Effectively Connected Income

Effectively Connected Income means:
foreign-source income of a foreign business that is attributable to a U.S. office and, in the case of sales income, is realized without material participation of a foreign office. A foreign corporation is subject to U.S. corporate taxation on any taxable income that is effectively connected with the conduct of a trade or business within the United States. Former IRC (check if this IRC provision is current here) §864(c).

U.S. and other Developed Countries International Tax Meaning

Non-resident alien individuals and foreign corporations engaged in trade or business within the US are subject to US income tax on income, from sources both within and outside the US, which is “effectively connected” with the conduct of the trade or business within the US. Income is effectively connected if it is derived from assets which are used in or held for use in the US, and the activities of the US business were a material factor in the realization of the income.

See the entries Income Tax and State Income Tax in the American Encyclopedia of Law.

See Corporate Tax in the U.S. Legal Encyclopedia and Corporate Tax in the International Legal Encyclopedia.