TREATMENT OF NONRESIDENT ALIENS ENGAGED IN INTERNATIONAL TRANSPORTATION SERVICES.

SEC. 1174. TREATMENT OF NONRESIDENT ALIENS ENGAGED IN INTERNATIONAL TRANSPORTATION SERVICES. (a) Sourcing Rules.— (1) In general.—Section 861(a)(3) is amended by adding at the end the following new flush sentence: “In addition, except for purposes of sections 79 and 105 and subchapter D, compensation for labor or services performed in the United States shall not be deemed to be income from sources within the United States if the labor or services are performed by a nonresident alien individual in connection with the individual’s temporary presence in the United States as a regular member of the crew of a foreign vessel engaged in transportation between the United States and a foreign country or a possession of the United States.”. (2) Transportation income.—Subparagraph (B) of section 863(c)(2) is amended by adding at the end the following flush sentence: “In the case of transportation income derived from, or in connection with, a vessel, this subparagraph shall only apply if the taxpayer is a citizen or resident alien.”. (b) Presence in United States.— (1) In general.—Paragraph (7) of section 7701(b) is amended by adding at the end the following new subparagraph: “(D) Crew members temporarily present.—An individual who is temporarily present in the United States on any day as a regular member of the crew of a foreign vessel engaged in transportation between the United States and a foreign country or a possession of the United States shall not be treated as present in the United States on such day unless such individual otherwise engages in any trade or business in the United States on such day.”. (2) Conforming amendment.—Subparagraph (A) of section 7701(b)(7) is amended by striking “or (C)” and inserting “, (C), or (D)”. (c) Effective Dates.— (1) In general.—The amendments made by this section shall apply to remuneration for services performed in taxable years beginning after December 31, 1997. (2) Presence.—The amendment made by subsection (b) shall apply to taxable years beginning after December 31, 1997.111 STAT. 990