# 26 U.S.C. § 250: Foreign-derived deduction eligible income and net CFC tested income

Source: OLRC release point 119-134 <https://uscode.house.gov/us/usc/119-134/t26/s250>. Cite pinpoints as 26 U.S.C. § 250(a)(1).

## § 250(a) Allowance of deduction

**§ 250(a)(1) In general.** In the case of a domestic corporation for any taxable year, there shall be allowed as a deduction an amount equal to the sum of—

**§ 250(a)(1)(A)** 33.34 percent of the foreign-derived deduction eligible income of such domestic corporation for such taxable year, plus

**§ 250(a)(1)(B)** 40 percent of—

**§ 250(a)(1)(B)(i)** the net CFC tested income amount (if any) which is included in the gross income of such domestic corporation under section 951A for such taxable year, and

**§ 250(a)(1)(B)(ii)** the amount treated as a dividend received by such corporation under section 78 which is attributable to the amount described in clause (i).

**§ 250(a)(2) Limitation based on taxable income.**

**§ 250(a)(2)(A) In general.** If, for any taxable year—

**§ 250(a)(2)(A)(i)** the sum of the foreign-derived deduction eligible income and the net CFC tested income amount otherwise taken into account by the domestic corporation under paragraph (1), exceeds

**§ 250(a)(2)(A)(ii)** the taxable income of the domestic corporation (determined without regard to this section),

then the amount of the foreign-derived deduction eligible income and the net CFC tested income amount so taken into account shall be reduced as provided in subparagraph (B).

**§ 250(a)(2)(B) Reduction.** For purposes of subparagraph (A)—

**§ 250(a)(2)(B)(i)** foreign-derived deduction eligible income shall be reduced by an amount which bears the same ratio to the excess described in subparagraph (A) as such foreign-derived deduction eligible income bears to the sum described in subparagraph (A)(i), and

**§ 250(a)(2)(B)(ii)** the net CFC tested income amount shall be reduced by the remainder of such excess.

## § 250(b) Foreign-derived deduction eligible income

For purposes of this section—

**§ 250(b)(1) Foreign-derived deduction eligible income.** The term “foreign-derived deduction eligible income” means, with respect to any taxpayer for any taxable year, any deduction eligible income of such taxpayer which is derived in connection with—

**§ 250(b)(1)(A)** property—

**§ 250(b)(1)(A)(i)** which is sold by the taxpayer to any person who is not a United States person, and

**§ 250(b)(1)(A)(ii)** which the taxpayer establishes to the satisfaction of the Secretary is for a foreign use, or

**§ 250(b)(1)(B)** services provided by the taxpayer which the taxpayer establishes to the satisfaction of the Secretary are provided to any person, or with respect to property, not located within the United States.

**§ 250(b)(2) Rules relating to foreign use property or services.** For purposes of this subsection—

**§ 250(b)(2)(A) Foreign use.** The term “foreign use” means any use, consumption, or disposition which is not within the United States.

**§ 250(b)(2)(B) Property or services provided to domestic intermediaries.**

**§ 250(b)(2)(B)(i) Property.** If a taxpayer sells property to another person (other than a related party) for further manufacture or other modification within the United States, such property shall not be treated as sold for a foreign use even if such other person subsequently uses such property for a foreign use.

**§ 250(b)(2)(B)(ii) Services.** If a taxpayer provides services to another person (other than a related party) located within the United States, such services shall not be treated as described in paragraph (1)(B) even if such other person uses such services in providing services which are so described.

**§ 250(b)(2)(C) Special rules with respect to related party transactions.**

**§ 250(b)(2)(C)(i) Sales to related parties.** If property is sold to a related party who is not a United States person, such sale shall not be treated as for a foreign use unless—

**§ 250(b)(2)(C)(i)(I)** such property is ultimately sold by a related party, or used by a related party in connection with property which is sold or the provision of services, to another person who is an unrelated party who is not a United States person, and

**§ 250(b)(2)(C)(i)(II)** the taxpayer establishes to the satisfaction of the Secretary that such property is for a foreign use.

For purposes of this clause, a sale of property shall be treated as a sale of each of the components thereof.

**§ 250(b)(2)(C)(ii) Service provided to related parties.** If a service is provided to a related party who is not located in the United States, such service shall not be treated described [OLRC note: So in original. Probably should be preceded by “as”.] in subparagraph (A)(ii) [OLRC note: So in original. Probably should be “(B)(ii)”.] unless the taxpayer established to the satisfaction of the Secretary that such service is not substantially similar to services provided by such related party to persons located within the United States.

**§ 250(b)(2)(D) Related party.** For purposes of this paragraph, the term “related party” means any member of an affiliated group as defined in section 1504(a), determined—

**§ 250(b)(2)(D)(i)** by substituting “more than 50 percent” for “at least 80 percent” each place it appears, and

**§ 250(b)(2)(D)(ii)** without regard to paragraphs (2) and (3) of section 1504(b).

Any person (other than a corporation) shall be treated as a member of such group if such person is controlled by members of such group (including any entity treated as a member of such group by reason of this sentence) or controls any such member. For purposes of the preceding sentence, control shall be determined under the rules of section 954(d)(3).

**§ 250(b)(2)(E) Sold.** For purposes of this subsection (other than paragraph (3)(A)(i)(VII)), the terms “sold”, “sells”, and “sale” shall include any lease, license, exchange, or other disposition.

**§ 250(b)(3) Deduction eligible income.**

**§ 250(b)(3)(A) In general.** The term “deduction eligible income” means, with respect to any domestic corporation, the excess (if any) of—

**§ 250(b)(3)(A)(i)** gross income of such corporation determined without regard to—

**§ 250(b)(3)(A)(i)(I)** any amount included in the gross income of such corporation under section 951(a)(1),

**§ 250(b)(3)(A)(i)(II)** the net CFC tested income included in the gross income of such corporation under section 951A,

**§ 250(b)(3)(A)(i)(III)** any financial services income (as defined in section 904(d)(2)(D)) of such corporation,

**§ 250(b)(3)(A)(i)(IV)** any dividend received from a corporation which is a controlled foreign corporation of such domestic corporation,

**§ 250(b)(3)(A)(i)(V)** any domestic oil and gas extraction income of such corporation,

**§ 250(b)(3)(A)(i)(VI)** any foreign branch income (as defined in section 904(d)(2)(J)), and

**§ 250(b)(3)(A)(i)(VII)** except as otherwise provided by the Secretary, any income and gain from the sale or other disposition (including pursuant to the deemed sale or other deemed disposition or a transaction subject to section 367(d)) of—

**§ 250(b)(3)(A)(i)(VII)(aa)** intangible property (as defined in section 367(d)(4)), and

**§ 250(b)(3)(A)(i)(VII)(bb)** any other property of a type that is subject to depreciation, amortization, or depletion by the seller, over

**§ 250(b)(3)(A)(ii)** expenses and deductions (including taxes), other than interest expense and research or experimental expenditures, properly allocable to such gross income.

**§ 250(b)(3)(B) Domestic oil and gas extraction income.** For purposes of subparagraph (A), the term “domestic oil and gas extraction income” means income described in section 907(c)(1), determined by substituting “within the United States” for “without the United States”.

## § 250(c) Regulations

The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section.

## Regulations

- [Treas. Reg. § 1.250-0](/26/reg/1.250-0.md): Table of contents. (interprets § 250)
- [Treas. Reg. § 1.250-1](/26/reg/1.250-1.md): Introduction. (interprets § 250)
- [Treas. Reg. § 1.250(a)-1](/26/reg/1.250(a)-1.md): Deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). (interprets § 250(a))
- [Treas. Reg. § 1.250(b)-1](/26/reg/1.250(b)-1.md): Computation of foreign-derived intangible income (FDII). (interprets § 250(b))
- [Treas. Reg. § 1.250(b)-2](/26/reg/1.250(b)-2.md): Qualified business asset investment (QBAI). (interprets § 250(b))
- [Treas. Reg. § 1.250(b)-3](/26/reg/1.250(b)-3.md): Foreign-derived deduction eligible income (FDDEI) transactions. (interprets § 250(b))
- [Treas. Reg. § 1.250(b)-4](/26/reg/1.250(b)-4.md): Foreign-derived deduction eligible income (FDDEI) sales. (interprets § 250(b))
- [Treas. Reg. § 1.250(b)-5](/26/reg/1.250(b)-5.md): Foreign-derived deduction eligible income (FDDEI) services. (interprets § 250(b))
- [Treas. Reg. § 1.250(b)-6](/26/reg/1.250(b)-6.md): Related party transactions. (interprets § 250(b))

## Forms named in the regulations

- [Form 8993](https://www.irs.gov/pub/irs-pdf/f8993.pdf)
- [Form 1065](https://www.irs.gov/pub/irs-pdf/f1065.pdf)

## Final rules

- [87 FR 276](https://www.federalregister.gov/documents/2022/01/04/2021-27887/guidance-related-to-the-foreign-tax-credit-clarification-of-foreign-derived-intangible-income) (2022): Guidance Related to the Foreign Tax Credit; Clarification of Foreign-Derived Intangible Income
- [86 FR 52971](https://www.federalregister.gov/documents/2021/09/24/2021-20615/guidance-on-the-treatment-of-qualified-improvement-property-under-sections-250b-and-951ad-and) (2021): Guidance on the Treatment of Qualified Improvement Property Under Sections 250(b) and 951A(d) and Guidance Related to the Foreign Tax Credit
- [85 FR 43042](https://www.federalregister.gov/documents/2020/07/15/2020-14649/deduction-for-foreign-derived-intangible-income-and-global-intangible-low-taxed-income) (2020): Deduction for Foreign-Derived Intangible Income and Global Intangible Low-Taxed Income

## Proposed regulations (not in force)

- [Prop. Treas. Reg. § 1.250(b)-2](/26/prop/1.250(b)-2_2020-27003.md): Qualified business asset investment (QBAI). (REG-104464-18, proposed 2021-01-15)
- [Prop. Treas. Reg. § 1.250-0](/26/prop/1.250-0_2026-17019.md): Table of contents. (REG-117130-25, proposed 2026-08-20)
- [Prop. Treas. Reg. § 1.250-1](/26/prop/1.250-1_2026-17019.md): Introduction. (REG-117130-25, proposed 2026-08-20)
- [Prop. Treas. Reg. § 1.250(b)-1](/26/prop/1.250(b)-1_2026-17019.md): Computation of foreign-derived intangible income (FDII). (REG-117130-25, proposed 2026-08-20)
- [Prop. Treas. Reg. § 1.250(b)-3](/26/prop/1.250(b)-3_2026-17019.md): Foreign-derived deduction eligible income (FDDEI) transactions. (REG-117130-25, proposed 2026-08-20)
- [Prop. Treas. Reg. § 1.250(b)-4](/26/prop/1.250(b)-4_2026-17019.md): Foreign-derived deduction eligible income (FDDEI) sales. (REG-117130-25, proposed 2026-08-20)
- [Prop. Treas. Reg. § 1.250-1](/26/prop/1.250-1_2026-18645.md): Introduction. (REG-117273-25, proposed 2026-09-11)
- [Prop. Treas. Reg. § 1.250(b)-1](/26/prop/1.250(b)-1_2026-18645.md): Computation of foreign-derived intangible income (FDII). (REG-117273-25, proposed 2026-09-11)

## Connections

Cites: § 78 Gross up for deemed paid foreign tax credit; § 367 Foreign corporations; § 904 Limitation on credit; § 907 Special rules in case of foreign oil and gas income; § 951 Amounts included in gross income of United States shareholders; § 951A Net CFC tested income included in gross income of United States shareholders; § 954 Foreign base company income; § 1504 Definitions

Cited by: § 172 Net operating loss deduction; § 246 Rules applying to deductions for dividends received; § 904 Limitation on credit

## Prior provisions

- A prior section 250, added Pub. L. 91–518, title IX, § 901(a), Oct. 30, 1970, 84 Stat. 1341; amended Pub. L. 93–496, § 12, Oct. 28, 1974, 88 Stat. 1531; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–473, § 2(a)(2)(C), Oct. 17, 1978, 92 Stat. 1464; Pub. L. 96–454, § 3(b)(1), Oct. 15, 1980, 94 Stat. 2012; Pub. L. 97–261, § 6(d)(3), Sept. 20, 1982, 96 Stat. 1107; Pub. L. 99–521, § 4(3), Oct. 22, 1986, 100 Stat. 2993, related to certain payments to National Railroad Passenger Corporation, prior to repeal by Pub. L. 101–508, title XI, § 11801(a)(15), Nov. 5, 1990, 104 Stat. 1388–520.

## Amendments

- 2017-12-22: [Pub. L. 115-97](/26/act/115-97.md), 131 Stat. 2213
- 2025-07-04: [Pub. L. 119-21](/26/act/119-21.md), 139 Stat. 204