# 26 U.S.C. § 957: Controlled foreign corporations; United States persons Source: OLRC release point 119-134 . Cite pinpoints as 26 U.S.C. § 957(a)(1). ## § 957(a) General rule For purposes of this title, the term “controlled foreign corporation” means any foreign corporation if more than 50 percent of— **§ 957(a)(1)** the total combined voting power of all classes of stock of such corporation entitled to vote, or **§ 957(a)(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. ## § 957(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. ## § 957(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— **§ 957(c)(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 **§ 957(c)(2)** with respect to a corporation organized under the laws of Guam, American Samoa, or the Northern Mariana Islands— **§ 957(c)(2)(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 **§ 957(c)(2)(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, 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. ## Regulations - [Treas. Reg. § 1.957-1](/26/reg/1.957-1.md): Definition of controlled foreign corporation. (interprets § 957) - [Treas. Reg. § 1.957-2](/26/reg/1.957-2.md): Controlled foreign corporation deriving income from insurance of United States risks. (interprets § 957) - [Treas. Reg. § 1.957-3](/26/reg/1.957-3.md): United States person defined. (interprets § 957) ## Final rules - [73 FR 19350](https://www.federalregister.gov/documents/2008/04/09/08-1105/source-rules-involving-us-possessions-and-other-conforming-changes) (2008): Source Rules Involving U.S. Possessions and Other Conforming Changes - [70 FR 18920](https://www.federalregister.gov/documents/2005/04/11/05-7087/residence-and-source-rules-involving-us-possessions-and-other-conforming-changes) (2005): Residence and Source Rules Involving U.S. Possessions and Other Conforming Changes - [62 FR 17](https://www.federalregister.gov/documents/1997/01/02/97-32378/definition-of-foreign-base-company-income-and-foreign-personal-holding-company-income-of-a) (1997): Definition of Foreign Base Company Income and Foreign Personal Holding Company Income of a Controlled Foreign Corporation - [60 FR 46500](https://www.federalregister.gov/documents/1995/09/07/95-21838/definition-of-a-controlled-foreign-corporation-foreign-base-company-income-and-foreign-personal) (1995): Definition of a Controlled Foreign Corporation, Foreign Base Company Income and Foreign Personal Holding Company Income of a Controlled Foreign Corporation ## Leading cases - [Garlock, Inc. v. Commissioner, 58 T.C. 423 (1972)](https://www.courtlistener.com/opinion/4703347/garlock-inc-v-commissioner/) - [Kraus v. Commissioner, 59 T.C. 681 (1973)](https://www.courtlistener.com/opinion/4703470/kraus-v-commissioner/) - [Estate of Weiskopf v. Commissioner, 64 T.C. 78 (1975)](https://www.courtlistener.com/opinion/4704096/estate-of-weiskopf-v-commissioner/) ## Connections Cites: § 933 Income from sources within Puerto Rico; § 953 Insurance income; § 958 Rules for determining stock ownership; § 7701 Definitions Cited by: § 163 Interest; § 267 Losses, expenses, and interest with respect to transactions between related taxpayers; § 304 Redemption through use of related corporations; § 312 Effect on earnings and profits; § 332 Complete liquidations of subsidiaries; § 543 Personal holding company income; § 672 Definitions and rules; § 679 Foreign trusts having one or more United States beneficiaries; § 864 Definitions and special rules; § 877 Expatriation to avoid tax; § 881 Tax on income of foreign corporations not connected with United States business; § 883 Exclusions from gross income; § 901 Taxes of foreign countries and of possessions of United States; § 904 Limitation on credit; § 937 Residence and source rules involving possessions; § 951 Amounts included in gross income of United States shareholders; § 951B Amounts included in gross income of foreign controlled United States shareholders; § 953 Insurance income; § 958 Rules for determining stock ownership; § 970 Reduction of subpart F income of export trade corporations; § 971 Definitions; § 1248 Gain from certain sales or exchanges of stock in certain foreign corporations; § 1291 Interest on tax deferral; § 1293 Current taxation of income from qualified electing funds; § 1298 Special rules; § 6241 Definitions and special rules ## Amendments - 1962-10-16: [Pub. L. 87-834](/26/act/87-834.md), 76 Stat. 1017 - 1976-10-04: [Pub. L. 94-455](/26/act/94-455.md), 90 Stat. 1834 - 1986-10-22: [Pub. L. 99-514](/26/act/99-514.md), 100 Stat. 2553 - 2004-10-22: [Pub. L. 108-357](/26/act/108-357.md), 118 Stat. 1656 - 2017-12-22: [Pub. L. 115-97](/26/act/115-97.md), 131 Stat. 2192 - 2018-03-23: [Pub. L. 115-141](/26/act/115-141.md), 132 Stat. 1192