§ 535. Accumulated taxable income

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. 1954

   Aug. 16, 1954, ch. 736, 68A Stat. 180 · 68A Stat. 180

   Enacted · 26 U.S.C. § 535

   Aug. 16, 1954, ch. 736, 68A Stat. 180

   Source evidence

   Code source credit
   Aug. 16, 1954, ch. 736, 68A Stat. 180

2. 1958

   Technical Amendments Act of 1958

   Pub. L. 85–866 § 31(a) · 72 Stat. 1606

   Struck · 26 U.S.C. § 535(b)(2)

   Pub. L. 85–866, § 31(a), struck out “the limitation in” after “without regard to”

   Source evidence

   Code amendment note
   Subsec. (b)(2). Pub. L. 85–866, § 31(a), struck out “the limitation in” after “without regard to”.

   Enacted provision · exact public law section
   (a) Adjustments to Taxable Income for Charitable Contributions.— Section 535 (b) (2) (relating to adjustments to taxable income 26 USC 535. to determine accumulated taxable income for purposes of the tax on corporations improperly accumulating surplus) is amended by striking out “the limitation in”.

3. 1958

   Technical Amendments Act of 1958

   Pub. L. 85–866 § 31(a) · 72 Stat. 1606

   Substituted · 26 U.S.C. § 535(b)(6)(B)

   Pub. L. 85–866, § 31(a), substituted “in taxable income the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year (determined without regard to the capital loss carryover provided in section 1212)” for “such excess in taxable income”

   Source evidence

   Code amendment note
   Subsec. (b)(6)(B). Pub. L. 85–866, § 31(a), substituted “in taxable income the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year (determined without regard to the capital loss carryover provided in section 1212)” for “such excess in taxable income”.

   Enacted provision · exact public law section
   (a) Adjustments to Taxable Income for Charitable Contributions.— Section 535 (b) (2) (relating to adjustments to taxable income 26 USC 535. to determine accumulated taxable income for purposes of the tax on corporations improperly accumulating surplus) is amended by striking out “the limitation in”.

4. 1958

   Small Business Tax Revision Act of 1958

   Pub. L. 85–866 § 205(a) · 72 Stat. 1606

   Substituted · 26 U.S.C. § 535(c)(2); 26 U.S.C. § 535(c)(3)

   Pub. L. 85–866, § 205(a), substituted “$100,000” for “$60,000”

   Source evidence

   Code amendment note
   Subsec. (c)(2), (3). Pub. L. 85–866, § 205(a), substituted “$100,000” for “$60,000”.

   Enacted provision · exact public law section
   (a) Increase.— Paragraphs (2) (relating to minimum accumulated earnings credit) and (3) (relating to accumulated earnings credit for holding and investment companies) of section 535 (c), and 26 USC 535, 1551. section 1551 (relating to disallowance of surtax exemption and accumulated earnings credit), of the Internal Revenue Code of 1954 are each amended by striking out “$60,000” and inserting in lieu thereof “$100,000”.

5. 1962

   Pub. L. 87–403 § 3(b) · 76 Stat. 4

   Added · 26 U.S.C. § 535(b)(9); 26 U.S.C. § 535(b)(10)

   Pub. L. 87–403 added pars. (9) and (10)

   Source evidence

   Code amendment note
   Subsec. (b)(9), (10). Pub. L. 87–403 added pars. (9) and (10).

   Enacted provision · exact public law section
   (b) Subsection (b) of section 535 of the Internal Revenue Code 26 USC 535. of 1954 (relating to accumulated taxable income) is amended by adding at the end thereof the following new paragraphs: “(9) Distributions of divested stock.— There shall be allowed as a deduction the amount of any dividend distribution received Ante, p. 4. of divested stock (as defined in subsection (e) of section 1111), minus the taxes imposed by this subtitle attributable to such receipt, but only if the stock with respect to which the distribution is made was owned by the distributee on September 6, 1961, or was owned by the distributee for at least 2 years prior to the date on which the antitrust order (as defined in subsection (d) of section 1111) was entered. “(10) Special adjustment on disposition of antitrust stock received as a dividend.— If— “(A) a corporation received antitrust stock (as defined in section 301(f)) in a distribution to which section 301 applied, “(B) the amount of the distribution determined under section 301(f)(2) exceeded the basis of the stock determined under section 301(f)(3), and “(C) paragraph (9) did not apply in respect of such distribution, then proper adjustment shall be made, under regulations prescribed by the Secretary or his delegate, if such stock (or other property the basis of which is determined by reference to the basis of such stock) is sold or exchanged.”

6. 1962

   Revenue Act of 1962

   Pub. L. 87–834 § 9(d)(2) · 76 Stat. 960

   Substituted · 26 U.S.C. § 535(b)(1)

   Pub. L. 87–834 substituted “accrued during the taxable year or deemed to be paid by a domestic corporation under section 902(a)(1) or 960(a)(1)(C) for the taxable year” for “accrued during the taxable year”

   Source evidence

   Code amendment note
   Subsec. (b)(1). Pub. L. 87–834 substituted “accrued during the taxable year or deemed to be paid by a domestic corporation under section 902(a)(1) or 960(a)(1)(C) for the taxable year” for “accrued during the taxable year”.

   Enacted provision · exact public law section
   (2) Section 535(b)(1) and the first sentence of section 545(b)(1) 26 USC 535, 545. are each amended by striking out “accrued during the taxable year,” and inserting in lieu thereof “accrued during the taxable year or deemed to be paid by a domestic corporation under section 902(a)(1) or 960(a)(1)(C) for the taxable year,”.

7. 1964

   Revenue Act of 1964

   Pub. L. 88–272 title II § 207(b)(4) · 78 Stat. 19

   Substituted · 26 U.S.C. § 535(b)(1)

   Pub. L. 88–272 substituted “section 275(a)(4)” for “section 164(b)(6)”

   Source evidence

   Code amendment note
   Subsec. (b)(1). Pub. L. 88–272 substituted “section 275(a)(4)” for “section 164(b)(6)”.

   Enacted provision · exact public law section
   (4) Paragraph (1) of section 535(b) (relating to adjustments to accumulated taxable income) is amended by striking out “section 164(b)(6)” and inserting in lieu thereof “section 275(a) (4)”.

8. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 § 512(f)(5) · 83 Stat. 487

   1. Substituted · 26 U.S.C. § 535(b)(6)

      Pub. L. 91–172, § 512(f)(5), substituted “capital loss carryback or carryover” for “capital loss carryover” in subpar. (B)

   2. Substituted · 26 U.S.C. § 535(b)(6)

      Pub. L. 91–172, § 512(f)(5), substituted “capital loss carryback and carryover” for “capital loss carryover” in subpar. (B)

   Source evidence

   Code amendment note
   Subsec. (b)(6). Pub. L. 91–172, § 512(f)(5), substituted “capital loss carryback or carryover” for “capital loss carryover” and “capital loss carryback and carryover” for “capital loss carryover” in subpar. (B).

   Enacted provision · exact public law section
   (5) Section 535(b)(6) (relating to improper accumulations of surplus) is amended— (A) by striking out “capital loss carryover” in the first sentence and inserting in lieu thereof “capital loss carryback or carryover”, and (B) by striking out “capital loss carryover” in subparagraph (B) and inserting in lieu thereof “capital loss carryback 72 Stat. 1631. and carryover”.

9. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 § 512(f)(6) · 83 Stat. 487

   1. Substituted · 26 U.S.C. § 535(b)(7)

      Pub. L. 91–172, § 512(f)(6), substituted “Capital loss” for “Capital loss carryover” in text

   2. Substituted · 26 U.S.C. § 535(b)(7)

      Pub. L. 91–172, § 512(f)(6), substituted “capital loss carryback or carryover” for “capital loss carryover” in text

   Source evidence

   Code amendment note
   Subsec. (b)(7). Pub. L. 91–172, § 512(f)(6), substituted “Capital loss” for “Capital loss carryover” in heading and “capital loss carryback or carryover” for “capital loss carryover” in text.

   Enacted provision · exact public law section
   (6) Paragraph (7) of section 535(b) (relating to treatment of capital loss carryovers) is amended to read as follows: “(7) Capital Loss.— No allowance shall be made for the capital loss carryback or carryover provided in section 1212.”

10. 1969

    Tax Reform Act of 1969

    Pub. L. 91–172 § 401(b)(2)(C) · 83 Stat. 487

    Substituted · 26 U.S.C. § 535(c)(5)

    Pub. L. 91–172, § 401(b)(2)(C), substituted “section 1551, and for limitation on such credit in the case of certain controlled corporations, see sections 1561 and 1564” for “section 1551”

    Source evidence

    Code amendment note
    Subsec. (c)(5). Pub. L. 91–172, § 401(b)(2)(C), substituted “section 1551, and for limitation on such credit in the case of certain controlled corporations, see sections 1561 and 1564” for “section 1551”.

    Enacted provision · exact public law section
    (C) Section 535(c)(5) is amended by striking out “section 1551” and inserting in lieu thereof “section 1551, and for limitation on such credit in the case of certain controlled corporations see sections 1561 and 1564”.

11. 1975

    Tax Reduction Act of 1975

    Pub. L. 94–12 title III § 304(a) · 89 Stat. 26

    Substituted · 26 U.S.C. § 535(c)(2); 26 U.S.C. § 535(c)(3)

    Pub. L. 94–12 substituted “$150,000” for “$100,000”

    Source evidence

    Code amendment note
    Subsec. (c)(2), (3). Pub. L. 94–12 substituted “$150,000” for “$100,000”.

    Enacted provision · exact public law section
    (a) Increase.— Paragraphs (2) and (3) of section 535(c) (relating 26 USC 535. to accumulated earnings credit) are each amended by striking out “$100,000” and inserting in lieu thereof “$150,900”.

12. 1976

    Pub. L. 94–455 title X § 1033(b)(3) · 90 Stat. 1520

    1. Struck · 26 U.S.C. § 535(b)(1)

       Pub. L. 94–455, §§ 1033(b)(3), 1901(a)(74), struck out “(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after December 31, 1940)” after “income and excess profits taxes”

    2. Substituted · 26 U.S.C. § 535(b)(1)

       Pub. L. 94–455, §§ 1033(b)(3), 1901(a)(74), substituted “section 902(a) or 960(a)(1)” for “section 902(a)(1) or 960(a)(1)(C)” after “domestic corporation under”

    Source evidence

    Code amendment note
    Subsec. (b)(1). Pub. L. 94–455, §§ 1033(b)(3), 1901(a)(74), struck out “(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after December 31, 1940)” after “income and excess profits taxes”, and substituted “section 902(a) or 960(a)(1)” for “section 902(a)(1) or 960(a)(1)(C)” after “domestic corporation under”.

    Enacted provision · exact public law section
    (3) Section 535(b)(1) (relating to accumulated taxable income) is amended by striking out “section 902(a)(1) or 960(a)(1)(C)” and inserting in lieu thereof “section 902(a) or 960(a)”

13. 1976

    Pub. L. 94–455 § 1901(b)(33)(D) · 90 Stat. 1520

    Substituted · 26 U.S.C. § 535(b)(6)

    Pub. L. 94–455, § 1901(b)(33)(D), substituted “Net” for “Long-term” after “(6)”

    Source evidence

    Code amendment note
    Subsec. (b)(6). Pub. L. 94–455, § 1901(b)(33)(D), substituted “Net” for “Long-term” after “(6)”.

    Enacted provision · exact public law section
    (D) Sections 535(b)(6) and 545(b)(5) are each amended— 26 USC 535, 545. (1) by striking out from the paragraph heading “Long-term” and inserting in lieu thereof “Net”, (2) by striking out from the text “the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year” each place it appears and inserting in lieu thereof’ “the net capital gain for the taxable year”, and (3) by striking out from the text “such excess” each place it appears and inserting in lieu thereof “such net capital gain”.

14. 1976

    Pub. L. 94–455 § 1901(b)(20)(A) · 90 Stat. 1520

    Struck · 26 U.S.C. § 535(b)(8)

    Pub. L. 94–455, § 1901(b)(20)(A), struck out par. (8) relating to allowance of deduction by bank affiliates

    Source evidence

    Code amendment note
    Subsec. (b)(8). Pub. L. 94–455, § 1901(b)(20)(A), struck out par. (8) relating to allowance of deduction by bank affiliates.

    Enacted provision · exact public law section
    (A) Section 535(b) is amended by striking out paragraph 26 USC 535. (8).

15. 1976

    Pub. L. 94–455 § 1901(b)(32)(C) · 90 Stat. 1520

    1. Struck · 26 U.S.C. § 535(b)(9); 26 U.S.C. § 535(b)(10)

       Pub. L. 94–455, § 1901(b)(32)(C), struck out par. (9) relating to allowance of deduction for distributions of divested stock

    2. Struck · 26 U.S.C. § 535(b)(9); 26 U.S.C. § 535(b)(10)

       Pub. L. 94–455, § 1901(b)(32)(C), struck out par. (10) relating to special adjustment on disposition of antitrust stock received as a dividend

    Source evidence

    Code amendment note
    Subsec. (b)(9), (10). Pub. L. 94–455, § 1901(b)(32)(C), struck out par. (9) relating to allowance of deduction for distributions of divested stock, and struck out par. (10) relating to special adjustment on disposition of antitrust stock received as a dividend.

    Enacted provision · exact public law section
    (C) Section 535(b) is amended by striking out paragraphs (9) and (10).

16. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 232(a) · 95 Stat. 175

    1. Amended · 26 U.S.C. § 535(c)(2)

       Pub. L. 97–34, § 232(a), designated existing provisions as subpar. (A)

    2. Substituted · 26 U.S.C. § 535(c)(2)

       Pub. L. 97–34, § 232(a), substituted “$250,000” for “$150,000”

    3. Added · 26 U.S.C. § 535(c)(2)

       Pub. L. 97–34, § 232(a), added subpar. (B)

    Source evidence

    Code amendment note
    Subsec. (c)(2). Pub. L. 97–34, § 232(a), designated existing provisions as subpar. (A), substituted “$250,000” for “$150,000”, and added subpar. (B).

    Enacted provision · exact public law section
    (a) Increase in Credit for Certain Corporations.— Paragraph (2) 26 USC 535. of section 535(c) (relating to accumulated earnings credit) is amended to read as follows: “(2) Minimum credit.— “(A) In general.— The credit allowable under paragraph (1) shall in no case be less than the amount by which $250,000 exceeds the accumulated earnings and profits of the corporation at the close of the preceding taxable year. “(B) Certain service corporations.— In the case of a corporation the principal function of which is the performance of services in the field of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting, subparagraph (A) shall be applied by substituting ‘$150,000’ for ‘$250,000’.”

17. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 232(b)(1) · 95 Stat. 175

    Substituted · 26 U.S.C. § 535(c)(3)

    Pub. L. 97–34, § 232(b)(1), substituted “$250,000” for “$150,000”

    Source evidence

    Code amendment note
    Subsec. (c)(3). Pub. L. 97–34, § 232(b)(1), substituted “$250,000” for “$150,000”.

    Enacted provision · exact public law section
    (1) Paragraph (3) of section 535(c) is amended by striking out “$150,000” and inserting in lieu thereof “$250,000”.

18. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 58(b) · 98 Stat. 494

    1. Amended · 26 U.S.C. § 535(b)(5)

       Pub. L. 98–369, § 58(b), designated existing provisions as subpar. (A)

    2. Redesignated · 26 U.S.C. § 535(b)(5)

       Pub. L. 98–369, § 58(b), substituted “Except as provided in subparagraph (B), there shall be allowed as a deduction an amount equal to the net capital loss for the taxable year (determined without regard to paragraph (7)(A)” for “There shall be allowed as deductions losses from sales or exchanges of capital assets during the taxable year which are disallowed as deductions under section 1211(a)” in subpar. (A) as so redesignated

    3. Added · 26 U.S.C. § 535(b)(5)

       Pub. L. 98–369, § 58(b), added subpars. (B) and (C)

    Source evidence

    Code amendment note
    Subsec. (b)(5). Pub. L. 98–369, § 58(b), designated existing provisions as subpar. (A), substituted “Except as provided in subparagraph (B), there shall be allowed as a deduction an amount equal to the net capital loss for the taxable year (determined without regard to paragraph (7)(A)” for “There shall be allowed as deductions losses from sales or exchanges of capital assets during the taxable year which are disallowed as deductions under section 1211(a)” in subpar. (A) as so redesignated, and added subpars. (B) and (C).

    Enacted provision · exact public law section
    (b) Treatment of Capital Gains and Losses.— Subsection (b) of section 535 (defining accumulated taxable income) is amended by 26 USC 535. striking out paragraphs (5), (6), and (7) and inserting in lieu thereof the following: “(5) Capital losses.— “(A) In general.— Except as provided in subparagraph (B), there shall be allowed as a deduction an amount equal to the net capital loss for the taxable year (determined without regard to paragraph (7)(A)). “(B) Recapture of previous deductions for capital gains.— The aggregate amount allowable as a deduction under subparagraph (A) for any taxable year shall be reduced by the lesser of— “(i) the nonrecaptured capital gains deductions, or “(ii) the amount of the accumulated earnings and profits of the corporation as of the close of the preceding taxable year. “(C) Nonrecaptured capital gains deductions.— For purposes of subparagraph (B), the term ‘nonrecaptured capital gains deductions’ means the excess of— “(i) the aggregate amount allowable as a deduction under paragraph (6) for preceding taxable years beginning after the date of the enactment of the Tax Reform Act of 1984, over Ante, p. 494. “(ii) the aggregate of the reductions under subparagraph (B) for preceding taxable years. “(6) Net capital gains.— “(A) In general.— There shall be allowed as a deduction— “(i) the net capital gain for the taxable year (determined with the application of paragraph (7)), reduced by “(ii) the taxes attributable to such net capital gain. “(B) Attributable taxes.— For purposes of subparagraph (A), the taxes attributable to the net capital gain shall be an amount equal to the difference between— “(i) the taxes imposed by this subtitle (E)(cept the tax imposed by this part) for the taxable year, and “(ii) such taxes computed for such year without including in taxable income the net capital gain for the taxable year (determined without the application of paragraph (7)). “(7) Capital loss carryovers.— “(A) Unlimited carryforward.— The net capital loss for any taxable year shall be treated as a short-term capital loss in the next taxable year. “(B) Section 1212 inapplicable.— No allowance shall be made for the capital loss carryback or carryforward provided in section 1212. “(8) Special rules for mere holding or investment companies.— In the case of a mere holding or investment company— “(A) Capital loss deduction, etc., not allowed.— paragraphs (5) and (7)(A) shall not apply. “(B) Deduction for certain offsets.— There shall be allowed as a deduction the net short-term capital gain for the taxable year to the extent such gain does not exceed the amount of any capital loss carryover to such taxable year under section 1212 (determined without regard to paragraph (7)(B)). “(C) Earnings and profits.— For purposes of subchapter C, the accumulated earnings and profits at any time shall not be less than they would be if this subsection had applied to the computation of earnings and profits for all taxable years beginning after the date of the enactment of the Tax Ante, p. 494. Reform Act of 1984.”

19. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 58(b) · 98 Stat. 494

    Substituted · 26 U.S.C. § 535(b)(6)

    Pub. L. 98–369, § 58(b), divided existing par. (6) into subpars. (A) and (B) and substituted references to the application of paragraph (7) for references to capital loss carryback and carryover provided in section 1212

    Source evidence

    Code amendment note
    Subsec. (b)(6). Pub. L. 98–369, § 58(b), divided existing par. (6) into subpars. (A) and (B) and substituted references to the application of paragraph (7) for references to capital loss carryback and carryover provided in section 1212.

    Enacted provision · exact public law section
    (b) Treatment of Capital Gains and Losses.— Subsection (b) of section 535 (defining accumulated taxable income) is amended by 26 USC 535. striking out paragraphs (5), (6), and (7) and inserting in lieu thereof the following: “(5) Capital losses.— “(A) In general.— Except as provided in subparagraph (B), there shall be allowed as a deduction an amount equal to the net capital loss for the taxable year (determined without regard to paragraph (7)(A)). “(B) Recapture of previous deductions for capital gains.— The aggregate amount allowable as a deduction under subparagraph (A) for any taxable year shall be reduced by the lesser of— “(i) the nonrecaptured capital gains deductions, or “(ii) the amount of the accumulated earnings and profits of the corporation as of the close of the preceding taxable year. “(C) Nonrecaptured capital gains deductions.— For purposes of subparagraph (B), the term ‘nonrecaptured capital gains deductions’ means the excess of— “(i) the aggregate amount allowable as a deduction under paragraph (6) for preceding taxable years beginning after the date of the enactment of the Tax Reform Act of 1984, over Ante, p. 494. “(ii) the aggregate of the reductions under subparagraph (B) for preceding taxable years. “(6) Net capital gains.— “(A) In general.— There shall be allowed as a deduction— “(i) the net capital gain for the taxable year (determined with the application of paragraph (7)), reduced by “(ii) the taxes attributable to such net capital gain. “(B) Attributable taxes.— For purposes of subparagraph (A), the taxes attributable to the net capital gain shall be an amount equal to the difference between— “(i) the taxes imposed by this subtitle (E)(cept the tax imposed by this part) for the taxable year, and “(ii) such taxes computed for such year without including in taxable income the net capital gain for the taxable year (determined without the application of paragraph (7)). “(7) Capital loss carryovers.— “(A) Unlimited carryforward.— The net capital loss for any taxable year shall be treated as a short-term capital loss in the next taxable year. “(B) Section 1212 inapplicable.— No allowance shall be made for the capital loss carryback or carryforward provided in section 1212. “(8) Special rules for mere holding or investment companies.— In the case of a mere holding or investment company— “(A) Capital loss deduction, etc., not allowed.— paragraphs (5) and (7)(A) shall not apply. “(B) Deduction for certain offsets.— There shall be allowed as a deduction the net short-term capital gain for the taxable year to the extent such gain does not exceed the amount of any capital loss carryover to such taxable year under section 1212 (determined without regard to paragraph (7)(B)). “(C) Earnings and profits.— For purposes of subchapter C, the accumulated earnings and profits at any time shall not be less than they would be if this subsection had applied to the computation of earnings and profits for all taxable years beginning after the date of the enactment of the Tax Ante, p. 494. Reform Act of 1984.”

20. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 58(b) · 98 Stat. 494

    1. Substituted · 26 U.S.C. § 535(b)(7)

       Pub. L. 98–369, § 58(b), substituted “Capital loss carryovers” for “Capital loss” in heading

    2. Redesignated · 26 U.S.C. § 535(b)(7)

       Pub. L. 98–369, § 58(b), redesignated existing provisions as subpar. (B)

    3. Added · 26 U.S.C. § 535(b)(7)

       Pub. L. 98–369, § 58(b), added subpar. (A)

    Source evidence

    Code amendment note
    Subsec. (b)(7). Pub. L. 98–369, § 58(b), substituted “Capital loss carryovers” for “Capital loss” in heading, redesignated existing provisions as subpar. (B), and added subpar. (A).

    Enacted provision · exact public law section
    (b) Treatment of Capital Gains and Losses.— Subsection (b) of section 535 (defining accumulated taxable income) is amended by 26 USC 535. striking out paragraphs (5), (6), and (7) and inserting in lieu thereof the following: “(5) Capital losses.— “(A) In general.— Except as provided in subparagraph (B), there shall be allowed as a deduction an amount equal to the net capital loss for the taxable year (determined without regard to paragraph (7)(A)). “(B) Recapture of previous deductions for capital gains.— The aggregate amount allowable as a deduction under subparagraph (A) for any taxable year shall be reduced by the lesser of— “(i) the nonrecaptured capital gains deductions, or “(ii) the amount of the accumulated earnings and profits of the corporation as of the close of the preceding taxable year. “(C) Nonrecaptured capital gains deductions.— For purposes of subparagraph (B), the term ‘nonrecaptured capital gains deductions’ means the excess of— “(i) the aggregate amount allowable as a deduction under paragraph (6) for preceding taxable years beginning after the date of the enactment of the Tax Reform Act of 1984, over Ante, p. 494. “(ii) the aggregate of the reductions under subparagraph (B) for preceding taxable years. “(6) Net capital gains.— “(A) In general.— There shall be allowed as a deduction— “(i) the net capital gain for the taxable year (determined with the application of paragraph (7)), reduced by “(ii) the taxes attributable to such net capital gain. “(B) Attributable taxes.— For purposes of subparagraph (A), the taxes attributable to the net capital gain shall be an amount equal to the difference between— “(i) the taxes imposed by this subtitle (E)(cept the tax imposed by this part) for the taxable year, and “(ii) such taxes computed for such year without including in taxable income the net capital gain for the taxable year (determined without the application of paragraph (7)). “(7) Capital loss carryovers.— “(A) Unlimited carryforward.— The net capital loss for any taxable year shall be treated as a short-term capital loss in the next taxable year. “(B) Section 1212 inapplicable.— No allowance shall be made for the capital loss carryback or carryforward provided in section 1212. “(8) Special rules for mere holding or investment companies.— In the case of a mere holding or investment company— “(A) Capital loss deduction, etc., not allowed.— paragraphs (5) and (7)(A) shall not apply. “(B) Deduction for certain offsets.— There shall be allowed as a deduction the net short-term capital gain for the taxable year to the extent such gain does not exceed the amount of any capital loss carryover to such taxable year under section 1212 (determined without regard to paragraph (7)(B)). “(C) Earnings and profits.— For purposes of subchapter C, the accumulated earnings and profits at any time shall not be less than they would be if this subsection had applied to the computation of earnings and profits for all taxable years beginning after the date of the enactment of the Tax Ante, p. 494. Reform Act of 1984.”

21. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 58(b) · 98 Stat. 494

    Added · 26 U.S.C. § 535(b)(8)

    Pub. L. 98–369, § 58(b), added par. (8)

    Source evidence

    Code amendment note
    Subsec. (b)(8). Pub. L. 98–369, § 58(b), added par. (8).

    Enacted provision · exact public law section
    (b) Treatment of Capital Gains and Losses.— Subsection (b) of section 535 (defining accumulated taxable income) is amended by 26 USC 535. striking out paragraphs (5), (6), and (7) and inserting in lieu thereof the following: “(5) Capital losses.— “(A) In general.— Except as provided in subparagraph (B), there shall be allowed as a deduction an amount equal to the net capital loss for the taxable year (determined without regard to paragraph (7)(A)). “(B) Recapture of previous deductions for capital gains.— The aggregate amount allowable as a deduction under subparagraph (A) for any taxable year shall be reduced by the lesser of— “(i) the nonrecaptured capital gains deductions, or “(ii) the amount of the accumulated earnings and profits of the corporation as of the close of the preceding taxable year. “(C) Nonrecaptured capital gains deductions.— For purposes of subparagraph (B), the term ‘nonrecaptured capital gains deductions’ means the excess of— “(i) the aggregate amount allowable as a deduction under paragraph (6) for preceding taxable years beginning after the date of the enactment of the Tax Reform Act of 1984, over Ante, p. 494. “(ii) the aggregate of the reductions under subparagraph (B) for preceding taxable years. “(6) Net capital gains.— “(A) In general.— There shall be allowed as a deduction— “(i) the net capital gain for the taxable year (determined with the application of paragraph (7)), reduced by “(ii) the taxes attributable to such net capital gain. “(B) Attributable taxes.— For purposes of subparagraph (A), the taxes attributable to the net capital gain shall be an amount equal to the difference between— “(i) the taxes imposed by this subtitle (E)(cept the tax imposed by this part) for the taxable year, and “(ii) such taxes computed for such year without including in taxable income the net capital gain for the taxable year (determined without the application of paragraph (7)). “(7) Capital loss carryovers.— “(A) Unlimited carryforward.— The net capital loss for any taxable year shall be treated as a short-term capital loss in the next taxable year. “(B) Section 1212 inapplicable.— No allowance shall be made for the capital loss carryback or carryforward provided in section 1212. “(8) Special rules for mere holding or investment companies.— In the case of a mere holding or investment company— “(A) Capital loss deduction, etc., not allowed.— paragraphs (5) and (7)(A) shall not apply. “(B) Deduction for certain offsets.— There shall be allowed as a deduction the net short-term capital gain for the taxable year to the extent such gain does not exceed the amount of any capital loss carryover to such taxable year under section 1212 (determined without regard to paragraph (7)(B)). “(C) Earnings and profits.— For purposes of subchapter C, the accumulated earnings and profits at any time shall not be less than they would be if this subsection had applied to the computation of earnings and profits for all taxable years beginning after the date of the enactment of the Tax Ante, p. 494. Reform Act of 1984.”

22. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 125(a) · 98 Stat. 494

    Added · 26 U.S.C. § 535(d)

    Pub. L. 98–369, § 125(a), added subsec. (d)

    Source evidence

    Code amendment note
    Subsec. (d). Pub. L. 98–369, § 125(a), added subsec. (d).

    Enacted provision · exact public law section
    (a) General Rule.— Section 535 (defining accumulated taxable 26 USC 535. income) is amended by adding at the end thereof the following new subsection: “(d) Income Distributed to United States-Owned Foreign Corporation Retains United States Connection.— “(1) In general.— For purposes of this part, if 10 percent or more of the earnings and profits of any foreign corporation for any taxable year— “(A) is derived from sources within the United States, or “(B) is effectively connected with the conduct of a trade or business within the United States, any distribution out of such earnings and profits (and any interest payment) received (directly or through 1 or more other entities) by a United States-owned foreign corporation shall be treated as derived by such corporation from sources within the United States. “(2) United states-owned foreign corporation.— The term ‘United States-owned foreign corporation’ has the meaning given to such term by section 904(g)(6).” Ante, p. 638. 26 USC 535 note.

23. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 § 1899A(17) · 100 Stat. 2085

    Substituted · 26 U.S.C. § 535(b)(5)(C)(i); 26 U.S.C. § 535(b)(5)(8)(C)

    Pub. L. 99–514, § 1899A(17), substituted “July 18, 1984” for “the date of the enactment of the Tax Reform Act of 1984”

    Source evidence

    Code amendment note
    Subsec. (b)(5)(C)(i), (8)(C). Pub. L. 99–514, § 1899A(17), substituted “July 18, 1984” for “the date of the enactment of the Tax Reform Act of 1984”.

    Enacted provision · exact public law section
    (17) Clause (i) of section 535(b)(5)(C) and subparagraph (C) of section 535(b)(8) are each amended by striking out “the date of the enactment of the Tax Reform Act of 1984” and inserting in lieu thereof “July 18, 1984”.

24. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 § 1225(a) · 100 Stat. 2085

    Added · 26 U.S.C. § 535(b)(9)

    Pub. L. 99–514, § 1225(a), added par. (9)

    Source evidence

    Code amendment note
    Subsec. (b)(9). Pub. L. 99–514, § 1225(a), added par. (9).

    Enacted provision · exact public law section
    (a) Accumulated Earnings Tax.— Subsection (b) of section 535 (relating to adjustments to taxable income) is amended by adding at the end thereof the following new paragraph: “(9) Special rule for capital gains and losses of foreign corporations.— In the case of a foreign corporation, paragraph (6) shall be applied by taking into account only gains and losses which are effectively connected with the conduct of a trade or business within the United States and are not exempt from tax under treaty.”

25. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 title XI § 11801(c)(18) · 104 Stat. 1388

    Substituted · 26 U.S.C. § 535(c)(5)

    Pub. L. 101–508 substituted “section 1561” for “sections 1561 and 1564”

    Source evidence

    Code amendment note
    Subsec. (c)(5). Pub. L. 101–508 substituted “section 1561” for “sections 1561 and 1564”.

    Enacted provision · exact public law section
    (18) Amendment relating to repeal of section 1564.— paragraph (5) of section 535(c) is amended by striking “sections 1561 and 1564” and inserting “section 1561”.

26. 2004

    Pub. L. 108–357 title IV § 402(b)(1) · 118 Stat. 1418

    Substituted · 26 U.S.C. § 535(d)(2)

    Pub. L. 108–357 substituted “section 904(h)(6)” for “section 904(g)(6)”

    Source evidence

    Code amendment note
    Subsec. (d)(2). Pub. L. 108–357 substituted “section 904(h)(6)” for “section 904(g)(6)”.

    Enacted provision · exact public law section
    (1) Section 535(d)(2) is amended by striking “section 904(g)(6)” and inserting “section 904(h)(6)”.

27. 2005

    Tax Technical Corrections Act of 2005

    Pub. L. 109–135 title IV § 403(n)(2) · 119 Stat. 2577

    Added · 26 U.S.C. § 535(b)(10)

    Pub. L. 109–135 added par. (10)

    Source evidence

    Code amendment note
    Subsec. (b)(10). Pub. L. 109–135 added par. (10).

    Enacted provision · exact public law section
    (2) Subsection (b) of section 535 is amended by adding at the end the following new paragraph: “(10) Controlled foreign corporations.— There shall be allowed as a deduction the amount of the corporation’s income for the taxable year which is included in the gross income of a United States shareholder under section 951(a). In the case of any corporation the accumulated taxable income of which would (but for this sentence) be determined without allowance of any deductions, the deduction under this paragraph shall be allowed and shall be appropriately adjusted to take into account any deductions which reduced such inclusion.” .

28. 2014

    Tax Technical Corrections Act of 2014

    Pub. L. 113–295 div. A title II § 221(a)(64) · 128 Stat. 4010

    Substituted · 26 U.S.C. § 535(b)(1)

    Pub. L. 113–295 substituted “section 531 or the personal holding company tax imposed by section 541.” for “section 531, the personal holding company tax imposed by section 541, or the taxes imposed by corresponding sections of a prior income tax law.”

    Source evidence

    Code amendment note
    Subsec. (b)(1). Pub. L. 113–295 substituted “section 531 or the personal holding company tax imposed by section 541.” for “section 531, the personal holding company tax imposed by section 541, or the taxes imposed by corresponding sections of a prior income tax law.”

    Enacted provision · exact public law section
    (64) Accumulated taxable income.— Paragraph (1) of section 535(b) and paragraph (1) of section 545(b) are each amended by striking “section 531” and all that follows and inserting “section 531 or the personal holding company tax imposed by section 541.”.

29. 2017

    Pub. L. 115–97 § 14301(c)(4) · 131 Stat. 2054

    Substituted · 26 U.S.C. § 535(b)(1)

    Pub. L. 115–97, § 14301(c)(4), substituted “section 960” for “section 902(a) or 960(a)(1)”

    Source evidence

    Code amendment note
    Subsec. (b)(1). Pub. L. 115–97, § 14301(c)(4), substituted “section 960” for “section 902(a) or 960(a)(1)”.

    Enacted provision · exact public law section
    (4) Sections 535(b)(1) and 545(b)(1) are each amended by striking “section 902(a) or 960(a)(1)” and inserting “section 960”.

    Effective date note
    Amendment by section 13001(b)(5)(B) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 13001(c)(1) of Pub. L. 115–97, set out as a note under section 11 of this title. Amendment by section 14301(c)(4) of 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.

30. 2017

    Pub. L. 115–97 § 13001(b)(5)(B) · 131 Stat. 2054

    Amended · 26 U.S.C. § 535(c)(5)

    Pub. L. 115–97, § 13001(b)(5)(B), amended par. (5) generally. Prior to amendment, text read as follows: “For denial of credit provided in paragraph (2) or (3) where multiple corporations are formed to avoid tax, see section 1551, and for limitation on such credit in the case of certain controlled corporations, see section 1561.”

    Source evidence

    Code amendment note
    Subsec. (c)(5). Pub. L. 115–97, § 13001(b)(5)(B), amended par. (5) generally. Prior to amendment, text read as follows: “For denial of credit provided in paragraph (2) or (3) where multiple corporations are formed to avoid tax, see section 1551, and for limitation on such credit in the case of certain controlled corporations, see section 1561.”

    Enacted provision · exact public law section
    (B) Section 535(c)(5) is amended to read as follows: “(5) Cross reference.— For limitation on credit provided in paragraph (2) or (3) in the case of certain controlled corporations, see section 1561.” .

    Effective date note
    Amendment by section 13001(b)(5)(B) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 13001(c)(1) of Pub. L. 115–97, set out as a note under section 11 of this title. Amendment by section 14301(c)(4) of 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.

39 of 40 references resolved to an enrolled provision · 1 partial