Forms: Form 1118
Final rules 1
(a) General rule A regulated investment company—
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(1) more than 50 percent of the value (as defined in section 851(c)(4)) of whose total assets at the close of the taxable year consists of stock or securities in foreign corporations, and
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(2) which meets the requirements of section 852(a) for the taxable year,
may, for such taxable year, elect the application of this section with respect to income, war profits, and excess profits taxes described in section 901(b)(1), which are paid by the investment company during such taxable year to foreign countries and possessions of the United States.
(b) Effect of election If the election provided in subsection (a) is effective for a taxable year—
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(1) the regulated investment company—
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(A) shall not, with respect to such taxable year, be allowed a deduction under section 164(a) or a credit under section 901 for taxes to which subsection (a) is applicable, and
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(B) shall be allowed as an addition to the dividends paid deduction for such taxable year the amount of such taxes;
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(2) each shareholder of such investment company shall—
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(A) include in gross income and treat as paid by him his proportionate share of such taxes, and
(B) treat as gross income from sources within the respective foreign countries and possessions of the United States, for purposes of applying subpart A of part III of subchapter N, the sum of his proportionate share of such taxes and the portion of any dividend paid by such investment company which represents income derived from sources within foreign countries or possessions of the United States.
(c) Statements to shareholders The amounts to be treated by the shareholder, for purposes of subsection (b)(2), as his proportionate share of—
Amended 1964, 1986, 1997, 1998, 2010
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(c)(1)(B), substituted “Statements” for “Notice” in heading.
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(c)(1)(A), which directed amendment by substituting “so reported by the company in a written statement furnished to such shareholder” for “so designated by the company in a written notice mailed to its shareholders not later than 60 days after the close of the taxable year”, was executed by making the substitution for “so designated by the company in a written notice mailed to its shareholders not later than 60 days after the close of its taxable year” in concluding provisions to reflect the probable intent of Congress.
- 1998 Pub. L. 105-206 Pub. L. 105–206, § 6010(k)(2), struck out at end “Such notice shall also include the amount of such taxes which (without regard to the election under this section) would not be allowable as a credit under section 901(a) to the regulated investment company by reason of section 901(k).”
- 1997 Pub. L. 105-34 Pub. L. 105–34 inserted at end “Such notice shall also include the amount of such taxes which (without regard to the election under this section) would not be allowable as a credit under section 901(a) to the regulated investment company by reason of section 901(k).”
- 1986 Pub. L. 99-514 Pub. L. 99–514 substituted “60 days” for “45 days”.
- 1964 Pub. L. 88-272 Pub. L. 88–272 substituted “45 days” for “30 days”.
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(1) taxes paid to any foreign country or possession of the United States, and
(2) gross income derived from sources within any foreign country or possession of the United States,
shall not exceed the amounts so reported by the company in a written statement furnished to such shareholder.
(d) Manner of making election The election provided in subsection (a) shall be made in such manner as the Secretary may prescribe by regulations.
Amended 1976, 2010
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(c)(2), struck out “and notifying shareholders” after “election” in heading and “and the notice to shareholders required by subsection (c)” after “subsection (a)” in text.
- 1976 Pub. L. 94-455 Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
(e) Treatment of certain taxes not allowed as a credit under section 901 This section shall not apply to any tax with respect to which the regulated investment company is not allowed a credit under section 901 by reason of subsection (k) or (l) of such section.
Amended 1998, 2005
- 2005 Pub. L. 109-135 Pub. L. 109–135 amended heading and text of subsec. (e) generally. Prior to amendment, text read as follows: “This section shall not apply to any tax with respect to which the regulated investment company is not allowed a credit under section 901 by reason of section 901(k).”
- 1998 Pub. L. 105-206 Pub. L. 105–206, § 6010(k)(1), added subsec. (e) and redesignated former subsec. (e) as (f).
(f) Cross references
Amended 1998
- 1998 Pub. L. 105-206 Pub. L. 105–206, § 6010(k)(1), added subsec. (e) and redesignated former subsec. (e) as (f).
(1) For treatment by shareholders of taxes paid to foreign countries and possessions of the United States, see section 164(a) and section 901.
(2) For definition of foreign corporation, see section 7701(a)(5).