26 U.S.C. § 7701 : US Code - Section 7701: Definitions

Search 26 U.S.C. § 7701 : US Code - Section 7701: Definitions

(a) When used in this title, where not otherwise distinctly
expressed or manifestly incompatible with the intent thereof -
(1) Person
The term "person" shall be construed to mean and include an
individual, a trust, estate, partnership, association, company or
corporation.
(2) Partnership and partner
The term "partnership" includes a syndicate, group, pool, joint
venture, or other unincorporated organization, through or by
means of which any business, financial operation, or venture is
carried on, and which is not, within the meaning of this title, a
trust or estate or a corporation; and the term "partner" includes
a member in such a syndicate, group, pool, joint venture, or
organization.
(3) Corporation
The term "corporation" includes associations, joint-stock
companies, and insurance companies.
(4) Domestic
The term "domestic" when applied to a corporation or
partnership means created or organized in the United States or
under the law of the United States or of any State unless, in the
case of a partnership, the Secretary provides otherwise by
regulations.
(5) Foreign
The term "foreign" when applied to a corporation or partnership
means a corporation or partnership which is not domestic.
(6) Fiduciary
The term "fiduciary" means a guardian, trustee, executor,
administrator, receiver, conservator, or any person acting in any
fiduciary capacity for any person.
(7) Stock
The term "stock" includes shares in an association, joint-stock
company, or insurance company.
(8) Shareholder
The term "shareholder" includes a member in an association,
joint-stock company, or insurance company.
(9) United States
The term "United States" when used in a geographical sense
includes only the States and the District of Columbia.
(10) State
The term "State" shall be construed to include the District of
Columbia, where such construction is necessary to carry out
provisions of this title.
(11) Secretary of the Treasury and Secretary
(A) Secretary of the Treasury
The term "Secretary of the Treasury" means the Secretary of
the Treasury, personally, and shall not include any delegate of
his.
(B) Secretary
The term "Secretary" means the Secretary of the Treasury or
his delegate.
(12) Delegate
(A) In general
The term "or his delegate" -
(i) when used with reference to the Secretary of the
Treasury, means any officer, employee, or agency of the
Treasury Department duly authorized by the Secretary of the
Treasury directly, or indirectly by one or more redelegations
of authority, to perform the function mentioned or described
in the context; and
(ii) when used with reference to any other official of the
United States, shall be similarly construed.
(B) Performance of certain functions in Guam or American Samoa
The term "delegate," in relation to the performance of
functions in Guam or American Samoa with respect to the taxes
imposed by chapters 1, 2, and 21, also includes any officer or
employee of any other department or agency of the United
States, or of any possession thereof, duly authorized by the
Secretary (directly, or indirectly by one or more redelegations
of authority) to perform such functions.
(13) Commissioner
The term "Commissioner" means the Commissioner of Internal
Revenue.
(14) Taxpayer
The term "taxpayer" means any person subject to any internal
revenue tax.
(15) Military or naval forces and armed forces of the United
States
The term "military or naval forces of the United States" and
the term "Armed Forces of the United States" each includes all
regular and reserve components of the uniformed services which
are subject to the jurisdiction of the Secretary of Defense, the
Secretary of the Army, the Secretary of the Navy, or the
Secretary of the Air Force, and each term also includes the Coast
Guard. The members of such forces include commissioned officers
and personnel below the grade of commissioned officers in such
forces.
(16) Withholding agent
The term "withholding agent" means any person required to
deduct and withhold any tax under the provisions of section 1441,
1442, 1443, or 1461.
(17) Husband and wife
As used in sections 682 and 2516, if the husband and wife
therein referred to are divorced, wherever appropriate to the
meaning of such sections, the term "wife" shall be read "former
wife" and the term "husband" shall be read "former husband"; and,
if the payments described in such sections are made by or on
behalf of the wife or former wife to the husband or former
husband instead of vice versa, wherever appropriate to the
meaning of such sections, the term "husband" shall be read "wife"
and the term "wife" shall be read "husband."
(18) International organization
The term "international organization" means a public
international organization entitled to enjoy privileges,
exemptions, and immunities as an international organization under
the International Organizations Immunities Act (22 U.S.C. 288-
288f).
(19) Domestic building and loan association
The term "domestic building and loan association" means a
domestic building and loan association, a domestic savings and
loan association, and a Federal savings and loan association -
(A) which either (i) is an insured institution within the
meaning of section 401(a) (!1) of the National Housing Act (12
U.S.C., sec. 1724(a)), or (ii) is subject by law to supervision
and examination by State or Federal authority having
supervision over such associations;
(B) the business of which consists principally of acquiring
the savings of the public and investing in loans; and
(C) at least 60 percent of the amount of the total assets of
which (at the close of the taxable year) consists of -
(i) cash,
(ii) obligations of the United States or of a State or
political subdivision thereof, and stock or obligations of a
corporation which is an instrumentality of the United States
or of a State or political subdivision thereof, but not
including obligations the interest on which is excludable
from gross income under section 103,
(iii) certificates of deposit in, or obligations of, a
corporation organized under a State law which specifically
authorizes such corporation to insure the deposits or share
accounts of member associations,
(iv) loans secured by a deposit or share of a member,
(v) loans (including redeemable ground rents, as defined in
section 1055) secured by an interest in real property which
is (or, from the proceeds of the loan, will become)
residential real property or real property used primarily for
church purposes, loans made for the improvement of
residential real property or real property used primarily for
church purposes, provided that for purposes of this clause,
residential real property shall include single or multifamily
dwellings, facilities in residential developments dedicated
to public use or property used on a nonprofit basis for
residents, and mobile homes not used on a transient basis,
(vi) loans secured by an interest in real property located
within an urban renewal area to be developed for
predominantly residential use under an urban renewal plan
approved by the Secretary of Housing and Urban Development
under part A or part B of title I of the Housing Act of 1949,
as amended, or located within any area covered by a program
eligible for assistance under section 103 of the
Demonstration Cities and Metropolitan Development Act of
1966, as amended, and loans made for the improvement of any
such real property,
(vii) loans secured by an interest in educational, health,
or welfare institutions or facilities, including structures
designed or used primarily for residential purposes for
students, residents, and persons under care, employees, or
members of the staff of such institutions or facilities,
(viii) property acquired through the liquidation of
defaulted loans described in clause (v), (vi), or (vii),
(ix) loans made for the payment of expenses of college or
university education or vocational training, in accordance
with such regulations as may be prescribed by the Secretary,
(x) property used by the association in the conduct of the
business described in subparagraph (B), and
(xi) any regular or residual interest in a REMIC, but only
in the proportion which the assets of such REMIC consist of
property described in any of the preceding clauses of this
subparagraph; except that if 95 percent or more of the assets
of such REMIC are assets described in clauses (i) through
(x), the entire interest in the REMIC shall qualify.
At the election of the taxpayer, the percentage specified in
this subparagraph shall be applied on the basis of the average
assets outstanding during the taxable year, in lieu of the
close of the taxable year, computed under regulations
prescribed by the Secretary. For purposes of clause (v), if a
multifamily structure securing a loan is used in part for
nonresidential purposes, the entire loan is deemed a
residential real property loan if the planned residential use
exceeds 80 percent of the property's planned use (determined as
of the time the loan is made). For purposes of clause (v),
loans made to finance the acquisition or development of land
shall be deemed to be loans secured by an interest in
residential real property if, under regulations prescribed by
the Secretary, there is reasonable assurance that the property
will become residential real property within a period of 3
years from the date of acquisition of such land; but this
sentence shall not apply for any taxable year unless, within
such 3-year period, such land becomes residential real
property. For purposes of determining whether any interest in a
REMIC qualifies under clause (xi), any regular interest in
another REMIC held by such REMIC shall be treated as a loan
described in a preceding clause under principles similar to the
principles of clause (xi); except that, if such REMIC's are
part of a tiered structure, they shall be treated as 1 REMIC
for purposes of clause (xi).
(20) Employee
For the purpose of applying the provisions of section 79 with
respect to group-term life insurance purchased for employees, for
the purpose of applying the provisions of sections 104, 105, and
106 with respect to accident and health insurance or accident and
health plans, and for the purpose of applying the provisions of
subtitle A with respect to contributions to or under a stock
bonus, pension, profit-sharing, or annuity plan, and with respect
to distributions under such a plan, or by a trust forming part of
such a plan, and for purposes of applying section 125 with
respect to cafeteria plans, the term "employee" shall include a
full-time life insurance salesman who is considered an employee
for the purpose of chapter 21, or in the case of services
performed before January 1, 1951, who would be considered an
employee if his services were performed during 1951.
(21) Levy
The term "levy" includes the power of distraint and seizure by
any means.
(22) Attorney General
The term "Attorney General" means the Attorney General of the
United States.
(23) Taxable year
The term "taxable year" means the calendar year, or the fiscal
year ending during such calendar year, upon the basis of which
the taxable income is computed under subtitle A. "Taxable year"
means, in the case of a return made for a fractional part of a
year under the provisions of subtitle A or under regulations
prescribed by the Secretary, the period for which such return is
made.
(24) Fiscal year
The term "fiscal year" means an accounting period of 12 months
ending on the last day of any month other than December.
(25) Paid or incurred, paid or accrued
The terms "paid or incurred" and "paid or accrued" shall be
construed according to the method of accounting upon the basis of
which the taxable income is computed under subtitle A.
(26) Trade or business
The term "trade or business" includes the performance of the
functions of a public office.
(27) Tax Court
The term "Tax Court" means the United States Tax Court.
(28) Other terms
Any term used in this subtitle with respect to the application
of, or in connection with, the provisions of any other subtitle
of this title shall have the same meaning as in such provisions.
(29) Internal Revenue Code
The term "Internal Revenue Code of 1986" means this title, and
the term "Internal Revenue Code of 1939" means the Internal
Revenue Code enacted February 10, 1939, as amended.
(30) United States person
The term "United States person" means -
(A) a citizen or resident of the United States,
(B) a domestic partnership,
(C) a domestic corporation,
(D) any estate (other than a foreign estate, within the
meaning of paragraph (31)), and
(E) any trust if -
(i) a court within the United States is able to exercise
primary supervision over the administration of the trust, and
(ii) one or more United States persons have the authority
to control all substantial decisions of the trust.
(31) Foreign estate or trust
(A) Foreign estate
The term "foreign estate" means an estate the income of
which, from sources without the United States which is not
effectively connected with the conduct of a trade or business
within the United States, is not includible in gross income
under subtitle A.
(B) Foreign trust
The term "foreign trust" means any trust other than a trust
described in subparagraph (E) of paragraph (30).
(32) Cooperative bank
The term "cooperative bank" means an institution without
capital stock organized and operated for mutual purposes and
without profit, which -
(A) either -
(i) is an insured institution within the meaning of section
401(a) (!2) of the National Housing Act (12 U.S.C., sec.
1724(a)), or
(ii) is subject by law to supervision and examination by
State or Federal authority having supervision over such
institutions, and
(B) meets the requirements of subparagraphs (B) and (C) of
paragraph (19) of this subsection (relating to definition of
domestic building and loan association).
In determining whether an institution meets the requirements
referred to in subparagraph (B) of this paragraph, any reference
to an association or to a domestic building and loan association
contained in paragraph (19) shall be deemed to be a reference to
such institution.
(33) Regulated public utility
The term "regulated public utility" means -
(A) A corporation engaged in the furnishing or sale of -
(i) electric energy, gas, water, or sewerage disposal
services, or
(ii) transportation (not included in subparagraph (C)) on
an intrastate, suburban, municipal, or interurban electric
railroad, on an intrastate, municipal, or suburban trackless
trolley system, or on a municipal or suburban bus system, or
(iii) transportation (not included in clause (ii)) by motor
vehicle -
if the rates for such furnishing or sale, as the case may be,
have been established or approved by a State or political
subdivision thereof, by an agency or instrumentality of the
United States, by a public service or public utility commission
or other similar body of the District of Columbia or of any
State or political subdivision thereof, or by a foreign country
or an agency or instrumentality or political subdivision
thereof.
(B) A corporation engaged as a common carrier in the
furnishing or sale of transportation of gas by pipe line, if
subject to the jurisdiction of the Federal Energy Regulatory
Commission.
(C) A corporation engaged as a common carrier (i) in the
furnishing or sale of transportation by railroad, if subject to
the jurisdiction of the Surface Transportation Board, or (ii)
in the furnishing or sale of transportation of oil or other
petroleum products (including shale oil) by pipe line, if
subject to the jurisdiction of the Federal Energy Regulatory
Commission or if the rates for such furnishing or sale are
subject to the jurisdiction of a public service or public
utility commission or other similar body of the District of
Columbia or of any State.
(D) A corporation engaged in the furnishing or sale of
telephone or telegraph service, if the rates for such
furnishing or sale meet the requirements of subparagraph (A).
(E) A corporation engaged in the furnishing or sale of
transportation as a common carrier by air, subject to the
jurisdiction of the Secretary of Transportation.
(F) A corporation engaged in the furnishing or sale of
transportation by a water carrier subject to jurisdiction under
subchapter II of chapter 135 of title 49.
(G) A rail carrier subject to part A of subtitle IV of title
49, if (i) substantially all of its railroad properties have
been leased to another such railroad corporation or
corporations by an agreement or agreements entered into before
January 1, 1954, (ii) each lease is for a term of more than 20
years, and (iii) at least 80 percent or more of its gross
income (computed without regard to dividends and capital gains
and losses) for the taxable year is derived from such leases
and from sources described in subparagraphs (A) through (F),
inclusive. For purposes of the preceding sentence, an agreement
for lease of railroad properties entered into before January 1,
1954, shall be considered to be a lease including such term as
the total number of years of such agreement may, unless sooner
terminated, be renewed or continued under the terms of the
agreement, and any such renewal or continuance under such
agreement shall be considered part of the lease entered into
before January 1, 1954.
(H) A common parent corporation which is a common carrier by
railroad subject to part A of subtitle IV of title 49 if at
least 80 percent of its gross income (computed without regard
to capital gains or losses) is derived directly or indirectly
from sources described in subparagraphs (A) through (F),
inclusive. For purposes of the preceding sentence, dividends
and interest, and income from leases described in subparagraph
(G), received from a regulated public utility shall be
considered as derived from sources described in subparagraphs
(A) through (F), inclusive, if the regulated public utility is
a member of an affiliated group (as defined in section 1504)
which includes the common parent corporation.
The term "regulated public utility" does not (except as provided
in subparagraphs (G) and (H)) include a corporation described in
subparagraphs (A) through (F), inclusive, unless 80 percent or
more of its gross income (computed without regard to dividends
and capital gains and losses) for the taxable year is derived
from sources described in subparagraphs (A) through (F),
inclusive. If the taxpayer establishes to the satisfaction of the
Secretary that (i) its revenue from regulated rates described in
subparagraph (A) or (D) and its revenue derived from unregulated
rates are derived from the operation of a single interconnected
and coordinated system or from the operation of more than one
such system, and (ii) the unregulated rates have been and are
substantially as favorable to users and consumers as are the
regulated rates, then such revenue from such unregulated rates
shall be considered, for purposes of the preceding sentence, as
income derived from sources described in subparagraph (A) or (D).
[(34) Repealed. Pub. L. 98-369, div. A, title IV, Sec.
4112(b)(11), July 18, 1984, 98 Stat. 792]
(35) Enrolled actuary
The term "enrolled actuary" means a person who is enrolled by
the Joint Board for the Enrollment of Actuaries established under
subtitle C of the title III of the Employee Retirement Income
Security Act of 1974.
(36) Income tax return preparer
(A) In general
The term "income tax return preparer" means any person who
prepares for compensation, or who employs one or more persons
to prepare for compensation, any return of tax imposed by
subtitle A or any claim for refund of tax imposed by subtitle
A. For purposes of the preceding sentence, the preparation of a
substantial portion of a return or claim for refund shall be
treated as if it were the preparation of such return or claim
for refund.
(B) Exceptions
A person shall not be an "income tax return preparer" merely
because such person -
(i) furnishes typing, reproducing, or other mechanical
assistance,
(ii) prepares a return or claim for refund of the employer
(or of an officer or employee of the employer) by whom he is
regularly and continuously employed,
(iii) prepares as a fiduciary a return or claim for refund
for any person, or
(iv) prepares a claim for refund for a taxpayer in response
to any notice of deficiency issued to such taxpayer or in
response to any waiver of restriction after the commencement
of an audit of such taxpayer or another taxpayer if a
determination in such audit of such other taxpayer directly
or indirectly affects the tax liability of such taxpayer.
(37) Individual retirement plan
The term "individual retirement plan" means -
(A) an individual retirement account described in section
408(a), and
(B) an individual retirement annuity described in section
408(b).
(38) Joint return
The term "joint return" means a single return made jointly
under section 6013 by a husband and wife.
(39) Persons residing outside United States
If any citizen or resident of the United States does not reside
in (and is not found in) any United States judicial district,
such citizen or resident shall be treated as residing in the
District of Columbia for purposes of any provision of this title
relating to -
(A) jurisdiction of courts, or
(B) enforcement of summons.
(40) Indian tribal government
(A) In general
The term "Indian tribal government" means the governing body
of any tribe, band, community, village, or group of Indians, or
(if applicable) Alaska Natives, which is determined by the
Secretary, after consultation with the Secretary of the
Interior, to exercise governmental functions.
(B) Special rule for Alaska Natives
No determination under subparagraph (A) with respect to
Alaska Natives shall grant or defer any status or powers other
than those enumerated in section 7871. Nothing in the Indian
Tribal Governmental Tax Status Act of 1982, or in the
amendments made thereby, shall validate or invalidate any claim
by Alaska Natives of sovereign authority over lands or people.
(41) TIN
The term "TIN" means the identifying number assigned to a
person under section 6109.
(42) Substituted basis property
The term "substituted basis property" means property which is -

(A) transferred basis property, or
(B) exchanged basis property.
(43) Transferred basis property
The term "transferred basis property" means property having a
basis determined under any provision of subtitle A (or under any
corresponding provision of prior income tax law) providing that
the basis shall be determined in whole or in part by reference to
the basis in the hands of the donor, grantor, or other
transferor.
(44) Exchanged basis property
The term "exchanged basis property" means property having a
basis determined under any provision of subtitle A (or under any
corresponding provision of prior income tax law) providing that
the basis shall be determined in whole or in part by reference to
other property held at any time by the person for whom the basis
is to be determined.
(45) Nonrecognition transaction
The term "nonrecognition transaction" means any disposition of
property in a transaction in which gain or loss is not recognized
in whole or in part for purposes of subtitle A.
(46) Determination of whether there is a collective bargaining
agreement
In determining whether there is a collective bargaining
agreement between employee representatives and 1 or more
employers, the term "employee representatives" shall not include
any organization more than one-half of the members of which are
employees who are owners, officers, or executives of the
employer. An agreement shall not be treated as a collective
bargaining agreement unless it is a bona fide agreement between
bona fide employee representatives and 1 or more employers.
(47) Executor
The term "executor" means the executor or administrator of the
decedent, or, if there is no executor or administrator appointed,
qualified, and acting within the United States, then any person
in actual or constructive possession of any property of the
decedent.
(48) Off-highway vehicles
(A) Off-highway transportation vehicles
(i) In general
A vehicle shall not be treated as a highway vehicle if such
vehicle is specially designed for the primary function of
transporting a particular type of load other than over the
public highway and because of this special design such
vehicle's capability to transport a load over the public
highway is substantially limited or impaired.
(ii) Determination of vehicle's design
For purposes of clause (i), a vehicle's design is
determined solely on the basis of its physical
characteristics.
(iii) Determination of substantial limitation or impairment
For purposes of clause (i), in determining whether
substantial limitation or impairment exists, account may be
taken of factors such as the size of the vehicle, whether
such vehicle is subject to the licensing, safety, and other
requirements applicable to highway vehicles, and whether such
vehicle can transport a load at a sustained speed of at least
25 miles per hour. It is immaterial that a vehicle can
transport a greater load off the public highway than such
vehicle is permitted to transport over the public highway.
(B) Nontransportation trailers and semitrailers
A trailer or semitrailer shall not be treated as a highway
vehicle if it is specially designed to function only as an
enclosed stationary shelter for the carrying on of an off-
highway function at an off-highway site.
(b) Definition of resident alien and nonresident alien
(1) In general
For purposes of this title (other than subtitle B) -
(A) Resident alien
An alien individual shall be treated as a resident of the
United States with respect to any calendar year if (and only
if) such individual meets the requirements of clause (i), (ii),
or (iii):
(i) Lawfully admitted for permanent residence
Such individual is a lawful permanent resident of the
United States at any time during such calendar year.
(ii) Substantial presence test
Such individual meets the substantial presence test of
paragraph (3).
(iii) First year election
Such individual makes the election provided in paragraph
(4).
(B) Nonresident alien
An individual is a nonresident alien if such individual is
neither a citizen of the United States nor a resident of the
United States (within the meaning of subparagraph (A)).
(2) Special rules for first and last year of residency
(A) First year of residency
(i) In general
If an alien individual is a resident of the United States
under paragraph (1)(A) with respect to any calendar year, but
was not a resident of the United States at any time during
the preceding calendar year, such alien individual shall be
treated as a resident of the United States only for the
portion of such calendar year which begins on the residency
starting date.
(ii) Residency starting date for individuals lawfully
admitted for permanent residence
In the case of an individual who is a lawfully permanent
resident of the United States at any time during the calendar
year, but does not meet the substantial presence test of
paragraph (3), the residency starting date shall be the first
day in such calendar year on which he was present in the
United States while a lawful permanent resident of the United
States.
(iii) Residency starting date for individuals meeting
substantial presence test
In the case of an individual who meets the substantial
presence test of paragraph (3) with respect to any calendar
year, the residency starting date shall be the first day
during such calendar year on which the individual is present
in the United States.
(iv) Residency starting date for individuals making first
year election
In the case of an individual who makes the election
provided by paragraph (4) with respect to any calendar year,
the residency starting date shall be the 1st day during such
calendar year on which the individual is treated as a
resident of the United States under that paragraph.
(B) Last year of residency
An alien individual shall not be treated as a resident of the
United States during a portion of any calendar year if -
(i) such portion is after the last day in such calendar
year on which the individual was present in the United States
(or, in the case of an individual described in paragraph
(1)(A)(i), the last day on which he was so described),
(ii) during such portion the individual has a closer
connection to a foreign country than to the United States,
and
(iii) the individual is not a resident of the United States
at any time during the next calendar year.
(C) Certain nominal presence disregarded
(i) In general
For purposes of subparagraphs (A)(iii) and (B), an
individual shall not be treated as present in the United
States during any period for which the individual establishes
that he has a closer connection to a foreign country than to
the United States.
(ii) Not more than 10 days disregarded
Clause (i) shall not apply to more than 10 days on which
the individual is present in the United States.
(3) Substantial presence test
(A) In general
Except as otherwise provided in this paragraph, an individual
meets the substantial presence test of this paragraph with
respect to any calendar year (hereinafter in this subsection
referred to as the "current year") if -
(i) such individual was present in the United States on at
least 31 days during the calendar year, and
(ii) the sum of the number of days on which such individual
was present in the United States during the current year and
the 2 preceding calendar years (when multiplied by the
applicable multiplier determined under the following table)
equals or exceeds 183 days:
The applicable
In the case of days in: multiplier is:
Current year 1
1st preceding year 1/3
2nd preceding year 1/6
(B) Exception where individual is present in the United States
during less than one-half of current year and closer
connection to foreign country is established
An individual shall not be treated as meeting the substantial
presence test of this paragraph with respect to any current
year if -
(i) such individual is present in the United States on
fewer than 183 days during the current year, and
(ii) it is established that for the current year such
individual has a tax home (as defined in section 911(d)(3)
without regard to the second sentence thereof) in a foreign
country and has a closer connection to such foreign country
than to the United States.
(C) Subparagraph (B) not to apply in certain cases
Subparagraph (B) shall not apply to any individual with
respect to any current year if at any time during such year -
(i) such individual had an application for adjustment of
status pending, or
(ii) such individual took other steps to apply for status
as a lawful permanent resident of the United States.
(D) Exception for exempt individuals or for certain medical
conditions
An individual shall not be treated as being present in the
United States on any day if -
(i) such individual is an exempt individual for such day,
or
(ii) such individual was unable to leave the United States
on such day because of a medical condition which arose while
such individual was present in the United States.
(4) First-year election
(A) An alien individual shall be deemed to meet the
requirements of this subparagraph if such individual -
(i) is not a resident of the United States under clause (i)
or (ii) of paragraph (1)(A) with respect to a calendar year
(hereinafter referred to as the "election year"),
(ii) was not a resident of the United States under paragraph
(1)(A) with respect to the calendar year immediately preceding
the election year,
(iii) is a resident of the United States under clause (ii) of
paragraph (1)(A) with respect to the calendar year immediately
following the election year, and
(iv) is both -
(I) present in the United States for a period of at least
31 consecutive days in the election year, and
(II) present in the United States during the period
beginning with the first day of such 31-day period and ending
with the last day of the election year (hereinafter referred
to as the "testing period") for a number of days equal to or
exceeding 75 percent of the number of days in the testing
period (provided that an individual shall be treated for
purposes of this subclause as present in the United States
for a number of days during the testing period not exceeding
5 days in the aggregate, notwithstanding his absence from the
United States on such days).
(B) An alien individual who meets the requirements of
subparagraph (A) shall, if he so elects, be treated as a resident
of the United States with respect to the election year.
(C) An alien individual who makes the election provided by
subparagraph (B) shall be treated as a resident of the United
States for the portion of the election year which begins on the
1st day of the earliest testing period during such year with
respect to which the individual meets the requirements of clause
(iv) of subparagraph (A).
(D) The rules of subparagraph (D)(i) of paragraph (3) shall
apply for purposes of determining an individual's presence in the
United States under this paragraph.
(E) An election under subparagraph (B) shall be made on the
individual's tax return for the election year, provided that such
election may not be made before the individual has met the
substantial presence test of paragraph (3) with respect to the
calendar year immediately following the election year.
(F) An election once made under subparagraph (B) remains in
effect for the election year, unless revoked with the consent of
the Secretary.
(5) Exempt individual defined
For purposes of this subsection -
(A) In general
An individual is an exempt individual for any day if, for
such day, such individual is -
(i) a foreign government-related individual,
(ii) a teacher or trainee,
(iii) a student, or
(iv) a professional athlete who is temporarily in the
United States to compete in a charitable sports event
described in section 274(l)(1)(B).
(B) Foreign government-related individual
The term "foreign government-related individual" means any
individual temporarily present in the United States by reason
of -
(i) diplomatic status, or a visa which the Secretary (after
consultation with the Secretary of State) determines
represents full-time diplomatic or consular status for
purposes of this subsection,
(ii) being a full-time employee of an international
organization, or
(iii) being a member of the immediate family of an
individual described in clause (i) or (ii).
(C) Teacher or trainee
The term "teacher or trainee" means any individual -
(i) who is temporarily present in the United States under
subparagraph (J) or (Q) of section 101(15) of the Immigration
and Nationality Act (other than as a student), and
(ii) who substantially complies with the requirements for
being so present.
(D) Student
The term "student" means any individual -
(i) who is temporarily present in the United States -
(I) under subparagraph (F) or (M) of section 101(15) of
the Immigration and Nationality Act, or
(II) as a student under subparagraph (J) or (Q) of such
section 101(15), and
(ii) who substantially complies with the requirements for
being so present.
(E) Special rules for teachers, trainees, and students
(i) Limitation on teachers and trainees
An individual shall not be treated as an exempt individual
by reason of clause (ii) of subparagraph (A) for the current
year if, for any 2 calendar years during the preceding 6
calendar years, such person was an exempt person under clause
(ii) or (iii) of subparagraph (A). In the case of an
individual all of whose compensation is described in section
872(b)(3), the preceding sentence shall be applied by
substituting "4 calendar years" for "2 calendar years".
(ii) Limitation on students
For any calendar year after the 5th calendar year for which
an individual was an exempt individual under clause (ii) or
(iii) of subparagraph (A), such individual shall not be
treated as an exempt individual by reason of clause (iii) of
subparagraph (A), unless such individual establishes to the
satisfaction of the Secretary that such individual does not
intend to permanently reside in the United States and that
such individual meets the requirements of subparagraph
(D)(ii).
(6) Lawful permanent resident
For purposes of this subsection, an individual is a lawful
permanent resident of the United States at any time if -
(A) such individual has the status of having been lawfully
accorded the privilege of residing permanently in the United
States as an immigrant in accordance with the immigration laws,
and
(B) such status has not been revoked (and has not been
administratively or judicially determined to have been
abandoned).
(7) Presence in the United States
For purposes of this subsection -
(A) In general
Except as provided in subparagraph (B), (C), or (D), an
individual shall be treated as present in the United States on
any day if such individual is physically present in the United
States at any time during such day.
(B) Commuters from Canada or Mexico
If an individual regularly commutes to employment (or self-
employment) in the United States from a place of residence in
Canada or Mexico, such individual shall not be treated as
present in the United States on any day during which he so
commutes.
(C) Transit between 2 foreign points
If an individual, who is in transit between 2 points outside
the United States, is physically present in the United States
for less than 24 hours, such individual shall not be treated as
present in the United States on any day during such transit.
(D) Crew members temporarily present
An individual who is temporarily present in the United States
on any day as a regular member of the crew of a foreign vessel
engaged in transportation between the United States and a
foreign country or a possession of the United States shall not
be treated as present in the United States on such day unless
such individual otherwise engages in any trade or business in
the United States on such day.
(8) Annual statements
The Secretary may prescribe regulations under which an
individual who (but for subparagraph (B) or (D) of paragraph (3))
would meet the substantial presence test of paragraph (3) is
required to submit an annual statement setting forth the basis on
which such individual claims the benefits of subparagraph (B) or
(D) of paragraph (3), as the case may be.
(9) Taxable year
(A) In general
For purposes of this title, an alien individual who has not
established a taxable year for any prior period shall be
treated as having a taxable year which is the calendar year.
(B) Fiscal year taxpayer
If -
(i) an individual is treated under paragraph (1) as a
resident of the United States for any calendar year, and
(ii) after the application of subparagraph (A), such
individual has a taxable year other than a calendar year,
he shall be treated as a resident of the United States with
respect to any portion of a taxable year which is within such
calendar year.
(10) Coordination with section 877
If -
(A) an alien individual was treated as a resident of the
United States during any period which includes at least 3
consecutive calendar years (hereinafter referred to as the
"initial residency period"), and
(B) such individual ceases to be treated as a resident of the
United States but subsequently becomes a resident of the United
States before the close of the 3rd calendar year beginning
after the close of the initial residency period,
such individual shall be taxable for the period after the close
of the initial residency period and before the day on which he
subsequently became a resident of the United States in the manner
provided in section 877(b). The preceding sentence shall apply
only if the tax imposed pursuant to section 877(b) exceeds the
tax which, without regard to this paragraph, is imposed pursuant
to section 871.
(11) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this
subsection.
(c) Includes and including
The terms "includes" and "including" when used in a definition
contained in this title shall not be deemed to exclude other things
otherwise within the meaning of the term defined.
(d) Commonwealth of Puerto Rico
Where not otherwise distinctly expressed or manifestly
incompatible with the intent thereof, references in this title to
possessions of the United States shall be treated as also referring
to the Commonwealth of Puerto Rico.
(e) Treatment of certain contracts for providing services, etc.
For purposes of chapter 1 -
(1) In general
A contract which purports to be a service contract shall be
treated as a lease of property if such contract is properly
treated as a lease of property, taking into account all relevant
factors including whether or not -
(A) the service recipient is in physical possession of the
property,
(B) the service recipient controls the property,
(C) the service recipient has a significant economic or
possessory interest in the property,
(D) the service provider does not bear any risk of
substantially diminished receipts or substantially increased
expenditures if there is nonperformance under the contract,
(E) the service provider does not use the property
concurrently to provide significant services to entities
unrelated to the service recipient, and
(F) the total contract price does not substantially exceed
the rental value of the property for the contract period.
(2) Other arrangements
An arrangement (including a partnership or other pass-thru
entity) which is not described in paragraph (1) shall be treated
as a lease if such arrangement is properly treated as a lease,
taking into account all relevant factors including factors
similar to those set forth in paragraph (1).
(3) Special rules for contracts or arrangements involving solid
waste disposal, energy, and clean water facilities
(A) In general
Notwithstanding paragraphs (1) and (2), and except as
provided in paragraph (4), any contract or arrangement between
a service provider and a service recipient -
(i) with respect to -
(I) the operation of a qualified solid waste disposal
facility,
(II) the sale to the service recipient of electrical or
thermal energy produced at a cogeneration or alternative
energy facility, or
(III) the operation of a water treatment works facility,
and
(ii) which purports to be a service contract,
shall be treated as a service contract.
(B) Qualified solid waste disposal facility
For purposes of subparagraph (A), the term "qualified solid
waste disposal facility" means any facility if such facility
provides solid waste disposal services for residents of part or
all of 1 or more governmental units and substantially all of
the solid waste processed at such facility is collected from
the general public.
(C) Cogeneration facility
For purposes of subparagraph (A), the term "cogeneration
facility" means a facility which uses the same energy source
for the sequential generation of electrical or mechanical power
in combination with steam, heat, or other forms of useful
energy.
(D) Alternative energy facility
For purposes of subparagraph (A), the term "alternative
energy facility" means a facility for producing electrical or
thermal energy if the primary energy source for the facility is
not oil, natural gas, coal, or nuclear power.
(E) Water treatment works facility
For purposes of subparagraph (A), the term "water treatment
works facility" means any treatment works within the meaning of
section 212(2) of the Federal Water Pollution Control Act.
(4) Paragraph (3) not to apply in certain cases
(A) In general
Paragraph (3) shall not apply to any qualified solid waste
disposal facility, cogeneration facility, alternative energy
facility, or water treatment works facility used under a
contract or arrangement if -
(i) the service recipient (or a related entity) operates
such facility,
(ii) the service recipient (or a related entity) bears any
significant financial burden if there is nonperformance under
the contract or arrangement (other than for reasons beyond
the control of the service provider),
(iii) the service recipient (or a related entity) receives
any significant financial benefit if the operating costs of
such facility are less than the standards of performance or
operation under the contract or arrangement, or
(iv) the service recipient (or a related entity) has an
option to purchase, or may be required to purchase, all or a
part of such facility at a fixed and determinable price
(other than for fair market value).
For purposes of this paragraph, the term "related entity" has
the same meaning as when used in section 168(h).
(B) Special rules for application of subparagraph (A) with
respect to certain rights and allocations under the contract
For purposes of subparagraph (A), there shall not be taken
into account -
(i) any right of a service recipient to inspect any
facility, to exercise any sovereign power the service
recipient may possess, or to act in the event of a breach of
contract by the service provider, or
(ii) any allocation of any financial burden or benefits in
the event of any change in any law.
(C) Special rules for application of subparagraph (A) in the
case of certain events
(i) Temporary shut-downs, etc.
For purposes of clause (ii) of subparagraph (A), there
shall not be taken into account any temporary shut-down of
the facility for repairs, maintenance, or capital
improvements, or any financial burden caused by the
bankruptcy or similar financial difficulty of the service
provider.
(ii) Reduced costs
For purposes of clause (iii) of subparagraph (A), there
shall not be taken into account any significant financial
benefit merely because payments by the service recipient
under the contract or arrangement are decreased by reason of
increased production or efficiency or the recovery of energy
or other products.
(5) Exception for certain low-income housing
This subsection shall not apply to any property described in
clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B)
(relating to low-income housing) if -
(A) such property is operated by or for an organization
described in paragraph (3) or (4) of section 501(c), and
(B) at least 80 percent of the units in such property are
leased to low-income tenants (within the meaning of section
167(k)(3)(B)) (as in effect on the day before the date of the
enactment of the Revenue Reconcilation (!3) Act of 1990).
(6) Regulations
The Secretary may prescribe such regulations as may be
necessary or appropriate to carry out the provisions of this
subsection.
(f) Use of related persons or pass-thru entities
The Secretary shall prescribe such regulations as may be
necessary or appropriate to prevent the avoidance of those
provisions of this title which deal with -
(1) the linking of borrowing to investment, or
(2) diminishing risks,
through the use of related persons, pass-thru entities, or other
intermediaries.
(g) Clarification of fair market value in the case of nonrecourse
indebtedness
For purposes of subtitle A, in determining the amount of gain or
loss (or deemed gain or loss) with respect to any property, the
fair market value of such property shall be treated as being not
less than the amount of any nonrecourse indebtedness to which such
property is subject.
(h) Motor vehicle operating leases
(1) In general
For purposes of this title, in the case of a qualified motor
vehicle operating agreement which contains a terminal rental
adjustment clause -
(A) such agreement shall be treated as a lease if (but for
such terminal rental adjustment clause) such agreement would be
treated as a lease under this title, and
(B) the lessee shall not be treated as the owner of the
property subject to an agreement during any period such
agreement is in effect.
(2) Qualified motor vehicle operating agreement defined
For purposes of this subsection -
(A) In general
The term "qualified motor vehicle operating agreement" means
any agreement with respect to a motor vehicle (including a
trailer) which meets the requirements of subparagraphs (B),
(C), and (D) of this paragraph.
(B) Minimum liability of lessor
An agreement meets the requirements of this subparagraph if
under such agreement the sum of -
(i) the amount the lessor is personally liable to repay,
and
(ii) the net fair market value of the lessor's interest in
any property pledged as security for property subject to the
agreement,
equals or exceeds all amounts borrowed to finance the
acquisition of property subject to the agreement. There shall
not be taken into account under clause (ii) any property
pledged which is property subject to the agreement or property
directly or indirectly financed by indebtedness secured by
property subject to the agreement.
(C) Certification by lessee; notice of tax ownership
An agreement meets the requirements of this subparagraph if
such agreement contains a separate written statement separately
signed by the lessee -
(i) under which the lessee certifies, under penalty of
perjury, that it intends that more than 50 percent of the use
of the property subject to such agreement is to be in a trade
or business of the lessee, and
(ii) which clearly and legibly states that the lessee has
been advised that it will not be treated as the owner of the
property subject to the agreement for Federal income tax
purposes.
(D) Lessor must have no knowledge that certification is false
An agreement meets the requirements of this subparagraph if
the lessor does not know that the certification described in
subparagraph (C)(i) is false.
(3) Terminal rental adjustment clause defined
(A) In general
For purposes of this subsection, the term "terminal rental
adjustment clause" means a provision of an agreement which
permits or requires the rental price to be adjusted upward or
downward by reference to the amount realized by the lessor
under the agreement upon sale or other disposition of such
property.
(B) Special rule for lessee dealers
The term "terminal rental adjustment clause" also includes a
provision of an agreement which requires a lessee who is a
dealer in motor vehicles to purchase the motor vehicle for a
predetermined price and then resell such vehicle where such
provision achieves substantially the same results as a
provision described in subparagraph (A).
(i) Taxable mortgage pools
(1) Treated as separate corporations
A taxable mortgage pool shall be treated as a separate
corporation which may not be treated as an includible corporation
with any other corporation for purposes of section 1501.
(2) Taxable mortgage pool defined
For purposes of this title -
(A) In general
Except as otherwise provided in this paragraph, a taxable
mortgage pool is any entity (other than a REMIC) if -
(i) substantially all of the assets of such entity consists
of debt obligations (or interests therein) and more than 50
percent of such debt obligations (or interests) consists of
real estate mortgages (or interests therein),
(ii) such entity is the obligor under debt obligations with
2 or more maturities, and
(iii) under the terms of the debt obligations referred to
in clause (ii) (or underlying arrangement), payments on such
debt obligations bear a relationship to payments on the debt
obligations (or interests) referred to in clause (i).
(B) Portion of entities treated as pools
Any portion of an entity which meets the definition of
subparagraph (A) shall be treated as a taxable mortgage pool.
(C) Exception for domestic building and loan
Nothing in this subsection shall be construed to treat any
domestic building and loan association (or portion thereof) as
a taxable mortgage pool.
(D) Treatment of certain equity interests
To the extent provided in regulations, equity interest of
varying classes which correspond to maturity classes of debt
shall be treated as debt for purposes of this subsection.
(3) Treatment of certain REIT's
If -
(A) a real estate investment trust is a taxable mortgage
pool, or
(B) a qualified REIT subsidiary (as defined in section
856(i)(2)) of a real estate investment trust is a taxable
mortgage pool,
under regulations prescribed by the Secretary, adjustments
similar to the adjustments provided in section 860E(d) shall
apply to the shareholders of such real estate investment trust.
(j) Tax treatment of Federal Thrift Savings Fund
(1) In general
For purposes of this title -
(A) the Thrift Savings Fund shall be treated as a trust
described in section 401(a) which is exempt from taxation under
section 501(a);
(B) any contribution to, or distribution from, the Thrift
Savings Fund shall be treated in the same manner as
contributions to or distributions from such a trust; and
(C) subject to section 401(k)(4)(B) and any dollar limitation
on the application of section 402(e)(3), contributions to the
Thrift Savings Fund shall not be treated as distributed or made
available to an employee or Member nor as a contribution made
to the Fund by an employee or Member merely because the
employee or Member has, under the provisions of subchapter III
of chapter 84 of title 5, United States Code, and section 8351
of such title 5, an election whether the contribution will be
made to the Thrift Savings Fund or received by the employee or
Member in cash.
(2) Nondiscrimination requirements
Notwithstanding any other provision of law, the Thrift Savings
Fund is not subject to the nondiscrimination requirements
applicable to arrangements described in section 401(k) or to
matching contributions (as described in section 401(m)), so long
as it meets the requirements of this section.
(3) Coordination with Social Security Act
Paragraph (1) shall not be construed to provide that any amount
of the employee's or Member's basic pay which is contributed to
the Thrift Savings Fund shall not be included in the term "wages"
for the purposes of section 209 of the Social Security Act or
section 3121(a) of this title.
(4) Definitions
For purposes of this subsection, the terms "Member",
"employee", and "Thrift Savings Fund" shall have the same
respective meanings as when used in subchapter III of chapter 84
of title 5, United States Code.
(5) Coordination with other provisions of law
No provision of law not contained in this title shall apply for
purposes of determining the treatment under this title of the
Thrift Savings Fund or any contribution to, or distribution from,
such Fund.
(k) Treatment of certain amounts paid to charity
In the case of any payment which, except for section 501(b) of
the Ethics in Government Act of 1978, might be made to any officer
or employee of the Federal Government but which is made instead on
behalf of such officer or employee to an organization described in
section 170(c) -
(1) such payment shall not be treated as received by such
officer or employee for all purposes of this title and for all
purposes of any tax law of a State or political subdivision
thereof, and
(2) no deduction shall be allowed under any provision of this
title (or of any tax law of a State or political subdivision
thereof) to such officer or employee by reason of having such
payment made to such organization.
For purposes of this subsection, a Senator, a Representative in, or
a Delegate or Resident Commissioner to, the Congress shall be
treated as an officer or employee of the Federal Government.
(l) Regulations relating to conduit arrangements
The Secretary may prescribe regulations recharacterizing any
multiple-party financing transaction as a transaction directly
among any 2 or more of such parties where the Secretary determines
that such recharacterization is appropriate to prevent avoidance of
any tax imposed by this title.
(m) Designation of contract markets
Any designation by the Commodity Futures Trading Commission of a
contract market which could not have been made under the law in
effect on the day before the date of the enactment of the Commodity
Futures Modernization Act of 2000 shall apply for purposes of this
title except to the extent provided in regulations prescribed by
the Secretary.
(n) Special rules for determining when an individual is no longer a
United States citizen or long-term resident
For purposes of this chapter -
(1) United States citizens
An individual who would (but for this paragraph) cease to be
treated as a citizen of the United States shall continue to be
treated as a citizen of the United States until such individual -

(A) gives notice of an expatriating act (with the requisite
intent to relinquish citizenship) to the Secretary of State,
and
(B) provides a statement in accordance with section 6039G (if
such a statement is otherwise required).
(2) Long-term residents
A long-term resident (as defined in section 877(e)(2)) who
would (but for this paragraph) be described in section 877(e)(1)
shall be treated as a lawful permanent resident of the United
States and as not described in section 877(e)(1) until such
individual -
(A) gives notice of termination of residency (with the
requisite intent to terminate residency) to the Secretary of
Homeland Security, and
(B) provides a statement in accordance with section 6039G (if
such a statement is otherwise required).
(o) Cross references
(1) Other definitions
For other definitions, see the following sections of Title 1
of the United States Code:
(1) Singular as including plural, section 1.
(2) Plural as including singular, section 1.
(3) Masculine as including feminine, section 1.
(4) Officer, section 1.
(5) Oath as including affirmation, section 1.
(6) County as including parish, section 2.
(7) Vessel as including all means of water transportation,
section 3.
(8) Vehicle as including all means of land transportation,
section 4.
(9) Company or association as including successors and
assigns, section 5.
(2) Effect of cross references
For effect of cross references in this title, see section
7806(a).