OAR 150-316-0027: Status of Individuals in a Foreign Country

(1) General. For purposes of ORS Chapter 316, a nonresident includes a person who is a foreign nonresident as defined by this rule. (2) “Foreign nonresident” means: (a) An individual who is a “qualified individual” under Internal Revenue Code section 911(d)(1); and (b) An individual who would be considered a “qualified individual” under IRC 911(d)(1) except that the person is not a U.S. citizen. Example 1: Ricardo, a citizen of Mexico, is domiciled in Oregon. He has established his tax home & bona fide residence in Canada. Even though he is not a “qualified individual” under IRC 911(d)(1) because he is not a U.S. citizen, he is considered a foreign nonresident for Oregon tax purposes. (3) To be considered a “qualified individual” under IRC 911, a person must maintain a tax home in a foreign country or countries and, for the same period of time, meet either: (a) The bona fide residence test described in subsection (4); or (b) The physical presence test described in subsection (5). (4) To meet the requirements of the “bona fide residence” test, the taxpayer must: (a) Establish, to the satisfaction of the Secretary of the U.S. Treasury, bona fide residence in a foreign country or countries, and (b) Maintain bona fide residence for an uninterrupted period of time that includes a full tax year. Example 2: Sandra is a calendar year taxpayer. She establishes bona fide residence in Russia on November 12, 1997. She is transferred back to the United States on December 30, 1998. She does not meet this test as the period of bona fide residence does not include a full tax year (i.e., all of a calendar year). Sandra may qualify under the physical presence test if she meets its requirements. Example 3: Assume the same facts as in Example 2, except that Sandra is transferred to England on December 30, 1998. She establishes bona fide residence in England where she continues to work until October 9, 1999 before returning to the United States. She qualifies under the bona fide residence test & will be taxed as an Oregon nonresident from November 12, 1997 to October 9, 1999. (5) Physical presence test. To meet the “physical presence” test, the taxpayer’s tax home must be in a foreign country and the taxpayer must be physically present in a foreign country or countries for 330 full days out of a 12 consecutive month period. (a) A full day means a period of 24 consecutive hours beginning at midnight. (b) The 12-month period may begin on any day of the calendar month and ends with the day before the corresponding calendar day twelve months later. For example, a period beginning July 1 will end June 30 of the next year. If the period begins on February 29, it will end February 28 of the next year. (c) The 12-month period may begin before or after arrival in a foreign country and may end before or after departure. Example 4: John arrives in England on April 24, 1998, at noon. He remains in Europe until 2 p.m. on March 21, 1999 when he returns to the United States. John is present in a foreign country for 330 full days during at least two twelve-month periods: April 25, 1998 through April 24, 1999 & March 21, 1998 through March 20, 1999. John qualifies for foreign nonresident treatment from April 25, 1998 through March 20, 1999. (6) Federal employees. Amounts paid by the U.S. government to its employees are not foreign earned income, and thus, do not qualify for a foreign earned income exclusion or a housing exclusion. However, if federal or military employees meet the bona fide residence test or the physical presence test, they may be taxed as foreign nonresidents for Oregon purposes. (7) Spouses of foreign nonresidents. A spouse who does not qualify as a foreign nonresident shall be treated as a nonresident only if the spouse does not maintain a principal place of abode in Oregon for the tax year. Example 5: Henry accepts an overseas assignment & leaves Oregon in July 1998. His wife remains in Portland at the family residence. Henry may be treated as a foreign nonresident if he meets the tests previously described. However, his wife will be taxed as a full year Oregon resident since her principal place of abode was not outside of Oregon. (8) Effective date: The provisions of this rule are effective for tax years beginning on or after January 1, 1995. Claims for refund based on retroactive application of the changes to ORS 316.027 may be filed at any time.