§ 1291. Interest on tax deferral

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 title XII § 1235(a) · 100 Stat. 2085

   Enacted · 26 U.S.C. § 1291

   Added Pub. L. 99–514, title XII, § 1235(a), Oct. 22, 1986, 100 Stat. 2566

   Source evidence

   Code source credit
   Added Pub. L. 99–514, title XII, § 1235(a), Oct. 22, 1986, 100 Stat. 2566

   Enacted provision · exact public law section
   (a) General Rule.— Subchapter P of chapter 1 is amended by adding at the end thereof the following new part: “PART VI— TREATMENT OF CERTAIN PASSIVE FOREIGN INVESTMENT COMPANIES “Subpart A. Interest on tax deferral. “Subpart B. Treatment of qualified electing funds. “Subpart C. General provisions. “Subpart A— Interest on Tax Deferral “1291. Interest on tax deferral. “SEC. 1291. INTEREST ON TAX DEFERRAL. “(a) Treatment of Distributions and Stock Dispositions.— “(1) Distributions.— If a United States person receives an excess distribution in respect of stock in a passive foreign investment company, then— “(A) the amount of the excess distribution shall be allocated ratably to each day in the taxpayer’s holding period for the stock, “(B) with respect to such excess distribution, the taxpayer’s gross income for the current year shall include (as ordinary income) only the amounts allocated under subparagraph (A) to— “(i) the current year, or “(ii) any period in the taxpayer’s holding period before the 1st day of the 1st taxable year of the com-pany for which it was a passive foreign investment company (or, if later, January 1, 1987), and “(C) the tax imposed by this chapter for the current year shall be increased by the deferred tax amount (determined under subsection (c)). “(2) Dispositions.— If the taxpayer disposes of stock in a passive foreign investment company, then the rules of paragraph (1) shall apply to any gain recognized on such disposition in the same manner as if such gain were an excess distribution. “(3) Definitions.— For purposes of this section— “(A) Holding period.— The taxpayer’s holding period shall be determined under section 1223; except that, in the case of an excess distribution, such holding period shall be treated as ending on the date of such distribution. “(B) Current year.— The term ‘current year’ means the taxable year in which the excess distribution or disposition occurs. “(4) Coordination with section 904.— Subparagraph (B) of paragraph (1) shall not apply for purposes of section 904. “(5) Section 902 not to apply.— Section 902 shall not apply to any dividend paid by a passive foreign investment company unless such company is a qualified electing fund. “(b) Excess Distribution.— “(1) In general.— For purposes of this section, the term ‘excess distribution’ means any distribution in respect of stock received during any taxable year to the extent such distribution does not exceed its ratable portion of the total excess distribution (if any) for such taxable year. “(2) Total excess distribution.— For purposes of this subsection— “(A) In general.— The term ‘total excess distribution’ means the excess (if any) of— “(i) the amount of the distributions in respect of the stock received by the taxpayer during the taxable year, over “(ii) 125 percent of the average amount received in respect of such stock by the taxpayer during the 3 preceding taxable years (or, if shorter, the portion of the taxpayer’s holding period before the taxable year). “(B) No excess for 1st year.— The total excess distributions with respect to any stock shall be zero for the taxable year in which the taxpayer’s holding period in such stock begins. “(3) Adjustments.— Under regulations prescribed by the Secretary— “(A) determinations under this subsection shall be made on a share-by-share basis, except that shares with the same holding period may be aggregated, “(B) proper adjustments shall be made for stock splits and stock dividends, “(C) if the taxpayer does not hold the stock during the entire taxable year, distributions received during such year shall be annualized, “(D) if the taxpayer’s holding period includes periods during which the stock was held by another person, distributions received by such other person shall be taken into account as if received by the taxpayer, and “(E) if the distributions are received in a foreign currency, determinations under this subsection shall be made in such currency and the amount of any excess distribution determined in such currency shall be translated into dollars. “(c) Deferred Tax Amount.— For purposes of this section— “(2) In general.— The term ‘deferred tax amount’ means, with respect to any distribution or disposition to which subsection (a) applies, an amount equal to the sum of— “(A) the aggregate increases in taxes described in paragraph (2), plus “(B) the aggregate amount of interest (determined in the manner provided under paragraph (3)) on such increases in tax. “(2) Aggregate increases in taxes.— For purposes of paragraph (1)(A), the aggregate increases in taxes shall be determined by multiplying each amount allocated under subsection (a)(1)(A) to any taxable year (other than any taxable year referred to in subsection (a)(1)(B)) by the highest rate of tax in effect for such taxable year under section 1 or 11, whichever applies. “(3) Computation of interest.— “(A) In general.— The amount of interest referred to in paragraph (1)(B) on any increase determined under paragraph (2) for any taxable year shall be determined for the period— “(i) beginning on the due date for such taxable year, and “(ii) ending on the due date for the taxable year with or within which the distribution or disposition occurs, by using the rates and method applicable under section 6621 for underpayments of tax for such period. “(B) Due date.— For purposes of this subsection, the term ‘due date’ means the date prescribed by law (determined without regard to extensions) for filing the return of the tax imposed by this chapter for the taxable year. “(d) Coordination With Subpart B.— “(1) In general.— This section shall not apply with respect “(A) any distribution paid by a passive foreign investment company during a taxable year for which such company is a qualified electing fund, and “(B) any disposition of stock in a passive foreign investment company if such company is a qualified electing fund for each of its taxable years— “(i) which begins after December 31, 1986, and for which such company is a passive foreign investment company, and “(ii) which includes any portion of the taxpayer’s holding period. “(2) Election to recognize gain where company becomes qualified electing fund.— “(A) In general.— If— “(i) a passive foreign investment company becomes a qualified electing fund for a taxable year which begins after December 31, 1986, “(ii) the taxpayer holds stock in such company on the first day of such taxable year, and “(iii) the taxpayer establishes to the satisfaction of the Secretary the fair market value of such stock on such first day, the taxpayer may elect to recognize gain as if he sold such stock on such first day for such fair market value. “(B) Adjustments.— In the case of any stock to which subparagraph (A) applies— “(i) the adjusted basis of such stock shall be increased by the gain recognized under subparagraph (A), and “(ii) the taxpayer’s holding period in such stock shall be treated as beginning on the first day referred to in subparagraph (A). “(e) Certain Basis, Etc., Rules Made Applicable.— Rules similar to the rules of subsections (c), (d), (e), and (f) of section 1246 shall apply for purposes of this section; except that— “(1) the reduction under subsection (e) of such section shall be the excess of the basis determined under section 1014 over the adjusted basis of the stock immediately before the decedent’s death, and “(2) such a reduction shall not apply in the case of a decedent who was not a nonresident alien at all times during his holding period in the stock. “(f) Nonrecognition Provisions.— To the extent provided in regulations, gain shall be recognized on any disposition of stock in a passive foreign investment company. “Subpart B— Treatment of Qualified Electing Funds “Sec. 1293. Current taxation of income from qualified electing funds. “Sec. 1294. Election to extend time for payment of tax on undistributed earnings. “Sec. 1295. Qualified electing fund. “SEC. 1293. CURRENT TAXATION OF INCOME FROM QUALIFIED ELECTING FINDS. “(a) Inclusion.— “(1) In general.— Every United States person who owns (or is treated under section 1297(a) as owning) stock of a qualified electing fund at any time during the taxable year of such fund shall include in gross income— “(A) as ordinary income, such shareholder’s pro rata share of the ordinary earnings of such fund for such year, and “(B) as long-term capital gain, such shareholder’s pro rata share of the net capital gain of such fund for such year. “(2) Year of inclusion.— The inclusion under paragraph (1) shall be for the taxable year of the shareholder in which or with which the taxable year of the fund ends. “(b) Pro Rata Share.— The pro rata share referred to in subsection (a) in the case of any shareholder is the amount which would have been distributed with respect to the shareholder’s stock if, on each day during the taxable year of the fund, the fund had distributed to each shareholder a pro rata share of that day’s ratable share of the fund’s ordinary earnings and net capital gain for such year. “(c) Previously Taxed Amounts Distributed Tax Free.— If the taxpayer establishes to the satisfaction of the Secretary that any amount distributed by a passive foreign investment company is paid out of earnings and profits of the company which were included under subsection (a) in the income of any United States person, such amount shall be treated as a distribution which is not a dividend. “(d) Basis Adjustments.— The basis of the taxpayer’s stock in a passive foreign investment company shall be— “(1) increased by any amount which is included in the income of the taxpayer under subsection (a) with respect to such stock, and “(2) decreased by any amount distributed with respect to such stock which is not includible in the income of the taxpayer by reason of subsection (c). A similar rule shall apply also in the case of any property if by reason of holding such property the taxpayer is treated under section 1297(a) as owning stock in a qualified electing fund. “(e) Ordinary Earnings.— For purposes of this section— “(1) Ordinary earnings.— The term ‘ordinary earnings’ means the excess of the earnings and profits of the qualified electing fund for the taxable year over its net capital gain for such taxable year. “(2) Limitation on net capital gain.— A qualified electing fund’s net capital gain for any taxable year shall not exceed its earnings and profits for such taxable year. “(f) Foreign Tax Credit Allowed In the Case of 10-Percent Corporate Shareholder.— For purposes of section 960— “(1) any amount included in the gross income under subsection (a) shall be treated as if it were included under section 951(a), and “(2) any amount excluded from gross income under subsection (c) shall be treated in the same manner as amounts excluded from gross income under section 959. “SEC. 1294. ELECTION TO EXTEND TIME FOR PAYMENT OF TAX ON UNDISTRIBUTED EARNINGS. “(a) Extension Allowed by Election.— “(1) In general.— At the election of the taxpayer, the time for payment of any undistributed PFIC earnings tax liability of the taxpayer for the taxable year shall be extended to the extent and subject to the limitations provided in this section. “(2) Election not permitted where amounts otherwise includible under section 551 or 951.— The taxpayer may not make an election under paragraph (1) with respect to the undistributed PFIC earnings tax liability attributable to a qualified electing fund for the taxable year if— “(A) any amount is includible in the gross income of the taxpayer under section 551 with respect to such fund for such taxable year, or “(B) any amount is includible in the gross income of the taxpayer under section 951 with respect to such fund for such taxable year. “(b) Definitions.— For purposes of this section— “(1) Undistributed pfic earnings tax liability.— The term ‘undistributed PFIC earnings tax liability’ means, in the case of any taxpayer, the excess of— “(A) the tax imposed by this chapter for the taxable year, over “(B) the tax which would be imposed by this chapter for such year without regard to the inclusion in gross income under section 1293 of the undistributed earnings of a qualified electing fund. “(2) Undistributed earnings.— The term ‘undistributed earnings’ means, with respect to any qualified electing fund, the excess (if any) of— “(A) the amount includible in gross income by reason of section 1293(a) for the taxable year, over “(B) the amount not includible in gross income by reason of section 1293(c) for such taxable year. “(c) Termination of Extension.— “(1) Distributions.— “(A) In general.— If a distribution is not includible in gross income for the taxable year by reason of section 1293(c), then the extension under subsection (a) for payment of the undistributed PFIC earnings tax liability with respect to the earnings to which such distribution is attributable shall expire on the last date prescribed by law (determined without regard to extensions) for filing the return of tax for such taxable year. “(B) Ordering rule.— For purposes of subparagraph (A), a distribution shall be treated as made from the most recently accumulated earnings and profits. “(2) Dispositions, etc.— If— “(A) stock in a passive foreign investment company is disposed of during the taxable year, or “(B) a passive foreign investment company ceases to be a qualified electing fund, all extensions under subsection (a) for payment of undistributed PFIC earnings tax liability attributable to such stock (or, in the case of such a cessation, attributable to any stock in such company) which had not expired before the date of such disposition or cessation shall expire on the last date prescribed by law (determined without regard to extensions) for filing the return of tax for the taxable year in which such disposition or cessation occurs. “(3) Jeopardy.— If the Secretary believes that collection of an amount to which an extension under this section relates is in jeopardy, the Secretary shall immediately terminate such extension with respect to such amount, and notice and demand shall be made by him for payment of such amount. “(d) Election.— The election under subsection (a) shall be made not later than the time prescribed by law (including extensions) for filing the return of tax imposed by this chapter for the taxable year. “(e) Authority To Require Bond.— Section 6165 shall apply to any extension under this section as though the Secretary were extending the time for payment of the tax. “SEC. 1295. QUALIFIED ELECTING FUND. “(a) General Rule.— For purposes of this part, the term ‘qualified electing fund’ means any passive foreign investment company if— “(1) an election under subsection (b) applies to such company for the taxable year, and “(2) such company complies for such taxable year with such requirements as the Secretary may prescribe for purposes of— “(A) determining the ordinary earnings and net capital gain of such company for the taxable year, “(B) ascertaining the ownership of its outstanding stock, and “(C) otherwise carrying out the purposes of this subpart. “(b) Election.— “(1) In General.— A passive foreign investment company may make an election under this subsection for any taxable year. Such an election, once made, shall apply to all subsequent taxable years of such company for which such company is a passive foreign investment company unless revoked with the consent of the Secretary. “(2) When made.— An election under this subsection may be made for any taxable year at any time before the 15th day of the 3rd month of the following taxable year. Subpart C— General Provisions “Sec. 1296. Passive foreign investment company. “Sec. 1297. Special rules. “SEC. 1296. PASSIVE FOREIGN INVESTMENT COMPANY. “(a) In General.— For purposes of this part, except as otherwise provided in this subpart the term ‘passive foreign investment company’ means any foreign corporation if— “(1) 75 percent or more of the gross income of such corporation for the taxable year is passive income, or “(2) the average percentage of assets (by value) held by such corporation during the taxable year which produce passive income or which are held for the production of passive income is at least 50 percent. “(b) Passive Income.— For purposes of this section— “(1) In general.— Except as provided in paragraph (2), the term ‘passive income’ has the meaning given such term by section 904(d)(2)(A) without regard to the exceptions contained in clause (iii) thereof. “(2) Exception for certain banks and insurance companies.— Except as provided in regulations, the term ‘passive income’ does not include any income— “(A) derived in the active conduct of a banking business by an institution licensed to do business as a bank in the United States (or, to the extent provided in regulations, by any other corporation), or “(B) derived in the active conduct of an insurance business by a corporation which would be subject to tax under subchapter L if it were a domestic corporation. “(c) Look-Thru in the Case of 25-Percent Owned Corporations.— If a foreign corporation owns at least 25 percent (by value) of the stock of another corporation, for purposes of determining whether such foreign corporation is a passive foreign investment company, such foreign corporation shall be treated as if it— “(1) held its proportionate share of the assets of such other corporation, and “(2) received directly its proportionate share of the income of such other corporation. “(d) Section 1247 Corporations.— For purposes of this part, the term ‘passive foreign investment company’ does not include any foreign investment company to which section 1247 applies. “SEC. 1297. SPECIAL RULES. “(a) Attribution of Ownership.— For purposes of this part— “(1) Attribution to united states persons.— This subsection— “(A) shall apply to the extent that the effect is to treat stock of a passive foreign investment company as owned by a United States person, and “(B) except to the extent provided in regulations, shall not apply to treat stock owned (or treated as owned under this subsection) by a United States person as owned by any other person. “(2) Corporations.— “(A) In general.— If 50 percent or more in value of the stock of a corporation is owned, directly or indirectly, by or for any person, such person shall be considered as owning the stock owned directly or indirectly by or for such corporation in that proportion which the value of the stock which such person so owns bears to the value of all stock in the corporation. “(B) 50-percent limitation not to apply to pfic.— For purposes of determining whether a shareholder of a passive foreign investment company is treated as owning stock owned directly or indirectly by or for such company, subparagraph (A) shall be applied without regard to the 50-percent limitation contained therein. “(3) Partnerships, etc.— Stock owned, directly or indirectly, by or for a partnership, estate, or trust shall be considered as being owned proportionately by its partners or beneficiaries. “(4) Successive application.— Stock considered to be owned by a person by reason of the application of paragraph (2) or (3) shall, for purposes of applying such paragraphs, be considered as actually owned by such person. “(b) Other Special Rules.— For purposes of this part— “(1) Time for determination.— Stock held by a taxpayer shall be treated as stock in a passive foreign investment company if, at any time during the holding period of the taxpayer with respect to such stock, such corporation (or any predecessor) was a passive foreign investment corporation which was not a qualified electing fund. The preceding sentence shall not apply if the taxpayer elects to recognize gain (as of the last day of the last taxable year for which the company was a passive foreign investment company) under rules similar to the rules of section 1291(d)(2). “(2) Certain corporations not treated as pfic’s during start-up year.— A corporation shall not be treated as a passive foreign investment company for the first taxable year such corporation has gross income (hereinafter in this paragraph referred to as the ‘start-up year’) if— “(A) no predecessor of such corporation was a passive foreign investment company, “(B) it is established to the satisfaction of the Secretary that such corporation will not be a passive foreign invest-ment company for either of the 1st 2 taxable years following the start-up year, and “(C) such corporation is not a passive foreign investment company for either of the 1st 2 taxable years following the start-up year. “(3) Certain corporations changing businesses.— A corporation shall not be treated as a passive foreign investment company for any taxable year if— “(A) such corporation (and any predecessor) was not a passive foreign investment corporation for any prior taxable year, “(B) it is established to the satisfaction of the Secretary that— “(i) substantially all of the passive income of the corporation for the taxable year is attributable to proceeds from the disposition of 1 or more active trades or businesses, and “(ii) such corporation will not be a passive foreign investment company for either of the 1st 2 taxable years following such taxable year, and “(C) such corporation is not a passive foreign investment company for either of such 2 taxable years. “(4) Separate interests treated as separate corporations.— Under regulations prescribed by the Secretary, where necessary to carry out the purposes of this part, separate classes of stock (or other interests) in a corporation shall be treated as interests in separate corporations. “(5) Application of section where stock held by other entity.— Under regulations, in any case in which a United States person is treated as holding stock in a passive foreign investment company by reason of subsection (a), any disposition by the United States person or the person holding such stock which results in the United States person being treated as no longer holding such stock, shall be treated as a disposition by the United States person with respect to stock in the passive foreign investment company. “(6) Dispositions.— If a taxpayer uses any stock in a passive foreign investment company as security for a loan, the taxpayer shall be treated as having disposed of such stock. “(7) Coordination with section 1246.— Section 1246 shall not apply to earnings and profits of any company for any taxable year beginning after December 31, 1986, if such company is a passive foreign investment company for such taxable year, “(c) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this part.”

2. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1012(p)(12) · 102 Stat. 3342

   Amended · 26 U.S.C. § 1291(a)(1)(B)(ii)

   Pub. L. 100–647, § 1012(p)(12), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “any period in the taxpayer’s holding period before the 1st day of the 1st taxable year of the company for which it was a passive foreign investment company (or, if later, January 1, 1987), and”

   Source evidence

   Code amendment note
   Subsec. (a)(1)(B)(ii). Pub. L. 100–647, § 1012(p)(12), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “any period in the taxpayer’s holding period before the 1st day of the 1st taxable year of the company for which it was a passive foreign investment company (or, if later, January 1, 1987), and”.

   Enacted provision · exact public law section
   (12) Clause (ii) of section 1291(a)(1)(B) of the 1986 Code is amended to read as follows: “(ii) any period in the taxpayer’s holding period before the 1st day of the 1st taxable year of the company which begins after December 31, 1986, and for which it was a passive foreign investment company, and”.

3. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1012(p)(14) · 102 Stat. 3342

   Substituted · 26 U.S.C. § 1291(a)(3)(A)

   Pub. L. 100–647, § 1012(p)(14), substituted “for purposes of applying this section to” for “in the case of”

   Source evidence

   Code amendment note
   Subsec. (a)(3)(A). Pub. L. 100–647, § 1012(p)(14), substituted “for purposes of applying this section to” for “in the case of”.

   Enacted provision · exact public law section
   (14) Subparagraph (A) of section 1291(a)(3) of the 1986 Code is amended by striking out “in the case of an excess distribution” and inserting in lieu thereof “for purposes of applying this section to an excess distribution”.

4. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1012(p)(7)(A) · 102 Stat. 3342

   Struck · 26 U.S.C. § 1291(a)(4); 26 U.S.C. § 1291(a)(5)

   Pub. L. 100–647, § 1012(p)(7)(A), struck out par. (4) which related to coordination with section 904, and par. (5) which related to section 902 not applying

   Source evidence

   Code amendment note
   Subsec. (a)(4), (5). Pub. L. 100–647, § 1012(p)(7)(A), struck out par. (4) which related to coordination with section 904, and par. (5) which related to section 902 not applying.

   Enacted provision · exact public law section
   (A) Paragraphs (4) and (5) of section 1291(a) of the 1986 Code are hereby repealed.

5. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1012(p)(13) · 102 Stat. 3342

   Inserted · 26 U.S.C. § 1291(b)(2)(A)

   Pub. L. 100–647, § 1012(p)(13), inserted at end “For purposes of clause (ii), any excess distribution received during such 3-year period shall be taken into account only to the extent it was included in gross income under subsection (a)(1)(B).”

   Source evidence

   Code amendment note
   Subsec. (b)(2)(A). Pub. L. 100–647, § 1012(p)(13), inserted at end “For purposes of clause (ii), any excess distribution received during such 3-year period shall be taken into account only to the extent it was included in gross income under subsection (a)(1)(B).”

   Enacted provision · exact public law section
   (13) Subparagraph (A) of section 1291(b)(2) of the 1986 Code is amended by adding at the end thereof the following new sentence: “For purposes of clause (ii), any excess distribution received during such 3-year period shall be taken into account only to the extent it was included in gross income under subsection (a)(1)(B).”

6. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1012(p)(3) · 102 Stat. 3342

   Added · 26 U.S.C. § 1291(b)(3)(F)

   Pub. L. 100–647, § 1012(p)(3), added subpar. (F)

   Source evidence

   Code amendment note
   Subsec. (b)(3)(F). Pub. L. 100–647, § 1012(p)(3), added subpar. (F).

   Enacted provision · exact public law section
   (3) Paragraph (3) of section 1291(b) of the 1986 Code is amended by striking out “and” at the end of subparagraph (D), by striking out the period at the end of subparagraph (E) and inserting in lieu thereof ”, and”, and by adding at the end thereof the following new subparagraph: “(F) proper adjustment shall be made for amounts not includible in gross income by reason of section 551(d), 959(a), or 1293(c).”

7. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1012(p)(33) · 102 Stat. 3342

   Added · 26 U.S.C. § 1291(b)(3)(G)

   Pub. L. 100–647, § 1012(p)(33), added subpar. (G)

   Source evidence

   Code amendment note
   Subsec. (b)(3)(G). Pub. L. 100–647, § 1012(p)(33), added subpar. (G).

   Enacted provision · exact public law section
   (33) Paragraph (3) of section 1291(b) of th® 1986 Code (as amended by paragraph (3)) is amended by striking out “and” at the end of subparagraph (E), by striking out the period at the end of subparagraph (F) and inserting in lieu thereof “, and”, and by adding at the end thereof the following new subparagraph: “(G) if a charitable deduction was allowable under section 642(c) to a trust for any distribution of its income, proper adjustments shall be made for the deduction so allowable to the extent allocable to distributions or gain in respect of stock in a passive foreign investment company.”

8. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1012(p)(31) · 102 Stat. 3342

   Inserted · 26 U.S.C. § 1291(c)(1)

   Pub. L. 100–647, § 1012(p)(31), inserted at end “Any increase in the tax imposed by this chapter for the current year under subsection (a) to the extent attributable to the amount referred to in subparagraph (B) shall be treated as interest paid under section 6601 on the due date for the current year.”

   Source evidence

   Code amendment note
   Subsec. (c)(1). Pub. L. 100–647, § 1012(p)(31), inserted at end “Any increase in the tax imposed by this chapter for the current year under subsection (a) to the extent attributable to the amount referred to in subparagraph (B) shall be treated as interest paid under section 6601 on the due date for the current year.”

   Enacted provision · exact public law section
   (31) Paragraph (i) of section 1291(c) of the 1986 Code is amended by adding at the end thereof the following new sentence: “Any increase in the tax imposed by this chapter for the current year under subsection (a) to the extent attributable to the amount referred to in subparagraph (B) shall be treated as interest paid under section 6601 on the due date for the current year.”

9. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 6127(b)(1) · 102 Stat. 3342

   Inserted · 26 U.S.C. § 1291(d)(1)

   Pub. L. 100–647, § 6127(b)(1), inserted “with respect to the taxpayer” after “qualified electing fund”

   Source evidence

   Code amendment note
   Subsec. (d)(1). Pub. L. 100–647, § 6127(b)(1), inserted “with respect to the taxpayer” after “qualified electing fund”.

   Enacted provision · exact public law section
   (1) Paragraph (1) of section 1291(d) of the 1986 Code (as amended by title I) is amended by striking out “for each” in the material preceding subparagraph (A) and inserting in lieu thereof “with respect to the taxpayer for each”.

10. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1012(p)(1) · 102 Stat. 3342

    Amended · 26 U.S.C. § 1291(d)(1)

    Pub. L. 100–647, § 1012(p)(1), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “This section shall not apply with respect to—

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 100–647, § 1012(p)(1), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “This section shall not apply with respect to—

    “(A) any distribution paid by a passive foreign investment company during a taxable year for which such company is a qualified electing fund, and “(B) any disposition of stock in a passive foreign investment company if such company is a qualified electing fund for each of its taxable years— “(i) which begins after December 31, 1986, and for which such company is a passive foreign investment company, and “(ii) which includes any portion of the taxpayer’s holding period.”

    Enacted provision · exact public law section
    (1) Paragraph (1) of section 1291(d) of the 1986 Code is amended to read as follows: “(1) In general.— This section shall not apply with respect to any distribution paid by a passive foreign investment company, or any disposition of stock in a passive foreign investment company, if such company is a qualified electing fund for each of its taxable years— “(A) which begins after December 31, 1986, and for which such company is a passive foreign investment company, and “(B) which includes any portion of the taxpayer’s holding period.”

11. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 6127(b)(2) · 102 Stat. 3342

    Inserted · 26 U.S.C. § 1291(d)(2)(A)(i)

    Pub. L. 100–647, § 6127(b)(2), inserted “with respect to the taxpayer” after “qualified electing fund”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(A)(i). Pub. L. 100–647, § 6127(b)(2), inserted “with respect to the taxpayer” after “qualified electing fund”.

    Enacted provision · exact public law section
    (2) Subparagraphs (A)(i) and (B)(i) of section 1291(d)(2) of the 1986 Code (as amended by title I) are each amended by striking out “for a taxable year” and inserting in lieu thereof “with respect to the taxpayer for a taxable year”.

12. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1012(p)(28) · 102 Stat. 3342

    1. Added · 26 U.S.C. § 1291(d)(2)(B)

       Pub. L. 100–647, § 1012(p)(28), added subpar. (B)

    2. Struck · 26 U.S.C. § 1291(d)(2)(B)

       Pub. L. 100–647, § 1012(p)(28), struck out former subpar. (B) which related to adjustments to basis of stock to which subpar. (A) applies

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B). Pub. L. 100–647, § 1012(p)(28), added subpar. (B) and struck out former subpar. (B) which related to adjustments to basis of stock to which subpar. (A) applies.

    Enacted provision · exact public law section
    (28) Paragraph (2) of section 1291(d) of the 1986 Code is amended by striking out subparagraph (B) and inserting in lieu thereof the following: “(B) Additional election for shareholder of controlled foreign corporations.— “(i) In general.— If— “(I) a passive foreign investment company be-comes a qualified electing fund for a taxable year which begins after December 31, 1986, “(II) the taxpayer holds stock in such company on the first day of such taxable year, and “(III) such company is a controlled foreign corporation (as defined in section 957(a)), the taxpayer may elect to include in gross income as a dividend received on such first day an amount equal to the portion of the post-1986 earnings and profits of such company attributable (under regulations prescribed by the Secretary) to the stock in such company held by the taxpayer on such first day. The amount treated as a dividend under the preceding sentence shall be treated as an excess distribution and shall be allocated under subsection (a)(1)(A) only to days during periods taken into account in determining the post-1986 earnings and profits so attributable. “(ii) Post-1986 earnings and profits.— For purposes of clause (i), the term ‘post-1986 earnings and profits’ means earnings and profits which were accumulated in taxable years of such company beginning after December 31, 1986, and during the period or periods the stock was held by the taxpayer while the company was a passive foreign investment company. “(iii) Coordination with section 959(e).— For purposes of section 959(e), any amount included in gross income under this subparagraph shall be treated as included in gross income under section 1248(a). “(C) Adjustments.— In the case of any stock to which subparagraph (A) or (B) applies— “(i) the adjusted basis of such stock shall be increased by the gain recognized under subparagraph (A) or the amount treated as a dividend under subparagraph (B), as the case may be, and “(ii) the taxpayer’s holding period in such stock shall be treated as beginning on the first day referred to in such subparagraph.”

13. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 6127(b)(2) · 102 Stat. 3342

    Inserted · 26 U.S.C. § 1291(d)(2)(B)(i)(I)

    Pub. L. 100–647, § 6127(b)(2), inserted “with respect to the taxpayer” after “qualified electing fund”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B)(i)(I). Pub. L. 100–647, § 6127(b)(2), inserted “with respect to the taxpayer” after “qualified electing fund”.

    Enacted provision · exact public law section
    (2) Subparagraphs (A)(i) and (B)(i) of section 1291(d)(2) of the 1986 Code (as amended by title I) are each amended by striking out “for a taxable year” and inserting in lieu thereof “with respect to the taxpayer for a taxable year”.

14. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1012(p)(28) · 102 Stat. 3342

    Added · 26 U.S.C. § 1291(d)(2)(C)

    Pub. L. 100–647, § 1012(p)(28), added subpar. (C)

    Source evidence

    Code amendment note
    Subsec. (d)(2)(C). Pub. L. 100–647, § 1012(p)(28), added subpar. (C).

    Enacted provision · exact public law section
    (28) Paragraph (2) of section 1291(d) of the 1986 Code is amended by striking out subparagraph (B) and inserting in lieu thereof the following: “(B) Additional election for shareholder of controlled foreign corporations.— “(i) In general.— If— “(I) a passive foreign investment company be-comes a qualified electing fund for a taxable year which begins after December 31, 1986, “(II) the taxpayer holds stock in such company on the first day of such taxable year, and “(III) such company is a controlled foreign corporation (as defined in section 957(a)), the taxpayer may elect to include in gross income as a dividend received on such first day an amount equal to the portion of the post-1986 earnings and profits of such company attributable (under regulations prescribed by the Secretary) to the stock in such company held by the taxpayer on such first day. The amount treated as a dividend under the preceding sentence shall be treated as an excess distribution and shall be allocated under subsection (a)(1)(A) only to days during periods taken into account in determining the post-1986 earnings and profits so attributable. “(ii) Post-1986 earnings and profits.— For purposes of clause (i), the term ‘post-1986 earnings and profits’ means earnings and profits which were accumulated in taxable years of such company beginning after December 31, 1986, and during the period or periods the stock was held by the taxpayer while the company was a passive foreign investment company. “(iii) Coordination with section 959(e).— For purposes of section 959(e), any amount included in gross income under this subparagraph shall be treated as included in gross income under section 1248(a). “(C) Adjustments.— In the case of any stock to which subparagraph (A) or (B) applies— “(i) the adjusted basis of such stock shall be increased by the gain recognized under subparagraph (A) or the amount treated as a dividend under subparagraph (B), as the case may be, and “(ii) the taxpayer’s holding period in such stock shall be treated as beginning on the first day referred to in such subparagraph.”

15. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1012(p)(6)(B) · 102 Stat. 3342

    Substituted · 26 U.S.C. § 1291(e)

    Pub. L. 100–647, § 1012(p)(6)(B), substituted “Except to the extent inconsistent with the regulations prescribed under subsection (f), rules similar”

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 100–647, § 1012(p)(6)(B), substituted “Except to the extent inconsistent with the regulations prescribed under subsection (f), rules similar”.

    Enacted provision · exact public law section
    (B) Subsection (e) of section 1291 of the 1986 Code is amended by striking out “Rules similar” and inserting in lieu thereof “Except to the extent inconsistent with the regulations prescribed under subsection (f), rules similar”.

16. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1012(p)(9) · 102 Stat. 3342

    Struck · 26 U.S.C. § 1291(e)(2)

    Pub. L. 100–647, § 1012(p)(9), struck out “not” before “a nonresident”

    Source evidence

    Code amendment note
    Subsec. (e)(2). Pub. L. 100–647, § 1012(p)(9), struck out “not” before “a nonresident”.

    Enacted provision · exact public law section
    (9) Paragraph (2) of section 1291(e) of the 1986 Code is amended by striking out “not” the second place it appears.

17. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1012(p)(6)(A) · 102 Stat. 3342

    Amended · 26 U.S.C. § 1291(f)

    Pub. L. 100–647, § 1012(p)(6)(A), amended subsec. (f) generally. Prior to amendment, subsec. (f), “Nonrecognition provisions”, read as follows: “To the extent provided in regulations, gain shall be recognized on any disposition of stock in a passive foreign investment company.”

    Source evidence

    Code amendment note
    Subsec. (f). Pub. L. 100–647, § 1012(p)(6)(A), amended subsec. (f) generally. Prior to amendment, subsec. (f), “Nonrecognition provisions”, read as follows: “To the extent provided in regulations, gain shall be recognized on any disposition of stock in a passive foreign investment company.”

    Enacted provision · exact public law section
    (A) Subsection (f) of section 1291 of the 1986 Code is amended to read as follows: “(f) Recognition of Gain.— To the extent provided in regulations, in the case of any transfer of stock in a passive foreign investment company where (but for this subsection) there is not full recognition of gain, the excess (if any) of— “(1) the fair market value of such stock, over “(2) its adjusted basis, shall be treated as gain from the sale or exchange of such stock and shall be recognized notwithstanding any provision of law. Proper adjustment shall be made to the basis of any such stock for gain recognized under the preceding sentence.”

18. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1012(p)(7)(B) · 102 Stat. 3342

    Added · 26 U.S.C. § 1291(g)

    Pub. L. 100–647, § 1012(p)(7)(B), added subsec. (g)

    Source evidence

    Code amendment note
    Subsec. (g). Pub. L. 100–647, § 1012(p)(7)(B), added subsec. (g).

    Enacted provision · exact public law section
    (B) Section 1291 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(g) Coordination With Foreign Tax Credit Rules.— “(1) In general.— If there are creditable foreign taxes with respect to any distribution in respect of stock in a passive foreign investment company— “(A) the amount of such distribution shall be determined for purposes of this section with regard to section 78, “(B) the excess distribution taxes shall be allocated rat-ably to each day in the taxpayer’s holding period for the stock, and “(C) to the extent— “(i) that such excess distribution taxes are allocated to a taxable year referred to in subsection (a)(1)(B), such taxes shall be taken into account under section 901 for the current year, and “(ii) that such excess distribution taxes are allocated to any other taxable year, such taxes shall reduce (subject to the principles of section 904(d) and not below zero) the increase in tax determined under subsection (c)(2) for such taxable year by reason of such distribution (but such taxes shall not be taken into account under section 901). “(2) Definitions.— For purposes of this subsection— “(A) Creditable foreign taxes.— The term ‘creditable foreign taxes’ means, with respect to any distribution— “(i) any foreign taxes deemed paid under section 902 with respect to such distribution, and “(ii) any withholding tax imposed with respect to such distribution, but only if the taxpayer chooses the benefits of section 901 and such taxes are creditable under section 901 (determined without regard to paragraph (1)(C)(ii)). “(B) Excess distribution taxes.— The term ‘excess distribution taxes’ means, with respect to any distribution, the portion of the creditable foreign taxes with respect to such distribution which is attributable (on a pro rata basis) to the portion of such distribution which is an excess distribution. “(C) Section 1248 gain.— The rules of this subsection also shall apply in the case of any gain which but for this section would be includible in gross income as a dividend under section 1248”.

19. 1997

    Pub. L. 105–34 § 1122(b)(3) · 111 Stat. 788

    Amended · 26 U.S.C. § 1291(a)(3)(A)

    Pub. L. 105–34, § 1122(b)(3), amended heading and text of subpar. (A) generally. Prior to amendment, text read as follows: “The taxpayer’s holding period shall be determined under section 1223; except that, for purposes of applying this section to an excess distribution, such holding period shall be treated as ending on the date of such distribution.”

    Source evidence

    Code amendment note
    Subsec. (a)(3)(A). Pub. L. 105–34, § 1122(b)(3), amended heading and text of subpar. (A) generally. Prior to amendment, text read as follows: “The taxpayer’s holding period shall be determined under section 1223; except that, for purposes of applying this section to an excess distribution, such holding period shall be treated as ending on the date of such distribution.”

    Enacted provision · exact public law section
    (3) Subparagraph (A) of section 1291(a)(3) is amended to read as follows: “(A) Holding period.— The taxpayer’s holding period shall be determined under section 1223; except that— “(i) for purposes of applying this section to an excess distribution, such holding period shall be treated as ending on the date of such distribution, and “(ii) if section 1296 applied to such stock with respect to the taxpayer for any prior taxable year, such holding period shall be treated as beginning on the first day of the first taxable year beginning after the last taxable year for which section 1296 so applied.”.

20. 1997

    Pub. L. 105–34 § 1122(b)(2) · 111 Stat. 788

    Substituted · 26 U.S.C. § 1291(d)

    Pub. L. 105–34, § 1122(b)(2), substituted “subparts B and C” for “subpart B” in heading

    Source evidence

    Code amendment note
    Subsec. (d). Pub. L. 105–34, § 1122(b)(2), substituted “subparts B and C” for “subpart B” in heading.

    Enacted provision · exact public law section
    (2) The subsection heading for subsection (d) of section 1291 is amended by striking “Subpart B” and inserting “Subparts B and C”.

21. 1997

    Pub. L. 105–34 § 1122(b)(1) · 111 Stat. 788

    Inserted · 26 U.S.C. § 1291(d)(1)

    Pub. L. 105–34, § 1122(b)(1), inserted concluding provisions

    Source evidence

    Code amendment note
    Subsec. (d)(1). Pub. L. 105–34, § 1122(b)(1), inserted concluding provisions.

    Enacted provision · exact public law section
    (1) Paragraph (1) of section 1291(d) is amended by adding at the end the following new flush sentence: “Except as provided in section 1296(j), this section also shall not apply if an election under section 1296(k) is in effect for the taxpayer’s taxable year.”.

22. 1998

    Internal Revenue Service Restructuring and Reform Act of 1998

    Pub. L. 105–206 title VI § 6011(c)(2) · 112 Stat. 685

    Inserted · 26 U.S.C. § 1291(d)(1)

    Pub. L. 105–206 inserted at end “In the case of stock which is marked to market under section 475 or any other provision of this chapter, this section shall not apply, except that rules similar to the rules of section 1296(j) shall apply.”

    Source evidence

    Code amendment note
    Subsec. (d)(1). Pub. L. 105–206 inserted at end “In the case of stock which is marked to market under section 475 or any other provision of this chapter, this section shall not apply, except that rules similar to the rules of section 1296(j) shall apply.”

    Enacted provision · exact public law section
    (2) Paragraph (1) of section 1291(d) of the 1986 Code is amended by adding at the end the following new sentence: “In the case of stock which is marked to market under section 475 or any other provision of this chapter, this section shall not apply, except that rules similar to the rules of section 1296( j) shall apply.”.

23. 2001

    Pub. L. 107–16 § 542(e)(5)(B) · 115 Stat. 38

    1. Struck · 26 U.S.C. § 1291(e)

       Pub. L. 107–16, § 542(e)(5)(B), struck out “(e),” after “subsections (c), (d),”

    2. Substituted · 26 U.S.C. § 1291(e)

       Pub. L. 107–16, § 542(e)(5)(B), substituted period at end for “; except that—

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 107–16, § 542(e)(5)(B), struck out “(e),” after “subsections (c), (d),” and substituted period at end for “; except that—

    “(1) the reduction under subsection (e) of such section shall be the excess of the basis determined under section 1014 over the adjusted basis of the stock immediately before the decedent’s death, and “(2) such a reduction shall not apply in the case of a decedent who was a nonresident alien at all times during his holding period in the stock.”

    Enacted provision · exact public law section
    (B) Subsection (e) of section 1291 is amended— (i) by striking “(e),”; and (ii) by striking “; except that” and all that follows and inserting a period.

24. 2004

    Pub. L. 108–357 § 413(c)(24)(A) · 118 Stat. 1418

    Substituted · 26 U.S.C. § 1291(b)(3)(F)

    Pub. L. 108–357, § 413(c)(24)(A), substituted “959(a)” for “551(d), 959(a),”

    Source evidence

    Code amendment note
    Subsec. (b)(3)(F). Pub. L. 108–357, § 413(c)(24)(A), substituted “959(a)” for “551(d), 959(a),”.

    Enacted provision · exact public law section
    (A) Subparagraph (F) of section 1291(b)(3) is amended by striking “551(d), 959(a),” and inserting “959(a)”.

25. 2004

    Pub. L. 108–357 § 413(c)(24)(B) · 118 Stat. 1418

    Inserted · 26 U.S.C. § 1291(e)

    Pub. L. 108–357, § 413(c)(24)(B), inserted “(as in effect on the day before the date of the enactment of the American Jobs Creation Act of 2004)” after “section 1246” in introductory provisions

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 108–357, § 413(c)(24)(B), inserted “(as in effect on the day before the date of the enactment of the American Jobs Creation Act of 2004)” after “section 1246” in introductory provisions.

    Enacted provision · exact public law section
    (B) Subsection (e) of section 1291 is amended by inserting “(as in effect on the day before the date of the enactment of the American Jobs Creation Act of 2004)” after “section 1246”.

26. 2010

    Hiring Incentives to Restore Employment Act

    Pub. L. 111–147 title V § 521(b) · 124 Stat. 71

    Substituted · 26 U.S.C. § 1291(e)

    Pub. L. 111–147 substituted “and (d)” for “, (d), and (f)”

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 111–147 substituted “and (d)” for “, (d), and (f)”.

    Enacted provision · exact public law section
    (b) Conforming Amendment.— Subsection (e) of section 1291 is amended by striking “, (d), and (f)” and inserting “and (d)”.

27. 2010

    Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

    Pub. L. 111–312 title III § 301(a) · 124 Stat. 3296

    1. Inserted · 26 U.S.C. § 1291(e)

       Pub. L. 111–312, which directed that subsec. (e) be amended to read as if amendment by Pub. L. 107–16, § 542(e)(5)(B), had never been enacted, was executed by inserting “(e),” after “subsections (c) and (d)”

    2. Substituted · 26 U.S.C. § 1291(e)

       Pub. L. 111–312, which directed that subsec. (e) be substituting “; except that—” and pars. (1) and (2) for the period at end. See 2001 Amendment note below

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 111–312, which directed that subsec. (e) be amended to read as if amendment by Pub. L. 107–16, § 542(e)(5)(B), had never been enacted, was executed by inserting “(e),” after “subsections (c) and (d)” and substituting “; except that—” and pars. (1) and (2) for the period at end. See 2001 Amendment note below.

    Enacted provision · exact public law section
    (a) In General.— Each provision of law amended by subtitle A or E of title V of the Economic Growth and Tax Relief Reconciliation Act of 2001 26 USC 121, 684, 1014, 1022, 1040, 1221, 1246, 1291, 1296, 2210, 2664, 6018, 6019, 6075, 6716, 7701. is amended to read as such provision would read if such subtitle had never been enacted.

28. 2017

    Pub. L. 115–97 title I § 14301(c)(34) · 131 Stat. 2054

    Substituted · 26 U.S.C. § 1291(g)(2)(A)

    Pub. L. 115–97 substituted “any distribution, any withholding tax imposed with respect to such distribution, but only if” for “any distribution—

    Source evidence

    Code amendment note
    Subsec. (g)(2)(A). Pub. L. 115–97 substituted “any distribution, any withholding tax imposed with respect to such distribution, but only if” for “any distribution—

    “(i) any foreign taxes deemed paid under section 902 with respect to such distribution, and “(ii) any withholding tax imposed with respect to such distribution, but only if”.

    Enacted provision · exact public law section
    (34) Section 1291(g)(2)(A) is amended by striking “any distribution—” and all that follows through “but only if” and inserting “any distribution, any withholding tax imposed with respect to such distribution, but only if”.

    Effective date note
    Amendment by Pub. L. 115–97 applicable to taxable years of foreign corporations beginning after Dec. 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14301(d) of Pub. L. 115–97, set out as a note under section 78 of this title.

29. 2018

    Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 div. U title IV § 401(a)(183) · 132 Stat. 348

    Substituted · 26 U.S.C. § 1291(e)

    Pub. L. 115–141 substituted “subsections (c), (d), and (e)” for “subsections (c) and (d) (e),” in introductory provisions

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 115–141 substituted “subsections (c), (d), and (e)” for “subsections (c) and (d) (e),” in introductory provisions.

    Enacted provision · exact public law section
    Sec. 401. The Nuclear Regulatory Commission shall comply with the July 5, 2011, version of Chapter VI of its Internal Commission Procedures when responding to Congressional requests for information.

32 of 32 references resolved to an enrolled provision