On Nov. 24, 2010, the U.S. Department of Homeland Security’s Federal Emergency Management Agency, or FEMA, announced that federal disaster aid was available to supplement the U.S. Virgin Islands’ recovery efforts in areas struck by severe storms, flooding, rockslides, and mudslides associated with Tropical Storm Tomas from Nov. 8–12. The territory has previously received two disaster declarations this year, for Hurricane Earl and Tropical Storm Otto.
Each disaster declaration made for the U.S. Virgin Islands gives V.I. residents who were outside the territory during the disaster or who left the territory around the time of disaster credit for those days as U.S. Virgin Islands days.
Specifically, the Treasury Department has provided that an individual is considered to be present in the U.S. Virgin Islands for any day that he or she is outside the U.S. Virgin Islands because the individual leaves or is unable to return to the U.S. Virgin Islands during any 14-day period within which a major disaster occurs in the U.S. Virgin Islands for which a FEMA Notice of a Presidential declaration of a major disaster is issued in the Federal Register.
The Tropical Storm Tomas declaration covers Nov. 8–12, so the relevant 14-day period could be Oct. 26 to Nov. 8, or Nov. 12 to Nov. 25, or any 14-day period in between.
Since the American Jobs Creation Act of 2004 went into effect on Jan. 1, 2005, many people have had to count their days in the territory to qualify as U.S. Virgin Islands residents for tax purposes on a year-by-year basis. If a taxpayer does not have a home in the mainland United States available for his or her full-time use, does not have a spouse or minor children living on the mainland, and is not registered to vote in a U.S. state, then the taxpayer does not have to “count days.” All other V.I. residents must count their days in the territory and must meet one of four physical presence tests to be considered a bona fide resident for tax payment and filing purposes.
A person can meet the physical presence test for residency by spending all or part of 183 days in the U.S. Virgin Islands or averaging 183 days a year in the territory over a rolling three-year period. A person can also meet the test by spending no more than 90 days in the United States during a taxable year. Finally, an individual can meet the test by spending more days in the U.S. Virgin Islands than in the United States and having no more than $3,000 in earned income from the United States.
However, if a person was outside the U.S. Virgin Islands when Tropical Storm Tomas hit and stayed outside for a 14-day period, then that person would meet the 183-day test by spending 169 days in the U.S. Virgin Islands – plus the 14 days credited as U.S. Virgin Islands days due to the disaster declaration. If the same person was outside the territory when Hurricane Earl and Tropical Storm Otto hit as well, then that period could meet the 183-day test by spending 141 days in the U.S. Virgin Islands – plus the 42 days credited as U.S. Virgin Islands days due to the three disaster declarations.
In “counting days,” taxpayers should keep a copy of the disaster declaration – – available at http://www.fema.gov/news/disasters.fema — in their tax files along with plane tickets, frequent flyer records, or other evidence of the days they were outside the U.S. Virgin Islands during the relevant period. Tropical Storm Tomas is Disaster Declaration No. 1949 for 2010.
In addition to meeting the physical presence tests, bona fide residents of the U.S. Virgin Islands must be able to demonstrate a closer connection to the U.S. Virgin Islands than anywhere else, and taxpayers who work must have a tax home, or principal place of business, in the territory.
Marjorie Roberts is a tax attorney in St. Thomas. She can be reached at jorie@marjorierobertspc.com. This article is intended to provide general tax information but is not intended to be used for the purpose of providing tax advice.
