26 U.S.C. § 871: Tax on nonresident alien individuals

interest (other than original issue discount as defined in section 1273), dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income, gains described in subsection (b) or (c) of section 631, a sale or exchange of an original issue discount obligation, the amount of the original issue discount accruing while such obligation was held by the nonresident alien individual (to the extent such discount was not theretofore taken into account under clause (ii)), and a payment on an original issue discount obligation, an amount equal to the original issue discount accruing while such obligation was held by the nonresident alien individual (except that such original issue discount shall be taken into account under this clause only to the extent such discount was not theretofore taken into account under this clause and only to the extent that the tax thereon does not exceed the payment less the tax imposed by subparagraph (A) thereon), and gains from the sale or exchange after October 4, 1966 , of patents, copyrights, secret processes and formulas, good will, trademarks, trade brands, franchises, and other like property, or of any interest in any such property, to the extent such gains are from payments which are contingent on the productivity, use, or disposition of the property or interest sold or exchanged, In the case of a nonresident alien individual present in the United States for a period or periods aggregating 183 days or more during the taxable year, there is hereby imposed for such year a tax of 30 percent of the amount by which his gains, derived from sources within the United States, from the sale or exchange at any time during such year of capital assets exceed his losses, allocable to sources within the United States, from the sale or exchange at any time during such year of capital assets. For purposes of this paragraph, gains and losses shall be taken into account only if, and to the extent that, they would be recognized and taken into account if such gains and losses were effectively connected with the conduct of a trade or business within the United States, except that such gains and losses shall be determined without regard to section 1202 and such losses shall be determined without the benefits of the capital loss carryover provided in section 1212. Any gain or loss which is taken into account in determining the tax under paragraph (1) or subsection (b) shall not be taken into account in determining the tax under this paragraph. For purposes of the 183-day requirement of this paragraph, a nonresident alien individual not engaged in trade or business within the United States who has not established a taxable year for any prior period shall be treated as having a taxable year which is the calendar year. 85 percent of any social security benefit (as defined in section 86(d)) shall be included in gross income (notwithstanding section 207 of the Social Security Act), and section 86 shall not apply. A nonresident alien individual engaged in trade or business within the United States during the taxable year shall be taxable as provided in section 1 or 55 on his taxable income which is effectively connected with the conduct of a trade or business within the United States. In determining taxable income for purposes of paragraph (1), gross income includes only gross income which is effectively connected with the conduct of a trade or business within the United States. For purposes of this section, a nonresident alien individual who (without regard to this subsection) is not engaged in trade or business within the United States and who is temporarily present in the United States as a nonimmigrant under subparagraph (F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act, as amended ( 8 U.S.C. 1101(a)(15)(F) , (J), (M), or (Q)), shall be treated as a nonresident alien individual engaged in trade or business within the United States, and any income described in the second sentence of section 1441(b) which is received by such individual shall, to the extent derived from sources within the United States, be treated as effectively connected with the conduct of a trade or business within the United States. from real property held for the production of income and located in the United States, or from any interest in such real property, including (i) gains from the sale or exchange of such real property or an interest therein, (ii) rents or royalties from mines, wells, or other natural deposits, and (iii) gains described in section 631(b) or (c), and which, but for this subsection, would not be treated as income which is effectively connected with the conduct of a trade or business within the United States, If an election has been made under paragraph (1) and such election has been revoked, a new election may not be made under such paragraph for any taxable year before the 5th taxable year which begins after the first taxable year for which such revocation is effective, unless the Secretary consents to such new election. An election under paragraph (1), and any revocation of such an election, may be made only in such manner and at such time as the Secretary may by regulations prescribe. personal services performed outside the United States by an individual who, at the time of performance of such personal services, was a nonresident alien, or personal services described in section 864(b)(1) performed within the United States by such individual, and at the time the first amount is paid as an annuity under the annuity plan or by the trust, 90 percent or more of the employees for whom contributions or benefits are provided under such annuity plan, or under the plan or plans of which the trust is a part, are citizens or residents of the United States. the recipient’s country of residence grants a substantially equivalent exclusion to residents and citizens of the United States; or the recipient’s country of residence is a beneficiary developing country under title V of the Trade Act of 1974 ( 19 U.S.C. 2461 et seq.). Except as provided in subparagraph (B), the term “original issue discount obligation” means any bond or other evidence of indebtedness having original issue discount (within the meaning of section 1273). Any obligation payable 183 days or less from the date of original issue (without regard to the period held by the taxpayer). Any obligation the interest on which is exempt from tax under section 103 or under any other provision of law without regard to the identity of the holder. The determination of the amount of the original issue discount which accrues during any period shall be made under the rules of section 1272 (or the corresponding provisions of prior law) without regard to any exception for short-term obligations. Except to the extent provided in regulations prescribed by the Secretary, the determination of whether any amount described in subsection (a)(1)(C) is from sources within the United States shall be made at the time of the payment (or sale or exchange) as if such payment (or sale or exchange) involved the payment of interest. The provisions of section 1286 (relating to the treatment of stripped bonds and stripped coupons as obligations with original issue discount) shall apply for purposes of this section. In the case of any portfolio interest received by a nonresident individual from sources within the United States, no tax shall be imposed under paragraph (1)(A) or (1)(C) of subsection (a). would be subject to tax under subsection (a) but for this subsection, and which is in registered form, and the United States person who would otherwise be required to deduct and withhold tax from such interest under section 1441(a) receives a statement (which meets the requirements of paragraph (5)) that the beneficial owner of the obligation is not a United States person, or the Secretary has determined that such a statement is not required in order to carry out the purposes of this subsection. The term “portfolio interest” shall not include any interest described in paragraph (2) which is received by a 10-percent shareholder. in the case of an obligation issued by a corporation, any person who owns 10 percent or more of the total combined voting power of all classes of stock of such corporation entitled to vote, or in the case of an obligation issued by a partnership, any person who owns 10 percent or more of the capital or profits interest in such partnership. section 318(a)(2)(C) shall be applied without regard to the 50-percent limitation therein, without regard to the 50-percent limitation therein; and in any case where such section would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) which is owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owns in such corporation bears to the value of all stock in such corporation, and any stock which a person is treated as owning after application of section 318(a)(4) shall not, for purposes of applying paragraphs (2) and (3) of section 318(a), be treated as actually owned by such person. any receipts, sales or other cash flow of the debtor or a related person, any income or profits of the debtor or a related person, any change in value of any property of the debtor or a related person, or any dividend, partnership distributions, or similar payments made by the debtor or a related person, or any other type of contingent interest that is identified by the Secretary by regulation, where a denial of the portfolio interest exemption is necessary or appropriate to prevent avoidance of Federal income tax. The term “related person” means any person who is related to the debtor within the meaning of section 267(b) or 707(b)(1), or who is a party to any arrangement undertaken for a purpose of avoiding the application of this paragraph. any amount of interest solely by reason of the fact that the timing of any interest or principal payment is subject to a contingency, any amount of interest solely by reason of the fact that the interest is paid with respect to nonrecourse or limited recourse indebtedness, any amount of interest all or substantially all of which is determined by reference to any other amount of interest not described in subparagraph (A) (or by reference to the principal amount of indebtedness on which such other interest is paid), any amount of interest solely by reason of the fact that the debtor or a related person enters into a hedging transaction to manage the risk of interest rate or currency fluctuations with respect to such interest, changes in the value of property (including stock) that is actively traded (within the meaning of section 1092(d)) other than property described in section 897(c)(1) or (g), the yield on property described in subclause (I), other than a debt instrument that pays interest described in subparagraph (A), or stock or other property that represents a beneficial interest in the debtor or a related person, or changes in any index of the value of property described in subclause (I) or of the yield on property described in subclause (II), and any other type of interest identified by the Secretary by regulation. which was issued on or before April 7, 1993 , or which was issued after such date pursuant to a written binding contract in effect on such date and at all times thereafter before such indebtedness was issued. the beneficial owner of such obligation, or a securities clearing organization, a bank, or other financial institution that holds customers’ securities in the ordinary course of its trade or business. beginning on the date specified by the Secretary, and ending on the date that the Secretary determines that the exchange of information between the United States and the foreign country is adequate to prevent the evasion of United States income tax by United States persons. Subparagraph (A) shall not apply to the payment of interest on any obligation which is issued on or before the date of the publication of the Secretary’s determination under such subparagraph. For purposes of this subsection, the term “registered form” has the same meaning given such term by section 163(f). No tax shall be imposed under paragraph (1)(A) or (1)(C) of subsection (a) on any amount described in paragraph (2). Interest on deposits, if such interest is not effectively connected with the conduct of a trade or business within the United States. any dividend paid by an existing 80/20 company, and any interest paid by an existing 80/20 company. Income derived by a foreign central bank of issue from bankers’ acceptances. Dividends paid by a foreign corporation which are treated under section 861(a)(2)(B) as income from sources within the United States. deposits with persons carrying on the banking business, deposits or withdrawable accounts with savings institutions chartered and supervised as savings and loan or similar associations under Federal or State law, but only to the extent that amounts paid or credited on such deposits or accounts are deductible under section 591 (determined without regard to sections 265 and 291) in computing the taxable income of such institutions, and amounts held by an insurance company under an agreement to pay interest thereon. No tax shall be imposed under paragraph (1)(A) of subsection (a) on the proceeds from a wager placed in any of the following games: blackjack, baccarat, craps, roulette, or big-6 wheel. The preceding sentence shall not apply in any case where the Secretary determines by regulation that the collection of the tax is administratively feasible. Except as provided in subparagraph (B), no tax shall be imposed under paragraph (1)(A) of subsection (a) on any interest-related dividend received from a regulated investment company which meets the requirements of section 852(a) for the taxable year with respect to which the dividend is paid. to any interest-related dividend received from a regulated investment company by a person to the extent such dividend is attributable to interest (other than interest described in subparagraph (E)(i) or (iii)) received by such company on indebtedness issued by such person or by any corporation or partnership with respect to which such person is a 10-percent shareholder, to any interest-related dividend with respect to stock of a regulated investment company unless the person who would otherwise be required to deduct and withhold tax from such dividend under chapter 3 receives a statement (which meets requirements similar to the requirements of subsection (h)(5)) that the beneficial owner of such stock is not a United States person, and to any interest-related dividend paid to any person within a foreign country (or any interest-related dividend payment addressed to, or for the account of, persons within such foreign country) during any period described in subsection (h)(6) with respect to such country. Except as provided in clause (ii), an interest related dividend is any dividend, or part thereof, which is reported by the company as an interest related dividend in written statements furnished to its shareholders. the reported interest related dividend amount, over the excess reported amount which is allocable to such reported interest related dividend amount. Except as provided in subclause (II), the excess reported amount (if any) which is allocable to the reported interest related dividend amount is that portion of the excess reported amount which bears the same ratio to the excess reported amount as the reported interest related dividend amount bears to the aggregate reported amount. In the case of any taxable year which does not begin and end in the same calendar year, if the post-December reported amount equals or exceeds the excess reported amount for such taxable year, subclause (I) shall be applied by substituting “post-December reported amount” for “aggregate reported amount” and no excess reported amount shall be allocated to any dividend paid on or before December 31 of such taxable year. The term “reported interest related dividend amount” means the amount reported to its shareholders under clause (i) as an interest related dividend. The term “excess reported amount” means the excess of the aggregate reported amount over the qualified net interest income of the company for the taxable year. The term “aggregate reported amount” means the aggregate amount of dividends reported by the company under clause (i) as interest related dividends for the taxable year (including interest related dividends paid after the close of the taxable year described in section 855). The term “post-December reported amount” means the aggregate reported amount determined by taking into account only dividends paid after December 31 of the taxable year. For purposes of subparagraph (C), the term “qualified net interest income” means the qualified interest income of the regulated investment company reduced by the deductions properly allocable to such income. Any amount includible in gross income as original issue discount (within the meaning of section 1273) on an obligation payable 183 days or less from the date of original issue (without regard to the period held by the company). any interest on an obligation issued by a corporation or partnership if the regulated investment company is a 10-percent shareholder in such corporation or partnership, and any interest which is treated as not being portfolio interest under the rules of subsection (h)(4). Any interest referred to in subsection (i)(2)(A) (without regard to the trade or business of the regulated investment company). Any interest-related dividend includable in gross income with respect to stock of another regulated investment company. For purposes of this paragraph, the term “10-percent shareholder” has the meaning given such term by subsection (h)(3)(B). Except as provided in subparagraph (B), no tax shall be imposed under paragraph (1)(A) of subsection (a) on any short-term capital gain dividend received from a regulated investment company which meets the requirements of section 852(a) for the taxable year with respect to which the dividend is paid. Subparagraph (A) shall not apply in the case of any nonresident alien individual subject to tax under subsection (a)(2). Except as provided in clause (ii), the term “short-term capital gain dividend” means any dividend, or part thereof, which is reported by the company as a short-term capital gain dividend in written statements furnished to its shareholders. the reported short-term capital gain dividend amount, over the excess reported amount which is allocable to such reported short-term capital gain dividend amount. Except as provided in subclause (II), the excess reported amount (if any) which is allocable to the reported short-term capital gain dividend amount is that portion of the excess reported amount which bears the same ratio to the excess reported amount as the reported short-term capital gain dividend amount bears to the aggregate reported amount. In the case of any taxable year which does not begin and end in the same calendar year, if the post-December reported amount equals or exceeds the excess reported amount for such taxable year, subclause (I) shall be applied by substituting “post-December reported amount” for “aggregate reported amount” and no excess reported amount shall be allocated to any dividend paid on or before December 31 of such taxable year. The term “reported short-term capital gain dividend amount” means the amount reported to its shareholders under clause (i) as a short-term capital gain dividend. The term “excess reported amount” means the excess of the aggregate reported amount over the qualified short-term gain of the company for the taxable year. The term “aggregate reported amount” means the aggregate amount of dividends reported by the company under clause (i) as short-term capital gain dividends for the taxable year (including short-term capital gain dividends paid after the close of the taxable year described in section 855). The term “post-December reported amount” means the aggregate reported amount determined by taking into account only dividends paid after December 31 of the taxable year. For purposes of subparagraph (C), the term “qualified short-term gain” means the excess of the net short-term capital gain of the regulated investment company for the taxable year over the net long-term capital loss (if any) of such company for such taxable year. For purposes of this subparagraph, the net short-term capital gain of the regulated investment company shall be computed by treating any short-term capital gain dividend includible in gross income with respect to stock of another regulated investment company as a short-term capital gain. shall not be treated as a short-term capital gain dividend, and shall be included in such shareholder’s gross income as a dividend from the regulated investment company. such corporation met the 80-percent foreign business requirements of section 861(c)(1) (as in effect before the date of the enactment of this subsection) for such corporation’s last taxable year beginning before January 1, 2011 , such corporation meets the 80-percent foreign business requirements of subparagraph (B) with respect to each taxable year after the taxable year referred to in clause (i), and there has not been an addition of a substantial line of business with respect to such corporation after the date of the enactment of this subsection. Except as provided in clause (iv), a corporation meets the 80-percent foreign business requirements of this subparagraph if it is shown to the satisfaction of the Secretary that at least 80 percent of the gross income from all sources of such corporation for the testing period is active foreign business income. is derived from sources outside the United States (as determined under this subchapter), and is attributable to the active conduct of a trade or business in a foreign country or possession of the United States. For purposes of this subsection, the term “testing period” means the 3-year period ending with the close of the taxable year of the corporation preceding the payment (or such part of such period as may be applicable). If the corporation has no gross income for such 3-year period (or part thereof), the testing period shall be the taxable year in which the payment is made. the percentage of the corporation’s gross income from all sources that is active foreign business income (as defined in subparagraph (B) of section 861(c)(1) (as in effect before the date of the enactment of this subsection)) for the portion of the testing period that includes taxable years beginning before January 1, 2011 , and the percentage of the corporation’s gross income from all sources that is active foreign business income (as defined in clause (ii) of this subparagraph) for the portion of the testing period, if any, that includes taxable years beginning on or after January 1, 2011 , the active foreign business percentage for such taxable year shall equal the weighted average percentage determined under subclause (I). the active foreign business income of such company for the testing period, is of the gross income of such company for the testing period from all sources. The corporation referred to in paragraph (1)(A) and all of such corporation’s subsidiaries shall be treated as one corporation. For purposes of subparagraph (A), the term “subsidiary” means any corporation in which the corporation referred to in subparagraph (A) owns (directly or indirectly) stock meeting the requirements of section 1504(a)(2) (determined by substituting “50 percent” for “80 percent” each place it appears and without regard to section 1504(b)(3)). The Secretary may issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section, including regulations or other guidance which provide for the proper application of the aggregation rules described in paragraph (3). For purposes of subsection (a), sections 881 and 4948(a), and chapters 3 and 4, a dividend equivalent shall be treated as a dividend from sources within the United States. any substitute dividend made pursuant to a securities lending or a sale-repurchase transaction that (directly or indirectly) is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States, any payment made pursuant to a specified notional principal contract that (directly or indirectly) is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States, and any other payment determined by the Secretary to be substantially similar to a payment described in subparagraph (A) or (B). in connection with entering into such contract, any long party to the contract transfers the underlying security to any short party to the contract, in connection with the termination of such contract, any short party to the contract transfers the underlying security to any long party to the contract, the underlying security is not readily tradable on an established securities market, in connection with entering into such contract, the underlying security is posted as collateral by any short party to the contract with any long party to the contract, or such contract is identified by the Secretary as a specified notional principal contract, in the case of payments made after the date which is 2 years after the date of the enactment of this subsection, any notional principal contract unless the Secretary determines that such contract is of a type which does not have the potential for tax avoidance. The term “long party” means, with respect to any underlying security of any notional principal contract, any party to the contract which is entitled to receive any payment pursuant to such contract which is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States with respect to such underlying security. The term “short party” means, with respect to any underlying security of any notional principal contract, any party to the contract which is not a long party with respect to such underlying security. The term “underlying security” means, with respect to any notional principal contract, the security with respect to which the dividend referred to in paragraph (2)(B) is paid. For purposes of this paragraph, any index or fixed basket of securities shall be treated as a single security. For purposes of this subsection, the term “payment” includes any gross amount which is used in computing any net amount which is transferred to or from the taxpayer. In the case of any chain of dividend equivalents one or more of which is subject to tax under subsection (a) or section 881, the Secretary may reduce such tax, but only to the extent that the taxpayer can establish that such tax has been paid with respect to another dividend equivalent in such chain, or is not otherwise due, or as the Secretary determines is appropriate to address the role of financial intermediaries in such chain. For purposes of this paragraph, a dividend shall be treated as a dividend equivalent. For purposes of chapters 3 and 4, each person that is a party to any contract or other arrangement that provides for the payment of a dividend equivalent shall be treated as having control of such payment. For tax treatment of certain amounts distributed by the United States to nonresident alien individuals, see section 402(e)(2). For taxation of nonresident alien individuals who are expatriate United States citizens, see section 877. For doubling of tax on citizens of certain foreign countries, see section 891. For adjustment of tax in case of nationals or residents of certain foreign countries, see section 896. For withholding of tax at source on nonresident alien individuals, see section 1441. For election to treat married nonresident alien individual as resident of United States in certain cases, see subsections (g) and (h) of section 6013. For special tax treatment of gain or loss from the disposition by a nonresident alien individual of a United States real property interest, see section 897. Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 881, 897, 1441, 1442, and 2105 of this title] shall apply to dividends with respect to taxable years of regulated investment companies beginning after December 31, 2004 . The amendment made by subsection (b) [amending section 2105 of this title ] shall apply to estates of decedents dying after December 31, 2004 . The amendments made by subsection (c) [amending section 897 of this title ] (other than paragraph (1) thereof) shall take effect after December 31, 2004 .” Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 163, 864, 881, 1441, 1442, and 2105 of this title] shall apply to interest received after the date of the enactment of this Act [ July 18, 1984 ] with respect to obligations issued after such date, in taxable years ending after such date. The amendment made by subsection (d) [amending section 2105 of this title ] shall apply to obligations issued after the date of the enactment of this Act [ July 18, 1984 ] with respect to the estates of decedents dying after such date. For purposes of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], payments of interest on a United States affiliate obligation to an applicable CFC in existence on or before June 22, 1984 , shall be treated as payments to a resident of the country in which the applicable CFC is incorporated. Subparagraph (A) shall not apply to any applicable CFC which did not meet requirements which are based on the principles set forth in Revenue Rulings 69–501, 69–377, 70–645, and 73–110 as such principles are applied in Revenue Ruling 86–6, except that the maximum debt-to-equity ratio described in such Revenue Rulings shall be increased from 5-to-1 to 25-to-1. The term ‘applicable CFC’ has the meaning given such term by section 121(b)(2)(D) of this Act [set out as a note under section 904 of this title ], except that such section shall be applied by substituting ‘the date of interest payment’ for ‘ March 31, 1984 ,’ in clause (i) thereof. The term ‘United States affiliate obligation’ means an obligation described in section 121(b)(2)(F) of this Act [set out as a note under section 904 of this title ] which was issued before June 22, 1984 .” Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 163 and 881 of this title] shall apply to payments made on or after the 60th day after the date of the enactment of this Act [ July 18, 1984 ] with respect to obligations issued after March 31, 1972 . The amendment made by subsection (c) [amending section 163 of this title ] shall apply to obligations issued after June 9, 1984 .” The amendments made by this section (other than the amendments made by subsections (h), (i), and (k)) [amending this section and sections 1, 116, 154, 872 to 874, 875, 932, 6015, and 7701 of this title, redesignating section 877 as 878, enacting section 877 of this title , and repealing section 1493 of this title ] shall apply with respect to taxable years beginning after December 31, 1966 . The amendments made by subsection (h) [amending section 1441 of this title ] shall apply with respect to payments made in taxable years of recipients beginning after December 31, 1966 . The amendments made by subsection (i) [amending section 1461 of this title ] shall apply with respect to payments occurring after December 31, 1966 . The amendments made by subsection (k) [amending section 3401 of this title ] shall apply with respect to remuneration paid after December 31, 1966 .”