ECI
Income that a non-resident earns through a U.S. trade or business, taxed at U.S. graduated rates rather than the flat 30% withholding.
Effectively Connected Income (ECI) is income that a non-resident earns through the active conduct of a U.S. trade or business. ECI is taxed at the same graduated rates as a U.S. resident's ordinary income, with deductions allowed. The opposing category, FDAP (Fixed, Determinable, Annual or Periodical), is taxed at a flat 30% gross withholding (often reduced by treaty). The ECI vs FDAP distinction is the central question for non-resident LLC tax planning, and the boundary is fact-intensive.
Also known asEffectively Connected Income, ECI Income
Related terms
- FDAP — U.S.-source passive income paid to non-residents, generally subject to 30% gross withholding (often reduced by…
- Form W-8BEN — The IRS form a non-U.S. individual gives to a U.S. payer to certify foreign status and claim treaty benefits.…
- Form 1042-S — The IRS information return that U.S. payers issue to non-residents to report U.S.-source income subject to wit…