University’s Payment & Reimbursement of Employee’s Green Card Fees
The income tax withholding provisions are set forth in IRC section 3401(a) which defines the term “wages” as all remuneration for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash except for statutory exceptions. For FICA purposes, IRC section 3121(a) defines wages in substantially the same manner.
Legal expenses and INS fees paid in connection with visa applications and visa renewals are primarily related to the business of the University as such visas (i.e. J, H, O, TN) are obtained by the University on behalf of the foreign individual for the express purpose of permitting that individual to enter the U.S. to work at the University.
In contrast, legal and other fees associated with securing status as a Lawful Permanent Resident (LPR) (obtaining a green card) primarily benefits the individual. LPR status is not employer specific and provides a personal long-term benefit to the individual to work for other employers. Even if an individual has legitimate University foreign travel needs, an employer specific visa, such as an H1, generally grants equivalent ability to re-enter the U.S. after traveling abroad on a level that is comparable to a green card.
The University may agree to sponsor and assist a recruit in obtaining LPR status. However, such agreement does not govern the taxability of providing such benefit. The provision of such benefit may be viewed as a recruiting expense of the University along the lines of granting a signing bonus. Signing bonuses are always wages. Thus, expenses and reimbursements designated for applying for and obtaining LPR status are considered as wages when paid on behalf of the recruit.
It is University practice to review employee expense payments and reimbursements on an audit basis. As a matter of policy, the University complies with federal and state tax regulations which govern expense reimbursements and/or payments with respect to tax reporting and withholding of any applicable payroll taxes, as well as the applicable federal laws and regulations governing U.S. Citizenship and Immigration.
To ensure that the University’s best interests are protected, all University sponsored employment-based applications discussed herein should be approved by The Office of General Counsel, the Coordinator for Nonresident Alien Employment. Before any employment-based petition is filed on behalf of the University, you should contact The Office of General Counsel (in the International Center) to discuss the proposal. The Office of General Counsel is authorized to advise University employees about H-1B, O-1, and TN visas, and LPR applications.
To the extent departments pay for any fees associated with applying for and obtaining LPR status, the amount of the benefit provided should be timely reported to the Payroll Department so that such benefit can be recorded as wages with appropriate employment taxes assessed and withheld. This is true in every case; the policy is the same whether the LPR fees are paid to the International Center, to a government entity, or to an outside law firm