A foreign born individual is considered a nonresident alien for tax purposes unless one of two tests is met. These tests are the "Green Card Test" and the "Substantial Presence Test". At UCLA, residency for tax purposes is determined at initial employment and is reviewed on a daily basis in the event a visitor’s duration of status changes.
A non-U.S. citizen will be treated as a U.S. resident for tax purposes when he becomes a lawful permanent resident. Documentation that grants the permanent resident status will be provided to the individual, by United States Citizenship and Immigration Service (USCIS). The proof is generally an alien registration card (a.k.a. green card). In some cases, the I-94 or stamp in the passport indicates approved status or an annotation on the visa (Note: annotation on visa must include a validation stamp from USCIS.) The resident status continues until the status is rescinded or abandoned.
A non-U.S. citizen will be treated as a U.S. resident for tax purposes if he is physically present in the United States for at least 31 days during the current calendar year, and a total of 183 days during a three year period. The three year period includes the current year and preceding two years. The 183 days are counted as follows:
- The number of days present in the United States during the current year plus (+)
- 1/3 of the days present in the United States during the 1st non-exempt year preceding the current calendar year plus (+)
- 1/6 of the days present in the United States during the 2nd non-exempt year preceding the current calendar year
The Substantial Presence Test must be completed for all non-immigrant visa holders. At UCLA, the GLACIER program automatically applies the Substantial Presence Test.
Remember - The non-immigrant visa holder must update GLACIER every time there is a change in their visa status or visit and they must submit their record to a designated UCLA central office for review (address provided on 2nd page of GLACIER instructions).
An alien visitor with an H1-B visa status was in the United States as follows: 129 days in 2009, 99 days in 2008, and 150 days in 2007. The Substantial Presence Test for 2009 would be calculated as follows:
|Number of Days of Presence||Factor||Days toward Residency||Notes|
|2009||H1||129||X 1||129||Test Year: Count 100% of days presence|
|2008||H1||99||X 1/3||33||1st preceding year: Count 1/3 days of presence|
|2007||H1||150||X 1/6||25||2nd preceding year: Count 1/6 days of presence|
|187||Total # of days in a 3 year look back is greater than 183
days; therefore, individual is a resident for tax purposes
In the above example, the alien visitor with an H1-B visa status would be a resident for tax purposes because the visitor is in the U.S. for at least 31 days in the current year (2009) and the total number of days for all 3 years is 187 days (greater than 183 days).
Exception to the Substantial Presence Test - Closer Connection Test
IRS regulations provide that a visitor who meets the Substantial Presence Test can still be treated as a nonresident alien if he meets the following tests:
- Present in the United States for fewer than 183 days in the current year and
- Maintains a "tax home" in a foreign country during the current year and
- Has a "closer connection" with the foreign country in which a tax home is maintained
The IRS defines a "tax home" as the individual’s regular place of abode in a real and substantial sense. It must be in existence for the entire current year and located in the country in which the individual is claiming to have a closer connection. The term "closer connection" means the individual has maintained significant contacts with the foreign country. Facts to be considered but not limited to:
- location of the individual’s permanent home;
- location of family;
- location of personal belongings;
- location of social, political, cultural, or religious organizations;
- location of bank;
- location where the individual has a drivers license; and
- location where the individual votes.
Please note that if a visitor claims this exception, a favorable determination letter must be sent to Payroll Services and also included with the 1042NR tax return.
Days of Presence in the United States Defined
Generally, a visitor will be treated as physically present in the United States for each day that he is present anywhere in the United States at any time during a 24 hour day.
Exception: Do not count the following as "days of presence" in the United States when applying the substantial presence test:
- Days commuting to work in the United States from a residence in Canada or Mexico
- Days spent in the United States for less than 24 hours while in transit between 2 places which are located outside the United States
- Days unable to leave the United States because of a medical condition that developed while in the United States
- Days the individual was an "exempt individual"
"Exempt Individuals" Defined
The term "exempt individual" does not imply exemption from federal income tax. The term applies to individuals who are exempt from "completing" the Substantial Presence Test. These individuals would remain non-residents for tax purposes for a specific period of time. Exempt individuals may include:
- a teacher/trainee;
- a student;
- a foreign government official; and
- a professional athlete.
At UCLA, "exempt individuals" tend to be teacher/trainees or students. In order to qualify, the individual must be in the United States temporarily, in compliance with their visa status, and meet the following requirement:
|Type of Visa||Presence in the United States|
|Teacher/Trainee||J or Q||less than 2 of the preceding 6 years|
|Student||F,J,M,Q||less than 5 years|
A link to examples can be found in Related Information.
The IRS uses the calendar year to determine the 2 year and 5 year limitation. A calendar year is January 1 - December 31. If the visitor is in the United States as an exempt individual for even one day of a calendar year, that year counts as one full year toward the time limitation.