Americans want Canadians to visit – really!

Canadians are protesting US tariffs by staying home. Tourism-dependent states are feeling the pinch. They’re trying to do something about it with the Canadian Snowbird Visa Act.

Americans love Canadian tourists and the dollars they bring. Whether it’s skiers to Vail, golfers to Scottsdale or beach-lovers to Fort Lauderdale, many parts of the United States are designed to cater to those of us from the Great White North.

However, Donald Trump’s imposition of high and ever-changing tariffs on Canadian goods (not just Canadian, but that’s what we care about) have angered a whole lot of us. All you have to do is watch TV to see the effective boycott of American-made goods. Everyone is advertising their “made in Canada” status – even companies that are anything but Canadian.

The target market

Requirements

(A) be a citizen of Canada;

(B) be at least 50 years of age;

(C) maintain a residence in Canada;

(D) own or rent a residence in the United States for the duration of the stay;

(E) not be inadmissible for health, criminal or similar reasons;

(F) not be deportable for having committed various immigration violations or criminal offenses;

(G) not engage in employment or labor for hire in the United States (but continued work for a Canadian employer is permissible)

(H) not seek US social assistance.

For a married couple, requirement (d) can be met by either one. Note, however, this is only for a legally married couple. The US federal government doesn’t have the same recognition of common-law marriage as does Canada.

This is a “non-immigrant” visa category. It doesn’t lead to a green card or citizenship. One of the rules about obtaining a non-immigrant visa is that the applicant can’t be planning on living in the United States indefinitely. Normally, owning or renting a US home would be an indicator of such an intent, but this bill removes that factor from the equation.

It doesn’t address the 30-day notification rule

On January 20, 2025, as part of the fire hose of Executive Orders, Donald Trump issued 14159. This Order requires all aliens (non-citizens) who were not registered when applying for a U.S. visa and who remain in the United States for 30 days or longer, must apply for registration.

The bill is older than this order, so it doesn’t negate this requirement. Expect that a future version of the bill will do so.

What about tax?

So far, so good. But this isn’t the first time we’ve seen a bill like this. One of the big problems for the previous ones is that they forgot about this tax impact.

Tax residency

Being a US resident for tax purposes comes with a lot of complexity. Under existing rules, a person (other than a US citizen or green-card holder) becomes a US tax resident simply by spending “too much” time in the United States.

Substantial presence test

If you meet the Substantial Presence Test (SPT), you are considered a US resident. To meet this test for the current year, you need to be physically present in the United States:

• At least 31 days in the current year, and
• The total of the following add up to at least 183:
  • Days present in the current year;
  • 1/3 of the days present in the prior year, and
  • 1/6 of the days present in the second prior year.

Any portion of a day counts as a day.

Do the math, and you’ll see that 122 days per year for 3 years makes one a US resident in the third year.

Closer connection exception

A Canadian who spends fewer than 183 days in the current year can avoid the SPT by filing IRS form 8840. This form has to be filed by June 15 following the end of the year.

What if you go over 183 days?

Well, you’ve likely got an immigration problem, if they catch you.

But you also have a tax problem, and this one’s on you to voluntarily admit to. As with Canadian tax, you have to file a US tax return. And this applies to people who spend under 183 days in the United States, but forget to file the 8840.

You probably can use the tax treaty to file as a US non-resident alien. But that’s more than just a bother. It’s complicated in general.

And if you have a Canadian corporation, partnership, trust or ULC, you have special filing that is shockingly intrusive, and expensive to complete. Form 5471 for a single company will usually cost several thousand dollars when prepared by a reputable accountant.

You may find it somewhat off-putting to pay thousands of dollars to file a return not to pay tax. And the penalties for failure to file start at US$10,000 and go up.

The new bill’s tax treatment

The new bill causes anyone who gets this visa to be a non-resident alien under domestic law. The treaty isn’t necessary. So the obligation to file many forms (such as the aforementioned 5471) disappears.

All in all, it works pretty well.

The bill would have to be amended, as many other parts of Canadian and US tax law, including the tax treaty are designed around the notion that things change at the 183 day mark.

And why should this be different?

Bills of this sort have been introduced on numerous occasions. There’s a special bin in the office of the Ways and Means committee where they go to die.

But with a recession looming, jobs needed, and widespread bipartisan support, this better-written bill has a serious chance of passing (IMHO).

Can we do more with this?

The tax planner in me wonders if it is possible to use this new bill to find a way for an individual to be non-resident anywhere. That would be an awesome result, because it could lead to a huge reduction in tax. But that’s a question for another day.