Section I – Criteria for Individuals to be considered a 

tax resident

As a general matter, under the U.S. Internal Revenue Code (Code), all U.S. citizens and U.S. residents are treated as U.S. tax residents.

In order for a non-U.S. citizen (alien individual) to be treated as a resident alien, he or she must satisfy either the “green card test” or the substantial presence test. The U.S. residence tests are generally applied on an annual calendar year basis.

Green Card Test – An alien individual will meet the green card test if the individual is a lawful permanent resident (LPR) of the United States, under U.S. immigration law, at any time during the calendar year. An individual is considered a LPR if such individual has been given the privilege by the

U.S. Citizenship and Immigration Services (USCIS) (or its predecessor organization) of residing permanently in the United States as an immigrant. An individual will generally have this status if USCIS has issued an alien registration card, also known as a “green card” to the individual. Unless the special rule for dual residents discussed below applies, an individual will continue to be treated as a U.S. resident under this test unless his or her LPR status is taken away by USCIS or is administratively or judicially determined to have been abandoned. The mere expiration of the actual “green card” document is not sufficient to terminate residence for tax purposes.

Substantial Presence Test – An alien individual will meet the substantial presence test if the individual is physically present in the United States for at least:

1. 31 days during the current calendar year; and
2. 183 days during the 3-year period that includes the current calendar year, and the 2 calendar years immediately preceding counting:
3. All days of physical presence in the United States during the current calendar year, and
4. 1/3 of the days the individual was present in 1st preceding year; and
5. 1/6 of the days the individual was present in 2nd preceding

Generally, an individual is treated as present in the United States on any day he or she is physically present in the country at any time during the day. However, there are exceptions where certain days of physical presence may not count for purposes of the test. For information on the specific exceptions, see IRS Publication 519, U.S. Tax Guide for Aliens (http://www.irs.gov/pub/irs-pdf/p519.pdf).

First-Year Choice Election – An alien individual who is classified as a nonresident of the United States for the entire calendar year immediately preceding his or her first calendar year as a U.S. resident under the substantial presence test may nevertheless be able to elect to be treated as a U.S. resident for part of the immediately preceding calendar year by making a special election. For information on the specific requirements of the First-Year Choice election, see IRS Publication 519.

Dual residents – Some green card holders and other resident aliens may also be residents of a foreign jurisdiction with which the United States has an income tax treaty. If such “dual residents” would be residents of the other country under a tie-breaker rule in the treaty, they may compute their U.S. tax liability for all or part of a tax year as if they were nonresident aliens provided they notify the U.S. tax authority that this is what they are doing. If they fail to notify the U.S. tax authority, they will continue to be treated as U.S. residents for purposes of computing their U.S. tax liability. U.S. citizens are not automatically treaty residents under a number of U.S. tax treaties. The treaties

provide additional requirements for those individuals to claim benefits as U.S. citizens from another country. U.S. citizens and other U.S. resident aliens may file IRS Form 8802, Application for United States Residency Certification, and Instructions (http://www.irs.gov/pub/irs-pdf/i8802.pdf), to obtain a letter from the U.S. Internal Revenue Service (IRS) certifying that the applicant is a U.S. resident. The certification of residence is used almost exclusively by U.S. taxpayers to demonstrate to another jurisdiction that they are eligible to obtain tax treaty benefits, and therefore, takes into account specific treaty rules that may affect whether a person is resident of the United States for purposes of that treaty.

Relevant Tax Provisions include the following:

Code section 7701(b)

Treas. Reg. §§ 301.7701(b)-1(b) & (c); 301.7701(b)-3; 301.7701(b)-4(c)(3); 301.7701(b)-7.