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The Immigration Reform and Control Act of 1986 and Tax Withholdings on Resident and Nonresident Aliens

by Neil Gibbs last modified Oct 03, 2007 11:24 AM

In Order to help ease navigation, this page has been divided into the following sections;

The Immigration Reform and Control Act of 1986 and the Tax Reform Act of 1986 established additional payroll/personnel document verification and information reporting requirements of all aliens in the University's employ.

The Immigration Reform and Control Act establishes controlled conditions under which all persons will be employed, thereby preventing employers from hiring illegal aliens. The law requires employers to do four things:

  1. Check documents establishing identity and eligibility to work for all employees newly hired after November 6, 1986.
  1. Properly complete an employment verification form.
  1. Retain verification forms for a specified period of time.
  1. Present verification forms upon request to an Immigration and Naturalization Service or Department of Labor officer.

The Tax Reform Act identifies specific written declarations required of nonresident aliens who claim exemption from withholding under an income tax treaty to which the United State is a party. These statements will vary considerably, depending upon the purpose for which the nonresident alien is present in the United States and the country from which he or she originates.

The University requires varying amount of information to administer the various tax regulations of federal, state, and municipal governments.

  1. The State Agency for Social Security mandates that employers may not compensate their respective employees until they have obtained an employee identification number (social security card).
  1. The Internal Revenue Service requires employees to provide a properly executed Employee’s Withholding Allowance Certificate, IRS Form W-4, before certain amounts of earned income can be exempted from graduated federal income tax withholdings. The Kentucky and Indiana Departments of Revenue have similar requirements.
  1. As indicated in this material, there are additional requirements based on whether an alien claims to be a resident or nonresident, type of vise, and country of origin.

THE IMMIGRATION REFORM AND CONTROL ACT OF 1986

The Immigration Reform and Control Act of 1986, commonly referred to as the Simpson-Mazzoli Immigration Act, became public law on November 6, 1986. The overall purpose of this immigration law, as it affects the University as an employer, is to prevent the employment of any alien not authorized to work in the United States.

Three major components of the new Immigration Reform and Control Act will dramatically affect the University and its employees. These provision are universal employee verification requirements, anti-discrimination provisions, and employer sanctions.

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EMPLOYEE VERIFICATION REQUIREMENTS

For any new employee hired after November 6, 1986, the employer is required to respectively check certain documents relating to identity and work authorization, and maintain on file a new form issued by the Immigration and Naturalization Service verifying that these documents have been checked. The law also provides civil fines for failure to keep the required records, and civil and criminal penalties for hiring illegal aliens.

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ANTI-DISCRIMINATION PROVISIONS

The new law contains an amendment called the "Frank Amendment", which prohibits an employer from discriminating against legal residents simply because they are not full-fledged citizens. An employer found to have discriminated can be ordered to hire the aggrieved person, and can be liable for back pay to that person as well as for a penalty of $1,000 for each individual discriminated against.

The reason for the universal requirements of verification and record-keeping is to answer some of the discrimination concerns raised by persons fearing that those who "looked foreign" would face discrimination by overly-cautious employers fearful of the law’s employer sanctions provision. The Frank Amendment provides additional tools to insure against such discrimination.

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EMPLOYER SANCTIONS

An employer determined by the Immigration and Naturalization Service to have knowingly hired an alien unauthorized to work in the United States, or continues to rehire such an alien after November 6, 1986 is subject to the following:

First violation—not less than $250 nor more than $2000 for each unauthorized alien; or,

Second violation—not less than $2000 nor more than $5000 for each unauthorized alien; or,

More than two violations—not less than $3000 nor more than $20,000 for each unauthorized alien.

The Act also provides criminal penalties for employers who engage in a pattern of violations. The criminal penalty is a fine of not more than $3,000 for each unauthorized alien, or a prison term of not more than six months, or both a fine and prison term.

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VERIFICATION AND RECORD-KEEPING REQUIREMENTS

The law contains verification and record-keeping requirements for all employers applying to all new employees. An employer who fails to comply with these requirements is in violation of the Act even if he hires no unauthorized aliens whatsoever.

For purposes of this procedure, the term "employer" will be interpreted as the University of Louisville which employs authorized "agents" such as deans, directors, and department heads who are delegated hiring authority, and their respective unit business managers who are charged with implementation responsibilities.

Employees Hired Before November 7, 1986

Employees hired before November 9, 1986 are exempt from the verification and record-keeping requirements of the law. Such employees will retain "grandfather status" through period of leave for study, illness, lay-off, pregnancy, and departmental transfers. However, this status is lost if the employee is terminated by the employer, unless the employee is reinstated due to wrongful termination.

Employees Hired Between November 7, 1986 and May 31, 1987

All employees hired after November 6, 1986 will be verified for work eligibility on an after-the-fact basis prior to September 1, 1987. Persons hired during this period who leave the University’s employ before June 1, 1987 are exempt from this verification requirement.

Employees Hired After May 31, 1987

Starting June 1, 1987, work eligibility for all employees will be verified at the time of hiring according to the following schedule:

If the employee is hire for less than a three-day period, the verification form must be completed by the employee and supporting documents inspected by the employer by the end of the employee’s first working day.

If the employee is hired for three days or more, the verification form must be completed by the employee on the first day of work and presented to the employer who will inspect the supporting documents within three business days.

Where an individual who is hired for three or more days is unable to provide the required document(s) within the time period required, the individual can still satisfy the requirement by presenting to the employer an receipt showing application for the document(s) within three days of the hire, so long as the document(s) are then presented within 21 days of the hire.

All Persons Hired After November 6, 1986

Documents presented by the individual for purposes of complying with the verification requirements of the Act will be photocopied and retained along with the Form I-9 in a separate file within the Employee Service Center. These documents will not be used for any purpose other than compliance with the Immigration Reform and Control Act. This information will be retained for three years or for one year past the end of the employment of the individual, whichever period is longer. If an individual is rehired for whom the University has on file a valid form executed within three years of the rehiring, a new form will not be completed.

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EMPLOYMENT AUTHORIZATION AND IDENTITY

Individuals must present and employers must verify documents which establish both identity and employment eligibility of the employee. The regulation specifies three categories of documents:

  1. Documents Establishing Both Identity and Employment Eligibility

Physically inspecting one of these documents and so indicating on the Employment Eligibility Verification Form will satisfy the employer’s verification responsibility. In this category are:

A United States Passport

A Certificate of United States Citizenship, INS Form N-580

A Certificate of Naturalization, INS Form N-550

A unexpired foreign passport with an unexpired stamp which reads "processed for I-551…" or which has attached a Form I-94 bearing the same name as the employment authorization stamp and the proposed employment is not in conflict with any restrictions or limitations identified on the Form I-94.

An Alien Registration Receipt Card, INS Form I-151, or Resident Alien, INS 551, provided that it contains a photograph of the bearer.

A Temporary Resident Card, INS Form I-688, or Employment Authorization Card, INS Form 688A, provided that it contains a photograph of the bearer.

  1. Documents Establishing Identity Only

If such a document is relied upon, the employer must also inspect a document from the list in the next category, documents establishing employment eligibility:

A state-issued driver’s license or identification card containing a photograph, or if the document does not contain a photograph, identifying information such as: name, date of birth, sex, height, color of eyes, and address.

A U.S. military identification card or draft record.

A school identification card with a photograph.

A voter’s registration card.

An identification card issued by a federal, state, or local government agency or entity.

A military dependent’s identification card.

Native American tribal documents.

A driver’s license issued by a Canadian government authority.

  1. Document Establishing Employment Eligibility Only

If such a document is relied upon, the employer must also inspect a document establishing identity form the list above:

A Social Security Card.

An original or certified copy of a birth certificate issued by a state or recognized subdivision of a state establishing birth in the state.

An unexpired Re-entry Permit, INS Form I-327.

An unexpired Refugee Travel document, INS Form I-571.

A Certificate of Birth issued by the Department of State, Form FS-545, or a Certificate of Birth Abroad issued by the Department of State, Form DS-1350.

An employment authorization document issued by the Immigration and Naturalization Service.

A Native American tribal document.

A United States Citizen Identification Card, INS Form I-197.

An Identification Card For The Use of Resident Citizen Of The United States, INS Form I-179.

  1. Minors Under Age 16

For individuals under age 16 and unable to produce the documents outlined previously, the following documents may be used to establish identity only:

A school record or report card.

A clinic, doctor, or hospital record.

A daycare or nursery school record.

Minors under the age of 16 who are unable to produce any of the document mentioned above are exempt from doing so if: 1) the minor’s parents or guardian completes the employee Section of the I-9 Form for the minor, writes in the employee signature space on the form the words "Minor Under Age 16," and completes the "Preparer/Translator Certification" section of the form; and 2) the employer writes in Section 2, the employer section of the I-9 in the space after "Document Identification #," the words "Minor Under Age 16".

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RESIDENT AND NONRESIDENT ALIENS

The immigration laws of the United States control the admission of aliens and the distribution of work privileges to those aliens who are qualified. A person is an "alien" for immigration purposes if he/she is a citizen of any country other than the United States, Guam, American Samoa, or the United States Virgin Islands.

Generally speaking, persons in the United States are either citizens or aliens. United States citizens are not required to carry evidence of citizenship such as birth or naturalization certificates; however, most persons, particularly those who speak English with significant difficulty, have some means of identification.

The vast majority of the aliens in the United States are here legally. Most aliens lawfully in the United States should have some kind of immigration document. Canadian citizens and certain other residents of Canada may be admitted for periods of up to one year for pleasure or business without the issuance of immigration documents' however, they usually will have in their possession evidence of Canadian citizenship or residence. Other aliens, such as government officials from Mexico or Canada, and employees of treaty organizations such as NATO, are often admitted without documents; however, they will have some form of official identification. Most aliens may be identified as either nonresident or resident.

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NONRESIDENT ALIENS—GENERAL INFORMATION

Nonresident aliens (nonimmigrant) are aliens admitted temporarily for specific purposes and definite periods of time. It is a requirement of U.S. immigration law that all nonimmigrant, except Canadians, must have a valid passport to enter and remain in the

United States. A passport is the document issued by the person's home country to identify the person as a citizen of that country, to permit him/her to travel abroad under the protection of the home country, and to permit his/her return to the home country. Passports must be extended, renewed, or reissued by the alien's home government.

The United States visa is the stamp placed by the United States consular officer on a page of the passport. It indicates that the consular officer has determined the holder is qualified to apply at a port of entry for admission into the U.S. in a particular immigration classification. The visa need be valid only at the time of entry into the United States; it need not remain valid while the alien remains here. Some visas are valid for several days, some for indefinite periods, but the expiration date of the visa has no bearing on the length of time the alien may remain in the United States.

At the port of entry, the alien must convince an immigration inspector that he/she is qualified to be admitted into the United States. If the immigration inspector's determination is positive, the alien is considered to have been "inspected," and, as admitted to the U.S., he/she will be issued Form I-94, Arrival/Departure Record, indicating the date and place of his/her admission to the U.S., the alien's immigration classification, and the date to which he/she is permitted to remain in the United States. If this person wishes to stay in the U.S. beyond that time, he/she must apply to the Immigration and Naturalization Service for an extension of stay.

Some aliens who are here on temporary visit may have a Form I-94 but no visa. Canadian or British subjects (persons who travel on a British Commonwealth country passport) who reside in Canada or Bermuda and are traveling only in the Western Hemisphere will not have a visa. Residents of the British, French, or Netherlands territory adjacent to the Caribbean Sea, Barbados, Grenada, Jamaica, or Trinidad and Tobago do not require a visa. Persons not required to have a visa are also not required to have a passport.

Nonresident aliens are generally required to carry the Arrival/Departure Record endorsed to show their status. The I-94 is the form which will describe accurately what is often inaccurately referred to as the alien's "visa." The alien's status and will have a number after it (i.e., B-2, F-1, H-3, J-1, etc.) with an expiration date. If "D/S" is indicated, the alien may remain in America for the "duration of status," or for an indefinite period, as long as the alien continues to comply with all other visa requirements.

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NONRESIDENT ALIENS—FOREIGN SCHOLARS

A foreign scholar is normally considered to be any alien who holds a nonimmigrant status and who is engaged in scholarly activity, such as teaching, conducting research, or gathering material for a book, at a university, college, research institute, or hospital, but who is not enrolled in any formal academic program.

The academic objectives of foreign scholars fall into a vast array of different categories, but when seen from the perspective of time and long-range plans, foreign scholars can be divided into four major types:

1. Scholars who are in the U.S. for a short visit of a few weeks or months and who've definite plans to leave the U.S. at the end of that time. Usually these scholars hold B-1 and B-2 status.

2. Scholars who are in the U.S. for a longer visit, i.e., more than a month or two but less than three years and who have definite plans to leave the U.S. at the end of their academic visits. Most scholars in this category hold J-1 status.

3. Scholars who are in the U.S. for a longer visit, as in (2), but who are considering the possibility of remaining in the U.S. for an indefinite period beyond their initial plans, either at the same institution or another one. Scholars in this category might hold H-1 or J-1 status.

4. Scholars who are in the U.S. with a definite intent to seek permanent residence and who have found an institution which is interested in offering them long-term employment and is assisting them in obtaining permanent residence. Such scholars must apply for immigrant status.

According to the Immigration and Naturalization Act, any alien who seeks to enter the United States is presumed to be intending immigration unless the alien can demonstrate that he/she fits into one of the nonimmigrant classifications defined in the law.

An alien who can demonstrate a clear intent to return to a residence abroad and who meets certain other conditions may qualify for a nonimmigrant visa. There are almost twenty types of nonimmigrant visas, but only a few of these are normally available to foreign scholars. Only those types of nonimmigrant most commonly encountered at the University are mentioned in this procedure. Additional information may be obtained by contacting the International Center, local office of the Immigration and Naturalization Service, or the Payroll Department.

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NONRESIDENT ALIENS—MAJOR FOREIGN SCHOLAR VISA CLASSIFICATIONS

B-1 – VISITOR FOR BUSINESS:

The B-1 visitor for business classification can be used by scholars planning to pay short visits to one or several campuses. It is not intended for use by a scholar accepting any type of formal academic appointment for a term or longer. Reimbursement is possible from a U.S. source for travel expenses and subsistence (per diem) only; no salary or honorarium is permitted. The business visitor may only be employed by a foreign employer and is not allowed to do work which can be done by a legal resident of this country.

B-2 – VISITOR FOR PLEASURE

The B-2 visitor for pleasure classification can be used by a scholar who is touring the United States but who also wishes to pay an academic visit to a U.S. campus during his/her stay in this country. If the alien indicates upon requesting a visa that he/she plans to combine an academic visit to the U.S. with sightseeing, he/she is likely to be given a "B-1/B-2" visa and be admitted to the U.S. in B-1/B-2 status, which does confer the

right to be reimbursed for travel and subsistence. An alien solely in B-2 status is not permitted to be reimbursed in any way from a U.S. source. The same comments made about honoraria (or other similar payments) to those in B-1 status apply fully to those in B-2 status. The visitor for pleasure may not work in the United States.

F-1 -- STUDENTS

An F-1 student is a person who has a residence in a foreign country, to which he/she plans to return, and who is coming to the United States temporarily and solely for the purpose of attending a school previously selected by him/her and approved by the Attorney General.

In order to apply for admission to the United States as an F-1 student, an alien must first apply for and be granted admission to the University. Once academic admission is granted, the University is required to then determine whether the student is academically, linguistically, and financially able to attend school and profit from the instruction available. An Immigration and Naturalization Service Form I-20, Certificate of Eligibility for F-1 Student Status for Academic and Language Students, completed by the University's foreign student coordinator, attests to this certification.

When the student receives Form I-20 from the University, he/she takes it, his/her passport, and evidence of the source and amount of financial support to the U.S. consulate which has jurisdiction over his/her place of residence. If the consular officer finds the applicant to be qualified, he will stamp a visa on a page of the applicant's passport. The student may then apply at a port of entry for admission to the United States.

A. Maintaining Status

In order to maintain status as an F-1 student, the alien must attend the school he/she used to gain admission to America. The student may not attend a different school unless he/she obtains Immigration and Naturalization Service permission. Except in special circumstances, permission will not be granted until the student has attended the authorized school for at least one academic term. He/she must be a full-time student during each of the regular semesters from September through May; attendance at summer sessions is not required. The student must carry a minimum of twelve credit hours each term.

B. Employment

An F-1 student is required to demonstrate full financial support in order to obtain an F-1 visa and be admitted to the U.S. as a student. Therefore, the assumption of the law is that the student will not be employed and thus take jobs away from U.S. workers or students. Exceptions to this policy are the following.

1. A student may be employed as a research assistant or teaching assistant or in connection with a fellowship without prior approval from anyone; such employment is considered a part of his/her educational program.

2. A student may be employed in other on-campus positions if such employment will not interfere with his/her ability to carry a full program of study and will not displace a U.S. worker.

3. A student may not work off-campus without prior Immigration Service approval. The student must also demonstrate that he/she has suffered an unforeseen change in financial circumstances which arose after admission to the United States and which makes it necessary for him/her to work to help to support himself/herself. Whether working on- or off-campus, the student may work a maximum of twenty hours per week while school is in session and full-time during vacation periods.

The F-1 student classification is normally used by foreign students enrolled in formal academic programs, but there are two instances in which a foreign student may work in this country after completing his/her studies in F-1 status:

1. Practical training. A foreign student who has just completed a degree in the U.S. may engage in either academic or non-academic employment for up to twelve months if the work is directly related to his/her field of study and if such employment is considered to be unavailable in his/her country. Approval of the Immigration and Naturalization Service is required.

2. Postdoctoral status. An alien who has completed a doctorate in the U.S. or abroad may continue in F-1 status or secure an F-1 visa to enter this country in order to engage in postdoctoral research or study. The position must be within the normal limits of postdoctoral research and thus could not be a regular staff position. Although there is no specified time limit for aliens in the F-1 postdoctoral category, it is assumed that no one in this status could get extensions for a total of more than two or three years, since it is rare that anyone is given a postdoctoral appointment for a longer span of time.

C. Dependents

Dependents of F-1 students (spouse and unmarried children only) are admitted to the United States in F-2 status. They are admitted for the purpose of accompanying the principal F-1 student to the U.S. F-2 dependents are not authorized to accept employment under any circumstances. They may attend school, full- or part-time, while retaining their F-2 status.

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H-1—TEMPORARY WORKER OF DISTINGUISHED MERIT OR ABILITY

The H-1 alien must be pursuing a scholarly or professional objective that is of a temporary nature, i.e., he/she cannot hold a permanent faculty or staff position (but may take the place of, for one or two years, an American holding a permanent faculty or staff position). Extensions of stay are usually available to an H-1 alien for up to three or four years. Requests for extensions beyond that period would bring into serious question the "temporary" aspect of his/her activities in this country. The Immigration and Naturalization Service generally only classifies graduates of foreign medical schools who are coming to teach or conduct research at a public or non-profit institution as H-1.

An alien with an H-1 classification is only authorized to work for the person, company, or institution which is providing sponsorship.

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J-1—EXCHANGE VISITOR STUDENTS

The exchange visitor classification is used for a variety of educational purposes. Under exchange visitor status, students, scholars, trainees, professors, researchers, and similar persons may come to the U.S. for temporary periods for the purpose of educational exchange under the sponsorship of an organization or institution which has previously been approved by the International Communication Agency as an exchange visitor program sponsor. Students may come to the U.S. in J-1 exchange visitor status if they are participants in a sponsored program (such as the Fulbright program) or under the sponsorship of their U.S. college or university, if it is designated as an approved exchange visitor program sponsor.

The basic document necessary for an alien to apply for a J-1 visa and J-1 status is the Form DS-2019 (formerly IAP-66), Certificate of Eligibility For Exchange Visitor (J-1) Status, issued by the University's foreign student coordinator. The applicant follows procedures similar to those for F-1 status in applying for a visa, entering the U.S., and maintaining status.

Students who are in J-1 status are subject to many of the same regulation, procedures and restrictions as are those in F-1 status, except for the following differences:

1. The J-1 student is considered a "sponsored" student and must have a sponsoring agency which may or may not provide financial support. His/her U.S. university may be that sponsoring agency for immigration purposes. If so, there exists a special relationship of sponsorship between the university and the student.

2. Sponsoring agencies have considerable authority to impose additional requirements on the student over and above those for F-1 students in matters such as definition of a full program of study, whether the student can change fields of study, extend his/her stay, or transfer to another school or sponsorship.

3. The sponsoring agency has the authority to grant off-campus work permission to the J-1 student without referring the matter to the Immigration and Naturalization Service if the sponsor determines that the employment is necessary because of an "urgent financial need which has arisen since acquiring exchange visitor status" and will not cause the student to fail to carry a full program of study.

4. J-1 students are eligible for up to eighteen months of practical training, as determined by the program sponsor, after completing their educational programs, compared to the maximum of twelve months which can be authorized for F-1 students.

5. The J-2 dependents of J-1 students can be authorized by the Immigration and Naturalization Service to accept employment if they can demonstrate that the employment is necessary for the support of the dependents and will not be used for the financial support of the J-1 student.

6. A J-1 student is not allowed to change his/her educational objective in the U.S. He/she may change a field of study or degree objective (with the sponsor's approval) but may not switch from one category of exchange visitor to another, i.e., from student to researcher or from student to professor.

7. Certain J-1 exchange visitors are required to live in their home countries for a period of two years after completing their exchange visitor programs in the U.S. before they are eligible to apply for immigrant status or for nonimmigrant status as temporary workers, trainees, or intra-company transferee's. The two-year home country requirement applies only to those exchange visitors who (1) are financially supported by the U.S. government or their home country; or (2) have skills which are needed in their home countries; or (3) are medical doctors who have graduated from a foreign medical school and have come to the U.S. to study or work in the field of medicine.

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NONRESIDENT ALIENS—IDENTIFICATION AND EMPLOYMENT REQUIREMENTS

The Immigration Act of 1986 requires employers to maintain paperwork affirming that all new hires have presented proof that they have the right to work in the United States, If the employee does not provide the required documents prior to the first day of work he/she must produce then no later than 72 hours after the employee start to work.

Prospective employees must furnish certain original documents (for photocopying) which establish both identity and employment authorization. The following single, or multiple combinations of, documents applicable to nonresident aliens are acceptable to the Immigration and Naturalization Service.

a. For establishing both identity and employment authorization: An unexpired foreign passport which reads "processed for I-551…" or has attached a Form I-94 with an employment authorization stamp.

b. For establishing only employment authorization:

An unexpired Re-entry Permit, INS Form I-327.

An unexpired Refugee Travel document, INS Form I-571.

An employment authorization document issued by the Immigration and Naturalization Service.

c. For establishing only identity:

A state-issued driver’s license or identification card containing a photograph, or if the document does not contain a photograph, identifying information such as: name, date of birth, sex, height, color of eyes, and address.

A driver’s license issued by a Canadian government authority.

The employee and employer must also complete an INS Form I-9, Employment Eligibility Verification, which must be signed by a University representative who attests to the employee’s eligibility for employment.

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NONRESIDENT ALIENS—INCOME TAX WITHHOLDING

For income tax purposes, all aliens are considered nonresident aliens unless they are treated as resident alien of the United States. A nonresident alien usually is subject to U.S. income tax only on income from sources within the United States, unlike resident aliens who are taxed on their worldwide income.

Only one personal exemption is allowed a nonresident alien individual who is not a resident of American Samoa, Canada, Mexico, Korea, or Japan. Alien individuals of these countries, as well as resident aliens, are allowed the same personal exemptions as U.S. citizens. Nonresident aliens may declare that they have established residence in the United States by providing IRS Form 1078, Certificate of Alien Claiming Residence in the United States, in duplicate to the Payroll Department.

Wages, salaries, and other compensation paid through the Payroll Department to nonresident aliens for services performed at/for the University of Louisville are subject to the same regular graduated withholding rates as remuneration paid to U.S. citizens unless the compensation is specifically exempted by an approved tax treaty agreement. The University will report these payments and any withheld tax on Form 1042S, Foreign Person's U.S. Source Income Subject to Withholding. Nonresident aliens who must file a U.S. Income tax return will use Form 1042S rather than Forms 1040EZ, 1040A, or 1040.

In some cases, a section of the Internal Revenue Code of a U.S. tax treaty provision will exclude certain payments to a nonresident alien from the taxable wage category. As such, these payments will not be subject to income tax withholding and the University will also report these payments on Form 1042S.

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NONRESIDENT ALIENS—TAX EXEMPTION PROVIDED BY TREATY OR CONVENTION

The United States has tax treaties or conventions with numerous countries under which citizens, and in some cases residents of those countries, are exempt from U.S. income tax on certain amounts received while they are temporarily in the United States. These foreign residents are required to notify the University that they are residents of a country with which the United States has an income tax convention and that they, therefore, qualify for reduced rates of, or total exemption from, income tax withholding.

To satisfy notification requirements, aliens claiming tax exemption under an approved tax treaty will provide IRS Form 8233, Exemption From Withholding on Compensation for Independent Personal Services of a Nonresident Alien Individual, to the Payroll Department by February 15 of the applicable tax year. Additionally, in certain instances an accompanying signed statement may also be required.

There are three primary categories under which aliens from tax treaty countries are physically present in the United States and at an educational institution.

A. Visitors on a Short Stay

Nonresident aliens from treaty countries who are in the U.S. for a short stay, and meet certain other requirements are able to treat their compensation as exempt from tax. Most tax treaties require that the nonresident alien claiming the exemption be present in the United States for a total of not more than 183 days during the tax year and that the compensation may not be more than a specific amount. An additional specifically-worded statement must accompany the submitted IRS Form 8233. (To access the proper statement, place the cursor on the appropriate country name.)

Country Maximum
Presence
In U.S.
Maximum
Amount of
Compensation
Armenia 183 days no limit
Austria 183 days $ 3,000
Azerbaijan 183 days no limit
Belarus 183 days no limit
Canada no limit $10,000
Denmark 90 days $ 3,000
Georgia 183 days no limit
Greece 180 days $10,000
Kyrgzystan 183 days no limit
Luxembourg 180 days $ 3,000
Moldava 183 days no limit
Sweden 90 days $ 3,000
Switzerland 183 days $10,000
Tajikistan 183 days no limit
Trinidad and Tobago 183 days $ 3,000
Turkmenistan 183 days no limit
Ukraine 183 days no limit
Uzbekistan 183 days no limit

B. Trainees, Students, and Apprentices ("F" Visa Holders)

Under certain circumstances, a limited amount of compensation received by students, trainees, and apprentices may be exempt from tax. For most treaty countries there is a 5-year, $2,000 per annum limitation. An additional specifically-worded statement must accompany the submitted IRS Form 8233. (To access the proper statement, place the cursor on the appropriate country name.)

Country Maximum
Presence
in U.S.
Maximum
Amount of
Compensation
Belgium 5 years $2,000
China, Peoples Republic none $5,000
Cyprus 5 years $2,000
Czech Republic 5 years $5,000
Egypt 5 years $3,000
France (Old) 5 years $2,000
Germany 4 years $5,000
Iceland 5 years $2,000
Indonesia 5 years $2,000
Japan 5 years $2,000
Korea 5 years $2,000
Morocco 5 years $2,000
Netherlands 5 years $2,000
Norway 5 years $2,000
Pakistan none $5,000
Philippines 5 years $3,000
Poland 5 years $2,000
Romania 5 years $2,000
Slovak Republic 5 years $5,000
Spain 5 years $5,000
Thailand 5 years $3,000
Trinidad and Tobago 5 years $2,000
Tunisia 5 years $4,000

C. Teachers, Professors, and Researchers ("J" Visa Holders)

Aliens who temporarily visit the United States for the primary purpose of teaching at a University are not subject to U.S. income tax on compensation received for teaching for the first two years after their last arrival in the United States. Many treaties also provide exemption for engaging in research. Generally, there is no limit as to the amount of compensation that may be earned in a calendar year. An additional specifically-worded statement must accompany the submitted IRS Form 8233. (To access the proper statement, place the cursor on the appropriate country name.)

Country Maximum
Presence
in U.S.
Maximum
Amount of
Compensation
Primary
Treaty
Purpose
Armenia 2 years no limit Teach, Rsch, Con
Austria 2 years no limit Teach, Rsch
Azerbaijan 2 years no limit Teach, Rsch, Con
Belarus 2 years no limit Teach, Rsch, Con
Belgium 2 years no limit Teach, Rsch
China, Peoples Republic 3 years no limit Teach, Rsch
Czech Republic 2 years no limit Teach, Rsch
Denmark 2 years no limit Teach
Egypt 2 years no limit Teach, Rsch
Germany 2 years no limit Teach, Rsch
Georgia 2 years no limit Teach, Rsch, Con
France 2 years no limit Teach, Rsch
France (Old) 2 years no limit Teach, Rsch
Greece 3 years no limit Teach
Hungary 2 years no limit Teach, Rsch
Iceland 2 years no limit Teach, Rsch
Indonesia 2 years no limit Teach, Rsch
India 2 years no limit Teach, Rsch
Ireland (Old) 2 years no limit Teach
Israel 2 years no limit Teach, Rsch
Italy 2 years no limit Teach, Rsch
Jamaica 2 years no limit Teach, Rsch
Japan 2 years no limit Teach, Rsch
Kazakhstan (Old) 2 years no limit Teach, Rsch, Con
Kyrgzystan 2 years no limit Teach, Rsch, Con
Korea 2 years no limit Teach, Rsch
Luxembourg 2 years no limit Teach, Rsch
Moldova 2 years no limit Teach, Rsch, Con
Netherlands 2 years no limit Teach, Rsch
Netherlands (Old) 2 years no limit Teach, Rsch
Norway 2 years no limit Teach, Rsch
Pakistan 2 years no limit Teach
Philippines 2 years no limit Teach, Rsch
Poland 2 years no limit Teach, Rsch
Portugal 2 years no limit Teach, Rsch
Romania 2 years no limit Teach, Rsch
Russia (Old) 2 years no limit Teach, Rsch, Con
Slovak Republic 2 years no limit Teach, Rsch
Sweden (Old) 2 years no limit Teach, Rsch
Switzerland (Old) 2 years no limit Teach
Tajikistan 2 years no limit Teach, Rsch, Con
Thailand 2 years no limit Teach, Rsch
Trinidad and Tobago 2 years no limit Teach, Rsch
Turkmenistan 2 years no limit Teach, Rsch, Con
United Kingdom 2 years no limit Teach, Rsch
Ukraine 2 years no limit Teach, Rsch, Con
Uzbekistan 2 years no limit Teach, Rsch, Con
Primary Treaty Purpose: Teach = Teaching;
Rsch = Research;
Con = Participating in Conferences

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NONRESIDENT ALIENS—CLAIMING TAX TREATY EXEMPTION

Nonresident aliens receiving compensation which is claimed to be exempt under a treaty must inform the payer of the grounds for their claim by submitting IRS Form 8233. The Form 8233 must contain sufficient facts to justify the claim for exemption. A separate Form 8233 must be filed for each taxable year.

The Form 8233 must contain or have attached certain representations based on the country under whose treaty the alien claims exemption. For most treaties, the alien must make representations about the date of his arrival in the United States. In many cases, whether the alien meets the residency and time limitations of the treaty is determined with reference to this date. In reference to this procedure, the date of the alien's arrival in the United States means the date of his/her last arrival in the United States before the beginning of study, teaching, research, or similar services for which exemption is claimed.

Tax exemption is not automatic. An alien's eligibility for a treaty exemption is a factual question to be determined under the circumstances of each case. Exemption will not commence until the Payroll Department, as payer, determines whether the alien has satisfied all existing Internal Revenue Service and Immigration and Naturalization Service document requirements.

When presented Form 8233 by the nonresident alien, the payer is required to examine it to determine to the payer's satisfaction that the exemption is warranted. If, based on the facts presented, the payer is satisfied, he accepts Form 8233 by making a certification, under penalties of perjury:

-- that the Form 8233 and any accompanying statements have been examined;

-- that the payer is satisfied that an exemption from withholding is warranted; and

-- that the payer does not know or have reason to know that the nonresident alien individual's compensation is not entitled to exemption, or that the eligibility of the nonresident alien individual's compensation for the exemption cannot be readily determined.

The payer is also required to forward Form 8233 within 5 days of acceptance to the Director, Foreign Operations District, Internal Revenue Service, 1325 K Street, N.W., Washington, DC 20225. The exemption from withholding becomes effective 10 days after the Form 8233 is mailed to the Internal Revenue Service.

If the nonresident alien individual's tax treaty exemption is based on a trainee, student, or apprentice ("F" visa) status, or a teacher, professor, or researcher ("J" visa) status, an accompanying statement based on the alien's visa status and country of residence must be attached to the Form 8233 when submitted to the Payroll Department. Please contact Payroll for the appropriate letter.

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RESIDENT ALIENS—GENERAL INFORMATION

Resident Aliens (immigrants) are persons who are admitted to the United States for the purpose of residing here permanently. They can be identified by their possession of a "green card." "Green card" is the term commonly applied to the card more properly called the Alien Registration Receipt Card, permanent resident card, or for I-151 or I-551. It identifies the alien as a permanent resident of the U.S. or an immigrant.

The "green card" was originally green in color, for several years was blue, and the current version is white and salmon in color. The term "green card" has stuck regardless of the actual color of the document. It is a laminated card 2-1/8" by 3-1/2" in size, and it carries a photograph of the alien, his date of admission to the United States as a permanent resident, and his alien registration number (an eight-digit number preceded by the letter A).

Immigrants may apply for U.S. citizenship after a period of five years residence in the U.S. (three years if they are married to a U.S. citizen), but they are not required to do so, and they may remain in the U.S. indefinitely as long as they retain a residence here and are not convicted of certain kinds of crimes which would make them subject to deportation

Refugees are persons who seek admission to the U.S. because they are unable or unwilling to return to their home country because of "persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion." A person seeking asylum is one who applies for refugee status from within the U.S. or at a port of entry or land border. After admission to the U.S. refugees are considered to be in temporary status for a period of one year, at which time they are converted to permanent resident status retroactively to the date of their entry to the U.S. or attainment of refugee status. During their one-year waiting period, refugees can be identified by their possession of a Form I-94, Arrival/Departure Record, which specifies refugee status. After that time they are permanent residents and can be identified by their possession of a "green card" or Alien Registration Receipt Card.

For most college or university purposes, immigrants and refugees can be treated much like U.S. citizens. Unlike F-1 students and J-1 exchange visitors they are eligible for federal financial aid, may be employed without restrictions of the immigration laws, and in most states can become residents for tuition purposes in public institutions. Immigrants may engage in employment without special permission from the Immigration and Naturalization Service.

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RESIDENT ALIENS—FOREIGN SCHOLARS

A scholar who is coming to the U.S. to take a permanent faculty position, or who has the intention to remain permanently in the U.S., should apply for the an immigrant visa. However, those eligible for immigrant visas or for adjustment of status in the U.S. to permanent resident status are limited to the following three types of persons:

-- Aliens who have family members who are U.S. citizens or permanent residents.

-- Refugees and applicants for asylum.

-- Aliens who qualify because of their occupational skills, specifically those who are "members of the professions" or who possess "exceptional ability in the sciences or the arts" (third preference) or persons who are "capable of performing specified skilled or unskilled labor, not of a temporary or seasonal nature, for which a shortage of employable and willing persons exists in the United States" (sixth preference). Foreign scholars who are offered permanent or long-term positions in academic institutions might qualify under this category as either third preference or sixth preference immigrants.

The efforts of a prospective employer are necessary for an alien to qualify as a third or sixth preference immigrant, and it is in this area that academic institutions become involved in applying for immigrant status for prospective faculty and staff members. There are three major steps in obtaining an immigrant visa:

1. Obtaining a Labor Certification

The first and most difficult requirement for an alien to qualify for third or sixth preference classification is that of a labor certification. A labor certification is a determination and statement by the U.S. Department of Labor (DOL) that there are no qualified U.S. workers (or equally qualified workers in the case of teaching faculty members) available for the employment and that the employment of an alien in a particular position will not adversely affect the wages and working conditions of other U.S. workers in the field.

The DOL requires elaborate procedures and documentation for labor certification applications. Applications by academic institutions will usually fall into one of the categories of (A) Teaching faculty members, (B) Aliens of exceptional ability, or (C) Other employees.

A. Teaching faculty members: In order to obtain a labor certification for a prospective teaching faculty member, the institution must demonstrate that the alien was selected as a result of a competitive recruitment and selection process and that the alien was found to be better qualified than any U.S. applicant for the position.

B. Aliens of exceptional ability: The DOL has determined that there is a shortage of qualified persons available in certain occupations. The most relevant occupation for academic institutions is that of "aliens of exceptional ability in the sciences or arts including college and university teachers of exceptional ability." In order to qualify, an alien must demonstrate that he is accorded "widespread acclaim and international recognition."

C. Other employees: If an academic institution wishes to apply for a labor certification for a prospective employee other than a teaching faculty member or a person who will qualify as being of exceptional ability, the institution must demonstrate that the alien is being offered wages and working conditions which are normal for the occupation and that there are no U.S. workers available who are even minimally qualified for the position. The alien must be the only qualified person available for the position.

2. Qualifying for Third or Sixth Preference

The next step is applying to the Immigration and Naturalization Service for classification as a third preference or sixth preference immigrant. Foreign scholars would normally qualify for either classification, but since sixth preference classification is currently "oversubscribed," third preference is the alternative usually selected. An alien himself or an agent acting in the alien's behalf (including the employer) can apply for third preference classification; an employer must apply for sixth preference classification on behalf of an alien.

3. Obtaining an Immigrant Visa or Adjusting Status

The third and final step in acquiring immigrant status is obtaining an immigrant visa and entering the U.S. as a permanent resident, or, if the alien is already in the U.S., applying for adjustment of status to that of a permanent resident. The alien who is outside the U.S. can apply to a U.S. consular officer for an immigrant visa. His family can apply for immigrant visas in the same classification as the principal alien. If the alien is found to be eligible for an immigrant visa in all respects, he and his family can be granted immigrant visas and proceed to the U.S. as immigrants.

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RESIDENT ALIENS—IMMIGRATION QUOTAS

The immigration law provides for a maximum of 270,000 immigrants per year (exclusive of immediate relatives, refugees, and certain special immigrants). The 270,000 annual limitations shared by the six preference classifications, each of which is assigned a certain percentage of the total. In addition, any one country can be allocated a maximum of 20,000 immigrant visas per year, and any one colony or dependency a maximum of 600 visas per year. Because of these limitations by preference and by country, not all persons who qualify for one of the preferences will be immediately eligible for an immigrant visa. In such a case, the preference category and/or the country maximum are said to be "over-subscribed."

Generally speaking, third preference immigrant visas have been and probably will continue to be immediately or quickly available to natives of all countries except China, India, Korea, Mexico, the Philippines, and most colonies, such as Hong Kong. Sixth preference immigration visas are not immediately available to natives of any country and are simply unavailable to natives of some countries because the 20,000 (or 600, in the case of colonies) maximum allocation is used up by higher preferences. Faculty members should consult the foreign student advisor for detailed information.

RESIDENT ALIENS—IDENTIFICATION AND EMPLOYMENT REQUIREMENTS

The Immigration Act of 1986 requires employers to maintain paperwork affirming that all new hires have presented proof that they have the right to work in the United States. If the employee does not provide the required documents prior to the first day of work, he/she must produce them no later than 72 hours after the employee starts to work.

Prospective employees must furnish certain original documents (for photocopying) which establishes both identity and employment authorization. The following single, or multiple combination of, documents applicable to resident aliens are acceptable to the Immigration and Naturalization Service.

A. For establishing both identity and employment authorization:

1. An Alien Registration Receipt Card, INS Form I-151, or Resident Alien INS Form 551, provided that is contains a photograph of the bearer.

2. A Temporary Resident Card, INS Form I-688, or Employment Authorization Card, INS Form I-688-A, provided that it contains a photograph of the bearer.

B. For establishing only employment authorization:

1. A social security card.

2. An unexpired Re-entry Permit, INS Form I-327.

3. An unexpired Refugee Travel Document, INS Form I-571.

4. An employment document issued by the INS.

C. For establishing only identity:

1. An original driver's license (provided it has the individual's photo and bears the person's full name, date of birth, height, weight, color of eyes, and residence address.)

2. A "non-driver's" license containing the same information.

3. A school identification card with a photograph.

4. An identification card issued by a federal, state, or local government agency or entity.

The employee and employer must also complete an INS Form I-9, Employment Eligibility Certification, which must be signed by a University representative who attests to the employee's eligibility for employment.

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RESIDENT ALIENS—INCOME TAX WITHHOLDING

For income tax purposes, a resident alien is subject to U.S. income tax on their world wide income, unlike nonresident aliens who are taxed only on income from sources within the United States. Resident aliens are allowed the same personal exemptions as U.S. citizens.

Wages, salaries, and other compensation paid through the Payroll Department to resident aliens for services performed at/for the University of Louisville are subject to the same regular graduated withholding rates as remuneration paid to U.S. citizens. The University will report these payments on IRS From W2, Wage and Tax Statement.

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Louisville, Ky. 40292

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Louisville, Ky. 40208-1707

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Louisville, Ky. 40208-1707

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Louisville, Ky. 40292

 
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