The U.S. imposes tax on U.S.-source income payable to foreign persons and entities, including offshore hedge funds and foreign investors. Under that regime, a person or entity that pays or receives “effectively connected income” (ECI) or “fixed, determinable, annual or periodical” income (FDAPI) may be subject to withholding and reporting requirements. This article offers an overview of ECI and FDAPI, the related reporting and withholding requirements, and the key exceptions to those requirements available to private fund managers. For a discussion of the flip side of this issue, i.e., taxation of investments outside the U.S., see “Tax Practitioners Discuss Taxation of Foreign Investments and Distressed Debt Investments at FRA/HFBOA Seminar (Part Three of Four),” Hedge Fund Law Report, Vol. 7, No. 4 (Jan. 30, 2014); and “How Can Hedge Funds Recoup Overwithholding of Tax on Non-U.S. Source Interest and Dividends?,” Hedge Fund Law Report, Vol. 6, No. 35 (Sep. 12, 2013).