I.R.C. § 861(a) Gross Income From Sources Within United States —
The following items of gross income shall be treated as income from sources within
the United States:
I.R.C. § 861(a)(1) Interest —
Interest from the United States or the District of Columbia, and interest on bonds,
notes, or other interest-bearing obligations of noncorporate residents or domestic
corporations not including—
I.R.C. § 861(a)(1)(A) —
interest—
I.R.C. § 861(a)(1)(A)(i) —
on deposits with a foreign branch of a domestic corporation or a domestic partnership
if such branch is engaged in the commercial banking business, and
I.R.C. § 861(a)(1)(A)(ii) —
on amounts satisfying the requirements of subparagraph (B) of section 871(i)(3) which are paid by a foreign branch of a domestic corporation or a domestic partnership,
and
I.R.C. § 861(a)(1)(B) —
in the case of a foreign partnership, which is predominantly engaged in the active
conduct of a trade or business outside the United States, any interest not paid by
a trade or business engaged in by the partnership in the United States and not allocable
to income which is effectively connected (or treated as effectively connected) with
the conduct of a trade or business in the United States.
I.R.C. § 861(a)(2) Dividends —
The amount received as dividends—
I.R.C. § 861(a)(2)(A) —
from a domestic corporation, or
I.R.C. § 861(a)(2)(B) —
from a foreign corporation unless less than 25 percent of the gross income from all
sources of such foreign corporation for the 3-year period ending with the close of
its taxable year preceding the declaration of such dividends (or for such part of
such period as the corporation has been in existence) was effectively connected (or
treated as effectively connected other than income described in section 884(d)(2)) with the conduct of a trade or business within the United States; but only in
an amount which bears the same ratio to such dividends as the gross income of the
corporation for such period which was effectively connected
(or treated as effectively connected other than income described in section 884(d)(2))
with the conduct of a trade or business within the United States bears to its gross
income from all sources; but dividends (other than dividends for which a deduction
is allowable under section 245(b)) from a foreign corporation shall, for purposes of subpart A of part III (relating
to foreign tax credit), be treated as income from sources without the United States
to the extent (and only to the extent) exceeding the amount which is 100/50th of
the amount of the deduction allowable under section 245 in respect of such dividends, or
I.R.C. § 861(a)(2)(C) —
from a foreign corporation to the extent that such amount is required by section
243(e) (relating to certain dividends from foreign corporations) to be treated as dividends
from a domestic corporation which is subject to taxation under this chapter, and
to such extent subparagraph (B) shall not apply to such amount, or
I.R.C. § 861(a)(2)(D) —
from a DISC or former DISC (as defined in section 992(a)) except to the extent attributable (as determined under regulations prescribed by
the Secretary)
to qualified export receipts described in section 993(a)(1) (other than interest and gains described in section 995(b)(1)).
In the case of any dividend from a 20-percent owned
corporation (as defined in section 243(c)(2)), subparagraph (B) shall be applied by substituting “100/65th”
for “100/50th”.
I.R.C. § 861(a)(3) Personal Services —
Compensation for labor or personal services performed in the United States; except
that compensation for labor or services performed in the United States shall not
be deemed to be income from sources within the United States if—
I.R.C. § 861(a)(3)(A) —
the labor or services are performed by a nonresident alien individual temporarily
present in the United States for a period or periods not exceeding a total of 90
days during the taxable year,
I.R.C. § 861(a)(3)(B) —
such compensation does not exceed
$3,000 in the aggregate, and
I.R.C. § 861(a)(3)(C) —
the compensation is for labor or services performed as an employee of or under a
contract with--
I.R.C. § 861(a)(3)(C)(i) —
a nonresident alien, foreign partnership, or foreign corporation, not engaged in
trade or business within the United States, or
I.R.C. § 861(a)(3)(C)(ii) —
an individual who is a citizen or resident of the United States, a domestic partnership,
or a domestic corporation, if such labor or services are performed for an office
or place of business maintained in a foreign country or in a possession of the United
States by such individual, partnership, or corporation.
In addition, compensation for labor
or services performed in the United States shall not be deemed to be income from
sources within the United States if the labor or services are performed by a nonresident
alien individual in connection with the individual's temporary presence in the United
States as a regular member of the crew of a foreign vessel engaged in transportation
between the United States and a foreign country or a possession of the United States.
I.R.C. § 861(a)(4) Rentals And Royalties —
Rentals or royalties from property located in the United States or from any interest
in such property, including rentals or royalties for the use of or for the privilege
of using in the United States patents, copyrights, secret processes and formulas,
good will, trade-marks, trade brands, franchises, and other like property.
I.R.C. § 861(a)(5) Disposition Of United States Real Property Interest —
Gains, profits, and income from the disposition of a United States real property
interest (as defined in section 897(c)).
I.R.C. § 861(a)(6) Sale Or Exchange Of Inventory Property —
Gains, profits, and income derived from the purchase of inventory property (within
the meaning of section 865(i)(1)) without the United States (other than within a possession of the United States)
and its sale or exchange within the United States.
I.R.C. § 861(a)(7) Amounts Received As Underwriting Income (As Defined In Section 832(b)(3)) Derived
From The Issuing (Or Reinsuring) Of Any Insurance Or Annuity Contract
I.R.C. § 861(a)(7)(A) —
in connection with property in, liability arising out of an activity in, or in connection
with the lives or health of residents of, the United States, or
I.R.C. § 861(a)(7)(B) —
in connection with risks not described in subparagraph (A) as a result of any arrangement whereby another corporation receives a
substantially equal amount of premiums or other consideration in respect to issuing
(or reinsuring) any insurance or annuity contract in connection with property in,
liability arising out of activity in, or in connection with the lives or health of
residents of, the United States.
I.R.C. § 861(a)(8) Social Security Benefits —
Any social security benefit (as defined in section 86(d)).
I.R.C. § 861(a)(9) Guarantees —
Amounts received, directly or indirectly, from—
I.R.C. § 861(a)(9)(A) —
a noncorporate resident or domestic corporation for the provision of a guarantee of
any indebtedness of such resident or corporation, or
I.R.C. § 861(a)(9)(B) —
any foreign person for the provision of a guarantee of any indebtedness of such person,
if such amount is connected with income which is effectively connected (or treated
as effectively connected) with the conduct of a trade or business in the United States.
I.R.C. § 861(b) Taxable Income From Sources Within United States —
From the items of gross income specified in subsection (a) as being income from sources within the United States there shall be deducted the
expenses, losses, and other deductions properly apportioned or allocated thereto
and a ratable part of any expenses, losses, or other deductions which cannot
definitely be allocated to some item or class of gross income. The
remainder, if any, shall be included in full as taxable income from
sources within the United States. In the case of an individual who does not itemize
deductions, an amount equal to the standard deduction shall be considered a deduction
which cannot definitely be allocated to some item or class of gross income.
I.R.C. § 861(c) Special Rule For Application Of Subsection (a)(2)(B) —
For purposes of subsection (a)(2)(B), if the foreign corporation has no gross income from any source for the 3-year period
(or part thereof) specified, the requirements of such subsection shall be applied
with respect to the taxable year of such corporation in which the payment of the
dividend is made.
I.R.C. § 861(d) Income From Certain Railroad Rolling Stock Treated As Income From Sources Within The
United States
I.R.C. § 861(d)(1) General Rule —
For purposes of subsection (a) and section 862(a), if—
I.R.C. § 861(d)(1)(A) —
a taxpayer leases railroad rolling stock which is section 1245 property
(as defined in section 1245(a)(3))
to a domestic common carrier by railroad or a corporation which is controlled, directly
or indirectly, by one or more such common carriers, and
I.R.C. § 861(d)(1)(B) —
the use under such lease is expected to be use within the United States,
all amounts includible in gross income by the taxpayer with respect to such railroad
rolling stock (including gain from sale or other disposition of such railroad rolling
stock)
shall be treated as income from sources within the United States. The requirements
of subparagraph (B) of the preceding sentence shall be treated as satisfied if the only expected use
outside the United States is use by a person (whether or not a United States person)
in Canada or Mexico on a temporary
basis which is not expected to exceed a total of 90 days in any taxable
year.
I.R.C. § 861(d)(2) Paragraph (1) Not To Apply Where Lessor Is A Member Of Controlled Group Which Includes
A Railroad —
Paragraph (1) shall not apply to a lease between two members of the same controlled group of corporations
(as defined in section 1563)
if any member of such group is a domestic common carrier by railroad or a switching
or terminal company all of whose stock is owned by one or more domestic common carriers
by railroad.
I.R.C. § 861(d)(3) Denial Of Foreign Tax Credit —
No credit shall be allowed under section 901 for any payments to foreign
countries with respect to any amount received by the taxpayer with respect to railroad
rolling stock which is subject to paragraph (1).
I.R.C. § 861(e) Cross Reference —
For treatment of interest paid by the branch of a foreign corporation, see section
884(f).
(Aug. 16, 1954, ch. 736, 68A Stat. 275; Sept. 14, 1960,
Pub. L. 86-779, Sec. 3(b), 74 Stat. 998; Oct. 16, 1962, Pub. L. 87-834, Sec. 9(c), 76 Stat. 1001; Nov. 13, 1966, Pub. L. 89-809, title I, Sec. 102(a)(1)-(3),
(b), (c), 80 Stat. 1541-1543;
Dec. 30, 1969, Pub. L. 91-172, title IV, Sec. 435(a), 83 Stat. 625;
Apr. 1, 1971, Pub. L. 92-9, Sec. 3(a)(2), 85 Stat. 15; Dec. 10, 1971, Pub. L. 92-178, title III, Sec. 314(a), title V, Sec. 503, 85 Stat. 528, 550; Jan. 3, 1975, Pub. L. 93-625, Sec. 8, 9(a), 88 Stat. 2116; Oct. 4, 1976, Pub. L. 94-455, title X, Sec. 1036(a), 1041, 1051(h)(3), title XIX, Sec. 1901(b)(26)(A), (B),
(c)(7), 1904(b)(10)(B), 1906(b)(13)(A), 90 Stat. 1633, 1634, 1647, 1798, 1803, 1817, 1834; May 23, 1977, Pub. L. 95-30, title I, Sec. 102(b)(9), 91 Stat. 138;
Nov. 6, 1978, Pub. L. 95-600, title III, Sec. 370(a), title V, Sec. 540(a), 92 Stat. 2858, 2887; Dec. 5, 1980, Pub. L. 96-499, title XI, Sec. 1124, 94 Stat. 2690; Dec. 28, 1980, Pub. L. 96-605, title I, Sec. 104(a), 94 Stat. 3523; Apr. 20, 1983, Pub. L. 98-21, title I, Sec. 121(d), 97 Stat. 83; Oct. 22, 1986, Pub. L. 99-514, title I, Sec. 104(b)(11), title XII, Sec. 1211(b)(1)(B), 1212(d), 1214(a), (b),
(c)(5), 1241(b), 100
Stat. 2105, 2536, 2539, 2541-2543, 2579; Dec. 22, 1987, Pub. L. 100-203, title X, Sec. 10221(d)(4), 101 Stat. 1330-409; Nov. 10, 1988, Pub. L. 100-647, title I, Sec. 1012(g)(3),
(i)(10), (14)(B), (q)(7), (9), (15), 1018(u)(39), 102 Stat. 3501, 3509, 3510, 3524, 3525, 3592; Dec. 19, 1989, Pub. L. 101-239, title VII, Sec. 7811(i)(2), 7841(d)(9), 103 Stat. 2409, 2428; Nov. 5, 1990, Pub. L. 101-508, title XI, Sec. 11801(a)(29), (c)(6)(C), (14), 11813(b)(17), 104 Stat. 1388-521, 1388-524, 1388-527, 1388-555; Pub. L. 105-34, title XI, Sec. 1174(a)(1), Aug. 5, 1997, 111
Stat 788; Pub. L. 107-16, title VI, Sec. 621(a), June 7, 2001, 115 Stat. 38; Pub. L. 108-357, title IV, Sec. 410, Oct. 22, 2004, 118 Stat. 1418; Pub. L. 111-226, title II, Sec. 217(a), (c)(1), Aug. 10, 2010, 124 Stat. 2389; Pub. L. 111-240, title II, Sec. 2122(a), Sept. 27, 2010, 124 Stat. 2504; Pub. L. 115-97, title I, Sec. 13002(e), Dec. 22, 2017, 131 Stat. 2054; Pub. L. 115-141, Div. U, title IV, Sec. 401(d)(1)(D)(ix), Mar. 23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
Amendments to Subchapter
1988--Pub. L. 100-647, title I, 1012(h)(2)(D), Nov. 10, 1988, 102 Stat. 3503, substituted “Source rules and other general rules relating to foreign income” for
“Determination of sources of income” in item for part I.
1976--Pub. L. 94-455, title X, 1064(b), Oct. 4, 1976, 90 Stat. 1653, added item V.
Amendments to Part
1988--Pub. L. 100-647, title I, 1012(e)(3)(B), (h)(2)(C), 1018(u)(37), Nov. 11, 1988, 102 Stat. 3500, 3502, 3592, substituted
“SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN INCOME"
for “DETERMINATION OF SOURCES OF INCOME” as part I heading, substituted
“Special rules for determining source” for “Items not specified in section 861 or
862” in item 863, and added item 865.
1986--Pub. L. 99-514, title XII, 1215(b)(2), Oct. 22, 1986, 100 Stat. 2545, substituted “Definitions and special rules"
for “Definitions” in item 864.
AMENDMENTS
2018 - Subsec. (a)(2)(A). Pub. L. 115-141, Div. U, Sec. 401(d)(1)(D)(ix), amended subpar. (A) by striking “other than a corporation
which has an election in effect under section 936”.
2017 -
Subsec. (a)(2)(B). Pub. L. 115-97, Sec. 13002(e)(1), amended par. (2)(B) by substituting “100/50th”
for “100/70th”.
Subsec. (a)(2). Pub. L. 115-97, Sec. 13002(e)(2), amended flush sentence at the end by substituting “100/65th” for
“100/80th”
and “100/50th” for “100/70th”.
2010 - Subsec. (a)(9). Pub. L. 111-240, Sec. 2122(a), amended subsec. (a) by adding par. (9).
Subsec. (a)(1)(A)-(C). Pub. L. 111-226, Sec. 217(a), amended par. (1) by striking subpar. (A) and by redesignating subpar. (B)
and (C) as subpar. (A) and (B), respectively. Before being struck, subpar. (A) read
as follows:
“(A) interest from a resident alien individual or domestic corporation, if such individual
or corporation meets the 80-percent foreign business requirements of subsection (c)(1),”
Subsec. (c)-(f). Pub. L. 111-226, Sec. 217(c)(1), struck subsec. (c) and redesignated subsec. (d)-(f) as subsec. (c)-(e), respectively.
Before being struck, subsec. (c) read as follows:
“(c) Foreign business requirements
“(1) Foreign business requirements
“(A) In general.—An individual or corporation meets the 80-percent foreign business
requirements of this paragraph if it is shown to the satisfaction of the Secretary
that at least 80 percent of the gross income from all sources of such individual or
corporation for the testing period is active foreign business income.
“(B) Active foreign business income.—For purposes of subparagraph (A), the term “active
foreign business income” means gross income which--
“(i) is derived from sources outside the United States (as determined under this subchapter)
or, in the case of a corporation, is attributable to income so derived by a subsidiary
of such corporation, and
“(ii) is attributable to the active conduct of a trade or business in a foreign country
or possession of the United States by the individual or corporation (or by a subsidiary.)
“For purposes of this subparagraph, the term
“subsidiary” means any corporation in which the corporation referred to in this
subparagraph owns (directly or indirectly) stock meeting the requirements of section
1504(a)(2) (determined by substituting
“50 percent” for “80 percent” each place it appears).
“(C) Testing period.—For purposes of this subsection, the term “testing period”
means the 3-year period ending with the close of the taxable year of the individual
or corporation preceding the payment (or such part of such period as may be applicable).
If the individual or corporation has no gross income for such 3-year
period (or part thereof), the testing period shall be the taxable year in which the
payment is made.
“(2) Look-thru where related person receives interest
“(A) In general.— In the case of interest received by a related person from a resident
alien individual or domestic corporation meeting the 80-percent foreign business
requirements of paragraph (1), subsection (a)(1)(A) shall apply only to a percentage
of such interest equal to the percentage which--
“(i) the gross income of such individual or corporation for the testing period from
sources outside the United
States (as determined under this subchapter), is of
“(ii) the total gross income of such individual or corporation for the testing period.
“(B) Related person.— For purposes of this paragraph, the term “related person”
has the meaning given such term by section 954(d)(3), except that--
“(i) such section shall be applied by substituting
“the individual or corporation making the payment” for “controlled foreign corporation”
each place it appears, and
“(ii) such section shall be applied by substituting
“10 percent or more” for “more than 50 percent” each place it
appears.”
2004 - Subsec. (a)(1). Pub. L. 108-357, Sec. 410(a), amended par. (1) by striking “and"
at the end of subpar. (A); by substituting “, and” for the period at the end of subpar.
(B); and by adding subpar. (C).
2001 - Subsec. (a)(3). Pub. L. 107-16, Sec. 621(a), amended par. (3) by striking “except for purposes of sections 79 and 105 and subchapter
D,” after “In addition,” in the second sentence.
1997 - Subsec. (a)(3). Pub. L. 105-34, Sec. 1174(a)(1). Added a new sentence at the end of paragraph (3).
1990 - Subsec. (a)(1)(A),
(B). Pub. L. 101-508, Sec. 11801(a)(29), (c)(14), inserted ‘and’ at end of subpar.
(A), substituted a period for a comma at end of subpar. (B), and struck out subpars.
(C) and (D) which read as follows:
‘(C) interest on a debt obligation which was part of an issue with respect to which
an election has been made under subsection (c) of section 4912 (as in effect before
July 1, 1974)
and which, when issued (or treated as issued under subsection (c)(2)
of such section), had a maturity not exceeding 15 years and, when issued, was purchased
by one or more underwriters with a view to distribution through resale, but only with
respect to interest attributable to periods after the date of such election, and
‘(D) interest on a debt obligation which was part of an issue which -
‘(i) was part of an issue outstanding on April 1, 1971,
‘(ii) was guaranteed by a United States person,
‘(iii) was treated under chapter 41 as a debt obligation of a foreign obligor,
‘(iv) as of June 30, 1974, had a maturity of not more than 15 years, and
‘(v) when issued, was purchased by one or more underwriters for the purpose of distribution
through resale.’
Subsec. (e)(1)(A). Pub. L. 101-508, Sec. 11813(b)(17), as amended by Pub. L. 104-188, Sec. 1702(h)(9), substituted ‘which is section 1245 property
(as defined in section 1245(a)(3))’ for ‘which is section 38 property
(or would be section 38 property but for section 48(a)(5))’.
Subsec. (e)(2). Pub. L. 101-508, Sec. 11801(c)(6)(C), substituted ‘all of whose stock is owned by one or more domestic common carriers
by railroad’ for ‘referred to in subparagraph (B) of section 184(d)(1)’.
1989 - Subsec. (a)(6). Pub. L. 101-239, Sec. 7811(i)(2), substituted ‘865(i)(1)’ for ‘865(h)(1)’.
Subsec. (e)(1). Pub. L. 101-239, Sec. 7841(d)(9), substituted ‘section 862(a)’
for ‘section 826(a)’ in introductory provisions.
1988 - Subsec. (a)(2)(B). Pub. L. 100-647, Sec. 1012(q)(7), substituted ‘other than income described in section 884(d)(2)’ for
‘other than under section 884(d)(2)’ in two places.
Subsec. (a)(2)(C). Pub. L. 100-647, Sec. 1012(q)(15), substituted ‘section 243(e)’ for ‘section 243(d)’.
Subsec. (a)(6). Pub. L. 100-647, Sec. 1018(u)(39), substituted ‘inventory property’
for ‘personal property’ in heading.
Subsec. (a)(7). Pub. L. 100-647, Sec. 1012(i)(10), amended par. (7) generally. Prior to amendment, par. (7) read as follows: ‘Amounts
received as underwriting income (as defined in section 832(b)(3)) derived from the
insurance of United States risks (as defined in section 953(a)).’
Subsec. (c)(1)(B). Pub. L. 100-647, Sec. 1012(g)(3), inserted ‘or, in the case of a corporation, is attributable to income so derived
by a subsidiary of such corporation’ after parenthetical in cl. (i), struck out ‘or
chain of subsidiaries of such corporation’
after ‘by a subsidiary’ in cl. (ii), and inserted sentence at end defining ‘subsidiary’.
Subsec. (c)(2)(B)(ii). Pub. L. 100-647, Sec. 1012(i)(14)(B), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows:
‘such section shall be applied by substituting ‘10 percent’ for ‘50 percent’ each
place it appears.'
Subsec. (f). Pub. L. 100-647, Sec. 1012(g)(9), added subsec. (f).
1987 - Subsec. (a)(2). Pub. L. 100-203, Sec. 10221(d)(4)(B), inserted at end ‘In the case of any dividend from a 20-percent owned corporation
(as defined in section 243(c)(2)), subparagraph (B) shall be applied by substituting
‘100/80th’ for ‘100/70th’.'
Subsec. (a)(2)(B). Pub. L. 100-203, Sec. 10221(d)(4)(A), which directed that subpar. (B) be amended by substituting ‘100/70th’
for ‘100/85th’, was executed by substituting ‘100/70th’ for ‘100/85ths’
to reflect the probable intent of Congress.
1986 - Subsec. (a)(1). Pub. L. 99-514, Sec. 1241(b)(1)(A), substituted ‘noncorporate residents or domestic corporations’ for
‘residents, corporate or otherwise,’ in introductory text.
Subsec. (a)(1)(A). Pub. L. 99-514, Sec. 1214(a)(1),
(c)(5)(A), amended subpar. (B) generally and redesignated it as (A). Prior to amendment
and redesignation, former subpar. (B) read as follows:
‘interest received from a resident alien individual or a domestic corporation, when
it is shown to the satisfaction of the Secretary that less than 20 percent of the
gross income from all sources of such individual or such corporation has been derived
from sources within the United States, as determined under the provisions of this
part, for the 3-year period ending with the close of the taxable year of such individual
or such corporation preceding the payment of such interest, or for such part of such
period as may be applicable,’. Former subpar. (A), which read ‘interest on amounts
described in subsection
(c) received by a nonresident alien individual or a foreign corporation, if such interest
is not effectively connected with the conduct of a trade or business within the United
States,’, was struck out.
Subsec. (a)(1)(B). Pub. L. 99-514, Sec. 1241(b)(1)(B), redesignated subpar. (D), as previously redesignated and amended by Sec. 1214(c)(5)(A),
(B) of Pub. L. 99-514, as (B) and struck out former subpar. (B) (previously (C)) which read as follows:
‘interest received from a foreign corporation (other than interest paid or credited
by a domestic branch of a foreign corporation, if such branch is engaged in the commercial
banking business), when it is shown to the satisfaction of the Secretary that less
than 50 percent of the gross income from all sources of such foreign corporation for
the 3-year period ending with the close of its taxable year preceding the payment
of such interest (or for such part of such period as the corporation has been in existence)
was effectively connected with the conduct of a trade or business within the United
States,’.
Pub. L. 99-514, Sec. 1214(c)(5)(A), (B), redesignated former subpar.
(F) as (D), substituted in cl. (ii), ‘subparagraph (B) of section 871(i)(3)’ for ‘paragraph
(2) of subsection (c)’, and redesignated former subpar. (C) as (B). Former subpar.
(B) redesignated (A).
Subsec. (a)(1)(C). Pub. L. 99-514, Sec. 1241(b)(1)(B), redesignated subpar. (E), as previously redesignated by Sec. 1214(c)(5)(A)
of Pub. L. 99-514, as (C) and struck out former subpar. (C) (previously (D)) which read as follows:
‘in the case of interest received from a foreign corporation (other than interest
paid or credited by a domestic branch of a foreign corporation, if such branch is
engaged in the commercial banking business), 50 percent or more of the gross income
of which from all sources for the 3-year period ending with the close of its taxable
year preceding the payment of such interest (or for such part of such period as the
corporation has been in existence) was effectively connected with the conduct of a
trade or business within the United States, an amount of such interest which bears
the same ratio to such interest as the gross income of such foreign corporation for
such period which was not effectively connected with the conduct of a trade or business
within the United States bears to its gross income from all sources,’.
Pub. L. 99-514, Sec. 1214(c)(5)(A), redesignated subpar. (D) as
(C). Former subpar. (C) redesignated (B).
Subsec. (a)(1)(D). Pub. L. 99-514, Sec. 1214(c)(5)(A), redesignated subpar. (H) as (F). Pub. L. 99-514, Sec. 1241(b)(1)(B), then redesignated such subpar.
(F) as (D). The original subpar. (D) was redesignated (C) and struck out, and the
original subpar. (F) was redesignated (D), then (B).
Subsec. (a)(1)(E). Pub. L. 99-514, Sec. 1241(b)(1)(B), redesignated subpar. (E), as previously redesignated by Sec. 1214(c)(5)(A)
of Pub. L. 99-514, as (C).
Pub. L. 99-514, Sec. 1214(c)(5)(A), redesignated subpar. (G) as
(E) and struck out former subpar. (E) which read as follows: ‘income derived by a
foreign central bank of issue from bankers’ acceptances,'.
Subsec. (a)(1)(F). Pub. L. 99-514, Sec. 1214(c)(5)(A), 1241(b)(1)(B), redesignated successively former subpar. (F) as (D)
and (B), respectively.
Subsec. (a)(1)(G). Pub. L. 99-514, Sec. 1214(c)(5)(A), 1241(b)(1)(B), redesignated successively former subpar. (G) as (E)
and (C), respectively.
Subsec. (a)(1)(H). Pub. L. 99-514, Sec. 1214(c)(5)(A), 1241(b)(1)(B), redesignated successively former subpar. (H) as (F)
and (D), respectively.
Subsec. (a)(2)(A). Pub. L. 99-514, Sec. 1214(b), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows:
‘from a domestic corporation other than a corporation which has an election in effect
under section 936, and other than a corporation less than 20 percent of whose gross
income is shown to the satisfaction of the Secretary to have been derived from sources
within the United States, as determined under the provisions of this part, for the
3-year period ending with the close of the taxable year of such corporation preceding
the declaration of such dividends (or for such part of such period as the corporation
has been in existence), or’.
Subsec. (a)(2)(B). Pub. L. 99-514, Sec. 1241(b)(2), substituted ‘25 percent’ for ‘50 percent’ and inserted ‘(or treated as effectively
connected other than under section 884(d)(2))’ in two places.
Subsec. (a)(6). Pub. L. 99-514, Sec. 1211(b)(1)(B), substituted ‘inventory property (within the meaning of section 865(h)(1))’
for ‘personal property’.
Subsec. (b). Pub. L. 99-514, Sec. 104(b)(11), substituted ‘the standard deduction’
for ‘the zero bracket amount’.
Subsec. (c). Pub. L. 99-514, Sec. 1214(a)(2), amended subsec. (c) generally, substituting provisions relating to foreign business
requirements for provisions relating to interest on deposits.
Subsec. (d). Pub. L. 99-514, Sec. 1214(c)(5)(C), amended subsec. (d) generally, substituting provision for special rule for application
of subsec.
(a)(2)(B) for former provision for special rules for application of subsec. (a), pars.
(1)(B) to (1)(D) and (2)(B), pars. (1) and (2)
thereof relating to new entities and transition rule provisions.
Subsecs. (e), (f). Pub. L. 99-514, Sec. 1212(d), redesignated subsec. (f) as (e)
and struck out former subsec. (e) relating to treatment of income from certain leased
aircraft, vessels, and spacecraft as income from sources within the United States.
1983 - Subsec. (a)(8). Pub. L. 98-21 added par. (8).
1980 - Subsec. (a)(5). Pub. L. 96-499 substituted ‘Disposition of United States real property interest’ for ‘Sale or exchange
of real property’ in heading and ‘disposition of a United States real property interest
(as defined in section 897(c))’ for ‘sale or exchange of real property located in
the United States’ in text.
Subsec. (e). Pub. L. 96-605 substituted provision directing that income from certain leased aircraft, vessels,
and spacecraft be treated as income from sources within the United States for provision
permitting the taxpayer to elect to treat income from certain aircraft and vessels
as income from sources within the United States and prescribing the manner of revocating
such an election.
1978 - Subsec. (a)(1)(F). Pub. L. 95-600, Sec. 540(a), designated existing provisions as cl. (i) and added cl. (ii).
Subsec. (f). Pub. L. 95-600, Sec. 370(a), added subsec. (f).
1977 - Subsec. (b). Pub. L. 95-30 provided that, in the case of an individual who does not itemize deductions, an amount
equal to the zero bracket amount shall be considered a deduction which cannot definitely
be allocated to some item or class of gross income.
1976 - Subsec. (a)(1). Pub. L. 94-455, Sec. 1901(c)(7), 1904(b)(10)(B), struck out ‘, any Territory, any political subdivision of a Territory,’
after ‘United States’ in provisions preceding subpar.
(A) and, in subpar. (G), substituted ‘subsection (c) of section 4912
(as in effect before July 1, 1974)’ for ‘section 4912(c)’ and ‘subsection
(c)(2) of such section’ for ‘section 4912(c)(2)’.
Subsec. (a)(2)(A). Pub. L. 94-455, Sec. 1051(h)(3), 1906(b)(13)(A), substituted ‘other than a corporation which has an election in effect
under section 936’ for ‘other than a corporation entitled to the benefits of section
931’ and struck out ‘or his delegate’
after ‘Secretary’.
Subsec. (a)(2)(D). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ‘or his delegate’ after ‘Secretary’.
Subsec. (a)(5), (6). Pub. L. 94-455, Sec. 1901(b)(26)(A), substituted ‘sale or exchange’ for ‘sale’ in headings and text.
Subsec. (a)(7). Pub. L. 94-455, Sec. 1036(a), added par. (7).
Subsec. (c)(3). Pub. L. 94-455, Sec. 1041, struck out provision that subsecs.
(a)(1)(A) and (c) would cease to apply effective with respect to amounts paid or credited
after Dec. 31, 1976.
Subsec. (e)(1). Pub. L. 94-455, Sec. 1901(b)(26)(B), substituted ‘sale, exchange, or other disposition’ for ‘sale or other disposition’.
Subsecs. (e)(2), (3). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ‘or his delegate’ after ‘Secretary’.
1975 - Subsec. (a)(1)(H). Pub. L. 93-625, Sec. 9(a), added subpar.
(H).
Subsec. (c)(3). Pub. L. 93-625, Sec. 8, substituted ‘1976’ for ‘1975’.
1971 - Subsec. (a)(1)(G). Pub. L. 92-9 added subpar. (G).
Subsec. (a)(2)(D). Pub. L. 92-178, Sec. 503, added subpar. (D).
Subsec. (e). Pub. L. 92-178, Sec. 314(a), added subsec. (e).
1969 - Subsec. (a)(1)(C),
(D). Pub. L. 91-172, Sec. 435(a)(1), struck out ‘after December 31, 1972,’ after ‘interest paid or credited’
in parenthetical after ‘interest received from a foreign corporation’.
Subsec. (c)(3). Pub. L. 91-172, Sec. 435(a)(2), substituted ‘1975’ for ‘1972’.
1966 - Subsec. (a)(1)(A). Pub. L. 89-809, Sec. 102(a)(1)(A), substituted ‘interest on amounts described in subsection (c) received by a nonresident
alien individual or a foreign corporation, if such interest is not effectively connected
with the conduct of a trade or business within the United States’ for ‘interest on
deposits with persons carrying on the banking business paid to persons not engaged
in business within the United States’.
Subsec. (a)(1)(B). Pub. L. 89-809, Sec. 102(a)(2), struck out interest received from a resident foreign corporation, and substituted
‘gross income from all sources of such individual or such corporation’ for ‘gross
income of such resident payor or domestic corporation’, and ‘taxable year of such
individual or such corporation’ for ‘taxable year of such payor’.
Subsec. (a)(1)(C) to (F). Pub. L. 89-809, Sec. 102(a)(2), added subpars. (C), (D), and (F), and redesignated former subpar.
(C) as (E).
Subsec. (a)(2)(B). Pub. L. 89-809, Sec. 102(b), substituted ‘50 percent of the gross income from all sources’ for ‘50 percent of
the gross income’, ‘effectively connected with the conduct of a trade or business
within the United States’ for ‘derived from sources within the United States as determined
from the provisions of this part’, and ‘ratio to such dividends as the gross income
of the corporation for such period which was effectively connected with the conduct
of a trade or business within the United States bears to its gross income from all
sources’ for ‘ratio to such dividends as the gross income of the corporation for such
period derived from sources within the United States bears to its gross income from
all sources’ and inserted ‘(other than dividends for which a deduction is allowable
under section 245(b))’ after ‘dividends’ and ‘(and only to the extent)’ after ‘extent’.
Subsec. (a)(3)(C)(ii). Pub. L. 89-809, Sec. 102(c), inserted
‘an individual who is a citizen or resident of the United States, a domestic partnership,
or’ before ‘a domestic corporation’ and ‘individual, partnership, or’ after ‘United
States by such’.
Subsecs. (c), (d). Pub. L. 89-809, Sec. 102(a)(1)(B),
(3), added subsecs. (c) and (d).
1962 - Subsec. (a)(2)(B). Pub. L. 87-834 substituted ‘to the extent exceeding the amount which is 100/85this of the amount
of the deduction allowable under section 245 in respect of such dividends’ for ‘to
the extent exceeding the amount of the deduction allowable under section 245 in respect
of such dividends.’
1960 - Subsec. (a)(2)(C). Pub. L. 86-779 added subpar. (C).
EFFECTIVE DATE OF 2018 AMENDMENTS
Amendment by Pub. L. 115-141, Div. U, Sec. 401(d)(1)(D)(ix), effective March 23, 2018.
Sec. 401(e) of Pub. L. 115-141, Div. U, provided the following Savings Provision:
“(e) General Savings Provision With Respect To Deadwood Provisions.—If—
“(1) any provision amended or repealed by the amendments made by subsection (b) or
(d)
applied to—
“(A) any transaction occurring before the date of the enactment of this Act,
“(B) any property acquired before such date of enactment, or
“(C) any item of income, loss, deduction, or credit taken into account before such
date of enactment, and
“(2) the treatment of such transaction, property, or item under such provision would
(without regard to the amendments or repeals made by such subsection)
affect the liability for tax for periods ending after such date of enactment,
“nothing in the amendments or repeals made by this section shall be construed to affect
the treatment of such transaction, property, or item for purposes of determining liability
for tax for periods ending after such date of enactment.”
EFFECTIVE DATE OF 2017 AMENDMENTS
Amendment by Pub. L. 115-97, Sec. 13002(e), effective for taxable years beginning after December 31, 2017.
EFFECTIVE DATE OF 2010 AMENDMENTS
Amendment by Pub. L. 111-240, Sec. 2122(a), effective for guarantees issued after the date of the enactment of this Act [Enacted:
Sept. 27, 2010].
Amendments by Pub. L. 111-226, Sec. 217, effective for taxable years beginning after December 31, 2010. Sec. 217(d)(2) of
Pub. L. 111-226 provided the following grandfather rule:
“(2)
GRANDFATHER RULE FOR OUTSTANDING DEBT OBLIGATIONS.—
“(A)
IN GENERAL.—The amendments made by this section shall not apply to payments of interest
on obligations issued before the date of the enactment of this Act.
“
(B) EXCEPTION FOR RELATED PARTY DEBT.—Subparagraph (A) shall not apply to any interest
which is payable to a related person (determined under rules similar to the rules
of section 954(d)(3)).
“(C)
SIGNIFICANT MODIFICATIONS TREATED AS NEW ISSUES.—For purposes of subparagraph (A),
a significant modification of the terms of any obligation (including any extension
of the term of such obligation)
shall be treated as a new issue.”
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendments by section 410(a) of Pub. L. 108-357 effective for taxable years beginning after December 31, 2003.
EFFECTIVE DATE OF 2001 AMENDMENTS
Section 621(b) of Pub. L. 107-16 provided that: “The amendment made by subsection
(a) shall apply to remuneration for services performed in plan years beginning after
December 31, 2001.
Section 901 (Sunset of Provisions of Act) of Pub. L. 107-16, as amended by Pub. L. 107-358, provided that:
“(a) IN GENERAL.--All provisions of, and amendments made by, this Act shall not apply--
“(1) to taxable, plan, or limitation years beginning after December 31, 2010, or
“(2) in the case of title V, to estates of decedents dying, gifts made, or generation
skipping transfers, after December 31, 2010.
“(b) APPLICATION OF CERTAIN LAWS.--The Internal Revenue Code of 1986 and the Employee
Retirement Income Security Act of 1974 shall be applied and administered to years,
estates, gifts, and transfers described in subsection (a) as if the provisions and
amendments described in subsection (a) had never been enacted.
“(c) EXCEPTION.-Subsection (a) shall not apply to section 803 (relating to no federal
income tax on restitution received by victims of the Nazi regime or their heirs or
estates).”
PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS OF ECONOMIC GROWTH AND
TAX RELIEF RECONCILIATION ACT OF 2001 MADE PERMANENT
Section 811 of Pub. L. 109-280 provided that:
“Title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall
not apply to the provisions of, and amendments made by, subtitles A through F of
title VI of such Act (relating to pension and individual retirement arrangement
provisions).”
EFFECTIVE DATE OF 1997 AMENDMENTS
Section 1174(c)(1) of Pub. L. 105-34 provided that:
“In general.--The amendments made by this section shall apply to remuneration for
services performed in taxable years beginning after December 31, 1997.”
Section 1174(c)(2) provided the following exception:
“Presence.--The amendment made by subsection (b)
shall apply to taxable years beginning after December 31, 1997 [enacted:
Aug. 5, 1997].”
EFFECTIVE DATE OF 1990 AMENDMENTS
Amendment by section 11813(b)(17) of Pub. L. 101-508 applicable to property placed in service after Dec. 31, 1990, but not applicable
to any transition property (as defined in section 49(e) of this title), any property
with respect to which qualified progress expenditures were previously taken into account
under section 46(d) of this title, and any property described in section 46(b)(2)(C)
of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c)
of Pub. L. 101-508, set out as a note under section 29 of this title.
EFFECTIVE DATE OF 1989 AMENDMENTS
Amendment by section 7811(i)(2) of Pub. L. 101-239 effective, except as otherwise provided, as if included in the provision of the Technical
and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such amendment relates, see section 7817 of Pub. L. 101-239, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENTS
Amendment by Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of the Tax
Reform Act of 1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1987 AMENDMENTS
Amendment by Pub. L. 100-203 applicable to dividends received or accrued after Dec. 31, 1987, in taxable years
ending after such date, see section 10221(e)(1) of Pub. L. 100-203, set out as a note under section 243 of this title.
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 104(b)(11) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of
Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 1211(b)(1)(B) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, except as otherwise provided,
see section 1211(c) of Pub. L. 99-514, set out as an Effective Date note under section 865 of this title.
Amendment by section 1212(d) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, with special rules for
certain leased property and for certain ships leased by United States Navy, see section
1212(f) of Pub. L. 99-514, set out as a note under section 863 of this title.
Section 1214(d) of Pub. L. 99-514, as amended by Pub. L. 100-647, title I, Sec. 1012(g)(1)(A), (2), Nov. 10, 1988, 102 Stat. 3500, 3501, provided that:
‘(1) In general. - The amendments made by this section (amending this section and
sections 871, 881, 1441, and 6049 of this title) shall apply to payments made in a
taxable year of the payor beginning after December 31, 1986.
‘(2) Treatment of certain interest. -
‘(A) In general. - The amendments made by this section shall not apply to any interest
paid or accrued on any obligation outstanding on December 31, 1985. The preceding
sentence shall not apply to any interest paid pursuant to any extension or renewal
of such an obligation agreed to after December 31, 1985.
‘(B) Special rule for related payee. - If the payee of any interest to which subparagraph
(A) applies is related (within the meaning of section 904(d)(2)(H) of the Internal Revenue Code of 1986) to the payor, such interest shall be treated for purposes of section 904
of such Code as if the payor were a controlled foreign corporation
(within the meaning of section 957(a) of such Code).
‘(3) Transitional rule. -
‘(A) Years before 1988. - In applying the amendments made by this section to any payment
made by a corporation in a taxable year of such corporation beginning before January
1, 1988, the requirements of clause (ii) of section 861(c)(1)(B) of the Internal Revenue Code of 1986 (relating to active business requirements), as amended by this section, shall
not apply to gross income of such corporation for taxable years beginning before January
1, 1987.
‘(B) Years after 1987. - In applying the amendments made by this section to any payment
made by a corporation in a taxable year of such corporation beginning after December
31, 1987, the testing period for purposes of section 861(c)
of such Code (as so amended) shall not include any taxable year beginning before January
1, 1987.
‘(4) Certain dividends. -
‘(A) In general. - The amendments made by this section shall not apply to any dividend
paid before January 1, 1991, by a qualified corporation with respect to stock which
was outstanding on May 31, 1985.
‘(B) Qualified corporation.
- For purposes of subparagraph (A), the term ‘qualified corporation’
means any business systems corporation which -
‘(i) was incorporated in Delaware in February, 1979,
‘(ii) is headquartered in Garden City, New York, and
‘(iii) the parent corporation of which is a resident of Sweden.’
(Section 1012(g)(1)(B) of Pub. L. 100-647 provided that: ‘A taxpayer may elect not to have the amendment made by subparagraph
(A) (amending section 1214(d)(1)
of Pub. L. 99-514, set out above)
apply and to have section 1214(d)(1) of the Reform Act (section 1214(d)(1)
of Pub. L. 99-514, set out above)
apply as in effect before such amendment. Such election shall be made at such time
and in such manner as the Secretary of the Treasury or his delegate may prescribe.')
Amendment by section 1241(b) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, see section 1241(e) of
Pub. L. 99-514, set out as an Effective Date note under section 884 of this title.
EFFECTIVE DATE OF 1983 AMENDMENTS
Amendment by Pub. L. 98-21 applicable to benefits received after Dec. 31, 1983, in taxable years ending after
such date, except for any portion of a lump-sum payment of social security benefits
received after Dec. 31, 1983, if the generally applicable payment date for such portion
was before Jan. 1, 1984, see section 121(g) of Pub. L. 98-21, set out as an Effective Date note under section 86 of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS
Section 104(b) of Pub. L. 96-605 provided that: ‘The amendment made by subsection
(a) (amending this section) shall apply to property first leased after the date of
the enactment of this Act (Dec. 28, 1980).’
Amendment by Pub. L. 96-499 applicable to dispositions after June 18, 1980, see section 1125(a) of Pub. L. 96-499, set out as an Effective Date note under section 897 of this title.
EFFECTIVE DATE OF 1978 AMENDMENTS
Section 370(b) of Pub. L. 95-600 provided that:
‘(1) In general. - The amendment made by subsection
(a) (amending this section) shall apply to all railroad rolling stock placed in service
with respect to the taxpayer after the date of the enactment of this Act (Nov. 6,
1978).
‘(2) Election to extend section 861(f) to railroad rolling stock placed in service
before date of enactment.
‘(A) In general. - At the election of the taxpayer, the amendment made by subsection
(a) shall also apply, for taxable years beginning after the date of the enactment
of this Act, to all railroad rolling stock placed in service with respect to the taxpayer
on or before such date of enactment. Such an election may not be revoked except with
the consent of the Secretary of the Treasury or his delegate.
‘(B) Manner and time of election and revocation. - An election under subparagraph
(A), and any revocation of such an election, shall be made in such manner and at such
time as the Secretary of the Treasury or his delegate may by regulations prescribe.’
Section 540(b) of Pub. L. 95-600 provided that: ‘The amendment made by subsection
(a) (amending this section) shall apply to taxable years beginning after the date
of the enactment of this Act (Nov. 6, 1978).’
EFFECTIVE DATE OF 1977 AMENDMENTS
Amendment by Pub. L. 95-30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a)
of Pub. L. 95-30, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1976 AMENDMENTS
Section 1036(c) of Pub. L. 94-455 provided that: ‘The amendments made by this section
(amending this section and section 862 of this title) shall apply to taxable years
beginning after December 31, 1976.’
For effective date of amendment by section 1051(h)(3)
of Pub. L. 94-455, see section 1051(i)(1) of Pub. L. 94-455, set out as a note under section 27 of this title.
Amendment by section 1901(b)(26)(A), (B), (c)(7)
of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
Amendment by section 1904(b)(10)(B) of Pub. L. 94-455 effective on first day of first month which begins more than 90 days after date of
enactment of this Act (Oct. 4, 1976), see section 1904(d) of Pub. L. 94-455, set out as a note under section 4041 of this title.
EFFECTIVE DATE OF 1975 AMENDMENTS
Section 9(c) of Pub. L. 93-625 provided that: ‘The amendment made by subsection
(a) (amending this section) applies to interest paid after the date of enactment of
this Act (Jan. 3, 1975), and the amendment made by subsection (b) (amending section
2104 of this title) applies with respect to estates of decedents dying after such
date.’
EFFECTIVE DATE OF 1971 AMENDMENTS
Section 3(a)(3) of Pub. L. 92-9 provided that: ‘The amendments made by this subsection
(amending this section and section 4912 of this title) shall take effect on the date
of the enactment of this Act (Apr. 1, 1971).’
Section 314(c) of Pub. L. 92-178 provided that: ‘The amendments made by this section
(amending this section and section 862 of this title) shall apply to taxable years
ending after August 15, 1971, but only with respect to leases entered into after such
date.’
Amendment by section 503 of Pub. L. 92-178 applicable with respect to taxable years ending after Dec. 31, 1971, except that
a corporation may not be a DISC for any taxable year beginning before Jan. 1, 1972,
see section 507 of Pub. L. 92-178, set out as an Effective Date note under section 991 of this title.
EFFECTIVE DATE OF 1969 AMENDMENTS
Section 435(a)(1) of Pub. L. 91-172 provided that the amendment made by that section is effective with respect to amounts
paid or credited after Dec. 31, 1969.
EFFECTIVE DATE OF 1966 AMENDMENTS
Section 102(e) of Pub. L. 89-809, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
‘(1) The amendments made by subsections (a), (c), and (d) (amending this section and
sections 864 and 895 of this title)
shall apply with respect to taxable years beginning after December 31, 1966; except
that in applying section 864(c)(4)(B)(iii) of the Internal Revenue Code of 1986 (formerly I.R.C. 1954) (as added by subsection
(d)) with respect to a binding contract entered into on or before February 24, 1966,
activities in the United States on or before such date in negotiating or carrying
out such contract shall not be taken into account.
‘(2) The amendments made by subsection (b) (amending this section) shall apply with
respect to amounts received after December 31, 1966.’
EFFECTIVE DATE OF 1962 AMENDMENTS
Amendment by Pub. L. 87-834 applicable in respect of any distribution received by a domestic corporation after
Dec. 31, 1964, and in respect of any distribution received by a domestic corporation
before Jan. 1, 1965, in a taxable year of such corporation beginning after Dec. 31,
1962, but only to the extent that such distribution is made out of the accumulated
profits of a foreign corporation for a taxable year (of such foreign corporation)
beginning after Dec. 31, 1962, see section 9(e) of Pub. L. 87-834, set out as a note under section 902 of this title.
EFFECTIVE DATE OF 1960 AMENDMENTS
Amendment by Pub. L. 86-779 applicable to dividends received after Dec. 31, 1959, in taxable years ending after
such date, see section 3(c) of Pub. L. 86-779, set out as a note under section 243 of this title.
SHORT TITLE OF 1971 AMENDMENTS
Section 1(a) of Pub. L. 92-9 provided that: ‘This Act (amending this section and sections 4911, 4912, 4914 to
4916, 4919 to 4921, 6651, 6680, and 6681 of this title and enacting provisions set
out as notes under this section and sections 6680 and 6681 of this title) may be cited
as the ‘Interest Equalization Tax Extension Act of 1971’.'
SHORT TITLE OF 1966 AMENDMENTS
Section 101 of title I of Pub. L. 89-809 provided that: ‘This title (enacting sections 877, 896, 906, 981, 2107, 2108, and
6683 of this title, amending this section and sections 1, 11, 116, 154, 245, 301,
512, 542, 543, 545, 819, 821, 822, 831, 832, 841, 842, 864, 871, 872, 873, 874, 875,
881, 882, 884, 894, 895, 901, 904, 911, 931, 932, 952, 953, 1248, 1249, 1441, 1442,
1461, 2014, 2101, 2102, 2104, 2105, 2106, 2501, 2511, 3401, 6015, 6016, 6018, 6501,
6513, and 7701 of this title, redesignating former section 877 as 878, repealing section
1493, and enacting provisions set out as notes under this section and sections 11,
871, 874, 894, 901, 904, 931, 2101, 2501, and 6501 of this title) may be cited as
the ‘Foreign Investors Tax Act of 1966’.'
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be construed to affect treatment of certain transactions occurring, property acquired,
or items of income, loss, deduction, or credit taken into account prior to Nov. 5,
1990, for purposes of determining liability for tax for periods ending after Nov.
5, 1990, see section 11821(b) of Pub. L. 101-508, set out as a note under section 29 of this title.
DIVIDENDS RECEIVED OR ACCRUED DURING 1987
Subsec. (a)(2)(B) of this section to be applied by substituting ‘100/80ths’ for the
fraction specified therein with regard to dividends received or accrued during 1987,
see section 1006(b)(1)(B)
of Pub. L. 100-647 set out as a note under section 245 of this title.
APPLICABILITY OF CERTAIN AMENDMENTS BY PUB. L. 99-514 IN RELATION TO TREATY OBLIGATIONS OF UNITED STATES
Section 1012(aa)(2)-(4) of title I of Pub. L. 100-647 provided that:
‘(2) Certain amendments to apply notwithstanding treaties. - The following amendments
made by the Reform Act (Pub. L. 99-514) shall apply notwithstanding any treaty obligation of the United States in effect
on the date of the enactment of the Reform Act (Oct. 22, 1986):
‘(A) The amendments made by section 1201 of the Reform Act (amending sections 864,
904, and 954 of this title).
‘(B) The amendments made by title VII of the Reform Act (enacting sections 53 and
55 to 59 of this title and amending sections 5, 12, 26, 28, 29, 38, 48, 173, 174,
263, 381, 443, 703, 882, 897, 904, 936, 1016, 1363, 1366, 1561, 6154, 6425, and 6655
of this title) to the extent such amendments relate to the alternative minimum tax
foreign tax credit.
‘(3) Certain amendments not to apply to the extent inconsistent with treaties. - The
following amendments made by the Reform Act (Pub. L. 99-514) shall not apply to the extent the application of such amendments would be contrary
to any treaty obligation of the United States in effect on the date of the enactment
of the Reform Act (Oct. 22, 1986):
‘(A) The amendments made by section 1211 of the Reform Act (enacting section 865 of
this title and amending this section and sections 862 to 864, 871, 881, and 904 of
this title) to the extent -
‘(i) such amendments apply in the case of an individual treated as a resident of a
foreign country under a treaty obligation of the United States as so in effect, or
‘(ii) such amendments relate to income of a nonresident from the sale or exchange
of inventory property which would otherwise be sourced under section 865(e)(2)
of the 1986 Code.
‘(B) The amendments made by section 1212(a) of the Reform Act (amending section 863
of this title);
except for purposes of determining the amount of the foreign tax credit.
‘(C) The amendments made by subsections (b) and (c) of section 1212 of the Reform
Act (enacting section 887 of this title and amending sections 872 and 883 of this
title).
‘(D) The amendments made by section 1214 of the Reform Act (amending this section
and sections 871, 881, 1441, and 6049 of this title); except for purposes of determining
the amount of the foreign tax credit.
‘(E) The amendment made by section 1241(a) of the Reform Act (enacting section 884
of this title and renumbering former section 884 as 885) to the extent that, under
a treaty obligation of the United States, interest described in section 884(f)(1)(A)
of the 1986 Code (as added by such amendment) which is in excess of amounts deducted
would be treated as other than United States source.
‘(F) The amendment made by section 1241(b)(2)(A) of the Reform Act (amending this
section).
‘(G) The amendment made by section 1241(a) of the Reform Act (enacting section 884
of this title and renumbering former section 884 as 885) to the extent such amendment
relates to section 884(f)(1)(B) of the 1986 Code.
‘(H) The amendments made by section 1242 of the Reform Act (amending section 864 of
this title)
to the extent they relate to paragraph (7) of section 864(c) of the 1986 Code.
‘(I) The amendment made by section 1247(a) of the Reform Act (amending section 892
of this title).
‘(J) The amendments made by section 123 of the Reform Act (amending sections 74, 117,
1441, and 7871 of this title).
‘(4) Treatment of technical corrections. - For purposes of paragraphs (2) and (3),
any amendment made by this title
(see Tables for classification) shall be treated as if it had been included in the
provision of the Reform Act (Pub. L. 99-514) to which such amendment relates.'
QUALIFIED RESEARCH AND EXPERIMENTAL EXPENDITURES;
ALLOCATION AND APPORTIONMENT; DEFINITIONS; SPECIAL RULES; EFFECTIVE DATES
Section 4009 of Pub. L. 100-647 provided that:
‘(a) General Rule. - For purposes of sections 861(b), 862(b), and 863(b) of the 1986
Code, qualified research and experimental expenditures shall be allocated and apportioned
as follows:
‘(1) Any qualified research and experimental expenditures expended solely to meet
legal requirements imposed by a political entity with respect to the improvement or
marketing of specific products or processes for purposes not reasonably expected to
generate gross income (beyond de minimis amounts) outside the jurisdiction of the
political entity shall be allocated only to gross income from sources within such
jurisdiction.
‘(2) In the case of any qualified research and experimental expenditures (not allocated
under paragraph
(1)) to the extent -
‘(A) that such expenditures are attributable to activities conducted in the United
States, 64 percent of such expenditures shall be allocated and apportioned to income
from sources within the United States and deducted from such income in determining
the amount of taxable income from sources within the United States, and
‘(B) that such expenditures are attributable to activities conducted outside the United
States, 64 percent of such expenditures shall be allocated and apportioned to income
from sources outside the United States and deducted from such income in determining
the amount of taxable income from sources outside the United States.
‘(3) The remaining portion of qualified research and experimental expenditures (not
allocated under paragraphs (1) and (2)) shall be apportioned, at the annual election
of the taxpayer, on the basis of gross sales or gross income, except that, if the
taxpayer elects to apportion on the basis of gross income, the amount apportioned
to income from sources outside the United States shall be at least 30 percent of the
amount which would be so apportioned on the basis of gross sales.
‘(b) Qualified Research and Experimental Expenditures.
- For purposes of this section, the term ‘qualified research and experimental expenditures’
means amounts which are research and experimental expenditures within the meaning
of section 174 of the 1986 Code. For purposes of this subsection, rules similar to
the rules of subsection (c) of section 174 of the 1986 Code shall apply.
‘(c) Special Rules for Expenditures Attributable to Activities Conducted in Space,
Etc. -
‘(1) In general. - Any qualified research and experimental expenditures described
in paragraph (2)
-
‘(A) if incurred by a United States person, shall be allocated and apportioned under
this section in the same manner as if they were attributable to activities conducted
in the United States, and
‘(B) if incurred by a person other than a United States person, shall be allocated
and apportioned under this section in the same manner as if they were attributable
to activities conducted outside the United States.
‘(2) Description of expenditures.
- For purposes of paragraph (1), qualified research and experimental expenditures
are described in this paragraph if such expenditures are attributable to activities
conducted -
‘(A) in space,
‘(B) on or under water not within the jurisdiction (as recognized by the United States)
of a foreign country, possession of the United States, or the United States, or
‘(C) in Antarctica.
‘(d) Affiliated Group. -
‘(1) Except as provided in paragraph
(2), the allocation and apportionment required by subsection (a) shall be determined
as if all members of the affiliated group (as defined in subsection (e)(5) of section
864 of the 1986 Code) were a single corporation.
‘(2) For purposes of the allocation and apportionment required by subsection (a) -
‘(A) sales and gross income from products produced in whole or in part in a possession
by an electing corporation (within the meaning of section 936(h)(5)(E) of the 1986
Code); and
‘(B) dividends from an electing corporation, shall not be taken into account, except
that this paragraph shall not apply to sales of (and gross income and dividends attributable
to sales of) products with respect to which an election under section 936(h)(5)(F)
of the 1986 Code is not in effect.
‘(3) The qualified research and experimental expenditures taken into account for purposes
of subsection
(a) shall be adjusted to reflect the amount of such expenditures included in computing
the cost-sharing amount (determined under section 936(h)(5)(C)(i)(I)
of the 1986 Code).
‘(4) The Secretary of the Treasury or his delegate may prescribe such regulations
as may be necessary to carry out the purposes of this subsection, including regulations
providing for the source of gross income and the allocation and apportionment of deductions
to take into account the adjustments required by paragraph
(3).
‘(5) Paragraph (6) of section 864(e) of the 1986 Code shall not apply to qualified
research and experimental expenditures.
‘(e) Years to Which Section Applies. -
‘(1) In general. - Except as provided in this subsection, this section shall apply
to the taxpayer's 1st taxable year beginning after August 1, 1987.
‘(2) Reduction in amounts to which section applies. - Notwithstanding paragraph (1),
this section shall only apply to that portion of the qualified research and experimental
expenditures for the taxable year referred to in paragraph (1) which bears the same
ratio to the total amount of such expenditures as -
‘(A) the lesser of 4 months or the number of months in the taxable year, bears to
‘(B) the number of months in the taxable year.’
1-YEAR MODIFICATION IN REGULATIONS PROVIDING FOR ALLOCATION OF RESEARCH AND EXPERIMENTAL
EXPENDITURES
Section 1216 of Pub. L. 99-514 provided that:
‘(a) General Rule. - For purposes of section 861(b), section 862(b), and section 863(b) of the Internal Revenue Code of 1954 (now 1986), notwithstanding section 864(e) of such Code -
‘(1) 50 percent of all amounts allowable as a deduction for qualified research and
experimental expenditures shall be apportioned to income from sources within the United
States and deducted from such income in determining the amount of taxable income from
sources within the United States, and
‘(2) the remaining portion of such amounts shall be apportioned on the basis of gross
sales or gross income.
The preceding sentence shall not apply to any expenditures described in section 1.861-8(e)(3)(i)(B)
of the Income Tax Regulations.
‘(b) Qualified Research and Experimental Expenditures.
- For purposes of this section -
‘(1) In general. - The term
‘qualified research and experimental expenditures’ means amounts -
‘(A) which are research and experimental expenditures within the meaning of section
174 of such Code, and
‘(B) which are attributable to activities conducted in the United States.
‘(2) Treatment of depreciation, etc. - Rules similar to the rules of section 174(c)
of such Code shall apply.
‘(c) Effective Date. - This section shall apply to taxable years beginning after August
1, 1986, and on or before August 1, 1987.’
ALLOCATION UNDER SECTION 861 OF RESEARCH AND EXPERIMENTAL EXPENDITURES
Pub. L. 98-369, div. A, title I, Sec. 126, July 18, 1984, 98 Stat. 648, as amended by Pub. L. 99-272, title XIII, Sec. 13211, Apr. 7, 1986, 100 Stat. 324; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
‘(a) In General. - For purposes of section 861(b), section 862(b), and section 863(b) of the Internal Revenue Code of 1986 (formerly I.R.C. 1954), all amounts allowable as a deduction for qualified research and experimental expenditures
shall be allocated to income from sources within the United States and deducted from
such income in determining the amount of taxable income from sources within the United
States.
‘(b) Qualified Research and Experimental Expenditures.
- For purposes of this section -
‘(1) In general. - The term
‘qualified research and experimental expenditures’ means amounts -
‘(A) which are research and experimental expenditures within the meaning of section
174 of such Code, and
‘(B) which are attributable to activities conducted in the United States.
‘(2) Treatment of depreciation, etc. - Rules similar to the rules of subsection (c)
of section 174 of such Code shall apply.
‘(c) Effective Dates. -
‘(1) In general. - This section shall apply to taxable years beginning after August
13, 1983, and on or before August 1, 1986.
‘(2) Special rule. - If the taxpayer's 4th taxable year beginning after August 13,
1981, is not described in paragraph (1), this section shall apply also to such 4th
taxable year.'
CONFORMITY OF AMENDMENTS MADE BY FOREIGN INVESTORS TAX ACT OF 1966 WITH TREATY OBLIGATIONS
OF THE UNITED STATES
Section 110 of title I of Pub. L. 89-809 provided that: ‘No amendment made by this title
(see Short Title note above) shall apply in any case where its application would be
contrary to any treaty obligation of the United States. For purposes of the preceding
sentence, the extension of a benefit provided by any amendment made by this title
shall not be deemed to be contrary to a treaty obligation of the United States.’
