§ 871. Tax on nonresident alien individuals
(a)
Income not connected with United States business—30 percent tax
(1)
Income other than capital gains
Except as provided in subsection (h), there is hereby imposed for each taxable year a tax of 30 percent of the amount received from sources within the United States by a nonresident alien individual as—
(A)
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,
(B)
gains described in section
631
(b) or (c), and gains on transfers described in section
1235 made on or before October 4, 1966,
(C)
in the case of—
(i)
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
(ii)
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
(D)
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,
but only to the extent the amount so received is not effectively connected with the conduct of a trade or business within the United States.
(2)
Capital gains of aliens present in the United States 183 days or more
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.
(c)
Participants in certain exchange or training programs
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.
(d)
Election to treat real property income as income connected with United States business
(1)
In general
A nonresident alien individual who during the taxable year derives any income—
(A)
from real property held for the production of income and located in the United States, or from any interest in such real property, including
(B)
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,
may elect for such taxable year to treat all such income as income which is effectively connected with the conduct of a trade or business within the United States. In such case, such income shall be taxable as provided in subsection (b)(1) whether or not such individual is engaged in trade or business within the United States during the taxable year. An election under this paragraph for any taxable year shall remain in effect for all subsequent taxable years, except that it may be revoked with the consent of the Secretary with respect to any taxable year.
(2)
Election after revocation
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.
(f)
Certain annuities received under qualified plans
(1)
In general
For purposes of this section, gross income does not include any amount received as an annuity under a qualified annuity plan described in section
403
(a)(1), or from a qualified trust described in section
401
(a) which is exempt from tax under section
501
(a), if—
(A)
all of the personal services by reason of which the annuity is payable were either—
(B)
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.
(2)
Exclusion
Income received during the taxable year which would be excluded from gross income under this subsection but for the requirement of paragraph (1)(B) shall not be included in gross income if—
(g)
Special rules for original issue discount
For purposes of this section and section
881—
(1)
Original issue discount obligation
(A)
In general
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).
(B)
Exceptions
The term “original issue discount obligation” shall not include—
(i)
Certain short-term obligations
Any obligation payable 183 days or less from the date of original issue (without regard to the period held by the taxpayer).
(ii)
Tax-exempt obligations
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.
(2)
Determination of portion of original issue discount accruing during any period
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.
(3)
Source of original issue discount
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.
(4)
Stripped bonds
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.
(h)
Repeal of tax on interest of nonresident alien individuals received from certain portfolio debt investments
(1)
In general
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).
(2)
Portfolio interest
For purposes of this subsection, the term “portfolio interest” means any interest (including original issue discount) which would be subject to tax under subsection (a) but for this subsection and which is described in any of the following subparagraphs:
(3)
Portfolio interest not to include interest received by 10-percent shareholders
For purposes of this subsection—
(A)
In general
The term “portfolio interest” shall not include any interest described in subparagraph (A) or (B) of paragraph (2) which is received by a 10-percent shareholder.
(B)
10-Percent shareholder
The term “10-percent shareholder” means—
(C)
Attribution rules
For purposes of determining ownership of stock under subparagraph (B)(i) the rules of section
318
(a) shall apply, except that—
(ii)
section
318
(a)(3)(C) shall be applied—
(II)
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
(iii)
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.
Under regulations prescribed by the Secretary, rules similar to the rules of the preceding sentence shall be applied in determining the ownership of the capital or profits interest in a partnership for purposes of subparagraph (B)(ii).
(4)
Portfolio interest not to include certain contingent interest
For purposes of this subsection—
(A)
In general
Except as otherwise provided in this paragraph, the term “portfolio interest” shall not include—
(C)
Exceptions
Subparagraph (A)(i) shall not apply to—
(i)
any amount of interest solely by reason of the fact that the timing of any interest or principal payment is subject to a contingency,
(ii)
any amount of interest solely by reason of the fact that the interest is paid with respect to nonrecourse or limited recourse indebtedness,
(iii)
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),
(iv)
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,
(v)
any amount of interest determined by reference to—
(I)
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),
(5)
Certain statements
A statement with respect to any obligation meets the requirements of this paragraph if such statement is made by—
(B)
a securities clearing organization, a bank, or other financial institution that holds customers’ securities in the ordinary course of its trade or business.
The preceding sentence shall not apply to any statement with respect to payment of interest on any obligation by any person if, at least one month before such payment, the Secretary has published a determination that any statement from such person (or any class including such person) does not meet the requirements of this paragraph.
(6)
Secretary may provide subsection not to apply in cases of inadequate information exchange
(A)
In general
If the Secretary determines that the exchange of information between the United States and a foreign country is inadequate to prevent evasion of the United States income tax by United States persons, the Secretary may provide in writing (and publish a statement) that the provisions of this subsection shall not apply to payments of interest to any person within such foreign country (or payments addressed to, or for the account of, persons within such foreign country) during the period—
(i)
Tax not to apply to certain interest and dividends
(1)
In general
No tax shall be imposed under paragraph (1)(A) or (1)(C) of subsection (a) on any amount described in paragraph (2).
(2)
Amounts to which paragraph (1) applies
The amounts described in this paragraph are as follows:
(A)
Interest on deposits, if such interest is not effectively connected with the conduct of a trade or business within the United States.
(3)
Deposits
For purposes of paragraph (2), the term “deposits” means amounts which are—
(B)
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
(j)
Exemption for certain gambling winnings
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.
(k)
Exemption for certain dividends of regulated investment companies
(1)
Interest-related dividends
(B)
Exceptions
Subparagraph (A) shall not apply—
(i)
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,
(ii)
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
(iii)
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.
Clause (iii) shall not apply to any dividend with respect to any stock which was acquired on or before the date of the publication of the Secretary’s determination under subsection (h)(6).
(C)
Interest-related dividend
For purposes of this paragraph—
(i)
In general
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.
(ii)
Excess reported amounts
If the aggregate reported amount with respect to the company for any taxable year exceeds the qualified net interest income of the company for such taxable year, an interest related dividend is the excess of—
(iii)
Allocation of excess reported amount
(I)
In general
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.
(II)
Special rule for noncalendar year taxpayers
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.
(iv)
Definitions
For purposes of this subparagraph—
(I)
Reported interest related dividend amount
The term “reported interest related dividend amount” means the amount reported to its shareholders under clause (i) as an interest related dividend.
(II)
Excess reported amount
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.
(III)
Aggregate reported amount
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).
(D)
Qualified net interest income
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.
(E)
Qualified interest income
For purposes of subparagraph (D), the term “qualified interest income” means the sum of the following amounts derived by the regulated investment company from sources within the United States:
(i)
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).
(ii)
Any interest includible in gross income (including amounts recognized as ordinary income in respect of original issue discount or market discount or acquisition discount under part V of subchapter P and such other amounts as regulations may provide) on an obligation which is in registered form; except that this clause shall not apply to—
(2)
Short-term capital gain dividends
(A)
In general
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.
(B)
Exception for aliens taxable under subsection (a)(2)
Subparagraph (A) shall not apply in the case of any nonresident alien individual subject to tax under subsection (a)(2).
(C)
Short-term capital gain dividend
For purposes of this paragraph—
(i)
In general
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.
(ii)
Excess reported amounts
If the aggregate reported amount with respect to the company for any taxable year exceeds the qualified short-term gain of the company for such taxable year, the term “short-term capital gain dividend” means the excess of—
(iii)
Allocation of excess reported amount
(I)
In general
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.
(II)
Special rule for noncalendar year taxpayers
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.
(iv)
Definitions
For purposes of this subparagraph—
(I)
Reported short-term capital gain dividend amount
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.
(II)
Excess reported amount
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.
(III)
Aggregate reported amount
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).
(D)
Qualified short-term gain
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.
(l)
Rules relating to existing 80/20 companies
For purposes of this subsection and subsection (i)(2)(B)—
(1)
Existing 80/20 company
<
(A)
In general
The term “existing 80/20 company” means any corporation if—
(i)
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,
(B)
Foreign business requirements
(i)
In general
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.
(ii)
Active foreign business income
For purposes of clause (i), the term “active foreign business income” means gross income which—
(iii)
Testing period
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.
(iv)
Transition rule
In the case of a taxable year for which the testing period includes 1 or more taxable years beginning before January 1, 2011—
(I)
a corporation meets the 80-percent foreign business requirements of this subparagraph if and only if the weighted average of—
(aa)
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
(bb)
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,
is at least 80 percent, and