itonewbie
Level 15

You do not have to wait until all the conditions under the safe harbor rule are satisfied before filing a return.  There must, however, be a realistic expectation that all the conditions will be met from the get-go.

Given you are considering the application of the safe harbor rule, I presume the taxpayers are in Japan for an employment-related contract that lasts at least 546 consecutive days, do not have more than $200k in intangible income per annum, and are not away from CA with a principal purpose of avoiding income tax.

For the purpose of the safe harbor rule, presence of no more than 45 days in CA during any calendar year covered by the employment-related contract would be considered temporary and not interrupt the 546-day period - if they had only one 10-day trip to CA in 2017, they would have met this requirement.

For 2016, assuming what I stated in the previous paragraphs are correct, the taxpayer should qualify as a part-year resident and be taxable to CA only for the period of residency.  You may, however, need to consider whether the spouse is relying on the taxpayer's employment contract or her own to determine not only her (and the taxpayer's) CA residency period but whether to file MFJ or MFS (which must be the same for both CA and Fed) and consider the total tax exposure given CA does not conform to §911 and is a community property state.

For 2017, it would appear, based on the limited information available, that they should qualify as NR for CA tax purposes under the safe harbor rule.

There is nothing special you'd need to do on the CA return with respect to the safe harbor rule.  If the taxpayer (and the spouse) is/are to be treated as part-year resident(s) for 2016, they will only need to file CA-540NR with a Schedule CA (540NR) to report their period(s) of residency, days spent in CA, etc. along with income earned within and without CA.

It appears you may not fully understand the application and may like to read up on the rule again in more details.

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Still an AllStar

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