Hastings Business Law Journal


Whether a particular set of activities constitute the conduct of a trade or business within the United States is an ongoing interpretive question affecting many foreign taxpayers. It controls what form of U.S. taxation, if any, applies to them. In the domestic context, a trade or business entails profit-oriented non-investment activity that is regular, continuous and considerable. It is tempting, in the transition to the international context, to conclude that the conduct of a trade or business within the U.S. requires that the taxpayer's U.S. activities must be regular, continuous, and considerable, and the standard is often articulated in this quantitative manner.

This Article, however, concludes that, as an interpretive matter, this approach is mistaken. Instead the Article disentangles the original inquiry into two distinct inquiries:

Is the foreign taxpayer engaged in a trade or business? Is the conduct of the trade or business "within" the United States?

The answer to the former question is quantitative. Once the existence of a trade or business is established, however, no minimum quantum of U.S. activity is necessary to bring a foreign trade or business into the United States. Instead, the necessary condition for an affirmative answer to the second question is qualitative, focusing on the types of U.S. connections rather than their regularity, continuity, or considerableness. In answering these questions, the Article advance a series of five distinct propositions that creates an interpretive reconciliation of the various authorities addressing this question.