owned subsidiariesTaxation of Resident and Non-Resident Aliens
The United States taxes an individual based on their residency status. Once a person is deemed a resident, they become subject to tax on their worldwide income in the same manner a U.S. citizen is taxed.
The first step in determining how an alien will be treated for U.S. tax purposes is to determine their classification. There are two basic tests in determining residency; they are referred to as the "green card" test and the "substantial presence" test.
Green Card Test
In the past when an alien was approved by INS (Immigration and Naturalization Service) for lawful permanent residence in the U.S., they received a green card. Although the card is no longer green, lawful permanent residence is equated to the term "green card." When an alien receives a green card they are automatically considered a resident alien for tax purposes. The length of time the green card holder is in the U.S. does not matter. Just by virtue of having the card, they will be taxed as a resident alien in the U.S.
Substantial Presence Test
An alien will be considered a resident if, in the current year, they are present in the U.S. for 31 days or more and have been in the U.S. in excess of 182 days during a three year period, based on a weighted formula. The formula works in the following manner: add up the number of days present in the U.S. for the current year; add the number of days present in the first preceding year multiplied by one-third; add the number of days present in the second preceding year multiplied by one-sixth; if the sum of these numbers is greater than 182, the alien is considered a resident for the current year. For example, the maximum time that an alien could stay in the U.S. without becoming a resident alien under this rule would be as follows:
| Year | Present in the U.S. | Multiplier | Total |
| 2009 | 120 | 1 | 120 |
| 2008 | 120 | 1/3 | 40 |
| 2007 | 120 | 1/6 | 20 |
| 180 |
