Amended 1976
- 1976 Pub. L. 94-455 Pub. L. 94–455, §§ 1032(b)(2), 1035(d)(1), 1052(c)(4), struck out subsec. (g) relating to Western Hemisphere trade corporations which are members of an affiliated group.
Final rules 1
(a) Reduction in amount allowed as foreign tax under section 901 In applying section 901, the amount of any foreign oil and gas taxes paid or accrued (or deemed to have been paid) during the taxable year which would (but for this subsection) be taken into account for purposes of section 901 shall be reduced by the amount (if any) by which the amount of such taxes exceeds the product of—
Amended 1976, 2008
- 2008 Pub. L. 110-343 Pub. L. 110–343, § 402(a), amended subsecs. (a) and (b) generally. Prior to amendment, subsec. (a) related to reduction in amount of oil and gas extraction taxes paid or accrued for purposes of section 901 and subsec. (b) excepted certain amounts of foreign oil related income taxes paid or accrued to any foreign country from the definition of “income, war profits, and excess profits taxes”.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1035(a), substituted “oil and gas extraction taxes” for “income, war profits, and excess profits taxes” after “the amount of any” and, in par. (2), substituted “the percentage which is the sum of the normal tax rate and the surtax rate for the taxable year specified in section 11” for provisions giving the percentage multiplier for years ending 1975, 1976, and after 1976.
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(1) the amount of the combined foreign oil and gas income for the taxable year,
(2) multiplied by—
Amended 1978
- 1978 Pub. L. 95-600 Pub. L. 95–600, §§ 301(b)(14), 701(u)(8)(A), designated existing provisions as subpar. (A), inserted applicability to corporations and generally reworked applicable formula, and added subpar. (B).
(A) in the case of a corporation, the percentage which is equal to the highest rate of tax specified under section 11(b), or
(B) in the case of an individual, a fraction the numerator of which is the tax against which the credit under section 901(a) is taken and the denominator of which is the taxpayer’s entire taxable income.
(b) Combined foreign oil and gas income; foreign oil and gas taxes For purposes of this section—
Amended 1976, 1978, 1982, 2008
- 2008 Pub. L. 110-343 Pub. L. 110–343, § 402(a), amended subsecs. (a) and (b) generally. Prior to amendment, subsec. (a) related to reduction in amount of oil and gas extraction taxes paid or accrued for purposes of section 901 and subsec. (b) excepted certain amounts of foreign oil related income taxes paid or accrued to any foreign country from the definition of “income, war profits, and excess profits taxes”.
- 1982 Pub. L. 97-248 Pub. L. 97–248, § 211(c)(1), added subsec. (b). Former subsec. (b), which had provided that section 904 be applied separately with respect to foreign oil related income and other taxable income, was struck out.
- 1978 Pub. L. 95-600 Pub. L. 95–600, § 701(u)(8)(B), substituted provisions relating to applicability of section 904 separately to foreign oil related income and other taxable income for provisions relating to applicability of section 904 to corporations and other taxpayers.
- 1976 Pub. L. 94-455 Pub. L. 94–455, §§ 1032(b)(1), 1035(b), inserted provisions making a distinction between corporations and other taxpayers and rules applicable to each and, as amended, struck out provision requiring the overall limitation, rather than the per-country limitation, be applied in the case of a corporation to foreign oil-related income and, a taxpayer other than a corporation, to foreign oil and gas extraction income.
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(1) Combined foreign oil and gas income The term “combined foreign oil and gas income” means, with respect to any taxable year, the sum of—
(2) Foreign oil and gas taxes The term “foreign oil and gas taxes” means, with respect to any taxable year, the sum of—
(A) oil and gas extraction taxes, and
(B) any income, war profits, and excess profits taxes paid or accrued (or deemed to have been paid or accrued under section 960) during the taxable year with respect to foreign oil related income (determined without regard to subsection (c)(4)) or loss which would be taken into account for purposes of section 901 without regard to this section.
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 14301(c)(24), struck out “902 or” after “under section”.
(c) Foreign income definitions and special rules For purposes of this section—
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(1) Foreign oil and gas extraction income The term “foreign oil and gas extraction income” means the taxable income derived from sources without the United States and its possessions from—
Amended 1993
- 1993 Pub. L. 103-66 Pub. L. 103–66 inserted concluding provisions.
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(A) the extraction (by the taxpayer or any other person) of minerals from oil or gas wells, or
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(B) the sale or exchange of assets used by the taxpayer in the trade or business described in subparagraph (A).
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Such term does not include any dividend or interest income which is passive income (as defined in section 904(d)(2)(A)).
(2) Foreign oil related income The term “foreign oil related income” means the taxable income derived from sources outside the United States and its possessions from—
Amended 1982, 1993
- 1993 Pub. L. 103-66 Pub. L. 103–66 inserted concluding provisions.
- 1982 Pub. L. 97-248 Pub. L. 97–248, § 211(b), in subpar. (A) substituted “the processing of minerals extracted (by the taxpayer or by any other person) from oil or gas wells into their primary products” for “the extraction (by the taxpayer or any other person) of minerals from oil or gas wells”, deleted subpar. (B) which had provided that foreign oil related income meant the taxable income derived from sources outside the United States and its possessions from the processing of minerals from oil or gas wells into their primary products, redesignated subpar. (C) as (B), redesignated subpar. (D) as (C) and in subpar. (C) as so redesignated struck out “or” at the end, redesignated subpar. (E) as (D) and in subpar. (D) as so redesignated substituted “disposition” for “sale or exchange”, and “or (C), or” for “(C), or (D)”, struck out the period at the end, and added subpar. (E).
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(A) the processing of minerals extracted (by the taxpayer or by any other person) from oil or gas wells into their primary products,
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(B) the transportation of such minerals or primary products,
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(C) the distribution or sale of such minerals or primary products,
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(D) the disposition of assets used by the taxpayer in the trade or business described in subparagraph (A), (B), or (C), or
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(E) the performance of any other related service.
Such term does not include any dividend or interest income which is passive income (as defined in section 904(d)(2)(A)).
(3) Dividends, interest, partnership distribution, etc. The term “foreign oil and gas extraction income” and the term “foreign oil related income” include—
Amended 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(g)(6)(B), struck out “and dividends described in subparagraph (B)” after “described in subparagraph (A)” in closing provisions.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(g)(6)(A), redesignated subpars. (C) and (D) as (B) and (C), respectively, and struck out former subpar. (B) which read as follows: “dividends from a domestic corporation which are treated under section 861(a)(2)(A) as income from sources without the United States,”.
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(A) interest, to the extent the category of income of such interest is determined under section 904(d)(3),
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 14301(c)(25)(A), added subpar. (A) and struck out former subpar. (A) which read as follows: “dividends and interest from a foreign corporation in respect of which taxes are deemed paid by the taxpayer under section 902,”.
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(B) amounts with respect to which taxes are deemed paid under section 960, and
Amended 1988, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 14301(c)(25)(B), substituted “section 960” for “section 960(a)”.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(g)(6)(A), redesignated subpars. (C) and (D) as (B) and (C), respectively, and struck out former subpar. (B) which read as follows: “dividends from a domestic corporation which are treated under section 861(a)(2)(A) as income from sources without the United States,”.
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(C) the taxpayer’s distributive share of the income of partnerships,
Amended 1988, 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(158), substituted comma for period at end.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(g)(6)(A), redesignated subpars. (C) and (D) as (B) and (C), respectively, and struck out former subpar. (B) which read as follows: “dividends from a domestic corporation which are treated under section 861(a)(2)(A) as income from sources without the United States,”.
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to the extent such dividends, interest, amounts, or distributive share is attributable to foreign oil and gas extraction income, or to foreign oil related income, as the case may be; except that interest described in subparagraph (A) shall not be taken into account in computing foreign oil and gas extraction income but shall be taken into account in computing foreign oil-related income.
(4) Recapture of foreign oil and gas losses by recharacterizing later combined foreign oil and gas income
Amended 1982, 2008
- 2008 Pub. L. 110-343 Pub. L. 110–343, § 402(b), amended par. (4) generally. Prior to amendment, par. (4) provided for recapture of foreign oil and gas extraction losses by recharacterizing later extraction income.
- 1982 Pub. L. 97-248 Pub. L. 97–248, § 211(a), substituted provisions regarding the recapture of foreign oil and gas extraction losses by recharacterization of later extraction income for provisions that if, for any foreign country for any taxable year, the taxpayer would have had a net operating loss if only items from sources within such country (including deductions properly apportioned or allocated thereto) which related to the extraction of minerals from oil or gas wells had been taken into account, such items would not be taken into account in computing foreign oil and gas extraction income for such year, but would be taken into account in computing foreign oil related income for such year.
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(A) In general The combined foreign oil and gas income of a taxpayer for a taxable year (determined without regard to this paragraph) shall be reduced—
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(i) first by the amount determined under subparagraph (B), and
(ii) then by the amount determined under subparagraph (C).
The aggregate amount of such reductions shall be treated as income (from sources without the United States) which is not combined foreign oil and gas income.
(B) Reduction for pre-2009 foreign oil extraction losses The reduction under this paragraph shall be equal to the lesser of—
Amended 1996
- 1996 Pub. L. 104-188 Pub. L. 104–188 inserted “(as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990)” after “section 172(h)”.
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(i) the foreign oil and gas extraction income of the taxpayer for the taxable year (determined without regard to this paragraph), or
(ii) the excess of—
(I) the aggregate amount of foreign oil extraction losses for preceding taxable years beginning after December 31, 1982, and before January 1, 2009, over
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(II) so much of such aggregate amount as was recharacterized under this paragraph (as in effect before and after the date of the enactment of the Energy Improvement and Extension Act of 2008) for preceding taxable years beginning after December 31, 1982.
(C) Reduction for post-2008 foreign oil and gas losses The reduction under this paragraph shall be equal to the lesser of—
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(i) the combined foreign oil and gas income of the taxpayer for the taxable year (determined without regard to this paragraph), reduced by an amount equal to the reduction under subparagraph (A) for the taxable year, or
(ii) the excess of—
(I) the aggregate amount of foreign oil and gas losses for preceding taxable years beginning after December 31, 2008, over
(II) so much of such aggregate amount as was recharacterized under this paragraph for preceding taxable years beginning after December 31, 2008.
(D) Foreign oil and gas loss defined
(i) In general For purposes of this paragraph, the term “foreign oil and gas loss” means the amount by which—
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(I) the gross income for the taxable year from sources without the United States and its possessions (whether or not the taxpayer chooses the benefits of this subpart for such taxable year) taken into account in determining the combined foreign oil and gas income for such year, is exceeded by
(II) the sum of the deductions properly apportioned or allocated thereto.
(ii) Net operating loss deduction not taken into account For purposes of clause (i), the net operating loss deduction allowable for the taxable year under section 172(a) shall not be taken into account.
(iii) Expropriation and casualty losses not taken into account For purposes of clause (i), there shall not be taken into account—
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(I) any foreign expropriation loss (as defined in section 172(h) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990)) for the taxable year, or
(II) any loss for the taxable year which arises from fire, storm, shipwreck, or other casualty, or from theft,
to the extent such loss is not compensated for by insurance or otherwise.
(iv) Foreign oil extraction loss For purposes of subparagraph (B)(ii)(I), foreign oil extraction losses shall be determined under this paragraph as in effect on the day before the date of the enactment of the Energy Improvement and Extension Act of 2008.
(5) Oil and gas extraction taxes The term “oil and gas extraction taxes” means any income, war profits, and excess profits tax paid or accrued (or deemed to have been paid under section 960) during the taxable year with respect to foreign oil and gas extraction income (determined without regard to paragraph (4)) or loss which would be taken into account for purposes of section 901 without regard to this section.
Amended 1976, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 14301(c)(26), struck out “902 or” after “under section”.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1035(d)(2), added par. (5).
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(d) Disregard of certain posted prices, etc. For purposes of this chapter, in determining the amount of taxable income in the case of foreign oil and gas extraction income, if the oil or gas is disposed of, or is acquired other than from the government of a foreign country, at a posted price (or other pricing arrangement) which differs from the fair market value for such oil or gas, such fair market value shall be used in lieu of such posted price (or other pricing arrangement).
[(e) Repealed. Pub. L. 101–508, title XI, § 11801(a)(32), Nov. 5, 1990, 104 Stat. 1388–521]
Amended 1976, 1982, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(a)(32), struck out subsec. (e) which read as follows:
- 1990 “(1) Credits arising in taxable years beginning before january 1, 1983.—The amount of taxes paid or accrued in any taxable year beginning before January 1, 1983 (hereinafter in this paragraph referred to as the ‘excess credit year’) which under section 904(c) or 907(f) may be deemed paid or accrued in a taxable year beginning after December 31, 1982, shall not exceed the amount which could have been deemed paid or accrued if sections 907(b), 907(f), and 904(f)(4) (as in effect on the day before the date of the enactment of the Tax Equity and Fiscal Responsibility Act of 1982) remained in effect for taxable years beginning after December 31, 1982.
- 1990 “(2) Carryback of credits arising in taxable years beginning after december 31, 1982.—The amount of the taxes paid or accrued in a taxable year beginning after December 31, 1982, which may be deemed paid or accrued under section 904(c) or 907(f) in a taxable year beginning before January 1, 1983, shall not exceed the amount which could have been deemed paid or accrued if sections 907(b), 907(f), and 904(f)(4) (as in effect on the day before the date of the enactment of the Tax Equity and Fiscal Responsibility Act of 1982) remained in effect for taxable years beginning after December 31, 1982.”
- 1982 Pub. L. 97-248 Pub. L. 97–248, § 211(d)(1), substituted rules regarding credits arising in taxable years beginning before Jan. 1, 1983, for rules regarding taxable years ending after Dec. 31, 1974, in par. (1), and in par. (2) substituted rules regarding carryback of credits arising in taxable years beginning after Dec. 31, 1982, for rules regarding taxable years ending after Dec. 31, 1975.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1031(b)(6)(A), substituted “(d) and (e) of section 904 (as in effect on the day before the date of enactment of the Tax Reform Act of 1976)” for “(d) and (e) of section 904” after “In applying subsections”.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1031(b)(6), substituted “(d) and (e) of section 904 (as in effect on the day before the date of enactment of the Tax Reform Act of 1976)” for “(d) and (e) of section 904” after “In applying subsections”, “section 904(a)(1) (as so in effect)” for “section 904(a)(1)” after “provided by section” and, in subpar. (A), “section 904(e)(2) (as so in effect)” for “section 904(e)(2)” after “sentence of section”.
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(f) Carryback and carryover of disallowed credits
Amended 1976, 2008
- 2008 Pub. L. 110-343 Pub. L. 110–343, § 402(c)(1), substituted “foreign oil and gas taxes” for “oil and gas extraction taxes” wherever appearing.
- 1976 Pub. L. 94-455 Pub. L. 94–455, §§ 1032(b)(2), 1035(d)(1), added subsec. (f). Former subsec. (f), relating to recapture of foreign oil related loss, was struck out.
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(1) In general If the amount of the foreign oil and gas taxes paid or accrued during any taxable year exceeds the limitation provided by subsection (a) for such taxable year (hereinafter in this subsection referred to as the “unused credit year”), such excess shall be deemed to be foreign oil and gas taxes paid or accrued in the first preceding taxable year and in any of the first 10 succeeding taxable years, in that order and to the extent not deemed tax paid or accrued in a prior taxable year by reason of the limitation imposed by paragraph (2). Such amount deemed paid or accrued in any taxable year may be availed of only as a tax credit and not as a deduction and only if the taxpayer for such year chooses to have the benefits of this subpart as to taxes paid or accrued for that year to foreign countries or possessions.
Amended 1982, 2004, 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(159), substituted “years,” for “year,”.
- 2004 Pub. L. 108-357 Pub. L. 108–357, § 417(b)(3), struck out at end “For purposes of this subsection, the terms ‘second preceding taxable year’, and ‘first preceding taxable year’ do not include any taxable year ending before January 1, 1975.”
- 2004 Pub. L. 108-357 Pub. L. 108–357, § 417(b)(2), substituted “and in any of the first 10” for “, and in the first, second, third, fourth, or fifth”.
- 2004 Pub. L. 108-357 Pub. L. 108–357, § 417(b)(1), struck out “in the second preceding taxable year,” before “in the first preceding taxable year”.
- 1982 Pub. L. 97-248 Pub. L. 97–248, § 211(d)(2)(A), substituted “such excess” for “so much of such excess as does not exceed 2 percent of foreign oil and gas extraction income for such taxable year” in first sentence, and struck out former provision that had directed that the above substitution be made regarding taxes deemed paid or accrued in any taxable year which ended in 1975, 1976, or 1977.
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(2) Limitation The amount of the unused foreign oil and gas taxes which under paragraph (1) may be deemed paid or accrued in any preceding or succeeding taxable year shall not exceed the lesser of—
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(A) the amount by which the limitation provided by subsection (a) for such taxable year exceeds the sum of—
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(i) the foreign oil and gas taxes paid or accrued during such taxable year, plus
(ii) the amounts of the foreign oil and gas taxes which by reason of this subsection are deemed paid or accrued in such taxable year and are attributable to taxable years preceding the unused credit year; or
(B) the amount by which the limitation provided by section 904 for such taxable year exceeds the sum of—
Amended 1982
- 1982 Pub. L. 97-248 Pub. L. 97–248, § 211(d)(2)(B)(i), substituted “provided by section 904 for such taxable year” for “provided by section 904 on taxes paid or accrued with respect to foreign oil-related income for such taxable year” in the introductory provisions, and in cl. (i) substituted “the United States during such taxable year” for “the United States with respect to such income during such taxable year”.
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(i) the taxes paid or accrued (or deemed to have been paid under section 960) to all foreign countries and possessions of the United States during such taxable year,
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 14301(c)(27), struck out “902 or” after “under section”.
(ii) the amount of such taxes which were deemed paid or accrued in such taxable year under section 904(c) and which are attributable to taxable years preceding the unused credit year, plus
(iii) the amount of the foreign oil and gas taxes which by reason of this subsection are deemed paid or accrued in such taxable year and are attributable to taxable years preceding the unused credit year.
(3) Special rules
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(a)(32), struck out subpar. (C) which read as follows: “For purposes of determining the amount of the unused oil and gas extraction taxes which under paragraph (1) may be deemed paid or accrued in any taxable year ending before January 1, 1977, subparagraph (A) of paragraph (2) shall be applied as if the amendment made by section 1035(a) of the Tax Reform Act of 1976 applied to such taxable year.”
(A) In the case of any taxable year which is an unused credit year under this subsection and which is an unused credit year under section 904(c), the provisions of this subsection shall be applied before section 904(c).
Amended 1982
- 1982 Pub. L. 97-248 Pub. L. 97–248, § 211(d)(2)(B)(ii), substituted “section 904(c)” for “section 904(c) with respect to oil-related income”.
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(B) For purposes of determining the amount of taxes paid or accrued in any taxable year which may be deemed paid or accrued in a preceding or succeeding taxable year under section 904(c), any tax deemed paid or accrued in such preceding or succeeding taxable year under this subsection shall be considered to be tax paid or accrued in such preceding or succeeding taxable year.
Amended 1982
- 1982 Pub. L. 97-248 Pub. L. 97–248, § 211(d)(2)(B)(iii), struck out “oil-related” after “determining the amount of”.
(4) Transition rules for pre-2009 and 2009 disallowed credits
Amended 2008
- 2008 Pub. L. 110-343 Pub. L. 110–343, § 402(c)(2), added par. (4).
(A) Pre-2009 credits In the case of any unused credit year beginning before January 1, 2009, this subsection, as in effect on the day before the date of the enactment of the Energy Improvement and Extension Act of 2008, shall apply to unused oil and gas extraction taxes carried from such unused credit year to a taxable year beginning after December 31, 2008.
Amended 2014
- 2014 Pub. L. 113-295 Pub. L. 113–295 substituted “this subsection, as in effect on the day before the date of the enactment of the Energy Improvement and Extension Act of 2008, shall apply to unused oil and gas extraction taxes carried from such unused credit year to a taxable year beginning after December 31, 2008.” for “this subsection shall be applied to any unused oil and gas extraction taxes carried from such unused credit year to a year beginning after December 31, 2008—
“(i) by substituting ‘oil and gas extraction taxes’ for ‘foreign oil and gas taxes’ each place it appears in paragraphs (1), (2), and (3), and
“(ii) by computing, for purposes of paragraph (2)(A), the limitation under subparagraph (A) for the year to which such taxes are carried by substituting ‘foreign oil and gas extraction income’ for ‘foreign oil and gas income’ in subsection (a).”
(B) 2009 credits In the case of any unused credit year beginning in 2009, the amendments made to this subsection by the Energy Improvement and Extension Act of 2008 shall be treated as being in effect for any preceding year beginning before January 1, 2009, solely for purposes of determining how much of the unused foreign oil and gas taxes for such unused credit year may be deemed paid or accrued in such preceding year.