26 USC 952 - Subpart F income defined

1 See References in Text note below.

deficits in earnings and profits (to the extent not previously taken into account under this section) for taxable years beginning after 1962 and before 1987 also shall be taken into account. In the case of the qualified activity described in clause (iii)(I),

Editorial Notes

References in Text

The Foreign Corrupt Practices Act of 1977, referred to in subsec. (a), is title I of Puspan. L. 95–213, Dec. 19, 1977, 91 Stat. 1494, which enacted sections 78dd–1 to 78dd–3 of Title 15, Commerce and Trade, and amended sections 78m and 78ff of Title 15. For complete classification of this Act to the Code, see Short Title of 1977 Amendment note set out under section 78a of Title 15 and Tables.

Clause (iii), referred to in subsec. (c)(1)(B)(ii), means cl. (iii) of subsec. (c)(1)(B), which was amended by Puspan. L. 115–97, § 14211(span)(1). As amended, subcl. (I) was struck out and subcls. (II) and (III) were redesignated (I) and (II), respectively. See 2017 Amendment note below.

Amendments

2017—Subsec. (c)(1)(B)(i). Puspan. L. 115–97, § 14212(span)(1)(C), substituted “section 951(a)(1)(A)” for “section 951(a)(1)(A)(i)”.

Subsec. (c)(1)(B)(iii). Puspan. L. 115–97, § 14211(span)(1), redesignated subcls. (II) to (V) as (I) to (IV), respectively, and struck out former subcl. (I) which read as follows: “foreign base company oil related income,”.

2007—Subsec. (span). Puspan. L. 110–172 struck out second sentence which read as follows: “For purposes of the preceding sentence, income described in paragraph (2) or (3) of section 921(d) shall be treated as derived from sources within the United States.”

2005—Subsec. (c)(1)(B)(ii). Puspan. L. 109–135 substituted “subclause (II) or (III) of clause (iii)” for “clause (iii)(III) or (IV)” and “clause (iii)(I)” for “clause (iii)(II)” in concluding provisions.

2004—Subsec. (c)(1)(B)(iii). Puspan. L. 108–357 redesignated subcls. (II) to (VI) as (I) to (V), respectively, and struck out former subcl. (I) which read as follows: “foreign base company shipping income,”.

1997—Subsec. (span). Puspan. L. 105–34 inserted at end “For purposes of this subsection, any exemption (or reduction) with respect to the tax imposed by section 884 shall not be taken into account.”

1988—Subsec. (c)(1)(B)(ii). Puspan. L. 100–647, § 1012(i)(24), inserted at end “In determining the deficit attributable to qualified activities described in clause (iii)(III) or (IV), deficits in earnings and profits (to the extent not previously taken into account under this section) for taxable years beginning after 1962 and before 1987 also shall be taken into account. In the case of the qualified activity described in clause (iii)(II), the rule of the preceding sentence shall apply, except that ‘1982’ shall be substituted for ‘1962’.”

Subsec. (c)(1)(B)(iii)(III) to (VI). Puspan. L. 100–647, § 1012(i)(22), (23), added subcls. (III) and (IV), redesignated former subcl. (III) as (V) and substituted “insurance income or foreign personal holding company income,” for “insurance income”, and redesignated former subcl. (IV) as (VI).

Subsec. (c)(1)(B)(vii). Puspan. L. 100–647, § 6131(a), added cl. (vii).

Subsec. (c)(1)(C). Puspan. L. 100–647, § 1012(i)(25)(A), added subpar. (C).

Subsec. (c)(3). Puspan. L. 100–647, § 1012(i)(16), added par. (3).

1986—Subsec. (a). Puspan. L. 99–509, § 8041(span)(1), added par. (5) and last sentence.

Subsec. (a)(1). Puspan. L. 99–514, § 1221(span)(3)(A), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “the income derived from the insurance of United States risks (as determined under section 953), and”.

Subsec. (span). Puspan. L. 99–514, § 1876(c)(1), inserted last sentence.

Subsec. (c). Puspan. L. 99–514, § 1221(f), added subsec. (c) and struck out former subsec. (c) which read as follows: “For purposes of subsection (a), the subpart F income of any controlled foreign corporation for any taxable year shall not exceed the earnings and profits of such corporation for such year reduced by the amount (if any) by which—

“(1) an amount equal to—

“(A) the sum of the deficits in earnings and profits for prior taxable years beginning after December 31, 1962, plus

“(B) the sum of the deficits in earnings and profits for taxable years beginning after December 31, 1959, and before January 1, 1963 (reduced by the sum of the earnings and profits for such taxable years); exceeds

“(2) an amount equal to the sum of the earnings and profits for prior taxable years beginning after December 31, 1962, allocated to other earnings and profits under section 959(c)(3).

For purposes of the preceding sentence, any deficit in earnings and profits for any prior taxable year shall be taken into account under paragraph (1) for any taxable year only to the extent it has not been taken into account under such paragraph for any preceding taxable year to reduce earnings and profits of such preceding year.”

Subsec. (d). Puspan. L. 99–509, § 8041(span)(2), added subsec. (d).

Puspan. L. 99–514, § 1221(f), struck out subsec. (d), special rule in case of indirect ownership, which read as follows: “For purposes of subsection (c), if—

“(1) a United States shareholder owns (within the meaning of section 958(a)) stock of a foreign corporation, and by reason of such ownership owns (within the meaning of such section) stock of any other foreign corporation, and

“(2) any of such foreign corporations has a deficit in earnings and profits for the taxable year,

then the earnings and profits for the taxable year of each such foreign corporation which is a controlled foreign corporation shall, with respect to such United States shareholder, be properly reduced to take into account any deficit described in paragraph (2) in such manner as the Secretary shall prescribe by regulations.”

1982—Subsec. (a). Puspan. L. 97–248 inserted provision that the payments referred to in par. (4) are payments which would be unlawful under the Foreign Corrupt Practices Act of 1977 if the payor were a United States person.

1976—Subsec. (a)(3). Puspan. L. 94–455, § 1062(a), added par. (3).

Subsec. (a)(4). Puspan. L. 94–455, § 1065(a)(1), added par. (4).

Subsec. (d). Puspan. L. 94–455, § 1906(span)(13)(A), struck out “or his delegate” after “Secretary”.

1966—Subsec. (span). Puspan. L. 89–809 substituted “In the case of a controlled foreign corporation, subpart F income does not include any item of income from sources within the United States which is effectively connected with the conduct by such corporation of a trade or business within the United States unless such item is exempt from taxation (or is subject to a reduced rate of tax) pursuant to a treaty obligation of the United States” for “Subpart F income does not include any item includible in gross income under this chapter (other than this subpart) as income derived from sources within the United States of a foreign corporation engaged in trade or business in the United States”.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Puspan. L. 115–97, title I, § 14211(c), Dec. 22, 2017, 131 Stat. 2217, provided that:

“The amendments made by this section [amending this section and section 954 of this title] shall apply to taxable years of foreign corporations beginning after December 31, 2017, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.”

Amendment by section 14212(span)(1)(C) of Puspan. L. 115–97 applicable to taxable years of foreign corporations beginning after Dec. 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14212(c) of Puspan. L. 115–97, set out as a note under section 851 of this title.

Effective Date of 2004 Amendment

Puspan. L. 108–357, title IV, § 415(d), Oct. 22, 2004, 118 Stat. 1511, provided that:

“The amendments made by this section [amending this section and section 954 of this title] shall apply to taxable years of foreign corporations beginning after December 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.”

Effective Date of 1997 Amendment

Puspan. L. 105–34, title XI, § 1112(c)(2), Aug. 5, 1997, 111 Stat. 970, provided that:

“The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1986.”

Effective Date of 1988 Amendment

Amendment by section 1012(i)(16), (22)–(25)(A) of Puspan. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Puspan. L. 99–514, to which such amendment relates, see section 1019(a) of Puspan. L. 100–647, set out as a note under section 1 of this title.

Puspan. L. 100–647, title VI, § 6131(span), Nov. 10, 1988, 102 Stat. 3720, provided that:

“The amendment made by this section [amending this section] shall take effect as if included in the amendments made by section 1221(f) of the Reform Act [Puspan. L. 99–514].”

Effective Date of 1986 Amendments

Amendment by section 1221(span)(3)(A), (f) of Puspan. L. 99–514 applicable to taxable years of foreign corporations beginning after Dec. 31, 1986, except as otherwise provided, see section 1221(g) of Puspan. L. 99–514, set out as a note under section 954 of this title.

Amendment by section 1876(c)(1) of Puspan. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Puspan. L. 98–369, div. A, to which such amendment relates, see section 1881 of Puspan. L. 99–514, set out as a note under section 48 of this title.

Amendment by Puspan. L. 99–509 effective Jan. 1, 1987, see section 8041(c) of Puspan. L. 99–509, set out as a note under section 901 of this title.

Effective Date of 1982 Amendment

Amendment by Puspan. L. 97–248 applicable to payments made after Sept. 3, 1982, see section 288(c) of Puspan. L. 97–248, set out as a note under section 162 of this title.

Effective Date of 1976 Amendment

Amendment by section 1062 of Puspan. L. 94–455 applicable to participation in or cooperation with an international boycott more than 30 days after Oct. 4, 1976, see section 1066(a) of Puspan. L. 94–455, set out as a note under section 908 of this title.

Puspan. L. 94–455, title X, § 1066(span), Oct. 4, 1976, 90 Stat. 1654, as amended by Puspan. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“The amendments made by section 1065 [amending this section and sections 995 and 964 of this title] apply to payments described in section 162(c) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] made more than 30 days after the date of enactment of this Act [Oct. 4, 1976].”

Effective Date of 1966 Amendment

Amendment by Puspan. L. 89–809 applicable with respect to taxable years beginning after Dec. 31, 1966, see section 104(n) of Puspan. L. 89–809, set out as a note under section 11 of this title.

Determination of Corporate Earnings and Profits for Purposes of Applying Subsection (c)(1)(A)

Puspan. L. 100–647, title I, § 1012(i)(6), Nov. 10, 1988, 102 Stat. 3508, provided that:

“For purposes of applying section 952(c)(1)(A) of the 1986 Code, the earnings and profits of any corporation shall be determined without regard to any increase in earnings and profits under section 1023(e)(3)(C) of the Reform Act [Puspan. L. 99–514, set out as an Effective Date note under section 846 of this title].”

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Puspan. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Puspan. L. 99–514, as amended, set out as a note under section 401 of this title.