I.R.C. § 959(a) Exclusion From Gross Income Of United States Persons —
For purposes of this chapter, the earnings and profits
of a foreign corporation attributable to amounts which are, or have been, included
in the gross income of a United States shareholder under section 951(a) shall not, when—
I.R.C. § 959(a)(1) —
such amounts are distributed to, or
I.R.C. § 959(a)(2) —
such amounts would, but for this subsection, be included under section 951(a)(1)(B) in the gross income of,
such shareholder (or any other United
States person who acquires from any person any portion of the interest of such United
States shareholder in such foreign corporation, but only to the extent of such portion,
and subject to such proof of the identity of such interest as the Secretary may by
regulations prescribe) directly or indirectly through a chain of ownership described
under section 958(a), be again included in the gross income of such United States shareholder
(or of such other United States person). The rules of subsection
(c) shall apply for purposes of paragraph (1) of this subsection and the rules of
subsection (f) shall apply for purposes of paragraph
(2) of this subsection.
I.R.C. § 959(b) Exclusion From Gross Income Of Certain Foreign Subsidiaries —
For purposes of section 951(a), the earnings and profits
of a controlled foreign corporation attributable to amounts which are, or have been,
included in the gross income of a United States shareholder under section 951(a), shall not, when distributed through a chain of ownership described under section
958(a), be also included in the gross income of another controlled foreign corporation
in such chain for purposes of the application of section 951(a) to such other controlled foreign corporation with respect to such United States
shareholder
(or to any other United States shareholder who acquires from any person any portion
of the interest of such United States shareholder
in the controlled foreign corporation, but only to the extent of such portion, and
subject to such proof of identity of such interest as the Secretary may prescribe
by regulations).
I.R.C. § 959(c) Allocation Of Distributions —
For purposes of subsections (a) and (b), section 316(a) shall be applied by
applying paragraph (2) thereof, and then paragraph (1) thereof—
I.R.C. § 959(c)(1) —
first to the aggregate of—
I.R.C. § 959(c)(1)(A) —
earnings and profits attributable to amounts included in gross income under section
951(a)(1)(B) (or which would have been included except for subsection (a)(2) of this section),
and
I.R.C. § 959(c)(1)(B) —
earnings and profits attributable to amounts included in gross income under section
951(a)(1)(C) (or which would have been included except for subsection (a)(3) of this section),
with any distribution being allocated between earnings and profits described in subparagraph
(A) and earnings and profits described in subparagraph (B) proportionately on the
basis of the respective amounts of such earnings and profits,
I.R.C. § 959(c)(2) —
then to earnings and profits attributable to amounts included in gross income under
section 951(a)(1)(A) (but reduced by amounts not included under subparagraph (B) or (C) of section 951(a)(1) because of the exclusions in paragraphs (2) and (3) of subsection (a) of this section),
and
I.R.C. § 959(c)(3) —
then to other earnings and profits.
References in this subsection to section 951(a)(1)(C) and subsection (a)(3) shall be treated as references to such provisions as in effect
on the day before the date of the enactment of the Small Business Job Protection
Act of 1996.
I.R.C. § 959(d) Distributions Excluded From Gross Income Not To Be Treated As Dividends —
Any distribution excluded from gross
income under subsection (a) shall be treated, for purposes of this
chapter, as a distribution which is not a dividend; except that such
distributions shall immediately reduce earnings and profits.
I.R.C. § 959(e) Coordination With Amounts Previously Taxed Under Section 1248 —
For purposes of this section and section 960(c), any amount included in the gross income of any person as a dividend by reason of
subsection (a) or (f) of section 1248 shall be treated as an amount included in the gross income of such person (or, in
any case to which section 1248(e) applies,
of the domestic corporation referred to in section 1248(e)(2)) under section 951(a)(1)(A).
I.R.C. § 959(f) Allocation Rules For Certain Inclusions
I.R.C. § 959(f)(1) In General —
For purposes of this section, amounts that would be included under subparagraph
(B) of section 951(a)(1) (determined without regard to this section) shall be treated as attributable first
to earnings described in subsection (c)(2), and then to earnings described in subsection
(c)(3).
I.R.C. § 959(f)(2) Treatment Of Distributions —
In applying this section, actual distributions shall be taken into account before
amounts that would be included under section 951(a)(1)(B)
(determined without regard to this section).
(Added Pub. L. 87-834, 12(a), Oct. 16, 1962, 76 Stat. 1019, and amended Pub. L. 94-455, title XIX, 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98-369, div. A, title I, 133(b)(1), July 18, 1984, 98 Stat. 668; Pub. L. 99-514, title XII, 1226(b), Oct. 22, 1986, 100 Stat. 2560; Pub. L. 100-647, title I, 1012(bb)(7)(A), Nov. 10, 1988, 102 Stat. 3536; Pub. L. 103-66, title XIII, Sec. 13231, Aug. 10, 1993, 107 Stat. 312; Pub. L. 104-188, title I, Aug. 20, 1996, 110 Stat. 1755; Pub. L. 115-97, title I, Sec. 14301(c)(32), (33), Dec. 22, 2017, 131 Stat. 2054.)
BACKGROUND NOTES
AMENDMENTS
2017 —Subsec. (d). Pub. L. 115-97, Sec. 14301(c)(32), amended subsec. (d) by substituting “Any” for “Except as provided in section 960(a)(3),
any”.
Subsec. (e). Pub. L. 115-97, Sec. 14301(c)(33), amended subsec. (e) by substituting “section 960(c)” for “section 960(b)”.
1996--Subsec. (a). Pub. L. 104-188, sec. 1501(b), added “or” at the end of par. (1); struck “or” at the end of par.
(2); and struck par. (3). Before being struck, par. (3) read as follows:
“(3) such amounts would, but for this subsection, be included under section 951(a)(1)(C)
in the gross income of,”
Subsec. (a). Pub. L. 104-188, sec. 1501(b), substituted “paragraph (2)” for
“paragraphs (2) and (3)” in the last sentence.
Subsec. (c). Pub. L. 104-188, sec. 1501(b), added the flush sentence.
Subsec. (f)(1). Pub. L. 104-188, sec. 1501(b), amended par. (1). Before amendment, par. (1) read as follows:
“(1) In general. --For purposes of this section --
(A) amounts that would be included under subparagraph (B) of section 951(a)(1) (determined
without regard to this section) shall be treated as attributable first to earnings
described in subsection (c)(2), and then to earnings described in subsection (c)(3),
and
(B) amounts that would be included under subparagraph (C) of section 951(a)(1) (determined
without regard to this section) shall be treated as attributable first to earnings
described in subsection (c)(2) to the extent the earnings so described were accumulated
in taxable years beginning after September 30, 1993, and then to earnings described
in subsection (c)(3).”
Subsec. (f)(2). Pub. L. 104-188, sec. 1501(b), substituted “section 951(a)(1)(B)"
for “subparagraphs (B) and (C) of section 951(a)(1)(B)”.
1993—Subsec. (a). Pub. L. 103-66, Sec. 13231(c)(1), amended subsec. (a) by striking “or” at the end of par.
(1), by adding “or” at the end of par. (2) and by adding par. (3).
Subsec. (a). Pub. L. 103-66, Sec. 13231(c)(2)(A), amended subsec. (a) by adding the sentence at the end.
Subsec. (a). Pub. L. 103-66, Sec. 13231(c)(4)(A), amended subsec. (a) by substituting “earnings and profits” for “earnings and profits
for a taxable year”.
Subsec. (b). Pub. L. 103-66, Sec. 13231(c)(4)(A), amended subsec. (b) by substituting “earnings and profits” for “earnings and profits
for a taxable year”.
Subsec. (c)(1). Pub. L. 103-66, Sec. 13231(c)(2)(C), amended par. (1). Before amendment, it read as follows:
“(1)
first to earnings and profits attributable to amounts included in
gross income under section 951(a)(1)(B) (or which would have been included except
for subsection (a)(2) of this section),”.
Subsec. (c)(2). Pub. L. 103-66, Sec. 13231(c)(4)(B), amended par. (2). Before amendment, it read as follows:
“(2) then to earnings and profits attributable to amounts included in gross income
under section 951(a)(1)(A) (but reduced by amounts not included under section 951(a)(1)(B)
because of the exclusion in subsection (a)(2) of this section), and”.
Subsec. (f). Pub. L. 103-66, Sec. 13231(c)(2)(B), added subsec. (f).
1988--Subsec. (e). Pub. L. 100-647 substituted “such person
(or, in any case to which section 1248(e) applies, of the domestic corporation referred
to in section 1248(e)(2)) under” for “such person under”.
1986--Subsec. (d). Pub. L. 99-514 inserted “;except that such distributions shall immediately reduce earnings and profits”.
1984--Subsec. (e). Pub. L. 98-369 added subsec. (e).
1976--Subsecs. (a), (b). Pub. L. 94-455 struck out “or his delegate"
after “Secretary”.
EFFECTIVE DATE OF 2017 AMENDMENTS
Section 14301(c) of Pub. L. 115-97 provided that: “The amendments made by this section shall apply to taxable years
of foreign corporations beginning after December 31, 2017, and for taxable years of
United States shareholders within which or with which such taxable years of foreign
corporations end.”
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1501(d) of Pub. L. 104-188 provided that: “The amendments made by this section shall apply 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.”
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13231 of Pub. L. 103-66 provided that: “The amendments made by this section shall apply to taxable years
of foreign corporations beginning after September 30, 1993, and to taxable years of
United States shareholders in which or with which such taxable years of foreign corporations
end.”
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1012(bb)(7)(B) of Pub. L. 100-647 provided that: “The amendment made by subparagraph
(A) [amending this section] shall apply in the case of transactions to which section
1248(e) of the 1986 Code applies and which occur after December 31, 1986.”
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1226(c)(2) of Pub. L. 99-514 provided that: “The amendment made by subsection
(b) [amending this section] shall apply to distributions after the date of the enactment
of this Act [Oct. 22, 1986].”
EFFECTIVE DATE OF 1984 AMENDMENT
Section 133(d)(2), (3) of Pub. L. 98-369, as amended by Pub. L. 99-514, 2, title XVIII, 1810(i)(2), Oct. 22, 1986, 100 Stat. 2095, 2829; Pub. L. 100-647, title I, 1018(g)(2), Nov. 10, 1988, 102 Stat. 3582, provided that:
“(2) Subsections (b) and (c).--Except as provided in paragraph (3), the amendments
made by subsections (b) and (c) [amending sections 959 and 1248 of this title] shall
apply with respect to transactions to which subsection (a) or (f) of section 1248 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] applies occurring after the date of the enactment of this Act [July 18, 1984].
“(3) Election of earlier date for certain transactions.--
“(A) In general.--If the appropriate election is made under subparagraph (B), the
amendments made by subsection
(b) [amending sections 959 and 1248 of this title] shall apply with respect to transactions
to which subsection (a) or (f) of section 1248 of such Code applies occurring after
October 9, 1975.
“(B) Election.--
“(i) Subparagraph (A) shall apply with respect to transactions to which subsection
(a) of section 1248 of such Code applies if the foreign corporation described in such
subsection (or its successor in interest) so elects.
“(ii) Subparagraph (A) shall apply with respect to transactions to which subsection
(f) of section 1248 of such Code applies if the domestic corporation described in
section 1248(f) (1) of such Code (or its successor) so elects.
“(iii) Any election under clause
(i) or (ii) shall be made not later than the date which is 1 year after the date of
the enactment of the Tax Reform Act of 1986 [Oct. 22, 1986] and shall be made in such
manner as the Secretary of the Treasury or his delegate shall prescribe.”
