Access to professional services & related infrastructures
Expansive access to well-developed and regulated professional and business services and infrastructures typically required by a family office. A stable and robust banking system and access to national and global private banks. Robust client acceptance and anti-money laundering regulatory framework.
Access to talent & skilled professionals
Broad availability of highly skilled and experienced family office professionals across all regions of the country, especially in major cities. There are a number of well-established family office networks for family members and office executives to participate in. Some of the world's top business schools are based in the US and several have specific curriculums available related to Family Offices. These include Chicago Booth, Northwestern Kellogg, Harvard Business School, University of Pennsylvania Wharton and Stanford.
Regulatory framework / Legal structures
General
The law of the United States includes several levels of codified and uncodified forms of law. The U.S. Constitution is the nation’s fundamental law. Four examples of primary sources of law are at the state, local and federal levels are the Constitution, federal and state statutes, administrative regulations, and case law.-to name a few.
Family Offices
On June 22, 2011 the Commission adopted rule 202(a)(11)(G)-1 that defines ‘family offices’ to be excluded from regulation under the Investment Advisers Act of 1940.
Family offices that are excluded from Advisers Act regulation under the rule are any company that:
- Provides investment advice about securities only to ‘family clients’, as defined by the rule;
- Is wholly owned by “family clients” and is exclusively controlled by ‘family members’ and/or ‘family entities’, as defined by the rule; and
- Does not hold itself out to the public as an investment adviser.
Permissible ‘family clients’:
• Family members. Family members include all lineal descendants (including by adoption, stepchildren, foster children, and, in some cases, by legal guardianship) of a common ancestor (who is no more than 10 generations removed from the youngest generation of family members), and such lineal descendants’ spouses or spousal equivalents.
• Key employees. Key employees include: executive officers, directors, trustees, general partners or persons serving in a similar capacity for the family office or its affiliated family office; any other employee of the family office or its affiliated family office who, in connection with his or her regular duties, participates in the investment activities of the family office or affiliated family office, and has been performing such duties for the family office or affiliated family office, or substantially similar functions or duties for another company, for at least twelve months.
• Other family clients. Other family clients generally include: any non-profit or charitable organization funded exclusively by family clients; any estate of a family member, former family member, key employee, or subject to certain conditions, a former key employee; Certain family client trusts; and any company wholly-owned by, and operated for the sole benefit of, family clients.
In the US, almost every family office is unique and there are various legal structures available depending on the profile and objectives of the family/wealth holder.
Tax Regime
Individual
Tax rate: Progressive
Tax basis: World-wide assets
Wealth and/or inheritance taxes: Estate tax
Tax on Investments (Dividends, foreign, other): Yes
Tax on Real Estate (Capital gains etc): Yes
Other taxes not listed above: State and Local tax, Sales and Use tax, Real estate transfer tax in certain jurisdictions; Gift tax, etc. (there are multiple areas of US tax).
Corporates
Corporate Tax: Federal CIT 21%;
The Inflation Reduction Act (IRA) enacted a new corporate AMT, effective for tax years beginning after 2022, based on financial statement income (corporate alternative minimum tax or CAMT). The CAMT is a 15% minimum tax on adjusted financial statement income (AFSI) of C corporations. The CAMT increases a taxpayer’s tax to the extent that the tentative minimum tax exceeds regular tax plus base erosion and anti-abuse tax (BEAT).
Non-US corporation engaged in a US trade or business is taxed at a 21% US CIT rate on income from US sources effectively connected with that business (i.e., effectively connected income or ECI) for tax years beginning after 31 December 2017.
Certain US-source income (e.g. interest, dividends, and royalties) not effectively connected with a non-US corporation’s business continues to be taxed on a gross basis at 30%.
State CITs range from 1% to 12% (although some states impose no CIT) and are deductible expenses for federal CIT purposes (these rates may change with the proposed tax law revisions under the Biden administration).
Tax holidays: There are special rules for certain types of companies, e.g., Real Estate Investment Trust (“REIT”), Regulated Investment Companies (“RIC”) and small businesses which may be subject to meeting the requisite conditions to qualify for tax exemptions.
Tax benefits: Yes
E.g. Net operating losses ("NOL"s) generated in tax years ending after December 31, 2017 generally may not be carried back and must instead be carried forward indefinitely. However, for NOLs generated in tax years beginning after 31 December 2017, the NOL deduction is limited to 80% of taxable income (determined without regard to the deduction).
Other tax benefits for corporates: Depreciation and amortization, Depletion, Goodwill, Start-up expenses, Interest expense limitation, Bad debt, Charitable contributions, Employee benefit plans (pension plans and expenses), Foreign-derived intangible income (FDII), R&E expenditures.
Immigration rules / Investment and golden visa availability
The United States provides for immigrant visas based on family ties, employment, adoption, special immigrant categories, and the diversity visa. An application for an employment-based immigrant visa is considered if the applicant has the right combination of skills, education, and/or work experience. Upon approval, a green card is issued to the permanent resident. Investors can obtain an EB-5 immigrant visa by investing substantial capital to finance a business in the United States that will employ a minimum of 10 American workers. There have been two notable changes to the EB-5 program in 2021. First, the investment amount is under review following a June 2021 lawsuit. As of November 2021, the United States Citizenship and Immigration Service has stated that the minimum investment amount of $1 million and the minimum investment amount of $500k in a Targeted Employment Area continues to apply. This amount may change and should be reviewed in real-time. Second, the former EB-5 Immigrant Investor Regional Center Program expired on June 30, 2021. It is currently not an option that can be used to structure an investment. Individuals interested in pursuing an EB-5 immigrant visa should consult with a US immigration attorney to understand the current requirements given the many recent changes.
Cultural landscape, living standards and connectivity
The United States is a multicultural country founded on values such as democracy, freedom, individualism, equality and achievement as well as directness and assertiveness. English is the predominant language used in business. In terms of living standards, the US ranks 17th globally in 2023.
Connectivity: With major international airports in most states, the US is easy to reach from any destination in the world.
Reputation
The US ranked 24th in the 2022 Corruption Perception Index (CPI), two places up since 2021 and in the 1st place in the 2022 Financial Secrecy Index with a secrecy score of 67 out of 100 (up from 2nd place in 2020). The country accounts for over 25.8% of the global offshore financial services market.
The US ranked 25th in the Corporate Tax Haven Index 2021, with the country responsible for 1.2% of the world’s corporate tax abuse risks.
According to the Global Forum Annual Report 2022 on tax transparency and exchange of Information, the US secured an overall rating of “Largely Compliant” in the implementation of the exchange of information on request (EOIR) standards.
Economic and Political stability
The US ranked 9th in the IMD's 2023 World Competitiveness Index, up by one position from 2022.
According to the IMD report, the US's resilient domestic economy and robust international investments fueled its economic performance, coupled with its strong technological and scientific infrastructure, high-quality education and high productivity and efficiency levels. In 2023, the US ranked 2nd in economic performance, 6th in infrastructure, 14th in business efficiency and 25th in government efficiency – a three positions improvement from 2021.
