California passes law stringently defining Independent Contractors after the Dynamex case

Last week California Governor Gavin Newsom signed a new legislation that codifies the test for determining when a worker is an independent contract as outlined in a California Supreme Court decision last year. This legislation, which goes into effect on January 1, 2020, is based on the stringent “ABC” test adopted by the California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles  case of 2018.

This legislation codifies that a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that the person is free from the control and direction of the hiring entity in connection with the performance of the work, the person performs work that is outside the usual course of the hiring entity’s business, and the person is customarily engaged in an independently established trade, occupation, or business.

Under this new law, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

As can be seen from the above, the new law lays down a very expansive definition of ‘employee’ by adopting the Dynamex case, whereby a worker is considered to be an independent contractor only if all three of the laid out factors are present.

The new legislation following the Dynamex ruling, marks a significant departure from the Borello multi-factor balancing test This could have far reaching impact on nearly every sector of the economy. The supporters of the legislation hail it as a landmark legislation to improve pay and benefits for low- and middle-wage workers, that could change the employment status of more than a million Californians including janitors, truckers, health care workers, construction workers, among others. This legislation would also cover gig economy workers such as software coders/ developers and other independent workers. The critics of the new legislation feel that the new classification test hampers the modern day employment models, especially in the Silicon Valley as it is out of tune with the flexibility and multiple freelance income opportunities that are available to independent software professionals.

Uber, Lyft and several other gig economy companies are finding ways to challenge the applicability of the tests on workers associated with them and are continuing with their lobbying campaign to keep them out of reach of the new legislation.

Exemptions

The following occupations have however, been provided exemption from the coverage of the new law and instead, the determination of employee or independent contractor status for individuals in those occupations shall be governed by Borello test.

(1) A person or organization who is licensed by the Department of Insurance

(2) A physician and surgeon, dentist, podiatrist, psychologist, or veterinarian licensed by the State of California

(3) An individual who holds an active license from the State of California and is practicing one of the following recognized professions: lawyer, architect, engineer, private investigator, or accountant.

(4) A securities broker-dealer or investment adviser or their agents and representatives

(5) Certain direct sales salesperson who perform services as a real estate, mineral, oil and gas, or cemetery broker or as a real estate, cemetery or direct sales salesperson, or a yacht broker or salesman.

(6) A commercial fisherman working on an American vessel

Severe criminal and civil penalties and fines

Employers not following the new law by mis-categorizing a worker as independent contractors, instead of as an employee could be subject to statutory fines and penalties under California Labor Code, EDD laws and California Franchise Tax board besides Internal Revenue Service as well.

Double Whammy for certain workers as well

Although the new law seems to be for the protection and benefit of workers by and large, as it provides them with employment law protection and benefits, for certain sales or field workers it may come as a disadvantage. This would be as as the JOBS Act 2017 removed the unreimbursed employment expense deduction for all employees. A lot of workers working purely on commission, cannot claim their legitimate travel, supplies, meals and many other out of pocket expenses if they are categorized as employees working on W2, but if they work as independent contractors, they could claim all such expenses while filing Schedule C for their tax returns as independent contractors.

 

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California shifts Sales Tax compliance responsibility on intermediaries – ‘Marketplace Facilitators’ instead of sellers beginning October 1, 2019

Beginning October 1, 2019, California joins those states that are looking to hold intermediaries and agents, or marketplace operators, or as they are technically called ‘marketplace facilitators’ responsible for collecting and remitting sales tax on behalf of all marketplace sellers.

The new law shifts the onus from ‘Marketplace seller’ to ‘Marketplace facilitator’, whereby the marketplace facilitator will be considered the seller and retailer for each sales facilitated through its marketplace. As a result, th Marketplace facilitator will be required to register with CDTFA, pay Sales Tax or collect and pay use tax on each retail sale facilitated by a marketplace seller through its marketplace on all retail sales for delivery to California customers facilitated through its marketplace. This new requirement is included in the Marketplace Facilitator Act, added by Assembly Bill 1471.

To be responsible under the new law, the Market place facilitator must actively sell tangible personal property in California, or be a retailer engaged in business in this state because they have a sufficient physical presence in California, such as a business location, sales representative, or inventory; or have an economic nexus with California. In the absence of physical presence in California, economic nexus threshold test is satisfied, if the total combined sales of tangible personal property for delivery in California by such marketplace facilitator, and all persons related to the retailer exceed $500,000 in the preceding or current calendar year.

Marketplace facilitator, in general, is any person who contracts with marketplace sellers to facilitate the sale of the marketplace sellers’ products through a marketplace operated by the person or a related person.

Specifically, “Marketplace facilitator” means a person who contracts with marketplace sellers and on their behalf or on is own behalf engages in:

  • Transmitting or otherwise communicating the offer or acceptance
  • Owning or operating the infrastructure, electronic or physical, or technology that brings buyers and sellers together.
  • Providing a virtual currency for transaction or Payment processing services.
  • Software development or R&D activities related to payment processing, fulfillment or storage or listing of products for sale.
  • Fulfillment or storage services.
  • Listing products for sale or Setting prices or Order taking.
  • Branding sales as those of the marketplace facilitator.
  • Providing customer service or accepting or assisting with returns or exchanges.

“Marketplace facilitator” however, does not include Newspapers, internet websites, and other entities that advertise tangible personal property for sale, that do not perform the functions listed earlier or a ‘Delivery network company’- a business entity that maintains an internet website or mobile application used to facilitate delivery services for the sale of local products.

It is interesting to note that the term “Marketplace” used in this context means a physical or electronic place, including, a store, booth, internet website, catalog, television or radio broadcast, or a dedicated sales software application, where a marketplace seller sells or offers for sale tangible personal property for delivery in this state.

Obligation of Marketplace Sellers selling through Market place facilitators

Beginning October 1, 2019, Marketplace sellers that sell tangible merchandise through a marketplace facilitator, such as an Internet website, may not be responsible for the sales or use tax on their marketplace sales for delivery to California customers. However, a marketplace seller is not necessarily relieved of its duty for Sales/ Use Tax, if it makes sales independent of Marketplace facilitator.

Background – Wayfair case

US Supreme Court’s decision in Wayfair vs. South Dakota in June 2018 has paved the way for more than 30 states to redefine the economic nexus for States to impose Sales Tax obligations on out of state businesses.  In the Wayfair case  the Supreme Court overruled the 1992 Quill case judgement which required physical presence of the out of state business to satisfy the nexus requirement, thereby holding that South Dakota State laws  imposing obligations on out of state sellers to comply with the State laws Tax laws even though they do not have physical presence in the state, does not violate the Commerce clause and Due process clause of the Constitution. In this landmark decision the Supreme Court ruled that the ‘physical presence rule’ is not a necessary interpretation of the requirement that a state tax must be “applied to an activ­ity with a substantial nexus with the taxing State”.  This case thereby affords greater latitude to the States to enforce their reach on certain out of state retailers selling to instate buyers.

Post Wayfair changes – Effective April 1, 2019 – Sales made to California customers:

After the Wayfair case decision, California has enacted changes whereby as of April 1, 2019, certain out-of-state retailers are required to register with the California Department of Tax and Fee Administration (CDTFA), collect California sales tax and remit taxes to the CDTFA regardless of having a physical presence in the state.

The new obligation would apply to out of state retailers who have more than $500,000 in annual sales to California customers within the preceding or current calendar year.

Change for In state businesses as well (Sales within a single District):

Beginning April 1, 2019, any retailer whose sales into a district exceed $500,000 in the preceding or current calendar year in any district, is considered to be engaged in business in that district and is required to collect that district ‘s use tax on sales made for delivery in that district.

Sales made in other states:

About 30 other states have passed laws post Wayfair decision imposing obligations on Out of State businesses to register, collect and deposit Sales tax with their State. Other state lawmakers are still studying the impact of Wayfair decision on their states and may pass similar laws soon.

Majority of the states have adopted the South Dakota threshold whereby, businesses with more than $100,000 in annual sales to customers in their state, or businesses with more than 200 sales transactions made to customers in their state within the preceding or current calendar year are covered by the obligation.

From April 1, 2019 California has New Use Tax Collection Requirements for In-State and Out-of-State Retailers

Effective from April 1, 2019, California has introduced new Sales Tax registration and collection requirements from out of state retailers post Wayfair case decision of the Supreme Court

Sales made to California customers:

As of April 1, 2019, certain out-of-state retailers are required to register with the California Department of Tax and Fee Administration (CDTFA), collect California sales tax and remit taxes to the CDTFA regardless of having a physical presence in the state.

Out of states businesses with more than $100,000 in annual sales from California, or businesses with more than 200 transactions in the state within the preceding or current calendar year would fall within the ambit on new requirements.

The new California law follows the June 2018 decision of the Supreme Court in South Dakota v. Wayfair, Inc wherein the Supreme Court overruled the 1992 Quill case judgement which required physical presence of the out of state business to satisfy the nexus requirement so as not to violate the Commerce clause and Due process clause of the Constitution. In this landmark decision the Supreme Court ruled that the ‘physical presence rule’ is not a necessary interpretation of the requirement that a state tax must be “applied to an activity with a substantial nexus with the taxing State” thereby affording greater latitude to the States to enforce their reach on certain out of state retainers selling to instate buyers.

In light of the freedom afforded by this judgment CDTFA Director Nick Maduros stated that “California will now require more out-of-state retailers to collect and remit taxes just as brick-and-mortar retailers have done for decades. With the Supreme Court ‘s decision in Wayfair, California is able to help level the playing field for California businesses.”

Change for in state businesses as well (Sales within a single District):

Beginning April 1, 2019, any retailer whose sales into a single district exceed $100,000 or who makes sales into a district in 200 or more transactions in the preceding or current calendar year will also considered to be engaged in business in that district and will be required to collect that district ‘s use tax on sales made for delivery in that district. This requirement will apply to both in-state and out-of-state retailers. Retailers will be required to report and pay any district tax to the CDTFA on their sales and use tax return.

Sales made in other states:

California retailers doing sales to customers in other states also need to be aware that about 30 other states have passed laws post Wayfair decision imposing similar obligations on Out of State businesses to register, collect and deposit Sales tax for sales made to buyers in their states. Many other states are still studying the implications of the Wayfair decision and may pass similar laws soon.

Majority of the states have adopted the South Dakota threshold of $100,000 in sales or over 200 transactions annually, but some states have different requirements

For 2019, IRS announces Inflation adjusted limits for various tax provisions

For 2019, IRS announces Inflation adjusted limits for various tax benefits, deductions, adjustments, exemptions, etc

The Internal Revenue Service has recently announced the tax year 2019 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes.

Tax Cuts and Jobs Act signed by President Trump last year had made major changes in various tax provisions including tax rates, deductions, benefits and adjustments. The current announcement applies the annual inflation adjustments to those tax changes for the year 2019. Revenue Procedure 2018-57 provides details about these annual adjustments.

The tax year 2019 adjustments generally are used on tax returns filed in 2020. The tax items for tax year 2019 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married filing jointly rises to $24,400 for tax year 2019, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,200 for 2019, up $200, and for heads of households, the standard deduction will be $18,350 for tax year 2019, up $350.
  • The personal exemption for tax year 2019 remains at 0, as it was for 2018, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
  • For tax year 2019, the top rate is 37 percent for individual single taxpayers with incomes greater than $510,300 ($612,350 for married couples filing jointly). The other rates are:
    • 35 percent, for incomes over $204,100 ($408,200 for married couples filing jointly);
    • 32 percent for incomes over $160,725 ($321,450 for married couples filing jointly);
    • 24 percent for incomes over $84,200 ($168,400 for married couples filing jointly);
    • 22 percent for incomes over $39,475 ($78,950 for married couples filing jointly);
    • 12 percent for incomes over $9,700 ($19,400 for married couples filing jointly).
    • The lowest rate is 10 percent for incomes of single individuals with incomes of $9,700 or less ($19,400 for married couples filing jointly).
  • For 2019, as in 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
  • The Alternative Minimum Tax exemption amount for tax year 2019 is $71,700 and begins to phase out at $510,300 ($111,700, for married couples filing jointly for whom the exemption begins to phase out at $1,020,600). The 2018 exemption amount was $70,300 and began to phase out at $500,000 ($109,400 for married couples filing jointly and began to phase out at $1 million).
  • The tax year 2019 maximum Earned Income Credit amount is $6,557 for taxpayers filing jointly who have three or more qualifying children, up from a total of $6,431 for tax year 2018. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
  • For tax year 2019, the monthly limitation for the qualified transportation fringe benefit is $265, as is the monthly limitation for qualified parking, up from $260 for tax year 2018.
  • For calendar year 2019, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is 0, per the Tax Cuts and Jobs act; for 2018 the amount was $695.
  • For the taxable years beginning in 2019, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,700, up $50 from the limit for 2018.
  • For tax year 2019, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,350, an increase of $50 from tax year 2018; but not more than $3,500, an increase of $50 from tax year 2018. For self-only coverage, the maximum out-of-pocket expense amount is $4,650, up $100 from 2018. For tax year 2019, participants with family coverage, the floor for the annual deductible is $4,650, up from $4,550 in 2018; however, the deductible cannot be more than $7,000, up $150 from the limit for tax year 2018. For family coverage, the out-of-pocket expense limit is $8,550 for tax year 2019, an increase of $150 from tax year 2018.
  • For tax year 2019, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $116,000, up from $114,000 for tax year 2018.
  • For tax year 2019, the foreign earned income exclusion is $105,900 up from $103,900 for tax year 2018.
  • Estates of decedents who die during 2019 have a basic exclusion amount of $11,400,000, up from a total of $11,180,000 for estates of decedents who died in 2018.
  • The annual exclusion for gifts is $15,000 for calendar year 2019, as it was for calendar year 2018.
  • The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $14,080, up from $13,810 for 2018.

Link for full details of Revenue Procedure 2018-57 are given in link below:

https://www.irs.gov/pub/irs-drop/rp-18-57.pdf

 

 

IRS reminds Taxpayers with expiring ITINs to submit renewal applications

IRS reminds Taxpayers with expiring ITINs to submit renewal applications

Individuals who are in the US on dependent visa, like H4, L2, F2, etc, may have an expiring Individual Taxpayer Identification Numbers (ITINs) for which they need to submit their renewal applications as soon as possible if they will have filing requirement in 2019, otherwise  processing of returns and refunds may be delayed in 2019.

ITINs are used by people who have tax filing requirements under U.S. law but are not eligible for a Social Security number. These include Spouses who file Joint returns as well as individual residents in the US who are claimed as dependents in the Tax returns should renew their ITINs. These individuals are mostly on H4, L2, F2 or other dependent visa status. But those who live outside the US need not renew them unless they anticipate being claimed for a tax benefit or if they file their own tax return. That’s because the tax reform law suspended the deduction for personal exemptions for tax years 2018 through 2025. Consequently, spouses or dependents outside the United States who would have been claimed for this personal exemption benefit and no other benefit do not need to renew their ITINs this year.

According to the IRS, Taxpayers with ITINs set to expire at the end of the year and who need to file a tax return in 2019 must submit a renewal application. These include ITINs with middle digits 73, 74, 75, 76, 77, 81 or 82 (for example: 9NN-73-NNNN) need to be renewed if the taxpayer will have a filing requirement in 2019. Likewise, ITINs with expired middle digits 71, 72, 78, 79 and 80 also need to be renewed if the taxpayer will have a filing requirement in 2019.

IRS requires such individuals with expiring ITINs to complete a Form W-7 and submit all required documentation. Although a tax return is normally attached to the Form W-7, a taxpayer is not required to attach a return to ITIN renewal applications. They may either mail the Form W-7, along with original identification documents or copies certified by the issuing agency, to the IRS or work with Certifying Acceptance Agents (CAAs) authorized by the IRS to help them apply for an ITIN.

Full details of IRS announcement are given in the link below:

https://www.irs.gov/newsroom/get-ready-for-taxes-renew-expiring-itins-now-to-file-a-return-next-year

IRS increases 401(k) limit to $19,000 and IRA limit to $6,000

Based on cost of living adjustments, for 2019 the IRS has announced increase in contribution limits for those who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan from $18,500 to $19,000. The catch-up contribution limit for employees aged 50 and over who participate in such plans remains unchanged at $6,000.

The limit on annual contributions to an IRA has been increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 remains $1,000.

The phase-out ranges for 2019, which applies when the taxpayer or, if married, either of the spouse is covered by a retirement plan at work will be as follows:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range has been raised to $64,000 to $74,000, up from $63,000 to $73,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range has been raised to $103,000 to $123,000, up from $101,000 to $121,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out has been raised to if the couple’s income between $193,000 and $203,000, up from $189,000 and $199,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

In respect of Roth IRA contributions, the income phase-out range has been increased to $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly (MFJ), the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return (MFS) who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

 

Full details of IRS Notice 2018-83 announcing 2019 Limitations are provided in the link below:

https://www.irs.gov/pub/irs-drop/n-18-83.pdf

 

Back taxes over $51,000 may now lead to denial or revocation of passport by IRS through State Department

IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015 require the IRS to notify the State Department of taxpayers seriously delinquent tax debt.  The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport or to even revoke their passport.

Taxpayers with a seriously delinquent tax debt are generally those who owe the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien or issued a levy.

Taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt by paying the tax debt in full, paying under an approved installment agreement, accepted offer in compromise or under an approved settlement with the Justice department or by having a pending collection due process appeal with levy. A passport will not be revoked after a request has been filed with the IRS for an installment agreement or if there is a pending offer in compromise with the IRS

A passport won’t be at risk under this program for any taxpayer who is in bankruptcy, or who is identified by the IRS as a victim of tax-related identity theft, or whose account the IRS has determined to be currently not collectible due to hardship or who is located within a federally declared disaster area.

IRS will postpone notifying the State Department and the individual’s passport will not be not subject to denial during the time such a delinquent taxpayer is serving in a combat zone.

 

Text of IRS bulletin 2018-3 – https://www.irs.gov/irb/2018-03_IRB

Startups can now claim R & D Tax credit by offsetting against Payroll Tax liability

Startups with qualifying research expenses have for the first time an additional option whereby they can choose to apply up to $250,000 of its research credit against its payroll tax liability. This new option is available to any eligible small business filing its 2016 federal income tax return this tax season. If, somehow, such a small business failed to choose this option while filing their 2016 Tax return, and still wishes to do so, it can still make the election by filing an amended return by Dec. 31, 2017. This new option was introduced through the PATH Act enacted in 2015

The option to elect the new payroll tax credit is especially beneficial for any eligible startup that has little or no income tax liability.

Key provisions of this new option are:

  • To qualify for the new option for the current tax-year, a business must have gross receipts of less than $5 million and must not have had gross receipts prior to 2012.
  • Such businesses can chose to apply upto $250,000 of its Research credit against the employer portion of Social Security Tax (FICA) for any calendar quarter.
  • Any amount of the payroll tax credit that exceeds the limitation for any calendar quarter could be carried to the succeeding calendar quarter and allowed as a payroll tax credit for such quarter.
  • Tax exempt organizations (Sec 501 entities) are not eligible for this benefit as they as are not qualified small businesses for the purpose.
  • The aggregate gross receipts of all members of a controlled group for a taxable year must be taken into account in determining whether the Gross Receipt rules of this notice are satisfied or not.
  • This payroll tax credit election cannot be made by taxpayer who has made such an election for 5 or more preceding taxable years.

To take advantage of this option, the qualified small business makes a payroll tax credit election in Form 6765 – Credit for Increasing Research Activities, in the portion relating to the payroll tax credit election, and attaching it to its timely filed (including extension) Tax  return  for the taxable year to which the election applies.

A qualified small business that elects to claim the payroll tax credit and files quarterly employment tax returns claims the payroll tax credit on its employment tax return for the first quarter that begins after it files the return reflecting the Tax credit election. This is done by filing Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities, and attaching the completed form to that employment tax return.

IRS Notice 2017-23 providing Interim guidance regarding this option is available at –

https://www.irs.gov/pub/irs-drop/n-17-23.pdf

 

 

USCIS announces significant reliefs For H1B/L-1 and other Nonimmigrant Workers

USCIS has announced major changes to employment based non immigrant and  immigrant visa programs for E-1, E-2, E-3, H-1B, H-1B1, L-1, O-1 or TN classification workers, aimed at improving the ability of U.S. employers to hire and retain high-skilled workers who are beneficiaries of approved employment-based immigrant visa petitions and are waiting to become lawful permanent residents, while increasing the ability of those workers to seek promotions, change employers, or pursue other employment options. In its Final Rule published on November 18, 2016, which will be effective from January 17, 2017, USCIS  made several changes, significant amongst these are as follows:

Retention of priority dates: Workers with approved Form I-140 petitions, will generally be allowed to retain their priority date as  long as the approval of the initial Form I-140 petition was not revoked  for fraud, willful misrepresentation of a material fact, the  invalidation or revocation of a labor certification, or material error.  The final rule provides that Form I-140 petitions that have been approved for 180 days or more would no longer  be subject to automatic revocation based solely on withdrawal by the  petitioner or the termination of the petitioner’s business.

60-day nonimmigrant grace periods: To further enhance job portability, the final rule establishes a grace period of up to 60 consecutive days for the E-1, E-2, E-3, H-1B, H-1B1, L-1, O-1 or TN classification workers, which will allow these high-skilled workers, including those whose employment ceases prior to the end of the petition validity period, to have their visa transferred to a new employer in the same visa classification.

10-day nonimmigrant grace periods: To promote stability and flexibility for the E-1, E-2, E-3, L-1, and TN classifications workers, the final rule provides two grace periods of up to 10 days, to allow an initial grace period of up to 10 days prior to the start of an authorized validity period, which provides nonimmigrants in the above classifications a reasonable amount of time to enter the United States and prepare to begin employment in the country. The rule also allows a second grace period of up to 10 days after the end of an authorized validity period, which provides a reasonable amount of time for such nonimmigrants to depart the United States or take other actions to extend, change, or otherwise maintain lawful status.

H-1B based on licensing: Where licensure is required to fully perform the duties of the relevant specialty occupation, the final regulations codify current DHS policy regarding exceptions to the requirement that makes the approval of an H-1B petition contingent upon the beneficiary’s licensure The final rule will generally allow for the temporary approval of an H-1B petition for an otherwise eligible unlicensed worker, if the petitioner can demonstrate that the worker is unable for certain technical reasons to obtain the required license before obtaining H-1B status. The final rule also clarifies the types of evidence that would need to be submitted to support approval of an H-1B petition on behalf of an unlicensed worker who will work in a state that allows the individual to be employed in the relevant occupation under the supervision of licensed senior or supervisory personnel

EAD – Employment Authorization Document : The rule automatically extends the employment authorization and validity of existing EADs issued to certain employment-eligible individuals for up to 180 days from the date of expiration, as long as a renewal application is filed before the expiry of previous EAD based on the same employment authorization category as the previously issued EAD (or the renewal application is for an individual approved for Temporary Protected Status -TPS) and the individual continues to be eligible for EAD beyond the expiration of the EAD.

Simultaneously the Federal Rule has eliminated the regulatory provision that requires USCIS to adjudicate the Form I-765, Application for Employment Authorization, within 90 days of filing and that authorizes interim EADs in cases where such adjudications are not conducted within the 90-day timeframe.

The final rule also clarifies method for determining which H-1B nonimmigrant workers are “cap-exempt” as a result of previously being counted against the cap  and the way in which H-1B nonimmigrant workers are counted against the annual H-1B numerical cap, including the method for calculating when these workers may access so-called remainder time (i.e., time when they were physically outside the United States), thus allowing them to use their full period of H-1B admission.

Full text of the USCIS announcement  in Federal Register  is available at

https://www.gpo.gov/fdsys/pkg/FR-2016-11-18/html/2016-27540.htm 

USCIS proposes new alternative to attract International Entrepreneurs to stay in the US

International entrepreneurs, who find find it difficult to satisy the EB5 criteria as they are unable to raise overseas investment, may soon be provided an alternative route. US Citizenship and Immigration Services (USCIS) is proposing a new rule which is aimed at expanding immigration options for foreign entrepreneurs who meet certain criteria for creating jobs, attracting investment and generating revenue in the U.S. This rule would allow certain international entrepreneurs to be considered for parole (temporary permission to be in the United States) so that they may start or scale their businesses here in the United States.

The proposed rule would allow the Department of Homeland Security (DHS) to use its existing discretionary statutory parole authority for entrepreneurs of startup entities whose stay in the United States would provide a significant public benefit through the substantial and demonstrated potential for rapid business growth and job creation.

Initial Approval: As per the proposed rule, an entrepreneur may be granted an initial stay of upto two years to oversee and grow their startup in the US. To establish that the enterpreneur qualifies for this rule, it must be established that the enterpreneur created a new entity within the last 3 years and is well-positioned to advance the entity’s business, by providing evidence that he or she possesses a significant (at least 15 percent) ownership interest in the entity at the time of adjudication of the initial grant of parole and  has an active and central role in the operations and future growth of the entity, such that his or her knowledge, skills, or experience would substantially assist the entity in conducting and growing its business in the United States.

To validate the entity’s substantial potential for rapid growth and job creation, the applicant may show that the entity has received significant investment of capital ($345,000 or more) from certain qualified U.S. investors with established records of successful investments, or that the start-up entity has received significant awards  or grants ($4100,000 or more) from Federal, State or local government entities with expertise in economic development, research and development, and/or job creation. Alternatively, an applicant who partially meets one or more of the above sub-criteria related to capital investment or government funding may be considered for parole under this rule if he or she provides additional evidence that his or her entry would provide a significant public benefit to the United States.

Extension: USCIS may grant a subsequent request for extension of parole (for up to three additional years) only if the entrepreneur and the startup entity continue to provide a significant public benefit as evidenced by substantial increases in capital investment, revenue or job creation. To establish this, the applicant would need to demonstrate that the entity continues to lawfully operate business in the United States and have substantial potential for rapid growth and job creation. Moreover, the applicant should continue to be an entrepreneur of the start-up entity who is well-positioned to advance the entity’s business by continuing to possess at least 10 percent ownership interest in the entity and continue to have an active and central role in the operations and future growth of the entity. For parole extension, the applicant needs to satisfy though evidence that the start-up entity received additional substantial investments of capital ($500,000 or more)  through qualified investments from U.S. investors or through significant awards or grants from government entities that regularly provide such funding to start-up entities; or a combination of both. Alternatively, the applicant may show that the start-up entity has generated substantial and rapidly increasing revenue in the United States  (At least $500,000 in annual revenue with average growth at leat 20 % annually), or by creating at least 10 full-time jobs for U.S. workers during the initial parole period.

As with initial parole, an applicant who partially meets one or more of the above sub-criteria related to capital investment or government funding may be considered for parole extension under this rule if he or she provides additional evidence that his or her entry would provide a significant public benefit to the United States.

 

The text of the proposed rule that was announced by US Department of Homeland Security on August 24, 2016 can be read on the link below:

https://www.uscis.gov/sites/default/files/USCIS/Laws/Articles/FR_2016-20663_793250_OFR.pdf