ECI

Effectively connected income is income effectively connected with the conduct of a trade or business within the United States. Its significance for a non-US investor is procedural as much as financial: ECI is taxed on a net basis at graduated rates, is subject to withholding under section 1446, and obliges the foreign partner to file a US tax return, an outcome many international LPs specifically invest to avoid. A partnership's activities are attributed to its partners, so a foreign LP in a US SPV can be dragged into US filing by what the vehicle does rather than by anything they did. Passive holding of corporate stock generally does not generate ECI; holding an interest in an operating business, or trading actively, can.