# 26 U.S.C. § 882: Tax on income of foreign corporations connected with United States business Source: OLRC release point 119-134 . Cite pinpoints as 26 U.S.C. § 882(a)(1). ## § 882(a) Imposition of tax **§ 882(a)(1) 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, or 59A, [OLRC note: So in original. The comma probably should not appear.] on its taxable income which is effectively connected with the conduct of a trade or business within the United States. **§ 882(a)(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. **§ 882(a)(3) [Cross reference 22 Par. (3) heading editorially supplied.].** For special tax treatment of gain or loss from the disposition by a foreign corporation of a United States real property interest, see section 897. ## § 882(b) Gross income In the case of a foreign corporation, except where the context clearly indicates otherwise, gross income includes only— **§ 882(b)(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 **§ 882(b)(2)** gross income which is effectively connected with the conduct of a trade or business within the United States. ## § 882(c) Allowance of deductions and credits **§ 882(c)(1) Allocation of deductions.** **§ 882(c)(1)(A) General rule.** In the case of a foreign corporation, the deductions shall be allowed only for purposes of subsection (a) and (except as provided by subparagraph (B)) only if and to the extent that they are connected with income which is effectively connected with the conduct of a trade or business within the United States; and the proper apportionment and allocation of the deductions for this purpose shall be determined as provided in regulations prescribed by the Secretary. **§ 882(c)(1)(B) Charitable contributions.** The deduction for charitable contributions and gifts provided by section 170 shall be allowed whether or not connected with income which is effectively connected with the conduct of a trade or business within the United States. **§ 882(c)(2) Deductions and credits allowed only if return filed.** A foreign corporation shall receive the benefit of the deductions and credits allowed to it in this subtitle only by filing or causing to be filed with the Secretary a true and accurate return, in the manner prescribed in subtitle F, including therein all the information which the Secretary may deem necessary for the calculation of such deductions and credits. The preceding sentence shall not apply for purposes of the tax imposed by section 541 (relating to personal holding company tax), and shall not be construed to deny the credit provided by section 33 for tax withheld at source or the credit provided by section 34 for certain uses of gasoline. **§ 882(c)(3) Foreign tax credit.** Except as provided by section 906, foreign corporations shall not be allowed the credit against the tax for taxes of foreign countries and possessions of the United States allowed by section 901. **§ 882(c)(4) Cross reference.** For rule that certain foreign taxes are not to be taken into account in determining deduction or credit, see section 906(b)(1). ## § 882(d) Election to treat real property income as income connected with United States business **§ 882(d)(1) In general.** A foreign corporation which during the taxable year derives any income— **§ 882(d)(1)(A)** from real property located in the United States, or from any interest in such real property, including (i) gains from the sale or exchange of real property or an interest therein, (ii) rents or royalties from mines, wells, or other natural deposits, and (iii) gains described in section 631(b) or (c), and **§ 882(d)(1)(B)** which, but for this subsection, would not be treated as income effectively connected with the conduct of a trade or business within the United States, may elect for such taxable year to treat all such income as income which is effectively connected with the conduct of a trade or business within the United States. In such case, such income shall be taxable as provided in subsection (a)(1) whether or not such corporation is engaged in trade or business within the United States during the taxable year. An election under this paragraph for any taxable year shall remain in effect for all subsequent taxable years, except that it may be revoked with the consent of the Secretary with respect to any taxable year. **§ 882(d)(2) Election after revocation, etc..** Paragraphs (2) and (3) of section 871(d) shall apply in respect of elections under this subsection in the same manner and to the same extent as they apply in respect of elections under section 871(d). ## § 882(e) Interest on United States obligations received by banks organized in possessions In the case of a corporation created or organized in, or under the law of, a possession of the United States which is carrying on the banking business in a possession of the United States, interest on obligations of the United States which is not portfolio interest (as defined in section 881(c)(2)) shall— **§ 882(e)(1)** for purposes of this subpart, be treated as income which is effectively connected with the conduct of a trade or business within the United States, and **§ 882(e)(2)** shall be taxable as provided in subsection (a)(1) whether or not such corporation is engaged in trade or business within the United States during the taxable year. ## § 882(f) Returns of tax by agent If any foreign corporation has no office or place of business in the United States but has an agent in the United States, the return required under section 6012 shall be made by the agent. ## Regulations - [Treas. Reg. § 1.882-0](/26/reg/1.882-0.md): Table of contents. (interprets § 882) - [Treas. Reg. § 1.882-1](/26/reg/1.882-1.md): Taxation of foreign corporations engaged in U.S. business or of foreign corporations treated as having effectively connected income. (interprets § 882) - [Treas. Reg. § 1.882-2](/26/reg/1.882-2.md): Income of foreign corporations treated as effectively connected with U.S. business. (interprets § 882) - [Treas. Reg. § 1.882-3](/26/reg/1.882-3.md): Gross income of a foreign corporation. (interprets § 882) - [Treas. Reg. § 1.882-4](/26/reg/1.882-4.md): Allowance of deductions and credits to foreign corporations. (interprets § 882) - [Treas. Reg. § 1.882-5](/26/reg/1.882-5.md): Determination of interest deduction. (interprets § 882) ## Forms named in the regulations - [Form 1120-F](https://www.irs.gov/pub/irs-pdf/f1120f.pdf) ## Final rules - [90 FR 57901](https://www.federalregister.gov/documents/2025/12/15/2025-22776/income-of-foreign-governments-and-of-international-organizations) (2025): Income of Foreign Governments and of International Organizations - [88 FR 42231](https://www.federalregister.gov/documents/2023/06/30/2023-13890/additional-guidance-on-the-transition-from-interbank-offer-rates-to-other-reference-rates-with) (2023): Additional Guidance on the Transition From Interbank Offer Rates to Other Reference Rates With Respect to the Interest Rates of a Foreign Bank - [74 FR 49315](https://www.federalregister.gov/documents/2009/09/28/E9-22867/determination-of-interest-expense-deduction-of-foreign-corporations) (2009): Determination of Interest Expense Deduction of Foreign Corporations - [74 FR 13340](https://www.federalregister.gov/documents/2009/03/27/E9-6944/determination-of-interest-expense-deduction-of-foreign-corporations) (2009): Determination of Interest Expense Deduction of Foreign Corporations - [71 FR 47443](https://www.federalregister.gov/documents/2006/08/17/E6-13402/determination-of-interest-expense-deduction-of-foreign-corporations) (2006): Determination of Interest Expense Deduction of Foreign Corporations - [68 FR 11313](https://www.federalregister.gov/documents/2003/03/10/03-5461/disallowance-of-deductions-and-credits-for-failure-to-file-timely-return) (2003): Disallowance of Deductions and Credits for Failure To File Timely Return - [67 FR 4173](https://www.federalregister.gov/documents/2002/01/29/02-2044/disallowance-of-deductions-and-credits-for-failure-to-file-timely-return) (2002): Disallowance of Deductions and Credits for Failure to File Timely Return - [61 FR 9325](https://www.federalregister.gov/documents/1996/03/08/96-5262/determination-of-interest-expense-deduction-of-foreign-corporations) (1996): Determination of Interest Expense Deduction of Foreign Corporations ## Leading cases - [Swallows Holding, Ltd. v. Commissioner, 515 F.3d 162 (3rd Cir. 2008)](https://www.courtlistener.com/opinion/1387190/swallows-holding-ltd-v-commissioner/) - [Tate & Lyle, Inc. v. Commissioner, 103 T.C. 656 (1994)](https://www.courtlistener.com/opinion/4694977/tate-lyle-inc-v-commissioner/) - [Espinosa v. Commissioner, 107 T.C. 146 (1996)](https://www.courtlistener.com/opinion/4695320/espinosa-v-commissioner/) ## Connections Cites: § 11 Tax imposed; § 33 Tax withheld at source on nonresident aliens and foreign corporations; § 34 Certain uses of gasoline and special fuels; § 170 Charitable, etc., contributions and gifts; § 541 Imposition of personal holding company tax; § 631 Gain or loss in the case of timber, coal, or domestic iron ore; § 871 Tax on nonresident alien individuals; § 881 Tax on income of foreign corporations not connected with United States business; § 897 Disposition of investment in United States real property; § 901 Taxes of foreign countries and of possessions of United States; § 906 Nonresident alien individuals and foreign corporations; § 6012 Persons required to make returns of income Cited by: § 11 Tax imposed; § 56A Adjusted financial statement income; § 457A Nonqualified deferred compensation from certain tax indifferent parties; § 884 Branch profits tax; § 897 Disposition of investment in United States real property; § 1442 Withholding of tax on foreign corporations; § 4373 Exemptions Derived from: 1939 § 231(b), (c); 1939 § 232(a), (b); 1939 § 233; 1939 § 234; 1939 § 235(a) ## Amendments - 1954-08-16: [Act Aug. 16, 1954, ch. 736](/26/act/1954-ch736.md), 68A Stat. 282 - 1966-11-13: [Pub. L. 89-809](/26/act/89-809.md), 80 Stat. 1555 - 1976-10-04: [Pub. L. 94-455](/26/act/94-455.md), 90 Stat. 1834 - 1978-11-06: [Pub. L. 95-600](/26/act/95-600.md), 92 Stat. 2822 - 1980-12-05: [Pub. L. 96-499](/26/act/96-499.md), 94 Stat. 2687 - 1983-01-06: [Pub. L. 97-424](/26/act/97-424.md), 96 Stat. 2182 - 1984-07-18: [Pub. L. 98-369](/26/act/98-369.md), 98 Stat. 843 - 1986-10-22: [Pub. L. 99-514](/26/act/99-514.md), 100 Stat. 2343 - 1988-11-10: [Pub. L. 100-647](/26/act/100-647.md), 102 Stat. 3527 - 2014-12-19: [Pub. L. 113-295](/26/act/113-295.md), 128 Stat. 4038 - 2017-12-22: [Pub. L. 115-97](/26/act/115-97.md), 131 Stat. 2094 - 2022-08-16: [Pub. L. 117-169](/26/act/117-169.md), 136 Stat. 1822