[956A. Repealed. Pub. L. 104-188, Sec. 1501(a)(2), repealed section 956A, effective for taxable years of foreign
corporations beginning after December 31, 1996, and to taxable years of United States
shareholders within which or with which such taxable years
of foreign corporations end.]
BACKGROUND NOTES
AMENDMENTS
1996--Sec. 956A. Pub. L. 104-188, Sec. 1501(a)(2) repealed section 956A. Before repeal, section 956A read as follows:
“(a) General rule. --In the case of any controlled foreign corporation, the amount
determined under this section with respect to any United States shareholder for any
taxable year is the lesser of --
(1) the excess (if any) of --
(A) such shareholder's pro rata share of the amount of the controlled foreign corporation's
excess passive assets for such taxable year, over
(B) the amount of earnings and profits described in section 959(c)(1)(B) with respect
to such shareholder, or
(2) such shareholder's pro rata share of the applicable earnings of such controlled
foreign corporation determined after the application of section 951(a)(1)(B).
(b) Applicable earnings. --
For purposes of this section, the term ‘applicable earnings’ means, with respect to
any controlled foreign corporation, the sum of --
(1) the amount (not including a deficit) referred to in section 316(a)(1) to the extent
such amount was accumulated in prior taxable years beginning after September 30, 1993,
and
(2) the amount referred to in section 316(a)(2), but reduced by distributions made
during the taxable year and reduced by the earnings and profits described in section
959(c)(1) to the extent that the earnings and profits so described were accumulated
in taxable years beginning after September 30, 1993.
(c) Excess passive assets. --
For purposes of this section
--
(1) In general. --
The excess passive assets of any controlled foreign corporation for any taxable year
is the excess
(if any) of --
(A) the average of the amounts of passive assets held by such corporation as of the
close of each quarter of such taxable year, over
(B) 25 percent of the average of the amounts of total assets held by such corporation
as of the close of each quarter of such taxable year. For purposes of the preceding
sentence, the amount taken into account with respect to any asset shall be its adjusted
basis as determined for purposes of computing earnings and profits.
(2) Passive asset. --
(A) In general. --
Except as otherwise provided in this section, the term ‘passive asset’ means any asset
held by the controlled foreign corporation which produces passive income (as defined
in section 1296(b)) or is held for the production of such income.
(B) Coordination with section 956. --
The term ‘passive asset’ shall not include any United States property (as defined
in section 956).
(3) Certain rules to apply.
--
For purposes of this subsection, the rules of the following provisions shall apply:
(A) Section 1296(c) (relating to look-thru rules).
(B) Section 1297(d) (relating to leasing rules).
(C) Section 1297(e) (relating to intangible property).
(d) Treatment of certain groups of controlled foreign corporations. --
(1) In general. --
For purposes of applying subsection
(c) --
(A) all controlled foreign corporations which are members of the same CFC group shall
be treated as 1 controlled foreign corporation, and
(B) the amount of the excess passive assets determined with respect to such 1 corporation
shall be allocated among the controlled foreign corporations which are members of
such group in proportion to their respective amounts of applicable earnings.
(2) CFC Group. --
For purposes of paragraph (1), the term ‘CFC group’ means 1 or more chains of controlled
foreign corporations connected through stock ownership with a top tier corporation
which is a controlled foreign corporation, but only if --
(A) the top tier corporation owns directly more than 50 percent (by vote or value)
of the stock of at least 1 of the other controlled foreign corporations, and
(B) more than 50 percent (by vote or value) of the stock of each of the controlled
foreign corporations
(other than the top tier corporation) is owned (directly or indirectly)
by one or more other members of the group.
(e) Special rule where corporation ceases to be controlled foreign corporation during
taxable year. --
If any foreign corporation ceases to be a controlled foreign corporation during any
taxable year --
(1) the determination of any United States shareholder's pro rata share shall be made
on the basis of stock owned (within the meaning of section 958(a)) by such shareholder
on the last day during the taxable year on which the foreign corporation is a controlled
foreign corporation, and
(2) the amount of such corporation's excess passive assets for such taxable year shall
be determined by only taking into account quarters ending on or before such last day,
and
(3) in determining applicable earnings, the amount taken into account by reason of
being described in paragraph (2) of section 316(a) shall be the portion of the amount
so described which is allocable (on a pro rata basis) to the part of such year during
which the corporation is a controlled foreign corporation.
(f) Regulations. --
The Secretary shall prescribe such regulations as may be necessary to carry out the
purposes of this section, including regulations to prevent the avoidance of the provisions
of this section through reorganizations or otherwiseand regulations coordinating the
provisions of subsections (c)(3)(A) and
(d).”
Subsec. (b)(1). Pub. L. 104-188, Sec. 1703(i)(2), amended par. (1), effective as if included in the provision of the Revenue Reconciliation
Act of 1993 to which such amendment relates. Before amendment, par. (1)
read as follows:
“(1) the amount referred to in section 316(a)(1) to the extent such amount was accumulated
in prior taxable years beginning after September 30, 1993, and”.
Subsec. (f). Pub. L. 104-188, Sec. 1703(i)(3), added “and regulations coordinating the provisions of subsections (c)(3)(A) and
(d)”, effective as if included in the provision of the Revenue Reconciliation Act
of 1993 to which such amendment relates.
EFFECTIVE DATE
Effective for tax years of foreign corporations beginning after September 30, 1993,
and to tax years of United States shareholders in which or with which such tax years
of foreign corporations end.
EFFECTIVE DATE OF REPEAL
Applicable to taxable years of foreign corporations beginning after December 31,
1996, and to taxable years of United States shareholders within which or with which
such taxable years of foreign corporations end.
