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Title 26, Internal Revenue CodeRelease 119-110

§887 Imposition of Tax on Gross Transportation Income of Nonresident Aliens and Foreign Corporations

Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter N — Tax Based on Income From Sources Within or Without the United States › PART II — NONRESIDENT ALIENS AND FOREIGN CORPORATIONS › Subpart C — Tax on Gross Transportation Income › § 887

Last updated Sep 22, 2026|Official source

Summary

Nonresident alien individuals and foreign corporations must pay a 4% tax each year on their United States source gross transportation income. That means the gross money they get from transportation that tax rules treat as coming from the United States. Rules may exclude some kinds of income that would not qualify for certain exemptions under section 883(a)(1) or (2). It does not include income already taxed as connected to a U.S. trade or business under section 871(b) or 882, or income taxed in a U.S. possession. Under these tax rules, the income is not treated as connected to a U.S. business unless the taxpayer has a fixed place of business in the United States used to earn it, and almost all of the U.S.-source transportation income comes from regularly scheduled transportation (or, for leasing a vessel or aircraft, is linked to that U.S. fixed place). Income taxed here will not be taxed again under sections 871, 881, or 882.

Full Legal Text

Title 26, §887

Internal Revenue Code, Source: USLM XML via OLRC

(a)Imposition of tax
In the case of any nonresident alien individual or foreign corporation, there is hereby imposed for each taxable year a tax equal to 4 percent of such individual’s or corporation’s United States source gross transportation income for such taxable year.
(b)United States source gross transportation income
(1)In general
Except as provided in paragraphs (2) and (3), the term “United States source gross transportation income” means any gross income which is transportation income (as defined in section 863(c)(3)) to the extent such income is treated as from sources in the United States under section 863(c)(2). To the extent provided in regulations, such term does not include any income of a kind to which an exemption under paragraph (1) or (2) of section 883(a) would not apply.
(2)Exception for certain income effectively connected with business in the United States
The term “United States source gross transportation income” shall not include any income taxable under section 871(b) or 882.
(3)Exception for certain income taxable in possessions
The term “United States source gross transportation income” does not include any income taxable in a possession of the United States under the provisions of this title as made applicable in such possession.
(4)Determination of effectively connected income
For purposes of this chapter, United States source gross transportation income of any taxpayer shall not be treated as effectively connected with the conduct of a trade or business in the United States unless—
(A)the taxpayer has a fixed place of business in the United States involved in the earning of United States source gross transportation income, and
(B)substantially all of the United States source gross transportation income (determined without regard to paragraph (2)) of the taxpayer is attributable to regularly scheduled transportation (or, in the case of income from the leasing of a vessel or aircraft, is attributable to a fixed place of business in the United States).
(c)Coordination with other provisions
Any income taxable under this section shall not be taxable under section 871, 881, or 882.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

1989—Subsec. (b)(1). Pub. L. 101–239, § 7811(i)(8)(B), substituted “paragraphs (2) and (3)” for “paragraph (2)”. Subsec. (b)(3). Pub. L. 101–239, § 7811(i)(8)(A), added par. (3). Former par. (3) redesignated (4). Subsec. (b)(4). Pub. L. 101–239, § 7811(i)(8)(A), (9), redesignated former par. (3) as (4) and substituted “United States source gross transportation income” for “transportation income” in introductory provisions and in subpar. (A). 1988—Subsec. (b)(1). Pub. L. 100–647 substituted “under section 863(c)(2)” for “under section 863(c)” and inserted at end “To the extent provided in

Regulations

, such term does not include any income of a kind to which an exemption under paragraph (1) or (2) of section 883(a) would not apply.”

Statutory Notes and Related Subsidiaries

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

Section applicable to taxable years beginning after Dec. 31, 1986, see section 1212(f) of Pub. L. 99–514, set out as an

Effective Date

of 1986 Amendment note under section 863 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(b)(1) of Pub. L. 99–514 (enacting this section) 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.

Reference

Citations & Metadata

Citation

26 U.S.C. § 887

Title 26, Internal Revenue Code

Last Updated

Sep 22, 2026

Release point: 119-110