United States – IRS Guidance on Sec. 911 for Four Countries

United States – IRS Guidance on Sec. 911 for Four...

The U.S. IRS issued an advance copy of Revenue Procedure 2014-25, which provides that the eligibility requirements of I.R.C. section 911 are waived in relation to Egypt, Lebanon, Pakistan, and Yemen for the 2013 tax year.

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Flash Alert 2014-033

On March 24, 2014, the U.S. Internal Revenue Service (IRS) released an advance copy of Rev. Proc. 2014-251, which concerns individuals who failed to meet the eligibility requirements of either the bona fide residence test or the physical presence test under U.S. Internal Revenue Code (I.R.C.) section 911(d)(1) – and thus may not exclude foreign earned income and housing cost amounts from gross income – because war, civil unrest, or similar adverse conditions in a foreign country precluded the individuals from satisfying these requirements for the 2013 tax year.

WHY THIS MATTERS

Individuals who would otherwise qualify for the foreign earned income and foreign housing cost exclusions, may lose the benefit of those exclusions if they are forced to leave a country due to war or civil unrest, which could affect the amount of tax they owe.

A special exception to the time requirements to qualify for those exclusions is allowed for persons in such a situation, who left countries designated by the IRS.  The list is updated annually. 

Revenue Procedure 2014-25: Egypt, Lebanon, Pakistan, Yemen

Rev. Proc. 2014-25 provides that for tax year 2013, the Treasury Department in consultation with the Department of State has determined that war, civil unrest, or similar adverse conditions precluded the normal conduct of business in Egypt, Lebanon, Pakistan, and Yemen.  An individual who left one of those countries on or after a designated date will be treated as a “qualified individual” for purposes of section 911 with respect to the period during which that person was present in, or was a bona fide resident of, the respective country if the individual establishes a reasonable expectation of meeting the requirements of section 911(d) but for the adverse conditions.

Country          Date

Egypt              July 3, 2013

Lebanon        September 5, 2013

Pakistan        August 9, 2013

Yemen           August 6, 2013

An individual who was first present, or established residency, in one of the foregoing countries after the designated date is not eligible to qualify for the exception.

Revenue Procedure 2014-25 will be published in Internal Revenue Bulletin 2014-15 dated April 7, 2014.

RELATED RESOURCE

For coverage of last year’s Rev. Proc covering countries for 2012, see Flash International Executive Alert 2013-060, April 10, 2013.

The information contained in this newsletter was submitted by KPMG LLP’s Washington National Tax practice.

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