Foreign Visitor Tax Guide: Section Four

Residency Determination for Tax Purposes

4.1 Resident for Tax Purposes
A resident for tax purposes, hereafter called a tax resident, is a person who is not a U.S. citizen and who meets either the "green card" test or the "substantial presence" test described in IRS Publication 519, U.S. Tax Guide for Aliens (See Appendix 2).

With regard to residency determination for tax purposes:

• F and J students are generally considered tax residents after their first five (5) calendar years in the U.S.
• J nonstudents (researchers, scholars, teachers, etc.) are generally considered tax residents after their first two (2) calendar years in the U.S.
• H temporary workers (H-1, H-2), trainees (H-3) and their spouses and minor, unmarried children (H-4) are considered tax residents only if they meet the "substantial presence" test described in Section 4.4 of this guide.

4.2 Nonresident for Tax Purposes

A nonresident for tax purposes is a person who is not a U.S. citizen and who does not meet either the "green card" test or the "substantial presence" test described in Publication 519, U.S. Tax Guide for Aliens. With regard to residency determination for tax purposes:

• F and J students are generally considered nonresidents during their first five (5) calendar years in the U.S.
• J nonstudents (researchers, scholars, teachers, etc.) are generally considered nonresidents during their first two (2) calendar years in the U.S.
• H status holders are considered nonresidents unless they meet the "substantial presence" test described in Section 4.4 of this guide.

4.3 Green Card Test
Under the "green card" test, a person is a resident for tax purposes if he/she is a permanent resident (PR) of the U.S., a status which only the BCIS or the DOS can grant. While this status is usually identified by an alien registration card, known as the "green card," the person need not be in possession of the "green card" itself to hold the status.

The right to lawful permanent residence is granted at the time of the final interview with BCIS or DOS officials and can be evidenced not only by the "green card" but also by a stamp in the applicant's passport which states "temporary evidence of lawful permanent status. "The "green card" may not be manufactured or mailed for several months after the final interview, and this stamp provides immediate proof of permanent status. Further, if the card is lost, the holder does not lose the status, or the rights and obligations inherent in it.

4.4 Substantial Presence Test

4.4.1 Counting Days
A person is a resident for tax purposes if he/she meets the substantial presence test for the calendar year.
To meet this test, the person must be physically present in the U.S. on at least:

(a) 31 days during the current year, and
(b) 183 days during the threeyear period that includes the current year and the two (2) years immediately before that, counting:

• all the days the person was present in the current year, and
• 1/3 of the days the person was present in the first year before the current year, and
• 1/6 of the days the person was present in the second year before the current year.

4.4.2 Days That Are Not Counted
A J-1 nonstudent (professor, researcher, etc.) who is substantially complying with the requirements of that status, does not count days for the first two (2) calendar years.

An F-1or J-1 student who substantially complies with the requirements of that status does not count days for the first five (5) calendar years.

It is important to note that the counting rules are based on a "calendar" year, not a 12month period. For example, a foreign national enters the U.S. on December 15, 1996. For purposes of the substantial presence test, 1996 is the "1st calendar year," even though the foreign national was present for only sixteen (16) days of that calendar year. 1997 is the "2nd calendar year." This individual's exemption would end effective December 31, 1997.

4.4.3 Circumstances That Disqualify One From the Substantial Presence Test
A person will not meet the "substantial presence" test if (1) he/she is present in the U.S. on fewer than 183 days during the current year, and (2) it is established for the current year that the person has a tax home in a foreign country that has a "closer connection" to that country than to the U.S. The "closer connection" exception is discussed in detail in IRS Publication 519, U.S. Tax Guide for Aliens.

To retain nonresident tax status after five (5) years, F1 students must be present in the U.S. fewer than 183 days and must establish that they have a tax home in a foreign country and that they have a closer connection to that country than to the U.S.