These are interesting times that we live in, to say the least. The outbreak of the coronavirus has dramatically changed the course of day-to-day life, even if only for a temporary period. Quarantines and travel restrictions are among the most noticeable changes that have been brought about as a result of the coronavirus pandemic. For most Americans, these restrictions represent a complete change to our accustomed way of life. For foreign individuals visiting the U.S., however, the inability to leave the U.S. presents more than just an inconvenience or a change in lifestyle – it presents a roadblock to the most basic of U.S. tax planning strategies. 

As many foreign individuals are already aware, whether or not an individual (who is not a U.S. citizen or green card holder) is considered a U.S. income tax resident depends on the amount of time said person is physically present in the United States. For many, this means not spending more than 121 days in the United States during any calendar year. The inability to leave the United States now puts all of these planning strategies in jeopardy, and the stakes could be high because U.S. residents are subject to U.S. federal income tax on worldwide income and gain. In addition to tax payment obligations, cumbersome reporting requirements apply to most types of assets located outside the U.S.

There are some exceptions to the day count rules. For example, days of physical presence do not count for certain "exempt individuals" based on their immigration status, such as certain students and teachers. Additionally, days that an individual is unable to leave the U.S. due to a medical condition that arose while present in the U.S. are not counted. With each exception, however, limitations and reporting requirements apply. A student can generally only exclude days for a maximum period of 5 years. In the case of the medical condition exception, pre-existing medical conditions are not eligible, and the condition must have specifically arisen while an individual was present in the U.S.

For those individuals who have spent too much time in the U.S. and do not qualify for an exception, an applicable income tax treaty or the closer connection exception may save the day.