Frequently Asked Questions
Who is eligible for the Foreign Source Interest Reporting Exclusion?
Applies to interest income derived from foreign governments, international organizations, or foreign corporations not engaged in U.S. business.
How does the Foreign Source Interest Reporting Exclusion work?
Excludes from reporting requirements interest that is income from sources outside the United States or paid by certain foreign entities not engaged in a U.S. trade or business.
What law authorizes the Foreign Source Interest Reporting Exclusion?
The Foreign Source Interest Reporting Exclusion is authorized under IRC §6049 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §6049
Source: Internal Revenue Code, Title 26, United States Code
§ 6049. Returns regarding payments of interest(a) Requirement of reportingEvery person—(1) who makes payments of interest (as defined in subsection (b)) aggregating $10 or more to any other person during any calendar year, or
(2) who receives payments of interest (as so defined) as a nominee and who makes payments aggregating $10 or more during any calendar year to any other person with respect to the interest so received,
shall make a return according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amount of such payments and the name and address of the person to whom paid.
(b) Interest defined(1) General ruleFor purposes of subsection (a), the term “interest” means—(A) interest on any obligation—(i) issued in registered form, or
(ii) of a type offered to the public,
other than any obligation with a maturity (at issue) of not more than 1 year which is held by a corporation,
(B) interest on deposits with persons carrying on the banking business,
(C) amounts (whether or not designated as interest) paid by a mutual savings bank, savings and loan association, building and loan association, cooperative bank, homestead association, credit union, industrial loan association or bank, or similar organization, in respect of deposits, investment certificates, or withdrawable or repurchasable shares,
(D) interest on amounts held by an insurance company under an agreement to pay interest thereon,
(E) interest on deposits with brokers (as defined in section 6045(c)),
(F) interest paid on amounts held by investment companies (as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3)) and on amounts invested in other pooled funds or trusts, and
(G) to the extent provided in regulations prescribed by the Secretary, any other interest (which is not described in paragraph (2)).
(2) ExceptionsFor purposes of subsection (a), the term “interest” does not include—(A) interest on any obligation issued by a natural person,
(B) except to the extent otherwise provided in regulations—(i) any amount paid to any person described in paragraph (4), or
(ii) any amount described in paragraph (5), and
(C) except to the extent otherwise provided in regulations, any amount not described in subparagraph (B) of this paragraph which is income from sources outside the United States or which is paid by—(i) a foreign government or international organization or any agency or instrumentality thereof,
(ii) a foreign central bank of issue,
(iii) a foreign corporation not engaged in a trade or business in the United States,
(iv) a foreign corporation, the interest payments of which would be exempt from withholding under subchapter A of chapter 3 if paid to a person who is not a United States person, or
(v) a partnership not engaged in a trade or business in the United States and composed in whole of nonresident alien individuals and persons described in clause (i), (ii), or (iii).
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