26 U.S.C. § 894
Section 894 · Income affected by treaty
Amended 4 times on record
Applied in 27 court decisions — leading case O'Connor 85-558 v. United States (1986)
Most recently applied in Matter of Spiak (September 2022)
How often courts cite this section
Court decisions citing this, by year.Markers show enactment, consequential amendments, and circuit splits over this section — watch for a citation surge after a change or a disagreement. The dip in the last several years is a data-coverage gap, not a real trend — our corpus holds fewer opinions from the most recent years, so recent citations are undercounted.
(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).
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).
(1) Application to certain payments
A 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.
Editorial notes U.S. Code · Office of the Law Revision Counsel
Amendments
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.
Effective Date of 1997 Amendment
Section 1054(b) of Pub. L. 105–34 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
Section 105(d) of Pub. L. 89–809 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.”