I.R.C. § 957(a) General Rule —
For purposes of this title, the term “controlled foreign corporation” means any
foreign corporation if more than 50 percent of—
I.R.C. § 957(a)(1) —
the total combined voting power of all classes of stock of such corporation entitled
to vote, or
I.R.C. § 957(a)(2) —
the total value of the stock of such corporation,
is owned
(within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such foreign
corporation.
I.R.C. § 957(b) Special Rule For Insurance —
For purposes only of taking into account income described in section 953(a)
(relating to insurance income), the term “controlled foreign corporation”
includes not only a foreign corporation as defined by subsection
(a) but also one of which more than 25 percent of the total combined voting power
of all classes of stock (or more than 25 percent of the total value of stock) is
owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such corporation,
if the gross amount of premiums or other consideration in respect of the reinsurance
or the issuing of insurance or annuity contracts not described in section 953(e)(2) exceeds 75 percent of the gross amount of all premiums or other consideration in
respect of all risks.
I.R.C. § 957(c) United States Person —
For purposes of this subpart, the term “United States person” has the meaning assigned
to it by section 7701(a)(30) except that—
I.R.C. § 957(c)(1) —
with respect to a corporation organized under the laws of the Commonwealth of Puerto
Rico, such term does not include an individual who is a bona fide resident of Puerto
Rico, if a dividend received by such individual during the taxable year from such
corporation would, for purposes of section 933(1), be treated as income derived from sources within Puerto Rico, and
I.R.C. § 957(c)(2) —
with respect to a corporation organized under the laws of Guam, American Samoa, or
the Northern Mariana Islands—
I.R.C. § 957(c)(2)(A) —
80 percent or more of the gross income of which for the 3-year period ending at the
close of the taxable year (or for such part of such period as such corporation or
any predecessor has been in existence) was derived from sources within such a possession
or was effectively connected with the conduct of a trade or business in such a possession,
and
I.R.C. § 957(c)(2)(B) —
50 percent or more of the gross income of which for such period (or part) was derived
from the active conduct of a trade or business within such a possession,
such term does not include an individual who is a bona fide resident of Guam, American
Samoa, or the Northern Mariana Islands.
For purposes of subparagraphs (A) and (B) of paragraph
(2), the determination as to whether income was derived from the active conduct of
a trade or business within a possession shall be made under regulations prescribed
by the Secretary.
(Added Pub. L. 87-834, 12(a), Oct. 16, 1962, 76 Stat. 1017, and amended Pub. L. 94-455, title XIX, 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 99-514, title XII, 1221(b)(3)(C), 1222(a), 1224(a), 1273(a), Oct. 22, 1986, 100 Stat. 2553, 2556, 2558, 2595; Pub. L. 108-357, title IX, Sec. 908(c), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 115-97, title I, Sec. 14101(e)(2), Dec. 22, 2017, 131 Stat. 2054; Pub. L. 115-141, Div. U, title IV, Sec. 401(a)(164), Mar. 23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
AMENDMENTS
2018--Subsec.
(b). Pub. L. 115-141, Div. U, Sec. 401(a)(164), amended subsec. (b) by substituting ‘‘contracts not described
in section 953(e)(2)” for “contracts described in section 953(a)(1)’’.
2017--Subsec. (a). Pub. L. 115-97, Sec. 14101(e)(2), amended subsec. (a) by substituting “title” for “subpart”
in the matter preceding par. (1).
2004--Subsec. (c). Pub. L. 108-357, Sec. 908(c)(5)(B), amended subsec. (c) by striking “derived from sources within a possession, was effectively
connected with the conduct of a trade or business within a possession, or” in the
last sentence.
Subsec. (c)(2)(B). Pub. L. 108-357, Sec. 908(c)(5)(A), amended subpar. (B) by substituting “active conduct of a” for “conduct of an active”.
1986--Subsec. (a). Pub. L. 99-514, 1222(a)(1), amended subsec.
(a) generally. Prior to amendment, subsec. (a) read as follows: “For purposes of this
subpart, the term ‘controlled foreign corporation’
means any foreign corporation of which more than 50 percent of the total combined
voting power of all classes of stock entitled to vote is owned (within the meaning
of section 958(a)), or is considered as owned by applying the rules of ownership of
section 958(b), by United States shareholders on any day during the taxable year of
such foreign corporation.”
Subsec. (b). Pub. L. 99-514, 1222(a)(2), inserted “(or more than 25 percent of the total value of stock)”.
Pub. L. 99-514, 1221(b)(3)(C), substituted “insurance income” for “income derived from insurance
of United States risks”.
Subsec. (c). Pub. L. 99-514, 1273(a), added par. (2) and concluding provisions and struck out former pars. (2)
and (3) which read as follows:
“(2) with respect to a corporation organized under the laws of the Virgin Islands,
such term does not include an individual who is a bona fide resident of the Virgin
Islands and whose income tax obligation under this subtitle for the taxable year is
satisfied pursuant to section 28(a) of the Revised Organic Act of the Virgin Islands,
approved July 22, 1954 (48 U.S.C. 1642), by paying tax on income derived from all sources both within and outside the Virgin
Islands into the treasury of the Virgin Islands, and
“(3) with respect to a corporation organized under the laws of any other possession
of the United States, such term does not include an individual who is a bona fide
resident of any such other possession and whose income derived from sources within
possessions of the United States is not, by reason of section 931(a), includible in
gross income under this subtitle for the taxable year.”
Pub. L. 99-514, 1224(a), redesignated subsec. (d) as (c) and struck out former subsec.
(c) which provided circumstances under which for purposes of this subpart, the term
“controlled foreign corporation” would not include certain corporations created or
organized in Puerto Rico or a possession of the United States or under the laws of
Puerto Rico or a possession of the United States.
Subsec. (d). Pub. L. 99-514, 1224(a), redesignated subsec. (d) as (c).
1976--Subsec. (c) Pub. L. 94-455 struck out “or his delegate"
after “Secretary”.
EFFECTIVE DATE OF 2018 AMENDMENTS
Amendment by Pub. L. 115-141, Div. U, Sec. 401(a)(164), effective March 23, 2018.
EFFECTIVE DATE OF 2017 AMENDMENTS
Amendment by section 14101(e)(2) of Pub. L. 115-97 effective for distributions made after December 31, 2017.
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendments by section 908(c)(5)
of Pub. L. 108-357 applicable to taxable years ending after the date of the enactment of this Act
[Enacted: Oct. 22, 2004].
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 1221(b)(3)(C) of Pub. L. 99-514 applicable to taxable years of foreign corporations beginning after Dec. 31, 1986,
except as otherwise provided, see section 1221(g) of Pub. L. 99-514, set out as a note under section 954 of this title.
Amendment by section 1222(a) of Pub. L. 99-514 applicable to taxable years of foreign corporations beginning after Dec. 31, 1986,
except that for purposes of applying sections 951(a)(1)(B) and 956 of this title,
amendment effective Aug. 16, 1986, with transitional rule and special rule for beneficiary
of trust, see section 1222(c) of Pub. L. 99-514, set out as a note under section 552 of this title.
Section 1224(b) of Pub. L. 99-514 provided that:
“(1) In general.--The amendment made by subsection
(a) [amending this section] shall apply to taxable years of foreign corporations beginning
after December 31, 1986; except that for purposes of applying sections 951(a)(1)(B)
and 956 of the Internal Revenue Code of 1986, such amendments shall take effect on August 16, 1986.
“(2) Transitional rule.--In the case of any corporation treated as a controlled foreign
corporation by reason of the amendment made by subsection (a), property acquired before
August 16, 1986, shall not be taken into account under section 956(b) of the Internal Revenue Code of 1986.”
Amendment by section 1273(a) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions
and qualifications, see section 1277 of Pub. L. 99-514, set out as a note under section 931 of this title.
