(a) Exclusion from gross income of United States persons For purposes of this chapter, the earnings and profits of a foreign corporation attributable to amounts which are, or have been, included in the gross income of a United States shareholder under section 951(a) shall not, when—
Amended 1976, 1993, 1996
- 1996 Pub. L. 104-188 Pub. L. 104–188, § 1501(b)(4), (5), substituted “paragraph (2)” for “paragraphs (2) and (3)” in closing provisions, inserted “or” at end of par. (1), struck out “or” at end of par. (2), and struck out par. (3) which read as follows: “such amounts would, but for this subsection, be included under section 951(a)(1)(C) in the gross income of,”.
- 1993 Pub. L. 103-66 Pub. L. 103–66, § 13231(c)(2)(A), (4)(A), substituted in introductory provisions “earnings and profits” for “earnings and profits for taxable year” and inserted at end of closing provisions “The rules of subsection (c) shall apply for purposes of paragraph (1) of this subsection and the rules of subsection (f) shall apply for purposes of paragraphs (2) and (3) of this subsection.”
- 1993 Pub. L. 103-66 Pub. L. 103–66, § 13231(c)(1), added par. (3).
- 1976 Pub. L. 94-455 Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
Cases: Principal Life Insurance Company and Subsidiaries v. United States, 120 Fed. Cl. 41 (Fed. Cl. 2015)
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(1) such amounts are distributed to, or
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(2) such amounts would, but for this subsection, be included under section 951(a)(1)(B) in the gross income of,
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such shareholder (or any other United States person who acquires from any person any portion of the interest of such United States shareholder in such foreign corporation, but only to the extent of such portion, and subject to such proof of the identity of such interest as the Secretary may by regulations prescribe) directly or indirectly through a chain of ownership described under section 958(a), be again included in the gross income of such United States shareholder (or of such other United States person). The rules of subsection (c) shall apply for purposes of paragraph (1) of this subsection and the rules of subsection (f) shall apply for purposes of paragraph (2) of this subsection.
(b) Exclusion from gross income of certain foreign subsidiaries For purposes of section 951(a), the earnings and profits of a controlled foreign corporation attributable to amounts which are, or have been, included in the gross income of a United States shareholder under section 951(a), shall not, when distributed through a chain of ownership described under section 958(a), be also included in the gross income of another controlled foreign corporation in such chain for purposes of the application of section 951(a) to such other controlled foreign corporation with respect to such United States shareholder (or to any other United States shareholder who acquires from any person any portion of the interest of such United States shareholder in the controlled foreign corporation, but only to the extent of such portion, and subject to such proof of identity of such interest as the Secretary may prescribe by regulations).
Amended 1976, 1993
- 1993 Pub. L. 103-66 Pub. L. 103–66, § 13231(c)(4)(A), substituted “earnings and profits” for “earnings and profits for a taxable year”.
- 1976 Pub. L. 94-455 Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
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(c) Allocation of distributions For purposes of subsections (a) and (b), section 316(a) shall be applied by applying paragraph (2) thereof, and then paragraph (1) thereof—
Amended 1996
- 1996 Pub. L. 104-188 Pub. L. 104–188, § 1501(b)(6), inserted at end “References in this subsection to section 951(a)(1)(C) and subsection (a)(3) shall be treated as references to such provisions as in effect on the day before the date of the enactment of the Small Business Job Protection Act of 1996.”
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(1) first to the aggregate of—
Amended 1993
- 1993 Pub. L. 103-66 Pub. L. 103–66, § 13231(c)(2)(C), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “first to earnings and profits attributable to amounts included in gross income under section 951(a)(1)(B) (or which would have been included except for subsection (a)(2) of this section),”.
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(A) earnings and profits attributable to amounts included in gross income under section 951(a)(1)(B) (or which would have been included except for subsection (a)(2) of this section), and
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(B) earnings and profits attributable to amounts included in gross income under section 951(a)(1)(C) (or which would have been included except for subsection (a)(3) of this section),
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with any distribution being allocated between earnings and profits described in subparagraph (A) and earnings and profits described in subparagraph (B) proportionately on the basis of the respective amounts of such earnings and profits,
(2) then to earnings and profits attributable to amounts included in gross income under section 951(a)(1)(A) (but reduced by amounts not included under subparagraph (B) or (C) of section 951(a)(1) because of the exclusions in paragraphs (2) and (3) of subsection (a) of this section), and
Amended 1993
- 1993 Pub. L. 103-66 Pub. L. 103–66, § 13231(c)(4)(B), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “then to earnings and profits attributable to amounts included in gross income under section 951(a)(1)(A) (but reduced by amounts not included under section 951(a)(1)(B) because of the exclusion in subsection (a)(2) of this section), and”.
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(3) then to other earnings and profits.
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References in this subsection to section 951(a)(1)(C) and subsection (a)(3) shall be treated as references to such provisions as in effect on the day before the date of the enactment of the Small Business Job Protection Act of 1996.
(d) Distributions excluded from gross income not to be treated as dividends Any distribution excluded from gross income under subsection (a) shall be treated, for purposes of this chapter, as a distribution which is not a dividend; except that such distributions shall immediately reduce earnings and profits.
Amended 1986, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 14301(c)(32), substituted “Any” for “Except as provided in section 960(a)(3), any”.
- 1986 Pub. L. 99-514 Pub. L. 99–514 inserted “; except that such distributions shall immediately reduce earnings and profits”.
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(e) Coordination with amounts previously taxed under section 1248 For purposes of this section and section 960(c), any amount included in the gross income of any person as a dividend by reason of subsection (a) or (f) of section 1248 shall be treated as an amount included in the gross income of such person (or, in any case to which section 1248(e) applies, of the domestic corporation referred to in section 1248(e)(2)) under section 951(a)(1)(A).
Amended 1984, 1988, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 14301(c)(33), substituted “section 960(c)” for “section 960(b)”.
- 1988 Pub. L. 100-647 Pub. L. 100–647 substituted “such person (or, in any case to which section 1248(e) applies, of the domestic corporation referred to in section 1248(e)(2)) under” for “such person under”.
- 1984 Pub. L. 98-369 Pub. L. 98–369 added subsec. (e).
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(f) Allocation rules for certain inclusions
Amended 1993
- 1993 Pub. L. 103-66 Pub. L. 103–66, § 13231(c)(2)(B), added subsec. (f).
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(1) In general For purposes of this section, amounts that would be included under subparagraph (B) of section 951(a)(1) (determined without regard to this section) shall be treated as attributable first to earnings described in subsection (c)(2), and then to earnings described in subsection (c)(3).
Amended 1996
- 1996 Pub. L. 104-188 Pub. L. 104–188, § 1501(b)(7), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of this section—
“(A) amounts that would be included under subparagraph (B) of section 951(a)(1) (determined without regard to this section) shall be treated as attributable first to earnings described in subsection (c)(2), and then to earnings described in subsection (c)(3), and
“(B) amounts that would be included under subparagraph (C) of section 951(a)(1) (determined without regard to this section) shall be treated as attributable first to earnings described in subsection (c)(2) to the extent the earnings so described were accumulated in taxable years beginning after September 30, 1993, and then to earnings described in subsection (c)(3).”
(2) Treatment of distributions In applying this section, actual distributions shall be taken into account before amounts that would be included under section 951(a)(1)(B) (determined without regard to this section).
Amended 1996
- 1996 Pub. L. 104-188 Pub. L. 104–188, § 1501(b)(8), substituted “section 951(a)(1)(B)” for “subparagraphs (B) and (C) of section 951(a)(1)”.