Is the Connection Effective? Through the Maze of Section 864

Stevenson, Alan B. | January 1, 1983

This article discusses certain of the rules under which foreign corporations and nonresident alien individuals may be subjected to United States federal income tax. It may at first be surprising that there are any situations in which the United States would attempt to tax the income of a nonresident alien or a foreign corporation. A moment’s reflection, however, will reveal that in some situations it is quite logical that the United States should tax at least a portion of the income of such persons. For example, it seems reasonable that a corporation which conducts some minimum level of business in the United States should be subjected to United States tax on the income from the business regardless of whether the corporation is incorporated domestically or abroad. Similarly, if an alien individual, though not resident in the United States, conducts business here through agents or employees, should not the income of that business be subjected to United States tax?