Updated: Aug 20, 2021
Por J. Rubens Scharlack | Scharlack
Foreign individuals who are not green-card holders and who meet the Substantial Presence Test (SPT) for a given calendar year by virtue of having sufficient days of physical presence in the United States (U.S.) are generally treated as U.S. residents for tax purposes in relation to that year, unless an exception applies.
Recognizing that the COVID-19 pandemic has disrupted the travel plans of foreign individuals who happened to be in the U.S. and most likely could not, or were afraid to, leave the U.S. due to travel restrictions or other governmental actions (including recommendations to implement social distancing and to avoid public spaces), the Internal Revenue Service (IRS) issued Revenue Procedure (Rev. Proc.) 2020-20, which created the COVID-19 Medical Condition Travel Exception to the SPT.
Under the COVID-19 Medical Condition Travel Exception, certain individuals (each an Eligible Individual, defined below) who (presumably) intended to leave the U.S. during certain days of 2020 (the so-called COVID-19 Emergency Period), but was (presumably) unable to do so, may exclude such days for purposes of the SPT. The COVID-19 pandemic shall be considered a medical condition that prevented the Eligible Individual from leaving the U.S. on each day during his/her COVID-19 Emergency Period and will not be treated as a pre-existing medical condition (which, under the regular Medical Exception, does not normally allow the exclusion of days from the SPT). Also, in determining an individual’s eligibility for treaty benefits with respect to income from employment or the performance of other dependent personal services within the U.S., any days of physical presence during the individual’s COVID-19 Emergency Period on which he/she was unable to leave the U.S. due to COVID-related travel disruptions will not be counted.
For purposes of Rev. Proc. 2020-20, the term COVID-19 Emergency Period means:
a single period of up to 60 (sixty) consecutive calendar days;
selected by an individual;
starting on or after February 1, 2020 and ending on or before April 1, 2020;
during which the individual is physically present in the U.S. on each day.
Also, an Eligible Individual is any individual who:
was not a U.S. resident at the close of the 2019 tax year;
is not a U.S. lawful permanent resident at any point in 2020;
is present in the U.S. on each of the days of the individual’s COVID-19 Emergency Period; and
does not become a U.S. resident in 2020 due to days of presence in the U.S. outside of the individual’s COVID-19 Emergency Period.
Under the COVID-19 Medical Condition Travel Exception, an Eligible Individual will be presumed to have intended to leave the U.S. on any day during the individual’s COVID-19 Emergency Period, unless he/she has applied, or otherwise taken steps, to become a lawful permanent resident of the U.S.. If the Eligible Individual has applied, or otherwise taken steps, to become a lawful permanent resident of the U.S. but is not yet a lawful permanent resident, the IRS advises that he/she retains any documents that may support a "facts and circumstances" analysis of his/her intent to leave the U.S.. The Eligible Individual should be prepared to produce these records if the IRS so requests.
Also, the COVID-19 Medical Condition Travel Exception will create the presumption that the Eligible Individual was unable to leave the U.S. on any day during his/her COVID-19 Emergency Period.
Finally, an individual claiming benefits under an applicable U.S. income tax treaty with respect to income from employment or other dependent personal services performed in the U.S. will be presumed unable to leave the U.S. on any day during his/her COVID-19 Emergency Period.
Eligible Individuals interested in making use of the COVID-19 Medical Condition Travel Exception shall fill out Form 8843 according to specific instructions from the IRS.
 When applying the SPT, an alien individual may exclude certain days of physical presence in the U.S., including if the individual qualifies for the Medical Condition Exception. The Medical Condition Exception provides that an alien individual is not treated as present in the U.S. on days when he/she intended to leave the U.S., but was unable to do so because of a medical condition that arose while he/she was present in the U.S. (Treas. Reg. § 301.7701(b)- 3(c)(1)). However, a medical condition will not be considered to arise while the individual is present in the U.S. if the condition or problem existed before his/her arrival in the U.S. and he/she was aware of the condition or problem (Treas. Reg. § 301.7701(b)-3(c)(3)).
 Generally, under U.S. income tax treaties, days spent in the U.S. due to an illness that prevents an individual from timely leaving the country are not taken into account in determining the availability of treaty benefits with respect to income from dependent personal services performed in the U.S.. For example, many U.S. income tax treaties exempt income from employment (or other dependent personal services) if, among other things, the person receiving the income is present in the U.S. for no more than 183 days in any twelve-month period that begins or ends in the relevant taxable year. For purposes of computing days of presence in the U.S. under this type of test, days on which an illness prevented the individual from leaving the U.S. are not counted.
J. Rubens Scharlack
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