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Revenue procedures, FAQs: Relief for nonresidents remaining in United States (COVID-19)

Relief for nonresidents remaining in United States

The IRS today released advance versions of two revenue procedures that provide relief for certain individuals who remain in the United States beyond a specified number of days because of the coronavirus (COVID-19) pandemic.

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Rev. Proc. 2020-20 [PDF 62 KB] provides relief for certain nonresident individuals who, but for COVID-19-related emergency travel disruptions, would not have been in the United States long enough during 2020 to be considered resident aliens under the “substantial presence test” or to become ineligible for treaty benefits on services income. 

Rev. Proc. 2020-20:

  • Offers relief under the “substantial presence test” and establishes procedures to apply the  medical condition exception to exclude up to 60 consecutive days spent in the United States during a time period starting on or after February 1, 2020, and on or before April 1, 2020, with the specific start date to be chosen by each individual
  • Provides procedures for an individual to exclude those days of presence in order to claim benefits under an income tax treaty with respect to dependent personal services income.

Rev. Proc. 2020-27 [PDF 52 KB] reflects that the Treasury Secretary has determined that the global health emergency caused by the outbreak of COVID-19 is an adverse condition that precludes the normal conduct of business globally. Therefore, relief is being provided to any individual that reasonably expected to become a “qualified individual” for purposes of claiming the foreign earned income exclusion under section 911 but left the foreign jurisdiction during the period described by this revenue procedure. 

Lastly, the IRS released a set of frequently asked questions” (FAQs) providing that  certain U.S. business activities conducted by a nonresident alien or foreign corporation will not be counted for up to 60 consecutive calendar days in determining whether the individual or entity is engaged in a U.S. trade or business or has a U.S. permanent establishment, but only if those activities would not have been conducted in the United States but for travel disruptions arising from the COVID-19 emergency. The IRS in June 2020 replaced and updated the FAQs. Read TaxNewsFlash

Text of the FAQs:

Question 1: Will a nonresident alien or foreign corporation, not otherwise engaged in a USTB, be treated as engaged in a USTB as a result of services or other activities conducted by one or more individuals temporarily present in the United States if, but for COVID-19 Emergency Travel Disruptions, those services or other activities would not have been conducted in the United States?

Answer: A nonresident alien, foreign corporation, or a partnership in which either is a partner (Affected Person) may choose an uninterrupted period of up to 60 calendar days, beginning on or after February 1, 2020, and on or before April 1, 2020 (the COVID-19 Emergency Period), during which services or other activities conducted in the United States will not be taken into account in determining whether the nonresident alien or foreign corporation is engaged in a USTB, provided that such activities were performed by one or more individuals temporarily present in the United States and would not have been performed in the United States but for COVID-19 Emergency Travel Disruptions. For purposes of these FAQs, an "individual temporarily present in the United States" means an individual who is present in the United States on or after February 1, 2020, and on or before April 1, 2020, and is a nonresident alien, or a U.S. citizen or lawful permanent resident who had a tax home as defined in section 911(d)(3) outside the United States in 2019 and reasonably expects to have a tax home outside the United States in 2020. In addition, to determine the nonresident status of an alien, the relief provided in Rev. Proc. 2020-20 is applicable.
 

Question 2: If a nonresident alien or foreign corporation is engaged in a USTB (taking into account the application of the treatment in Question 1) but otherwise does not carry on such USTB through a PE under an applicable income tax treaty, will the nonresident alien or foreign corporation be treated as conducting business through a PE due to services or other activities conducted by individuals temporarily present in the United States that would not have been conducted in the United States but for COVID-19 Emergency Travel Disruptions?

Answer: During an Affected Person's COVID-19 Emergency Period, services or other activities performed by one or more individuals temporarily present in the United States will not be taken into account to determine whether the nonresident or foreign corporation has a PE, provided that the services or other activities of these individuals would not have occurred in the United States but for COVID-19 Emergency Travel Disruptions.

Read a related IRS release—IR-2020-77.

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