United States – IRS Updates Guidance on Sec. 911

United States – IRS Updates Guidance on Sec. 911

The U.S. Internal Revenue Service (IRS) added South Sudan to the list of foreign countries eligible for a waiver in claiming section 911 exclusions for the 2013 tax year.

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Flash Alert 2014-077

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.

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 for those exclusions is allowed for persons in such a situation, who left countries designated by the IRS.

Background

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: South Sudan Added to Foreign Country List

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. 

FOOTNOTES

1  See Announcement 2014-28 at: http://www.irs.gov/pub/irs-drop/a-14-28.pdf .

2  2014-15 I.R.B. 927.  

RELATED RESOURCE

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.

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