---
kind: "section"
citation: "26 U.S.C. § 896"
title: "26"
title_heading: "Internal Revenue Code"
number: "896"
heading: "Adjustment of tax on nationals, residents, and corporations of certain foreign countries"
release: "119-102"
url: "https://uscodex.org/usc/26/896"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter N — Tax Based on Income From Sources Within or Without the United States"
  - "Part II — Nonresident Aliens and Foreign Corporations"
  - "Subpart D — Miscellaneous Provisions"
---

# §896. Adjustment of tax on nationals, residents, and corporations of certain foreign countries

- (a) **Imposition of more burdensome taxes by foreign country—** Whenever the President finds that—
  - (1) under the laws of any [foreign](/usc/26/7701.md?p=a-5) country, considering the tax system of such [foreign](/usc/26/7701.md?p=a-5) country, citizens of the [United States](/usc/26/638.md?p=1) not residents of such [foreign](/usc/26/7701.md?p=a-5) country or [domestic](/usc/26/7701.md?p=a-4) [corporations](/usc/26/7701.md?p=a-3) are being subjected to more burdensome taxes, on any item of income received by such citizens or [corporations](/usc/26/7701.md?p=a-3) from sources within such [foreign](/usc/26/7701.md?p=a-5) country, than taxes imposed by the provisions of this subtitle on similar income derived from sources within the [United States](/usc/26/638.md?p=1) by residents or [corporations](/usc/26/7701.md?p=a-3) of such [foreign](/usc/26/7701.md?p=a-5) country,
  - (2) such [foreign](/usc/26/7701.md?p=a-5) country, when requested by the [United States](/usc/26/638.md?p=1) to do so, has not acted to revise or reduce such taxes so that they are no more burdensome than taxes imposed by the provisions of this subtitle on similar income derived from sources within the [United States](/usc/26/638.md?p=1) by residents or [corporations](/usc/26/7701.md?p=a-3) of such [foreign](/usc/26/7701.md?p=a-5) country, and
  - (3) it is in the public [interest](/usc/26/856.md?p=f-1) to apply pre-1967 tax provisions in accordance with the provisions of this subsection to residents or [corporations](/usc/26/7701.md?p=a-3) of such [foreign](/usc/26/7701.md?p=a-5) country,

  the President shall proclaim that the tax on such similar income derived from sources within the [United States](/usc/26/638.md?p=1) by residents or [corporations](/usc/26/7701.md?p=a-3) of such [foreign](/usc/26/7701.md?p=a-5) country shall, for [taxable years](/usc/26/441.md?p=b) beginning after such proclamation, be determined under this subtitle without regard to amendments made to this subchapter and [chapter 3](/usc/26/chstA-ch3.md) on or after the date of enactment of this section.

- (b) **Imposition of discriminatory taxes by foreign country—** Whenever the President finds that—
  - (1) under the laws of any [foreign](/usc/26/7701.md?p=a-5) country, citizens of the [United States](/usc/26/638.md?p=1) or [domestic](/usc/26/7701.md?p=a-4) [corporations](/usc/26/7701.md?p=a-3) (or any class of such citizens or [corporations](/usc/26/7701.md?p=a-3)) are, with respect to any item of income, being subjected to a higher effective rate of tax than are nationals, residents, or [corporations](/usc/26/7701.md?p=a-3) of such [foreign](/usc/26/7701.md?p=a-5) country (or a similar class of such nationals, residents, or [corporations](/usc/26/7701.md?p=a-3)) under similar circumstances;
  - (2) such [foreign](/usc/26/7701.md?p=a-5) country, when requested by the [United States](/usc/26/638.md?p=1) to do so, has not acted to eliminate such higher effective rate of tax; and
  - (3) it is in the public [interest](/usc/26/856.md?p=f-1) to adjust, in accordance with the provisions of this subsection, the effective rate of tax imposed by this subtitle on similar income of nationals, residents, or [corporations](/usc/26/7701.md?p=a-3) of such [foreign](/usc/26/7701.md?p=a-5) country (or such similar class of such nationals, residents, or [corporations](/usc/26/7701.md?p=a-3)),

  the President shall proclaim that the tax on similar income of nationals, residents, or [corporations](/usc/26/7701.md?p=a-3) of such [foreign](/usc/26/7701.md?p=a-5) country (or such similar class of such nationals, residents, or [corporations](/usc/26/7701.md?p=a-3)) shall, for [taxable years](/usc/26/441.md?p=b) beginning after such proclamation, be adjusted so as to cause the effective rate of tax imposed by this subtitle on such similar income to be substantially equal to the effective rate of tax imposed by such [foreign](/usc/26/7701.md?p=a-5) country on such item of income of citizens of the [United States](/usc/26/638.md?p=1) or [domestic](/usc/26/7701.md?p=a-4) [corporations](/usc/26/7701.md?p=a-3) (or such class of citizens or [corporations](/usc/26/7701.md?p=a-3)). In implementing a proclamation made under this subsection, the effective rate of tax imposed by this subtitle on an item of income may be adjusted by the disallowance, in whole or in part, of any deduction, credit, or exemption which would otherwise be allowed with respect to that item of income or by increasing the rate of tax otherwise applicable to that item of income.

- (c) **Alleviation of more burdensome or discriminatory taxes—** Whenever the President finds that—
  - (1) the laws of any [foreign](/usc/26/7701.md?p=a-5) country with respect to which the President has made a proclamation under [subsection (a)](#a) have been modified so that citizens of the [United States](/usc/26/638.md?p=1) not residents of such [foreign](/usc/26/7701.md?p=a-5) country or [domestic](/usc/26/7701.md?p=a-4) [corporations](/usc/26/7701.md?p=a-3) are no longer subject to more burdensome taxes on the item of income derived by such citizens or [corporations](/usc/26/7701.md?p=a-3) from sources within such [foreign](/usc/26/7701.md?p=a-5) country, or
  - (2) the laws of any [foreign](/usc/26/7701.md?p=a-5) country with respect to which the President has made a proclamation under [subsection (b)](#b) have been modified so that citizens of the [United States](/usc/26/638.md?p=1) or [domestic](/usc/26/7701.md?p=a-4) [corporations](/usc/26/7701.md?p=a-3) (or any class of such citizens or [corporations](/usc/26/7701.md?p=a-3)) are no longer subject to a higher effective rate of tax on the item of income,

  he shall proclaim that the tax imposed by this subtitle on the similar income of nationals, residents, or [corporations](/usc/26/7701.md?p=a-3) of such [foreign](/usc/26/7701.md?p=a-5) country shall, for any [taxable year](/usc/26/441.md?p=b) beginning after such proclamation, be determined under this subtitle without regard to such subsection.

- (d) **Notification of Congress required—** No proclamation shall be issued by the President pursuant to this section unless, at least 30 days prior to such proclamation, he has notified the Senate and the House of Representatives of his intention to issue such proclamation.
- (e) **Implementation by regulations—** The [Secretary](/usc/26/7701.md?p=a-11-B) shall prescribe such regulations as he deems necessary or appropriate to implement this section.

## Source credit

(Added Pub. L. 89–809, title I, § 105(b), Nov. 13, 1966, 80 Stat. 1563; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)

## Notes

### Editorial Notes

### References in Text

The date of enactment of this section, referred to in the provisions following subsec. (a)(3), is the date of enactment of Pub. L. 89–809, which was approved Nov. 13, 1966.

### Amendments

1976—Subsec. (e). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

### Statutory Notes and Related Subsidiaries

### Effective Date

Section applicable with respect to taxable years beginning after Dec. 31, 1966, see section 105(d) of Pub. L. 89–809, set out as an Effective Date of 1966 Amendment note under section 894 of this title.