# 26 U.S.C. § 959: Exclusion from gross income of previously taxed earnings and profits Source: OLRC release point 119-134 . Cite pinpoints as 26 U.S.C. § 959(a)(1). ## § 959(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— **§ 959(a)(1)** such amounts are distributed to, or **§ 959(a)(2)** such amounts would, but for this subsection, be included under section 951(a)(1)(B) in the gross income of, 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. ## § 959(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). ## § 959(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— **§ 959(c)(1)** first to the aggregate of— **§ 959(c)(1)(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 **§ 959(c)(1)(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), 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, **§ 959(c)(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 **§ 959(c)(3)** then to other earnings and profits. 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. ## § 959(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. ## § 959(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). ## § 959(f) Allocation rules for certain inclusions **§ 959(f)(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). **§ 959(f)(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). ## Regulations - [Treas. Reg. § 1.959-1](/26/reg/1.959-1.md): Exclusion from gross income of United States persons of previously taxed earnings and profits. (interprets § 959) - [Treas. Reg. § 1.959-2](/26/reg/1.959-2.md): Exclusion from gross income of controlled foreign corporations of previously taxed earnings and profits. (interprets § 959) - [Treas. Reg. § 1.959-3](/26/reg/1.959-3.md): Allocation of distributions to earnings and profits of foreign corporations. (interprets § 959) - [Treas. Reg. § 1.959-4](/26/reg/1.959-4.md): Distributions to United States persons not counting as dividends. (interprets § 959) ## Leading cases - [Principal Life Insurance Company and Subsidiaries v. United States, 120 Fed. Cl. 41 (Fed. Cl. 2015)](https://www.courtlistener.com/opinion/2776459/principal-life-insurance-company-and-subsidiaries-v-united-states/) ## Proposed regulations (not in force) - [Prop. Treas. Reg. § 1.959-1](/26/prop/1.959-1_2024-27227.md): Overview, definitions, and rules of general applicability. (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.959-2](/26/prop/1.959-2_2024-27227.md): Accounting of previously taxed earnings and profits. (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.959-3](/26/prop/1.959-3_2024-27227.md): Adjustments to shareholder-level accounts. (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.959-4](/26/prop/1.959-4_2024-27227.md): Exclusion from gross income of previously taxed earnings and profits received in a distribution. (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.959-5](/26/prop/1.959-5_2024-27227.md): Exclusion of a section 956 amount from gross income to the extent allocated to previously taxed earnings and profits. (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.959-6](/26/prop/1.959-6_2024-27227.md): Allocating and apportioning current year taxes to previously taxed earnings and profits of a foreign corporation. (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.959-7](/26/prop/1.959-7_2024-27227.md): General successor transactions. (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.959-8](/26/prop/1.959-8_2024-27227.md): [Reserved] (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.959-10](/26/prop/1.959-10_2024-27227.md): Examples. (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.959-11](/26/prop/1.959-11_2024-27227.md): Transition rules. (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.959-12](/26/prop/1.959-12_2024-27227.md): Applicability dates. (REG-105479-18, proposed 2024-12-02) ## Connections Cites: § 316 Dividend defined; § 951 Amounts included in gross income of United States shareholders; § 958 Rules for determining stock ownership; § 960 Deemed paid credit for subpart F inclusions; § 1248 Gain from certain sales or exchanges of stock in certain foreign corporations Cited by: § 851 Definition of regulated investment company; § 951 Amounts included in gross income of United States shareholders; § 956 Investment of earnings in United States property; § 960 Deemed paid credit for subpart F inclusions; § 961 Adjustments to basis of stock in controlled foreign corporations and of other property; § 962 Election by individuals to be subject to tax at corporate rates; § 965 Treatment of deferred foreign income upon transition to participation exemption system of taxation; § 986 Determination of foreign taxes and foreign corporation’s earnings and profits; § 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 ## Amendments - 1962-10-16: [Pub. L. 87-834](/26/act/87-834.md), 76 Stat. 1019 - 1976-10-04: [Pub. L. 94-455](/26/act/94-455.md), 90 Stat. 1834 - 1984-07-18: [Pub. L. 98-369](/26/act/98-369.md), 98 Stat. 668 - 1986-10-22: [Pub. L. 99-514](/26/act/99-514.md), 100 Stat. 2560 - 1988-11-10: [Pub. L. 100-647](/26/act/100-647.md), 102 Stat. 3536 - 1993-08-10: [Pub. L. 103-66](/26/act/103-66.md), 107 Stat. 497 - 1996-08-20: [Pub. L. 104-188](/26/act/104-188.md), 110 Stat. 1826 - 2017-12-22: [Pub. L. 115-97](/26/act/115-97.md), 131 Stat. 2224