§ 8.3 Nonresident

• Library: Rights of Foreign Nationals (OSBar) (2020 Ed.)

§ 8.3 NONRESIDENT

If a taxpayer is considered a nonresident for U.S. or Oregon tax purposes, the taxpayer is generally taxed only on U.S. or Oregon source income. IRS Publ'n 519 (U.S. Tax Guide for Aliens) 10 (2019); DOR Publ'n OR-17 (Individual Income Tax Guide) 13-14 (2019); see IRC § 871(a) ("from sources within the United States"); ORS 316.117-316.131. Certain income that is U.S. source will be taxable at a federal 30 percent flat nonresident rate (called FDAP income: fixed, deter-minable, annual, or periodical income). See IRC § 871(a); IRS, Fixed, Determinable, Annual, Periodical (FDAP) Income, < www.irs.gov/individuals/international-taxpayers/fixed-determinable-annual-periodical-fdap-income >. This FDAP income generally includes U.S. source received by a nonresident (dividends, annuities, royalties, and similar). Treaties can provide for a lower withholding rate (e.g., 10-15 percent on dividends). See IRS Publication 901 (U.S. Tax Treaties) for a list of treaty withholding rates. Generally, the withholding at source satisfies the tax requirement, and no tax return is required to be filed.

Sources of income considered to be "effectively connected" to a U.S. trade or business will be subject to U.S. tax at graduated tax rates, not the flat 30 percent rate. IRC § 871(b); IRS Publ'n 519 at 17. Income from such sources as employment, pensions from U.S. services, business income...