There’s No Business Like Show Business! – Nonimmigrant Options for Sports and Entertainment Professionals.

Congress created several unique nonimmigrant categories for artists, entertainers, and athletes coming to the U.S. to create, perform and compete. This article is an overview of the options available to these individuals to enter the U.S. temporarily, as well as other professionals working in the sports and entertainment industries. It also discusses the potential tax consequences of such options.

The O Visa Category

The O-1 visa category was created for individuals who have extraordinary ability in the sciences, arts, education, business, or athletics. An U.S. employer or agent must file the O-1 petition on behalf of a foreign national who is coming to the U.S. to continue to work/perform/ compete in their field of specialty. Additionally, a peer/labor/management group consultation regarding the nature of the proposed work and the foreign national’s qualifications is mandatory before an O petition can be approved.

To be eligible for O-1 classification as a professional of extraordinary ability, an individual must present evidence of their sustained national or international acclaim. Receipt of a major, internationally recognized award, such as an Olympic medal or a Grammy Award, satisfies this requirement. However, not everyone has to be a Frank Sinatra or Michael Jackson to enter on an O visa; in the absence of such a high honor, the beneficiary may satisfy this standard by documenting at least three of the following:

• Other national or international awards,
• experience judging the work/performance of others in the field;
• major contributions of original significance;
• the financial success of their work,
• praise of well-respected and well-known peers,
• published material in the media regarding their success,
• high salary/remuneration;
• membership in organizations requiring outstanding achievement;
• other comparable evidence.

We can work with O-1 beneficiaries to ensure that their assistants are also allowed to the United States to work for them in O-2 status.

The P Visa Category

The P visa category is for entertainment groups, individual athletes, athletic teams, artists participating in a cultural exchange program, and culturally unique artists. P visa applicants must have “a high level of achievement in the field evidenced by a degree of skill and recognition substantially above that ordinarily encountered, to the extent that such achievement is renowned, leading, or well known in more than one country.” Generally, eligibility for P status is easier to prove than “extraordinary ability” for O-1 classification.

Individual athletes must be performing at “an internationally recognized” level to be admitted in P-1 status, and athletic teams must be recognized internationally as outstanding. A tendered contract with a major U.S. sports league or team, or a tendered contract with an individual sport “commensurate with international recognition in that sport” is required evidence. In addition to the contract, an applicant must submit evidence of at least two of the following:

• Participation in a U.S. major league season
• Participation in international competition with a national team
• Participation in a prior U.S. university-level season in intercollegiate competition
• Statement from a major U.S. sports league official or the sport’s governing body detailing the alien’s or team’s international recognition
• Statement from the sports media or a recognized expert respecting international recognition
• International ranking
• Significant honors/awards in the sport

P-1 visas can be issued to entertainers coming to the U.S. to perform as members of an entertainment group that has been recognized internationally (national recognition can suffice in some circumstances) as outstanding in the discipline for a sustained and substantial period of time. An artistic group’s international recognition can be evidenced by documentation of the group’s nomination for or receipt of significant international awards or prizes for outstanding achievement in the field, or by a combination of evidence, which confirm a high level of acclaim.

P-2 visas are reserved for artists and entertainers coming to the U.S. to perform individually or as part of a group, pursuant to a reciprocal exchange program that provides for the temporary exchange of artists and entertainers.

The P-3 classification is reserved for culturally unique artists and entertainers, either individually or as a group, coming to the United States to develop, interpret, represent, coach, or teach their particular art or discipline.

U.S. Taxation of Foreign Artists Athletes and Entertainers

As a general rule all compensation for services performed in the United States is subject to U.S. taxation. Even if payment is made in foreign currency, from a foreign country, by a foreign payor, compensation allocable to U.S. workdays is U.S. source income, unless an exception applies.

Foreign artists, athletes and entertainers are subject to the same U.S. tax rules as other foreign nationals temporarily in the U.S. Many are unaware of the U.S. tax implications of their presence in the U.S. The IRS has published an IRS audit guide specific to foreign athletes and entertainers. In addition, the IRS issued a new set of regulations effective 2001, for payments to foreign persons. The withholding of tax at the source insures that foreign persons comply with their U.S. tax obligations. Unless an exception applies, the U. S. withholding tax is 30 percent. One exception is wages subject to payroll withholding. Both U. S. and foreign employers are required to withhold federal and state income taxes and social security and Medicare taxes on compensation paid for employment services in the U.S.

Pre-immigration Tax Planning

All pre-immigration tax planning ideas depend on the individual’s tax status at the time the idea is implemented. It is important to know how many days the individual may be present in the U.S. and still maintain nonresident status for the year. A key objective is for the foreign national to have the option to choose the most beneficial status, whether nonresident, part-year resident or full-year resident. A nonresident alien would be able to exclude from U.S. tax – the U.S.-paid income that is foreign-sourced. If the individual’s foreign residency status terminates upon the transfer to the U.S., the income will likely escape foreign tax. Thus, the income is potentially exempt from all taxes worldwide.

Foreign national entertainers who are due a bonus or deferred compensation payment attributable to services rendered outside the U.S. during the nonresident period should accelerate receipt prior to entering the U.S. or deferring receipt until after the residency period ends. The U.S. taxes on a cash basis. Therefore, if the foreign national is a resident, they will be subject to U.S. tax on distributions earned prior to coming to the U.S. This result can be a extremely onerous.

From a U.S. perspective, if an individual expects to become a U.S. resident as of the date of transfer, then all compensation and bonuses attributable to the nonresident period should generally be paid prior to arrival. However, if the individual expects to be a nonresident all year, then the income should be paid after arrival – with the possibility to escape both U.S. and foreign taxation.

Pre-immigration planning strategies must also be applied to personal and investment assets. Many countries do not tax gains from stock investments and other assets, if certain criteria are met. Investment portfolios and home country tax laws should be carefully reviewed to determine if it would be beneficial to recognize gains or losses prior to establishing U.S. tax residency.

Conclusion

Under U.S. immigration law, artists, entertainers, and athletes have unique opportunities to perform, compete, and work in the United States. Tax planning prior to seeking admission to the United States is critical to these individual’s ability to reap the maximum financial benefit from their work in the U.S. Greenberg Traurig’s Business Immigration Group offers premier immigration and tax planning services for foreign national artists, entertainers, and athletes, as well as other sports and entertainment professionals, who are exploring employment in the United States.

This article was excerpted form a longer piece on visa options for entertainers. For a copy of the entire article please e-mail mailto:imminfo@gtlaw.com

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