intend to enter the United States for a period of specifically limited duration; and
(c) Seek admission for the sole purpose of engaging in legitimate activities relating to business or pleasure.
See 9 FAM 41.31, note 1.
The applicant must demonstrate that he/she has significant ties abroad including “permanent employment, meaningful business or financial connections, close family ties, or social or cultural associations, which will indicate a strong inducement to return to the country of origin.” See 9 FAM 41.31, note 3.4. Further, applicants must show that they possess sufficient finances to cover the visit, in order to avoid the risk that they will obtain “unlawful employment.” See 9 FAM 41.31, note 4.2.
Question: If my foundation invites a nonresident to the U.S. to participate in a program or to speak, and we want to pay or reimburse them for travel expenses and accommodations, can we do this if they travel under a B visa?
Answer: It depends. If they are carrying a B-2 visa, the answer is no. B-2 visitors are not payment eligible, and payments or reimbursements to a B-2 visitor are not permitted; in-kind or indirect payments are similarly impermissible. If the visitor is carrying a B-1 visa, the answer is yes. Payments to a visitor in B-1 status are permitted, but employment compensation by a U.S. source (such as a U.S. foundation) is not:
A nonimmigrant in B-1 status may not receive a salary from a U.S. source for services rendered in connection with his or her activities in the United States. A U.S. source, however, may provide the alien with an expense allowance or reimbursement for expenses incidental to the temporary stay. Incidental expenses may not exceed the actual reasonable expenses the alien will incur in traveling to and from the event, together with living expenses the alien reasonably can be expected to incur for meals, lodging, laundry, and other basic services.
See 9 FAM 41, note 11.1.
Payments that constitute “academic honoraria” are also permitted, if certain specific criteria are met. See The American Competitiveness and Workforce Improvement Act of 1998; and 9 FAM 41, note 11.2.
Question: The Foundation is interested in hiring a nonresident student who is currently attending a U.S. college or university. Can we do this?
Answer: It depends. Temporary employment, employment during the school year, on-campus employment, off-campus employment, practical training opportunities, post-graduate employment, and other periods
of employment are tightly regulated under the U.S. immigration laws that apply to nonresident students. Further, close coordination with the student’s visa sponsoring college or university are required to ensure that the student does not violate his/her visa status; status violations may lead to deportation. For the undergraduate student population, most nonresident students are under F-1 visas. Types of possible employment are discussed on the State Dept’s Student Visas website, USCIS website, and the U.S. Immigration and Customs Enforcement (ICE) website. For organizations interested in establishing longer term programs and opportunities involving nonresident students, the NAFSA Association International Educators Advisers Manual is a highly recommended resource. Graduate and post-graduate nonresident students will either have a F-1 or J-1 visa. The J-visa is a visa issued under the Exchange Visitor Program. The ICE website is a good starting place for information about J-1 students. Detailed discussions of F-1 and J-1 student visas and their eligibility for employment and payment are discussed in the respective sections of the Foreign Affairs Manual, 9 FAM 41.61 (F-1 Students) and 9 FAM 41.62 (J-1 visitors).
Question: What are the foundation’s tax responsibilities as the payor?
Answer: In terms of the foundation’s tax responsibilities, the foundation’s role as payor renders the foundation responsible or liable for the payment of taxes in the form of withholding. See 26 U.S.C. 1461. Again, more than what can be discussed here, the extent of the withholding is determined under 26 U.S.C. 1441 and applicable guidance from the Internal Revenue Service. Foundations should consult with expert tax counsel to determine the appropriate rate of withholding, as well as the potential reduction or elimination of withholding based on any applicable tax treaty exemption the nonresident payee may be eligible to claim. Claims for exemptions under a U.S./Foreign Country tax treaty vary based on the country, the primary purpose of the visit, the visa category, prior visits (paid/unpaid), the amount of the proposed payment (monetary thresholds and caps may apply), tax residency status of the nonresident (application of savings clauses), and the chapter of the tax treaty that the applicant/activity fit under. State tax laws may also be implicated.
Conclusion
Among the various types of nonresident visitors and visa types, U.S. immigration law varies greatly about the payment eligibility and what elements of costs may be paid or reimbursed to a nonresident visitor. Close coordination with expert counsel is recommended. Note that noncompliance – paying visitors who are not payment eligible can have serious consequences for the nonresident. Some examples: unauthorized employment of a B-2 visitor will constitute a status violation. See 8 CFR 214.1(e); unauthorized employment of a F-1 student is also a status violation and is cause for deportation. See 8 CFR 214.2(f)(5)(1) and Ghorbani v INS, 686 F.2d 784 (9th Cir. 1982); and exchange visitors (J visas) who have engaged in unauthorized employment will also be deemed to be in violation of his or her program status and are subject to termination as participants in an exchange visitor program. See 9 FAM 41.62, note 8(b).
