26 USC 245 - Dividends received from certain foreign corporations

Collapse to view only § 245. Dividends received from certain foreign corporations

§ 241. Allowance of special deductions
[§ 242. Repealed.
§ 243. Dividends received by corporations
[§ 244. Repealed.
§ 245. Dividends received from certain foreign corporations
§ 245A. Deduction for foreign source-portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations
§ 246. Rules applying to deductions for dividends received
§ 246A. Dividends received deduction reduced where portfolio stock is debt financed
§ 247. Contributions to Alaska Native Settlement Trusts
§ 248. Organizational expenditures
§ 249. Limitation on deduction of bond premium on repurchase
§ 250. Foreign-derived intangible income and global intangible low-taxed income

§ 241. Allowance of special deductions

In addition to the deductions provided in part VI (sec. 161 and following), there shall be allowed as deductions in computing taxable income the items specified in this part.

(Aug. 16, 1954, ch. 736, 68A Stat. 72.)

[§ 242. Repealed. Pub. L. 94–455, title XIX, § 1901(a)(33), Oct. 4, 1976, 90 Stat. 1769]

§ 243. Dividends received by corporations

(a) General rule

In the case of a corporation, there shall be allowed as a deduction an amount equal to the following percentages of the amount received as dividends from a domestic corporation which is subject to taxation under this chapter:

(1) 50 percent, in the case of dividends other than dividends described in paragraph (2) or (3);

(2) 100 percent, in the case of dividends received by a small business investment company operating under the Small Business Investment Act of 1958 (15 U.S.C. 661 and following); and

(3) 100 percent, in the case of qualifying dividends (as defined in subsection (b)(1)).

(b) Qualifying dividends

(1) In general

For purposes of this section, the term “qualifying dividend” means any dividend received by a corporation—

(A) if at the close of the day on which such dividend is received, such corporation is a member of the same affiliated group as the corporation distributing such dividend, and

(B) if such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after December 31, 1963, and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group.

(2) Affiliated group

For purposes of this subsection:

(A) In general

(B) Group must be consistent in foreign tax treatment

The requirements of paragraph (1)(A) shall not be treated as being met with respect to any dividend received by a corporation if, for any taxable year which includes the day on which such dividend is received—

(i) 1 or more members of the affiliated group referred to in paragraph (1)(A) choose to any extent to take the benefits of section 901, and

(ii) 1 or more other members of such group claim to any extent a deduction for taxes otherwise creditable under section 901.

(3) Special rule for groups which include life insurance companies

(A) In general

(B) Effect of election

If an election under this paragraph is in effect with respect to any affiliated group—

(i) part II of subchapter B of chapter 6 (relating to certain controlled corporations) shall be applied with respect to the members of such group without regard to sections 1563(a)(4) and 1563(b)(2)(D), and

(ii) for purposes of this subsection, a distribution by any member of such group which is subject to tax under section 801 shall not be treated as a qualifying dividend if such distribution is out of earnings and profits for a taxable year for which an election under this paragraph is not effective and for which such distributing corporation was not a component member of a controlled group of corporations within the meaning of section 1563 solely by reason of section 1563(b)(2)(D).

(1) In general

(2) 20-percent owned corporation

(d) Special rules for certain distributions

For purposes of subsection (a)—

(1) Any amount allowed as a deduction under section 591 (relating to deduction for dividends paid by mutual savings banks, etc.) shall not be treated as a dividend.

(2) A dividend received from a regulated investment company shall be subject to the limitations prescribed in section 854.

(3) Any dividend received from a real estate investment trust which, for the taxable year of the trust in which the dividend is paid, qualifies under part II of subchapter M (section 856 and following) shall not be treated as a dividend.

(e) Certain dividends from foreign corporations

(Aug. 16, 1954, ch. 736, 68A Stat. 73; Pub. L. 85–866, title I, § 57(b), Sept. 2, 1958, 72 Stat. 1645; Pub. L. 86–779, §§ 3(a), 10(g), Sept. 14, 1960, 74 Stat. 998, 1009; Pub. L. 88–272, title II, § 214(a), Feb. 26, 1964, 78 Stat. 52; Pub. L. 90–364, title I, § 103(e)(2), June 28, 1968, 82 Stat. 264; Pub. L. 91–172, title V, § 504(c)(1), Dec. 30, 1969, 83 Stat. 633; Pub. L. 94–12, title III, § 304(b), Mar. 29, 1975, 89 Stat. 45; Pub. L. 94–455, title X, §§ 1031(b)(2), 1051(f)(1), (2), title XIX, §§ 1901(a)(34), (b)(1)(J)(ii), (21)(A)(i), 1906(b)(3)(C)(ii), (13)(A), Oct. 4, 1976, 90 Stat. 1622, 1646, 1769, 1791, 1797, 1833, 1834; Pub. L. 97–34, title II, § 232(b)(2), Aug. 13, 1981, 95 Stat. 250; Pub. L. 98–369, div. A, title II, § 211(b)(3), July 18, 1984, 98 Stat. 754; Pub. L. 99–514, title IV, § 411(b)(2)(C)(iv), title VI, § 611(a)(1), Oct. 22, 1986, 100 Stat. 2227, 2249; Pub. L. 100–203, title X, § 10221(a)(1), (b), Dec. 22, 1987, 101 Stat. 1330–408; Pub. L. 100–647, title I, § 1010(f)(4), Nov. 10, 1988, 102 Stat. 3454; Pub. L. 101–508, title XI, § 11814(a), Nov. 5, 1990, 104 Stat. 1388–556; Pub. L. 104–188, title I, § 1702(h)(4), (8), Aug. 20, 1996, 110 Stat. 1873, 1874; Pub. L. 113–295, div. A, title II, § 221(a)(41)(C), (D), Dec. 19, 2014, 128 Stat. 4044; Pub. L. 115–97, title I, § 13002(a), Dec. 22, 2017, 131 Stat. 2100; Pub. L. 115–141, div. U, title IV, § 401(d)(1)(D)(v), (xvii)(II), Mar. 23, 2018, 132 Stat. 1207, 1208.)

[§ 244. Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(41)(A), Dec. 19, 2014, 128 Stat. 4043]

§ 245. Dividends received from certain foreign corporations

(a) Dividends from 10-percent owned foreign corporations

(1) In general

(2) Qualified 10-percent owned foreign corporation

(3) U.S.-source portion

For purposes of this subsection, the U.S.-source portion of any dividend is an amount which bears the same ratio to such dividend as—

(A) the post-1986 undistributed U.S. earnings, bears to

(B) the total post-1986 undistributed earnings.

(4) Post-1986 undistributed earnings

The term “post-1986 undistributed earnings” means the amount of the earnings and profits of the foreign corporation (computed in accordance with sections 964(a) and 986) accumulated in taxable years beginning after December 31, 1986—

(A) as of the close of the taxable year of the foreign corporation in which the dividend is distributed, and

(B) without diminution by reason of dividends distributed during such taxable year.

(5) Post-1986 undistributed U.S. earnings

For purposes of this subsection, the term “post-1986 undistributed U.S. earnings” means the portion of the post-1986 undistributed earnings which is attributable to—

(A) income of the qualified 10-percent owned foreign corporation which is effectively connected with the conduct of a trade or business within the United States and subject to tax under this chapter, or

(B) any dividend received (directly or through a wholly owned foreign corporation) from a domestic corporation at least 80 percent of the stock of which (by vote and value) is owned (directly or through such wholly owned foreign corporation) by the qualified 10-percent owned foreign corporation.

(6) Special rule

(7) Coordination with subsection (b)

(8) Disallowance of foreign tax credit

(9) Coordination with section 904

(10) Coordination with treaties

If—

(A) any portion of a dividend received by a corporation from a qualified 10-percent-owned foreign corporation would be treated as from sources in the United States under paragraph (9),

(B) under a treaty obligation of the United States (applied without regard to this subsection), such portion would be treated as arising from sources outside the United States, and

this subsection shall not apply to such dividend (but subsections (a), (b), and (c) of section 904 and sections 907 and 960 shall be applied separately with respect to such portion of such dividend).

(11) Coordination with section 1248

(12) Dividends derived from RICs and REITs ineligible for deduction

(b) Certain dividends received from wholly owned foreign subsidiaries

(1) In general

(2) Eligible dividends

Paragraph (1) shall apply only to dividends which are paid out of the earnings and profits of a foreign corporation for a taxable year during which—

(A) all of its outstanding stock is owned (directly or indirectly) by the domestic corporation to which such dividends are paid; and

(B) all of its gross income from all sources is effectively connected with the conduct of a trade or business within the United States.

(3) Exception

Paragraph (1) shall not apply to any dividends if an election under section 1562 is effective for either—

(A) the taxable year of the domestic corporation in which such dividends are received, or

(B) the taxable year of the foreign corporation out of the earnings and profits of which such dividends are paid.

(1) In general

In the case of a domestic corporation, there shall be allowed as a deduction an amount equal to—

(A) 100 percent of any dividend received from another corporation which is distributed out of earnings and profits attributable to foreign trade income for a period during which such other corporation was a FSC, and

(B) 50 percent (65 percent in the case of dividends from a 20-percent owned corporation as defined in section 243(c)(2)) of any dividend received from another corporation which is distributed out of earnings and profits attributable to effectively connected income received or accrued by such other corporation while such other corporation was a FSC.

(2) Exception for certain dividends

Paragraph (1) shall not apply to any dividend which is distributed out of earnings and profits attributable to foreign trade income which—

(A) is section 923(a)(2) nonexempt income (within the meaning of section 927(d)(6)), or

(B) would not, but for section 923(a)(4), be treated as exempt foreign trade income.

(3) No deduction under subsection (a) or (b)

(4) Definitions

For purposes of this subsection—

(A) Foreign trade income; exempt foreign trade income

(B) Effectively connected income

(5) References to prior law

(Aug. 16, 1954, ch. 736, 68A Stat. 73; Pub. L. 87–834, § 5(c), Oct. 16, 1962, 76 Stat. 977; Pub. L. 89–809, title I, § 104(d), (e), Nov. 13, 1966, 80 Stat. 1558; Pub. L. 98–369, div. A, title VIII, § 801(b)(1), (2)(B), July 18, 1984, 98 Stat. 994, 995; Pub. L. 99–514, title XII, § 1226(a), title XVIII, § 1876(d)(1), (j), Oct. 22, 1986, 100 Stat. 2559, 2898, 2900; Pub. L. 100–203, title X, § 10221(d)(1), Dec. 22, 1987, 101 Stat. 1330–409; Pub. L. 100–647, title I, §§ 1006(e)(16), 1012(l)(2), (3), (bb)(9)(A), Nov. 10, 1988, 102 Stat. 3403, 3513, 3537; Pub. L. 101–239, title VII, § 7811(i)(14), Dec. 19, 1989, 103 Stat. 2411; Pub. L. 108–357, title IV, § 413(c)(3), Oct. 22, 2004, 118 Stat. 1507; Pub. L. 110–172, § 11(g)(3), (4), Dec. 29, 2007, 121 Stat. 2490; Pub. L. 114–113, div. Q, title III, § 326(a), Dec. 18, 2015, 129 Stat. 3103; Pub. L. 115–97, title I, §§ 13002(b), 14301(c)(2), (3), Dec. 22, 2017, 131 Stat. 2100, 2222.)

§ 245A. Deduction for foreign source-portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations

(a) In general

(b) Specified 10-percent owned foreign corporation

For purposes of this section—

(1) In general

(2) Exclusion of passive foreign investment companies

For purposes of this section—

(1) In general

The foreign-source portion of any dividend from a specified 10-percent owned foreign corporation is an amount which bears the same ratio to such dividend as—

(A) the undistributed foreign earnings of the specified 10-percent owned foreign corporation, bears to

(B) the total undistributed earnings of such foreign corporation.

(2) Undistributed earnings

The term “undistributed earnings” means the amount of the earnings and profits of the specified 10-percent owned foreign corporation (computed in accordance with sections 964(a) and 986)—

(A) as of the close of the taxable year of the specified 10-percent owned foreign corporation in which the dividend is distributed, and

(B) without diminution by reason of dividends distributed during such taxable year.

(3) Undistributed foreign earnings

The term “undistributed foreign earnings” means the portion of the undistributed earnings which is attributable to neither—

(A) income described in subparagraph (A) of section 245(a)(5), nor

(B) dividends described in subparagraph (B) of such section (determined without regard to section 245(a)(12)).

(d) Disallowance of foreign tax credit, etc.

(1) In general

(2) Denial of deduction

(e) Special rules for hybrid dividends

(1) In general

(2) Hybrid dividends of tiered corporations

If a controlled foreign corporation with respect to which a domestic corporation is a United States shareholder receives a hybrid dividend from any other controlled foreign corporation with respect to which such domestic corporation is also a United States shareholder, then, notwithstanding any other provision of this title—

(A) the hybrid dividend shall be treated for purposes of section 951(a)(1)(A) as subpart F income of the receiving controlled foreign corporation for the taxable year of the controlled foreign corporation in which the dividend was received, and

(B) the United States shareholder shall include in gross income an amount equal to the shareholder’s pro rata share (determined in the same manner as under section 951(a)(2)) of the subpart F income described in subparagraph (A).

(3) Denial of foreign tax credit, etc.

(4) Hybrid dividend

The term “hybrid dividend” means an amount received from a controlled foreign corporation—

(A) for which a deduction would be allowed under subsection (a) but for this subsection, and

(B) for which the controlled foreign corporation received a deduction (or other tax benefit) with respect to any income, war profits, or excess profits taxes imposed by any foreign country or possession of the United States.

(f) Special rule for purging distributions of passive foreign investment companies

(g) Regulations

(Added Pub. L. 115–97, title I, § 14101(a), Dec. 22, 2017, 131 Stat. 2189.)

§ 246. Rules applying to deductions for dividends received

(a) Deduction not allowed for dividends from certain corporations

(1) In general

(2) Subsection not to apply to certain dividends of Federal Home Loan Banks

(A) Dividends out of current earnings and profitsIn the case of any dividend paid by any FHLB out of earnings and profits of the FHLB for the taxable year in which such dividend was paid, paragraph (1) shall not apply to that portion of such dividend which bears the same ratio to the total dividend as—

(i) the dividends received by the FHLB from the FHLMC during such taxable year, bears to

(ii) the total earnings and profits of the FHLB for such taxable year.

(B) Dividends out of accumulated earnings and profitsIn the case of any dividend which is paid out of any accumulated earnings and profits of any FHLB, paragraph (1) shall not apply to that portion of the dividend which bears the same ratio to the total dividend as—

(i) the amount of dividends received by such FHLB from the FHLMC which are out of earnings and profits of the FHLMC—(I) for taxable years ending after December 31, 1984, and(II) which were not previously treated as distributed under subparagraph (A) or this subparagraph, bears to

(ii) the total accumulated earnings and profits of the FHLB as of the time such dividend is paid.

For purposes of clause (ii), the accumulated earnings and profits of the FHLB as of January 1, 1985, shall be treated as equal to its retained earnings as of such date.

(D) DefinitionsFor purposes of this paragraph—

(i) FHLB

(ii) FHLMC

(iii) Taxable year of FHLB

(iv) Earnings and profitsThe earnings and profits of any FHLB for any taxable year shall be treated as equal to the sum of—(I) any dividends received by the FHLB from the FHLMC during such taxable year, and(II) the total earnings and profits (determined without regard to dividends described in subclause (I)) of the FHLB as reported in its annual financial statement prepared in accordance with section 20 of the Federal Home Loan Bank Act (12 U.S.C. 1440).

(b) Limitation on aggregate amount of deductions

(1) General rule

(2) Effect of net operating loss

(3) Special rulesThe provisions of paragraph (1) shall be applied—

(A) first separately with respect to dividends from 20-percent owned corporations (as defined in section 243(c)(2)) and the percentage determined under this paragraph shall be 65 percent, and

(B) then separately with respect to dividends not from 20-percent owned corporations and the percentage determined under this paragraph shall be 50 percent and the taxable income shall be reduced by the aggregate amount of dividends from 20-percent owned corporations (as so defined).

(1) In generalNo deduction shall be allowed under section 243 1 245, or 245A, in respect of any dividend on any share of stock—

(A) which is held by the taxpayer for 45 days or less during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend, or

(B) to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.

(2) 90-day rule in the case of certain preference dividendsIn the case of stock having preference in dividends, if the taxpayer receives dividends with respect to such stock which are attributable to a period or periods aggregating in excess of 366 days, paragraph (1)(A) shall be applied—

(A) by substituting “90 days” for “45 days” each place it appears, and

(B) by substituting “181-day period” for “91-day period”.

(3) Determination of holding periodsFor purposes of this subsection, in determining the period for which the taxpayer has held any share of stock—

(A) the day of disposition, but not the day of acquisition, shall be taken into account, and

(B) paragraph (3) of section 1223 shall not apply.

(4) Holding period reduced for periods where risk of loss diminishedThe holding periods determined for purposes of this subsection shall be appropriately reduced (in the manner provided in regulations prescribed by the Secretary) for any period (during such periods) in which—

(A) the taxpayer has an option to sell, is under a contractual obligation to sell, or has made (and not closed) a short sale of, substantially identical stock or securities,

(B) the taxpayer is the grantor of an option to buy substantially identical stock or securities, or

(C) under regulations prescribed by the Secretary, a taxpayer has diminished his risk of loss by holding 1 or more other positions with respect to substantially similar or related property.

The preceding sentence shall not apply in the case of any qualified covered call (as defined in section 1092(c)(4) but without regard to the requirement that gain or loss with respect to the option not be ordinary income or loss), other than a qualified covered call option to which section 1092(f) applies.

(5) Special rules for foreign source portion of dividends received from specified 10-percent owned foreign corporations

(A) 1-year holding period requirementFor purposes of section 245A—

(i) paragraph (1)(A) shall be applied—(I) by substituting “365 days” for “45 days” each place it appears, and(II) by substituting “731-day period” for “91-day period”, and

(ii) paragraph (2) shall not apply.

(B) Status must be maintained during holding periodFor purposes of applying paragraph (1) with respect to section 245A, the taxpayer shall be treated as holding the stock referred to in paragraph (1) for any period only if—

(i) the specified 10-percent owned foreign corporation referred to in section 245A(a) is a specified 10-percent owned foreign corporation at all times during such period, and

(ii) the taxpayer is a United States shareholder with respect to such specified 10-percent owned foreign corporation at all times during such period.

(d) Dividends from a DISC or former DISC

(Aug. 16, 1954, ch. 736, 68A Stat. 74; Pub. L. 85–866, title I, §§ 18(a), 57(c)(2), Sept. 2, 1958, 72 Stat. 1614, 1646; Pub. L. 88–272, title II, § 214(b)(2), Feb. 26, 1964, 78 Stat. 55; Pub. L. 91–172, title IV, § 434(b)(1), title V, § 512(f)(3), Dec. 30, 1969, 83 Stat. 625, 641; Pub. L. 92–178, title V, § 502(a), Dec. 10, 1971, 85 Stat. 549; Pub. L. 94–455, title X, § 1051(f)(3), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1646, 1834; Pub. L. 97–248, title II, § 213(c), Sept. 3, 1982, 96 Stat. 465; Pub. L. 98–369, div. A, title I, §§ 53(b), (d)(2), 177(b), title VIII, § 801(b)(2)(A), July 18, 1984, 98 Stat. 567, 568, 709, 995; Pub. L. 99–514, title VI, § 611(a)(3), title XII, § 1275(a)(2)(B), title XVIII, §§ 1804(b)(1)(A), (B), 1812(d)(1), Oct. 22, 1986, 100 Stat. 2249, 2598, 2798, 2835; Pub. L. 100–203, title X, § 10221(c)(1), Dec. 22, 1987, 101 Stat. 1330–409; Pub. L. 100–647, title I, § 1018(u)(10), Nov. 10, 1988, 102 Stat. 3590; Pub. L. 104–188, title I, § 1616(b)(4), Aug. 20, 1996, 110 Stat. 1856; Pub. L. 105–34, title X, § 1015(a), (b), Aug. 5, 1997, 111 Stat. 921, 922; Pub. L. 108–311, title IV, § 406(f), Oct. 4, 2004, 118 Stat. 1190; Pub. L. 108–357, title I, § 102(d)(4), title VIII, § 888(d), Oct. 22, 2004, 118 Stat. 1429, 1643; Pub. L. 109–135, title IV, § 402(a)(4), Dec. 21, 2005, 119 Stat. 2610; Pub. L. 113–295, div. A, title II, § 221(a)(41)(E), Dec. 19, 2014, 128 Stat. 4044; Pub. L. 115–97, title I, §§ 11011(d)(2), 13002(c), 13305(b)(1), 14101(b), (c)(1), 14202(b)(2), Dec. 22, 2017, 131 Stat. 2071, 2100, 2126, 2191, 2216; Pub. L. 115–141, div. U, title IV, § 401(d)(1)(D)(vi), Mar. 23, 2018, 132 Stat. 1207.)

§ 246A. Dividends received deduction reduced where portfolio stock is debt financed

(a) General ruleIn the case of any dividend on debt-financed portfolio stock, there shall be substituted for the percentage which (but for this subsection) would be used in determining the amount of the deduction allowable under section 243 or 245(a) a percentage equal to the product of—

(1) 50 percent (65 percent in the case of any dividend from a 20-percent owned corporation as defined in section 243(c)(2)), and

(2) 100 percent minus the average indebtedness percentage.

(b) Section not to apply to dividends for which 100 percent dividends received deduction allowableSubsection (a) shall not apply to—

(1) qualifying dividends (as defined in section 243(b)), and

(2) dividends received by a small business investment company operating under the Small Business Investment Act of 1958.

(1) In general

(2) Portfolio stockThe term “portfolio stock” means any stock of a corporation unless—

(A) as of the beginning of the ex-dividend date, the taxpayer owns stock of such corporation—

(i) possessing at least 50 percent of the total voting power of the stock of such corporation, and

(ii) having a value equal to at least 50 percent of the total value of the stock of such corporation, or

(B) as of the beginning of the ex-dividend date—

(i) the taxpayer owns stock of such corporation which would meet the requirements of subparagraph (A) if “20 percent” were substituted for “50 percent” each place it appears in such subparagraph, and

(ii) stock meeting the requirements of subparagraph (A) is owned by 5 or fewer corporate shareholders.

(3) Special rule for stock in a bank or bank holding company

(A) In general

(B) DefinitionsFor purposes of subparagraph (A)—

(i) Bank

(ii) Bank holding company

(4) Treatment of certain preferred stock

(d) Average indebtedness percentageFor purposes of this section—

(1) In generalExcept as provided in paragraph (2), the term “average indebtedness percentage” means the percentage obtained by dividing—

(A) the average amount (determined under regulations prescribed by the Secretary) of the portfolio indebtedness with respect to the stock during the base period, by

(B) the average amount (determined under regulations prescribed by the Secretary) of the adjusted basis of the stock during the base period.

(2) Special rule where stock not held throughout base period

(3) Portfolio indebtedness

(A) In general

(B) Certain amounts received from short sale treated as indebtedness

(4) Base periodThe term “base period” means, with respect to any dividend, the shorter of—

(A) the period beginning on the ex-dividend date for the most recent previous dividend on the stock and ending on the day before the ex-dividend date for the dividend involved, or

(B) the 1-year period ending on the day before the ex-dividend date for the dividend involved.

(e) Reduction in dividends received deduction not to exceed allocable interest

(f) Regulations

(Added Pub. L. 98–369, div. A, title I, § 51(a), July 18, 1984, 98 Stat. 562; amended Pub. L. 99–514, title VI, § 611(a)(4), title XVIII, § 1804(a), Oct. 22, 1986, 100 Stat. 2249, 2798; Pub. L. 100–203, title X, § 10221(d)(2), Dec. 22, 1987, 101 Stat. 1330–409; Pub. L. 100–647, title I, § 1012(l)(1), Nov. 10, 1988, 102 Stat. 3513; Pub. L. 108–311, title IV, § 408(a)(9), Oct. 4, 2004, 118 Stat. 1191; Pub. L. 113–295, div. A, title II, § 221(a)(41)(F), Dec. 19, 2014, 128 Stat. 4044; Pub. L. 115–97, title I, § 13002(d), Dec. 22, 2017, 131 Stat. 2100; Pub. L. 115–141, div. U, title IV, § 401(b)(17), Mar. 23, 2018, 132 Stat. 1202.)

§ 247. Contributions to Alaska Native Settlement Trusts

(a) In general

(b) Amount of deductionThe amount of the deduction under subsection (a) shall be equal to—

(1) in the case of a cash contribution (regardless of the method of payment, including currency, coins, money order, or check), the amount of such contribution, or

(2) in the case of a contribution not described in paragraph (1), the lesser of—

(A) the Native Corporation’s adjusted basis in the property contributed, or

(B) the fair market value of the property contributed.

(1) In general

(2) Carryover

(d) Definitions

(e) Manner of making election

(1) In general

(2) Revocation

(f) Additional rules

(1) Earnings and profits

(2) Gain or loss

(3) Income

(4) Period

(5) BasisThe basis that a Settlement Trust has for which a deduction is allowed under this section shall be equal to the lesser of—

(A) the adjusted basis of the Native Corporation in such property immediately before such contribution, or

(B) the fair market value of the property immediately before such contribution.

(6) Prohibition

(g) Election by Settlement Trust to defer income recognition

(1) In general

(2) TreatmentIn the case of property described in paragraph (1), any income or gain realized on the sale or exchange of such property shall be treated as—

(A) for such amount of the income or gain as is equal to or less than the amount of income which would be included in income at the time of contribution under subsection (f)(3) but for the taxpayer’s election under this subsection, ordinary income, and

(B) for any amounts of the income or gain which are in excess of the amount of income which would be included in income at the time of contribution under subsection (f)(3) but for the taxpayer’s election under this subsection, having the same character as if this subsection did not apply.

(3) Election

(A) In general

(B) Revocation

(i) In general(I) this section shall be applied as if the election under this subsection had not been made,(II) any income or gain which would have been included in the year of contribution under subsection (f)(3) but for the taxpayer’s election under this subsection shall be included in income for the taxable year of such contribution, and(III) the Settlement Trust shall pay any increase in tax resulting from such inclusion, including any applicable interest, and increased by 10 percent of the amount of such increase with interest.

(ii) Assessment

(Added Pub. L. 115–97, title I, § 13821(b)(1), Dec. 22, 2017, 131 Stat. 2179.)

§ 248. Organizational expenditures

(a) Election to deductIf a corporation elects the application of this subsection (in accordance with regulations prescribed by the Secretary) with respect to any organizational expenditures—

(1) the corporation shall be allowed a deduction for the taxable year in which the corporation begins business in an amount equal to the lesser of—

(A) the amount of organizational expenditures with respect to the taxpayer, or

(B) $5,000, reduced (but not below zero) by the amount by which such organizational expenditures exceed $50,000, and

(2) the remainder of such organizational expenditures shall be allowed as a deduction ratably over the 180-month period beginning with the month in which the corporation begins business.

(b) Organizational expenditures definedThe term “organizational expenditures” means any expenditure which—

(1) is incident to the creation of the corporation;

(2) is chargeable to capital account; and

(3) is of a character which, if expended incident to the creation of a corporation having a limited life, would be amortizable over such life.

(Aug. 16, 1954, ch. 736, 68A Stat. 76; Pub. L. 94–455, title XIX, §§ 1901(a)(36), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1770, 1834; Pub. L. 108–357, title VIII, § 902(b), Oct. 22, 2004, 118 Stat. 1651; Pub. L. 113–295, div. A, title II, § 221(a)(42), Dec. 19, 2014, 128 Stat. 4044.)

§ 249. Limitation on deduction of bond premium on repurchase

(a) General rule

(b) Adjusted issue price

(Added Pub. L. 91–172, title IV, § 414(a), Dec. 30, 1969, 83 Stat. 612; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98–369, div. A, title I, § 42(a)(5), July 18, 1984, 98 Stat. 557; Pub. L. 112–95, title XI, § 1108(a), (b), Feb. 14, 2012, 126 Stat. 154; Pub. L. 113–295, div. A, title II, §§ 220(i), 221(a)(43), Dec. 19, 2014, 128 Stat. 4036, 4044.)

§ 250. Foreign-derived intangible income and global intangible low-taxed income

(a) Allowance of deduction

(1) In generalIn the case of a domestic corporation for any taxable year, there shall be allowed as a deduction an amount equal to the sum of—

(A) 37.5 percent of the foreign-derived intangible income of such domestic corporation for such taxable year, plus

(B) 50 percent of—

(i) the global intangible low-taxed income amount (if any) which is included in the gross income of such domestic corporation under section 951A for such taxable year, and

(ii) the amount treated as a dividend received by such corporation under section 78 which is attributable to the amount described in clause (i).

(2) Limitation based on taxable income

(A) In generalIf, for any taxable year—

(i) the sum of the foreign-derived intangible income and the global intangible low-taxed income amount otherwise taken into account by the domestic corporation under paragraph (1), exceeds

(ii) the taxable income of the domestic corporation (determined without regard to this section),

then the amount of the foreign-derived intangible income and the global intangible low-taxed income amount so taken into account shall be reduced as provided in subparagraph (B).

(B) ReductionFor purposes of subparagraph (A)—

(i) foreign-derived intangible income shall be reduced by an amount which bears the same ratio to the excess described in subparagraph (A) as such foreign-derived intangible income bears to the sum described in subparagraph (A)(i), and

(ii) the global intangible low-taxed income amount shall be reduced by the remainder of such excess.

(3) Reduction in deduction for taxable years after 2025In the case of any taxable year beginning after December 31, 2025, paragraph (1) shall be applied by substituting—

(A) “21.875 percent” for “37.5 percent” in subparagraph (A), and

(B) “37.5 percent” for “50 percent” in subparagraph (B).

(b) Foreign-derived intangible incomeFor purposes of this section—

(1) In generalThe foreign-derived intangible income of any domestic corporation is the amount which bears the same ratio to the deemed intangible income of such corporation as—

(A) the foreign-derived deduction eligible income of such corporation, bears to

(B) the deduction eligible income of such corporation.

(2) Deemed intangible incomeFor purposes of this subsection—

(A) In generalThe term “deemed intangible income” means the excess (if any) of—

(i) the deduction eligible income of the domestic corporation, over

(ii) the deemed tangible income return of the corporation.

(B) Deemed tangible income return

(3) Deduction eligible income

(A) In generalThe term “deduction eligible income” means, with respect to any domestic corporation, the excess (if any) of—

(i) gross income of such corporation determined without regard to—(I) any amount included in the gross income of such corporation under section 951(a)(1),(II) the global intangible low-taxed income included in the gross income of such corporation under section 951A,(III) any financial services income (as defined in section 904(d)(2)(D)) of such corporation,(IV) any dividend received from a corporation which is a controlled foreign corporation of such domestic corporation,(V) any domestic oil and gas extraction income of such corporation, and(VI) any foreign branch income (as defined in section 904(d)(2)(J)), over

(ii) the deductions (including taxes) properly allocable to such gross income.

(B) Domestic oil and gas extraction income

(4) Foreign-derived deduction eligible incomeThe term “foreign-derived deduction eligible income” means, with respect to any taxpayer for any taxable year, any deduction eligible income of such taxpayer which is derived in connection with—

(A) property—

(i) which is sold by the taxpayer to any person who is not a United States person, and

(ii) which the taxpayer establishes to the satisfaction of the Secretary is for a foreign use, or

(B) services provided by the taxpayer which the taxpayer establishes to the satisfaction of the Secretary are provided to any person, or with respect to property, not located within the United States.

(5) Rules relating to foreign use property or servicesFor purposes of this subsection—

(A) Foreign use

(B) Property or services provided to domestic intermediaries

(i) Property

(ii) Services

(i) Sales to related partiesIf property is sold to a related party who is not a United States person, such sale shall not be treated as for a foreign use unless—(I) such property is ultimately sold by a related party, or used by a related party in connection with property which is sold or the provision of services, to another person who is an unrelated party who is not a United States person, and(II) the taxpayer establishes to the satisfaction of the Secretary that such property is for a foreign use.

For purposes of this clause, a sale of property shall be treated as a sale of each of the components thereof.

(ii) Service provided to related parties

(D) Related partyFor purposes of this paragraph, the term “related party” means any member of an affiliated group as defined in section 1504(a), determined—

(i) by substituting “more than 50 percent” for “at least 80 percent” each place it appears, and

(ii) without regard to paragraphs (2) and (3) of section 1504(b).

Any person (other than a corporation) shall be treated as a member of such group if such person is controlled by members of such group (including any entity treated as a member of such group by reason of this sentence) or controls any such member. For purposes of the preceding sentence, control shall be determined under the rules of section 954(d)(3).

(E) Sold

(Added Pub. L. 115–97, title I, § 14202(a), Dec. 22, 2017, 131 Stat. 2213.)