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.
(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
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.
(c) Records and accounts of United States shareholders
(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.
(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.
(d) Treatment of certain branches
(1) In general
For purposes of this chapter, section
6046, and such other provisions as may be specified in regulations—
(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
(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.
(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—
(A)separate books and accounts are maintained for such branch,
(B)the principal place of business of such branch is in such foreign country,
(C)such branch would be taxable under subchapter L if it were a separate domestic corporation, and
(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.
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.
(e) Gain on certain stock sales by controlled foreign corporations treated as dividends
(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.
(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).
(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.
The Foreign Corrupt Practices Act of 1977, referred to in subsec. (a), is title I of Pub. L. 95–213, Dec. 19, 1977, 91 Stat. 1494, as amended, which enacted sections
78dd–3 of Title
15, Commerce and Trade, and amended sections
78ff of Title
15. For complete classification of this Act to the Code, see Short Title of 1977 Amendment note set out under section
78a of Title
15 and Tables.
1982—Subsec. (a). Pub. L. 97–248inserted 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.
1976—Subsec. (a). Pub. L. 94–455, §§ 1065(b),
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.
Pub. L. 105–34, title XI, § 1111(c)(1),Aug. 5, 1997, 111 Stat. 969, provided that: “The amendment made by subsection (a) [amending this section] shall apply to gain recognized on transactions occurring after the date of the enactment of this Act [Aug. 5, 1997].”
Effective Date of 1988 Amendment
Pub. L. 100–647, title VI, § 6129(b),Nov. 10, 1988, 102 Stat. 3716, 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. 97–248applicable to payments made after Sept. 3, 1982, see section 288(c) ofPub. L. 97–248, set out as a note under section
162 of this title.
Effective Date of 1981 Amendment
Amendment by Pub. L. 97–34applicable to property placed in service after Dec. 31, 1980, in taxable years ending after that date, see section 209(a) ofPub. 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) ofPub. L. 94–455applicable to payments described in section
162(c) of this title made more than 30 days after Oct. 4, 1976, see section 1066(b) ofPub. L. 94–455, set out as a note under section
952 of this title.
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
An empty table indicates that we see no relevant changes listed in the classification tables. If you suspect that our system may be missing something, please double-check with the Office of the Law Revision Counsel.
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