Title 26 — Internal Revenue CodeRelease 119-73

§638 Continental Shelf Areas

Title 26 › Subtitle Subtitle A— Income Taxes › Chapter 1— NORMAL TAXES AND SURTAXES › Subchapter I— Natural Resources › Part V— CONTINENTAL SHELF AREAS › § 638

Last updated Apr 6, 2026|Official source

Summary

For income tax rules about mines, oil and gas wells, and other natural deposits, the term "United States" includes the seabed and subsoil next to U.S. territorial waters where the United States holds exclusive rights under international law to explore and develop natural resources. So offshore drilling on the U.S. continental shelf counts as activity in the United States. The same idea extends "foreign country" and "possession of the United States" to their adjacent seabed areas, but for a foreign country only if that country actually taxes the exploration or development there.

Full Legal Text

Title 26, §638

Internal Revenue Code — Source: USLM XML via OLRC

For purposes of applying the provisions of this chapter (including section 861(a)(3) and 862(a)(3) in the case of the performance of personal services) with respect to mines, oil and gas wells, and other natural deposits—

(1)the term “United States” when used in a geographical sense includes the seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the United States and over which the United States has exclusive rights, in accordance with international law, with respect to the exploration and exploitation of natural resources; and

(2)the terms “foreign country” and “possession of the United States” when used in a geographical sense include the seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the foreign country or such possession and over which the foreign country (or the United States in case of such possession) has exclusive rights, in accordance with international law, with respect to the exploration and exploitation of natural resources, but this paragraph shall apply in the case of a foreign country only if it exercises, directly or indirectly, taxing jurisdiction with respect to such exploration or exploitation.

Reference

Citations & Metadata

Citation

26 U.S.C. § 638

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73