Title 26 — Internal Revenue CodeRelease 119-73
§872 Gross income
Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter N— - Tax Based on Income From Sources Within or Without the United States › Part PART II— - NONRESIDENT ALIENS AND FOREIGN CORPORATIONS › Subpart Subpart A— - Nonresident Alien Individuals › § 872
Summary
For a person who is a nonresident alien, only income that comes from inside the United States or income that is tied to running a U.S. trade or business counts as gross income for tax purposes. Some kinds of income are not taxed. Income from operating ships or aircraft internationally is excluded if the foreign country gives the same exemption to U.S. residents (this also covers renting ships or aircraft). Pay from a foreign employer while temporarily in the United States as a nonimmigrant under 101(a)(15)(F), (J), or (Q) is excluded; a "foreign employer" means a nonresident alien, a foreign partnership or corporation, or an office/place of business abroad or in a U.S. possession run by a U.S. company, partnership, or citizen/resident. Interest on Series E or H U.S. savings bonds is excluded if the bond was bought while the person lived in the Ryukyu Islands or the Trust Territory of the Pacific Islands. Winnings from a pooled betting (parimutuel) system that started outside the U.S. on a live U.S. horse or dog race are excluded. The Treasury Secretary can treat different kinds of transportation income separately, and a U.S. possession can be treated as a foreign country under regulations.
Full Legal Text
Title 26, §872
Internal Revenue Code — Source: USLM XML via OLRC
(a)In the case of a nonresident alien individual, except where the context clearly indicates otherwise, gross income includes only—
(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
(2)gross income which is effectively connected with the conduct of a trade or business within the United States.
(b)The following items shall not be included in gross income of a nonresident alien individual, and shall be exempt from taxation under this subtitle:
(1)Gross income derived by an individual resident of a foreign country from the international operation of a ship or ships if such foreign country grants an equivalent exemption to individual residents of the United States.
(2)Gross income derived by an individual resident of a foreign country from the international operation of aircraft if such foreign country grants an equivalent exemption to individual residents of the United States.
(3)Compensation paid by a foreign employer to a nonresident alien individual for the period he is temporarily present in the United States as a nonimmigrant under subparagraph (F), (J), or (Q) of section 101(a)(15) of the Immigration and Nationality Act, as amended. For purposes of this paragraph, the term “foreign employer” means—
(A)a nonresident alien individual, foreign partnership, or foreign corporation, or
(B)an office or place of business maintained in a foreign country or in a possession of the United States by a domestic corporation, a domestic partnership, or an individual who is a citizen or resident of the United States.
(4)Income derived by a nonresident alien individual from a series E or series H United States savings bond, if such individual acquired such bond while a resident of the Ryukyu Islands or the Trust Territory of the Pacific Islands.
(5)Gross income derived by a nonresident alien individual from a legal wagering transaction initiated outside the United States in a parimutuel pool with respect to a live horse race or dog race in the United States.
(6)Income to which paragraphs (1) and (2) apply shall include income which is derived from the rental on a full or bareboat basis of a ship or ships or aircraft, as the case may be.
(7)The Secretary may provide that this subsection be applied separately with respect to income from different types of transportation.
(8)To the extent provided in regulations, a possession of the United States shall be treated as a foreign country for purposes of this subsection.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
section 101 of the Immigration and Nationality Act, referred to in subsec. (b)(3), is classified to section 1101 of Title 8, Aliens and Nationality.
Amendments
2004—Subsec. (b)(5) to (8). Pub. L. 108–357 added par. (5) and redesignated former pars. (5) to (7) as (6) to (8), respectively. 1994—Subsec. (b)(3). Pub. L. 103–296 substituted “(F), (J), or (Q)” for “(F) or (J)”. 1989—Subsec. (b)(7). Pub. L. 101–239 added par. (7). 1988—Subsec. (a). Pub. L. 100–647, § 1012(s)(2)(A), inserted “, except where the context clearly indicates otherwise” after “individual”. Subsec. (b)(1), (2). Pub. L. 100–647, § 1012(e)(2)(B), (5), substituted “to individual residents of the United States” for “to citizens of the United States and to corporations organized in the United States” and “international operation” for “operation”. 1986—Subsec. (b)(1). Pub. L. 99–514, § 1212(c)(1), added par. (1) and struck out former par. (1), ships under foreign flag, which read as follows: “Earnings derived from the operation of a ship or ships documented under the laws of a foreign country which grants an equivalent exemption to citizens of the United States and to corporations organized in the United States.” Subsec. (b)(2). Pub. L. 99–514, § 1212(c)(1), added par. (2) and struck out former par. (2), aircraft of foreign registry, which read as follows: “Earnings derived from the operation of aircraft registered under the laws of a foreign country which grants an equivalent exemption to citizens of the United States and to corporations organized in the United States.” Subsec. (b)(5), (6). Pub. L. 99–514, § 1212(c)(2), added pars. (5) and (6). 1966—Subsec. (a). Pub. L. 89–809, § 103(b)(1), limited the inclusion of gross income which is derived from sources within the United States to such income which is not effectively connected with the conduct of a trade or business within the United States and inserted provision including gross income without the limitation as to source which is effectively connected with the conduct of a trade or business within the United States. Subsec. (b)(3)(B). Pub. L. 89–809, § 103(b)(2), substituted “by a domestic corporation, a domestic partnership, or an individual who is a citizen or resident of the United States” for “by a domestic corporation”. Subsec. (b)(4). Pub. L. 89–809, § 102(b)(3), added par. (4). 1961—Subsec. (b)(3). Pub. L. 87–256 added par. (3).
Statutory Notes and Related Subsidiaries
Effective Date
of 2004 Amendment Pub. L. 108–357, title IV, § 419(c), Oct. 22, 2004, 118 Stat. 1513, provided that: “The
Amendments
made by this section [amending this section and section 883 of this title] shall apply to wagers made after the date of the enactment of this Act [Oct. 22, 2004].”
Effective Date
of 1994 AmendmentAmendment by Pub. L. 103–296 effective with calendar quarter following Aug. 15, 1994, see section 320(c) of Pub. L. 103–296, set out as a note under section 871 of this title.
Effective Date
of 1989 AmendmentAmendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.
Effective Date
of 1988 AmendmentAmendment 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 1986 AmendmentAmendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 1212(f) of Pub. L. 99–514, set out as a note under section 863 of this title.
Effective Date
of 1966 AmendmentAmendment by Pub. L. 89–809 applicable with respect to taxable years beginning after Dec. 31, 1966, see section 103(n)(1) of Pub. L. 89–809, set out as a note under section 871 of this title.
Effective Date
of 1961 AmendmentAmendment by Pub. L. 87–256 applicable to taxable years beginning after Dec. 31, 1961, see section 110(h)(1) of Pub. L. 87–256, set out as a note under section 117 of this title. Applicability of Certain
Amendments
by Pub. L. 99–514 in Relation to Treaty Obligations of United StatesFor nonapplication of amendment by section 1212(c)(1), (2) of Pub. L. 99–514 to the extent application of such amendment would be contrary to any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(3), (4) of Pub. L. 100–647, set out as a note under section 861 of this title.
Executive Documents
Termination of Trust Territory of the Pacific Islands For termination of Trust Territory of the Pacific Islands, see note set out preceding section 1681 of Title 48, Territories and Insular Possessions.
Reference
Citations & Metadata
Citation
26 U.S.C. § 872
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73