# 26 U.S.C. § 960: Deemed paid credit for subpart F inclusions Source: OLRC release point 119-134 . Cite pinpoints as 26 U.S.C. § 960(a)(1). ## § 960(a) In general For purposes of subpart A of this part, if there is included in the gross income of a domestic corporation any item of income under section 951(a)(1) with respect to any controlled foreign corporation with respect to which such domestic corporation is a United States shareholder, such domestic corporation shall be deemed to have paid so much of such foreign corporation’s foreign income taxes as are properly attributable to such item of income. ## § 960(b) Special rules for distributions from previously taxed earnings and profits For purposes of subpart A of this part— **§ 960(b)(1) In general.** If any portion of a distribution from a controlled foreign corporation to a domestic corporation which is a United States shareholder with respect to such controlled foreign corporation is excluded from gross income under section 959(a), such domestic corporation shall be deemed to have paid so much of such foreign corporation’s foreign income taxes as— **§ 960(b)(1)(A)** are properly attributable to such portion, and **§ 960(b)(1)(B)** have not been deemed to have to [OLRC note: So in original.] been paid by such domestic corporation under this section for the taxable year or any prior taxable year. **§ 960(b)(2) Tiered controlled foreign corporations.** If section 959(b) applies to any portion of a distribution from a controlled foreign corporation to another controlled foreign corporation, such controlled foreign corporation shall be deemed to have paid so much of such other controlled foreign corporation’s foreign income taxes as— **§ 960(b)(2)(A)** are properly attributable to such portion, and **§ 960(b)(2)(B)** have not been deemed to have been paid by a domestic corporation under this section for the taxable year or any prior taxable year. ## § 960(c) Special rules for foreign tax credit in year of receipt of previously taxed earnings and profits **§ 960(c)(1) Increase in section 904 limitation.** In the case of any taxpayer who— **§ 960(c)(1)(A)** either (i) chose to have the benefits of subpart A of this part for a taxable year beginning after September 30, 1993, in which he was required under section 951(a) to include any amount in his gross income, or (ii) did not pay or accrue for such taxable year any income, war profits, or excess profits taxes to any foreign country or to any possession of the United States, **§ 960(c)(1)(B)** chooses to have the benefits of subpart A of this part for any taxable year in which he receives 1 or more distributions or amounts which are excludable from gross income under section 959(a) and which are attributable to amounts included in his gross income for taxable years referred to in subparagraph (A), and **§ 960(c)(1)(C)** for the taxable year in which such distributions or amounts are received, pays, or is deemed to have paid, or accrues income, war profits, or excess profits taxes to a foreign country or to any possession of the United States with respect to such distributions or amounts, the limitation under section 904 for the taxable year in which such distributions or amounts are received shall be increased by the lesser of the amount of such taxes paid, or deemed paid, or accrued with respect to such distributions or amounts or the amount in the excess limitation account as of the beginning of such taxable year. **§ 960(c)(2) Excess limitation account.** **§ 960(c)(2)(A) Establishment of account.** Each taxpayer meeting the requirements of paragraph (1)(A) shall establish an excess limitation account. The opening balance of such account shall be zero. **§ 960(c)(2)(B) Increases in account.** For each taxable year beginning after September 30, 1993, the taxpayer shall increase the amount in the excess limitation account by the excess (if any) of— **§ 960(c)(2)(B)(i)** the amount by which the limitation under section 904(a) for such taxable year was increased by reason of the total amount of the inclusions in gross income under section 951(a) for such taxable year, over **§ 960(c)(2)(B)(ii)** the amount of any income, war profits, and excess profits taxes paid, or deemed paid, or accrued to any foreign country or possession of the United States which were allowable as a credit under section 901 for such taxable year and which would not have been allowable but for the inclusions in gross income described in clause (i). Proper reductions in the amount added to the account under the preceding sentence for any taxable year shall be made for any increase in the credit allowable under section 901 for such taxable year by reason of a carryback if such increase would not have been allowable but for the inclusions in gross income described in clause (i). **§ 960(c)(2)(C) Decreases in account.** For each taxable year beginning after September 30, 1993, for which the limitation under section 904 was increased under paragraph (1), the taxpayer shall reduce the amount in the excess limitation account by the amount of such increase. **§ 960(c)(3) Distributions of income previously taxed in years beginning before October 1, 1993.** If the taxpayer receives a distribution or amount in a taxable year beginning after September 30, 1993, which is excluded from gross income under section 959(a) and is attributable to any amount included in gross income under section 951(a) for a taxable year beginning before October 1, 1993, the limitation under section 904 for the taxable year in which such amount or distribution is received shall be increased by the amount determined under this subsection as in effect on the day before the date of the enactment of the Revenue Reconcilation [OLRC note: So in original. Probably should be “Reconciliation”.] Act of 1993. **§ 960(c)(4) Cases in which taxes not to be allowed as deduction.** In the case of any taxpayer who— **§ 960(c)(4)(A)** chose to have the benefits of subpart A of this part for a taxable year in which he was required under section 951(a) to include in his gross income an amount in respect of a controlled foreign corporation, and **§ 960(c)(4)(B)** does not choose to have the benefits of subpart A of this part for the taxable year in which he receives a distribution or amount which is excluded from gross income under section 959(a) and which is attributable to earnings and profits of the controlled foreign corporation which was included in his gross income for the taxable year referred to in subparagraph (A), no deduction shall be allowed under section 164 for the taxable year in which such distribution or amount is received for any income, war profits, or excess profits taxes paid or accrued to any foreign country or to any possession of the United States on or with respect to such distribution or amount. **§ 960(c)(5) Insufficient taxable income.** If an increase in the limitation under this subsection exceeds the tax imposed by this chapter for such year, the amount of such excess shall be deemed an overpayment of tax for such year. ## § 960(d) Deemed paid credit for taxes properly attributable to tested income **§ 960(d)(1) In general.** For purposes of subpart A of this part, if any amount is includible in the gross income of a domestic corporation under section 951A, such domestic corporation shall be deemed to have paid foreign income taxes equal to 90 percent of the product of— **§ 960(d)(1)(A)** such domestic corporation’s inclusion percentage, multiplied by **§ 960(d)(1)(B)** the aggregate tested foreign income taxes paid or accrued by controlled foreign corporations. **§ 960(d)(2) Inclusion percentage.** For purposes of paragraph (1), the term “inclusion percentage” means, with respect to any domestic corporation, the ratio (expressed as a percentage) of— **§ 960(d)(2)(A)** such corporation’s net CFC tested income (as defined in section 951A(b)), divided by **§ 960(d)(2)(B)** the aggregate amount described in section 951A(b)(1)(A) with respect to such corporation. **§ 960(d)(3) Tested foreign income taxes.** For purposes of paragraph (1), the term “tested foreign income taxes” means, with respect to any domestic corporation which is a United States shareholder of a controlled foreign corporation, the foreign income taxes paid or accrued by such foreign corporation which are properly attributable to the tested income of such foreign corporation taken into account by such domestic corporation under section 951A. **§ 960(d)(4) Disallowance of foreign tax credit with respect to distributions of previously taxed net CFC tested income.** No credit shall be allowed under section 901 for 10 percent of any foreign income taxes paid or accrued (or deemed paid under subsection (b)(1)) with respect to any amount excluded from gross income under section 959(a) by reason of an inclusion in gross income under section 951A(a). ## § 960(e) Foreign income taxes The term “foreign income taxes” means any income, war profits, or excess profits taxes paid or accrued to any foreign country or possession of the United States. ## § 960(f) Regulations The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section. ## Regulations - [Treas. Reg. § 1.960-1](/26/reg/1.960-1.md): Overview, definitions, and computational rules for determining foreign income taxes deemed paid under section 960(a), (b), and (d). (interprets § 960) - [Treas. Reg. § 1.960-2](/26/reg/1.960-2.md): Foreign income taxes deemed paid under sections 960(a) and (d). (interprets § 960) - [Treas. Reg. § 1.960-3](/26/reg/1.960-3.md): Foreign income taxes deemed paid under section 960(b). (interprets § 960) - [Treas. Reg. § 1.960-4](/26/reg/1.960-4.md): Additional foreign tax credit in year of receipt of previously taxed earnings and profits. (interprets § 960) - [Treas. Reg. § 1.960-5](/26/reg/1.960-5.md): Credit for taxable year of inclusion binding for taxable year of exclusion. (interprets § 960) - [Treas. Reg. § 1.960-6](/26/reg/1.960-6.md): Overpayments resulting from increase in limitation for taxable year of exclusion. (interprets § 960) - [Treas. Reg. § 1.960-7](/26/reg/1.960-7.md): Applicability dates. (interprets § 960) ## Final rules - [87 FR 276](https://www.federalregister.gov/documents/2022/01/04/2021-27887/guidance-related-to-the-foreign-tax-credit-clarification-of-foreign-derived-intangible-income) (2022): Guidance Related to the Foreign Tax Credit; Clarification of Foreign-Derived Intangible Income - [85 FR 71998](https://www.federalregister.gov/documents/2020/11/12/2020-21819/guidance-related-to-the-allocation-and-apportionment-of-deductions-and-foreign-taxes-foreign-tax) (2020): Guidance Related to the Allocation and Apportionment of Deductions and Foreign Taxes, Foreign Tax Redeterminations, Foreign Tax Credit Disallowance Under Section 965(g), Consolidated Groups, Hybrid Arrangements and Certain Payments Under Section 951A - [84 FR 69022](https://www.federalregister.gov/documents/2019/12/17/2019-24848/foreign-tax-credit-guidance-related-to-the-tax-cuts-and-jobs-act-overall-foreign-loss-recapture-and) (2019): Foreign Tax Credit Guidance Related to the Tax Cuts and Jobs Act, Overall Foreign Loss Recapture, and Foreign Tax Redeterminations - [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 ## Leading cases - [Eaton Corporation and Subsidiaries v. Commissioner (T.C. 2025)](https://www.courtlistener.com/opinion/10338291/eaton-corporation-and-subsidiaries/) - [FEDEX CORPORATION and SUBSIDIARIES v. United States (W.D. Tenn. 2023)](https://www.courtlistener.com/opinion/9974703/fedex-corporation-and-subsidiaries-v-united-states/) ## Proposed regulations (not in force) - [Prop. Treas. Reg. § 1.960-1](/26/prop/1.960-1_2024-27227.md): Overview, definitions, and computational rules for determining foreign income taxes deemed paid under section 960(a), (b), and (d). (REG-105479-18, proposed 2024-12-02) - [Prop. Treas. Reg. § 1.960-3](/26/prop/1.960-3_2026-15614.md): Foreign income taxes deemed paid under section 960(b) and foreign tax credits disallowed under section 960(d)(4). (REG-115145-25, proposed 2026-08-03) - [Prop. Treas. Reg. § 1.960-7](/26/prop/1.960-7_2026-15614.md): Applicability dates. (REG-115145-25, proposed 2026-08-03) ## Connections Cites: § 164 Taxes; § 901 Taxes of foreign countries and of possessions of United States; § 904 Limitation on credit; § 951 Amounts included in gross income of United States shareholders; § 951A Net CFC tested income included in gross income of United States shareholders; § 959 Exclusion from gross income of previously taxed earnings and profits Cited by: § 78 Gross up for deemed paid foreign tax credit; § 535 Accumulated taxable income; § 545 Undistributed personal holding company income; § 901 Taxes of foreign countries and of possessions of United States; § 904 Limitation on credit; § 907 Special rules in case of foreign oil and gas income; § 908 Reduction of credit for participation in or cooperation with an international boycott; § 909 Suspension of taxes and credits until related income taken into account; § 958 Rules for determining stock ownership; § 959 Exclusion from gross income of previously taxed earnings and profits; § 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; § 1293 Current taxation of income from qualified electing funds; § 6038 Information reporting with respect to certain foreign corporations and partnerships ## Amendments - 1962-10-16: [Pub. L. 87-834](/26/act/87-834.md), 76 Stat. 1020 - 1976-10-04: [Pub. L. 94-455](/26/act/94-455.md), 90 Stat. 1622 - 1986-10-22: [Pub. L. 99-514](/26/act/99-514.md), 100 Stat. 2530 - 1993-08-10: [Pub. L. 103-66](/26/act/103-66.md), 107 Stat. 502 - 1997-08-05: [Pub. L. 105-34](/26/act/105-34.md), 111 Stat. 971 - 2010-08-10: [Pub. L. 111-226](/26/act/111-226.md), 124 Stat. 2399 - 2017-12-22: [Pub. L. 115-97](/26/act/115-97.md), 131 Stat. 2212 - 2025-07-04: [Pub. L. 119-21](/26/act/119-21.md), 139 Stat. 203