Vermont Bar Journal, Vol. 40, No. 2 Spring 2015, Vol. 41, No. 1 | Page 19

If you think about it from a layman’s point
of view, the term non-resident alien is rather suggestive of a science fiction creature,
so we tend to use the terms “non-resident” or “NRA” with our clients. Most lawyers and Vermont real estate agents know
that, for federal tax purposes, if a non-US
citizen individual is physically present in the
United States for 183 days or more, he or
she becomes a US tax resident. What is not
well known is that this “days of presence”
calculation takes into consideration onethird of the days of US presence in the prior year for which the measurement is made
and one-sixth of the days of presence in
the second prior year. Therefore, nonUS citizen individuals can become US tax
residents if they are present in the United
States more than 122 days each year over a
three year period. Having a tax residence in
the US can be very significant because US
tax residents are taxed here on their worldwide income.
What is even less well known is that, under federal domestic tax law, an individual
who becomes a US tax resident as a result
of this particular counting rule can claim a
“closer connection” to a foreign state so as
to avoid worldwide taxation here, provided
that their period of presence in the United States is less than 183 days.5 The claim
to a closer connection to another country
is made on IRS Form 8840. This should be
of particular interest to Canadian “snowbirds,” who are Canadians known to cross
the US border sometime in November, not
returning to Canada until sometime in May.
If Canadian snowbirds spend 150 days a
year in the United States in 2013, 2014,
and 2015, they are certainly tax residents
of the United States in 2015 under the days
of physical presence count [150 + (150/3) +
(150/6) = 225]. In those situations, the Canadian snowbirds will have to file a timely
IRS Form 8840 to avoid becoming liable for
US tax on their worldwide income¾despite
the fact that Canada will also be looking for
a tax return on the basis that the snowbird
remained a Canadian resident.
At the deepest level of obscure knowledge in this area, the “tiebreaker rules” in
US tax treaties may offer a separate escape
hatch for Canadian snowbirds (and other
NRAs protected by a tax treaty) who may
be present in the US for more than 183
days in the calendar year. Under the model US Income Tax Treaty (latest version issued November 15, 20066) if an individual
is a resident of both the US and the treaty
partner, NRAs can claim that they are solely
a resident of the foreign treaty partner because their “center of vital interest” is located in the foreign country. The US-Canada treaty contains such a provision. This
Article 4 tiebreaker i ́