DEFINITIONS: “Foreign Person”

By ftsig-admin | July 30, 2024

WRITING CONVENTIONS ON THIS SITE DEALING WITH “Foreign Persons”:

Writing Conventions on This Website
Section 7: Foreign Person
https://ftsig.org/introduction/writing-conventions-on-this-website/#7._Foreign_Person

7. Foreign Person

There is LOTS of government equivocation surrounding the term “foreign” as indicated in the previous section. There is JUST as much equivocation by going on with the term “foreign person” because it can be used in its PUBLIC/PRIVILEGED/INTERNAL context or its PRIVATE/FOREIGN/EXTERNAL context. Below is a table summarizing the symbology for the term used on this site:

7.1. Components of the term “foreign person”

#	“Foreign” context	“Person” context	Constitutional protections?	Satisfies Presence Test I.R.C. 7701(b) (1)(A)?	Defined/ described In	Notes
1	Foreign^S	Person^PRI	Yes	Yes	Bill of Rights	Aliens or American nationals in the country residing/domiciled on land protected by the Constitution in a state of the Union
2	Foreign^P	Person^PUB	No	Yes	26 U.S.C. §7701(b)(1)(B)	Aliens domiciled/residing within the exclusive jurisdiction of Congress and not protected by the Constitution
3	Foreign^P	Person^PUB	No	No	26 C.F.R. §1.1441(c)(2) 26 C.F.R. §1.1441(c)(3)	Aliens abroad doing business in the COUNTRY
4	Foreign^S	Person^PRI	Yes	Yes	Bill of Rights	Aliens residing abroad but visiting a state of the Union

NOTES:

I-9 Form pertains ONLY to privileged aliens, and never “nationals of the United States^P“. See:
1.1. 8 U.S.C. §1324a (a)(1), (a)(4), (a)(7)
1.2. 8 C.F.R. §274a.12 and 20 C.F.R. §422.105, §404.418(a)
1.3. I-9 Form Amended, form #06.028
https://sedm.org/Forms/06-AvoidingFranch/i-9Amended.pdf
Those who are born or naturalized anywhere in the country are “nationals of the United States^P“. This is a POLITICAL and PRIVATE status, not a CIVIL status. You CANNOT be a “national” and an “alien” at the same time in any act of Congress. It’s ONE or the OTHER.
For the definitions of “foreign person”, see:
DEFINITIONS: “Foreign Person”, FTSIG
https://ftsig.org/definitions-foreign-person/
Those protected by the Constitution in column 6 may NOT be subjected to direct taxes under Article 1, Section 9, Clause 4 and Article 1, Section 2, Clause 3. This includes aliens residing on land protected by the Constitution under rows 1 and 4. The “Bill of Rights” attaches to human beings standing on land protected by the Constitution, not to the status of the people ON that land. Even aliens present on said land enjoy constitutional protections because the Bill of Rights attaches to PRIVATE Persons^PRI, not to just “citizens”.
For articles dealing with the subject on this website:
4.1. Microsoft Copilot: How does an “national of the United States” under 8 U.S.C. 1101(a)(22) become a “foreign person”?, FTSIG
https://ftsig.org/microsoft-copilot-how-does-an-national-of-the-united-states-under-8-u-s-c-1101a22-become-a-foreign-person/
4.2. Microsoft Copilot: American nationals are not “foreign persons” for the purpose of I.R.C. Chapter 3 “foreign person” withholding in 26 U.S.C. 1441 and 26 C.F.R. 1.1441-1, FTSIG
https://ftsig.org/microsoft-copilot-american-nationals-are-not-foreign-persons-for-the-purpose-of-i-r-c-chapter-3-foreign-person-withholding-in-26-u-s-c-1441-and-26-c-f-r-1-1441-1/
4.3. META AI: Is a “NATIONAL OF THE UNITED STATES” A “FOREIGN PERSON” under 26 U.S.C. 1441?, FTSIG
https://ftsig.org/meta-ai-is-a-national-of-the-united-states-a-foreign-person/
4.4. Lawfully Avoiding Foreign Person Withholding, FTSIG
https://ftsig.org/lawfully-avoiding-foreign-person-withholding/

7.2. Types of “Foreign Persons”

#	Name	Nationality	Described but not defined in	Identifying Number	Type of “Foreign person”?	Symbol
1	Nonresident alien	American National	26 U.S.C. §7701(b)(1)(B)	SSN	Foreign^S Person^PRI	NRA⁵⁰ NRA^T&P
2	Nonresident alien	Alien	26 U.S.C. §7701(b)(1)(B)	ITIN	Foreign^S/P Person^PRI	NRA^Alien
3	Non-Resident Alien	Alien	26 U.S.C. §874	ITIN	Foreign^P Person^PUB
4	Individual	Alien ONLY	26 C.F.R. §1.1441-1(c)(3)	ITIN	Foreign^P Person^PUB	NRA^Alien
5	alien individual	Alien ONLY	26 C.F.R. §1.1441-1(c)(3)(i)	ITIN	Foreign^P Person^PUB	NRA^Alien
6	nonresident alien individual	Alien ONLY	26 C.F.R. §1.1441-1(c)(3)(ii)	ITIN	Foreign^P Person^PUB	NRA^Alien
7	“nonresident alien^P individual^PUB“	Alien ONLY	26 C.F.R. §1.6012-1(b)(1)(i)	ITIN	Foreign^P Person^PUB	NRA^Alien
8	“nonresident alien^S” + “individual^PRI“	American National ONLY	26 C.F.R. §1.6012-1(b)(1)(i)	SSN	Foreign^S Person^PRI	NRA⁵⁰

NOTES:

Only “foreign persons” are subject to 26 C.F.R. §1.1441-1 withholding. American nationals are NOT “foreign persons” for the purposes of withholding. This is because “foreign person” withholding is implemented as a foreign affairs function under Article 1, Section 8, Clause 3 of the Constitution and American Nationals do not come under the authority of foreign affairs within a constitutional state. See:
1.1. META AI: Is a “NATIONAL OF THE UNITED STATES” A “FOREIGN PERSON” under 26 U.S.C. 1441?, FTSIG
https://ftsig.org/meta-ai-is-a-national-of-the-united-states-a-foreign-person/
1.2. Section 7 of this page.
U.S. Tax Guide for Aliens, IRS Publications 519, covers withholding for nonresident aliens and aliens who are ALL “aliens” and never “nationals”. NOWHERE does it mention “American Nationals” or “U.S. nationals”, or “nationals of the United States” except dealing with deductions for dependents. Everything in this publication deals with the presence test under 26 U.S.C. §7701(b) that only applies to “alien individuals”. Therefore, they are EXCLUDED from “foreign person” withholding under 26 C.F.R. §1.1441-1.
https://www.irs.gov/publications/p519
26 C.F.R. §1.1441-1(c)(3)(ii) points back to 26 U.S.C. §7701(b)(1)(B) within its definition. However, 26 C.F.R. §1.1441-1(c)(3)(ii) only EXPRESSLY includes aliens and nowhere are “nationals” mentioned. Thus, they are purposefully excluded per the rules of statutory construction and interpretation.
Tax Guide for Individuals with Income from U.S. Territories, Publication 570 deals with taxation in territories
https://www.irs.gov/publications/p570
Individual Taxpayer Identification Numbers (ITINs) are issued ONLY to “aliens” and never “nationals” under the authority of 26 C.F.R. §301.6109-1(d). More at:
About SSNs and TINs on Government Forms and Correspondence, Form #05.012, Section 5.3.
https://sedm.org/Forms/05-MemLaw/AboutSSNsAndTINs.pdf
The Presence Test:
6.1. Found in 26 U.S.C. §7701(b) and only applies to “alien individuals” and never “American Nationals”.
6.2. There is a separate “presence test” for possessions under 26 U.S.C. §937(a) and 26 C.F.R. §1.937-1 that also applies to U.S. citizens and American Nationals.
6.3. Courts try to EQUIVOCATE/DECEIVE LEGALLY present with PHYSICALLY present. An “effectively connected” election makes you LEGALLY present but not PHYSICALLY present. See 26 C.F.R. §301.7701-5 (1999) and Walby v. United States, 957 F.3d. 1295 (2020).

26 C.F.R. §301.7701-5 Domestic, foreign, resident, and nonresident persons.

A domestic corporation is one organized or created in the United States, including only the States (and during the periods when not States, the Territories of Alaska and Hawaii), and the District of Columbia, or under the law of the United States or of any State or Territory. A foreign corporation is one which is not domestic. A domestic corporation is a resident corporation even though it does no business and owns no property in the United States. A foreign corporation engaged in trade or business within the United States is referred to in the regulations in this chapter as a resident foreign corporation, and a foreign corporation not engaged in trade or business within the United States, as a nonresident foreign corporation. A partnership engaged in trade or business within the United States is referred to in the regulations in this chapter as a resident partnership, and a partnership not engaged in trade or business within the United States, as a nonresident partnership. Whether a partnership is to be regarded as resident or nonresident is not determined by the nationality or residence of its members or by the place in which it was created or organized.
[Amended by T.D. 8813, Federal Register: February 2, 1999 (Volume 64, Number 21), Page 4967-4975]
[IMPORTANT NOTE!: Whether a “person” is a “resident” or “nonresident” has NOTHING to do with the nationality or residence, but with whether it is engaged in a “trade or business”]

26 C.F.R. §1.1441-1 – Requirement for the deduction and withholding of tax on payments to foreign persons.

(c) Definitions.

The following definitions apply for purposes of sections 1441 through 1443, 1461, and regulations under those sections. For definitions of terms used in these regulations that are defined under sections 1471 through 1474, see subparagraphs (43) through (56) of this paragraph.

(1) Withholding.

The term withholding means the deduction and withholding of tax at the applicable rate from the payment.

(2) Foreign and U.S. person—

(i) In general.

The term foreign person means any person that is not a U.S. person, including a QI branch of a U.S. financial institution (as defined in § 1.1471-1(b)(109). Such a branch continues to be a U.S. payor for purposes of chapter 61 of the Code. See § 1.6049-5(c)(4). A U.S. person is a person described in section 7701(a)(30), the U.S. government (including an agency or instrumentality thereof), a State (including an agency or instrumentality thereof), or the District of Columbia (including an agency or instrumentality thereof).

(ii) Dual residents.

Individuals will not be treated as U.S. persons for purposes of this section for a taxable year or any portion of a taxable year for which they are a dual resident taxpayer (within the meaning of § 301.7701(b)-7(a)(1) of this chapter) who is treated as a nonresident alien pursuant to § 301.7701(b)-7(a)(1) of this chapter for purposes of computing their U.S. tax liability.

(3) Individual—

(i) Alien individual.

The term alien individual means an individual who is not a citizen or a national of the United States. See § 1.1-1(c).

(ii) Nonresident alien individual.

The term nonresident alien individual means persons described in section 7701(b)(1)(B), alien individuals who are treated as nonresident aliens pursuant to § 301.7701(b)-7 of this chapter for purposes of computing their U.S. tax liability, or an alien individual who is a resident of Puerto Rico, Guam, the Commonwealth of Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa as determined under § 301.7701(b)-1(d) of this chapter. An alien individual who has made an election under section 6013(g) or (h) to be treated as a resident of the United States is nevertheless treated as a nonresident alien individual for purposes of withholding under chapter 3 of the Code and the regulations thereunder.

Posted in Definitions and tagged foreign person