Exceptions to the Bona Fide Residence and the Physical Presence Tests
There are two exceptions to meeting the minimum time requirements under the bona fide residence and the physical presence tests.
Waiver Of Time Requirements
Both the bona fide residence test and the physical presence test contain minimum time requirements. However, the minimum time requirements can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that foreign country. You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions. To qualify for the waiver, you must actually have your tax home in the foreign country and be a bona fide resident of, or be physically present in, the foreign country on or before the beginning date of the waiver.
Each year, the IRS publishes a list of the foreign countries for which the minimum time requirements are waived. For example, for tax year 2010, the list was published in Revenue Procedure 2011-20 (PDF).
Note: Although you can still meet the minimum time requirements under the bona fide residence test and the physical presence test under this exception, in figuring your foreign earned income exclusion or deduction, the number of your qualifying days of bona fide residence or physical presence only includes days of actual residence or presence within the foreign country.
U.S. Travel Restrictions
If you are present in a foreign country in violation of U.S. law, you will not be treated as a bona fide resident of a foreign country or as physically present in a foreign country while you are in violation of the law. Income that you earn from sources within such a country for services performed during a period of violation does not qualify as foreign earned income. Your housing expenses within that country (or outside that country for housing your spouse or dependents) while you are in violation of the law cannot be included in figuring your foreign housing amount.
For 2010 and 2011, the only country to which travel restrictions applied was Cuba. The restrictions applied for the entire year. For restrictions applicable to other tax years, refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
However, see the exception below for civilians working at the U.S. Naval Base at Guantanamo Bay in Cuba.
More information on these restrictions may be found in Notice 2003-52 and Revenue Ruling 2005-3. These rulings may be updated from time to time.
Civilians Working in Guantanamo Bay Cuba
Notice 2006-84 provides that civilian individuals who are performing services at the U.S. Naval Base in Guantanamo Bay Cuba are eligible for the foreign earned income exclusion and/or the foreign housing exclusion or deduction, provided that they meet all the usual requirements under Section 911 of the Internal Revenue Code. Please refer to Publication 54.
References/Related Topics
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.
