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IRS Provides Tax Relief Relating to Travel Disruptions Due to the COVID-19 Pandemic

The novel coronavirus (“COVID-19”) pandemic has significantly disrupted international travel. Such travel disruption could potentially impact the U.S. federal income tax treatment of affected individuals and the enterprises to which such individuals provide services. On April 21, 2020, the Treasury Department and the Internal Revenue Service (the “IRS”) issued helpful guidance providing relief to individuals and businesses affected by travel disruptions resulting from the COVID-19 pandemic. The guidance includes Revenue Procedures 2020-20 and 2020-27, as well as accompanying Frequently Asked Questions (“FAQs”).

Relief for Nonresident Aliens Residing in the U.S. (Rev. Proc. 2020-20)

An individual who is not a U.S. citizen or lawful permanent resident (a “Nonresident Alien”) is nevertheless generally treated as a U.S. tax resident during a particular taxable year, and is thus subject to U.S. federal income tax on a worldwide basis (subject to treaty exceptions), if such Nonresident Alien is present in the U.S. for 183 days or more in a given year or during a three-year period based on a certain formula (the “Substantial Presence Test”). Several exceptions apply to the Substantial Presence Test, including the “Medical Condition Exception”, which excludes from the calculation days in which a Nonresident Alien was prevented from leaving the U.S. because of a medical condition that arose while such individual was present in the U.S.

Rev. Proc. 2020-20 expands the Medical Condition Exception by creating a new “COVID-19 Medical Condition Travel Exception”. Under this new exception, subject to certain conditions, a Nonresident Alien may generally exclude up to 60 consecutive calendar days during which the individual was physically present in the U.S. for purposes of applying the Substantial Presence Test (the “COVID-19 Emergency Period”). The COVID-19 Medical Condition Travel Exception applies to a Nonresident Alien who (1) was not a U.S. resident at the close of the 2019 tax year, (2) is not a lawful permanent resident at any point in 2020, and (3) is present in the U.S. on each of the days of the individual’s COVID-19 Emergency Period (an “Eligible Individual”).

In addition, residents of tax treaty jurisdictions earning dependent personal service or employee income in the U.S., are generally able to exclude salaries, wages and other similar remuneration derived while present in the U.S. if, among other things, such individuals are present in the U.S. for no more than 183 days in any 12-month period. Consistent with the COVID-19 Medical Condition Travel Exception, Rev. Proc. 2020-20 provides that in determining the eligibility for that treaty exclusion, such individuals can exclude any days of presence in the U.S. during the 60-day period in which they were unable to leave the United States due to the COVID-19 pandemic.

Relief for U.S. Citizens and Green Card Holders Working Abroad (Rev. Proc. 2020-27)

U.S. nationals are generally subject to U.S. federal income tax on a worldwide basis. However, U.S. nationals who meet specified requirements as to residency or physical presence in a foreign country may elect under Section 911 of the Internal Revenue Code, as amended (the “Code”) to exclude from gross income all or a portion of their foreign earned income for the year and to exclude or deduct certain amounts related to foreign housing costs.

Rev. Proc. 2020-27 provides relief to U.S. nationals such that days spent away from the foreign country where eligible individuals were living and working due to the COVID-19 pandemic will not be taken into account in determining the eligibility of such individuals to the benefits of Section 911 of the Code.

The relief period under Rev. Proc. 2020-27 begins globally as of February 1, 2020. However, with respect to the People’s Republic of China (but excluding the Special Administrative Regions of Hong Kong and Macau (China)), such period begins as of December 1, 2019. The relief will expire on July 15, 2020, unless further extended.

FAQs on U.S. Trade or Business and U.S. Permanent Establishment

In the FAQs, the IRS provides that certain services and other business activities performed by individuals “temporarily present in the U.S.” during a specified “COVID-19 Emergency Period” are disregarded in determining whether a foreign corporation or Nonresident Alien is engaged in a U.S. trade or business or is treated as having a U.S. permanent establishment, if such activities would not have been performed in the U.S. but for the COVID-19 travel disruption.

A Nonresident Alien or foreign corporation (or a partnership in which either is a partner) may choose a COVID-19 Emergency Period of up to 60 uninterrupted calendar days beginning on or after February 1, 2020, and on or before April 1, 2020. For these purposes, “temporarily present in the U.S.” means an individual who is present in the U.S. on or after February 1, 2020, and on or before April 1, 2020, and is either (1) a Nonresident Alien (determined using the relief provided in Rev. Proc. 2020), or (2) a U.S. citizen or lawful permanent resident who had a tax home (as defined in Section 911(d)(3) of the Code) outside the U.S. in 2019 and reasonably expects to have a tax home outside the U.S. in 2020.

What’s Next?

The guidance issued by the Treasury Department and the IRS provides much needed relief and answers some of the questions that were raised by the unprecedented conditions and travel restrictions resulting from the COVID-19 pandemic. Similar relief measures were introduced by multiple other countries. We expect that the Treasury Department and the IRS (as well as other countries) will issue additional guidance on these topics as the global pandemic unfolds. In the meantime, potentially affected individuals and businesses should closely monitor developments relating to these matters and consult with tax advisers to properly plan and address their particular circumstances.


If you have any questions concerning this alert, please feel free to reach out to the authors of this alert or your usual contact attorney at Mintz.


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David K. Salamon is an Associate at Mintz. He advises clients across a variety of industries on complex tax issues pertaining to mergers, acquisitions, restructuring, and additional matters.