Attorneys
Shareholder Patrick W. Martin and Associate Luz Villegas-Bañuelos Published in Tax Notes
Our international tax lawyers, San Antonio-based Shareholder Patrick W. Martin and Associate Luz Villegas-Bañuelos’s recent article published on October 28, 2024, in Tax Notes discusses the need for clear guidelines from the IRS for tax return filing obligations for international taxpayers. Specifically, how someone with a “green card” in their pocket who does not principally reside in the U.S., have specific tax treaty rights determined by the Courts.
The first three paragraphs of the article are included below with permission from Tax Notes. To read the full article, subscribers may click here.
I. Introduction
The Internal Revenue Code makes a distinction between how a U.S. person and a nonresident alien are to report and pay income taxes. For that reason, section 7701(b) defines who (or what) is a U.S. person. [1] Regulations under title 31 that provide for the reporting of foreign bank accounts adopt the IRC’s definition of U.S. person. [2]
That definition is at times complex because it not only defines who is a lawful permanent resident (LPR) but also specifies when an individual ceases to be an LPR.3 That is when the individual (1) is treated as a resident of a foreign country for tax purposes under a tax treaty, (2) does not waive the benefits of that treaty, and (3) notifies Treasury of their treatment under the treaty.4 All three elements must be met.
The IRS introduced Form 8833, “Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b),” in 1993. It serves as a way to notify Treasury of an individual’s residence in a foreign country in accordance with a tax treaty and allows the individual to explain how a tax treaty applies in a particular circumstance.
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2 See 31 C.F.R. section 1010.350(b)(2).
3 See id. and section 7001(b)(6).
4 See section 7001(b)(6); see also Aroeste v. United States, No. 22-cv-00682, at 17 (S.D. Cal. Nov. 20, 2023) (finding that Alberto Aroeste ceased to be an LPR “because he commenced to be treated as a resident of Mexico under the Treaty, did not waive the benefits of such Treaty, and notified the Secretary of the commencement of such treatment”).
To view the full article, subscribers may click here.