U.S. Code » Title 26 » Subtitle Subtitle A— Income Taxes › Chapter CHAPTER 1— NORMAL TAXES AND SURTAXES › Subchapter Subchapter N— Tax Based on Income From Sources Within or Without the United States › Part PART II— NONRESIDENT ALIENS AND FOREIGN CORPORATIONS › Subpart Subpart A— Nonresident Alien Individuals

26 U.S.C. § 872

Gross income

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(a) General ruleIn the case of a nonresident alien individual, 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 a trade or business within the United States.(b) ExclusionsThe following items shall not be included in gross income of a nonresident alien individual, and shall be exempt from taxation under this subtitle:(1) Ships operated by certain nonresidents

Gross income derived by an individual resident of a foreign country from the international operation of a ship or ships if such foreign country grants an equivalent exemption to individual residents of the United States.

(2) Aircraft operated by certain nonresidents

Gross income derived by an individual resident of a foreign country from the international operation of aircraft if such foreign country grants an equivalent exemption to individual residents of the United States.

(3) Compensation of participants in certain exchange or training programsCompensation paid by a foreign employer to a nonresident alien individual for the period he is temporarily present in the United States as a nonimmigrant under subparagraph (F), (J), or (Q) of section 101(a)(15) of the Immigration and Nationality Act, as amended. For purposes of this paragraph, the term “foreign employer” means—(A) a nonresident alien individual, foreign partnership, or foreign corporation, or(B) an office or place of business maintained in a foreign country or in a possession of the United States by a domestic corporation, a domestic partnership, or an individual who is a citizen or resident of the United States.(4) Certain bond income of residents of the Ryukyu Islands or the Trust Territory of the Pacific Islands

Income derived by a nonresident alien individual from a series E or series H United States savings bond, if such individual acquired such bond while a resident of the Ryukyu Islands or the Trust Territory of the Pacific Islands.

(5) Income derived from wagering transactions in certain parimutuel pools

Gross income derived by a nonresident alien individual from a legal wagering transaction initiated outside the United States in a parimutuel pool with respect to a live horse race or dog race in the United States.

(6) Certain rental income

Income to which paragraphs (1) and (2) apply shall include income which is derived from the rental on a full or bareboat basis of a ship or ships or aircraft, as the case may be.

(7) Application to different types of transportation

The Secretary may provide that this subsection be applied separately with respect to income from different types of transportation.

(8) Treatment of possessions

To the extent provided in regulations, a possession of the United States shall be treated as a foreign country for purposes of this subsection.

(Aug. 16, 1954, ch. 736, 68A Stat. 280; Pub. L. 87–256, § 110(c), Sept. 21, 1961, 75 Stat. 536; Pub. L. 89–809, title I, § 103(b), Nov. 13, 1966, 80 Stat. 1550; Pub. L. 99–514, title XII, § 1212(c)(1), (2), Oct. 22, 1986, 100 Stat. 2538; Pub. L. 100–647, title I, § 1012(e)(2)(B), (5), (s)(2)(A), Nov. 10, 1988, 102 Stat. 3500, 3527; Pub. L. 101–239, title VII, § 7811(i)(8)(C), Dec. 19, 1989, 103 Stat. 2411; Pub. L. 103–296, title III, § 320(a)(2), Aug. 15, 1994, 108 Stat. 1535; Pub. L. 108–357, title IV, § 419(a), Oct. 22, 2004, 118 Stat. 1513.)Editorial NotesReferences in Text

Section 101 of the Immigration and Nationality Act, referred to in subsec. (b)(3), is classified to section 1101 of Title 8, Aliens and Nationality.

Amendments

2004—Subsec. (b)(5) to (8). Pub. L. 108–357 added par. (5) and redesignated former pars. (5) to (7) as (6) to (8), respectively.

1994—Subsec. (b)(3). Pub. L. 103–296 substituted “(F), (J), or (Q)” for “(F) or (J)”.

1989—Subsec. (b)(7). Pub. L. 101–239 added par. (7).

1988—Subsec. (a). Pub. L. 100–647, § 1012(s)(2)(A), inserted “, except where the context clearly indicates otherwise” after “individual”.

Subsec. (b)(1), (2). Pub. L. 100–647, § 1012(e)(2)(B), (5), substituted “to individual residents of the United States” for “to citizens of the United States and to corporations organized in the United States” and “international operation” for “operation”.

1986—Subsec. (b)(1). Pub. L. 99–514, § 1212(c)(1), added par. (1) and struck out former par. (1), ships under foreign flag, which read as follows: “Earnings derived from the operation of a ship or ships documented under the laws of a foreign country which grants an equivalent exemption to citizens of the United States and to corporations organized in the United States.”

Subsec. (b)(2). Pub. L. 99–514, § 1212(c)(1), added par. (2) and struck out former par. (2), aircraft of foreign registry, which read as follows: “Earnings derived from the operation of aircraft registered under the laws of a foreign country which grants an equivalent exemption to citizens of the United States and to corporations organized in the United States.”

Subsec. (b)(5), (6). Pub. L. 99–514, § 1212(c)(2), added pars. (5) and (6).

1966—Subsec. (a). Pub. L. 89–809, § 103(b)(1), limited the inclusion of gross income which is derived from sources within the United States to such income which is not effectively connected with the conduct of a trade or business within the United States and inserted provision including gross income without the limitation as to source which is effectively connected with the conduct of a trade or business within the United States.

Subsec. (b)(3)(B). Pub. L. 89–809, § 103(b)(2), substituted “by a domestic corporation, a domestic partnership, or an individual who is a citizen or resident of the United States” for “by a domestic corporation”.

Subsec. (b)(4). Pub. L. 89–809, § 102(b)(3), added par. (4).

1961—Subsec. (b)(3). Pub. L. 87–256 added par. (3).

Statutory Notes and Related SubsidiariesEffective Date of 2004 Amendment

Pub. L. 108–357, title IV, § 419(c), Oct. 22, 2004, 118 Stat. 1513, provided that: “The amendments made by this section [amending this section and section 883 of this title] shall apply to wagers made after the date of the enactment of this Act [Oct. 22, 2004].”

Effective Date of 1994 Amendment

Amendment by Pub. L. 103–296 effective with calendar quarter following Aug. 15, 1994, see section 320(c) of Pub. L. 103–296, set out as a note under section 871 of this title.

Effective Date of 1989 Amendment

Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 1212(f) of Pub. L. 99–514, set out as a note under section 863 of this title.

Effective Date of 1966 Amendment

Amendment by Pub. L. 89–809 applicable with respect to taxable years beginning after Dec. 31, 1966, see section 103(n)(1) of Pub. L. 89–809, set out as a note under section 871 of this title.

Effective Date of 1961 Amendment

Amendment by Pub. L. 87–256 applicable to taxable years beginning after Dec. 31, 1961, see section 110(h)(1) of Pub. L. 87–256, set out as a note under section 117 of this title.

Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States

For nonapplication of amendment by section 1212(c)(1), (2) of Pub. L. 99–514 to the extent application of such amendment would be contrary to any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(3), (4) of Pub. L. 100–647, set out as a note under section 861 of this title.

Executive DocumentsTermination of Trust Territory of the Pacific Islands

For termination of Trust Territory of the Pacific Islands, see note set out preceding section 1681 of Title 48, Territories and Insular Possessions.

Notes of Decisions
Cited in 34 cases, 1928–2003 · leading case: Demore v. Kim, 538 U.S. 510 (2003).
Sort: Relevance Newest Treatment
Demore v. Kim, 538 U.S. 510 (2003). · cites it 2× “Unlike temporary, nonimmigrant aliens, who are generally taxed only on income from domestic sources or connected with a domestic business, 26 U.S.C. § 872 , LPRs, like citizens, are taxed on their worldwide income, 26 CFR §§ 1.”
Lunding v. New York Tax Appeals Tribunal, 522 U.S. 287 (1998). · cites it 2× “Although such treatment may accord with the Federal Government's treatment of taxpayers who are nonresident aliens, see 26 U. S. C. §§ 872 and 873, the reasonableness of such a scheme on a national level is a different issue that does not implicate the Privileges and Immunities…”
Munn v. Bowers, 47 F.2d 204 (2d Cir. 1931). · cites it 6× “791 [26 USCA § 872]). A claim for a refund was rejected, and suit was brought.”
Julian C. Stanford & Elizabeth C. Stanford v. Comm'r of Internal Revenue, 297 F.2d 298 (9th Cir. 1961). · cites it 3× “If Congress can reasonably make such a discrimination, we are not bound to construe Section 911(a) (1) to include both classes of taxpayer contrary to the language of the statute as construed in the light of its legislative history.”
Andres Iglesias v. The United States of Am., 848 F.2d 362 (2d Cir. 1988). “” 26 U.S.C. § 872 . Section 861 of the Internal Revenue Code includes within the definition of income from sources within the United States “[ijnterest from the United States or the District of Columbia and interest on bonds, notes, or other interest-bearing obligations of…”
Chicago Engineers' Club v. United States, 9 F. Supp. 680 (Ct. Cl. 1935). · cites it 2× “33, with interest thereon; the principal sum being the amount of taxes paid on dues and initiation fees paid by plaintiff under section 501 of the Revenue Act of 1926 (26 USCA § 872 note), and section 413 of the Revenue Act of 1928 (26 USCA § 872 and note).”
Houston Club v. United States, 58 F.2d 487 (Ct. Cl. 1932). “92 [26 USCA § 872 note]). Plaintiff club is an incorporated organization, incorporated under the laws of Texas, and during the taxable years in issue occupied *492 under leasehold the seventh, eighth, ninth, and tenth floors of the Chamber of Commerce Building in Houston, Tex.”
Cosmos Club v. United States, 42 F.2d 321 (Ct. Cl. 1930). “321 (26 USCA § 872 note), and 1926, 44 Stat. 92 .”
Garden City Golf Club v. Corwin, 62 F.2d 246 (2d Cir. 1932). “Section 501 (d) of the Revenue Aet of 1926, as amended by section 413 (a), of the Revenue Aet of 1928 (26 USCA § 872 (d), provides that “As used in this section, the term ‘dues' includes any assessment irrespective of the purpose for which made; and the term ‘initiation fees',…”
Garzon v. United States, 605 F. Supp. 738 (S.D. Fla. 1985). “Title 26 U.S.C.A. § 872 provides: (a) General rule.”
The Cordon v. United States, 46 F.2d 719 (Ct. Cl. 1931). “From what has been stated above, it is quite evident that from the object set out in its charter, the conduct of the club and the activities of its members, the predominating purpose of the club is to foster the arts, and its small social features are immaterial, subordinate,…”
Knollwood Club v. United States, 48 F.2d 971 (Ct. Cl. 1931). “791 , 864 (26 USCA § 872, and § 872 note) provides as follows: “Sec.”
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