When foreign corporations have certain activities in the U.S.,
the question often arises as to whether a taxable presence exists
in the U.S. for Federal income tax purposes. Under U.S. Federal tax
law, a foreign corporate taxpayer with direct activities or
operations in the U.S. is subject to U.S. corporate income tax and
branch profits tax if it has a U.S. trade or business generating
effectively connected income.1 Recently, the I.R.S.
Large Business and International division published an
international practice unit ("I.P.U.") addressing the
creation of a P.E. through the activities of a "dependent
agent."
In general, the permanent establishment ("P.E.")
article of a treaty between the foreign taxpayer's jurisdiction
and the U.S. will govern U.S. tax treatment of the foreign
taxpayer's U.S. activities, if the taxpayer is eligible and
elects for treaty benefits.2 Often, the treaty
definition of a P.E. is, in effect, less stringent in that it
allows for the
