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source, an additional tax known as the surtax, shall be assessed at graduated rates, as follows:

$5,000 to $7,500 1%

7,500 10,000 2% 10,000 12,500 3% 12,500 15,000 4% 15,000 20,000

5% 20,000 40,000

8% 40,000 60,000 12% 60,000 80,000 17% 80,000 100,000 22% 100,000 150,000 27% 150,000 200,000 81% 200,000 250,000 37% 250,000 300,000 42% 800,000 500,000 46% 500,000 750,000 50%

750,000 1,000,000 55% 1,000,000 1,500,000 61% 1,500,000 2,000,000 62%

On excess of 2,000,000 68% The following example shows the assessment of the normal and additional tax:

"A, a non-resident alien individual has a net income amounting to $18,000, including dividends of corporations, which are taxable upon their net income under this law, amounting to $3,000; credit for excess profits tax assessed, $1,000.

Tax Computation
Net income

Less credit for excess profits tax 1,000
Income subject to surtax

Less credit for dividends

Net income subject to normal tax $14,000
Amount of normal tax at 2% (levied
under Act of September 8, 1916)


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Amount subject to surtax:
Over $5,000 and not over $7,500, $2,500 1%

$25 $7,500

10,000, 2,500 2% 50 $10,000 12,500, 2,500

75 $12,500

15,000, 2,500 4% 100 $15,000 up to 17,000, 2,000 5% 100 Total income tax (not including excess profits tax) $630

Credit shall be taken for any amount of tax which has been withheld at the source. PARTNERSHIFS

Non-resident alien partnerships, as such, are not subject to the income tax but the net income of such partnerships derived from sources within the United States, whether distributed or not, payable to its individual members, must be returned by them as income and will be taxed the same

as any other income received by an individual from sources within the United States.

For example, if a foreign partnership with
two partners, having equal shares in the
profits, has the following net income:
From business transacted in the
United States

From interest on bonds of domestic

From dividends on stocks of domestic

The total net income of the partner-
ship is

The share of each partner in the in-
come is

$15,000 The amount of $15,000 will be reported by each partner in his individual return as his net share of the income of the partnership, entering separately the amounts representing income from dividends, from interest on corporate bonds, and from other sources.


On the net income of non-resident alien corporations, derived from sources within the United States, as hereinafter described, a tax of two per centum shall be assessed and paid, under the Act of September 8, 1916, as amended.

An additional tax of four per centum, known as the War Income Tax, is imposed on such net income of corporations, except that for the purpose of computing this additional tax, net income shall be credited with the amount of dividends received from corporations organized and existing under the laws of the United States.

For example, if a foreign corporation has the following net income:

From business transacted in
the United States

From interest on bonds of

domestic corporations 5,000
From dividends on stocks of
domestic corporations

The total net income subject
to tax at 2%

Tax at 2%

$360 Less dividends

8,000 Income subject to tax at 4% $15,000 Tax at 4%

600 Total income tax (not including excess profits tax) $960

Credit shall be taken for the amount of tax which has been withheld at the source.

Non-Resident Alien Defined


Non-resident alien, under the Federal Income Tax Law, means a citizen of a country other than the United States, whose domicile is without the United States. Aliens, temporarily residing or employed in the United States, as for a season or other similarly definite term, are within the class of non-resident aliens.

For the purposes of the income tax, it is held that where for business purposes or otherwise, an alien is permanently located in the United States, has there his principal business establishment and is there permanently occupied or employed, even though his domicile may be without the United States, he will be held to be within the definition of “every person residing in the United States, though not a citizen thereof” and subject to tax accordingly.

Residence means that place where a man has his true, fixed and permanent home and principal establishment and to which, whenever he is absent, he has the intention of returning, and indicates permanency of occupation as distinct from lodging or boarding, or temporary occupation.

It is important to note that a native or naturalized citizen of the United States can become a non-resident alien only where his status is changed by affirmative action or is forfeited by overt act. An American woman marrying a foreigner takes the nationality of her husband.

Aliens coming to the United States with the intention of becoming residents thereof, within the meaning and intent of the income tax law, may establish that fact and have the privilege of resident aliens under the law, by filing with withholding agents, & certificate (Form 1078), which certificate shall be forwarded by withholding agents to collectors of Internal Revenue, as justification for the assessment of the income tax on the basis of residence in the United States.

“United States” includes the States, Territories of Alaska and Hawaii and the District of Columbia.

“Foreign” refers to any foreign country or govern. ment or any possession of the United States not mentioned above.


“Foreign corporation" includes municipal and private corporations holding charters under laws of countries foreign to the United States. Foreign corporations having several branch offices in the United States should designate one as their principal office and also designate the proper officer to make tax returns for them.

A foreign corporation may be transacting business or have capital invested in this country through an agent as completely as if it were transacting business or investing capital direct from its home office or duly established branch office. Such agent is to all intents and purposes a branch of the foreign corporation. If a representative of a foreign corporation is employed for the purpose of soliciting business, such corporation will be “transacting business in this country,” the fact that the agent has only a mailing address here being immaterial.

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