[Blogger's note: Whether by dint of nature or nurture, lawyers love to argue; immigration lawyers perhaps more so. Unlike our colleagues (outside of immigration practice) for whom sources of law are better defined, immigration attorneys can access a wider array of law and non-law sources with which to fashion our pro and con arguments.
As a change of pace from this blog's usual fare of criticizing immigration agencies and Congress, today we'll offer a PG-rated point/counterpoint with guest blogger, Karin Wolman, and me (Disclosure: Neither of us is depicted in the photo).
We debate the oft-posed question whether a foreign citizen while living in the United States and holding one of any number of categories of U.S. nonimmigrant status who are not expressly authorized to work can nonetheless be employed by and serve a foreign employer. This might, for example, include:
- a spouse on a dependent visa whose other half is lawfully employed on a work visa;
- a B-2 or WT (visa waiver) visitor for pleasure vacationing in the U.S. who must attend to emails sent by a customer of the visitor's foreign employer;
- a B-1 or WB (visa waiver) visitor for business who must assign or supervise work to be performed abroad;
- an F-1 student who is sent by her employer abroad to study for an MBA; or
- an H-1B work visa holder who (although authorized to work for a specific U.S. employer) is not expressly permitted to moonlight for an employer abroad.
The controversy arises because Congress has never bothered to define "employment" under the immigration laws, and the definitions of the term in immigration regulations, case law and non-binding policy guidance are incomplete or imprecise.
So you be the judge.]
Can I Work from Home for a Foreign Employer?
[Karin Wolman's answer]
May a foreign national without work-authorized visa status to work remotely from a home located in the United States for an employer located abroad? This question lies squarely at the intersection of immigration & tax law, and the short answer is no, except for nonimmigrants in the F-1 (Academic Students), J-1 (Exchange Visitors) & Q (Cultural Exchange Participants) visa categories.
May a foreign national without work-authorized visa status to work remotely from a home located in the United States for an employer located abroad? This question lies squarely at the intersection of immigration & tax law, and the short answer is no, except for F, J & Q nonimmigrants.
For the individual, the foremost reason why not is spelled out in Chapter 3 of IRS Publication 519, US Tax Guide for Aliens. Any income from services performed for a foreign employer by someone present in the United States is deemed “US source income” unless that income meets ALL THREE of the following conditions:
- total annual earnings from such services is less than $3,000;
- the nonresident alien is physically present in the United States for not more than 90 days in the year;
- the services are performed under contract with a nonresident alien individual, foreign partnership or foreign corporation.
This tax rule interacts with the visa rules in the following way: Many nonimmigrants, such as B-1/B-2 visitors, and certain dependent spouses of temporary workers, such as those in H-4 or O-3 status, are ineligible to apply for work authorization in the United States. For the H-4 or O-3 visa holder, here accompanying a spouse who is lawfully employed in the US, such a person is likely to be physically present in the United States for all or most of the year, rather than under 3 months. Their visa status does not permit them to earn any “US source income.” If they do earn any significant income from a foreign source while spending most of the year here, it will be considered “US source income” because they are located here, and it will be taxable here. From the immigration perspective, earning any US source income would be considered freelance “self-employment” (since there is no U.S. employer) and it would be considered a visa status violation. That income, revealed later on the couple’s US income tax return, could render the non-work-authorized spouse ineligible to adjust status to lawful permanent residence under Immigration and Nationality Act (INA) § 245(c).
There is one important carve-out for foreign students and exchange visitors present in the United States under F, J or Q nonimmigrant visa status. These nonimmigrants, including their spouses and children in a dependent visa classification, are permitted to exclude from their U.S. gross income any pay received from a foreign employer. This group includes a wide assortment of students, scholars, trainees, interns, teachers, professors, researchers and research assistants, or leaders in a field of specialized knowledge or skill. F, J & Q nonimmigrants and their dependents may work from home for a foreign employer, and are not considered to have earned any US source income by doing so.
The ramifications for the foreign employer are much more significant, and involve overlapping global mobility issues of tax, immigration, corporate, and employment laws. The foreign company must determine how to obtain the appropriate visa status for its worker so it can have an employee legally residing and working in the United States. This in turn will require the foreign company to have some type of corporate entity or branch office doing business in the United States. In addition to establishing a legal presence in the United States, the foreign company must identify what other taxes its U.S. entity may be subject to, in addition to payroll tax, how that will affect treatment of corporate income of the foreign entity, and whether they can avoid double-taxation by means of a tax treaty. The foreign employer must consider local employment and contract laws in the jurisdiction where the employee is located in the United States, as the employee’s physical location determines which laws apply.
*CAVEAT* I am an immigration attorney, not a tax attorney or accountant. Please seek advice on the tax implications of your specific situation from a qualified tax professional.
Can I Work from Home for a Foreign Employer?
[Angelo Paparelli's reply]
Can a nonimmigrant who lacks authorization by U.S. immigration authorities be employed in the U.S. to work from his or her home in the U.S. for a foreign employer abroad? My lawyerly answer is: It depends. The question is not one of tax law. The tax laws and immigration statutes have each been enacted for distinct purposes, and one legal regimen does not necessarily inform the other. Rather than taxation, the laws of employment and of immigration apply, as well as a subject of law study known as "conflicts of law."
Phrase the question thusly and the answer may well be different from the one Karin offers:
Does U.S. immigration law prohibit a foreign citizen from fulfilling an employment agreement with a company incorporated and doing business abroad?
Before answering, assume the agreement specifies that the required activities will involve creating and saving work product, through the use of a web browser in "the cloud," with the cloud's servers located on foreign soil.
Assume further that the agreement allows the foreign citizen to work from anywhere in the world, is made before the individual enters the U.S., and provides that salary payment shall be in a foreign (non-U.S.) currency with direct deposit into a foreign bank account and provides that the law of the foreign state and the courts of that state where the employer has its headquarters shall govern any disputes that may arise between employer and employee.
On these assumed facts, does the foreign employer or employee violate American immigration law if the employee fulfills his or her part of the bargain from a residence in the United States? My answer is: Probably not, because the mere fortuity that the work is performed from within the U.S. rather than in any other country is too slim a fact to give the U.S. under conflicts of law principles a legitimate interest in applying American law. After all, no American workers were harmed by the work performed under this contract.
As I read the INA, Congress has never expressly said that U.S. immigration law should be given extraterritorial effect. See EEOC v. Arabian American Oil Co., 499 U.S. 244, 111 S.Ct. 1227, 1230 (1991), in which the Supreme Court changed the longstanding presumption against the extraterritorial application of American law (unless a contrary intent appears) into a presumption against extraterritoriality (unless there is the affirmative intention of the Congress clearly expressed). To be sure, the U.S. immigration police would probably try to assert that a nonimmigrant who works from his U.S. home for a foreign employer on the facts I've posited has violated the immigration laws. But that doesn't mean the immigration cops would be right. I believe, nonetheless, that the federal judiciary would follow EEOC v. Arabian American Oil Co. and say that U.S. immigration law cannot be applied extraterritorially to prohibit that which is lawful on foreign soil.
[Karin Wolman's retort]
I fall unequivocally on the "unauthorized employment" side: The salary paid for the employment is active, earned income characterized by a combination of three factors -- provision of services for hire by the foreign national + physical presence in the US that is not brief nor intermittent + U.S. source income in exchange for provision of those services.
[Angelo Paparelli's rejoinder]
The real question then is not whether a foreign employer may employ a foreign citizen working in her American home without a work visa but WWTCD (What would the courts do)?