This article discusses the preparation and use of the Federal Residency Declaration.

A full copy of the form is available here so you can follow along with the instructions.

Analyzing the Federal Residency Declaration

The Federal Residency Declaration, first tuesday Form 301, is made available to sellers for their preparation and declaration of legal status in the United States in all sales transactions. The listing broker or his agent present this form to their seller as soon as possible, as a disclosure of federal withholding requirements which will reduce the seller’s net sales proceeds, unless the seller declares himself to be a citizen or resident foreigner. In the case of a seller who is a non-resident foreigner, he must obtain a “qualifying statement” or other permission from the IRS limiting or eliminating the withholding requirements.

The buyer and escrow are handed a copy of the declaration signed by all the sellers involved in the sale prior to the close of the sales escrow. Further, the buyer of a single-family residence (SFR) may declare they will reside in the property as their residence, and if the property’s sales price is $300,000 or less, no withholding by the buyer is required.

Preparing the Purchase Agreement

The following instructions are for the preparation and use of Form 301, the Federal Residential Declaration. Form 301 is designed for the seller of real estate to declare his legal status as a citizen or resident alien. In the event the seller is a resident alien, the seller will state the days of residency within the United States during the current and past two calendar years and calculate the total days of credit he has for resident alien status based on the 183-total day rule of “substantial presence” in the United States. Prior to closing a sale, the buyer declares whether they intend to reside in the property.

The instructions correspond to the provision in the form bearing the same number.

Editor’s note — Check and enter items throughout the agreement in each provision with boxes and blanks, unless the provision is not intended to be included as part of the final agreement, in which case it is left unchecked or blank.

Document Identification:

Date: Enter the date and name of the city where the Federal Residency Declaration is prepared. This is the date used to identify this document.

Facts:
1. Compliance with law: States the purpose of the declaration and the right of the broker and buyer to rely on the seller’s declaration.
  1.1. Tax identification number: Enter the name of one of the sellers and this seller’s social security number or other tax page identification number the seller uses for Federal income tax reporting.
  1.2. Tax identification number: Enter the name of one of the sellers and this seller’s social security number or other tax page identification number the seller uses for Federal income tax reporting.
2. Property Description: Enter the common address of the property being sold by the seller, or the legal description or assessor’s parcel number (APN) used to identify the property.
Seller’s Declaration:
3. Seller’s Declaration:
  3.1 Citizenship: Check the box to indicate the sellers named on this declaration are citizens of the United States of America.
  3.2 Resident alien: Check the box to indicate the sellers named in this declaration are all foreigners who either legally reside in the United States or have resided in the United States for the total number of days necessary to demonstrate their substantial presence in the United States.
    a. Legal Residency in the United States: Check the box to indicate the sellers named in this declaration are all foreigners holding a declaration of legal residency issued by the INS. Enter the resident alien registration number.
    b. Substantial presence in United States of America: Check the box to indicate the foreigner does not hold an INS Declaration of Legal Residency, but does meet the total days under the 183-day substantial presence test. Enter the number of actual days the foreigner has resided in the United States during the current year and each of the preceding two years. Calculate and enter the fractional portion of each day allowed to contribute to the total days to meet the 183-day substantial presence test. Enter the total of the days given for credit toward the 183 days needed to qualify as a resident alien under the 183 day substantial presence test.
4. Non-Resident alien: Check the box to indicate the sellers named in the declaration are not citizens of the United States and do not qualify for resident alien status. Disclose the non-resident alien’s need to obtain a Qualifying Statement or other permission from the IRS to avoid, in whole or in part, the withholding of funds from the sales proceeds as a deposit toward any taxes the seller may owe due to the sale.
5. Reliance on Declaration: States the brokers, their agents, escrow and the buyer may rely on the declaration as the truth of the matter.
6. Exemption from withholding: States the buyer’s residency in the property purchased at a price of $300,000 or less qualifies the sale by the non-resident alien as exempt from the withholding requirement and relieves the buyer of the need to withhold. Note, however, that the buyer or his family members are required to reside in the property on making the declaration and not withhold the amount required.
Buyer’s Acknowledgment:
7. Buyer’s Receipt: States the buyer (on signing his declaration at the end of the form) has read and received the seller’s declaration regarding the seller’s status in the United States.
8. Buyer’s Residency Declaration: Check the box to indicate the buyer will use the property purchased as his (or his family’s) residence. This declaration only exempts the buyer from withholding if the purchase price paid is $300,000 or less.

Signatures:

Seller’s Signature: Enter the date each seller signs. Obtain each seller’s signature on their declaration.

Buyer’s Signature: Enter the date each buyer signs. Obtain each buyer’s signature on their declaration.