Amendments
2020—Subsec. (c)(6)(C). Pub. L. 116–260 substituted “January 1, 2026” for “January 1, 2021”.
2019—Subsec. (c)(6)(C). Pub. L. 116–94 substituted “January 1, 2021” for “January 1, 2020”.
2017—Subsec. (a)(5). Pub. L. 115–97, § 14211(a), struck out par. (5) which read as follows: “the foreign base company oil related income for the taxable year (determined under subsection (g) and reduced as provided in subsection (b)(5)).”
Subsec. (b)(4). Pub. L. 115–97, § 14211(b)(2)(A), struck out at end “The preceding sentence shall not apply to foreign base company oil-related income described in subsection (a)(5).”
Subsec. (b)(5). Pub. L. 115–97, § 14211(b)(2)(B), which directed substitution of “and the foreign base company services income” for “the foreign base company services income, and the foreign base company oil related income”, was executed by making the substitution for “the foreign base company services income,, and the foreign base company oil related income” to reflect the probable intent of Congress.
Subsec. (b)(6). Pub. L. 115–97, § 14211(b)(2)(C), struck out par. (6). Text read as follows: “Income of a corporation which is foreign base company oil related income shall not be considered foreign base company income of such corporation under paragraph (2), or (3) of subsection (a).”
Subsec. (g). Pub. L. 115–97, § 14211(b)(3), struck out subsec. (g) which related to foreign base company oil related income.
Subsec. (i)(5)(B). Pub. L. 115–97, § 13517(b)(5), substituted “shall apply,” for “shall be substituted for the prevailing State assumed interest rate,”.
2015—Subsec. (c)(6)(C). Pub. L. 114–113, § 144(a), substituted “January 1, 2020” for “January 1, 2015”.
Subsec. (h)(9). Pub. L. 114–113, § 128(b), struck out par. (9). Text read as follows: “This subsection, subsection (c)(2)(C)(ii), and the last sentence of subsection (e)(2) shall apply only to taxable years of a foreign corporation beginning after December 31, 1998, and before January 1, 2015, and to taxable years of United States shareholders with or within which any such taxable year of such foreign corporation ends.”
2014—Subsec. (c)(6)(C). Pub. L. 113–295, § 135(a), substituted “January 1, 2015” for “January 1, 2014”.
Subsec. (h)(9). Pub. L. 113–295, § 134(b), substituted “January 1, 2015” for “January 1, 2014”.
2013—Subsec. (c)(6)(C). Pub. L. 112–240, § 323(a), substituted “January 1, 2014” for “January 1, 2012”.
Subsec. (h)(9). Pub. L. 112–240, § 322(b), substituted “January 1, 2014” for “January 1, 2012”.
2010—Subsec. (c)(6)(C). Pub. L. 111–312, § 751(a), substituted “January 1, 2012” for “January 1, 2010”.
Subsec. (h)(9). Pub. L. 111–312, § 750(a), substituted “January 1, 2012” for “January 1, 2010”.
2008—Subsec. (c)(6)(C). Pub. L. 110–343, § 304(a), substituted “January 1, 2010” for “January 1, 2009”.
Subsec. (h)(9). Pub. L. 110–343, § 303(b), substituted “January 1, 2010” for “January 1, 2009”.
2007—Subsec. (c)(1)(F). Pub. L. 110–172, § 11(a)(19), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Any item of income, gain, deduction, or loss from a notional principal contract entered into for purposes of hedging any item described in any preceding subparagraph shall not be taken into account for purposes of this subparagraph but shall be taken into account under such other subparagraph.”
Subsec. (c)(1)(H), (I). Pub. L. 110–172, § 11(a)(20), redesignated subpar. (I) as (H).
Subsec. (c)(2)(C)(ii). Pub. L. 110–172, § 11(g)(15)(B), substituted “section 956(c)(2)(I)” for “section 956(c)(2)(J)”.
Subsec. (c)(6)(B), (C). Pub. L. 110–172, § 4(a), added subpar. (B) and redesignated former subpar. (B) as (C).
2006—Subsec. (c)(6). Pub. L. 109–222, § 103(b)(1), added par.(6).
Subsec. (c)(6)(A). Pub. L. 109–432, in first sentence, substituted “which is neither subpart F income nor income treated as effectively connected with the conduct of a trade or business in the United States” for “which is not subpart F income” and, in last sentence, substituted “The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out this paragraph, including such regulations as may be necessary or appropriate to prevent the abuse of the purposes of this paragraph” for “The Secretary shall prescribe such regulations as may be appropriate to prevent the abuse of the purposes of this paragraph”.
Subsec. (h)(9). Pub. L. 109–222, § 103(a)(2), substituted “January 1, 2009” for “January 1, 2007”.
2005—Subsec. (c)(1)(C)(i). Pub. L. 109–135, § 412(ll), substituted “paragraph (5)(A)” for “paragraph (4)(A)”.
Subsec. (c)(1)(F). Pub. L. 109–135, § 412(mm), struck out “Net income from notional principal contracts.” before “Any item of income”.
Subsec. (c)(4)(B). Pub. L. 109–135, § 403(m), inserted at end “If a controlled foreign corporation is treated as owning a capital or profits interest in a partnership under constructive ownership rules similar to the rules of section 958(b), the controlled foreign corporation shall be treated as owning such interest directly for purposes of this subparagraph.”
2004—Subsec. (a)(4). Pub. L. 108–357, § 415(a)(1), struck out par. (4) which read as follows: “the foreign base company shipping income for the taxable year (determined under subsection (f) and reduced as provided in subsection (b)(5)), and”.
Subsec. (b)(5). Pub. L. 108–357, § 415(c)(2)(A), struck out “the foreign base company shipping income,” after “the foreign base company services income,,”.
Subsec. (b)(6) to (8). Pub. L. 108–357, § 415(c)(2)(B), (C), redesignated par. (8) as (6) and struck out former pars. (6) and (7) which set forth special rules and special exclusion for foreign base company shipping income.
Subsec. (c)(1)(C)(i), (ii). Pub. L. 108–357, § 414(a), amended cls. (i) and (ii) generally. Prior to amendment, cls. (i) and (ii) read as follows:
“(i) arise out of bona fide hedging transactions reasonably necessary to the conduct of any business by a producer, processor, merchant, or handler of a commodity in the manner in which such business is customarily and usually conducted by others,
“(ii) are active business gains or losses from the sale of commodities, but only if substantially all of the controlled foreign corporation’s business is as an active producer, processor, merchant, or handler of commodities, or”.
Subsec. (c)(1)(I). Pub. L. 108–357, § 413(b)(2), added subpar. (I).
Subsec. (c)(2)(A). Pub. L. 108–357, § 415(b), inserted at end “For purposes of the preceding sentence, rents derived from leasing an aircraft or vessel in foreign commerce shall not fail to be treated as derived in the active conduct of a trade or business if, as determined under regulations prescribed by the Secretary, the active leasing expenses are not less than 10 percent of the profit on the lease.”
Subsec. (c)(2)(C)(i). Pub. L. 108–357, § 414(c), inserted “and transactions involving physical settlement” after “(including hedging transactions”.
Subsec. (c)(4). Pub. L. 108–357, § 412(a), added par. (4).
Subsec. (c)(5). Pub. L. 108–357, § 414(b), added par. (5).
Subsec. (f). Pub. L. 108–357, § 415(a)(2), struck out subsec. (f) which defined “foreign base company shipping income” for purposes of subsec. (a)(4).
Subsec. (h)(3)(E). Pub. L. 108–357, § 416(a), added subpar. (E).
2002—Subsec. (c)(1)(B). Pub. L. 107–147, § 417(24)(B)(ii), which directed the amendment of Pub. L. 106–170, § 532(c)(2)(Q), was executed to that section as if the amendment were retroactive to the effective date of the amendment by Pub. L. 106–170 to reflect the probable intent of Congress. See 1999 Amendment note below.
Subsec. (h)(9). Pub. L. 107–147, § 614(a)(2), substituted “January 1, 2007” for “January 1, 2002”.
Subsec. (i)(4)(B). Pub. L. 107–147, § 614(b)(1), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “The amount of the reserve of a qualifying insurance company or qualifying insurance company branch for any life insurance or annuity contract shall be equal to the greater of—
“(i) the net surrender value of such contract (as defined in section 807(e)(1)(A)), or
“(ii) the reserve determined under paragraph (5).”
1999—Subsec. (c)(1)(B). Pub. L. 106–170, § 532(c)(2)(Q), as amended by Pub. L. 107–147, § 417(24)(B)(ii), substituted “section 1221(a)(1)” for “section 1221(1)” in concluding provisions.
Subsec. (h)(9). Pub. L. 106–170, § 503(a), substituted “taxable years” for “the first taxable year”, “January 1, 2002” for “January 1, 2000”, and “within which any such” for “within which such”.
1998—Subsec. (c)(1)(B)(i). Pub. L. 105–277, § 1005(e), inserted “other than property which gives rise to income not treated as foreign personal holding company income by reason of subsection (h) or (i) for the taxable year” before comma at end.
Subsec. (c)(2)(C). Pub. L. 105–277, § 1005(c), amended heading and text of subpar. (C), generally. Prior to amendment, text read as follows: “Except as provided in subparagraph (A), (E), or (G) of paragraph (1) or by regulations, in the case of a regular dealer in property (within the meaning of paragraph (1)(B)), forward contracts, option contracts, or similar financial instruments (including notional principal contracts and all instruments referenced to commodities), there shall not be taken into account in computing foreign personal holding income any item of income, gain, deduction, or loss from any transaction (including hedging transactions) entered into in the ordinary course of such dealer’s trade or business as such a dealer.”
Subsec. (e)(2). Pub. L. 105–277, § 1005(d), inserted “or” at end of subpar. (A), substituted a period for “, or” at end of subpar. (B), and inserted concluding provisions.
Subsec. (e)(2)(C). Pub. L. 105–277, § 4003(j), substituted “(h)(9)” for “(h)(8)”.
Pub. L. 105–277, § 1005(d), struck out subpar. (C) which read as follows: “in the case of taxable years described in subsection (h)(9), the active conduct by a controlled foreign corporation of a banking, financing, insurance, or similar business, but only if the corporation is predominantly engaged in the active conduct of such business (within the meaning of subsection (h)(3)) or is a qualifying insurance company.”
Subsec. (h). Pub. L. 105–277, § 1005(a), amended heading and text of subsec. (h) generally. Prior to amendment, text consisted of pars. (1) to (9) relating to special rule for income derived in active conduct of banking, financing, or similar businesses, principles for determining applicable income, meaning of “predominantly engaged” for purposes of the special rule, methods of determining unearned premiums and reserves, definitions of certain terms for purposes of subsec. (h), anti-abuse rules, coordination with section 953 of this title, and taxable year applicability of subsec. (h).
Subsec. (i). Pub. L. 105–277, § 1005(b)(2), added subsec. (i).
1997—Subsec. (c)(1)(B). Pub. L. 105–34, § 1051(a)(2), in concluding provisions, struck out “In the case of any regular dealer in property, gains and losses from the sale or exchange of any such property or arising out of bona fide hedging transactions reasonably necessary to the conduct of the business of being a dealer in such property shall not be taken into account under this subparagraph.” before “Gains and losses” and “also” after “section 1221(1)”.
Subsec. (c)(1)(F), (G). Pub. L. 105–34, § 1051(a)(1), added subpars. (F) and (G).
Subsec. (c)(2)(C). Pub. L. 105–34, § 1051(b), added subpar. (C).
Subsec. (e)(2)(C). Pub. L. 105–34, § 1175(b), added subpar. (C).
Subsec. (h). Pub. L. 105–34, § 1175(a), added subsec. (h).
1996—Subsec. (c)(3)(A)(i). Pub. L. 104–188 amended directory language of Pub. L. 101–239, § 7811(i)(3)(A). See 1989 Amendment note below.
1993—Subsec. (b)(8). Pub. L. 103–66, § 13235(a)(3)(B), struck out “(1),” after “such corporation under paragraph”.
Subsec. (c)(3)(C). Pub. L. 103–66, § 13233(a)(1), added subpar. (C).
Subsec. (d)(4). Pub. L. 103–66, § 13239(d), added par. (4).
Subsec. (f). Pub. L. 103–66, § 13235(b), inserted at end of concluding provisions “Except as provided in paragraph (1), such term shall not include any dividend or interest income which is foreign personal holding company income (as defined in subsection (c)).”
Subsec. (g)(1). Pub. L. 103–66, § 13235(a)(3)(A), inserted at end “Such term shall not include any foreign personal holding company income (as defined in subsection (c)).”
1989—Subsec. (c)(3)(A). Pub. L. 101–239, § 7811(i)(3)(C), inserted at end “To the extent provided in regulations, payments made by a partnership with 1 or more corporate partners shall be treated as made by such corporate partners in proportion to their respective interests in the partnership.”
Subsec. (c)(3)(A)(i). Pub. L. 101–239, § 7811(i)(3)(A), as amended by Pub. L. 104–188, substituted “is a corporation created” for “is created” after “person which (I)”.
Subsec. (c)(3)(A)(ii). Pub. L. 101–239, § 7811(i)(3)(B), substituted “from a corporation which is a related person” for “from a related person”.
1988—Subsec. (b)(6), (7). Pub. L. 100–647, § 1012(i)(12), struck out “(determined without regard to the exclusion under paragraph (2) of this subsection)” after “paragraph (4) of subsection (a)”.
Subsec. (c)(1)(B). Pub. L. 100–647, § 1012(i)(18), (20), added cl. (ii), redesignated former cl. (ii) as (iii), added closing provisions, and struck out former closing provisions which read as follows: “This subparagraph shall not apply to gain from the sale or exchange of any property which, in the hands of the taxpayer, is property described in section 1221(1) or to gain from the sale or exchange of any property by a regular dealer in such property.”
Subsec. (c)(3)(B). Pub. L. 100–647, § 1012(i)(25)(B), inserted before period at end “or creates (or increases) a deficit which under section 952(c) may reduce the subpart F income of the payor or another controlled foreign corporation”.
Subsec. (d)(3). Pub. L. 100–647, § 1012(i)(14)(A), substituted “more than 50 percent” for “50 percent or more” in last two sentences.
Subsec. (e)(3). Pub. L. 100–647, § 1018(u)(38), related to execution of amendment by Pub. L. 99–514, § 1221(b)(3)(B), see 1986 Amendment note below.
1986—Subsec. (a)(5). Pub. L. 99–514, § 1221(c)(3)(A)(ii), substituted “determined under subsection (g)” for “determined under subsection (h)”.
Subsec. (b)(2). Pub. L. 99–514, § 1221(c)(1), struck out par. (2), exclusion for reinvested shipping income, which read as follows: “For purposes of subsection (a), foreign base company income does not include foreign base company shipping income to the extent that the amount of such income does not exceed the increase for the taxable year in qualified investments in foreign base company shipping operations of the controlled foreign corporation (as determined under subsection (g)).”
Subsec. (b)(3). Pub. L. 99–514, § 1223(a), amended par. (3) generally. Prior to amendment, par. (3), special rule where foreign base company income is less than 10 percent or more than 70 percent of gross income, read as follows: “For purposes of subsection (a)—
“(A) If the foreign base company income (determined without regard to paragraphs (2) and (5)) is less than 10 percent of gross income, no part of the gross income of the taxable year shall be treated as foreign base company income.
“(B) If the foreign base company income (determined without regard to paragraphs (2) and (5)) exceeds 70 percent of gross income, the entire gross income of the taxable year shall, subject to the provisions of paragraphs (2), (4), and (5), be treated as foreign base company income.”
Subsec. (b)(4). Pub. L. 99–514, § 1221(d), amended par. (4) generally. Prior to amendment, par. (4), exception for foreign corporations not availed of to reduce taxes, read as follows: “For purposes of subsection (a), foreign base company income does not include any item of income received by a controlled foreign corporation if it is established to the satisfaction of the Secretary that neither—
“(A) the creation or organization of such controlled foreign corporation under the laws of the foreign country in which it is incorporated (or, in the case of a controlled foreign corporation which is an acquired corporation, the acquisition of such corporation created or organized under the laws of the foreign country in which it is incorporated), nor
“(B) the effecting of the transaction giving rise to such income through the controlled foreign corporation,
has as one of its significant purposes a substantial reduction of income, war profits, or excess profits or similar taxes. The preceding sentence shall not apply to foreign base company oil related income described in subsection (a)(5).”
Subsec. (b)(5). Pub. L. 99–514, § 1201(c), inserted at end “Except to the extent provided in regulations prescribed by the Secretary, any interest which is paid or accrued by the controlled foreign corporation to any United States shareholder in such corporation (or any controlled foreign corporation related to such a shareholder) shall be allocated first to foreign personal holding company income which is passive income (within the meaning of section 904(d)(2)) of such corporation to the extent thereof. The Secretary may, by regulations, provide that the preceding sentence shall apply also to interest paid or accrued to other persons.”
Subsec. (c). Pub. L. 99–514, § 1221(a)(1), amended subsec. (c) generally, substituting pars. (1) to (3) for former provisions which had provided: in par. (1), a reference to definition of “foreign personal holding company income” contained in section 553; in par. (2), that all rents would be included in “foreign personal holding company income” without regard to whether or not such rents constituted 50 percent or more of gross income; in par. (3), for exclusion of certain income derived in active conduct of a trade or business; and in par. (4), exclusion of certain income received from related persons from being included in “foreign personal holding company income”. See subsec. (c)(3).
Subsec. (d)(3). Pub. L. 99–514, § 1221(e), added subpars. (A) and (B) and concluding provisions and struck out former subpars. (A) to (C) and concluding provisions which read as follows:
“(A) such person is an individual, partnership, trust, or estate which controls the controlled foreign corporation;
“(B) such person is a corporation which controls, or is controlled by, the controlled foreign corporation; or
“(C) such person is a corporation which is controlled by the same person or persons which control the controlled foreign corporation.
For purposes of the preceding sentence, control means the ownership, directly or indirectly, of stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote. For purposes of this paragraph, the rules for determining ownership of stock prescribed by section 958 shall apply.”
Subsec. (e). Pub. L. 99–514, § 1810(k), in amending subsec. (e) generally, designated existing provisions as par. (1), added par. heading, and substituted subpar. (A) and (B) designations for prior par. (1) and (2) designations, struck out provisions relating to nonapplicability of preceding sentence to services performed in connection with manufactured or grown or extracted property, and provisions determining the place of performance of services for purposes of paragraph (2) with respect to any policy of insurance and reinsurance, and added pars. (2) and (3).
Subsec. (e)(3). Pub. L. 99–514, § 1221(b)(3)(B), and Pub. L. 100–647, § 1018(u)(38), struck out par. (3) as enacted by section 1810(k) of Pub. L. 99–514, which read as follows: “For purposes of paragraph (1), in the case of any services performed with respect to any policy of insurance or reinsurance with respect to which the primary insured is a related person (within the meaning of section 864(d)(4))—
“(A) such primary insured shall be treated as a related person for purposes of paragraph (1)(A) (whether or not the requirements of subsection (d)(3) are met),
“(B) such services shall be treated as performed in the country within which the insured hazards, risks, losses, or liabilities occur, and
“(C) except as otherwise provided in regulations by the Secretary, rules similar to the rules of section 953(b) shall be applied in determining the income from such services.”
Subsec. (f). Pub. L. 99–514, § 1221(c)(2), inserted last sentence.
Subsecs. (g), (h). Pub. L. 99–514, § 1221(c)(3)(A)(i), redesignated subsec. (h) as (g) and struck out former subsec. (g), increase in qualified investments in foreign base company shipping operations, which read as follows: “For purposes of subsection (b)(2), the increase for any taxable year in qualified investments in foreign base company shipping operations of any controlled foreign corporation is the amount by which—
“(1) the qualified investments in foreign base company shipping operations (as defined in section 955(b)) of the controlled foreign corporation at the close of the taxable year, exceed
“(2) the qualified investments in foreign base company shipping operations (as so defined) of the controlled foreign corporation at the close of the preceding taxable year.”
1984—Subsec. (e). Pub. L. 98–369, § 137(a), inserted provision that for purposes of par. (2) services performed with respect to any insurance or reinsurance policy be treated as performed in the country of risk.
Subsec. (h)(1). Pub. L. 98–369, § 712(f), substituted “paragraphs (2) and (3) of section 907(c)” for “section 907(c)(2)”.
1982—Subsec. (a)(5). Pub. L. 97–248, § 212(a), (e), added par. (5).
Subsec. (b)(4). Pub. L. 97–248, § 212(d), inserted at end “The preceding sentence shall not apply to foreign base company oil related income described in subsection (a)(5).”
Subsec. (b)(5). Pub. L. 97–248, § 212(b)(1), substituted “, the foreign base company shipping income, and the foreign base company oil related income” for “and the foreign base company shipping income”.
Subsec. (b)(8). Pub. L. 97–248, § 212(b)(2), added par. (8).
Subsec. (h). Pub. L. 97–248, § 212(c), added subsec. (h).
1976—Subsecs. (b)(4), (5). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Subsec. (b)(7). Pub. L. 94–455, § 1024(a), added par. (7).
Subsec. (c)(3)(C). Pub. L. 94–455, § 1023(a), added subpar. (C).
1975—Subsec. (a)(4). Pub. L. 94–12, § 602(d)(1)(A), added par. (4).
Subsec. (b)(1). Pub. L. 94–12, § 602(c)(1), struck out subsec. (b)(1) which related to the exclusion of certain dividends, interest, and gains from qualified investments in less developed countries.
Subsec. (b)(2). Pub. L. 94–12, § 602(d)(1)(B), substituted “foreign base company shipping income to the extent that the amount of such income does not exceed the increase for the taxable year in qualified investments in foreign base company shipping operations of the controlled foreign corporation (as determined under subsection (g))” for “income derived from, or in connection with, the use (or hiring or leasing for use) of any aircraft or vessel in foreign commerce, or the performance of services directly related to the use of any such aircraft or vessel” in text and “Exclusion for reinvested shipping income” for “Exclusion of certain shipping income” in heading.
Subsec. (b)(3). Pub. L. 94–12, § 602(d)(1)(C), (D), (e), substituted “10 percent” for “30 percent” in heading, substituted “paragraphs (2) and (5)” for “paragraphs (1) and (5)” and “10 percent” for “30 percent” in subpar. (A), and substituted “paragraphs (2) and (5)” for “paragraphs (1) and (5)” and “paragraphs (2), (4), and (5)” for “paragraphs (1), (2), (4), and (5)” in subpar. (B).
Subsec. (b)(5). Pub. L. 94–12, § 602(d)(1)(E), substituted “the foreign base company services income, and the foreign base company shipping income” for “and the foreign base company services income”.
Subsec. (b)(6). Pub. L. 94–12, § 602(d)(1)(F), added par. (6).
Subsec. (d)(1). Pub. L. 94–12, § 602(b), provided that for purposes of subsec. (d) personal property does not include agricultural commodities which are not grown in the United States in commercially marketable quantities.
Subsecs. (f), (g). Pub. L. 94–12, § 602(c)(2), (d)(1)(G), added subsecs. (f) and (g).
1969—Subsec. (b)(4). Pub. L. 91–172 inserted reference to a foreign corporation which is an acquired corporation, and made the effecting of a transaction giving rise to foreign base income through the controlled foreign corporation subject to the Secretary’s power to disallow inclusion of any item of such income where such inclusion will have one of the effects prescribed by this section.
