Subject: CND-US Special Edition on Visa and Tax, Wed Nov 27, 1991

From: [email-masked]
Date: Wed, 27 Nov 1991 18:06:18 -0500

+-+-+-+-+-+-+-+-+-+   C h i n a   N e w s   D i g e s t  +-+-+-+-+-+-+-+-+-+

                       (US Regional Special Edition)

                        Wednesday, November 27, 1991

                       === VISA & TAX INFORMATION ===

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| CND-US, normally 1 or 2 issues a week, is a supplement to CND-Global and |
| has  basically no overlap with the daily news.  CND-US provides in-depth |
| information concerning Chinese students/scholars in the United States.   |
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Table of Contents                                               No. of Lines

1.  FICA & FUTA TAX Liabilities for many F-1 & J-1 Visa Holders ......... 38
2.  New USIA  Rules on J-1 Visa ........................................ 166
3.  Congress Passes H-1B Amendments ..................................... 31
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1.  FICA & FUTA TAX Liabilities for many F-1 & J-1 Visa Holders ......... 38
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>From:   Bo Xiong <[email-masked]>
Source: INTER-L, Mon Nov 26, 1991

SUMMARY
Employers of certain foreign students and exchange visitors (and  other  J-1
categories) may need to take immediate action to retroactively withhold FICA
(social security) and pay FUTA (federal unemployment) taxes for those  indi-
viduals  described above who are considered U.S. residents for tax purposes.
Employers may wish to consider making one-time  payroll  adjustments  during
December  in  order to retroactively withhold these taxes (back to the start
of this year) before the calendar year 1991 payroll is closed.  Furthermore,
employers  would be required to carefully monitor tax residency status on an
on-going basis in order to comply with FICA and FUTA tax rules.

BACKGROUND
For simplicity, the remainder of this document will be devoted entirely to a
discussion  of the FICA provisions.  Based on language contained in Internal
Revenue Code section 7701(b), as enacted in the Tax Reform Act of 1984,  the
Treasury  Department issued Proposed Regulation section 31.3121 on September
10, 1987, (cited as 52 CFR 34358) which would eliminate the special FICA ex-
ception  for  F-1 and J-1 visa holders who are U.S. tax residents for income
tax purposes.  This regulation is expected to be finalized any  moment,  and
unless Treasury has a sudden change of heart, will be effective retroactive-
ly to years after December 31, 1984.

EXCEPTION
It would appear that educational institutions and  certain  other  organiza-
tions  would have the opportunity to utilize a different statutory provision
to continue to exempt both resident and nonresident  F-1  and  J-1  students
from FICA taxation.  This unique provision does not apply to J-1 non-student
visa holders or to most non-educational  institution  employers  of  foreign
students.

LINKAGE TO DEFINITION OF U.S. TAX RESIDENT
As mentioned above, IRC section 7701(b) defines  individuals  considered  as
U.S.  tax residents.  The Treasury Department issued proposed regulations to
clarify and in some cases "fill the gaps" in this  statute.   These  regula-
tions are also expected to be finalized any moment, and with respect to most
provisions, would be retroactive to years after December 31, 1984.

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2.  New USIA  Rules on J-1 Visa ........................................ 166
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>From:   Bo Xiong <[email-masked]>
Source: NAFSA Update No. 154, Mon, 25 Nov 1991

The United States Information Agency (USIA) published today two sets of pro-
posed  rules  addressing general provisions for the exchange visitor program
and trainee regulations.   Both notices appeared  in  the  Federal  Register
(pp.  59822 - 59837 and 59837 - 59642, respectively) and have 90 day comment
periods.

USIA's regulatory overhaul stems from a March 1990 report by the General Ac-
counting  Office (GAO) on the J program entitled "Inappropriate Uses of Edu-
cational and Cultural Exchange Visas." The GAO report  concludes  that  some
exchange activities administered under the J program are not consistent with
the 1961 Fulbright-Hays Act which created the temporary visa.  In  addition,
GAO  pointed out a number of management problems relating to USIA's adminis-
tration of the exchange visitor program.

In addition to the two proposed rules published today, at least  five  other
sets  of  proposed rules will be drafted by the Agency and published as pro-
posed rules in the coming months.  The regulations will address the  follow-
ing  areas:  1)  professors,  scholars, and researchers, 2) secondary school
student exchange programs, 3) university students, 4) camp  counselors,  and
5) sanctions and revocation procedures.

General Provisions (Rulemaking No. 5)

USIA has drafted new regulations addressing general provisions for which all
program sponsors will be required to comply.  The general provisions outline
sponsor obligations for reporting, insurance, reciprocity, designation,  and
orientation.  The general provisions also include definitions for all facets
of the exchange visitor program.

Reporting. Of  extreme concern  to NAFSA is  USIA's intent to greatly expand
the current level of  reporting  provided to the  Agency.  The new reporting
requirements  would  include  both ongoing  reporting and  annual reporting.
Under the first type, sponsors would  be required  to immediately  report to
the Agency a change 1) in organizational structure effecting citizenship re-
quirements, 2) in responsible officers, 3) of address or phone number, 4) in
accreditation, 5) of licensure, 6) in finances, and 7)  in the status of the
exchange  visitor.  In addition, sponsors would   be required to complete an
annual report which included  the following information: program  report and
evaluation,  reciprocity,  cross-cultural  activities, proof   of insurance,
IAP-66 usage, program transfers, exchange visitor change of visa status, and
program terminations.

Insurance. USIA is also hoping to expand  the  level  of  insurance  program
sponsors  would have to provide to all program participants.  Minimum levels
of coverage would be required to provide $50,000 per  accident  or  illness,
repatriation in the amount of $7,500, and expenses associated with the medi-
cal evacuation of the exchange visitor to his or her  home  country  in  the
amount of $10,000.  Insurance policies would not be permitted to exclude the
coverage of perils associated with an exchange  activity  (flight  training,
for  example).   Any  accompanying spouse and children would also have to be
covered, although the cost of this coverage could be paid by either  J-1  or
the program sponsor.

Designation. USIA is proposing to designate sponsors for 5 years and require
that they be redesignated after that time.  If implemented, USIA is planning
a two-year phase-in for redesignating existing programs.

In earlier informal comments to  the  Agency,  NAFSA  strongly  opposed  new
redesignation  procedures and noted that they would be needlessly burdensome
to both program sponsors and the Agency, especially if program sponsors com-
ply with the proposed annual reporting requirements.  NAFSA plans to suggest
to the Agency that redesignation be requested  by  USIA  on  a  case-by-case
basis, so as to allow program sponsors to keep their designations for an in-
definite period of time, as long as they are operating  within  the  regula-
tions and are reporting to USIA as required.

Orientation. All program sponsors would be required to provide  an  orienta-
tion  to program participants, according to the proposal.  In addition, USIA
would  recommend  that  dependent  orientation  be  provided  if   possible.
Currently, orientation is only required for teenage exchange visitors, prac-
tical trainees, participants in the summer student travel/work program,  and
international camp counselors.

Orientation would have to include information on the life and customs in the
United States and the local community, local community resources, a descrip-
tion of the program, rules that the exchange visitor and his or  her  family
will  be  required  to follow, address of the sponsor and the name and tele-
phone number of the responsible officer, address and telephone number of the
Exchange  Visitor  staff at USIA, and a copy of the Exchange Visitor program
brochure outlining relevant regulations.

Reciprocity.  According to the notice, USIA would require all program  spon-
sors  to provide for reciprocity in exchange programs to the fullest extent.
In situations where the opportunity for reciprocity is limited, the  Sponsor
would have to provide sufficient explanation to USIA.

Cross-cultural activity. Sponsors would also be required to provide  an  ex-
change  visitor participant with cross-cultural activities during his or her
stay in the United States.  USIA would define cross-cultural  activities  as
"activities  which  are designed to promote exposure and interchange between
exchange visitors and Americans."

Control of IAP-66 Form.  In an effort to regulate all  aspects  of  the  is-
suance of IAP-66 forms, USIA would require that all sponsors record and des-
troy damaged IAP-66 forms.  All forms issued would also have to  be  tracked
and recorded.

Eligible Participants. The general provisions  propose  to  restructure  the
current categories for participant eligibility.  USIA states that participa-
tion would be limited to the following  groups  of  individuals:   students,
scholars, trainees, teachers, professors, researchers, specialists, and oth-
er persons of similar description, including, but not limited  to,  interna-
tional visitors, government visitors, and camp counselors.

The Agency is also proposing to define a "student" as an individual pursuing
a  "recognized  full  course of study leading or culminating in the award of
either a diploma or degree from an accredited  educational  institution,  or
engaged  in full-time participation in a  prescribed course of study of less
than one year in duration sponsored and conducted by  an  accredited  educa-
tional  institution."   Full course of study is defined as undergraduate en-
rollment of not less than 12 semester hours and graduate enrollment  of  not
less  than  nine  (or the equivalent) academic credits.  The current regula-
tions do not specify the number of credit hours required by student partici-
pants.

USIA will accept comments on the general provisions until February 24, 1992.
Five  copies  of written comments should be sent to: Rulemaking No. 5, Merry
Lymn, Assistant General Counsel, Office of the General  Counsel,  Room  700,
U.S. Information Agency, 301 4th Street, SW, Washington, DC  20547.

Trainees (Rulemaking No. 6)

In its proposed trainee regulations, USIA has expressed their intent to dis-
tinguish  between  gainful employment and legitimate training.  To this end,
USIA would require sponsors of training programs  to  demonstrate  they  are
providing "bona fide" training programs.

Under the proposal, sponsors of training programs would  have  two  alterna-
tives  to  establish  that  they are providing bona fide training.  Training
programs could either be accredited by a recognized agency, or  otherwise  a
program  sponsor would be required to meet guidelines set forth by the Agen-
cy. (Flight training programs would have to be accredited  under  the  draft
proposal.)   Absent of accreditation, the Agency would consider the designa-
tion of training programs which 1) impart skills, knowledge,  and  competen-
cies  to  the  trainee, 2) provide a fixed schedule, defined objectives, and
periodic evaluation of trainees, 3) provide for continuous and direct super-
vision  of  the  trainee by the sponsor.  Sponsors would also be required to
describe, in general, the structure of the training course  and  the  skill,
knowledge, and competencies to be provided to the trainee in each segment of
the training program.

Sponsors would be permitted to designate a third party to conduct the train-
ing program.  If a third party were utilized, USIA would require the sponsor
and the third party to execute  a  written  agreement  outlining  the  third
party's obligations.

Comments on the trainee regulations will be also be accepted until  February
24,  1992.  Please submit five copies of all written comments to: Rulemaking
No. 6, Merry Lymn, Assistant General Counsel, Office of the General Counsel,
Room  700,  U.S.   Information  Agency,  301  4th Street, SW, Washington, DC
20547.

The remaining sets of rules (professors,  researchers,  and  scholars,  stu-
dents,  etc.)  are  scheduled to be published in the coming months.  The ex-
change community will have the opportunity to comment on each set of the re-
gulations  after they are published in proposed rule form.  NAFSA will alert
members of the publication of these regulations through the  Government  Af-
fairs Bulletin and Bitnet electronic mail.  After all sets of proposed regu-
lations are published, and after the Agency reviews comments received,  USIA
is  planning to publish final regulations for the J program sometime in late
spring or early summer.  For further information on this advocacy effort, or
if  you have any comments or suggestions, please contact your Government Re-
gulations Advisory Committee regional representative or the government rela-
tions staff at NAFSA.

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3.  Congress Passes H-1B Amendments ..................................... 31
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>From:   Bo Xiong <[email-masked]>
Source: NAFSA Update No. 156, Tue, 26 Nov 1991

As some of you may already know (see 11/26 message from Benjamin Milk, NAFSA
Central),  late last week the Senate put together an H-1B amendment package.
Although it does not contain the H-1C, it does address a number of our  con-
cerns.  This  amendment passed Congress early this morning as part of a much
larger immigration related bill which the President is expected to sign into
law.

The major changes in the H-1B program are the following: 1) removing the re-
quirement  that  U.S. workers be paid the same as the H-1Bs; 2) removing the
automatic debarment from filing for immigrant  and  nonimmigrant  categories
for one year except in cases of wilful violations of the labor condition ap-
plication (LCA); 3) providing a more precise definition of actual wage which
allows  employers  to make greater distinctions; 4) placing a seven day time
limit on the Department of Labor (DOL) processing of LCAs;  5)  making  pre-
vailing  wage  determinations based on the best information available at the
time of filing; and 6) mandating that DOL implement a final or interim final
rule on the H-1B changes by January 2, 1992.

In addition, the amendment is retroactively effective to October 1, 1991 and
thus  will override the current regulations immediately upon the President's
signature. According to one source, this means that DOL (and INS)  would  be
forced  to  implement some kind of interim operating instructions almost im-
mediately and then make final rules available by January 2 (or as soon there
after as bureaucratically possible). [N.B. Rumor has it that INS "H,L,O & P"
regulations were to be published this coming Monday, and the  permanent  em-
ployment regulations this Friday; it remains to be seen what impact the pas-
sage of this bill may have on the publication schedule]. As soon as we  know
how  this  all  shakes out in terms of 1) filing LCAs and I-129s etc. and 2)
commenting on DOL's interim final regulations, we will let you know.

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