PRIA Logo™
Title 26 — Internal Revenue CodeRelease 119-73not60

§896 Adjustment of Tax on Nationals, Residents, and Corporations of Certain Foreign Countries

Title 26 › Subtitle 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 D— Miscellaneous Provisions › § 896

Last updated Apr 5, 2026|Official source

Summary

The President can change how the United States treats taxes for people or companies from a foreign country when three things happen. First, U.S. citizens who live outside that country or U.S. companies are taxed more heavily on income from that country than people or companies of that country are taxed on similar U.S. income, or they face a higher effective tax rate. Second, the United States asks that country to fix the problem and the country does not. Third, the change is in the public interest. The President may apply tax rules that were in effect before 1967 or adjust the effective U.S. tax rate for that country’s nationals, residents, or companies. The President must tell the Senate and the House at least 30 days before making such a proclamation. If the foreign country later fixes the problem, the special treatment can be ended. The Secretary must write rules needed to carry out these actions.

Full Legal Text

Title 26, §896

Internal Revenue Code — Source: USLM XML via OLRC

(a)Whenever the President finds that—
(1)under the laws of any foreign country, considering the tax system of such foreign country, citizens of the United States not residents of such foreign country or domestic corporations are being subjected to more burdensome taxes, on any item of income received by such citizens or corporations from sources within such foreign country, than taxes imposed by the provisions of this subtitle on similar income derived from sources within the United States by residents or corporations of such foreign country,
(2)such foreign country, when requested by the United States to do so, has not acted to revise or reduce such taxes so that they are no more burdensome than taxes imposed by the provisions of this subtitle on similar income derived from sources within the United States by residents or corporations of such foreign country, and
(3)it is in the public interest to apply pre-1967 tax provisions in accordance with the provisions of this subsection to residents or corporations of such foreign country,
(b)Whenever the President finds that—
(1)under the laws of any foreign country, citizens of the United States or domestic corporations (or any class of such citizens or corporations) are, with respect to any item of income, being subjected to a higher effective rate of tax than are nationals, residents, or corporations of such foreign country (or a similar class of such nationals, residents, or corporations) under similar circumstances;
(2)such foreign country, when requested by the United States to do so, has not acted to eliminate such higher effective rate of tax; and
(3)it is in the public interest to adjust, in accordance with the provisions of this subsection, the effective rate of tax imposed by this subtitle on similar income of nationals, residents, or corporations of such foreign country (or such similar class of such nationals, residents, or corporations),
(c)Whenever the President finds that—
(1)the laws of any foreign country with respect to which the President has made a proclamation under subsection (a) have been modified so that citizens of the United States not residents of such foreign country or domestic corporations are no longer subject to more burdensome taxes on the item of income derived by such citizens or corporations from sources within such foreign country, or
(2)the laws of any foreign country with respect to which the President has made a proclamation under subsection (b) have been modified so that citizens of the United States or domestic corporations (or any class of such citizens or corporations) are no longer subject to a higher effective rate of tax on the item of income,
(d)No proclamation shall be issued by the President pursuant to this section unless, at least 30 days prior to such proclamation, he has notified the Senate and the House of Representatives of his intention to issue such proclamation.
(e)The Secretary shall prescribe such regulations as he deems necessary or appropriate to implement this section.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

References in Text

The date of enactment of this section, referred to in the provisions following subsec. (a)(3), is the date of enactment of Pub. L. 89–809, which was approved Nov. 13, 1966.

Amendments

1976—Subsec. (e). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

Statutory Notes and Related Subsidiaries

Effective Date

Section applicable with respect to taxable years beginning after Dec. 31, 1966, see section 105(d) of Pub. L. 89–809, set out as an

Effective Date

of 1966 Amendment note under section 894 of this title.

Reference

Citations & Metadata

Citation

26 U.S.C. § 896

Title 26 — Internal Revenue Code

Last Updated

Apr 5, 2026

Release point: 119-73not60