Tax Court: Antarctica Not a Foreign Country for Tax Purposes

March 11, 2008

The federal government taxes U.S. citizens on all income wherever it is earned, but those working and living abroad in a “foreign country” for a certain number of days may exclude a certain dollar amount of wages earned overseas under section 911 of the Internal Revenue Code.

Durant and Mette Cephers spent much of 2001 and 2002 at the McMurdo Station on Ross Island, Antarctica, and their tax returns excluded income as outlined in section 911 as having been earned in a foreign country.

The U.S. Tax Court ruled yesterday in Cephers v. Commissioner that the wages were improperly excluded because Antarctica is not a foreign country. They cited a previous ruling, Arnette v. Commissioner, which held that a “foreign country” is a territory under the sovereignty of a government other than the United States or its possessions. Because Antarctica has no government under the terms of the 1961 Antarctic Treaty, it does not meet the definition.

Section 911 is meant to give some relief to taxpayers trapped by the U.S.’s insistence on taxing income earned beyond its borders. Antarctica is beyond the borders of the U.S. government, and should be treated as such for the purposes of Section 911. Instead, U.S. taxpayers who work in Antarctica are treated differently and punitively than U.S. taxpayers who work anywhere else in the world.


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