Substantial Presence Test
The Substantial Presence Test is strictly a quantitative test, found on Form 1040NR page 5 Schedule I- Other Information G and H.
The Substantial Presence Test- Determination
Under Internal Revenue Code (IRC) Section (Sec.) 7701(b)(3) individuals meet the Substantial Presence Test if they have at least 31 days of U.S. presence in the current year and when the following sums to 183 days or greater: 100 percent of the physical days of U.S. presence in the current year + 1/3 of the days of U.S. presence in the preceding year + 1/6 of the days of U.S. presence in the second preceding year.
To summarize Substantial Presence Test determination, one looks at the presence in the U.S. consisting of all days in the current year and fractions of days in the two-year look-back period.
For the purposes of the Substantial Presence Test, partial days count as full days and, while fractional days add, any remaining fractional days are neither rounded up or down, but dropped.
The Substantial Presence Test must continue to be met on an annual U.S. calendar tax period basis for an individual to continue to be considered a continuing U.S. resident alien year after year.
Residency start date
For persons who were not U.S. resident aliens at all during the prior tax year and who meet either the Substantial Presence Test their first day of presence (making them U.S. resident aliens) will be counted starting the first day that they enter the U.S. in the year in which they meet the Substantial Presence Test, excluding under 7701(b)(C)(ii) up to 10 de minimus days of prior presence;
Under IRC Sec 7701(b)(2)(c), 7701(b)(2)(c)(i) and 7701(b)(c)(ii) in conjunction allow for the disregarding of certain nominal presence- up to 10 de minimus days may be excluded from U.S. presence for the determination of the U.S. residency start and end dates under the Substantial Presence Test, when the individuals tax home is in a foreign country and they maintained a closer connection to that foreign country other than the U.S.
Under Reg. 301.7701(b)-4(c)(1) Days from more than one period of presence may be disregarded for purposes of determining an individual’s residency starting date or termination date so long as the total is not more than 10 days and you may not disregard any days that occur in a period of consecutive days.
Excluded days from the Substantial Presence Test
In limited circumstances an individual’s physical days of U.S. presence may be excluded for purposes of determining the Substantial Presence Test, in cases where they were:
a. Exempt individuals: under IRC Sec 7701(b)(3)(D) as defined by 7701(b)(5(A-D) a student in the U.S. on an F, M, J or Q visa, a trainee or a teacher in the U.S. on a J or Q visa or others on an M or Q visa, a professional athlete, or an individual with a medical condition;
b. Others: under IRC Sec 7701(b)(7) regular commuters who work in the U.S. from Canada or Mexico when in transit in the U.S. between other points for less than 24 hours, days in the U.S. as a crew member of a foreign vessel and all employees of international organizations or foreign governments.
Exceptions to the Exempt individual rules
(i) Under IRC Sec 7701(b)(5)(E)(i) A teacher or trainee- on a J or Q visa was exempt as a teacher, trainee or student for any part of two of the last six prior calendar years. In that case in the current year you cannot exclude days of presence unless all four of the following apply as a teacher or trainee in the current year:
1) You were exempt as a teacher, trainee or student for any part of three or fewer of the prior six calendar years and 2) A foreign employer paid all current year compensation and 3) You were present in the U.S. as a teacher or trainee in any of the six prior years and 4) A foreign employer paid all compensation during each of those prior six years you were present in the U.S. as a teacher or trainee
(ii) Under IRC Sec 7701(b)(5)(E)(ii) A student- on an F or J or M or Q visa was exempt as a teacher, trainee or student for any part of more than five calendar years cannot exclude days of presence unless they establish that they did not intend to reside permanently in the U.S.
The facts and circumstances to be considered in determining if you have demonstrated an intent to reside permanently in the U.S. include, but are not limited to: 1) Whether you have not maintained a closer connection to a foreign country other than to the U.S.; and 2) Whether you have taken affirmative steps to change your status from nonimmigrant to lawful permanent resident (green card holder).