|
An alien will be treated as
being present in the United States
on any day if he or she is physically present in the United States
at any time during such day. However, exceptions to this rule exist for
residents of Canada and Mexico who commute daily to employment in the United
States, individuals who are present in the United States less than 24 hours
while in transit between two points outside of the United States, and
individuals who were unable to leave the United States because of medical
conditions that arose while the individuals were present in the United
States.
Exceptions
to Substantial Presence
There
are two main exceptions to the substantial presence test: the
exempt-individual exception and the closer-connection-to-a-foreign-country
exception.
Under the
exempt-individual exception, an alien will not be treated as being present in
the United States
on any day in which the alien is considered an exempt individual. Except as
noted below, an exempt individual is anyone temporarily present in the United States as a foreign government-related
individual, a teacher or trainee who holds a “J” or “Q”
visa, a student holding either an “F,” “J,” “M,”
or “Q” visa, or a professional athlete temporarily in the United States
to compete in a charitable sports event. A foreign government-related
individual will remain a nonresident alien regardless of how long he or she
resides in the United
States. The law, however, provides time
limits for teachers, trainees, or students. A teacher or trainee will not be
treated as an exempt individual for the current year if, for any two of the
last six calendar years, such person was previously considered an exempt
teacher, trainee, or student. In certain cases, this period is extended to
four of the last six calendar years. Similarly, the exemption for students is
generally limited to students who have not been present in the United States
for more than five calendar years as a student, teacher, or trainee. However,
an alien may continue to be exempt as a student beyond the fifth year if the
student can satisfy the IRS that he or she has substantially complied with
the terms of the student visa and does not intend to permanently reside in
the United States.
Under the
closer-connection-to-a-foreign-country exception, an alien who would
otherwise meet the substantial presence test is treated as not meeting the
test for the current calendar year if:
- The alien is present in the United States for fewer than
183 days during the current year;
- The alien maintains a tax home in a foreign
country during the current year; and
- The alien has a closer connection during the
current year to a single foreign country in which he or she maintains a
tax home than to the United
States.
An alien may generally
establish that his or her tax home is in a foreign country by showing that
his or her principal place of business and/or abode are located in such
foreign country. The determination of whether the alien has a closer
connection to such foreign country will generally be made by weighing the
individual’s contacts with the United States against those with
the foreign country. Both the tax-home and closer-connection determinations
are factual issues and are therefore subject to some degree of uncertainty.
An alien should thus rely on the closer-connection-to-a-foreign-country
exception only when none of the other exceptions applies. Further, this
exception to the substantial presence test will not apply for any year during
which the individual has an application pending for adjustment to permanent
resident status or has taken other affirmative steps to apply for status as a
lawful permanent resident of the United States.
Dual Status Aliens
It is possible for an alien to be both a
nonresident alien and a resident alien during the same tax year. This dual
status usually occurs in the year in which a foreign citizen arrives in or
departs from the United
States. The U.S.
residency starting and ending dates depend on whether the individual
qualifies as a U.S.
resident under the lawful permanent resident test or the substantial presence
test, or both. The U.S. residency starting date for an alien who meets only
the lawful permanent resident test is the first day during the calendar year
in which the alien is physically present in the United States as a lawful
permanent resident (i.e., with a valid greencard). The residency starting
date for an individual qualifying as a U.S.
resident under the substantial presence test is generally the first day
during the year in which the individual is physically present in the United States.
Individuals who qualify under the substantial presence test may qualify for a
nominal presence exception, which allows an individual to be present in the
United States for short periods of up to 10 days in total (for example, for
business or house-hunting trips) without starting his or her U.S. residency
for tax purposes.
Dual status may also occur during the
individual’s last year of U.S. residency. An alien who
qualifies as a U.S.
resident under the lawful permanent resident test, generally, will cease to
be a U.S.
resident on the day his or her status as a lawful permanent resident is
officially terminated. An alien who meets the substantial presence test will
generally not be treated as a U.S.
resident during the part of the year following the individual’s last
day of physical presence in the United States. Subsequent short
periods (up to 10 days in total) of presence in the United States may be disregarded.
An individual will be treated as a nonresident for the latter part of the
year if such individual has a closer connection to a foreign country than to
the United States during that part of the year, the individual maintains a
tax home in the foreign country for the remainder of the year, and the
individual is not a U.S. resident at any time during the next calendar year.
No-Lapse
Rule
A “no-lapse” rule will apply
for aliens who were U.S.
residents for any part of two consecutive years. An alien who was a U.S. resident during any part of the preceding
calendar year and who is a U.S.
resident for any part of the current year will be considered to be taxable as
a resident at the beginning of the current year. Similarly, an alien who is a
U.S. resident for any part
of the current year and who is also a U.S. resident for any part of the
following year (regardless of whether the individual has a closer connection
with a foreign country) will be taxable as a resident through the end of the
current year.
Treaty
Rules
The rules for determining U.S.
residency do not override tax treaty residency rules. Thus, if an alien is a
U.S. resident under the Internal Revenue Code (I.R.C.) but is treated as a
resident of a treaty country under the tie-breaker provisions of an income
tax treaty, the alien may elect to be treated as a nonresident of the United
States for matters within the scope of the treaty. (See Chapter
6 for a discussion of tax treaty benefits.)
Immigration Laws and Visas
A nonresident alien who wishes to work or
do business in the United States
must consider the immigration laws of the United States. The Immigration
and Nationality Act contains the rules relating to the entry of aliens and is
administered by the Department of Homeland Security (DHS) (through its
bureau, U.S. Citizen and Immigration Services (USCIS)), and by the Department
of State (through U.S.
embassies and consulates abroad). The general rules applicable to nonresident
aliens who wish to do business in the United States are briefly
discussed below. As the rules in
this area are complex and involve non-tax legal issues, individuals should
consult with immigration counsel to determine the appropriate course of
action for their particular circumstances.
An “alien” under the
immigration laws is any person who is not a citizen or national of the United States.
A national of the United States
is a person who, although not a U.S.
citizen, owes permanent allegiance to the United States. Immigrants are
aliens who seek to enter the United
States on a permanent basis, while
non-immigrants seek admittance on a temporary basis. Certain numerical
limitations applicable to immigrants do not apply to non-immigrants. In
preparing for a journey to the United States,
an alien, if not exempt from the visa requirement, should apply abroad to a U.S.
consular official for an appropriate visa. A visa may not be granted until
satisfactory evidence is submitted to show that the alien will be able to
proceed to the United
States. This includes assurance that the
alien will obtain any exit permits and visas that may be needed for transit
to the port of embarkation.
Set forth below is a partial listing of the
visa classifications for non-immigrants. (For further information, visit the
visas Web page for the U.S. Citizenship and Immigration Services at http://www.uscis.gov.)
“A” visas apply to foreign
government officials, such as ambassadors, public ministers, or diplomatic or
consular officers, and their immediate families. This visa classification
also applies, upon the basis of reciprocity, to certain other officials and
employees of foreign governments, as well as to the attendants and personal
employees of these officials.
“B” visas are granted to aliens
having residence in foreign countries that they do not intend to abandon and
who are visiting the United
States temporarily for business or
pleasure. The B-l visa is assigned to temporary visitors for business, and
the holder thereof may engage in legitimate commercial or professional
activities; however, such holders may not engage in purely local employment
or labor for hire. These B-1 visas are generally valid for periods not
exceeding one year. The B-2 visa is a tourist visa and is to be used for
pleasure trips. It is generally valid for a minimum of six months but not
more than one year.
“E” visas are granted to
non-immigrant treaty-traders and treaty-investors. These are aliens who enter
the United States to carry on substantial trade between the United States and
the foreign state of which they are nationals, or who enter the United States
to develop and direct an enterprise in which an alien has invested or is
actively in the process of investing a substantial amount of capital pursuant
to a treaty of friendship, commerce, and navigation. Such visas are also
applicable to the spouses and unmarried children under age 21 accompanying
the treaty-trader or treaty-investor.
“F” visas generally apply to
alien students, their spouses, and their children, and are generally granted
to non-immigrant students enrolled in U.S. colleges, universities,
seminaries, language training programs, etc.
“G” visas are generally granted
to certain representatives of international organizations and members of
their immediate families. Aliens holding G visas generally must be employed
by the foreign government entity or the international organization sponsoring
their assignments to the United
States.
“H” visas apply to temporary
workers or trainees who are generally authorized to come to the United States
temporarily to perform services or labor for, or to receive training from,
certain employers. H visas also apply to aliens of distinguished merit and
ability in the fields of arts, entertainment, athletics, and fashion
modeling.
“J” visas are granted to alien
students, scholars, trainees, teachers, professors, or others of similar
description, and their spouses and children for the purpose of teaching,
instructing, lecturing, studying, observing, etc. J visas generally apply to
exchange aliens who have acquired exchange-visitor status under the U.S.
Information and Education Exchange Act.
“L” visas are designed to
enable firms to transfer alien employees to the United
States for continued employment in the United States
by the same or an affiliated enterprise. The alien must have been employed
continuously for one year by a firm, corporation, or other legal entity, or
an affiliate or subsidiary thereof, and must serve in a managerial or
executive capacity or possess specialized knowledge. A recipient of an L visa
may be admitted for an initial period of three years and may be granted
extensions until the duties are completed. The DHS and the Department of
State, however, may restrict renewals. The holder of an L visa is permitted
to have his or her spouse and unmarried children join him or her in the United States.
“M” visas apply to aliens,
their spouses, and their minor children who temporarily enter the United
States solely for the purpose of pursuing a full course of study at an
established vocational or other recognized non-academic institution (other
than in a language training program).
“O” visas are granted to aliens
with extraordinary ability in the sciences, arts, education, business, or
athletics which has been demonstrated by sustained national or international
acclaim who seek to enter the United States to continue work in the area of
their extraordinary ability. “O” visas may also be granted to their
spouses; their children; and limited assistants.
“P” visas apply to alien
artists, entertainers, or athletes who seek to enter the United States solely for the
purpose of performing as such; their spouses; their children; and certain
other aliens who are integral to such performances.
“Q” visas apply to aliens
having residence in a foreign country, which they have no intention of
abandoning, who are coming temporarily (for a period not to exceed 15 months)
to the United States as participants in an international cultural exchange
program for the purpose of providing practical training, employment, and the
sharing of the history, culture, and traditions of the country of the aliens’
nationality and who will be employed under the same wages and working
conditions as domestic workers.
“TN” (Trade NAFTA) visas apply
to self-employed individuals non-immigrant citizens of Mexico and Canada
who seek temporary entry into the United States to perform business
activities. Spouses and dependent children can accompany such individuals
under the “TD” status (Trade Dependent).
Generally, aliens must possess valid,
unexpired visas and passports to enter the United States. In lieu of a visa,
a returning U.S.
resident may present a re-entry permit. An alien admitted as a non-immigrant
cannot remain permanently in the United States under that status.
An alien who fails to maintain the non-immigrant status under which he or she
was admitted, or to which he or she changed, under the Immigration and
Nationality Act or who fails to comply with the conditions of such status may
be subject to deportation. An alien who entered as a non-immigrant is also
subject to deportation if it is established that the alien was inadmissible
at the time of entry.
As stated above, immigrants seek to enter
the United States
on a permanent basis. Aliens applying for immigrant status are generally
subject to quotas restricting the number of such individuals who may enter
the United States
during the calendar year. The spouse, minor children, and parents of a
citizen of the United States
and special immigrants (generally immigrants lawfully admitted to the United States
for permanent residence who are returning from temporary visits abroad) are
exempt from the quotas.
|
