The U.S. Internal Revenue Service (IRS) has added South Sudan to the list of foreign countries for which a waiver is in effect for purposes of claiming the Internal Revenue Code section 911 exclusions for the 2013 tax year.1
In March 2014, the IRS had released Rev. Proc. 2014-25,2 which provides a current list of foreign countries and the departure dates for those countries for which the eligibility requirements of section 911(d)(1) are waived. Egypt, Lebanon, Pakistan, and Yemen were the countries originally listed. The IRS has now updated the list to include South Sudan.
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 for those exclusions is allowed for persons in such a situation, who left countries designated by the IRS.
Rev. Proc. 2014-25 provides guidance to individuals who fail to meet the eligibility requirements of either the bona fide residence test or the physical presence test under section 911(d)(1) because war, civil unrest, or similar adverse conditions in a foreign country precluded the individuals from satisfying these requirements for the 2013 tax year. Rev. Proc. 2014-25 provides a current list of foreign countries and the departure dates for those countries for which the eligibility requirements of section 911(d)(1) are waived.
Announcement 2014-28 has the effect of amending Rev. Proc. 2014-25 so as to add South Sudan to the list of foreign countries for which a waiver is in effect for purposes of claiming the section 911 exclusions for the 2013 tax year.
Thus, an individual who left South Sudan on or after December 17, 2013, will be treated as a “qualified individual” for purposes of section 911 if he or she can establish a reasonable expectation of meeting the requirements of section 911(d) but for the adverse conditions in that country. An individual who was first present, or established residency, in South Sudan after December 17, 2013, is not eligible to qualify for the waiver.
Announcement 2014-28 will be published in Internal Revenue Bulletin 2014-34 dated August 18, 2014.
1 See Announcement 2014-28 at: http://www.irs.gov/pub/irs-drop/a-14-28.pdf .
2 2014-15 I.R.B. 927.
For prior coverage of Revenue Procedure 2014-25, see Flash International Executive Alert 2014-033, March 25, 2014.
The information contained in this newsletter was submitted by KPMG LLP’s Washington National Tax practice.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.