Yes. Corporations that are U.S. incorporated are also subject to worldwide U.S. taxation, even if the income is earned elsewhere (abroad). However, generally, the U.S. does not have power to tax the earnings of foreign corporations. The exception is when the foreign corporation engages in a U.S. trade or business. Those earnings that are effectively connected with the U.S. trade or business are taxed. This concept is called “effectively connected income” or “ECI.” Generally, when a foreign entity engages in a trade or business in the U.S., all income from sources within the U.S. connected with the conduct of that trade or business is considered to ECI. Typically, the entity must be engaged in a trade or business during the tax year for its income to be deemed ECI.
