# 26 U.S.C. § 964: Miscellaneous provisions Source: OLRC release point 119-134 . Cite pinpoints as 26 U.S.C. § 964(a)(1). ## § 964(a) Earnings and profits Except as provided in section 312(k)(4), for purposes of this subpart, the earnings and profits of any foreign corporation, and the deficit in earnings and profits of any foreign corporation, for any taxable year shall be determined according to rules substantially similar to those applicable to domestic corporations, under regulations prescribed by the Secretary. In determining such earnings and profits, or the deficit in such earnings and profits, the amount of any illegal bribe, kickback, or other payment (within the meaning of section 162(c)) shall not be taken into account to decrease such earnings and profits or to increase such deficit. The payments referred to in the preceding sentence are payments which would be unlawful under the Foreign Corrupt Practices Act of 1977 if the payor were a United States person. ## § 964(b) Blocked foreign income Under regulations prescribed by the Secretary, no part of the earnings and profits of a controlled foreign corporation for any taxable year shall be included in earnings and profits for purposes of sections 952 and 956, if it is established to the satisfaction of the Secretary that such part could not have been distributed by the controlled foreign corporation to United States shareholders who own (within the meaning of section 958(a)) stock of such controlled foreign corporation because of currency or other restrictions or limitations imposed under the laws of any foreign country. ## § 964(c) Records and accounts of United States shareholders **§ 964(c)(1) Records and accounts to be maintained.** The Secretary may by regulations require each person who is, or has been, a United States shareholder of a controlled foreign corporation to maintain such records and accounts as may be prescribed by such regulations as necessary to carry out the provisions of this subpart and subpart G. **§ 964(c)(2) Two or more persons required to maintain or furnish the same records and accounts with respect to the same foreign corporation.** Where, but for this paragraph, two or more United States persons would be required to maintain or furnish the same records and accounts as may by regulations be required under paragraph (1) with respect to the same controlled foreign corporation for the same period, the Secretary may by regulations provide that the maintenance or furnishing of such records and accounts by only one such person shall satisfy the requirements of paragraph (1) for such other persons. ## § 964(d) Treatment of certain branches **§ 964(d)(1) In general.** For purposes of this chapter, section 6038, section 6046, and such other provisions as may be specified in regulations— **§ 964(d)(1)(A)** a qualified insurance branch of a controlled foreign corporation shall be treated as a separate foreign corporation created under the laws of the foreign country with respect to which such branch qualifies under paragraph (2), and **§ 964(d)(1)(B)** except as provided in regulations, any amount directly or indirectly transferred or credited from such branch to one or more other accounts of such controlled foreign corporation shall be treated as a dividend paid to such controlled foreign corporation. **§ 964(d)(2) Qualified insurance branch.** For purposes of paragraph (1), the term “qualified insurance branch” means any branch of a controlled foreign corporation which is licensed and predominantly engaged on a permanent basis in the active conduct of an insurance business in a foreign country if— **§ 964(d)(2)(A)** separate books and accounts are maintained for such branch, **§ 964(d)(2)(B)** the principal place of business of such branch is in such foreign country, **§ 964(d)(2)(C)** such branch would be taxable under subchapter L if it were a separate domestic corporation, and **§ 964(d)(2)(D)** an election under this paragraph applies to such branch. An election under this paragraph shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary. **§ 964(d)(3) Regulations.** The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection. ## § 964(e) Gain on certain stock sales by controlled foreign corporations treated as dividends **§ 964(e)(1) In general.** If a controlled foreign corporation sells or exchanges stock in any other foreign corporation, gain recognized on such sale or exchange shall be included in the gross income of such controlled foreign corporation as a dividend to the same extent that it would have been so included under section 1248(a) if such controlled foreign corporation were a United States person. For purposes of determining the amount which would have been so includible, the determination of whether such other foreign corporation was a controlled foreign corporation shall be made without regard to the preceding sentence. **§ 964(e)(2) Same country exception not applicable.** Clause (i) of section 954(c)(3)(A) shall not apply to any amount treated as a dividend by reason of paragraph (1). **§ 964(e)(3) Clarification of deemed sales.** For purposes of this subsection, a controlled foreign corporation shall be treated as having sold or exchanged any stock if, under any provision of this subtitle, such controlled foreign corporation is treated as having gain from the sale or exchange of such stock. **§ 964(e)(4) Coordination with dividends received deduction.** **§ 964(e)(4)(A) In general.** If, for any taxable year of a controlled foreign corporation beginning after December 31, 2017, any amount is treated as a dividend under paragraph (1) by reason of a sale or exchange by the controlled foreign corporation of stock in another foreign corporation held for 1 year or more, then, notwithstanding any other provision of this title— **§ 964(e)(4)(A)(i)** the foreign-source portion of such dividend shall be treated for purposes of section 951(a)(1)(A) as subpart F income of the selling controlled foreign corporation for such taxable year, **§ 964(e)(4)(A)(ii)** a United States shareholder with respect to the selling controlled foreign corporation shall include in gross income for the taxable year of the shareholder with or within which such taxable year of the controlled foreign corporation ends an amount equal to the shareholder’s pro rata share (determined in the same manner as under section 951(a)(2)) of the amount treated as subpart F income under clause (i), and **§ 964(e)(4)(A)(iii)** the deduction under section 245A(a) shall be allowable to the United States shareholder with respect to the subpart F income included in gross income under clause (ii) in the same manner as if such subpart F income were a dividend received by the shareholder from the selling controlled foreign corporation. **§ 964(e)(4)(B) Application of basis or similar adjustment.** For purposes of this title, in the case of a sale or exchange by a controlled foreign corporation of stock in another foreign corporation in a taxable year of the selling controlled foreign corporation beginning after December 31, 2017, rules similar to the rules of section 961(d) shall apply. **§ 964(e)(4)(C) Foreign-source portion.** For purposes of this paragraph, the foreign-source portion of any amount treated as a dividend under paragraph (1) shall be determined in the same manner as under section 245A(c). ## Regulations - [Treas. Reg. § 1.964-1](/26/reg/1.964-1.md): Determination of the earnings and profits of a foreign corporation. (interprets § 964) - [Treas. Reg. § 1.964-2](/26/reg/1.964-2.md): Treatment of blocked earnings and profits. (interprets § 964) - [Treas. Reg. § 1.964-3](/26/reg/1.964-3.md): Records to be provided by United States shareholders. (interprets § 964) - [Treas. Reg. § 1.964-4](/26/reg/1.964-4.md): Verification of certain classes of income. (interprets § 964) - [Treas. Reg. § 1.964-5](/26/reg/1.964-5.md): Effective date of subpart F. (interprets § 964) ## Forms named in the regulations - [Form 3115](https://www.irs.gov/pub/irs-pdf/f3115.pdf) - [Form 5471](https://www.irs.gov/pub/irs-pdf/f5471.pdf) ## Final rules - [84 FR 9231](https://www.federalregister.gov/documents/2019/03/14/2019-03474/eliminating-unnecessary-tax-regulations) (2019): Eliminating Unnecessary Tax Regulations - [74 FR 27868](https://www.federalregister.gov/documents/2009/06/11/E9-13521/application-of-separate-limitations-to-dividends-from-noncontrolled-section-902-corporations) (2009): Application of Separate Limitations to Dividends From Noncontrolled Section 902 Corporations ## Leading cases - [Estate of Whitlock v. Commissioner, 59 T.C. 490 (1972)](https://www.courtlistener.com/opinion/4703449/estate-of-whitlock-v-commissioner/) - [Eaton Corporation and Subsidiaries v. Commissioner, 152 T.C. No. 2 (2019)](https://www.courtlistener.com/opinion/4593805/eaton-corporation-and-subsidiaries-v-commissioner/) ## Proposed regulations (not in force) - [Prop. Treas. Reg. § 1.964-1](/26/prop/1.964-1_2011-28658.md): (REG-114749-09, proposed 2011-11-04) - [Prop. Treas. Reg. § 1.964-1](/26/prop/1.964-1_2022-00067.md): Determination of the earnings and profits of a foreign corporation. (REG-101828-19, proposed 2022-01-25) ## Connections Cites: § 162 Trade or business expenses; § 245A Deduction for foreign source-portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations; § 312 Effect on earnings and profits; § 951 Amounts included in gross income of United States shareholders; § 954 Foreign base company income; § 958 Rules for determining stock ownership; § 961 Adjustments to basis of stock in controlled foreign corporations and of other property; § 1248 Gain from certain sales or exchanges of stock in certain foreign corporations; § 6038 Information reporting with respect to certain foreign corporations and partnerships; § 6046 Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock Cited by: § 163 Interest; § 909 Suspension of taxes and credits until related income taken into account ## Amendments - 1962-10-16: [Pub. L. 87-834](/26/act/87-834.md), 76 Stat. 1027 - 1969-12-30: [Pub. L. 91-172](/26/act/91-172.md), 83 Stat. 628 - 1976-10-04: [Pub. L. 94-455](/26/act/94-455.md), 90 Stat. 1654 - 1981-08-13: [Pub. L. 97-34](/26/act/97-34.md), 95 Stat. 225 - 1982-09-03: [Pub. L. 97-248](/26/act/97-248.md), 96 Stat. 571 - 1988-11-10: [Pub. L. 100-647](/26/act/100-647.md), 102 Stat. 3716 - 1997-08-05: [Pub. L. 105-34](/26/act/105-34.md), 111 Stat. 968 - 2017-12-22: [Pub. L. 115-97](/26/act/115-97.md), 131 Stat. 2193