Rev. Rul. 76-19 - Canadian Corp With Employees In the U.S.

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Rev. Rul. 76-19 - Canadian Corp With Employees In the U.S.

2024-10-01

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Today we published a chart of Rev. Rul. 76-19. In this ruling, a Canadian corporation sent two employees to the U.S. for 12 months of training. The employees continued to be paid by the Canadian employer. The ruling held that:

The treaty did not prevent the employees from being subject to U.S. income tax,
Each of the employees was engaged in a U.S. trade or business under Code §864(b),
The salary earned by each of the employees was effectively connected to the U.S. trade or business,
The Canadian employer needed to withhold U.S. federal income tax under Code §3402, and
The Canadian employer needed to withhold Federal Insurance Contributions Act ("FICA") tax.

This ruling was published prior to Canada and the U.S. entering into a totalization agreement. The totalization agreement would likely change holding number five.

It is interesting that the ruling did not discuss whether the Canadian employer itself could be engaged in a U.S. trade or business.

Tags: 864 Engaged in U.S. Trade or Business (ETOB), 871 / 881 FDAP, 894 Treaties

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Rev. Rul. 76-19 - Canadian Corp With Employees In the U.S.

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