Amended 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1006(e)(16), struck out subsec. (d) which read as follows: “Property distributions.—For purposes of this section, the amount of any distribution of property other than money shall be the amount determined by applying section 301(b)(1)(B).”
(a) Dividends from 10-percent owned foreign corporations
Amended 1966, 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1226(a), in amending subsec. (a) generally, substituted “Dividends from 10-percent owned foreign corporations” for “General rule” as heading, and in text substituted provisions set out in nine numbered paragraphs allowing for deduction for dividends received from certain foreign corporations qualifying as “10-percent owned foreign corporations” for former provisions which directed that, in the case of dividends received from a foreign corporation (other than a foreign personal holding company) which was subject to taxation under this chapter, if, for an uninterrupted period of not less than 36 months ending with the close of such foreign corporation’s taxable year in which such dividends were paid (or, if the corporation had not been in existence for 36 months at the close of such taxable year, for the period the foreign corporation had been in existence as of the close of such taxable year) such foreign corporation had been engaged in trade or business within the United States and if 50 percent or more of the gross income of such corporation from all sources for such period was effectively connected with the conduct of a trade or business within the United States, there was allowed as a deduction in the case of a corporation a percentage of dividends received.
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 104(d), (e)(2), substituted “and if 50 percent or more of the gross income of such corporation from all sources for such period is effectively connected with the conduct of a trade or business within the United States” for “and has derived 50 percent or more of its gross income from sources within the United States” in provisions preceding par. (1), “which is effectively connected with the conduct of a trade or business within the United States” for “from sources within the United States” in par. (1), “, which is effectively connected with the conduct of a trade or business within the United States,” for “from sources within the United States” in par. (2), and inserted provisions following par. (2).
Cited by 10
(1) In general In the case of dividends received by a corporation from a qualified 10-percent owned foreign corporation, there shall be allowed as a deduction an amount equal to the percent (specified in section 243 for the taxable year) of the U.S.-source portion of such dividends.
Cited by 1
(2) Qualified 10-percent owned foreign corporation For purposes of this subsection, the term “qualified 10-percent owned foreign corporation” means any foreign corporation (other than a passive foreign investment company) if at least 10 percent of the stock of such corporation (by vote and value) is owned by the taxpayer.
Amended 2004
- 2004 Pub. L. 108-357 Pub. L. 108–357 struck out “foreign personal holding company or” after “(other than a”.
Cited by 3
(3) U.S.-source portion For purposes of this subsection, the U.S.-source portion of any dividend is an amount which bears the same ratio to such dividend as—
(A) the post-1986 undistributed U.S. earnings, bears to
(B) the total post-1986 undistributed earnings.
(4) Post-1986 undistributed earnings The term “post-1986 undistributed earnings” means the amount of the earnings and profits of the foreign corporation (computed in accordance with sections 964(a) and 986) accumulated in taxable years beginning after December 31, 1986—
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 14301(c)(2), amended par. (4) generally. Prior to amendment, text read as follows: “For purposes of this subsection, the term ‘post-1986 undistributed earnings’ has the meaning given to such term by section 902(c)(1).”
(A) as of the close of the taxable year of the foreign corporation in which the dividend is distributed, and
(B) without diminution by reason of dividends distributed during such taxable year.
(5) Post-1986 undistributed U.S. earnings For purposes of this subsection, the term “post-1986 undistributed U.S. earnings” means the portion of the post-1986 undistributed earnings which is attributable to—
Cited by 8
(A) income of the qualified 10-percent owned foreign corporation which is effectively connected with the conduct of a trade or business within the United States and subject to tax under this chapter, or
Cited by 4
(B) any dividend received (directly or through a wholly owned foreign corporation) from a domestic corporation at least 80 percent of the stock of which (by vote and value) is owned (directly or through such wholly owned foreign corporation) by the qualified 10-percent owned foreign corporation.
Cited by 4
(6) Special rule If the 1st day on which the requirements of paragraph (2) are met with respect to any foreign corporation is in a taxable year of such corporation beginning after December 31, 1986, the post-1986 undistributed earnings and the post-1986 undistributed U.S. earnings of such corporation shall be determined by only taking into account periods beginning on and after the 1st day of the 1st taxable year in which such requirements are met.
(7) Coordination with subsection (b) Earnings and profits of any qualified 10-percent owned foreign corporation for any taxable year shall not be taken into account under this subsection if the deduction provided by subsection (b) would be allowable with respect to dividends paid out of such earnings and profits.
(8) Disallowance of foreign tax credit No credit shall be allowed under section 901 for any taxes paid or accrued (or treated as paid or accrued) with respect to the United States-source portion of any dividend received by a corporation from a qualified 10-percent-owned foreign corporation.
Amended 1988, 1989
- 1989 Pub. L. 101-239 Pub. L. 101–239 made clarifying amendment to directory language of Pub. L. 100–647, § 1012(l)(2)(A), see 1988 Amendment note below.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(l)(2)(A), as amended by Pub. L. 101–239, substituted “Disallowance of foreign tax credit” for “Coordination with section 902” in heading and amended text generally. Prior to amendment, text read as follows: “In the case of a dividend received by a corporation from a qualified 10-percent owned foreign corporation, no credit shall be allowed under section 901 for any taxes treated as paid under section 902 with respect to the U.S.-source portion of such dividend.”
(9) Coordination with section 904 For purposes of section 904, the U.S.-source portion of any dividend received by a corporation from a qualified 10-percent owned foreign corporation shall be treated as from sources in the United States.
Cited by 1
(10) Coordination with treaties If—
Amended 1988, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 14301(c)(3), which directed amendment of subsec. (a)(10)(C) by substituting “907 and 960” for “902, 907, and 960”, was executed by making the substitution in concluding provisions of subsec. (a)(10) to reflect the probable intent of Congress.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(l)(2)(B), (3), added pars. (10) and (11).
Cited by 4
(A) any portion of a dividend received by a corporation from a qualified 10-percent-owned foreign corporation would be treated as from sources in the United States under paragraph (9),
(B) under a treaty obligation of the United States (applied without regard to this subsection), such portion would be treated as arising from sources outside the United States, and
(C) the taxpayer chooses the benefits of this paragraph,
this subsection shall not apply to such dividend (but subsections (a), (b), and (c) of section 904 and sections 907 and 960 shall be applied separately with respect to such portion of such dividend).
(11) Coordination with section 1248 For purposes of this subsection, the term “dividend” does not include any amount treated as a dividend under section 1248.
Amended 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(l)(2)(B), (3), added pars. (10) and (11).
(12) Dividends derived from RICs and REITs ineligible for deduction Regulated investment companies and real estate investment trusts shall not be treated as domestic corporations for purposes of paragraph (5)(B).
Amended 2015
- 2015 Pub. L. 114-113 Pub. L. 114–113 added par. (12).
Cited by 4
(b) Certain dividends received from wholly owned foreign subsidiaries
Amended 1962, 1966
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 104(e)(1), (3), added subsec. (b), redesignated former subsec. (b) as (c), and substituted therein “subsections (a) and (b)” for “subsection (a)”.
- 1962 Pub. L. 87-834 Pub. L. 87–834 designated existing provisions as subsec. (a), inserted heading, and added subsec. (b).
Cited by 6
(1) In general In the case of dividends described in paragraph (2) received from a foreign corporation by a domestic corporation which, for its taxable year in which such dividends are received, owns (directly or indirectly) all of the outstanding stock of such foreign corporation, there shall be allowed as a deduction (in lieu of the deduction provided by subsection (a)) an amount equal to 100 percent of such dividends.
Cited by 2
(2) Eligible dividends Paragraph (1) shall apply only to dividends which are paid out of the earnings and profits of a foreign corporation for a taxable year during which—
Cited by 2
(3) Exception Paragraph (1) shall not apply to any dividends if an election under section 1562 is effective for either—
(c) Certain dividends received from FSC
Amended 1966, 1984, 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(bb)(9)(A), amended subsec. (c) generally, revising and restating provisions of pars. (1) to (4).
- 1984 Pub. L. 98-369 Pub. L. 98–369 added subsec. (c), redesignated former subsec. (c) as (d), and substituted therein “this section” for “subsections (a) and (b)”.
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 104(e)(1), (3), added subsec. (b), redesignated former subsec. (b) as (c), and substituted therein “subsections (a) and (b)” for “subsection (a)”.
Cited by 2
(1) In general In the case of a domestic corporation, there shall be allowed as a deduction an amount equal to—
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1876(d)(1)(A), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “In the case of a domestic corporation, there shall be allowed as a deduction an amount equal to 100 percent of any dividend received by such corporation from another corporation which is distributed out of earnings and profits attributable to foreign trade income for a period during which such other corporation was a FSC. The deduction allowable under the preceding sentence with respect to any dividend shall be in lieu of any deduction allowable under subsection (a) or (b) with respect to such dividend.”
Cited by 1
(A) 100 percent of any dividend received from another corporation which is distributed out of earnings and profits attributable to foreign trade income for a period during which such other corporation was a FSC, and
(B) 50 percent (65 percent in the case of dividends from a 20-percent owned corporation as defined in section 243(c)(2)) of any dividend received from another corporation which is distributed out of earnings and profits attributable to effectively connected income received or accrued by such other corporation while such other corporation was a FSC.
Amended 1987, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13002(b), substituted “50 percent” for “70 percent” and “65 percent” for “80 percent”.
- 1987 Pub. L. 100-203 Pub. L. 100–203 substituted “70 percent (80 percent in the case of dividends from a 20-percent owned corporation as defined in section 243(c)(2))” for “85 percent”.
(2) Exception for certain dividends Paragraph (1) shall not apply to any dividend which is distributed out of earnings and profits attributable to foreign trade income which—
(A) is section 923(a)(2) nonexempt income (within the meaning of section 927(d)(6)), or
(B) would not, but for section 923(a)(4), be treated as exempt foreign trade income.
(3) No deduction under subsection (a) or (b) No deduction shall be allowable under subsection (a) or (b) with respect to any dividend which is distributed out of earnings and profits of a corporation accumulated while such corporation was a FSC.
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1876(j), added par. (3). Former par. (3) redesignated (4).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1876(d)(1)(B), inserted “For purposes of this subsection, the term ‘qualified interest and carrying charges’ means any interest or carrying charges (as defined in section 927(d)(1)) derived from a transaction which results in foreign trade income.”
(4) Definitions For purposes of this subsection—
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1876(j), redesignated former par. (3) as (4).
(A) Foreign trade income; exempt foreign trade income The terms “foreign trade income” and “exempt foreign trade income” have the respective meanings given such terms by section 923.
(B) Effectively connected income The term “effectively connected income” means any income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States and is subject to tax under this chapter. Such term shall not include any foreign trade income.
(C) FSC The term “FSC” has the meaning given such term by section 922.
Amended 2007
- 2007 Pub. L. 110-172 Pub. L. 110–172, § 11(g)(3), added subpar. (C).
(5) References to prior law Any reference in this subsection to section 922, 923, or 927 shall be treated as a reference to such section as in effect before its repeal by the FSC Repeal and Extraterritorial Income Exclusion Act of 2000.
Amended 2007
- 2007 Pub. L. 110-172 Pub. L. 110–172, § 11(g)(4), added par. (5).