Some Modest Simplification Proposals for Inbound Transactions

Abstract

The article proposes four changes to the inbound U.S. international tax rules to be read in conjunction with the changes proposed by the Joint Committee in its simplification study. First, the dollar threshold for nonresidential alien individuals performing services in the U.S. should be increased from $3,000 to $25,000 to reflect the fact that the threshold amount has not changed since its enactment in 1936. Second, a nonresidential alien ("NRA") or foreign corporation owning U.S. real property should be treated as having income from the U.S. real property as income effectively connected to a U.S. trade or business unless the activity is not a trade or business and the NRA or foreign corporation elects to have the income subject to the 30 percent gross basis withholding tax. Third, a nonresident alien should be treated as a nonresident for purposes of the sourcing rules for personal property even if the nonresidential alien has a tax home in the United States. Finally, a provision treating foreign source income from the sale of inventory as effectively connected income should be repealed.