The issue the NYT is complaining about is: the US prefers to use "place of incorporation" instead of "place of effective management" in deciding where a company

The issue the NYT is complaining about is: the US prefers to use "place of incorporation" instead of "place of effective management" in deciding where a company should be taxed. Of course this should hardly be a surprise, when Delaware alone is "home" to tens of thousands of companies owned by non-resident aliens. For those who are curious or suffering from insomnia, here's the actual laws that make Carnival mostly tax-exempt: Internal Revenue Code Sec. 883: (a) The following items shall not be included in gross income of a foreign corporation, and shall be exempt from taxation under this subtitle: (1) Ships operated by certain foreign corporations: Gross income derived by a corporation organized in a foreign country from the international operation of a ship or ships if such foreign country grants an equivalent exemption to corporations organized in the United States. http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000883----000-.html http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_0... "Foreign corporation" is defined in Sec. 7701: (4) Domestic: The term “domestic” when applied to a corporation or partnership means created or organized in the United States or under the law of the United States or of any State unless, in the case of a partnership, the Secretary provides otherwise by regulations. (5) Foreign: The term “foreign” when applied to a corporation or partnership means a corporation or partnership which is not domestic. http://www.law.cornell.edu/uscode/26/usc_sec_26_00007701----000-.html http://www.law.cornell.edu/uscode/26/usc_sec_26_00007701----... In some countries, the laws and treaties care about the "place of effective management" of a corporation in deciding where it is to be taxed. That would catch out Carnival. For example, the OECD model tax convention says: Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is located http://browse.oecdbookshop.org/oecd/pdfs/browseit/2310081E.PDF http://browse.oecdbookshop.org/oecd/pdfs/browseit/2310081E.P... However, the US uses the following in most of its treaties instead: Profits of an enterprise of a Contracting State from the operation in international traffic of ships or aircraft shall be taxable only in that State. And, there is no double-taxation treaty between the US and Panama in the first place, only a tax information exchange agreement.