§1441 — Withholding of tax on nonresident aliens
70 cases·15 followed·1 distinguished·24 questioned·4 overruled·26 cited—21% support
Statute Text — 26 U.S.C. §1441
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.
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), and gains subject to tax under section 871(a)(1)(D). 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—
incident to a qualified scholarship to which section 117(a) applies, but only to the extent includible in gross income; or
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—
an organization described in section 501(c)(3) which is exempt from tax under section 501(a),
a foreign government,
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
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.
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.
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.
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 27½ percent of the interest, shall not exceed the rate of 27½ percent per annum.
Under regulations prescribed by the Secretary, compensation for personal services may be exempted from deduction and withholding under subsection (a).
In the case of gains described in section 631(b) or (c), and gains subject to tax under section 871(a)(1)(D), 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.
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.
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).
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.
In the case of portfolio interest (within the meaning of section 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).
No tax shall be required to be deducted and withheld under subsection (a) from any amount described in section 871(i)(2).
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).
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(k).
For purposes of subparagraph (A), clause (i) of section 871(k)(1)(B) shall not apply to any dividend unless the regulated investment company knows that such dividend is a dividend referred to in such clause. A similar rule shall apply with respect to the exception contained in section 871(k)(2)(B).
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.
For purposes of this section, the term “nonresident alien individual” includes an alien resident of Puerto Rico.
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.
For provision treating 85 percent of social security benefits as subject to withholding under this section, see section 871(a)(3).
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.1441-0 Outline of regulation provisions for section 1441
- Treas. Reg. §Treas. Reg. §1.1441-0(a) In general.
- Treas. Reg. §Treas. Reg. §1.1441-0(b) Exception.
- Treas. Reg. §Treas. Reg. §1.1441-0(c) Liability.
- Treas. Reg. §Treas. Reg. §1.1441-0(d) Examples.
- Treas. Reg. §Treas. Reg. §1.1441-0(e) Effective date.
- Treas. Reg. §Treas. Reg. §1.1441-0(f) Effective date.
- Treas. Reg. §Treas. Reg. §1.1441-0(g) Effective/applicability date.
- Treas. Reg. §Treas. Reg. §1.1441-0(h) Dividend equivalents.
- Treas. Reg. §Treas. Reg. §1.1441-0(i) In general.
- Treas. Reg. §Treas. Reg. §1.1441-0(v) Withholding foreign trusts.
- Treas. Reg. §Treas. Reg. §1.1441-0(x) Examples.
- Treas. Reg. §Treas. Reg. §1.1441-1 Requirement for the deduction and withholding of tax on payments to foreign persons
- Treas. Reg. §Treas. Reg. §1.1441-1(a) Purpose and scope.
- Treas. Reg. §Treas. Reg. §1.1441-1(b) General rules of withholding—(1) Requirement to withhold on payments to foreign persons.
- Treas. Reg. §Treas. Reg. §1.1441-1(c) Definitions.
- Treas. Reg. §Treas. Reg. §1.1441-1(d) Beneficial owner's or payee's claim of U.
- Treas. Reg. §Treas. Reg. §1.1441-1(e) Beneficial owner's claim of foreign status—(1) Withholding agent's reliance—(i) In general.
- Treas. Reg. §Treas. Reg. §1.1441-1(f) Effective/applicability date—(1) In general.
- Treas. Reg. §Treas. Reg. §1.1441-1(i) If the qualified intermediary provides a withholding statement described in § 1.
- Treas. Reg. §Treas. Reg. §1.1441-1(v) Withholding statement—(A) In general.
- Treas. Reg. §Treas. Reg. §1.1441-1(x) Amounts described in section 871(f) that are received as annuities from certain qualified plans are exempt from withholding under section 1441(a).
- Treas. Reg. §Treas. Reg. §1.1441-10 Withholding agents with respect to fast-pay arrangements
- Treas. Reg. §Treas. Reg. §1.1441-10(a) In general.
- Treas. Reg. §Treas. Reg. §1.1441-10(b) Exception.
70 Citing Cases
I think that this 1988 provision "overrules" neither the cases on which I rely nor this Court's specific venue statute.
We tried the case to 4 Section 1441 governs the withholding oftax on nonresident aliens.
1441 requires, relevantly, that "all persons" who make a paymentto nonresident aliens ofspecified items constituting U.S.
1441 requires, relevantly, that "all persons" who make a paymentto nonresident aliens ofspecified items constituting U.S.
RUWE, Judge: Respondent determined deficiencies in petitioner's Federal income taxes as follows: Year Deficiency 1982 $3,785,250 1983 3,785,250 1984 3,785,250 1985 3,785,250 The sole issue for decision is whether petitioner was required, pursuant to section 1441,1 to withhold tax on amounts of interest paid to nonresident aliens.
1441 (1994) should apply for purposes of determining venue under section 7482(b)(1). Petitioner argues that “In the related field of diversity jurisdiction, courts have demonstrated a willingness to look behind the individual residence of the executor when determining the citizenship of parties.” The Judicial Improvements and Access to Justice
--- MAJORITY --- OPINION Ruwe, Judge: Section 1441 requires a payor to withhold income tax on certain types of income paid to nonresident alien individuals.
Petitioner contended that it was not liable for employment taxes or the mandatory 30% withholding tax on nonresident aliens under section 1441 with respect to the foreign flight attendants’ salaries because the “business visitor exception” and/or RA ’78 sec.
Section 1441(a) provides that any person "having the control, receipt, custody, disposal, or payment of any of the items of income specified in * * * [section 1441](b) (to the - 180 - extent that any of such items constitutes gross income from sources within the United States), of any nonresident alien individual" must deduct and withhold from such income a tax of 30 percent of the amount of such income.
Section 1441(a) provides that any person "having the control, receipt, custody, disposal, or payment of any of the items of income specified in * * * [section 1441](b) (to the - 180 - extent that any of such items constitutes gross income from sources within the United States), of any nonresident alien individual" must deduct and withhold from such income a tax of 30 percent of the amount of such income.
3,785,250 The sole issue for decision is whether petitioner was required, pursuant to section 1441, to withhold tax on amounts of interest paid to nonresident aliens.
The tax imposed by section 1441 et seq.
., his compensation for 2010-2011 for employment (personal service) was exempt from tax withholding” (emphasis added), and to support this argument he cites authorities related to section 1441 (“Withholding of tax on nonresident aliens”).
Therefore, we uphold respondent’s determination to that effect.46 For the reasons explained above, we also 46 According to the FPAAs, YA Global paid withholding tax under section 1441 or 1442 for each of 2006, 2007, and 2008.
oner, T.C. Memo. 1992-157, 63 T.C.M. (CCH) 2435, 2438 (1992) ("As a matter oflaw, petitioner cannot rely on private letter rulings as authority for a position[.]"). Second, the guidance cited pertains to withholding oftax on nonresident aliens under sec. 1441, not the underlying validity ofthe claimed deductions. - 20 - B. Respondent's Argument Respondent's primary argument is that petitioners each had a principal place ofbusiness in the United States at the location oftheir respective summerjob
oner, T.C. Memo. 1992-157, 63 T.C.M. (CCH) 2435, 2438 (1992) ("As a matter oflaw, petitioner cannot rely on private letter rulings as authority for a position[.]"). Second, the guidance cited pertains to withholding oftax on nonresident aliens under sec. 1441, not the underlying validity ofthe claimed deductions. - 20 - B. Respondent's Argument Respondent's primary argument is that petitioners each had a principal place ofbusiness in the United States at the location oftheir respective summerjob
oner, T.C. Memo. 1992-157, 63 T.C.M. (CCH) 2435, 2438 (1992) ("As a matter oflaw, petitioner cannot rely on private letter rulings as authority for a position[.]"). Second, the guidance cited pertains to withholding oftax on nonresident aliens under sec. 1441, not the underlying validity ofthe claimed deductions. - 20 - B. Respondent's Argument Respondent's primary argument is that petitioners each had a principal place ofbusiness in the United States at the location oftheir respective summerjob
1.863-7(b), Income Tax Regs. "A collar is an option strategy that limits the possible positive or negative returns on an underlying investment to a specific range. Generally, in an option collar transaction, an (continued...) -14- Benzinger LP purchased 163, 980 put options" from UBS and sold 147,582" call options" to UBS. Pursuan
Burden of Proof Petitioner argues that the notices of deficiency refer only to section 1441, so that reliance by respondent on section 1442 constitutes a new matter on which respondent has the burden of proof under Rule 142(a).
(a) General Rule.--In the case of foreign corporations subject to taxation under this subtitle, there shall be deducted and withheld at the source in the same manner and on the same items of income as is provided in section 1441 a tax equal to 30 percent thereof.
(a) General Rule.--In the case of foreign corporations subject to taxation under this subtitle, there shall be deducted and withheld at the source in the same manner and on the same items of income as is provided in section 1441 a tax equal to 30 percent thereof.
(a) General Rule.--In the case of foreign corporations subject to taxation under this subtitle, there shall be deducted and withheld at the source in the same manner and on the same items of income as is provided in section 1441 a tax equal to 30 percent thereof.
(a) General Rule.--In the case of foreign corporations subject to taxation under this subtitle, there shall be deducted and withheld at the source in the same manner and on the same items of income as is provided in section 1441 a tax equal to 30 percent thereof.
Burden of Proof Petitioner argues that the notices of deficiency refer only to section 1441, so that reliance by respondent on section 1442 constitutes a new matter on which respondent has the burden of proof under Rule 142(a).