Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1224(a), redesignated subsec. (d) as (c).
Cases: Garlock, Inc. v. Commissioner, 58 T.C. 423 (1972); Kraus v. Commissioner, 59 T.C. 681 (1973); Estate of Weiskopf v. Commissioner, 64 T.C. 78 (1975)
Final rules 4
(a) General rule For purposes of this title, the term “controlled foreign corporation” means any foreign corporation if more than 50 percent of—
(1) the total combined voting power of all classes of stock of such corporation entitled to vote, or
(2) the total value of the stock of such corporation,
is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such foreign corporation.
Amended 1986, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97 substituted “title” for “subpart” in introductory provisions.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1222(a)(1), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “For purposes of this subpart, the term ‘controlled foreign corporation’ means any foreign corporation of which more than 50 percent of the total combined voting power of all classes of stock entitled to vote is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such foreign corporation.”
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(b) Special rule for insurance For purposes only of taking into account income described in section 953(a) (relating to insurance income), the term “controlled foreign corporation” includes not only a foreign corporation as defined by subsection (a) but also one of which more than 25 percent of the total combined voting power of all classes of stock (or more than 25 percent of the total value of stock) is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such corporation, if the gross amount of premiums or other consideration in respect of the reinsurance or the issuing of insurance or annuity contracts not described in section 953(e)(2) exceeds 75 percent of the gross amount of all premiums or other consideration in respect of all risks.
Amended 1986, 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141 substituted “contracts not described in section 953(e)(2)” for “contracts described in section 953(a)(1)”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1222(a)(2), inserted “(or more than 25 percent of the total value of stock)”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1221(b)(3)(C), substituted “insurance income” for “income derived from insurance of United States risks”.
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(c) United States person For purposes of this subpart, the term “United States person” has the meaning assigned to it by section 7701(a)(30) except that—
Amended 1976, 1986, 2004
- 2004 Pub. L. 108-357 Pub. L. 108–357, § 908(c)(5)(B), struck out “derived from sources within a possession, was effectively connected with the conduct of a trade or business within a possession, or” after “whether income was” in concluding provisions.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1273(a), added par. (2) and concluding provisions and struck out former pars. (2) and (3) which read as follows:
- 1986 “(2) with respect to a corporation organized under the laws of the Virgin Islands, such term does not include an individual who is a bona fide resident of the Virgin Islands and whose income tax obligation under this subtitle for the taxable year is satisfied pursuant to section 28(a) of the Revised Organic Act of the Virgin Islands, approved July 22, 1954 (48 U.S.C. 1642), by paying tax on income derived from all sources both within and outside the Virgin Islands into the treasury of the Virgin Islands, and
- 1986 “(3) with respect to a corporation organized under the laws of any other possession of the United States, such term does not include an individual who is a bona fide resident of any such other possession and whose income derived from sources within possessions of the United States is not, by reason of section 931(a), includible in gross income under this subtitle for the taxable year.”
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1224(a), redesignated subsec. (d) as (c) and struck out former subsec. (c) which provided circumstances under which for purposes of this subpart, the term “controlled foreign corporation” would not include certain corporations created or organized in Puerto Rico or a possession of the United States or under the laws of Puerto Rico or a possession of the United States.
- 1976 L. 94–455 struck out “or his delegate” after “Secretary”.
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(1) with respect to a corporation organized under the laws of the Commonwealth of Puerto Rico, such term does not include an individual who is a bona fide resident of Puerto Rico, if a dividend received by such individual during the taxable year from such corporation would, for purposes of section 933(1), be treated as income derived from sources within Puerto Rico, and
(2) with respect to a corporation organized under the laws of Guam, American Samoa, or the Northern Mariana Islands—
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(A) 80 percent or more of the gross income of which for the 3-year period ending at the close of the taxable year (or for such part of such period as such corporation or any predecessor has been in existence) was derived from sources within such a possession or was effectively connected with the conduct of a trade or business in such a possession, and
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(B) 50 percent or more of the gross income of which for such period (or part) was derived from the active conduct of a trade or business within such a possession,
Amended 2004
- 2004 Pub. L. 108-357 Pub. L. 108–357, § 908(c)(5)(A), substituted “active conduct of a” for “conduct of an active”.
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such term does not include an individual who is a bona fide resident of Guam, American Samoa, or the Northern Mariana Islands.
For purposes of subparagraphs (A) and (B) of paragraph (2), the determination as to whether income was derived from the active conduct of a trade or business within a possession shall be made under regulations prescribed by the Secretary.