### Question
How does the law define portfolio interest?


### Answer
Under *26 U.S.C. § 881*, **portfolio interest** is defined as:

> any interest (including original issue discount) which—



(A) would be subject to tax under subsection (a) but for this subsection, and



(B) is paid on an obligation—



(i) which is in registered form, and



(ii) with respect to which—



(I) the person who would otherwise be required to deduct and withhold tax from such interest under section 1442(a) receives a statement which meets the requirements of section 871(h)(5) that the beneficial owner of the obligation is not a United States person, or



(II) the Secretary has determined that such a statement is not required in order to carry out the purposes of this subsection

#### Citation:
  - *26 U.S.C. § 881*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter N-Tax Based on Income From Sources Within or Without the United States > PART II-NONRESIDENT ALIENS AND FOREIGN CORPORATIONS > Subpart B-Foreign Corporations**

