Santos v. Commissioner

NORMA A. SANTOS, PETITIONER v. COMMISSIONER OF

INTERNAL REVENUE RESPONDENT

Docket Nos. 1173–09, 5323–09. Filed October 18, 2010.

P, a teacher from the Philippines, came to the United

States under an exchange teacher program sponsored by the

U.S. Department of State. P claims that her wages from

teaching in the United States are exempt from taxation under

art. 21 of the U.S.-Philippines income tax convention (art. 21),

which provides that certain teacher’s earnings may be exempt

from income tax if the requirements of art. 21 are satisfied.

The parties dispute whether P was invited to come to the

United States ‘‘for a period not expected to exceed 2 years’’,

as is required in order to receive the exemption. Held:

Whether P was invited to the United States for a period ‘‘not

expected to exceed 2 years’’, as contemplated by the conven-

tion, is to be determined on the basis of an objective consider-

ation of all of the relevant facts and circumstances. The rel-

evant facts and circumstances do not establish that P was

invited to the United States ‘‘for a period not expected to

exceed 2 years’’. Therefore, P’s income is not exempt from tax-

ation under art. 21.

Michael J. Low and Jonathon M. Morrison, for petitioner.

Jon D. Feldhammer and Melissa C. Quale, for respondent.

RUWE, Judge: Respondent determined deficiencies of

$4,346 and $6,126 in petitioner’s 2005 and 2006 Federal

income taxes. 1 The only issue for decision is whether peti-

1 Respondent also determined that petitioner was liable for the accuracy-related penalty under

sec. 6662(a) for taxable year 2006 but has now conceded that issue.

447

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448 135 UNITED STATES TAX COURT REPORTS (447)

tioner’s 2005 and 2006 wages are exempt from taxation

because she came to the United States for a period ‘‘not

expected to exceed 2 years’’ as contemplated by the Conven-

tion With Respect to Taxes on Income, U.S.-Phil., art. 21,

Oct. 1, 1976, 34 U.S.T. 1277 (article 21). 2 Unless otherwise

indicated, all section references are to the Internal Revenue

Code (Code) as amended, and all Rule references are to the

Tax Court Rules of Practice and Procedure.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found.

The stipulation of facts, the supplemental stipulation of facts,

and the attached exhibits are incorporated herein by this ref-

erence. At the time the petitions were filed, petitioner

resided in California.

Amity

Petitioner entered the United States on August 9, 2004,

under an international exchange teacher program sponsored

by the U.S. Department of State. Amity Institute (Amity), a

nonprofit organization, operates an exchange teacher pro-

gram regulated by the Department of State. Amity’s

exchange teacher program permits internationally qualified

faculty to come to the United States to teach in their respec-

tive subjects for up to 3 years. Amity expects that teachers

who participate in the exchange teacher program will come

to the United States for 3 years. In preparation for the

return to their home countries, Amity requires that partici-

pants complete a cultural project in the third year of their

teaching assignment. Even though Amity intends that

participants return home after 3 years, it has been Amity’s

experience that only a very small percentage of Filipino

teachers actually return to their home country at that time,

with the vast majority of the participants deciding to remain

in the United States.

As part of the exchange teacher program, Amity serves as

a J–1 visa sponsor for teachers entering the United States

from other countries. Amity is authorized to issue Forms DS–

2 In the petition at docket No. 1173–09, petitioner concedes that she is entitled, at most, to

an exemption for only $28,161 of her wages for 2006 because the remainder was earned after

she had been in the United States for more than 2 years.

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(447) SANTOS v. COMMISSIONER 449

2019, Certificate of Eligibility for Exchange Visitor (J–1)

Status, which allow teachers to apply for J–1 visas to enter

the United States.

Avenida International Consultants and Badilla Corp.

Amity does not directly recruit teachers from the Phil-

ippines. During 2004 and 2005 Amity used Avenida Inter-

national Consultants (AIC) and Badilla Corp. (Badilla) to

recruit teachers from the Philippines. Badilla is AIC’s local

affiliate in the Philippines. Ligaya Avenida is the owner and

operator of both AIC and Badilla. Badilla obtains re´sume´s

and transcripts from teachers seeking employment in the

United States and maintains a database of this information.

Badilla finds prospective teachers primarily by word of

mouth and through seminars conducted by Ms. Avenida. For

a fee of at least $3,000 in 2004, AIC and/or Badilla would

assist a teacher in: (1) Finding employment in the United

States; (2) getting their American teaching credentials; (3)

getting a visa; (4) arranging for health, Department of Jus-

tice, and other Federal clearances; (5) obtaining transpor-

tation and initial housing; and (6) getting training and accul-

turation information. When AIC contracts with a prospective

teacher, it is AIC’s expectation that the exchange teacher will

stay in the United States for 3 years, before returning to his

or her home country. Even though AIC intends for the teacher

participants to return to their home countries after 3 years,

in reality 80 to 90 percent of participants remain in the

United States after the program has concluded.

AIC assists school districts in the United States with the

recruitment of international teachers. AIC finds school dis-

tricts that might be interested in its services by attending job

fairs and by reviewing vacancy postings. AIC provides

interested school districts with access to its database, which

comprises re´sume´s and transcripts for candidate teachers in

various subject areas whom AIC believes eligible to receive

teaching credentials in the United States. AIC then preselects

the teaching candidates for the schools to interview and

facilitates the interviews.

After the completion of the interview process, the school

districts can extend employment offers to candidates. Once a

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450 135 UNITED STATES TAX COURT REPORTS (447)

candidate is offered employment, AIC will assist the teacher

in obtaining a visa.

Generally, there are two types of visas that may be avail-

able to foreign teachers. The first, an H–1B visa, is for

working professionals. The second, a J–1 visa, is for individ-

uals entering the United States under a cultural exchange

program approved by the Department of State. The H–1B

visa does not work well for school districts hiring new

teachers through the exchange teacher program because its

April 1 application deadline prevents teachers from securing

visas before the school year begins. As a result, the J–1 visa

is used more frequently in hiring teachers through exchange

programs. The J–1 visa allows teachers from foreign coun-

tries to teach in the United States for the period specified on

Form DS–2019. Form DS–2019, the basic document used in

the administration of the exchange visitor program, allows a

prospective exchange visitor to seek an interview at a U.S.

embassy or consulate in order to obtain a J–1 visa to enter

the United States. Form DS–2019 identifies the exchange

visitor and the visitor’s designated sponsor and provides a

brief description of the exchange visitor’s program, including

the starting and ending dates, the category of exchange, and

an estimate of the financial support to be provided to the

exchange visitor. After the period specified on Form DS–

2019, the teacher must return to his or her home country,

unless a waiver of the return requirement is obtained from

the Department of State.

When a school district has found a teacher that it wishes

to hire, AIC sends the teacher’s documentation to Amity.

Amity then issues a Form DS–2019 showing that Amity is

sponsoring the applicant and thereby allowing the teacher to

obtain a J–1 visa.

Petitioner learned of Ms. Avenida’s business through an

occupational therapist who had previously attended one of

Ms. Avenida’s seminars. Petitioner met Ms. Avenida when

she attended one of her seminars regarding available

teaching opportunities in the United States. Petitioner paid

a fee to AIC and/or Badilla to assist her in finding a teaching

position in the United States.

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(447) SANTOS v. COMMISSIONER 451

Ravenswood City School District

During the latter part of the 2003–2004 school year, the

Ravenswood City School District (RCSD), located in Cali-

fornia, used AIC to recruit teachers from the Philippines

because it was unable to hire a sufficient number of qualified

special education providers to meet the needs of the school

district. When recruiting teachers from the Philippines, the

RCSD was looking for someone who had completed the rel-

evant coursework and would qualify for a preliminary

teaching credential in California with contingencies. The

RCSD offered extensive training to its special education

teachers. Providing this type of training was very expensive

for the school district. When making an offer of employment,

the RSCD’s goal was to hire a teacher interested in staying at

the RCSD long term, in order to maintain its academic pro-

grams. When the RCSD hired a teacher through the exchange

teacher program, it hoped and expected that the teacher

would be an employee for at least 3 years and, in many

cases, for longer periods. 3 This expectation was based on the

RCSD’s history with Filipino teachers hired through the

exchange program. It was the RCSD’s experience that such

teachers would often stay in the United States beyond the

duration of the exchange program and become residents.

The RCSD offered petitioner employment as an education

specialist for the 2004–2005 school year. Petitioner’s employ-

ment with the RCSD was at will, and she signed a 1-year con-

tract on June 9, 2004. When the RCSD offers employment to

a new teacher, the term of the employment contract is 1 aca-

demic year, regardless of whether the teacher is recruited

from within the United States or from abroad. The RCSD uses

a 1-year contract with its teachers until the point at which

they are granted tenure. Teachers are granted tenure with

the RCSD when they have obtained all required credentials

and have begun the first day of work in their third year of

teaching. On June 30, 2005, shortly after the expiration of

petitioner’s initial contract with the RCSD, she signed a

second contract of employment for the 2005–2006 school

3 When asked to testify about her expectations regarding how long petitioner would remain

in the United States, Maria Ibarra, former director of human resources for the RCSD testified:

‘‘So my hopes when I recruited—not just Ms. Santos, but any candidate—is that it’s a long term,

three year—I know that they had—candidates from the Philippines had a J–1, so it was three

years. But my hope was that they’d be able to stay longer.’’

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452 135 UNITED STATES TAX COURT REPORTS (447)

year. Before the second contract’s expiration, petitioner

signed a contract on June 6, 2006, for the 2006–2007 school

year. In June 2004 petitioner, Amity, and the RCSD entered

into the Amity exchange teacher contract covering the period

of the Form DS–2019 that was to be issued. Pursuant to the

contract, Amity agreed to provide J–1 visa sponsorship for up

to 3 years.

Petitioner’s Visa

After petitioner received an offer of employment from the

RCSD, she paid Amity to sponsor her J–1 visa pursuant to

Amity’s 3-year administrative fee payment contract, which

was signed on July 25, 2004. According to the contract, peti-

tioner agreed to pay, and did pay, $1,500 to Amity during the

first year of the exchange teacher program and $750 for each

of the second and third years.

To receive and remain eligible for the J–1 visa, petitioner

was required to obtain a valid Form DS–2019. Amity issued

her Form DS–2019 certificates which met the J–1 visa

requirements for the first 3 years that she was eligible to

remain in the United States under her visa. Petitioner was

issued two separate Forms DS–2019 in order to remain

eligible for a J–1 visa for the entire 3-year period. Before

2004, and in all subsequent years, Amity would have issued

a teacher a Form DS–2019 that covered a 3-year period from

the outset. However, in 2004 Amity instead issued a 2-year

Form DS–2019, which was subsequently reissued for a third

year as a matter of course. The change in practice was

caused by Amity’s mistaken interpretation of a new Depart-

ment of State policy. Amity incorrectly believed that because

it had to be redesignated as a visa sponsor by the Depart-

ment of State every 2 years, it was permitted to issue Form

DS–2019 certificates only for 2-year periods. Consequently,

every teacher sponsored by Amity in 2004 received a Form

DS–2019 that covered a 2-year period. As a result, Amity

issued petitioner a Form DS–2019 that covered the 2-year

period from August 1, 2004, to July 31, 2006, followed by a

second Form DS–2019 covering the period from August 1,

2004, to July 31, 2007.

From 2004 to 2007 petitioner’s J–1 visa was sponsored by

Amity. On July 28, 2004, petitioner was issued a J–1 visa

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(447) SANTOS v. COMMISSIONER 453

that allowed for her entry into the United States on August

9, 2004. Petitioner’s visa was valid for 5 years at the time it

was issued, and its expiration date was July 27, 2009. Peti-

tioner’s visa was also subject to a 2-year-residency require-

ment under which she had to return to the Philippines for

at least 2 years after the expiration of the exchange teacher

program. Petitioner requested and was granted a waiver of

the 2-year-residency requirement. On July 25, 2004, peti-

tioner signed a contract with Amity agreeing to return to the

Philippines after her J–1 visa expired or otherwise pay a

$1,500 fine.

Teaching Credentials

Before petitioner could begin teaching in the United

States, she was required to obtain a preliminary teaching

credential. The preliminary teaching credential petitioner

received was valid for 5 years but conditioned upon her

taking and passing the California Basic Educational Skills

Test (CBEST). However, a teacher is permitted to apply to the

California Commission on Teacher Credentialing (the

commission) for a waiver of the CBEST requirement. If

granted, the waiver is valid for 1 year. From 2004 to 2007,

a teacher could request a maximum of three waivers of the

CBEST requirement.

Petitioner’s teaching credential was valid from August 16,

2004, to September 1, 2009. On August 30, 2004, petitioner

requested from the commission a waiver of the CBEST

requirement. Under the waiver, petitioner could have taught

in the RCSD without passing the CBEST until August 16, 2005.

Petitioner requested a second waiver of the CBEST require-

ment on September 27, 2005, which the commission granted.

The second waiver would have allowed petitioner to teach in

the RCSD until August 29, 2006, without passing the CBEST.

Petitioner passed the mathematics, writing, and reading

sections of the CBEST in April and August 2005 and April

2006, respectively. As of April 22, 2006, petitioner had

passed all components of the CBEST. Petitioner also partici-

pated in the RCSD’s special education training program that

was provided to its special education teachers.

While working in the United States, petitioner earned a

salary that was considerably greater than that which she

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454 135 UNITED STATES TAX COURT REPORTS (447)

would have earned in the Philippines. In the Philippines,

petitioner earned the equivalent of $400 to $500 per month,

while during her first 3 years at the RCSD she was paid

$3,700 to $4,200 a month. Petitioner incurred at least $5,000

in expenses and fees in order to come to the United States.

Petitioner’s Tax Returns

Petitioner timely filed her 2005 and 2006 Federal income

tax returns and stated her occupation as teacher. On her

2005 and 2006 returns petitioner reported wages of $38,941

and $46,722 and taxable income of zero and requested

refunds of $5,364 and $7,384, respectively. On her 2005 and

2006 Schedules A, Itemized Deductions, petitioner claimed

deductions of $38,941 and $46,721, respectively, stating

‘‘J–1 Tax Exempt Status of Exchange Teacher’’.

In September 2008 petitioner filed amended Forms 1040X,

Amended U.S. Individual Income Tax Return, and Forms

1040NR, U.S. Nonresident Alien Income Tax Return, for the

taxable years 2005 and 2006. For tax year 2005 petitioner

reported on Form 1040NR wages of zero and claimed an

overpayment of $5,364. For tax year 2006 petitioner reported

on Form 1040NR wages of $18,561 and tax owed of $1,141.

Petitioner contends that she was exempt from taxation

during 2005 and 2006 on account of article 21.

Respondent issued to petitioner separate notices of defi-

ciency for 2005 and 2006, respectively, on the grounds that

petitioner did not qualify for the exemption provided for by

article 21. Petitioner timely filed separate petitions with this

Court.

OPINION

Generally, the Commissioner’s determinations in the notice

of deficiency are presumed correct and the taxpayer bears

the burden of proving error in the determinations. Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).

For the years at issue, petitioner was classified as a non-

resident alien under section 7701(b) because she had a J–1

visa and participated in the exchange teacher program. Sec-

tion 7701(b)(1)(B) provides that a nonresident alien is a per-

son who is not a citizen or resident of the United States

within the meaning of section 7701(b)(1)(A). Generally, a

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(447) SANTOS v. COMMISSIONER 455

nonresident alien individual engaged in trade or business

within the United States is taxed on the taxable income

effectively connected with that trade or business. Sec. 871(b).

The phrase ‘‘trade or business within the United States’’ gen-

erally includes the performance of personal services within

the United States at any time within the taxable year. Sec.

864(b). Compensation paid to a nonresident alien in

exchange for the performance of services in the United States

constitutes income that is effectively connected with the con-

duct of a trade or business in the United States. Sec. 1.864–

4(c)(6)(ii), Income Tax Regs. As a result, petitioner’s wages

would ordinarily be subject to taxation under the Code. How-

ever, section 894(a) provides that the provisions of the Code

will be applied to any taxpayer with due regard to any treaty

obligations of the United States that apply. Therefore, the

treatment of petitioner’s wages might be altered by treaty

provisions. See id.

Article 21 provides an exemption to certain individuals

from U.S. income taxation for income earned through the

performance of personal services as teachers in the United

States if the requirements of article 21 are satisfied. Article

21 provides:

Article 21

TEACHERS

(1) Where a resident of one of the Contracting States is invited by the

Government of the other Contracting State, a political subdivision or local

authority thereof, or by a university or other recognized educational

institution in that other Contracting State to come to that other Con-

tracting State for a period not expected to exceed 2 years for the purpose

of teaching or engaging in research, or both, at a university or other recog-

nized educational institution and such resident comes to that other Con-

tracting State primarily for such purpose, his income from personal serv-

ices for teaching or research at such university or educational institution

shall be exempt from tax by that other Contracting State for a period not

exceeding 2 years from the date of his arrival in that other Contracting

State.

When interpreting a treaty, 4 we begin with the text of the

treaty and the context in which the written words are used.

E. Airlines, Inc. v. Floyd, 499 U.S. 530, 534 (1991); Sumitomo

4 The term ‘‘treaty’’ is used synonymously with ‘‘convention’’.

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456 135 UNITED STATES TAX COURT REPORTS (447)

Shoji Am., Inc. v. Avagliano, 457 U.S. 176, 179–180 (1982).

The plain words of the treaty control unless their effect is

contrary to the intent of the signatories. Sumitomo Shoji

Am., Inc. v. Avagliano, supra at 180; Amaral v. Commis-

sioner, 90 T.C. 802, 812 (1988). The words of a treaty are to

be interpreted according to their ordinary meaning as under-

stood in the public law of nations. Amaral v. Commissioner,

supra at 812.

Under article 21, a taxpayer’s wages can be exempt from

Federal income tax only if the taxpayer meets the following

requirements: (1) She was a resident of the Philippines

before coming to the United States; (2) she was invited by

the Government or a recognized educational institution

within the United States; (3) she was invited for a period not

expected to exceed 2 years; (4) she was invited for the purpose

of teaching or engaging in research at the recognized edu-

cational institution; and (5) she did in fact come to the

United States primarily to carry out the purpose of the

invitation.

In order for petitioner to qualify for the article 21 exemp-

tion of her wages, she must satisfy all of its requirements.

Petitioner has clearly met four of the five requirements, and

the only dispute between the parties is whether she meets

the third. As a result, the only issue for us to decide is

whether petitioner has established that the invitation that

she accepted was ‘‘for a period not expected to exceed 2

years’’ within the meaning of article 21.

Respondent contends that petitioner fails to qualify for

benefits on any portion of her visit under article 21 because

petitioner has not established that she was invited to come

to the United States ‘‘for a period not expected to exceed 2

years’’. Respondent contends that it is the invitor’s expecta-

tion that is relevant in determining whether petitioner came

to the United States for a period not expected to exceed 2

years. Respondent bases his position on what he maintains

is the plain reading of the text of article 21. Petitioner argues

that the expectation referred to in article 21 is that of the

invitee alone; in this case, petitioner. Petitioner contends

that her expectation is the only relevant expectation and that

it can be evidenced through her testimony and an observance

of the surrounding circumstances.

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(447) SANTOS v. COMMISSIONER 457

Article 21 provides an exemption from income tax for up

to 2 years for specified persons who are invited to the United

States by specified governmental entities and educational

institutions for the purpose of teaching, but only if the invita-

tion is ‘‘for a period not expected to exceed 2 years’’. The text

of article 21 does not support one party’s suggested

interpretation to a greater extent than it does the other

party’s. Article 21 is ambiguous with respect to whose

expectation is relevant in determining the expected duration

of an exchange teacher’s visit. Therefore, we believe that the

most logical reading of article 21 requires us to consider all

of the relevant facts and circumstances and then make an

objective determination of whether petitioner was invited to

come to the United States ‘‘for a period not expected to

exceed 2 years’’. This standard does not focus exclusively or

primarily on the expectation of any single party or on a par-

ticular factor; rather, this inquiry necessitates that we look

at all of the facts, including the expectations of the involved

parties as well as any relevant facts and circumstances

regarding the operation of the exchange teacher program.

To begin our analysis, we will consider the evidence that

relates to petitioner’s expectation. Petitioner argues that she

did not expect to remain in the United States for more than

2 years. Petitioner advances several facts intended to support

her position, including: Her family ties to, and familiarity

with, the Philippines; the limited terms of her employment

agreement(s); and her limited right to remain in the United

States both legally and contractually. The strongest of peti-

tioner’s arguments can be stated as two basic positions: (1)

Because she was hired under a 1-year contract as an at-will

employee, it was not possible for petitioner to expect to

remain in the United States for a period greater than 2

years, and (2) because her J–1 visa was not permanent and

was not guaranteed to remain valid beyond the first 2 years,

petitioner could not have expected to remain in the United

States for more than 2 years. After taking into consideration

all of the relevant objective facts and circumstances, we find

petitioner’s arguments unpersuasive in establishing that she

came to the United States for a period not expected to exceed

2 years. There is a variety of facts that indicate petitioner’s

expectation was to stay in the United States for more than

2 years under the exchange teacher program.

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458 135 UNITED STATES TAX COURT REPORTS (447)

Petitioner entered into several contractual agreements

indicating that it was likely she expected to remain in the

United States for at least 3 years. Petitioner, Amity, and the

RCSD signed the Amity exchange teacher contract in June

2004, which indicates that petitioner was contracted to

Amity for the duration of the period specified on the Form

DS–2019 issued to her. Amity was the sponsor of petitioner’s

visa, as indicated on both Forms DS–2019, and that sponsor-

ship covered a 3-year period. The fact that petitioner was

issued two Forms DS–2019 does not change the fact that

Amity’s sponsorship was always intended to cover a 3-year

period. The record indicates that were it not for Amity’s mis-

taken interpretation of a new Department of State policy,

petitioner would have initially been issued a Form DS–2019

for a 3-year period. In fact, Amity issued to petitioner a

second Form DS–2019 as a matter of course in order to reach

the same result. In addition, petitioner agreed to pay, and

did pay, Amity’s fees when she entered into the 3-year

administrative fee payment contract in July 2004. Petitioner

paid Amity $1,500 the first year and $750 in each of the next

2 years. The fact that petitioner contracted to pay Amity’s

fees for its services over a 3-year period indicates that peti-

tioner expected that she would participate in the exchange

teacher program for more than 2 years. In July 2004 peti-

tioner also signed Amity’s home return memo of under-

standing, agreeing to adhere to the requirements of her J–

1 visa and the Amity exchange teacher program regulations,

which contemplated her return to the Philippines after 3

years.

Additionally, upon petitioner’s arrival in the United States

she was granted a preliminary teaching credential. This

credential provided that if petitioner passed the CBEST within

1 year, she would be eligible to work as a special education

instructor for 5 years. In August 2004 and again in Sep-

tember 2005 petitioner requested a 1-year waiver of the

CBEST requirements from the commission. These two waivers

would have allowed petitioner to teach in the United States

for a period of more than 2 years from the time she arrived

in the United States without ever having to complete the

CBEST requirements. If petitioner had expected to return to

the Philippines in less than 2 years, these waivers would

have been sufficient to enable her to do so without examina-

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(447) SANTOS v. COMMISSIONER 459

tion. However, in April 2005 petitioner began the CBEST, and

she completed its requirements the following year. The fact

that petitioner decided to take the CBEST, without being

required to do so, indicates that from early on in her visit

petitioner expected to remain in her position with the RCSD

beyond 2 years.

In determining petitioner’s expectations, it is also useful to

look at her communications with Amity, AIC, and the RCSD

regarding her participation in the exchange teacher program.

Petitioner has introduced no evidence that she ever

expressed to any of the parties involved that she had the

desire to return to the Philippines after only 2 years. In fact,

petitioner did not testify at trial that she had expected to

return home after 2 years. Instead, she stated that she did

not have any expectation regarding the duration of her stay

in the United States. 5

Also relevant to whether petitioner expected that she

would remain in the United States for more than 2 years are

the financial circumstances surrounding her participation in

the exchange teacher program. Petitioner spent at least

$5,000 on expenses and fees in order to come to the United

States. Given that petitioner earned the equivalent of $400

to $500 a month in the Philippines, this represents a consid-

erable investment. These expenses, coupled with her ability

to earn dramatically higher wages in the United States,

make it all the more likely that petitioner would not have

come to the United States expecting to return to her home

country earlier than necessary.

In addition to considering petitioner’s expectation

regarding the length of her participation in the exchange

teacher program, we must also consider the expectations of

the RCSD, Amity, and AIC and/or Badilla. The record clearly

indicates that all of the parties involved with petitioner’s

invitation and employment in the United States expected

that she would remain in the United States as a teacher for

more than 2 years. This expectation is evidenced both by con-

tracts that were entered into and by the testimony given at

trial by representatives of the RCSD, Amity, and AIC and/or

Badilla.

5 When asked at trial whether there had been an expectation as to how long she would stay

in the United States at the time she received her offer from the RCSD, petitioner responded

‘‘No’’.

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460 135 UNITED STATES TAX COURT REPORTS (447)

Representatives from the RCSD, Amity, and AIC and/or

Badilla all testified that they expected participants in the

exchange teacher program, such as petitioner, to remain in

the United States for at least 3 years. None of these individ-

uals expressed any knowledge of special circumstances which

had caused them to have a different expectation with regard

to petitioner’s participation. The fact that Amity and the

RCSD entered into the Amity exchange teacher contract

indicates that both organizations expected that petitioner

would stay in the United States for at least 3 years. This is

also evidenced by the 3-year administrative fee payment con-

tract between Amity and petitioner.

It is also useful to consider the historical experience

regarding the exchange teacher program. Representatives

from Amity, AIC, and Badilla testified that despite their best

efforts to encourage teachers to return to their home coun-

tries after their participation in the exchange teacher pro-

gram, the vast majority of Filipino participants decide to stay

in the United States beyond the 3-year program term.

Additionally, a representative from the RCSD testified that

when teachers from the Philippines had been hired in the

past as part of the exchange teacher program, many had

decided to stay in the United States for more than 3 years

and become residents. The record indicates that an over-

whelming majority of the Filipino teachers who participate in

the exchange teacher program remain in the United States

for more than the 3-year period provided by the exchange.

This information, while itself not determinative, is useful in

adding context to our consideration of all of the relevant facts

and circumstances in determining what the expectation was

regarding the length of petitioner’s stay.

In conclusion, after considering all of the relevant facts and

circumstances, we find that petitioner was invited to the

United States for a period that was expected to exceed 2

years. Accordingly, petitioner’s wage income for the taxable

years 2005 and 2006 is not exempt from taxation under

article 21, and we sustain respondent’s determinations of the

deficiencies.

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(447) SANTOS v. COMMISSIONER 461

To reflect the foregoing,

Decisions will be entered under Rule 155.

f

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