A Vancouver couple winters at their house in Temecula. A retired father from Pune stays more than half the year with his daughter in Ontario. Both usually know the IRS day count cold.
California does not use that count, and it does not honor the treaty that may have settled the federal answer. A foreign national can file with the IRS as a nonresident and still owe California tax on worldwide income at up to 13.3 percent, with no credit for tax paid at home.
How does the IRS decide whether a noncitizen is a U.S. resident?
Under 26 U.S.C. § 7701(b)(1)(A), an alien is a resident for the year if he or she held a green card at any time during it or meets the substantial presence test. That test, in section 7701(b)(3), needs 31 days this year and a weighted 183: current-year days count in full, last year’s at one third, the year before at one sixth.
Days as an exempt individual (certain students and teachers, for example) do not count, nor do days someone could not leave because of a medical condition that arose here. Section 7701(b)(2) generally starts residency on the first day of presence in the year the test is met.
The closer connection exception in section 7701(b)(3)(B) requires fewer than 183 days this year, a foreign tax home, and more significant contacts abroad under Treas. Reg. § 301.7701(b)-2(d), claimed on Form 8840. A late form forfeits it under Treas. Reg. § 301.7701(b)-8(d), and section 301.7701(b)-2(f) denies it once a relative files an I-130 for the person.
The other exit is a treaty tiebreaker under Treas. Reg. § 301.7701(b)-7: Form 1040-NR plus Form 8833, with a $1,000 penalty under 26 U.S.C. § 6712 for skipping the 8833. Form 8938 has a treaty carve-out in Treas. Reg. § 1.6038D-2(e), but the FBAR rule in 31 C.F.R. § 1010.350(b) has none, so our FBAR deadline post reaches this group.
How does California decide whether a foreign national is a resident?
Cal. Rev. & Tax. Code § 17014(a) makes a resident of every individual “in this state for other than a temporary or transitory purpose.” Visa type and the IRS count are irrelevant, and section 17024.5(b)(10) makes Internal Revenue Code references to nonresident aliens inapplicable. Section 17016 presumes residency after more than nine months in the year, rebuttable by proof of a temporary purpose.
Conversely, 18 Cal. Code Regs. § 17014(b) treats someone domiciled elsewhere, with a permanent abode there and no more than six months here, as temporary so long as he acts only as “a seasonal visitor, tourist or guest.” Owning a California house does not break that rule. Working from it can.
In between, the state of “closest connection during the taxable year is the state of his residence.” Appeal of Stephen D. Bragg, 2003-SBE-002 (May 28, 2003), lists the objective factors, from residences to phone records, citing Appeal of Berner, 2001-SBE-006-A (2002). Whittell v. Franchise Tax Board, 231 Cal.App.2d 278 (1964), taxed a couple who split each year between Woodside and Lake Tahoe’s Nevada shore, and Noble v. Franchise Tax Board, 118 Cal.App.4th 560 (2004), weighed physical presence above stated intent. Our post on residency audits of Californians who leave covers the mirror problem.
Does a tax treaty protect a foreign national from California tax?
No. Article II(2)(b) of the U.S.-Canada treaty covers “the Federal income taxes imposed by the Internal Revenue Code,” and the U.S.-India treaty reads almost identically. Container Corp. of America v. Franchise Tax Board, 463 U.S. 159 (1983), observed that U.S. treaties “do not generally cover the taxing activities of subnational governmental units such as States,” and FTB Publication 1031 says treaties limited to federal taxes “do not apply to California.”
Section 17041(a) then taxes a resident’s entire income at 2025 rates reaching 12.3 percent, and section 17043 adds 1 percent above $1 million. Section 17024.5(b)(6) and (b)(7) switch off the foreign tax credit and the foreign earned income exclusion. The credit in section 18001 covers tax paid to “another state,” which section 17018 stretches only to the District of Columbia and U.S. possessions. Tax paid in Ottawa buys nothing in Sacramento.
What if you are a federal resident but a California nonresident?
An L-1 manager from Monterrey sent to a Sacramento-area plant for a project with a fixed end date can pass the substantial presence test, file Form 1040, and still be a California nonresident. The regulation treats presence to “perform a particular contract” for a short period as temporary, a fact question every time.
He files Form 540NR and is taxed under section 17951(a) only on California-source income, including wages for days worked here under 18 Cal. Code Regs. § 17951-5, but generally not interest on intangibles under section 17952. If his wife stays in Monterrey, Publication 1031 lets his domicile decide whether his pay is community property.
The CPA’s point is on the rate line. Section 17041(b) sets a nonresident’s rate as if all worldwide income were Californian, so $40,000 of Temecula rent owned by a Vancouver executive is taxed at the average rate his full income would produce.
How does this play out for a Canadian couple in Temecula?
Assume the Vancouver couple own a distribution company there and were in California 170 days in each of 2024, 2025 and 2026, each drawing about $320,000 from the company. The figures are illustrative.
Federally, 170 plus 56.7 (one third) plus 28.3 (one sixth) is 255 weighted days, so they meet the test. At 170 days with tax homes in Vancouver, each can file Form 8840 by June 15, 2027. The Canada treaty’s Article IV(2) is the backstop, and there the Temecula house counts: with a permanent home in both countries, the question moves to the “centre of vital interests,” which is British Columbia.
California’s regulation treats them as seasonal visitors, much like its own example of a Minnesota couple who winter here, but only while they act like visitors. If one of them runs the company by laptop from Temecula, the FTB can say the stays are no longer a guest’s and the pay for those days is California-source anyway.
Using the 2025 schedules in the Form 540 booklet, as nonresidents with no California-source income they owe California nothing. Because 26 U.S.C. § 6013(a)(1) bars a joint federal return and section 18521(a)(1) follows federal status, as residents each would file separately and owe about $25,700 on roughly $314,000 after the $5,706 standard deduction. About $51,000 for the couple, with no credit for Canadian tax.
A variation: a retired father from India on a B-2 visa spends 200 days of 2026 with his daughter in Ontario, living on about $23,000 of Indian pension and interest. At 200 days Form 8840 is unavailable, so he claims India-treaty residence on Form 8833.
In California, 200 days is under the nine-month presumption but over the six-month rule, so connections decide it, and his home and pension are in India. Even if the FTB disagreed, $23,000 is under the 2025 filing threshold of $30,591 for a single filer 65 or older, indexed from section 18501.
What records decide a residency dispute, and what does the estate tax add?
The FTB’s Residency and Sourcing Technical Manual tells auditors to build presence calendars from card and bank statements and airline tickets. Pull your I-94 travel history and keep a calendar as the year happens. Section 19057 gives four years from filing to assess, but section 19087 allows assessment “at any time” when no return exists, so a Form 540NR disclosing the facts starts the clock.
For estate tax, Treas. Reg. § 20.0-1(b)(1) asks about domicile. A Canadian domiciled in Vancouver who dies owning the Temecula house is taxed on U.S.-situs property under section 2103, with only the $13,000 credit in section 2102(b)(1), which shelters $60,000, unless the treaty’s prorated credit applies under section 2102(b)(3)(A). California has had no estate tax for deaths after January 1, 2005.
| Rule | Trigger | Escape hatch | Form | Consequence |
|---|---|---|---|---|
| Green card (§ 7701(b)(1)(A)(i)) | Green card at any time in the year | Treaty tiebreaker | 1040, or 1040-NR with 8833 | Worldwide income; FBAR |
| Substantial presence (§ 7701(b)(3)) | 31 days and 183 weighted days | Closer connection under 183 days; treaty | 8840 or 8833 | Resident from first day present |
| California resident (Rev. & Tax. Code § 17014) | Presence not temporary or transitory | Closest connections elsewhere | 540 | Worldwide income; no foreign tax credit |
| Six-month visitor rule (18 CCR § 17014(b)) | Six months or less, home abroad | Visitor conduct only | 540NR | California-source income only |
Frequently Asked Questions
Can I be a nonresident for the IRS and a resident for California?
Yes. The IRS uses a day count and green card status, subject to treaty tiebreakers. California asks whether you are here for other than a temporary or transitory purpose, judged by your closest connections. A Form 8840 or 8833 filed with the IRS does not bind the Franchise Tax Board.
Does the tax treaty with my home country protect me from California tax?
Usually not. Most U.S. income tax treaties, including those with Canada and India, cover only federal income taxes. The Supreme Court has noted that U.S. treaties generally do not reach state taxes, and FTB Publication 1031 says treaties limited to federal taxes do not apply to California.
How many days can I spend in California without becoming a resident?
There is no safe number. More than nine months creates a rebuttable presumption of residency. Six months or less is treated as temporary if you are domiciled elsewhere, keep a permanent home there and act only as a seasonal visitor. Anything in between turns on your closest connections.
Does California give a credit for income tax I pay in my home country?
No. California’s credit for taxes paid covers only other U.S. states, the District of Columbia and U.S. possessions, and California does not follow the federal foreign tax credit or foreign earned income exclusion. A California resident can pay full tax in both countries.
What happens if I never filed a California return?
When no return is filed, the Franchise Tax Board may estimate income and assess tax, interest and penalties at any time under Revenue and Taxation Code section 19087. The four-year assessment period starts only when a return is filed, so a nonresident return that discloses your facts is the safer course.
Does owning a house in California make me a California resident?
Not by itself. A seasonal visitor can own a home here without becoming a resident if the stay is six months or less, a permanent home is kept where the person is domiciled, and the conduct here is a visitor’s. Working from the house can change that.
How North Star Law Firm Can Help
North Star Law Firm advises foreign nationals and their U.S. families across the Inland Empire and the Sacramento area on FTB and IRS residency examinations, unfiled California returns and estate planning for California property. Phillip Zagotti is a California attorney and a CPA admitted to the U.S. Tax Court, who prepares the federal and California positions together.
If you or a family member spends long stretches in California without calling it home, contact North Star Law Firm or schedule a consultation.