If the sole object of our tax law is certainty, then the quest for a bright-line, mechanical test would appear to be justified. Fairness, however, is an equally important objective. If fairness is sacrificed in our rush to formulate a bright-line test, then the law is not fully successful. The trade-off between certainty and fairness attains particular significance for non-United States citizens earning income in this country. Under United States tax laws, these individuals may be taxed as either resident aliens or nonresident aliens. This classification can be crucial because the resident alien is taxed on his worldwide income; the nonresident alien is only taxed on his United States source income. The judicial test for resident alien status has created a situation of concern because it has moved from a subjective evaluation to an objective formula. With this in mind, this Article will look at the changing federal income tax definition of a resident alien individual.
Part II reviews the background of the resident alien definition. This background provides an overview of the importance of defining an alien individual's status, as well as a close look at some of the key cases that formulated the judicial test. Part III explores the bright-line, mechanical test of Internal Revenue Code (Code) section 7701(b), which was added in 1984. This part analyzes both the test and the factors that led to its formation. Part III also addresses the questions left unanswered by the new statute, the problems it created, and the proposed regulations enacted on September 10, 1987. Finally, Part IV examines solutions to those problems by looking at alternative approaches to defining a resident alien individual.
David Williams, II,
Back to the Future: A Time for Rethinking the Test for Resident Alien Status Under the Income Tax Laws,
21 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vjtl/vol21/iss5/2