A bipartisan bill in the U.S. House of Representatives aims to extend the visa-free stay for Canadian retirees (aged 50+) to 240 days annually, requiring property ownership or a rental agreement. While seemingly beneficial, experts caution about the bill's lack of clarity regarding tax implications.
The bill's brief mention of maintaining non-resident tax status is deemed insufficient by financial planners and lawyers. The bill may not override the recent 30-day registration requirement for all non-visa “aliens”, including Canadians. The “substantial presence test”, determining U.S. tax residency based on days spent in the U.S. over three years, remains unclear. It is uncertain how the proposed longer stay interacts with this test and the Canada-U.S. tax treaty.
The bill explicitly prohibits work for U.S. employers and access to public assistance programs.
A similar bill failed in the U.S. Senate in 2013. Experts doubt the current bill's success due to its insufficient handling of tax complexities. The recent 30-day registration requirement for Canadians staying longer than 30 days isn't addressed. Further implications include potential jeopardy to provincial health coverage, with Ontario residents needing 153 days/year in the province for coverage eligibility.
Despite the complexities, the bill is viewed by some as an attempt to revive Canadian tourism, which declined significantly after trade disputes and political tensions.
A new bill in the U.S. appears to be a win for Canadian retirees who want to spend more time residing south of the border, but experts warn it doesn’t address key tax and regulatory hurdles that come with longer stays.
The bipartisan Canadian Snowbird Act was introduced in the U.S. House of Representatives in late April. It proposes to extend how long Canadians aged 50 and older can spend in the U.S. without a visa – 240 days a year, up from 182 – so long as they own property in the U.S. or have a signed rental agreement for the duration of their stay.
While the bill has a brief mention that Canadians would retain their nonresident tax status, financial planners and lawyers say that would be harder to achieve in practice. Some also said it likely wouldn’t override the new 30-day registration requirements required for all “aliens” 14 years or older – including Canadians – without a visa, unless otherwise exempted.
Darren Coleman, senior portfolio manager with Coleman Wealth at Raymond James Ltd. in Oakville, Ont., said the bill would be “extremely appealing” to many of his snowbird clients. But, he added, the real concern is avoiding U.S. taxes.
Currently, the U.S. levies taxes on non-citizens if they reside in the U.S. for a certain amount of time. To determine that, a test, called the “substantial presence test” uses a calculation based on a person’s days spent in the U.S. over a three-year period. If the total surpasses 183 days, individuals may be considered U.S. tax residents – requiring them to file a U.S. tax return and potentially splitting tax dollars between both countries.
The bill does not explain how this longer stay period would interact with the substantial presence test or the Canada-U.S. tax treaty.
“I imagine that would take a massive overhaul of the process that’s been in place for a long time,” Mr. Coleman said. “There needs to be more meat on the bone for us to really be comfortable.” The bill also says Canadians would not be permitted to work for U.S. employers or access public assistance programs.
A version of the Canadian Snowbird Act was passed in the U.S. Senate in 2013 but failed to make it in the House. Since then, similar bills have been introduced but have never succeeded.
Terry Ritchie, a senior director and private wealth manager with Cardinal Point Wealth Management ULC in Calgary, said such legislation has largely failed because they don‘t meaningfully address the tax complications. She said she believes the latest version of the bill will likely face the same fate.
Experts also warn that the measure doesn’t appear to negate the recent U.S. rule requiring Canadians and other visitors without visas to register if they plan to stay in the U.S. for 30 days or longer. For Canadian snowbirds without visas who own or lease property in the U.S., they are still required to register in most cases.
“They are completely separate,” said Eileen Martin, a partner at law firm Lippes Mathias in Buffalo. “People would still have to take into account those types of requirements even if they were allowed to stay longer.”
Staying longer in the U.S. could also jeopardize access to provincial health coverage, said Rosanna Berardi, an immigration lawyer in Buffalo. For example, Ontario residents must spend at least 153 days out of a 12-month period in the province to be eligible for coverage.
Ms. Berardi, who said the details of the bill are “clear as mud,” still sees it as the U.S. “extending the olive branch” to Canadians who have been spurning U.S. travel in response to the Trump administration’s trade war and threats of annexation.
Canadian residents driving back from the U.S. in March declined nearly 32 per cent compared with the same month last year, according to Statistics Canada.
The Canadian Snowbird Act would likely help regions in the U.S. that depend on Canadian dollars and are feeling the pinch.
“Providing Canadians who own homes and property in the United States with extra time to visit and boost our economy will help revive Canadian tourism to the United States,” said Elise Stefanik, a Republican Representative for an upstate New York district that borders Canada who co-introduced the bill, in a statement.
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