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Pub. 570, Tax Guide for Individuals With Income From U.S. Possessions 2006 Tax Year

1.   Bona Fide Residence

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

In order to qualify for certain tax benefits (see chapter 3), you must be a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI for the entire tax year.

Generally, you are a bona fide resident of one of these possessions (the relevant possession) if, during the tax year, you:

  • Meet the presence test,

  • Do not have a tax home outside the relevant possession, and

  • Do not have a closer connection to the United States or to a foreign country than to the relevant possession.

For your 2006 return (for tax years ending after January 31, 2006), use the information in this chapter to determine if you were a bona fide resident.

For the transition rules that apply to your 2004 and 2005 tax returns, see chapter 1 of the 2005 revision of Publication 570. This is available at www.irs.gov/pub/irs-prior/p570--2005.pdf.

Special rule for members of the U.S. Armed Forces.   If a member of the U.S. Armed Forces qualified as a bona fide resident of the relevant possession in an earlier tax year, his or her absence from that possession during the current tax year in compliance with military orders will not affect the individual's status as a bona fide resident. Likewise, being in a possession solely in compliance with military orders will not qualify an individual for bona fide residency. Also see the special income source rule for members of the U.S. Armed Forces in chapter 2, under Compensation for Labor or Personal Services.

Presence Test

Caution presence test
If you became a bona fide resident before October 23, 2004, you must meet the new presence test for tax years beginning after October 22, 2004, in order to continue in that status. If you are a calendar year taxpayer, this applies to your tax returns for 2005 and later years.

If you are a U.S. citizen or resident alien, you will satisfy the presence test for the entire tax year if you meet one of the following conditions.

  1. You were present in the relevant possession for at least 183 days during the tax year.

  2. You were present in the relevant possession for at least 549 days during the 3-year period that includes the current tax year and the 2 immediately preceding tax years. During each year of the 3-year period, you must be present in the relevant possession for at least 60 days.

  3. You were present in the United States for no more than 90 days during the tax year.

  4. You had earned income in the United States of no more than a total of $3,000 and were present for more days in the relevant possession than in the United States during the tax year. Earned income is pay for personal services performed, such as wages, salaries, or professional fees.

  5. You had no significant connection to the United States during the tax year.

Special rule for nonresident aliens.   Conditions (1) through (5) above do not apply to nonresident aliens of the United States. Instead, nonresident aliens must meet the substantial presence test discussed in chapter 1 of Publication 519. In that discussion, substitute the name of the possession for “United States” and “U.S.” wherever they appear. Also disregard the discussion in that chapter about a Closer Connection to a Foreign Country.

Days of Presence in the United States or Relevant Possession

Generally, you are treated as being present in the United States or in the relevant possession on any day that you are physically present in that location at any time during the day.

Days of presence in a possession.   You are considered to be present in the relevant possession on any of the following days.
  1. Any day you are physically present in that possession at any time during the day.

  2. Any day you are outside of the relevant possession in order to receive, or to accompany any of the following family members to receive, qualifying medical treatment (see Qualifying Medical Treatment, on the next page).

    1. Your parent.

    2. Your spouse.

    3. Your child, who is your son, daughter, stepson, stepdaughter, adopted child, or eligible foster child.

  3. Any day you are outside the relevant possession because you leave or are unable to return to the relevant possession during any:

    1. 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a Presidential declaration of a major disaster is issued in the Federal Register, or

    2. Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located.

  If, during a single day, you are physically present:
  • In the United States and in the relevant possession, that day is considered a day of presence in the relevant possession; or

  • In two possessions, that day is considered a day of presence in the possession where your tax home is located (see Tax Home, later).

Adopted child.   An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

Eligible foster child.   An eligible foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

Days of presence in the United States.   You are considered to be present in the United States on any day that you are physically present in the United States at any time during the day. However, do not count the following days as days of presence in the United States.
  1. Any day you are temporarily present in the United States in order to receive, or to accompany a parent, spouse, or child who is receiving, qualifying medical treatment. “Child” is defined under item 2c above. The definition of “qualifying medical treatment” is on the next page.

  2. Any day you are in the United States for less than 24 hours when you are traveling between two places outside the United States.

  3. Any day you are temporarily present in the United States as a professional athlete to compete in a charitable sports event (defined on the next page).

  4. Any day you are temporarily in the United States as a student (defined on the next page).

  5. Any day you are in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions).

  6. Any day you are temporarily present in the United States because you leave or are unable to return to the relevant possession during any:

    1. 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a Presidential declaration of a major disaster is issued in the Federal Register, or

    2. Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located.

Qualifying Medical Treatment

Such treatment is generally provided by (or under the supervision of) a physician for an illness, injury, impairment, or physical or mental condition. The treatment generally involves:

  • Any period of inpatient care that requires an overnight stay in a hospital or hospice, and any period immediately before or after that inpatient care to the extent it is medically necessary, or

  • Any temporary period of inpatient care in a residential medical care facility for medically necessary rehabilitation services.

With respect to each qualifying medical treatment, you must prepare (or obtain) and maintain documentation supporting your claim that such treatment meets the criteria to be considered days of presence in the relevant possession. You must keep the following documentation.

  1. Records that provide:

    1. The patient's name and relationship to you (if the medical treatment is provided to a person you accompany);

    2. The name and address of the hospital, hospice, or residential medical care facility where the medical treatment was provided;

    3. The name, address, and telephone number of the physician who provided the medical treatment;

    4. The date(s) on which the medical treatment was provided; and

    5. Receipt(s) of payment for the medical treatment.

  2. Signed certification by the providing or supervising physician that the medical treatment met the requirements for being qualified medical treatment, and setting forth:

    1. The patient's name,

    2. A reasonably detailed description of the medical treatment provided by (or under the supervision of) the physician,

    3. The dates on which the medical treatment was provided, and

    4. The medical facts that support the physician's certification and determination that the treatment was medically necessary.

Charitable Sports Event

A charitable sports event is one that meets all of the following conditions.

  • The main purpose is to benefit a qualified charitable organization.

  • The entire net proceeds go to charity.

  • Volunteers perform substantially all the work.

In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in the charitable sports event. You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events.

Student

To qualify as a student, you must be, during some part of each of any 5 calendar months during the calendar year:

  1. A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or

  2. A student taking a full-time, on-farm training course given by a school described in (1) above or by a state, county, or local government agency.

The 5 calendar months do not have to be consecutive.

Full-time student.   A full-time student is a person who is enrolled for the number of hours or courses the school considers to be full-time attendance.

School.   The term “school” includes elementary schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. It does not include on-the-job training courses, correspondence schools, and schools offering courses only through the Internet.

Significant Connection

One way in which you can meet the presence test is to have no significant connection to the United States during the tax year. This section looks at the factors that determine if a significant connection exists.

You are treated as having a significant connection to the United States if you:

  1. Have a permanent home in the United States,

  2. Are currently registered to vote in any political subdivision of the United States, or

  3. Have a spouse or child (see item 2c under Days of presence in a possession, earlier) who is under age 18 whose main home is in the United States, other than:

    1. A child who is in the United States because he or she is the child of divorced or legally separated parents and who is living with a custodial parent under a custodial decree or multiple support agreement, or

    2. A child who is in the United States as a student.

For the purpose of determining if you have a significant connection to the United States, the term “spouse” does not include a spouse from whom you are legally separated under a decree of divorce or separate maintenance.

Permanent home.   A permanent home generally includes an accommodation such as a house, an apartment, or a furnished room that is either owned or rented by you or your spouse. The dwelling unit must be available at all times, continuously, not only for short stays.

Exception for rental property.   If you or your spouse own the dwelling unit and at any time during the tax year it is rented to someone else at fair rental value, it will be considered a permanent home only if you or your spouse uses that property for personal purposes for more than the greater of:
  • 14 days, or

  • 10% of the number of days during that tax year that the property is rented to others at a fair rental value.

  You are treated as using rental property for personal purposes on any day the property is not being rented to someone else at fair rental value for the entire day.

  A day of personal use of a dwelling unit is also any day that the unit is used by any of the following persons.
  • You or any other person who has an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement.

  • A member of your family or a member of the family of any other person who has an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. Family includes only brothers and sisters, half-brothers and half-sisters, spouses, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.).

  • Anyone under an arrangement that lets you use some other dwelling unit.

  • Anyone at less than a fair rental price.

  However, any day you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Whether your property is used mainly for this purpose is determined in light of all the facts and circumstances, such as:
  • The amount of time you devote to repair and maintenance work,

  • How often during the tax year you perform repair and maintenance work on this property, and

  • The presence and activities of companions.

  See Publication 527, Residential Rental Property, for more information about personal use of a dwelling unit.

Example—significant connection.

Ann Green, a U.S. citizen, is a sales representative for a company based in Guam. Ann lives with her husband and young children in their house in Guam, where she is also registered to vote. Her business travel requires her to spend 120 days in the United States and another 120 days in foreign countries. When traveling on business, Ann generally stays at hotels but sometimes stays with her brother, who lives in the United States. Ann's stays are always of short duration and she asks her brother's permission to stay with him. Her brother's house is not her permanent home, nor does she have any other accommodations in the United States that would be considered her permanent home. Ann satisfies the presence test because she has no significant connection to the United States.

Example—presence test.

Eric and Wanda Brown live for part of the year in a condominium, which they own, in the CNMI. They also own a house in Maine where they live for 120 days every year to be near their grown children and grandchildren. The Browns are retired and their only income is from pension payments, dividends, interest, and social security benefits. In 2006, they spent only 175 days in the CNMI because of a 70-day vacation to Europe and Asia.

Thus, in 2006, the Browns were not present in the CNMI for at least 183 days, were present in the United States for more than 90 days, and had a significant connection to the United States because of their permanent home. However, the Browns still satisfied the presence test with respect to the CNMI because they had no earned income in the United States and were physically present for more days in the CNMI than in the United States.

Tax Home

You will have met the tax home test if you did not have a tax home outside the relevant possession during any part of the tax year.

Your tax home is your regular or main place of business, employment, or post of duty regardless of where you maintain your family home. If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work.

Exceptions

There are some special rules that provide exceptions to the general rule stated above. You will be considered to have met the tax home test if any of the following situations apply.

Students and Government Officials

Disregard the following days when determining whether you have a tax home outside the relevant possession.

  • Days you were temporarily in the United States as a student (see Student under Days of Presence in the United States or Relevant Possession, earlier).

  • Days you were in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions).

Seafarers

You will not be considered to have a tax home outside the relevant possession solely because you are employed on a ship or other seafaring vessel that is predominantly used in local and international waters. For this purpose, a vessel is considered to be predominantly used in local and international waters if, during the tax year, the total amount of time it is used in international waters and in the waters within 3 miles of the relevant possession exceeds the total amount of time it is used in the territorial waters of the United States, another possession, or any foreign country.

Example.

In 2006, Sean Silverman, a U.S. citizen, was employed by a fishery and spent 250 days at sea on a fishing vessel. When not at sea, Sean lived with his wife at a house they own in American Samoa. The fishing vessel on which Sean works departs and arrives at various ports in American Samoa, other possessions, and foreign countries, but was in international or American Samoa's local waters for 225 days. For purposes of determining bona fide residency of American Samoa, Sean will not be considered to have a tax home outside that possession solely because of his employment on board the fishing vessel.

Year of Move

If you are moving to or from a possession during the year, you may still be able to meet the tax home test for that year. See Special Rules in the Year of a Move, later in this chapter.

Closer Connection

You will have met the closer connection test if, during any part of the tax year, you do not have a closer connection to the United States or a foreign country than to the relevant U.S. possession.

You will be considered to have a closer connection to a possession than to the United States or to a foreign country if you have maintained more significant contacts with the possession(s) than with the United States or foreign country. In determining if you have maintained more significant contacts with the relevant possession, the facts and circumstances to be considered include, but are not limited to, the following.

  • The location of your permanent home.

  • The location of your family.

  • The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by you and your family.

  • The location of social, political, cultural, professional, or religious organizations with which you have a current relationship.

  • The location where you conduct your routine personal banking activities.

  • The location where you conduct business activities (other than those that go into determining your tax home).

  • The location of the jurisdiction in which you hold a driver's license.

  • The location of the jurisdiction in which you vote.

  • The location of charitable organizations to which you contribute.

  • The country of residence you designate on forms and documents.

  • The types of official forms and documents you file, such as Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, or Form W-9, Request for Taxpayer Identification Number and Certification.

Your connections to the relevant possession will be compared to the total of your connections with the United States and foreign countries. Your answers to the questions on Form 8898, Part III, will help establish the jurisdiction to which you have a closer connection.

Example—closer connection to the United States.

Marcos Reyes, a U.S. citizen, moved to Puerto Rico in 2006 to start an investment consulting and venture capital business. His wife and two teenage children remained in California to allow the children to complete high school. He traveled back to the United States regularly to see his wife and children, to engage in business activities, and to take vacations. Marcos had an apartment available for his full-time use in Puerto Rico, but remained a joint owner of the residence in California where his wife and children lived. Marcos and his family had automobiles and personal belongings such as furniture, clothing, and jewelry located at both residences. Although Marcos was a member of the Puerto Rico Chamber of Commerce, he also belonged to and had current relationships with social, political, cultural, and religious organizations in California. Marcos received mail in California, including bank and brokerage statements and credit card bills. He conducted his personal banking activities in California. He held a California driver's license and was also registered to vote there. Based on all of the particular facts and circumstances pertaining to Marcos, he was not a bona fide resident of Puerto Rico in 2006 because he had a closer connection to the United States than to Puerto Rico.

Closer connection to another possession.   Generally, possessions are not treated as foreign countries. Therefore, a closer connection to a possession other than the relevant possession will not be treated as a closer connection to a foreign country.

Example—tax home and closer connection to possession.

Pearl Blackmon, a U.S. citizen, is a permanent employee of a hotel in Guam, but works only during the tourist season. For the remainder of each year, Pearl lives with her husband and children in the CNMI, where she has no outside employment. Most of Pearl's personal belongings, including her automobile, are located in the CNMI. She is registered to vote in, and has a driver's license issued by, the CNMI. She does her personal banking in the CNMI and routinely lists her CNMI address as her permanent address on forms and documents. Pearl satisfies the presence test with respect to both Guam and the CNMI. She satisfies the tax home test with respect to Guam, because her regular place of business is in Guam. Pearl satisfies the closer connection test with respect to both Guam and the CNMI, because she does not have a closer connection to the United States or to any foreign country. Pearl is considered a bona fide resident of Guam, the location of her tax home.

Exception for Year of Move

If you are moving to or from a possession during the year, you may still be able to meet the closer connection test for that year. See Special Rules in the Year of a Move, next.

Special Rules in the Year of a Move

If you are moving to or from a possession during the year, you may still be able to meet the tax home and closer connection tests for that year.

Year of Moving to a Possession

You will satisfy the tax home and closer connection tests in the tax year of changing your residence to the relevant possession if you meet all of the following.

  • You have not been a bona fide resident of the relevant possession in any of the 3 tax years immediately preceding your move.

  • In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the last 183 days of the tax year.

  • You are a bona fide resident of the relevant possession for each of the 3 tax years immediately following your move.

Example.

Dwight Wood, a U.S. citizen, files returns on a calendar year basis. He lived in the United States from January 2001 through May 2006. In June 2006, he moved to the USVI, purchased a house, and accepted a permanent job with a local employer. From July 1 through December 31, 2006 (more than 183 days), Dwight's principal place of business was in the USVI and, during that time, he did not have a closer connection to the United States or a foreign country than to the USVI. If he continues to live and work in the USVI during all of 2007 through 2009, and maintains a closer connection to the USVI than to the United States or any foreign country, he will satisfy the tax home and closer connection tests for 2006. If Dwight also satisfies the presence test in 2006, he will be considered a bona fide resident of the USVI for the entire 2006 tax year.

Year of Moving From a Possession

In the year you cease to be a bona fide resident of American Samoa, the CNMI, Guam, or the USVI, you will satisfy the tax home and closer connection tests with respect to the relevant possession if you meet all of the following.

  • You have been a bona fide resident of the relevant possession for each of the 3 tax years immediately preceding your change of residence.

  • In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the first 183 days of the tax year.

  • You are not a bona fide resident of the relevant possession for any of the 3 tax years immediately following your move.

Example.

Jean Aspen, a U.S. citizen, files returns on a calendar year basis. From January 2003 through December 2005, Jean was a bona fide resident of American Samoa. Jean continued to live there until September 6, 2006, when she accepted new employment and moved to Hawaii. Jean's principal place of business from January 1 through September 5, 2006 (more than 183 days), was in American Samoa, and during that period Jean did not have a closer connection to the United States or a foreign country than to American Samoa. If Jean continues to live and work in Hawaii for the rest of 2006 and throughout years 2007 through 2009, she will satisfy the tax home and closer connection tests for 2006 with respect to American Samoa. If Jean also satisfies the presence test in 2006, she will be considered a bona fide resident for the entire 2006 tax year.

Puerto Rico

You will be considered a bona fide resident of Puerto Rico for the part of the tax year preceding the date on which you move if you:

  • Are a U.S. citizen,

  • Are a bona fide resident of Puerto Rico for at least 2 tax years immediately preceding the tax year of the move,

  • Cease to be a bona fide resident of Puerto Rico during the tax year,

  • Cease to have a tax home in Puerto Rico during the tax year, and

  • Have a closer connection to Puerto Rico than to the United States or a foreign country throughout the part of the tax year preceding the date on which you cease to have a tax home in Puerto Rico.

Example.

Randy White, a U.S. citizen, files returns on a calendar year basis. For all of 2004 and 2005, Randy was a bona fide resident of Puerto Rico. From January through April 2006, Randy continued to reside and maintain his principal place of business in and closer connection to Puerto Rico. On May 5, 2006, Randy moved and changed his tax home to Nevada. Later that year he established a closer connection to the United States than to Puerto Rico. Randy did not satisfy the presence test for 2006 with respect to Puerto Rico, nor the tax home or closer connection tests. However, because Randy was a bona fide resident of Puerto Rico for at least 2 tax years before he moved to Nevada in 2006, he was a bona fide resident of Puerto Rico from January 1 through May 4, 2006.

Reporting a Change in Bona Fide Residence

Beginning with tax year 2001, if you became or ceased to be a bona fide resident of a U.S. possession, you may need to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession. For this purpose, the following are considered U.S. possessions: American Samoa, the CNMI, Guam, Puerto Rico, and the USVI.

Who Must File

You must file Form 8898 for the tax year (beginning with tax year 2001) in which you meet both of the following conditions.

  1. Your worldwide gross income (defined below) in that tax year is more than $75,000.

  2. You meet one of the following.

    1. You take a position for U.S. tax purposes that you became a bona fide resident of a U.S. possession after a tax year for which you filed a U.S. income tax return as a citizen or resident alien of the United States but not as a bona fide resident of the possession.

    2. You are a citizen or resident alien of the United States who takes the position for U.S. tax purposes that you ceased to be a bona fide resident of a U.S. possession after a tax year for which you filed an income tax return (with the IRS, the possession tax authority, or both) as a bona fide resident of the possession.

    3. You take the position for U.S. tax purposes that you became a bona fide resident of Puerto Rico or American Samoa after a tax year for which you were required to file an income tax return as a bona fide resident of the CNMI, Guam, or the USVI.

Worldwide gross income.   Worldwide gross income means all income you received in the form of money, goods, property, and services, including any income from sources outside the United States (even if you can exclude part or all of it) and before any deductions, credits, or rebates.

Example.

You are a U.S. citizen who moved to the CNMI in December 2003, but did not become a bona fide resident of that possession until the 2004 tax year. You must file Form 8898 for the 2004 tax year if your worldwide gross income for that year was more than $75,000.

Penalty for Not Filing Form 8898

If you are required to file Form 8898 for any tax year and you fail to file it, you may owe a penalty of $1,000. You may also owe this penalty if you do not include all the information required by the form or the form includes incorrect information. In either case, you will not owe this penalty if you can show that such failure is due to reasonable cause and not willful neglect. This is in addition to any criminal penalty that may be imposed.

Reporting a USVI Bona Fide Residence-Based Return Position

Caution
As of the date this publication went to print, the IRS and the USVI were discussing an exchange of information agreement concerning these rules. If an exchange of information agreement becomes effective, then these rules may change.

If you take the position that you are a bona fide resident of the USVI in the tax years ending on or after December 31, 2006, you may file a U.S. Form 1040 with an attached statement to start the U.S. statute of limitations.

Who May File

You may file a U.S. Form 1040 with an attached statement for each tax year ending on or after December 31, 2006, in which you meet all of the following conditions.

  1. You are a citizen or resident alien of the United States who takes the position for U.S. tax purposes that you are a bona fide resident of the USVI.

  2. Your worldwide gross income (defined next) is $75,000 or more.

  3. You filed a USVI income tax return with the USVI.

The U.S. Form 1040 filed with the IRS will start the running of the 3-year period of limitations under Internal Revenue Code section 6501(a).

A U.S. citizen or resident alien who takes the position that he or she is a bona fide resident of the USVI, files a return with the USVI, and has less than $75,000 of gross income for the taxable year is a “covered person” under Notice 2007-19. A covered person, under that notice, is deemed to have filed a U.S. return and does not need to file with the IRS to start the period of limitations under section 6501(a).

Worldwide gross income.   Worldwide gross income means all income you received in the form of money, goods, property, and services, including any income from sources outside the United States (even if you can exclude part or all of it) and before any deductions, credits, or rebates (for example, disregarding any USVI tax benefits under Internal Revenue Code section 934(b)). Do not include any of your spouse's income when figuring whether your worldwide gross income is $75,000 or more.

U.S. Form 1040.   If you satisfy each of the three conditions under Who May File, you may choose to file a U.S. Form 1040 showing you have no gross income and no taxable income for U.S. tax purposes. If you and your spouse file a joint USVI tax return, then both of you can file a joint U.S. Form 1040. However, each spouse who takes the position that he or she is a bona fide resident of the USVI must attach a separate statement.

Bona fide residence-based return position statement.   The statement must include the following information.
  1. The title “Bona Fide Residence-Based Return Position.

  2. Your name, social security number or individual taxpayer identification number, and address you reported on U.S. Form 1040.

  3. A statement affirming you are a bona fide resident of the USVI and a brief summary of the facts on which your residence is based.

  4. A statement affirming that you filed a USVI tax return and listing the amount of the total tax liability and gross income (including any applicable territorial tax benefits authorized under section 934(b)) you reported on your USVI tax return.

  5. The following declaration signed and dated by you: “Under penalties of perjury, I declare that I have examined this statement and the accompanying attachments and to the best of my knowledge and belief, they are true, correct, and complete.

Tax years ending before December 31, 2006.    If you meet the conditions listed under Who May File for a tax year ending before December 31, 2006, you can choose to report a USVI bona fide residence-based return position for that tax year. If you make this choice, you must:
  1. File U.S. Form 1040 (explained earlier) at the address listed under Where To File, next, and

  2. Write the following across the top of page 1 of U.S. Form 1040 for the applicable tax year: “Filed in accordance with Notice 2007-19.

You do not have to attach a bona fide residence-based return position statement (defined above).

  Persons who satisfy the definition of a covered person (defined earlier) for a tax year ending before December 31, 2006, may apply Notice 2007-19 to that earlier tax year without filing a U.S. return. For details, see Notice 2007-19, 2007-11 I.R.B. 689 available at http://www.irs.gov/irb/2007-11_IRB/ar08.html.

Where To File

File your U.S. Form 1040 with the attached statement (defined earlier) at the following address.

Internal Revenue Service Center
P.O. Box 331, Drop Point S-607
Bensalem, PA 19020-8517

Penalty

If you choose to file U.S. Form 1040 to report a USVI bona fide residence-based return position for any tax year ending on or after December 31, 2006, you may owe a penalty of $1,000 if you fail to file the required “Bona Fide Residence-Based Return Position” statement. You may also owe this penalty if you do not include all the required information or you include incorrect information. You will not owe this penalty if you can show that such failure is due to reasonable cause and not willful neglect. This is in addition to any criminal penalty that may be imposed.

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