26 U.S.C. § 894

Income affected by treaty

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(a) Treaty provisions(1) In general

The provisions of this title shall be applied to any taxpayer with due regard to any treaty obligation of the United States which applies to such taxpayer.

(2) Cross reference

For relationship between treaties and this title, see section 7852(d).

(b) Permanent establishment in United States

For purposes of applying any exemption from, or reduction of, any tax provided by any treaty to which the United States is a party with respect to income which is not effectively connected with the conduct of a trade or business within the United States, a nonresident alien individual or a foreign corporation shall be deemed not to have a permanent establishment in the United States at any time during the taxable year. This subsection shall not apply in respect of the tax computed under section 877(b).

(c) Denial of treaty benefits for certain payments through hybrid entities(1) Application to certain paymentsA foreign person shall not be entitled under any income tax treaty of the United States with a foreign country to any reduced rate of any withholding tax imposed by this title on an item of income derived through an entity which is treated as a partnership (or is otherwise treated as fiscally transparent) for purposes of this title if—(A) such item is not treated for purposes of the taxation laws of such foreign country as an item of income of such person,(B) the treaty does not contain a provision addressing the applicability of the treaty in the case of an item of income derived through a partnership, and(C) the foreign country does not impose tax on a distribution of such item of income from such entity to such person.(2) Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to determine the extent to which a taxpayer to which paragraph (1) does not apply shall not be entitled to benefits under any income tax treaty of the United States with respect to any payment received by, or income attributable to any activities of, an entity organized in any jurisdiction (including the United States) that is treated as a partnership or is otherwise treated as fiscally transparent for purposes of this title (including a common investment trust under section 584, a grantor trust, or an entity that is disregarded for purposes of this title) and is treated as fiscally nontransparent for purposes of the tax laws of the jurisdiction of residence of the taxpayer.

(Aug. 16, 1954, ch. 736, 68A Stat. 284; Pub. L. 89–809, title I, § 105(a), Nov. 13, 1966, 80 Stat. 1563; Pub. L. 100–647, title I, § 1012(aa)(6), Nov. 10, 1988, 102 Stat. 3533; Pub. L. 105–34, title X, § 1054(a), Aug. 5, 1997, 111 Stat. 943.)Editorial NotesAmendments

1997—Subsec. (c). Pub. L. 105–34 added subsec. (c).

1988—Subsec. (a). Pub. L. 100–647 substituted “Treaty provisions” for “Income affected by treaty” in heading and amended text generally. Prior to amendment, text read as follows: “Income of any kind, to the extent required by any treaty obligation of the United States, shall not be included in gross income and shall be exempt from taxation under this subtitle.”

1966—Pub. L. 89–809 designated existing provisions as subsec. (a), added subsec. (b), and substituted “affected by treaty” for “exempt under treaty” in section catchline.

Statutory Notes and Related SubsidiariesEffective Date of 1997 Amendment

Pub. L. 105–34, title X, § 1054(b), Aug. 5, 1997, 111 Stat. 944, provided that: “The amendments made by this section [amending this section] shall apply upon the date of enactment of this Act [Aug. 5, 1997].”

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 1966 Amendment

Pub. L. 89–809, title I, § 105(d), Nov. 13, 1966, 80 Stat. 1565, provided that: “The amendments made by this section (other than subsections (d) and (f)) [amending this section and enacting section 896 of this title] shall apply with respect to taxable years beginning after December 31, 1966.”

Notes of Decisions

Cited in 14 cases (1 in the last 5 years), 1958–2022 · leading case: O'CONNOR v. United States, 479 U.S. 27 (1986).

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O'CONNOR v. United States, 479 U.S. 27 (1986). “The Coordinating Committee may establish such regulations as may be appropriate for the implementation of this Article.” The petitioners contend that § 2 of this Article constitutes an express exemption of their Commission salaries from both Panamanian and United States taxation.”

Coplin v. United States, 6 Cl. Ct. 115 (Ct. Cl. 1984). “See 26 U.S.C. § 894 (a) (1982). This section provides that “gross income” shall not include any income excluded “by any treaty obliga *125 tion of the United States.”

Ralph D. Harris & Joan F. Harris v. United States, 768 F.2d 1240 (11th Cir. 1985). “" 26 U.S.C. § 894 (a) (1982). As the Supreme Court recognized in Weinberger v.”

Corliss v. United States, 567 F. Supp. 162 (W.D. Ark. 1983). “§ 7422 and 26 U.S.C. § 894 . The cause is presently before the Court on the motion of plaintiffs to reconsider the summary judgment previously granted in favor of defendant, United States of America, and to grant plaintiffs a hearing.”

Highley v. United States, 574 F. Supp. 715 (M.D. Tenn. 1983). “§ 7422 and 26 U.S.C. § 894 for the recovery of Internal Revenue taxes and interest erroneously or illegally assessed or collected from the plaintiffs by the defendant, United States of America.”

Matter of Spiak, 2022 NY Slip Op 05190 (N.Y. App. Div. 2022). “If respondent benefits from an income tax treaty between the United States and Poland ( see generally 26 USC § 894 ; 26 CFR 1.1441-6), that too has gone unexplained.”

Dillon v. United States, 792 F.2d 849 (9th Cir. 1986). “" 26 U.S.C. § 894 (a). Section 7852 provides: "No provision of this title shall apply in any case where its application would be contrary to any treaty obligation of the United States in effect on the date of enactment of this title.”

Chris-Marine USA, Inc. v. United States, 892 F. Supp. 1437 (M.D. Fla. 1995). “This taxation is made “with regard to” the treaty obligations of the United States, 26 U.S.C. § 894 (a)(1), which seek to eliminate double taxation on international transactions.”

United States v. Harry J. Alker, Jr., 255 F.2d 851 (3rd Cir. 1958). “The first charged him in one count with violating Section 894(b) (2) (C) of the Internal Revenue Code of 1939, 26 U.S.C. § 894 (b) (2) (C), by willfully attempting to evade part of the estate tax due on the estate of Winfred S.”

Benjamin L. v. United States, 592 F. Supp. 701 (W.D. Wash. 1983). “§ 7422 , and Title 26 U.S.C. § 894 . 2. Plaintiff was hired to work for the Panama Canal Commission (P.”

Klubo-Gwiezdzinska v. Comm'r, 2017 T.C. Summary Opinion 45 (Tax Ct. 2017). “An applicable treaty obligation can therefore alter an individual's income tax liability under the Internal Revenue Code. II.”

Comm'r of Internal Revenue v. Universal Leaf Tobacco Co., Inc., 318 F.2d 658 (4th Cir. 1963). “§ 892 (income of foreign governments) ; § 894, 26 U.S.C. § 894 (income exempt under treaty); § 912, 26 U.”

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— 26 U.S.C. § 894(b) — 1 case

United States v. Alker, 180 F. Supp. 661 (E.D. Pa. 1959).

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