Tax Provision May Impede Aliens Seeking Legal Status

A little-noticed provision in the new tax law could hamper efforts to grant legal resident status to large numbers of illegal immigrants under the landmark immigration law passed last fall, advocates for the immigrants said Friday.

The tax law, also passed last year, requires anyone seeking permanent residence to certify that he has paid income taxes if any were due in the previous three years.

Advocates for the immigrants assert that this requirement will have a “chilling effect” on the immigration law because many illegal immigrants will refuse to come forward if they are liable for taxes.

Immigration experts estimate that as many as 30% of illegal immigrants have not paid federal taxes. “This portion of the undocumented (illegal) population is placed in serious jeopardy with respect to the legalization program,” said Charles Kamasaki, Washington-based director of policy analysis for the National Council of La Raza, a Latino rights organization.

The situation comprises competing interests. The Immigration and Naturalizaton Service wants to portray its legalization program as open and to show immigrants that it can be trusted. At the same time, the Internal Revenue Service wants to collect any taxes it is owed.

For their part, advocates for illegal immigrants acknowledged that the immigrants should not avoid paying taxes. However, they expressed skepticism about compliance with the tax provision, noting that the very status of illegal immigrants means that they have been trying to avoid a “paper trail,” including tax payments.

Joseph M. Trevino, executive director of the League of United Latin American Citizens, said that the immigrants are a “unique population.” Applying the tax requirement to them, he said, “would serve to undermine congressional intent” on the immigration law.

The immigration law prohibits the INS from sharing with the IRS any information gathered from people who apply for legal status. In the case of the tax provision, the immigrants must supply directly to the IRS information relating to their liability.

First Step to Citizenship

Under the immigration law, illegal immigrants who have lived in this country continuously starting before 1982 may seek temporary resident status, the first step toward citizenship; the INS will begin accepting applications in May.

Those granted temporary status then must wait 18 months before applying for permanent resident status. It is during this second step that the tax liability information would have to be provided.

Thus, Kamasaki and other advocates reason, many immigrants--not realizing that it is the second stage that is covered by the tax law--will not even seek temporary resident status.

Moreover, they say, if the tax provision is enforced, immigrants who have not paid taxes would face serious penalties and might be rendered ineligible for legal status.

Must Show Documents

To get legal status, immigrants must show documents--driver’s licenses, bills and employment records, for example--that prove they have been here since 1982. Virginia Lamp, labor relations attorney for the U.S. Chamber of Commerce, said that some employers among the chamber’s 180,000 members nationwide are “concerned that exposing records provides a paper trail that may expose them” to IRS scrutiny.

The tax law contains a loophole, of sorts, for the immigration law. It says that the Treasury secretary can create regulations to “exempt any class of individuals from the requirements” of the tax law if he determines that the requirement “is not necessary to carry out the purposes” of the provision.

At the INS and the IRS, officials said that they are aware of the conflict between the two laws and that they are working to resolve it, though both agencies have said that the immigration law offering amnesty does not mean that there will be tax amnesty as well.

Richard E. Norton, INS associate commissioner for examinations, noted that the Treasury secretary can grant an exemption to the tax reporting requirement and said that INS officials “would have to discuss this” with the Treasury Department.

Waiting for INS Action

At the IRS, spokesman Wilson Fadely said his agency is waiting for the INS to create its regulations before taking any action.

Both men predicted that the situation would be resolved satisfactorily.

“We feel confident that the needs of both laws can be addressed without jeopardizing any applicants for legalization,” Norton said.