I.R.C. § 964(a) Earnings And Profits —
Except as provided in section 312(k)(4), for purposes of this subpart, the earnings and profits of any foreign corporation,
and the deficit in earnings and profits of any foreign corporation, for any taxable
year shall be determined according to rules substantially similar to those applicable
to domestic corporations, under regulations prescribed by the Secretary. In determining
such earnings and profits, or the deficit in such earnings and profits, the amount
of any illegal bribe, kickback, or other payment (within the meaning of section 162(c)) shall not be taken
into account to decrease such earnings and profits or to increase such deficit. The
payments referred to in the preceding sentence are payments which would be unlawful
under the Foreign Corrupt Practices Act of 1977 if the payor were a United States
person.
I.R.C. § 964(b) Blocked Foreign Income —
Under regulations prescribed by the Secretary, no part of the earnings and profits
of a controlled foreign corporation for any taxable year shall be included in earnings
and profits for purposes of sections 952 and
956, if it is established to the satisfaction of the Secretary that such part could
not have been distributed by the controlled foreign corporation to United States
shareholders who own (within the meaning of section
958(a)) stock of such controlled foreign corporation because of currency or other restrictions
or limitations imposed under the laws of any foreign
country.
I.R.C. § 964(c) Records And Accounts Of United States Shareholders
I.R.C. § 964(c)(1) Records And Accounts To Be Maintained —
The Secretary may by regulations require each person who is, or has been, a United
States shareholder of a controlled foreign corporation to maintain such records and
accounts as may be prescribed by such regulations as necessary to carry out the provisions
of this subpart and subpart G.
I.R.C. § 964(c)(2) Two Or More Persons Required To Maintain Or Furnish The Same Records And Accounts
With Respect To The Same Foreign Corporation —
Where, but for this paragraph, two or more United States persons would be required
to maintain or furnish the same records and accounts as may by regulations be required
under paragraph (1)
with respect to the same controlled foreign corporation for the same period, the
Secretary may by regulations provide that the maintenance or furnishing of such records
and accounts by only one such person shall satisfy the requirements of paragraph
(1) for such other persons.
I.R.C. § 964(d) Treatment Of Certain Branches
I.R.C. § 964(d)(1) In General —
For purposes of this chapter, section 6038, section 6046, and such other provisions as may be specified in regulations—
I.R.C. § 964(d)(1)(A) —
a qualified insurance branch of a controlled foreign corporation shall be treated
as a separate foreign corporation created under the laws of the foreign country with
respect to which such branch qualifies under paragraph (2), and
I.R.C. § 964(d)(1)(B) —
except as provided in regulations, any amount directly or indirectly transferred
or credited from such branch to one or more other accounts of such controlled foreign
corporation shall be treated as a dividend paid to such controlled foreign corporation.
I.R.C. § 964(d)(2) Qualified Insurance Branch —
For purposes of paragraph (1), the term “qualified insurance branch” means any branch
of a controlled foreign corporation which is licensed and predominantly engaged on
a permanent basis in the active conduct of an insurance business in a foreign country
if—
I.R.C. § 964(d)(2)(A) —
separate books and accounts are maintained for such branch,
I.R.C. § 964(d)(2)(B) —
the principal place of business of such branch is in such foreign country,
I.R.C. § 964(d)(2)(C) —
such branch would be taxable under subchapter L if it were a separate domestic corporation,
and
I.R.C. § 964(d)(2)(D) —
an election under this paragraph applies to such branch.
An election under this paragraph shall apply to the
taxable year for which made and all subsequent taxable years unless
revoked with the consent of the Secretary.
I.R.C. § 964(d)(3) Regulations —
The Secretary shall prescribe such regulations as may be necessary or appropriate
to carry out the purposes of this subsection.
I.R.C. § 964(e) Gain On Certain Stock Sales By Controlled Foreign Corporations Treated As Dividends
I.R.C. § 964(e)(1) In General —
If a controlled foreign corporation sells or exchanges stock in any other foreign
corporation, gain recognized on such sale or exchange shall be included in the gross
income of such controlled foreign corporation as a dividend to the same extent that
it would have been so included under section 1248(a) if such controlled foreign corporation were a United States person. For purposes
of determining the amount which would have been so includible, the determination
of whether such other foreign corporation was a controlled foreign corporation shall
be made without regard to the preceding sentence.
I.R.C. § 964(e)(2) Same Country Exception Not Applicable —
Clause (i) of section 954(c)(3)(A) shall not apply to any amount treated as a dividend by reason of paragraph
(1).
I.R.C. § 964(e)(3) Clarification Of Deemed Sales —
For purposes of this subsection, a controlled foreign corporation shall be treated
as having sold or exchanged any stock if, under any provision of this subtitle, such
controlled foreign corporation is treated as having gain from the sale or exchange
of such stock.
I.R.C. § 964(e)(4) Coordination With Dividends Received Deduction
I.R.C. § 964(e)(4)(A) In General —
If, for any taxable year of a controlled foreign corporation beginning after December
31, 2017, any amount is treated as a dividend under paragraph (1) by reason of a sale
or exchange by the controlled foreign corporation of stock in another foreign corporation
held for 1 year or more, then, notwithstanding any other provision of this title—
I.R.C. § 964(e)(4)(A)(i) —
the foreign-source portion of such dividend shall be treated for purposes of section
951(a)(1)(A) as subpart F income of the selling controlled foreign corporation for such taxable
year,
I.R.C. § 964(e)(4)(A)(ii) —
a United States shareholder with respect to the selling controlled foreign corporation
shall include in gross income for the taxable year of the shareholder with or within
which such taxable year of the controlled foreign corporation ends an amount equal
to the shareholder's pro rata share (determined in the same manner as under section
951(a)(2))
of the amount treated as subpart F income under clause (i), and
I.R.C. § 964(e)(4)(A)(iii) —
the deduction under section 245A(a) shall be allowable to the United States shareholder with respect to the subpart F
income included in gross income under clause (ii) in the same manner as if such subpart
F income were a dividend received by the shareholder from the selling controlled foreign
corporation.
I.R.C. § 964(e)(4)(B) Application Of Basis Or Similar Adjustment —
For purposes of this title, in the case of a sale or exchange by a controlled foreign
corporation of stock in another foreign corporation in a taxable year of the selling
controlled foreign corporation beginning after December 31, 2017, rules similar to
the rules of section 961(d) shall apply.
I.R.C. § 964(e)(4)(C) Foreign-Source Portion —
For purposes of this paragraph, the foreign-source portion of any amount treated as
a dividend under paragraph (1) shall be determined in the same manner as under section
245A(c).
(Added Pub. L. 87-834, 12(a), Oct. 16, 1962, 76 Stat. 1027, and amended Pub. L. 91-172, title IV, 442(b)(1), Dec. 30, 1969, 83 Stat. 628; Pub. L. 94-455, title X, 1065(b), title XIX, 1901(b)(32)(B)(iii), 1906(b)(13)(A), Oct. 4, 1976,
90 Stat. 1654, 1800, 1834; Pub. L. 97-34, title II, 206(c), Aug. 13, 1981, 95 Stat. 225; Pub. L. 97-248, title II, 288(b)(2), Sept. 3, 1982, 96 Stat. 571; Pub. L. 100-647, title VI, 6129(a), Nov. 10, 1988, 102 Stat. 3716; Pub. L. 105-34, title XI, Sec. 1111(a), Aug. 5, 1997, 111 Stat 788; Pub. L. 115-97, title I, Sec. 14102(c)(1), 14212(b)(4), Dec. 22, 2017, 131 Stat. 2054.)
BACKGROUND NOTES
AMENDMENTS
2017—Subsec. (b). Pub. L. 115-97, Sec. 14212(b)(4), amended subsec. (b) by striking “, 55,”.
Subsec. (e)(4). Pub. L. 115-97, Sec. 14102(c)(1), added par. (4).
1997--Subsec. (e). Pub. L. 105-34, Sec. 1111(a), added subsec. (e).
1988--Subsec. (d). Pub. L. 100-647 added subsec. (d).
1982--Subsec. (a). Pub. L. 97-248 inserted provision that payments referred to in sentence beginning “In determining
such earnings and profits” are payments which would be unlawful under the Foreign
Corrupt Practices Act of 1977 if the payor were a United States person.
1981--Subsec. (a). Pub. L. 97-34 substituted “section 312(k)(4)"
for “section 312(k)(3)”.
1976--Subsec. (a). Pub. L. 94-455, 1065(b), 1901(b)(32)(B)(ii), 1906(b)(13)(A), struck out “or his delegate” after
“Secretary”, inserted second sentence, and substituted “312(k)(3)” for “312(m)(3)”
after
“provided in section”.
Subsecs. (b), (c)(1), (2). Pub. L. 94-455, 1906(b)(13)(A), struck out “or his delegate"
after “Secretary” whenever appearing.
1969--Subsec. (a). Pub. L. 91-172 inserted reference to the exception provided for in section 312(m)(3).
EFFECTIVE DATE OF 2017 AMENDMENTS
Amendment by Section 14102(c)(1) of Pub. L. 115-97 effective for sales or exchanges after December 31, 2017.
Amendment by Section 14212(b)(4) of Pub. L. 115-97 effective for taxable years of foreign corporations beginning after December 31,
2017, and to taxable years of United States shareholders in which or with which such
taxable years of foreign corporations end.
EFFECTIVE DATE OF 1997 AMENDMENTS
Section 1111(c)(1) of Pub. L. 105-34 provided that:
“(1) The amendment made by subsection (a) shall apply to gain recognized on transactions
occurring after the date of the enactment of this Act”. Section 1111(c)(2) provided
the following exception:
“(2) The amendment made by subsection (b) shall apply to distributions after the date
of the enactment of this Act”.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 6129(b) of Pub. L. 100-647 provided that: “The amendment made by subsection
(a) [amending this section] shall apply to taxable years of foreign corporations beginning
after December 31, 1988.”
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by Pub. L. 97-248 applicable to payments made after Sept. 3, 1982, see section 288(c) of Pub. L. 97-248, set out as a note under section 162 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable to property placed in service after Dec. 31, 1980, in taxable years ending
after that date, see section 209(a) of Pub. L. 97-34, set out as an Effective Date note under section 168 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1065(b) of Pub. L. 94-455 applicable to payments described in section 162(c) of this title made more than 30
days after Oct. 4, 1976, see section 1066(b) of Pub. L. 94-455, set out as a note under section 952 of this title.
