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Revenue Administrative Bulletin 1990-6

Approved: January 12, 1990



RAB-90-6. This Bulletin explains the Michigan income tax treatment of Michigan residents engaged in foreign employment. This position is effective for tax years beginning on or after January 1, 1990.

Federal Treatment

IRC Section 911(a) gives a qualified individual an election to exclude foreign earned income and housing cost amounts from gross income for the taxable year within the applicable limitations. All other sources of income subject to Federal Income Tax are not affected by this provision.

IRC Section 911(d)(1) defines "qualified individual" as an individual who is a citizen of the U.S. and:

  1. Establishes bona fide residency in a foreign country for an uninterrupted period which includes an entire taxable year, or
  2. Who is physically present in a foreign country or countries for at least 330 full days during any 12 consecutive months.

Michigan Treatment

Under the Michigan Income Tax Act, an individual domiciled in this state is subject to a tax upon all taxable income from any source whatsoever, except that attributable to another state, under provisions of Sections 111 to 115 of the Act and subject to credit provisions of Section 255 of the Act. [MCL 206.110, MSA 7.556(110)]

Under the provisions of Section 911 of the Internal Revenue Code 26 USC 911, a qualified individual may make an election to exclude from his or her gross income reportable to the United States:

  1. "Foreign earned income of such individual" as that term is defined in the Code, and/or
  2. "Housing cost amount of such individual" as that term is defined by the Code.

An individual does not lose his or her domicile by simply qualifying for the Section 911 election.

The taxable income of an individual domiciled in Michigan will not include any of those sums which he or she as a qualified individual has elected under Section 911 to exclude from gross income. Such individual must, however, report and pay the income tax levied by the State of Michigan upon all other taxable income from any source whatsoever.

An individual who expects to meet IRC Section 911 and is a resident of Michigan must file an income tax return as a resident unless he or she can prove domicile in another state or jurisdiction. "Domicile" means the fixed, permanent, and principal home to which a person, wherever temporarily located, always intends to return. A person may have several residences or dwelling places but only may have one domicile at a particular time. Domicile, once established, is not lost until there is a concurrence of all the following:

  1. The specific intent to abandon the old domicile.
  2. The intent to acquire a specific new domicile.
  3. Actual physical presence in the new state of domicile.

The issue of domicile is a factual one and will be decided on a case-by-case basis. Any taxpayer who meets the above definition of a nonresident should submit a completed form C-4440-R "Statement to Determine State of Domicile."