As additional relief for U.S. taxpayers that are affected by COVID-19, the IRS and Treasury provided guidance for tax issues as a result of the travel disruptions for both 2019 and 2020.

  • Rev. Proc. 2020-20: Provides that eligible nonresident aliens, who were not able to depart the U.S. because of COVID-19 emergency, can exclude up to 60 consecutive calendar days for purposes of determining the persons’ U.S. tax residency (i.e., substantial presence test). An Eligible Individual can also exclude the 60 days for purposes of determining whether the individual qualifies for tax treaty benefits related to income for personal services performed in the U.S.
  • Rev. Proc. 2020-27: Provides relief to the eligible U.S. tax residents who would be qualified for the foreign-earned income and housing exclusions under IRC section 911 but were not able to stay the required number of days in the foreign country due to the COVID-19 emergency.
  • Inbound Investments FAQs: The IRS has also released FAQs to provide relief related to certain U.S. business activities conducted by nonresident aliens or foreign corporations. Whereas the activities (under certain circumstances) 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.

Below is a detailed discussion about the new guidance and the GHJ (GHJ) observations.


This Revenue Procedure addresses the potential unintended U.S. tax residency issues for nonresident aliens.


In general, the U.S. tax residency status for a foreign person (non-U.S. citizen and non-U.S. green card holder) is determined by the substantial presence test. A foreign person is treated as a U.S. tax resident if the person is present in the U.S. on at least 31 days during the current calendar year, and the sum of

  1. The number of days of presence in the current calendar year;
  2. One-third of the number of days of presence in the preceding calendar year; and
  3. One-sixth of the number of days of presence in the second preceding calendar year totals 183 days or more.

COVID-19 Disruption

Due to the travel bans, orders of government authorities, canceled flights and disruptions in other forms of transportation, many foreign persons who were in the U.S. during the emergency period may not be able to leave the U.S. as planned even if they did not have COVID-19. As a result, an individual may unintentionally meet the aggregate 183 days of presence in the U.S. and become a U.S. tax resident.

Updated Revenue Procedure

Rev. Proc. 2020-20 provides that, when applying the substantial presence test, the Eligible Individual could exclude up to 60 consecutive days during COVID-19 Emergency Period (defined below). Eligible Individual is defined as any individual:

  1. Who was not a U.S. resident at the close of the 2019 tax year;
  2. Who is not a lawful permanent resident at any point in 2020;
  3. Who is present in the United States (without regard to this Revenue Procedure) on each of the days of the individual’s COVID-19 Emergency Period; and
  4. Who 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.

COVID-19 Emergency Period: This term is defined as a single period of up to 60 consecutive calendar days selected by an individual starting on or after Feb. 1, 2020 and on or before April 1, 2020 during which the individual is physically present in the U.S. on each day. It is important to note that for purposes of this Revenue Procedure, 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. If the individual has applied, or otherwise taken steps, to become a lawful permanent resident of the U.S. (e.g., applying for a U.S. green card), an individual is not eligible to apply the relief provided in this Revenue Procedure. Other exceptions, such as the “closer connection” exception or a treaty based “tie break,” are still available and have not been impacted by this Revenue Procedure.

Application of the COVID-19 Medical Condition Travel Exception

The mechanics for utilizing this Revenue Procedure is done via the Medical Condition Exception of the substantial presence test under Code section 7701(b)(3)(D)(ii) and Treasury Regulation section 301.7701(b)-3(c). Therefore, in order to claim the exclusion of the 60 days for purposes of the substantial presence test, the Eligible Individual, if otherwise required to file a U.S. tax return, must file Form 8843, Statement for Exempt Individuals and Individuals with a Medical Conditions, with the individual’s Form 1040-NR, U.S. Nonresident Alien Income Tax Return. If a U.S. income tax return filing is not otherwise required, there are special procedures for maintaining the form and supporting information to substantiate compliance with the Revenue Procedure.

In order to claim an exception from withholding on income for dependent personal services pursuant to a U.S. income tax treaty in accordance with this Revenue Procedure, an individual should provide the employer or other withholding agent Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, certifying that the income is exempt. If tax has already been withheld, there are special procedures for obtaining a refund.

GHJ Observations

For certain nonresident alien individuals, the status or the timing of their U.S. tax residency is extremely important. For example, a nonresident alien individual who has significant investments and holdings in non-U.S. companies may have adverse U.S. tax consequences both in terms of income tax as well as reporting if he/she accidentally becomes a U.S. tax resident. The U.S. anti-deferral tax regimes (e.g., Subpart F and GILTI inclusion rules or PFIC rules) could create tax liabilities and compliance burdens.

In addition, certain individuals may be executing plans for pre-immigration to the U.S. or exit from the U.S. The unexpected presence days in the U.S. in 2020 could jeopardize the whole plan. Although there is a 60-days exclusion for the period that can start on any day on or after Feb. 1, 2020 to April 1, 2020 for Eligible Individuals, the reality of resuming the pre-scheduled travel plan post April 1 could be still challenging. Taxpayers should closely monitor their presence days in the U.S. with the travel disruptions, particularly those who cannot use the tie-breaker treaty provisions or the closer-connection exception provided in the U.S. tax statute.
In addition, those individuals who do not otherwise have to file a U.S. income tax return may want to consider making a protective filing.


This provides specific relief for U.S. tax residents with respect to the foreign income exclusion.


Under Code section 911, a “qualified individual” could elect to exclude from gross income the individual’s certain foreign-earned income (limited to $107,600 for tax year 2020, subject to an annual inflation adjustment) and the housing-cost amount (also subject to limitation depending on the city of residence and subject to an annual inflation adjustment).

The term “qualified individual” is defined as an individual whose tax home is in a foreign country and who is:

  1. A citizen of the U.S. and establishes to the satisfaction of the Secretary that the individual has been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire taxable year, or
  2. A citizen or resident of the U.S. who, during any period of 12 consecutive months, is present in a foreign country or countries during at least 330 full days.

COVID-19 Disruption

Due to the COVID-19 Emergency, the U.S. government imposed restrictions for U.S. citizens to travel to certain foreign countries since late 2019. As a result, some U.S. tax residents who were in the U.S. and intended to work outside of the U.S. may not have been able to travel.

Their presence days outside of the U.S. during the pandemic period may be reduced and impact their ability to claim the Code section 911 foreign-earned income exclusion.

Updated Revenue Procedure

Rev. Proc. 2020-27 provides that individuals seeking to qualify for Code section 911 foreign-earned income exclusion because they could reasonably have been expected to have been present in a foreign country for 330 days but for the COVID-19 Emergency and have met the other requirements for qualification may use any 12-month period to meet the “qualified individual” requirement. The period covered under this Revenue Procedures ends on July 15, 2020.

For example, an individual who:

  • Was present in the U.K. on Jan. 1 through March 1, 2020
  • Establishes that he or she reasonably expected to work in the U.K. for the entire calendar year
  • Departed the U.K. on March 2, 2020 due to the COVID-19 emergency
  • Returns to the U.K. on August 25, 2020 for the remainder of the calendar year

He or she would be a qualified individual for 2020 with respect to the period between Jan. 1 through March 1, 2020 and August 25 through Dec. 31, 2020, assuming the individual has met the other requirements for qualification under section 911.

GHJ Observation

Utilization of Code section 911 foreign-earned income exclusion requires a reduction of foreign tax credits with respect to the excluded foreign earnings. In practice, taxpayers should run a comparison of the net U.S. tax impact between claiming the exclusion versus not claiming the exclusion but taking the full foreign tax credit.


Finally, in the FAQs dated April 21, 2020, the IRS further clarified that the 60 days exclusion should also be available for determining whether a permanent establishment has been created or whether a nonresident alien individual or foreign entity engaged in a U.S. trade or business and thus potentially be subject to U.S. taxation but only if those activities would not have been conducted in the U.S. but for travel disruptions arising from the COVID-19 emergency.

The above guidance is provided under the current status of the COVID-19 Pandemic. Depending the developments of the global fight with the virus, the rules may be expanded or further developed.

GHJ has been actively monitoring these issues. Please consult your GHJ tax advisor or a member of our COVID-19 Resource Team if you have any questions about this or any other COVID-19-related items.