Skip to content

General education, not advice for your situation.

Carry Forward Learning Start here Intern0 XP

Internal Revenue Code · 26 U.S.C.

§ 861. Income from sources within the United States

In force Text current through Public Law 119-121 (October 9, 2026) release point 119-121

Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).

Cite as 26 U.S.C. § 861

At a glance

Read from the text, the source credit and the official notes. Not part of the law.

Status
In force
Enacted
September 14, 1960 by Pub. L. 86–779
Last amended
March 23, 2018 by Pub. L. 115–141
Amendments
25 dated changes in the source credit
Length
5 subsections · 2,030 words · about 9 min to read
Cross-references
cites 15; cited by 19 Code sections and 86 other regulations
Regulations
26 issued under this section
(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:
(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—
(A) interest—
(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
(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, and
(B) in the case of a foreign partnership, which is predominantly engaged in the active conduct of a trade or business outside the United States, any interest not paid by a trade or business engaged in by the partnership in the United States and not allocable to income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States.
(2) Dividends The amount received as dividends—
(A) from a domestic corporation, or
(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 dividends for which a deduction is allowable under section 245(b)) from a 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 100/50th of the amount of the deduction allowable under section 245 in respect of such dividends, or
(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
(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 “100/65th” for “100/50th”.
(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—
(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,
(B) such compensation does not exceed $3,000 in the aggregate, and
(C) the compensation is for labor or services performed as an employee of or under a contract with—
(i) a nonresident alien, foreign partnership, or foreign corporation, not engaged in trade or business within the United States, or
(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.
In addition, compensation for labor or services performed in the United States shall not be deemed to be income from sources within the United States if the labor or services are performed by a nonresident alien individual in connection with the individual’s temporary presence in the United States as a regular member of the crew of a foreign vessel engaged in transportation between the United States and a foreign country or a possession of the United States.
(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.

(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)).

(6) Sale or exchange of inventory property

Gains, profits, and income derived from the purchase of inventory property (within the meaning of 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.

(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—
(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
(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.
(8) Social security benefits

Any social security benefit (as defined in section 86(d)).

(9) Guarantees Amounts received, directly or indirectly, from—
(A) a noncorporate resident or domestic corporation for the provision of a guarantee of any indebtedness of such resident or corporation, or
(B) any foreign person for the provision of a guarantee of any indebtedness of such person, if such amount is connected with income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States.
(b) Taxable income from sources within United States

From the items of gross income specified in subsection (a) as being income from sources within the United States there shall be deducted the expenses, losses, and other deductions properly apportioned or allocated thereto and a ratable part of any expenses, losses, or other deductions which cannot definitely be allocated to some item or class of gross income. The remainder, if any, shall be included in full as taxable income from sources within the United States. In the case of an individual who does not itemize deductions, an amount equal to the standard deduction shall be considered a deduction which cannot definitely be allocated to some item or class of gross income.

(c) Special rule for application of subsection (a)(2)(B)

For purposes of subsection (a)(2)(B), if the foreign corporation has no gross income from any source for the 3-year period (or part thereof) specified, the requirements of such subsection shall be applied with respect to the taxable year of such corporation in which the payment of the dividend is made.

(d) Income from certain railroad rolling stock treated as income from sources within the United States
(1) General rule For purposes of subsection (a) and section 862(a), if—
(A) a taxpayer leases railroad rolling stock which is section 1245 property (as defined in section 1245(a)(3)) to a domestic common carrier by railroad or a corporation which is controlled, directly or indirectly, by one or more such common carriers, and
(B) the use under such lease is expected to be use within the United States,
all amounts includible in gross income by the taxpayer with respect to such railroad rolling stock (including gain from sale or other disposition of such railroad rolling stock) shall be treated as income from sources within the United States. The requirements of subparagraph (B) of the preceding sentence shall be treated as satisfied if the only expected use outside the United States is use by a person (whether or not a United States person) in Canada or Mexico on a temporary basis which is not expected to exceed a total of 90 days in any taxable year.
(2) Paragraph (1) not to apply where lessor is a member of controlled group which includes a railroad

Paragraph (1) shall not apply to a lease between two members of the same controlled group of corporations (as defined in section 1563) if any member of such group is a domestic common carrier by railroad or a switching or terminal company all of whose stock is owned by one or more domestic common carriers by railroad.

(3) Denial of foreign tax credit

No credit shall be allowed under section 901 for any payments to foreign countries with respect to any amount received by the taxpayer with respect to railroad rolling stock which is subject to paragraph (1).

(e) Cross reference

For treatment of interest paid by the branch of a foreign corporation, see section 884(f).

(Aug. 16, 1954, ch. 736, 68A Stat. 275; Pub. L. 86–779, § 3(b), Sept. 14, 1960, 74 Stat. 998; Pub. L. 87–834, § 9(c), Oct. 16, 1962, 76 Stat. 1001; Pub. L. 89–809, title I, § 102(a)(1)–(3), (b), (c), Nov. 13, 1966, 80 Stat. 1541–1543; Pub. L. 91–172, title IV, § 435(a), Dec. 30, 1969, 83 Stat. 625; Pub. L. 92–9, § 3(a)(2), Apr. 1, 1971, 85 Stat. 15; Pub. L. 92–178, title III, § 314(a), title V, § 503, Dec. 10, 1971, 85 Stat. 528, 550; Pub. L. 93–625, §§ 8, 9(a), Jan. 3, 1975, 88 Stat. 2116; Pub. L. 94–455, title X, §§ 1036(a), 1041, 1051(h)(3), title XIX, §§ 1901(b)(26)(A), (B), (c)(7), 1904(b)(10)(B), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1633, 1634, 1647, 1798, 1803, 1817, 1834; Pub. L. 95–30, title I, § 102(b)(9), May 23, 1977, 91 Stat. 138; Pub. L. 95–600, title III, § 370(a), title V, § 540(a), Nov. 6, 1978, 92 Stat. 2858, 2887; Pub. L. 96–499, title XI, § 1124, Dec. 5, 1980, 94 Stat. 2690; Pub. L. 96–605, title I, § 104(a), Dec. 28, 1980, 94 Stat. 3523; Pub. L. 98–21, title I, § 121(d), Apr. 20, 1983, 97 Stat. 83; Pub. L. 99–514, title I, § 104(b)(11), title XII, §§ 1211(b)(1)(B), 1212(d), 1214(a), (b), (c)(5), 1241(b), Oct. 22, 1986, 100 Stat. 2105, 2536, 2539, 2541–2543, 2579; Pub. L. 100–203, title X, § 10221(d)(4), Dec. 22, 1987, 101 Stat. 1330–409; Pub. L. 100–647, title I, §§ 1012(g)(3), (i)(10), (14)(B), (q)(7), (9), (15), 1018(u)(39), Nov. 10, 1988, 102 Stat. 3501, 3509, 3510, 3524, 3525, 3592; Pub. L. 101–239, title VII, §§ 7811(i)(2), 7841(d)(9), Dec. 19, 1989, 103 Stat. 2409, 2428; Pub. L. 101–508, title XI, §§ 11801(a)(29), (c)(6)(C), (14), 11813(b)(17), Nov. 5, 1990, 104 Stat. 1388–521, 1388–524, 1388–527, 1388–555; Pub. L. 104–188, title I, § 1702(h)(9), Aug. 20, 1996, 110 Stat. 1874; Pub. L. 105–34, title XI, § 1174(a)(1), Aug. 5, 1997, 111 Stat. 989; Pub. L. 107–16, title VI, § 621(a), June 7, 2001, 115 Stat. 111; Pub. L. 108–357, title IV, § 410(a), Oct. 22, 2004, 118 Stat. 1500; Pub. L. 111–226, title II, § 217(a), (c)(1), Aug. 10, 2010, 124 Stat. 2400, 2402; Pub. L. 111–240, title II, § 2122(a), Sept. 27, 2010, 124 Stat. 2567; Pub. L. 115–97, title I, § 13002(e), Dec. 22, 2017, 131 Stat. 2100; Pub. L. 115–141, div. U, title IV, § 401(d)(1)(D)(ix), Mar. 23, 2018, 132 Stat. 1207.)

Regulations under this section

Treasury regulations (26 CFR) issued under § 861

Cross-references

Computed from the citations in the text of Title 26 and 26 CFR.

This section cites 15 other sections

Cited by 19 Code sections

Cited in 86 regulations not issued under it

Show 62 more

Amendment history

From the source credit and the official notes, newest first.

  1. Amended by Pub. L. 115–141Parts changed in 2018: (a)(2)(A)
  2. Amended by Pub. L. 115–97Parts changed in 2017: (a)(2) (a)(2)(B)
  3. Amended by Pub. L. 111–240Parts changed in 2010: (a)(1) (a)(9) (c)
  4. Amended by Pub. L. 111–226
  5. Amended by Pub. L. 108–357Parts changed in 2004: (a)(1)(C)
  6. Amended by Pub. L. 107–16Parts changed in 2001: (a)(3)
  7. Amended by Pub. L. 105–34Parts changed in 1997: (a)(3)
  8. Amended by Pub. L. 104–188Parts changed in 1996: (e)(1)(A)
  9. Amended by Pub. L. 101–508Parts changed in 1990: (a)(1)(A) (e)(1)(A) (e)(2)
  10. Amended by Pub. L. 101–239Parts changed in 1989: (a)(6) (e)(1)
  11. Amended by Pub. L. 100–647Parts changed in 1988: (a)(2)(B) (a)(2)(C) (a)(6) (a)(7) (c)(1)(B) (c)(2)(B)(ii) (f)
  12. Amended by Pub. L. 100–203Parts changed in 1987: (a)(2) (a)(2)(B)
  13. Amended by Pub. L. 99–514Parts changed in 1986: (a)(1) (a)(1)(A) (a)(1)(B) (a)(1)(C) (a)(1)(D) (a)(1)(E) (a)(1)(F) (a)(1)(G) (a)(1)(H) (a)(2)(A) (a)(2)(B) (a)(6) (b) (c) (d) (e)
  14. Amended by Pub. L. 98–21Parts changed in 1983: (a)(8)
  15. Amended by Pub. L. 96–605Parts changed in 1980: (a)(5) (e)
  16. Amended by Pub. L. 96–499
  17. Amended by Pub. L. 95–600Parts changed in 1978: (a)(1)(F) (f)
  18. Amended by Pub. L. 95–30Parts changed in 1977: (b)
  19. Amended by Pub. L. 94–455Parts changed in 1976: (a)(1) (a)(2)(A) (a)(2)(D) (a)(5) (a)(7) (c)(3) (e)(1) (e)(2)
  20. Amended by Pub. L. 93–625Parts changed in 1975: (a)(1)(H) (c)(3)
  21. Amended by Pub. L. 92–178Parts changed in 1971: (a)(1)(G) (a)(2)(D) (e)
  22. Amended by Pub. L. 92–9
  23. Amended by Pub. L. 91–172Parts changed in 1969: (a)(1)(C) (c)(3)
  24. Amended by Pub. L. 89–809Parts changed in 1966: (a)(1)(A) (a)(1)(B) (a)(1)(C) (a)(2)(B) (a)(3)(C)(ii) (c)
  25. Amended by Pub. L. 87–834Parts changed in 1962: (a)(2)(B)
  26. Enacted by Pub. L. 86–779Parts changed in 1960: (a)(2)(C)

Where it sits in the Code

  1. Subtitle A Income Taxes
  2. Chapter 1 NORMAL TAXES AND SURTAXES
  3. Subchapter N Tax Based on Income From Sources Within or Without the United States
  4. Part I SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN INCOME

Nearby sections

Official notes

The Law Revision Counsel's notes for this section (amendments, effective dates and related laws) are long, so they have their own page.