VISIT USA Act Gains More Bipartisan Support

The VISIT USA Act is gaining further bipartisan traction.  Congresswoman Mazie Hirono (D-HI) and Congressman David Dreier (R-CA) recently introduced the VISIT USA Act citing the need to boost tourism into the United States.

Here are some recent links regarding the VISIT USA Act on the House side:

Rep. Hirono's press release.

KHON 2 (Hawaii) cover the introduction of the bill.

Recent Articles on the VISIT-USA Act

A few recent articles regarding the VISIT-USA Act:

Sylvia Cochran gives a primer on the VISIT-USA Act

A survey by the Bank of China and the Hurun Report, which publishes luxury magazines and runs a research institute, found that 46 percent of Chinese with assets worth more than 10 million yuan ($1.6 million) were considering moving abroad, confirming our own assessment below.  Naturally,  the U.S. and Canada are the two most popular destinations.  


Greyhill Advisors believe that the impact of the VISIT-USA Act will be minimal

Joshua Kimura, Esq. can be reached at joshua.kimura@knchlaw.com

Will You Be My Neighbor? The Target Market for the VISIT-USA Act

When Sen. Charles Schumer (D-New York) and Sen. Mike Lee (R-Utah) introduced the VISIT-USA Act (S. 1746), the general consensus was that this bipartisan bill was hopefully one of several solutions Congress would roll out to give a much needed boost to the sagging housing market.  Modeled similarly after the EB-5 (where foreign nationals who invest or purchase a small business employing ten (10) U.S. citizens can gain a provisional green card), the VISIT-USA Act aims to lure wealthy foreigners with residential visas upon the purchase of $500,000 in residential real estate.

However, in order to prevent an influx of foreign workers competing against U.S. citizens in an already hyper-competitive job market, the residential visa that would be issued through the purchase of residential real estate (A minimum of $250,000 must be spent on a primary residence, the remainder rest can be spent however the buyer sees fit) comes with a host of restrictions:

• The residency visa issued will not allow the visa holder to work in the United States.  A separate work visa will need to be obtained in order to lawfully obtain employment.
• The residency visa will not put the foreign national on a path to citizenship.  
• The residential real estate (and accompanying taxes) must be purchased in cash.  No financing or home equity loans are allowed.
•   The holder of the residency visa will not be eligible for any federal benefits (Social Security, Medicare, Medicaid, etc).
• The holder of the residency will have to pass criminal/nationality background checks and will be required to renew the visa every three years.
• The resident holder will be required to reside at their residence at least 180 days out of year, making their foreign income eligible to be taxed by the Internal Revenue Service. 

It may come to no surprise that after reviewing the litany of restrictions that accompanies the proposed residential visa, coupled with the fact that the visa holder’s foreign based income would be eligible to be taxed by the I.R.S., the wealthy foreigner may think twice before assuming the white knight role that the housing market desperately needs.  Thus, this begs the question; which country has the ideal market that a simple residency visa would entice them to pay cash for homes and have their income taxed?  The answer is quite obvious.  The reason, however, is not as transparent. 

     

The Chinese Market  

Prior to the introduction of this bill, there is no denying that foreign nationals are snapping up residential real estate in large quantities.  According to the National Association of Realtors 2011 Report (released in May), “[i]nternational buyers accounted for around $82 billion in U.S. residential real-estate sales for the year ending in March, up from $66 billion during the previous year period.”  Of the $82 billion spent, China, along with China, Mexico, U.K. & India accounted for 53% percent of all transactions.

Additionally, there is no doubt that the Chinese market was specifically targeted by this bill.  The VISIT-USA Act has other provisions that specifically target easing tourist visa restrictions for Chinese nationals traveling to the U.S. because of the $6,000 Chinese nationals spend on average during their stay.  Yet, there is quite a difference between spending $6,000 while traveling abroad and spending $500,000 in residential real estate and paying taxes.  

The answer as to why the Chinese market would be open to such an expenditure is two-fold.  First, Chinese buyers, among others, would be able to take advantage of big declines in U.S. home prices and favorable foreign exchange rates.  This makes the residential real estate in the U.S. less expensive than comparable foreign properties in China.  The Chinese buyer could look at residential real estate in the U.S. as  a secure, long term investment that provides both rental value and a residency visa.  

    The second and more important reason, is that by purchasing residential real estate in the U.S., the Chinese buyer can now send his/her children to primary school in the U.S.  Currently, unless a Chinese national has a long term visa enabling them to reside in the U.S., the only opportunity for an under-18 year old student to attend a school in the U.S. is via an F-Visa.  An F-Visa recipient is only eligible for one year of high school and then must return to their country of origin.  Those who purchase their home under the proposed bill could sponsor their children to reside in the U.S. with them and allow their children to be educated from K-12 in the U.S.

     

    Therein lies the true value.  Obtaining the residency visa allows the Chinese buyer the flexibility and freedom to send their child to the U.S. at any point in their lives.  In the ultra-competitive Asian culture of education, where entrance exams are required to enter high school and most students attend “cram” schools to gain an edge over their peers, the ability to send a child to the U.S. for an indefinite amount of time is priceless.  It can be as simple as having their child reside in the U.S. each summer to learn how to speak English or as involved as having the child primarily educated in the U.S. from K-12.  Since residency, and not citizenship, is the determinate factor regarding access to public school education in the U.S., there is no doubt that competition amongst parents regarding their children’s education will be a powerful driving force in the Chinese market.

Joshua Kimura, Esq. can be reached at joshua.kimura@knchlaw.com