Title 26 — Internal Revenue CodeRelease 119-73
§906 Nonresident alien individuals and foreign corporations
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 III— - INCOME FROM SOURCES WITHOUT THE UNITED STATES › Subpart Subpart A— - Foreign Tax Credit › § 906
Summary
Allows a nonresident alien or a foreign corporation that does business in the United States to take a foreign tax credit under section 901 for income, war profits, and excess profits taxes they paid or accrued to a foreign country or U.S. possession on income that is effectively connected to their U.S. business. Do not count as foreign tax any tax that is charged only because the person is a citizen or resident of that foreign country (for individuals) or because the corporation was created, organized, or domiciled there. For applying section 904, treat the taxpayer’s taxable income as only the income effectively connected with the U.S. business. The credit cannot be used against the taxes in section 871(a), section 881, or section 884, and the rule in this paragraph also affects deductions under sections 873(a) and 882(c).
Full Legal Text
Title 26, §906
Internal Revenue Code — Source: USLM XML via OLRC
(a)A nonresident alien individual or a foreign corporation engaged in trade or business within the United States during the taxable year shall be allowed a credit under section 901 for the amount of any income, war profits, and excess profits taxes paid or accrued during the taxable year to any foreign country or possession of the United States with respect to income effectively connected with the conduct of a trade or business within the United States.
(b)(1)For purposes of subsection (a) and for purposes of determining the deductions allowable under section 873(a) and 882(c), in determining the amount of any tax paid or accrued to any foreign country or possession there shall not be taken into account any amount of tax to the extent the tax so paid or accrued is imposed with respect to income from sources within the United States which would not be taxed by such foreign country or possession but for the fact that—
(A)in the case of a nonresident alien individual, such individual is a citizen or resident of such foreign country or possession, or
(B)in the case of a foreign corporation, such corporation was created or organized under the law of such foreign country or possession or is domiciled for tax purposes in such country or possession.
(2)For purposes of subsection (a), in applying section 904 the taxpayer’s taxable income shall be treated as consisting only of the taxable income effectively connected with the taxpayer’s conduct of a trade or business within the United States.
(3)The credit allowed pursuant to subsection (a) shall not be allowed against any tax imposed by section 871(a) (relating to income of nonresident alien individual not connected with United States business) or 881 (relating to income of foreign corporations not connected with United States business).
[(4), (5) Repealed. Pub. L. 115–97, title I, § 14301(c)(23), Dec. 22, 2017, 131 Stat. 2223.]
(6)No credit shall be allowed under this section against the tax imposed by section 884.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2017—Subsec. (a). Pub. L. 115–97, § 14301(c)(22), struck out “(or deemed, under section 902, paid or accrued during the taxable year)” after “paid or accrued during the taxable year”. Subsec. (b)(4), (5). Pub. L. 115–97, § 14301(c)(23), struck out pars. (4) and (5) which read as follows: “(4) For purposes of section 902(a) and 78, a foreign corporation choosing the benefits of this subpart which receives dividends shall, with respect to such dividends, be treated as a domestic corporation. “(5) For purposes of section 902, any income, war profits, and excess profits taxes paid or accrued (or deemed paid or accrued) to any foreign country or possession of the United States with respect to income effectively connected with the conduct of a trade or business within the United States shall not be taken into account, and any accumulated profits attributable to such income shall not be taken into account.” 2007—Subsec. (b)(5) to (7). Pub. L. 110–172 redesignated pars. (6) and (7) as (5) and (6), respectively, and struck out former par. (5) which read as follows: “No credit shall be allowed under this section for any income, war profits, and excess profits taxes paid or accrued with respect to the foreign trade income (within the meaning of section 923(b)) of a FSC.” 1988—Subsec. (b)(6), (7). Pub. L. 100–647 redesignated par. (6), relating to credit against tax imposed by section 884, as (7). 1986—Subsec. (b)(6). Pub. L. 99–514, § 1876(d)(3), added par. (6) relating to credit for income, war profits, and excess profits taxes paid or accrued to a foreign country or possession of the United States. Pub. L. 99–514, § 1241(c), added par. (6) relating to credit against tax imposed by section 884. 1984—Subsec. (b)(5). Pub. L. 98–369 added par. (5).
Statutory Notes and Related Subsidiaries
Effective Date
of 2017 AmendmentAmendment by Pub. L. 115–97 applicable to taxable years of foreign corporations beginning after Dec. 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14301(d) of Pub. L. 115–97, set out as a note under section 78 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 section 1241(c) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 1241(e) of Pub. L. 99–514, set out as an
Effective Date
note under section 884 of this title. Amendment by section 1876(d)(3) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.
Effective Date
of 1984 AmendmentAmendment by Pub. L. 98–369 applicable to transactions after Dec. 31, 1984, in taxable years ending after such date, see section 805(a)(1) of Pub. L. 98–369, as amended, set out as a note under section 245 of this title.
Effective Date
Section applicable with respect to taxable years beginning after Dec. 31, 1966, and, in applying section 904 of this title with respect to this section, no amount to be carried from or to any taxable year beginning before Jan. 1, 1967, and no such year to be taken into account, see section 106(a)(6) of Pub. L. 89–809, set out as an
Effective Date
of 1966 Amendment note under section 874 of this title. Plan
Amendments
Not Required Until January 1, 1989For provisions directing that if any
Amendments
made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.
Reference
Citations & Metadata
Citation
26 U.S.C. § 906
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73