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APPLICABLE INTERNAL REVENUE CODE AND
TREASURY REGULATIONS
TABLE OF CONTENTS
SEC. 117. QUALIFIED SCHOLARSHIPS
SEC. 861. INCOME FROM SOURCES WITHIN THE UNITED STATES
SEC.1441. WITHHOLDING OF TAX ON NONRESIDENT ALIENS
SEC.7701 DEFINITION OF RESIDENT ALIEN AND NONRESIDENT ALIEN
301.6109-1 IDENTIFYING NUMBERS
SEC. 117. QUALIFIED SCHOLARSHIPS.
Subsec. (a) General Rule.--
Gross income does not include any amount received as a qualified scholarship
by an individual who is a candidate for a degree at an educational organization
described in section 170(b)(1)(A)(ii) .
For purposes of this section--
117(b)(1) In general.--The term "qualified
scholarship" means any amount received by an individual as a scholarship or
fellowship grant to the extent the individual establishes that, in accordance
with the conditions of the grant, such amount was used for qualified tuition
and related expenses.
117(b)(2) Qualified
tuition and related expenses.--For purposes of paragraph (1), the term "qualified
tuition and related expenses" means--
117(b)(2)(A)
tuition and fees required for the enrollment or attendance of a student at an
educational organization described in section 170(b)(1)(A)(ii) , and
117(b)(2)(B)
fees, books, supplies, and equipment required for courses of instruction at
such an educational organization.
SEC. 117. QUALIFIED SCHOLARSHIPS. Subsec. (c)
Limitation.--
Subsections (a) and (d) shall not apply to that portion of any amount received
which represents payment for teaching, research, or other services by the student
required as a condition for receiving the qualified scholarship or qualified
tuition reduction.
SEC. 117. QUALIFIED SCHOLARSHIPS. Subsec. (d)
Qualified Tuition Reduction.--
117(d)(1) In
general.--Gross income shall not include any qualified tuition reduction.
117(d)(2) Qualified
tuition reduction.--For purposes of this subsection, the term "qualified tuition
reduction" means the amount of any reduction in tuition provided to an employee
of an organization described in section 170(b)(1)(A)(ii) for the education
(below the graduate level) at such organization (or another organization described
in section 170(b)(1)(A)(ii) ) of--
117(d)(2)(A)
such employee, or
117(d)(2)(B)
any person treated as an employee (or whose use is treated as an employee use)
under the rules of section 132(h) .
117(d)(3) Reduction
must not discriminate in favor of highly compensated, etc.--Paragraph (1) shall
apply with respect to any qualified tuition reduction provided with respect
to any highly compensated employee only if such reduction is available on substantially
the same terms to each member of a group of employees which is defined under
a reasonable classification set up by the employer which does not discriminate
in favor of highly compensated employees (within the meaning of section 414(q)
). For purposes of this paragraph, the term "highly compensated employee"
has the meaning given such term by section 414(q) .
117(d)(5)[4]
Special rules for teaching and research assistants.--In the case of the education
of an individual who is a graduate student at an educational organization described
in section 170(b)(1)(A)(ii) and who is engaged in teaching or research
activities for such organization, paragraph (2) shall be applied as if it did
not contain the phrase "(below the graduate level)".
SEC. 861. INCOME FROM SOURCES WITHIN THE UNITED STATES.
Subsec. (a) Gross Income From Sources Within United States.--
The following items of gross income shall be treated as income from sources
within the United States:
861(a)(1) Interest.--Interest
from the United States or the District of Columbia, and interest on bonds, notes,
or other interest-bearing obligations of noncorporate residents or domestic
corporations, not including--
861(a)(1)(A)
interest from a resident alien individual or domestic corporation, if such individual
or corporation meets the 80-percent foreign business requirements of subsection
(c)(1), and
861(a)(1)(B)
interest--
861(a)(1)(B)(I)
on deposits with a foreign branch of a domestic corporation or a domestic partnership
if such branch is engaged in the commercial banking business, and
861(a)(1)(B)(ii)
on amounts satisfying the requirements of subparagraph (B) of section 871(I)(3)
which are paid by a foreign branch of a domestic corporation or a domestic
partnership.
861(a)(2) Dividends.--The
amount received as dividends--
861(a)(2)(A)
from a domestic corporation other than a corporation which has an election in
effect under section 936 , or
861(a)(2)(B)
from a foreign corporation unless less than 25 percent of the gross income from
all sources of such foreign corporation for the 3-year period ending with the
close of its taxable year preceding the declaration of such dividends (or for
such part of such period as the corporation has been in existence) was effectively
connected (or treated as effectively connected other than income described in
section 884(d)(2) ) with the conduct of a trade or business within the
United States; but only in an amount which bears the same ratio to such dividends
as the gross income of the corporation for such period which was effectively
connected (or treated as effectively connected other than income described in
section 884(d)(2) ) with the conduct of a trade or business within the
United States bears to its gross income from all sources; but dividends (other
than [SP.1]dividends [SP.1]for [SP.1]which [SP.1]a [SP.1]deduction [SP.1]is
[SP.1]allowable [SP.1]under [SP.1]section [SP.1]245(b)) [SP.1]from [SP.1]a [SP.1]foreign
corporation shall, for purposes of subpart A of part III (relating to foreign
tax credit), be treated as income from sources without the United States to
the extent (and only to the extent) exceeding the amount which is 100/70th of
the amount of the deduction allowable under section 245 in respect of
such dividends, or
861(a)(2)(C)
from a foreign corporation to the extent that such amount is required by
section 243(e) (relating to certain dividends from foreign corporations)
to be treated as dividends from a domestic corporation which is subject to taxation
under this chapter, and to such extent subparagraph (B) shall not apply to such
amount, or
861(a)(2)(D)
from a DISC or former DISC (as defined in section 992(a) ) except to
the extent attributable (as determined under regulations prescribed by the Secretary)
to qualified export receipts described in section 993(a)(1) (other than
interest and gains described in section 995(b)(1) ).
In the case of any dividend from a 20-percent owned corporation (as defined
in section 243(c)(2) ), subparagraph (B) shall be applied by substituting
"100/80th" for "100/70th".
861(a)(3) Personal
services.--Compensation for labor or personal services performed in the United
States; except that compensation for labor or services performed in the United
States shall not be deemed to be income from sources within the United States
if--
861(a)(3)(A)
the labor or services are performed by a nonresident alien individual temporarily
present in the United States for a period or periods not exceeding a total of
90 days during the taxable year,
861(a)(3)(B)
such compensation does not exceed $3,000 in the aggregate, and
861(a)(3)(C)
the compensation is for labor or services performed as an employee of or under
a contract with--
861(a)(3)(C)(i)
a nonresident alien, foreign partnership, or foreign corporation, not engaged
in trade or business within the United States, or
861(a)(3)(C)(ii)
an individual who is a citizen or resident of the United States, a domestic
partnership, or a domestic corporation, if such labor or services are performed
for an office or place of business maintained in a foreign country or in a possession
of the United States by such individual, partnership, or corporation.
861(a)(4) Rentals
and royalties.--Rentals or royalties from property located in the United States
or from any interest in such property, including rentals or royalties for the
use of or for the privilege of using in the United States patents, copyrights,
secret processes and formulas, good will, trade-marks, trade brands, franchises,
and other like property.
861(a)(5) Disposition
of united states real property interest.--Gains, profits, and income from the
disposition of a United States real property interest (as defined in section
897(c) ).
861(a)(6) Sale
or exchange of inventory property.--Gains, profits, and income derived from
the purchase of inventory property (within the meaning of0 section 865(i)(1)
) without the United States (other than within a possession of the United
States) and its sale or exchange within the United States.
861(a)(7) Amounts
received as underwriting income (as defined in section 832(b)(3)) derived
from the issuing (or reinsuring) of any insurance or annuity contract--
861(a)(7)(A)
in connection with property in, liability arising out of an activity in, or
in connection with the lives or health of residents of, the United States, or
861(a)(7)(B)
in connection with risks not described in subparagraph (A) as a result of any
arrangement whereby another corporation receives a substantially equal amount
of premiums or other consideration in respect to issuing (or reinsuring) any
insurance or annuity contract in connection with property in, liability arising
out of activity in, or in connection with the lives or health of residents of,
the United States.
861(a)(8) Social
security benefits.--Any social security benefit (as defined in section 86(d)).
SEC. 1441. WITHHOLDING OF TAX ON NONRESIDENT ALIENS.
Subsec. (a) General Rule.--
Except as otherwise provided in subsection (c), all persons, in whatever capacity
acting (including lessees or mortgagors of real or personal property, fiduciaries,
employers, and all officers and employees of the United States) having the control,
receipt, custody, disposal, or payment of any of the items of income specified
in subsection (b) (to the extent that any of such items constitutes gross income
from sources within the United States), of any nonresident alien individual
or of any foreign partnership shall (except as otherwise provided in regulations
prescribed by the Secretary under section 874 ) deduct and withhold from
such items a tax equal to 30 percent thereof, except that in the case of any
item of income specified in the second sentence of subsection (b), the tax shall
be equal to 14 percent of such item.
SEC. 1441. WITHHOLDING OF TAX ON NONRESIDENT
ALIENS. Subsec. (b) Income
Items.--
The items of income referred to in subsection (a) are interest (other than original
issue discount as defined in section 1273 ), dividends, rent, salaries,
wages, premiums, annuities, compensations, remunerations, emoluments, or other
fixed or determinable annual or periodical gains, profits, and income, gains
described in section 631(b) or (c) , amounts subject to tax under
section 871(a)(1)(C) , gains subject to tax under section 871(a)(1)(D)
, and gains on transfers described in section 1235 made on or before
October 4, 1966. The items of income referred to in subsection (a) from which
tax shall be deducted and withheld at the rate of 14 percent are amounts which
are received by a nonresident alien individual 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 and which
are--
1441(b)(1)
incident to a qualified scholarship to which section 117(a) applies,
but only to the extent includible in gross income; or
1441(b)(2)
in the case of an individual who is not a candidate for a degree at an educational
organization described in section 170(b)(1)(A)(ii) , granted by--
1441(b)(2)(A)
an organization described in section 501(c)(3) which is exempt from tax
under section 501(a) .
1441(b)(2)(B)
a foreign government,
1441(b)(2)(C)
an international organization, or a binational or multinational educational
and cultural foundation or commission created or continued pursuant to the Mutual
Educational and Cultural Exchange Act of 1961, or
1441(b)(2)(D)
the United States, or an instrumentality or agency thereof, or a State, or a
possession of the United States, or any political subdivision thereof, or the
District of Columbia, as a scholarship or fellowship for study, training, or
research in the United States.
In the case of a nonresident alien individual who is a member of a domestic
partnership, the items of income referred to in subsection (a) shall be treated
as referring to items specified in this subsection included in his distributive
share of the income of such partnership.
SEC. 1441. WITHHOLDING OF TAX ON NONRESIDENT
ALIENS. Subsec. (c) Exceptions.--
1441(c)(1)
Income connected with United States business.--No deduction or withholding under
subsection (a) shall be required in the case of any item of income (other than
compensation for personal services) which is effectively connected with the
conduct of a trade or business within the United States and which is included
in the gross income of the recipient under section 871(b)(2) for the
taxable year.
1441(c)(2)
Owner unknown.--The Secretary may authorize the tax under subsection (a) to
be deducted and withheld from the interest upon any securities the owners of
which are not known to the withholding agent.
1441(c)(3)
Bonds with extended maturity dates.--The deduction and withholding in the case
of interest on bonds, mortgages, or deeds of trust or other similar obligations
of a corporation, within subsections (a), (b), and (c) of section 1451
(as in effect before its repeal by the Tax Reform Act of 1984) were it not
for the fact that the maturity date of such obligations has been extended on
or after January 1, 1934, and the liability assumed by the debtor exceeds 271/2
percent of the interest, shall not exceed the rate of 271/2 percent per annum.
1441(c)(4)
Compensation of certain aliens.--Under regulations prescribed by the Secretary,
compensation for personal services may be exempted from deduction and withholding
under subsection (a).
1441(c)(5)
Special items.--In the case of gains described in section 631(b) or
(c) , gains subject to tax under section 871(a)(1)(D) , and gains
on transfers described in section 1235 made on or before October 4, 1966,
the amount required to be deducted and withheld shall, if the amount of such
gain is not known to the withholding agent, be such amount, not exceeding 30
percent of the amount payable, as may be necessary to assure that the tax deducted
and withheld shall not be less than 30 percent of such gain.
1441(c)(6)
Per diem of certain aliens.--No deduction or withholding under subsection (a)
shall be required in the case of amounts of per diem for subsistence paid by
the United States Government (directly or by contract) to any nonresident alien
individual who is engaged in any program of training in the United States under
the Mutual Security Act of 1954, as amended.
1441(c)(7)
Certain annuities received under qualified plans.--No deduction or withholding
under subsection (a) shall be required in the case of any amount received as
an annuity if such amount is, under section
871(f) , exempt from the tax imposed by
section 871(a)
.
1441(c)(8)
Original issue discount.--The Secretary may prescribe such regulations as may
be necessary for the deduction and withholding of the tax on original issue
discount subject to tax under section 871(a)(1)(C)
including rules for the deduction and withholding
of the tax on original issue discount from payments of interest.
1441(c)(9)
Interest income from certain portfolio debt investments.--In the case of portfolio
interest (within the meaning of 871(h)), no tax shall be required to be deducted
and withheld from such interest unless the person required to deduct and withhold
tax from such interest knows, or has reason to know, that such interest is not
portfolio interest by reason of section 871(h)(3) or (4) .
1441(c)(10)
Exception for certain interest and dividends.--No tax shall be required to be
deducted and withheld under subsection (a) from any amount described in section
871(i)(2) .
1441(c)(11)
Certain gambling winnings.--No tax shall be required to be deducted and withheld
under subsection (a) from any amount exempt from the tax imposed by section
871(a)(1)(A) by reason of section 871(j) .
SEC. 1441. WITHHOLDING OF TAX ON NONRESIDENT
ALIENS. Subsec. (d) Exemption of Certain Foreign
Partnerships.--
Subject to such terms and conditions as may be provided by regulations prescribed
by the Secretary, subsection (a) shall not apply in the case of a foreign partnership
engaged in trade or business within the United States if the Secretary determines
that the requirements of subsection (a) impose an undue administrative burden
and that the collection of the tax imposed by section 871(a) on the members
of such partnership who are nonresident alien individuals will not be jeopardized
by the exemption.
SEC. 1441. WITHHOLDING OF TAX ON NONRESIDENT
ALIENS. Subsec. (e) Alien Resident of Puerto
Rico.--
For purposes of this section, the term "nonresident alien individual" includes
an alien resident of Puerto Rico.
SEC. 1441. WITHHOLDING OF TAX ON NONRESIDENT
ALIENS. Subsec. (f) Continental Shelf Areas.--
For sources of income derived from, or for services performed with respect to,
the exploration or exploitation of natural resources on submarine areas adjacent
to the territorial waters of the United States, see section 638 .
SEC. 1441. WITHHOLDING OF TAX ON NONRESIDENT
ALIENS. Subsec. (g) Cross Reference.--
For provision treating one-half of social security benefits as subject to withholding
under this section, see section 871(a)(3) .
SEC. 1461. LIABILITY FOR WITHHELD
TAX.
Every person required to deduct and withhold any tax under this chapter is hereby
made liable for such tax and is hereby indemnified against the claims and demands
of any person for the amount of any payments made in accordance with the provisions
of this chapter.
Sec. 7701 DEFINITIONS Subsec. (b) Definition of Resident Alien
and Nonresident Alien.--
7701(b)(1)
In general.--For purposes of this title (other than subtitle B)--
7701(b)(1)(A)
Resident alien.--An alien individual shall be treated as a resident of the United
States with respect to any calendar year if (and only if) such individual meets
the requirements of clause (i), (ii), or (iii):
7701(b)(1)(A)(i)
Lawfully admitted for permanent residence.--Such individual is a lawful permanent
resident of the United States at any time during such calendar year.
7701(b)(1)(A)(ii)
Substantial presence test.--Such individual meets the substantial presence test
of paragraph (3).
7701(b)(1)(A)(iii)
First year election.--Such individual makes the election provided in paragraph
(4).
7701(b)(1)(B)
Nonresident alien.--An individual is a nonresident alien if such individual
is neither a citizen of the United States nor a resident of the United States
(within the meaning of subparagraph (A)).
7701(b)(2)
Special rules for first and last year of residency.--
7701(b)(2)(A)
First year of residency.--
7701(b)(2)(A)(i)
In general.--If an alien individual is a resident of the United States under
paragraph (1)(A) with respect to any calendar year, but was not a resident of
the United States at any time during the preceding calendar year, such alien
individual shall be treated as a resident of the United States only for the
portion of such calendar year which begins on the residency starting date.
7701(b)(2)(A)(ii)
Residency starting date for individuals lawfully admitted for permanent residence.--In
the case of an individual who is a lawfully permanent resident of the United
States at any time during the calendar year, but does not meet the substantial
presence test of paragraph (3), the residency starting date shall be the first
day in such calendar year on which he was present in the United States while
a lawful permanent resident of the United States.
7701(b)(2)(A)(iii)
Residency starting date for individuals meeting substantial presence test.--In
the case of an individual who meets the substantial presence test of paragraph
(3) with respect to any calendar year, the residency starting date shall be
the first day during such calendar year on which the individual is present in
the United States.
7701(b)(2)(A)(iv)
Residency starting date for individuals making first year election.--In the
case of an individual who makes the election provided by paragraph (4) with
respect to any calendar year, the residency starting date shall be the 1st day
during such calendar year on which the individual is treated as a resident of
the United States under that paragraph.
7701(b)(2)(B)
Last year of residency.--An alien individual shall not be treated as a resident
of the United States during a portion of any calendar year if--
7701(b)(2)(B)(i)
such portion is after the last day in such calendar year on which the individual
was present in the United States (or, in the case of an individual described
in paragraph (1)(A)(i), the last day on which he was so described),
7701(b)(2)(B)(ii)
during such portion the individual has a closer connection to a foreign country
than to the United States, and
7701(b)(2)(B)(iii)
the individual is not a resident of the United States at any time during the
next calendar year.
7701(b)(2)(C)
Certain nominal presence disregarded.--
7701(b)(2)(C)(i)
In general.--For purposes of subparagraphs (A)(iii) and (B), an individual shall
not be treated as present in the United States during any period for which the
individual establishes that he has a closer connection to a foreign country
than to the United States.
7701(b)(2)(C)(ii)
Not more than 10 days disregarded.--Clause (i) shall not apply to more than
10 days on which the individual is present in the United States.
7701(b)(3)
Substantial presence test.--
7701(b)(3)(A)
In general.--Except as otherwise provided in this paragraph, an individual meets
the substantial presence test of this paragraph with respect to any calendar
year (hereinafter in this subsection referred to as the "current year") if--
7701(b)(3)(A)(i)
such individual was present in the United States on at least 31 days during
the calendar year, and
7701(b)(3)(A)(ii)
the sum of the number of days on which such individual was present in the United
States during the current year and the 2 preceding calendar years (when multiplied
by the applicable multiplier determined under the following table) equals or
exceeds 183 days:
In the case of days in: The applicable
multiplier is:
Current year ............... 1
1st preceding year ......... 1/3
2nd preceding year ......... 1/6
7701(b)(3)(B)
Exception where individual is present in the United States during less than
one-half of current year and closer connection to foreign country is established.--An
individual shall not be treated as meeting the substantial presence test of
this paragraph with respect to any current year if--
7701(b)(3)(B)(i)
such individual is present in the United States on fewer than 183 days during
the current year, and
7701(b)(3)(B)(ii)
it is established that for the current year such individual has a tax home (as
defined in section 911(d)(3) without regard to the second sentence thereof)
in a foreign country and has a closer connection to such foreign country than
to the United States.
7701(b)(3)(C)
Subparagraph (B) not to apply in certain cases.--Subparagraph (B) shall not
apply to any individual with respect to any current year if at any time during
such year--
7701(b)(3)(C)(i)
such individual had an application for adjustment of status pending, or
7701(b)(3)(C)(ii)
such individual took other steps to apply for status as a lawful permanent resident
of the United States.
7701(b)(3)(D)
Exception for exempt individuals or for certain medical conditions.--An individual
shall not be treated as being present in the United States on any day if--
7701(b)(3)(D)(i)
such individual is an exempt individual for such day, or
7701(b)(3)(D)(ii)
such individual was unable to leave the United States on such day because of
a medical condition which arose while such individual was present in the United
States.
7701(b)(4)
First-year election.--
7701(b)(4)(A)
An alien individual shall be deemed to meet the requirements of this subparagraph
if such individual--
7701(b)(4)(A)(i)
is not a resident of the United States under clause (i) or (ii) of paragraph
(1)(A) with respect to a calendar year (hereinafter referred to as the "election
year"),
7701(b)(4)(A)(ii)
was not a resident of the United States under paragraph (1)(A) with respect
to the calendar year immediately preceding the election year,
7701(b)(4)(A)(iii)
is a resident of the United States under clause (ii) of paragraph (1)(A) with
respect to the calendar year immediately following the election year, and
7701(b)(4)(A)(iv)
is both--
7701(b)(4)(A)(iv)(I)
present in the United States for a period of at least 31 consecutive days in
the election year, and
7701(b)(4)(A)(iv)(II)
present in the United States during the period beginning with the first day
of such 31-day period and ending with the last day of the election year (hereinafter
referred to as the "testing period") for a number of days equal to or exceeding
75 percent of the number of days in the testing period (provided that an individual
shall be treated for purposes of this subclause as present in the United States
for a number of days during the testing period not exceeding 5 days in the aggregate,
notwithstanding his absence from the United States on such days).
7701(b)(4)(B)
An alien individual who meets the requirements of subparagraph (A) shall, if
he so elects, be treated as a resident of the United States with respect to
the election year.
7701(b)(4)(C)
An alien individual who makes the election provided by subparagraph (B) shall
be treated as a resident of the United States for the portion of the election
year which begins on the 1st day of the earliest testing period during such
year with respect to which the individual meets the requirements of clause (iv)
of subparagraph (A).
7701(b)(4)(D)
The rules of subparagraph (D)(i) of paragraph (3) shall apply for purposes of
determining an individual's presence in the United States under this paragraph.
7701(b)(4)(E)
An election under subparagraph (B) shall be made on the individual's tax return
for the election year, provided that such election may not be made before the
individual has met the substantial presence test of paragraph (3) with respect
to the calendar year immediately following the election year.
7701(b)(4)(F)
An election once made under subparagraph (B) remains in effect for the election
year, unless revoked with the consent of the Secretary.
7701(b)(5)
Exempt individual defined.--For purposes of this subsection--
7701(b)(5)(A)
In general.--An individual is an exempt individual for any day if, for such
day, such individual is--
7701(b)(5)(A)(i)
a foreign government-related individual,
7701(b)(5)(A)(ii)
a teacher or trainee,
7701(b)(5)(A)(iii)
a student, or
7701(b)(5)(A)(iv)
a professional athlete who is temporarily in the United States to compete in
a charitable sports event described in section 274(l)(1)(B).
7701(b)(5)(B)
Foreign government-related individual.--The term "foreign government-related
individual" means any individual temporarily present in the United States by
reason of--
7701(b)(5)(B)(i)
diplomatic status, or a visa which the Secretary (after consultation with the
Secretary of State) determines represents full-time diplomatic or consular status
for purposes of this subsection,
7701(b)(5)(B)(ii)
being a full-time employee of an international organization, or
7701(b)(5)(B)(iii)
being a member of the immediate family of an individual described in clause
(i) or (ii).
7701(b)(5)(C)
Teacher or trainee.--The term "teacher or trainee" means any individual--
7701(b)(5)(C)(i)
who is temporarily present in the United States under subparagraph (J) or (Q)
of section 101(15) of the Immigration and Nationality Act (other than as a student),
and
7701(b)(5)(C)(ii)
who substantially complies with the requirements for being so present.
7701(b)(5)(D)
Student.--The term "student" means any individual--
7701(b)(5)(D)(i)
who is temporarily present in the United States--
7701(b)(5)(D)(i)(I)
under subparagraph (F) or (M) of section 101(15) of the Immigration and Nationality
Act, or
7701(b)(5)(D)(i)(II)
as a student under subparagraph (J) or (Q) of such section 101(15), and
7701(b)(5)(D)(ii)
who substantially complies with the requirements for being so present.
7701(b)(5)(E)
Special rules for teachers, trainees, and students.--
7701(b)(5)(E)(i)
Limitation on teachers and trainees.--An individual shall not be treated as
an exempt individual by reason of clause (ii) of subparagraph (A) for the current
year if, for any 2 calendar years during the preceding 6 calendar years, such
person was an exempt person under clause (ii) or (iii) of subparagraph (A).
In the case of an individual all of whose compensation is described in section
872(b)(3), the preceding sentence shall be applied by substituting "4 calendar
years" for "2 calendar years".
7701(b)(5)(E)(ii)
Limitation on students.--For any calendar year after the 5th calendar year for
which an individual was an exempt individual under clause (ii) or (iii) of subparagraph
(A), such individual shall not be treated as an exempt individual by reason
of clause (iii) of subparagraph (A), unless such individual establishes to the
satisfaction of the Secretary that such individual does not intend to permanently
reside in the United States and that such individual meets the requirements
of subparagraph (D)(ii).
7701(b)(6)
Lawful permanent resident.--For purposes of this subsection, an individual is
a lawful permanent resident of the United States at any time if--
7701(b)(6)(A)
such individual has the status of having been lawfully accorded the privilege
of residing permanently in the United States as an immigrant in accordance with
the immigration laws, and
7701(b)(6)(B)
such status has not been revoked (and has not been administratively or judicially
determined to have been abandoned).
7701(b)(7)
Presence in the United States.--For purposes of this subsection--
7701(b)(7)(A)
In general.--Except as provided in subparagraph (B) or (C), an individual shall
be treated as present in the United States on any day if such individual is
physically present in the United States at any time during such day.
7701(b)(7)(B)
Commuters from Canada or Mexico.--If an individual regularly commutes to employment
(or self-employment) in the United States from a place of residence in Canada
or Mexico, such individual shall not be treated as present in the United States
on any day during which he so commutes.
7701(b)(7)(C)
Transit between 2 foreign points.--If an individual, who is in transit between
2 points outside the United States, is physically present in the United States
for less than 24 hours, such individual shall not be treated as present in the
United States on any day during such transit.
7701(b)(8)
Annual statements.--The Secretary may prescribe regulations under which an individual
who (but for subparagraph (B) or (D) of paragraph (3)) would meet the substantial
presence test of paragraph (3) is required to submit an annual statement setting
forth the basis on which such individual claims the benefits of subparagraph
(B) or (D) of paragraph (3), as the case may be.
7701(b)(9)
Taxable year.--
7701(b)(9)(A)
In general.--For purposes of this title, an alien individual who has not established
a taxable year for any prior period shall be treated as having a taxable year
which is the calendar year.
7701(b)(9)(B)
Fiscal year taxpayer.--If--
7701(b)(9)(B)(i)
an individual is treated under paragraph (1) as a resident of the United States
for any calendar year, and
7701(b)(9)(B)(ii)
after the application of subparagraph (A), such individual has a taxable year
other than a calendar year, he shall be treated as a resident of the United
States with respect to any portion of a taxable year which is within such calendar
year.
7701(b)(10)
Coordination with section 877.--If--
7701(b)(10)(A)
an alien individual was treated as a resident of the United States during any
period which includes at least 3 consecutive calendar years (hereinafter referred
to as the "initial residency period"), and
7701(b)(10)(B)
such individual ceases to be treated as a resident of the United States but
subsequently becomes a resident of the United States before the close of the
3rd calendar year beginning after the close of the initial residency period,
such individual shall be taxable for the period after the close of the initial
residency period and before the day on which he subsequently became a resident
of the United States in the manner provided in section 877(b). The preceding
sentence shall apply only if the tax imposed pursuant to section 877(b) exceeds
the tax which, without regard to this paragraph, is imposed pursuant to section
871.
7701(b)(11)
Regulations.--The Secretary shall prescribe such regulations as may be necessary
or appropriate to carry out the purposes of this subsection.
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