COVID-19 RELIEF FOR NONRESIDENTS

Nonresident alien individuals present in the U.S. for too many days in a calendar year may be classified as residents for federal income tax purposes under the substantial presence test. If such individuals are stuck in the U.S. due to medical conditions, those days of presence may be excluded in making the days computations pursuant to statutory provisions.

There are nonresident alien individuals who are in the U.S. during the current COVID-19 crises who are unable to leave due to travel bans and similar limitations, but not due to their own illness. It is uncertain whether the medical exception applies to them.

As a relief measure, the IRS has issued a Revenue Procedure that allows qualified individuals to exclude a single consecutive period of presence in the U.S. starting on or after February 1, 2020 and ending on or before April 1, 2020 from their days present under the substantial presence test. Such individuals do not have to show they are actually stuck here due to COVID-19 - that is presumed.

Eligible persons do not include persons who were a U.S. resident for federal income tax purposes at the close of the 2019 tax year, or who are a lawful permanent resident at any point in time in 2020.

To obtain the exclusion, eligible individuals who need to file a Form 1040-NR for 2020 must include a Form 8843 to their timely filed return, which includes the information described in the Revenue Procedure. If the individual does not need to file a Form 1040-NR for 2020, then no Form 8843 is required, but such individuals are advised to retain documentation establishing their qualification for the exclusion of days.

Perhaps the April 1, 2020 ending date may be extended through April or beyond, based on events occurring subsequent to the date of the Revenue Procedure.

If an individual uses the procedure, they can also exclude other days if eligible under the medical exception or other exceptions if they qualify for them.

The consecutive days of presence requirement appears to prevent aggregating multiple stays in the U.S. during the exclusion period if the individual is in the U.S., leaves, and then returns.

On a related note, the U.S. Citizenship and Immigration Services is also providing relief relating to COVID-19, including for extensions of stay under visas (which may need to be applied for). See information on that here.

Revenue Procedure 2020-20 (April 21, 2020)

Surviving Spouse Homestead Limitations Struck Down as Unconstitutional [Florida]

Article VII, Section 6(f)(1) of the Florida Constitution provides ad valorem tax relief to surviving spouses of veterans who died from service-connected causes while on active duty. The provision specifically provides the relief to homestead property of:

“[t]he surviving spouse of a veteran who died from service-connected causes while on active duty as a member of the United States Armed Forces.”

In implementing this provision, Fla.Stats. §196.081(4) was enacted to provide:

“Any real estate that is owned and used as a homestead by the surviving spouse of a veteran who died from service connected causes while on active duty as a member of the United States Armed Forces and for whom a letter from the United States Government or United States Department of Veterans Affairs or its predecessor has been issued certifying that the veteran who died from service-connected causes while on active duty is exempt from taxation if the veteran was a permanent resident of this state on January 1 of the year in which the veteran died.” (emphasis added)

In 2013, Teri Ann Bell filed for ad valorem tax relief in Hillsborough County, Florida on her homestead property. She was married to a member of the U.S. Army who was killed in action in Iraq in March, 2007. Her application for the tax exemption was denied by the Hillsborough County Property Appraiser solely on the basis that Ms. Bell's husband was not a Florida resident as of January 1, 2007, the year he was killed in action, as required by the language of the implementing statute.

After administrative appeals provided no relief, Ms. Bell appealed to the 2nd DCA.

The 2nd DCA determined that the Florida Constitution provision did not have a residency restriction, and thus the insertion of such a restriction in the statute was invalid and unenforceable. The 2nd DCA concluded that the legislature could not substantively alter or materially limit the class of individuals eligible for the exemption under the plain language of the constitution.

Department of Revenue v. Bell, 2020 WL 808178 (2nd DCA)

IRS Provides Transfer Tax Extensions

Over the past few weeks, the IRS has provided numerous extensions due to the Covid-19 virus outrbreak. These included Notice 2020-17, Notice 2020-18, and Notice 2020-20. Some relief was provided for gift and generation-skipping transfer tax return filings and payments under Notice 2020-20.

Late last week, additional extensions were granted in Notice 2020-23 aimed at estate and generation-skipping tax returns and payments (and certain gift tax payments and returns) due on or after April 1, 2020 and before July 15, 2020 - these extensions are to July 15, 2020:

• Estate and generation-skipping transfer tax payments and return filings on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, 706-A, United States Additional Estate Tax Return, 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts, 706-GS(T), Generation-Skipping Transfer Tax Return for Terminations, 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions, and 706-GS(D-1), Notification of Distribution from a Generation Skipping Trust (including the due date for providing such form to a beneficiary).
• Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, filed pursuant to Revenue Procedure 2017-34.
• Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent and any supplemental Form 8971, including all requirements contained in section 6035(a) of the Code.
• Gift and generation-skipping transfer tax payments and return filings on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return that are due on the date an estate is required to file Form 706 or Form 706-NA.
• Estate tax payments of principal or interest due as a result of an election made under sections 6166, 6161, or 6163 and annual recertification requirements under section 6166 of the Code.

The notice also address other returns and payments, including various Forms 1040, Forms 1120, Form 1065, Forms 1041, Forms 990-T, and estimated taxes.

Notice 2020-23

A Short Summary of the Key Tax Provision of the CARES Act

Follow this link to our firm’s summary of the Act, which contains some unprecedent tax relief to address the economic harm arising from the Covid-19 crisis.