878. Foreign educational, charitable, and certain other exempt organizations
For special provisions relating to foreign educational, charitable, and other exempt organizations, see sections 512(a) and 4948.
879. Tax treatment of certain community income in the case of nonresident alien individuals
881. Tax on income of foreign corporations not connected with United States business
(a) Imposition of tax. -- Except as provided in subsection (c), 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 foreign corporation as --
(1) 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,
(2) gains described in section 631(b) or (c),
(3) in the case of --
(A) 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 foreign corporation (to the extent such discount was not theretofore taken into account under subparagraph (B)), and
(B) a payment on an original issue discount obligation, an amount equal to the original issue discount accuring while such obligation was held by the foreign corporation (except that such original issue discount shall be taken into account under this subparagraph only to the extent such discount was not theretofore taken into account under this subparagraph and only to the extent that the tax thereon does not exceed the payment less the tax imposed by paragraph (1) thereon), and
(4) 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 dispostion 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.
(b) Exception for certain Guam and Virgin Islands corporations. --
(1) In general. -- For purposes of this section and section 884, a corporation created or organized in Guam, American Samoa, the Northern Mariana Islands, or the Virgin Islands or under the law of any such possession shall not be treated as a foreign corporation of any taxable year if --
(A) at all times during such taxable year less than 25 percent in value of the stock of such corporation is benefically owned (directly or indirectly) by foreign persons,
(B) at least 65 percent of the gross income of such corporation is shown to the satisfaction of the Secretary to be effectively connected with the conduct of a trade or business in such a possession or the United States for the 3-year period ending with the close of the taxable year of such corporation (or for such part of such period as the corporation or any predecessor has been in existence), and
(2) Definitions. --
(A) Foreign person. -- For purposes of paragraph (1), the term "foreign person" means any person other than --
(i) a United States person, or
(ii) a person who would be a United States person if references to the United States in section 7701 included references to a possession of the United States.
(B) Indirect ownership rules. -- For purposes of paragraph (1), the rules of section 318(a)(2) shall apply except that "5 percent" shall be substituted for "50 percent" in subparagraph (C) thereof.
(c) Repeal of tax on interest of foreign corporations received from certain portfolio debt investments. --
(1) In general. -- In the case of any portfolio interest received by a foreign corporation from sources withint the United States, no tax shall be imposed under paragraph (1) or (3) 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:
(A) Certain obligations which are not registered. -- Interest which is paid on any obligation which is described in section 871(h)(2)(A).
(B) Certain registered obligations. -- Interest which is paid on an obligation --
(i) which is in registered form, and
(ii) with respect to which the person who would otherwise be required to deduct and withhold tax from such interest under section 1442(a) receives a statement which meets the requirements of section 871(h)(4) that the beneficial owner of the obligation is not a United States person.
(3) Portfolio interest shall not include interest received by certain persons. -- For purposes of this subsection, the term "portfolio interest" shall not include any portfolio interest which --
(A) except in the case of interest paid on an obligation of the United States, is received by a bank on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business,
(B) is received by a 10-percent shareholder (within the meaning of section 871(h)(3)(B)), or
(C) is received by a controlled foreign corporation from a related person (within the meaning of section 864(d)(4)).
(4) Special rules for controlled foreign corporations.--
(A) In general. -- In the case of any portfolio interest received by a controlled foreign corporation, the following provisions shall not apply:
(i) Subparagraph (A) of section 954(b)(3) (relating to exception where foreign base company income is less than 5 percent or $1,000,000).
(ii) Paragraph (4) of section 954(b)(3) (relating to exception for certain income subject to high foreign taxes).
(iii) Clause (i) of section 954(c)(3)(A) (relating to certain income received from related persons).
(B) Controlled foreign corporation. -- For purposes of this subsection, the term "controlled foreign corproation" has the meaning given to such term by section 957(a).
(5) Secretary may cease application of this subsection. -- Under rules similar to the rules of section 871(h)(5), the Secretary may provide that this subsection shall not apply to payments of interest described in section 871(h)(5).
(6) Registered form. -- For purposes of this subsection, the term "registered form" has the meaning given such term by section 163(f).
(d) Tax not to apply to certain interest and dividends. -- No tax shall be imposed under paragraph (1) or (3) of subsection (a) on any amount described in section 871(i)(2).
(e) Cross reference. --
For doubling of tax on corporations of certain foreign countries, see section 891.
For special rules for original issue discount, see section 871(g).
882. Tax on income of foreign corporations connected with United States business
(a) Imposition of tax. --
(I) In general. -- A foreign corporation engaged in trade or business within the United States during the taxable year shall be taxable as provided in section 11, 55, 59A, or 1201(a) on its taxable income which is effectively connected with the conduct of a trade or business within the United States.
(2) Determination of taxable income. -- 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.
(3) [Cross reference. --] For special tax treatment of gain or loss from the dispostion by a foreign corporation of a United States real property interest, see section 897.
(b) Gross income. -- In the case of a foreign corporation, except where the context clearly indicates otherwise, gross income includes only --
(1) gross income which is derived from sources within the United States and which is not effectively connected with the conduct of a trade or business within the United States, and
(2) gross income which is effectively connected with the conduct of
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