Recent reporting and disclosure requirements may apply to certain nonresidents after 1991.

• Author: Miller, Deborah L.

Many Canadians and other individuals spend several months each year vacationing in the United States. Because they spend so much time here, they may be considered U.S. residents and may even be required to file tax returns. Under recently adopted regulations, many of these individuals must file disclosure statements for tax years beginning after 1991; see Regs. Sec. 301.7701(b)-9(b)(4).

If the individuals are U.S. residents, they are taxed in the United States on their worldwide income. If not, they are taxed at graduated rates on their income effectively connected with a U.S. trade or business and subject to 30% withholding on certain U.S.- source fixed or determinable income (such as interest and dividends), unless a tax treaty provides otherwise.

To be a U.S. resident, an individual must determine his status under U.S. law. The individual must hold a green card, meet the substantial presence test or make a first-year election to be a U.S. resident. However, even if he is considered to be a U.S. resident under U.S. tax law, the "tie-breaker" provision contained in many income tax treaties may override U.S. law.

Substantial presence test

Under this test, an individual is a U.S. resident if he is present in the United States at least 31 days during the current tax year and a total of 183 days during the current year and two preceding years, based on the following formula: The number of days spent in the United States ("days") in the current year is weighted by 1, days in the first preceding year by 1/3 and days in the second preceding year by 1/6. Days as a teacher, trainee or student generally are not counted.

According to this formula, if an individual is never present in the United States for more than 121 days a year, he cannot be a U.S. resident under the substantial presence test. See the example above.

Closer connection exception

If an individual currently is present in the United States for 122 to 182 days, has a tax home in a foreign country, and can prove a closer connection to that foreign country, he will not be deemed to be a U.S. resident. Facts to be considered include the location of his permanent home, family and personal belongings, the site of his social and religious organizations, the location where he conducts his routine personal banking and business activities (other than those that constitute his tax home), the jurisdiction in which he votes and holds a driver's license, the residence he designates on forms and...