26 U.S. Code § 965 - Temporary dividends received deduction
In the case of a corporation which is a United States shareholder and for which the election under this section is in effect for the taxable year, there shall be allowed as a deduction an amount equal to 85 percent of the cash dividends which are received during such taxable year by such shareholder from controlled foreign corporations.
If the taxpayer has fewer than 5 taxable years ending on or before June 30, 2003, then in lieu of applying subparagraph (A), the base period years shall include all the taxable years of the taxpayer ending on or before June 30, 2003.
Rules similar to the rules of subparagraphs (A) and (B) of section 41(f)(3) shall apply for purposes of this paragraph.
The term “dividend” shall not include amounts includible in gross income as a dividend under section 78, 367, or 1248. In the case of a liquidation under section 332 to which section 367(b) applies, the preceding sentence shall not apply to the extent the United States shareholder actually receives cash as part of the liquidation.
No deduction shall be allowed under section 243 or 245 for any dividend for which a deduction is allowed under this section.
All United States shareholders which are members of an affiliated group filing a consolidated return under section 1501 shall be treated as one United States shareholder.
All corporations which are treated as a single employer under section 52(a) shall be limited to one $500,000,000 amount in subsection (b)(1)(A), and such amount shall be divided among such corporations under regulations prescribed by the Secretary.
If a financial statement is an applicable financial statement for more than 1 United States shareholder, the amount applicable under subparagraph (B) or (C) of subsection (b)(1) shall be divided among such shareholders under regulations prescribed by the Secretary.
No deduction shall be allowed for expenses directly allocable to the deductible portion described in paragraph (1).
For purposes of paragraph (1), unless the taxpayer otherwise specifies, the deductible portion of any dividend or other amount is the amount which bears the same ratio to the amount of such dividend or other amount as the amount allowed as a deduction under subsection (a) for the taxable year bears to the amount described in subsection (b)(2)(A) for such year.
The taxable income of any United States shareholder for any taxable year shall in no event be less than the amount of nondeductible CFC dividends received during such year.
The date of the enactment of this section, referred to in subsec. (f), is the date of enactment of Pub. L. 108–357, which was approved Oct. 22, 2004.
2005—Subsec. (a)(2)(B). Pub. L. 109–135, § 403(q)(1), inserted “from another controlled foreign corporation in such chain of ownership” before “, but only to the extent”.
Subsec. (b)(2)(A). Pub. L. 109–135, § 403(q)(2), inserted “cash” before “dividends”.
Subsec. (b)(3). Pub. L. 109–135, § 403(q)(3), inserted at end “The Secretary may prescribe such regulations as may be necessary or appropriate to prevent the avoidance of the purposes of this paragraph, including regulations which provide that cash dividends shall not be taken into account under subsection (a) to the extent such dividends are attributable to the direct or indirect transfer (including through the use of intervening entities or capital contributions) of cash or other property from a related person (as so defined) to a controlled foreign corporation.”
Subsec. (c)(1). Pub. L. 109–135, § 403(q)(4), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “The term ‘applicable financial statement’ means, with respect to a United States shareholder, the most recently audited financial statement (including notes and other documents which accompany such statement) which includes such shareholder—
“(A) which is certified on or before June 30, 2003, as being prepared in accordance with generally accepted accounting principles, and
“(B) which is used for the purposes of a statement or report—
“(i) to creditors,
“(ii) to shareholders, or
“(iii) for any other substantial nontax purpose.
In the case of a corporation required to file a financial statement with the Securities and Exchange Commission, such term means the most recent such statement filed on or before June 30, 2003.”
Subsec. (d)(2). Pub. L. 109–135, § 403(q)(5), substituted “directly allocable” for “properly allocated and apportioned”.
Subsec. (d)(4). Pub. L. 109–135, § 403(q)(6), added par. (4).
Subsec. (e)(1). Pub. L. 109–135, § 403(q)(7), inserted “which are imposed by foreign countries and possessions of the United States and are” after “taxes” in concluding provisions.
Subsec. (f). Pub. L. 109–135, § 403(q)(8), inserted “on or” before “before the due date” in concluding provisions.
Amendments by Pub. L. 109–135 effective as if included in the provisions of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which they relate, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.
Written determinations for this section
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