§ 956. Investment of earnings in United States property

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. 1962

   Revenue Act of 1962

   Pub. L. 87–834 § 12(a) · 76 Stat. 960

   Enacted · 26 U.S.C. § 956

   Added Pub. L. 87–834, § 12(a), Oct. 16, 1962, 76 Stat. 1015

   Source evidence

   Code source credit
   Added Pub. L. 87–834, § 12(a), Oct. 16, 1962, 76 Stat. 1015

2. 1976

   Pub. L. 94–455 § 1021(a) · 90 Stat. 1520

   1. Added · 26 U.S.C. § 956(b)(2)(F)(H)

      Pub. L. 94–455, § 1021(a), added subpars. (F) and (G)

   2. Redesignated · 26 U.S.C. § 956(b)(2)(F)(H)

      Pub. L. 94–455, § 1021(a), redesignated former subpar. (F) as (H)

   Source evidence

   Code amendment note
   Subsec. (b)(2)(F) to (H). Pub. L. 94–455, § 1021(a), added subpars. (F) and (G) and redesignated former subpar. (F) as (H).

   Enacted provision · exact public law section
   (a) Exceptions to Definition of United States Property.— Section 956(b)(2) (relating to exceptions to definition of United States property) is amended by striking out “and” at the end of sub-paragraph (E),by redesignating subparagraph (F) as subparagraph (H), and by inserting after subparagraph (E) the following new subparagraphs: “(F) the stock or obligations of a domestic corporation which is neither a United States shareholder (as defined in section 951(b)) of the controlled foreign corporation, nor a domestic corporation, 25 percent or more of the total combined voting power of which, immediately after the acquisition of any stock in such domestic corporation by the controlled foreign corporation, is owned, or is considered as being owned, by such United States shareholder’s in the aggregate; “(G) any movable property (other than a vessel or aircraft) which is used for the purpose of exploring for, developing, removing, or transporting resources from ocean waters or under such waters when used on the Continental Shelf of the United States: and”.

3. 1976

   Pub. L. 94–455 § 1906(b)(13)(A) · 90 Stat. 1520

   Struck · 26 U.S.C. § 956(c)

   Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”

   Source evidence

   Code amendment note
   Subsec. (c). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

   Enacted provision · exact public law section
   (A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”.

4. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 801(d)(8) · 98 Stat. 494

   Added · 26 U.S.C. § 956(b)(2)(I)

   Pub. L. 98–369, § 801(d)(8), added subpar. (I)

   Source evidence

   Code amendment note
   Subsec. (b)(2)(I). Pub. L. 98–369, § 801(d)(8), added subpar. (I).

   Enacted provision · exact public law section
   (8) Paragraph (2) of section 956(b) (defining United States property) is amended by striking out “and” at the end of subparagraph (G), by striking out the period at the end of subparagraph (H) and inserting in lieu thereof a semicolon and “and”, and by adding at the end thereof the following new subparagraph: “(I) to the extent provided in regulations prescribed by the Secretary, property which is otherwise United States property which is held by a FSC and which is related to the export activities of such FSC.”.

5. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 123(b) · 98 Stat. 494

   Added · 26 U.S.C. § 956(b)(3)

   Pub. L. 98–369, § 123(b), added par. (3)

   Source evidence

   Code amendment note
   Subsec. (b)(3). Pub. L. 98–369, § 123(b), added par. (3).

   Enacted provision · exact public law section
   (b) Treatment as United States Property.— Subsection (b) of 26 USC 956. section 956 (defining United States property) is amended by adding at the end thereof the following new paragraph: “(3) Certain trade or service receivables acquired from related united states persons.— “(A) In general.— Notwithstanding paragraph (2), the term ‘United States property’ includes any trade or service receivable if— “(i) such trade or service receivable is acquired (directly or indirectly) from a related person who is a United States person, and “(ii) the obligor under such receivable is a United States person. “(B) Definitions.— For purposes of this paragraph, the term ‘trade or service receivable’ and ‘related person’ have the respective meanings given to such terms by section Ante, p. 644. 864(d).”

6. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 title XVIII § 1810(c)(1) · 100 Stat. 2085

   Inserted · 26 U.S.C. § 956(b)(3)(A)

   Pub. L. 99–514 inserted “(other than subparagraph (H) thereof)”

   Source evidence

   Code amendment note
   Subsec. (b)(3)(A). Pub. L. 99–514 inserted “(other than subparagraph (H) thereof)”.

   Enacted provision · exact public law section
   (1) Subparagraph (A) of section 956(b)(3) (relating to certain trade or service receivables acquired from related United States persons) is amended by striking out “paragraph (2)” and inserting in lieu thereof “paragraph (2) (other than subparagraph (H) thereof)”.

7. 1993

   Revenue Reconciliation Act of 1993

   Pub. L. 103–66 § 13232(a)(2) · 107 Stat. 312

   1. Added · 26 U.S.C. § 956(a)

      Pub. L. 103–66, § 13232(a)(2), added subsec. (a)

   2. Struck · 26 U.S.C. § 956(a)

      Pub. L. 103–66, § 13232(a)(2), struck out former subsec. (a) which consisted of introductory provisions and pars. (1) to (3) setting out general rules for calculating amount of earnings of a controlled foreign corporation invested in United States and pro rata share of the increase for any taxable year in earnings of such a corporation invested in United States property

   Source evidence

   Code amendment note
   Subsec. (a). Pub. L. 103–66, § 13232(a)(2), added subsec. (a) and struck out former subsec. (a) which consisted of introductory provisions and pars. (1) to (3) setting out general rules for calculating amount of earnings of a controlled foreign corporation invested in United States and pro rata share of the increase for any taxable year in earnings of such a corporation invested in United States property.

   Enacted provision · exact public law section
   (2) by striking subsection (a) and inserting the following: “(a) General Rule.— In the case of any controlled foreign corporation, the amount determined under this section with respect to any United States shareholder for any taxable year is the lesser of— “(1) the excess (if any) of— “(A) such shareholder’s pro rata share of the average of the amounts of United States property held (directly or indirectly) by the controlled foreign corporation as of the close of each quarter of such taxable year, over “(B) the amount of earnings and profits described in section 959(c)(1)(A) with respect to such shareholder, or “(2) such shareholder’s pro rata share of the applicable earnings of such controlled foreign corporation. The amount taken into account under paragraph (1) with respect to any property shall be its adjusted basis as determined for purposes of computing earnings and profits, reduced by any liability to which the property is subject. “(b) Special Rules.— “(1) Applicable earnings.— For purposes of this section, the term ‘applicable earnings’ has the meaning given to such term by section 956A(b), except that the provisions of such section excluding earnings and profits accumulated in taxable years beginning before October 1, 1993, shall be disregarded. “(2) Special rule for u.s. property acquired before corporation is a controlled foreign corporation.— In applying subsection (a) to any taxable year, there shall be disregarded any item of United States property which was acquired by the controlled foreign corporation before the first day on which such corporation was treated as a controlled foreign corporation. The aggregate amount of property disregarded under the preceding sentence shall not exceed the portion of the applicable earnings of such controlled foreign corporation which were accumulated during periods before such first day. “(3) Special rule where corporation ceases to be controlled foreign corporation.— Rules similar to the rules of section 956A(e) shall apply for purposes of this section.”

8. 1993

   Revenue Reconciliation Act of 1993

   Pub. L. 103–66 § 13232(a) · 107 Stat. 312

   1. Added · 26 U.S.C. § 956(b)(d)

      Pub. L. 103–66, § 13232(a), added subsec. (b)

   2. Redesignated · 26 U.S.C. § 956(b)(d)

      Pub. L. 103–66, § 13232(a), redesignated former subsecs. (b) and (c) as (c) and (d), respectively

   Source evidence

   Code amendment note
   Subsecs. (b) to (d). Pub. L. 103–66, § 13232(a), added subsec. (b) and redesignated former subsecs. (b) and (c) as (c) and (d), respectively.

   Enacted provision · exact public law section
   (a) General Rule.— Section 956 (relating to investment of earnings in United States property) is amended— 26 USC 956. (1) by redesignating subsections (b) and (c) as subsections (c) and (d), respectively, and (2) by striking subsection (a) and inserting the following: “(a) General Rule.— In the case of any controlled foreign corporation, the amount determined under this section with respect to any United States shareholder for any taxable year is the lesser of— “(1) the excess (if any) of— “(A) such shareholder’s pro rata share of the average of the amounts of United States property held (directly or indirectly) by the controlled foreign corporation as of the close of each quarter of such taxable year, over “(B) the amount of earnings and profits described in section 959(c)(1)(A) with respect to such shareholder, or “(2) such shareholder’s pro rata share of the applicable earnings of such controlled foreign corporation. The amount taken into account under paragraph (1) with respect to any property shall be its adjusted basis as determined for purposes of computing earnings and profits, reduced by any liability to which the property is subject. “(b) Special Rules.— “(1) Applicable earnings.— For purposes of this section, the term ‘applicable earnings’ has the meaning given to such term by section 956A(b), except that the provisions of such section excluding earnings and profits accumulated in taxable years beginning before October 1, 1993, shall be disregarded. “(2) Special rule for u.s. property acquired before corporation is a controlled foreign corporation.— In applying subsection (a) to any taxable year, there shall be disregarded any item of United States property which was acquired by the controlled foreign corporation before the first day on which such corporation was treated as a controlled foreign corporation. The aggregate amount of property disregarded under the preceding sentence shall not exceed the portion of the applicable earnings of such controlled foreign corporation which were accumulated during periods before such first day. “(3) Special rule where corporation ceases to be controlled foreign corporation.— Rules similar to the rules of section 956A(e) shall apply for purposes of this section.”

9. 1993

   Revenue Reconciliation Act of 1993

   Pub. L. 103–66 § 13232(b) · 107 Stat. 312

   Added · 26 U.S.C. § 956(e)

   Pub. L. 103–66, § 13232(b), added subsec. (e)

   Source evidence

   Code amendment note
   Subsec. (e). Pub. L. 103–66, § 13232(b), added subsec. (e).

   Enacted provision · exact public law section
   (b) Regulatory Authority.— Section 956 is amended by adding at the end thereof the following new subsection: “(e) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations to prevent the avoidance of the provisons of this section through reorganizations or otherwise.”

10. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 § 1501(b)(2) · 110 Stat. 1755

    Amended · 26 U.S.C. § 956(b)(1)

    Pub. L. 104–188, § 1501(b)(2), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of this section, the term ‘applicable earnings’ has the meaning given to such term by section 956A(b), except that the provisions of such section excluding earnings and profits accumulated in taxable years beginning before October 1, 1993, shall be disregarded.”

    Source evidence

    Code amendment note
    Subsec. (b)(1). Pub. L. 104–188, § 1501(b)(2), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of this section, the term ‘applicable earnings’ has the meaning given to such term by section 956A(b), except that the provisions of such section excluding earnings and profits accumulated in taxable years beginning before October 1, 1993, shall be disregarded.”

    Enacted provision · exact public law section
    (2) Paragraph (1) of section 956(b) is amended to read as follows: “(1) Applicable earnings.— For purposes of this section, the term ‘applicable earnings’ means, with respect to any controlled foreign corporation, the sum of— “(A) the amount (not including a deficit) referred to in section 316(a)(1), and “(B) the amount referred to in section 316(a)(2), but reduced by distributions made during the taxable year and by earnings and profits described in section 959(c)(1).”.

11. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 § 1501(b)(3) · 110 Stat. 1755

    Amended · 26 U.S.C. § 956(b)(3)

    Pub. L. 104–188, § 1501(b)(3), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Rules similar to the rules of section 956A(e) shall apply for purposes of this section.”

    Source evidence

    Code amendment note
    Subsec. (b)(3). Pub. L. 104–188, § 1501(b)(3), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Rules similar to the rules of section 956A(e) shall apply for purposes of this section.”

    Enacted provision · exact public law section
    (3) Paragraph (3) of section 956(b) is amended to read as follows: “(3) Special rule where corporation ceases to be controlled foreign corporation.— if any foreign corporation ceases to be a controlled foreign corporation during any taxable year— “(A) the determination of any United States shareholder’s pro rata share shall be made on the basis of stock owned (within the meaning of section 958(a)) by such shareholder on the last day during the taxable year on which the foreign corporation is a controlled foreign corporation, “(B) the average referred to in subsection (a)(1)(A) for such taxable year shall be determined by only talting into account quarters ending on or before such last day, and “(C) in determining applicable earnings, the amount taken into account by reason of being described in paragraph (2) of section 316(a) shall be the portion of the amount so described which is allocable (on a pro rata basis) to the part of such year during which the corporation is a controlled foreign corporation.”.

12. 1997

    Pub. L. 105–34 § 1601(e) · 111 Stat. 788

    Inserted · 26 U.S.C. § 956(b)(1)(A)

    Pub. L. 105–34, § 1601(e), inserted “to the extent such amount was accumulated in prior taxable years” after “section 316(a)(1)”

    Source evidence

    Code amendment note
    Subsec. (b)(1)(A). Pub. L. 105–34, § 1601(e), inserted “to the extent such amount was accumulated in prior taxable years” after “section 316(a)(1)”.

    Enacted provision · exact public law section
    (E) Clause (i) of section 408(p)(2)(D) is amended by adding at the end the following new sentence: “If only individuals other than employees described in subparagraph (A) or (B) of section 410(b)(3) are eligible to participate in such arrangement, then the preceding sentence shall be applied without regard to any qualified plan in which only employees so described are eligible to participate.”.

13. 1997

    Pub. L. 105–34 § 1173(a) · 111 Stat. 788

    Added · 26 U.S.C. § 956(c)(2)

    Pub. L. 105–34, § 1173(a), added subpars. (J) and (K) and concluding provisions

    Source evidence

    Code amendment note
    Subsec. (c)(2). Pub. L. 105–34, § 1173(a), added subpars. (J) and (K) and concluding provisions.

    Enacted provision · exact public law section
    (a) In General.— Section 956(c)(2) is amended by striking “and” at the end of subparagraph (H), by striking the period at the end of subparagraph (I) and inserting a semicolon, and by adding at the end the following new subparagraphs: “(J) deposits of cash or securities made or received on commercial terms in the ordinary course of a United States or foreign person’s business as a dealer in securities or in commodities, but only to the extent such deposits are made or received as collateral or margin for (i) a securities loan, notional principal contract, options contract, forward contract, or futures contract, or (ii) any other financial transaction in which the Secretary determines that it is customary to post collateral or margin; and “(K) an obligation of a United States person to the extent the principal amount of the obligation does not exceed the fair market value of readily marketable securities sold or purchased pursuant to a sale and repurchase agreement or otherwise posted or received as collateral for the obligation in the ordinary course of its business by a United States or foreign person which is a dealer in securities or commodities. For purposes of subparagraphs (J) and (K), the term ‘dealer in securities’ has the meaning given such term by section 475(c)(1), and the term ‘dealer in commodities’ has the meaning given such term by section 475(e), except that such term shall include a futures commission merchant.”.

14. 2004

    Pub. L. 108–357 § 407(b) · 118 Stat. 1418

    Substituted · 26 U.S.C. § 956(c)(2)

    Pub. L. 108–357, § 407(b), substituted “, (K), and (L)” for “and (K)” in concluding provisions

    Source evidence

    Code amendment note
    Subsec. (c)(2). Pub. L. 108–357, § 407(b), substituted “, (K), and (L)” for “and (K)” in concluding provisions.

    Enacted provision · exact public law section
    (b) Conforming Amendment.— Section 956(c)(2) is amended by striking “and (K)” in the last sentence and inserting “, (K), and (L)”.

    Effective date note
    Pub. L. 108–357, title IV, § 407(c), Oct. 22, 2004, 118 Stat. 1499, provided that: “The amendments made by this section [amending this section] shall apply to taxable years of foreign corporations beginning after December 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.” Pub. L. 108–357, title VIII, § 837(b), Oct. 22, 2004, 118 Stat. 1596, provided that: “The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [Oct. 22, 2004].”

15. 2004

    Pub. L. 108–357 § 837(a) · 118 Stat. 1418

    Amended · 26 U.S.C. § 956(c)(2)(A)

    Pub. L. 108–357, § 837(a), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “obligations of the United States, money, or deposits with persons carrying on the banking business;”

    Source evidence

    Code amendment note
    Subsec. (c)(2)(A). Pub. L. 108–357, § 837(a), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “obligations of the United States, money, or deposits with persons carrying on the banking business;”.

    Enacted provision · exact public law section
    (a) In General.— Subparagraph (A) of section 956(c)(2) is amended to read as follows: “(A) obligations of the United States, money, or deposits with— “(i) any bank (as defined by section 2(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)), without regard to subparagraphs (C) and (G) of paragraph (2) of such section), or “(ii) any corporation not described in clause (i) with respect to which a bank holding company (as defined by section 2(a) of such Act) or financial holding company (as defined by section 2(p) of such Act) owns directly or indirectly more than 80 percent by vote or value of the stock of such corporation;” .

    Effective date note
    Pub. L. 108–357, title IV, § 407(c), Oct. 22, 2004, 118 Stat. 1499, provided that: “The amendments made by this section [amending this section] shall apply to taxable years of foreign corporations beginning after December 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.” Pub. L. 108–357, title VIII, § 837(b), Oct. 22, 2004, 118 Stat. 1596, provided that: “The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [Oct. 22, 2004].”

16. 2004

    Pub. L. 108–357 § 407(a) · 118 Stat. 1418

    Added · 26 U.S.C. § 956(c)(2)(L); 26 U.S.C. § 956(c)(2)(M)

    Pub. L. 108–357, § 407(a), added subpars. (L) and (M)

    Source evidence

    Code amendment note
    Subsec. (c)(2)(L), (M). Pub. L. 108–357, § 407(a), added subpars. (L) and (M).

    Enacted provision · exact public law section
    (a) In General.— Section 956(c)(2) (relating to exceptions from property treated as United States property) is amended by striking “and” at the end of subparagraph (J), by striking the period at the end of subparagraph (K) and inserting a semicolon, and by adding at the end the following new subparagraphs: “(L) securities acquired and held by a controlled foreign corporation in the ordinary course of its business as a dealer in securities if— “(i) the dealer accounts for the securities as securities held primarily for sale to customers in the ordinary course of business, and “(ii) the dealer disposes of the securities (or such securities mature while held by the dealer) within a period consistent with the holding of securities for sale to customers in the ordinary course of business; and “(M) an obligation of a United States person which— “(i) is not a domestic corporation, and “(ii) is not— “(I) a United States shareholder (as defined in section 951(b)) of the controlled foreign corporation, or “(II) a partnership, estate, or trust in which the controlled foreign corporation, or any related person (as defined in section 954(d)(3)), is a partner, beneficiary, or trustee immediately after the acquisition of any obligation of such partnership, estate, or trust by the controlled foreign corporation.” .

    Effective date note
    Pub. L. 108–357, title IV, § 407(c), Oct. 22, 2004, 118 Stat. 1499, provided that: “The amendments made by this section [amending this section] shall apply to taxable years of foreign corporations beginning after December 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.” Pub. L. 108–357, title VIII, § 837(b), Oct. 22, 2004, 118 Stat. 1596, provided that: “The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [Oct. 22, 2004].”

17. 2007

    Tax Technical Corrections Act of 2007

    Pub. L. 110–172 § 11(g)(15)(A)(ii) · 121 Stat. 2473

    Substituted · 26 U.S.C. § 956(c)(2)

    Pub. L. 110–172, § 11(g)(15)(A)(ii), substituted “subparagraphs (I), (J), and (K)” for “subparagraphs (J), (K), and (L)” in concluding provisions

    Source evidence

    Code amendment note
    Subsec. (c)(2). Pub. L. 110–172, § 11(g)(15)(A)(ii), substituted “subparagraphs (I), (J), and (K)” for “subparagraphs (J), (K), and (L)” in concluding provisions.

    Enacted provision · exact public law section
    (ii) by striking “subparagraphs (J), (K), and (L)” in the flush sentence at the end and inserting “subparagraphs (I), (J), and (K)”.

18. 2007

    Tax Technical Corrections Act of 2007

    Pub. L. 110–172 § 11(g)(15)(A)(i) · 121 Stat. 2473

    1. Redesignated · 26 U.S.C. § 956(c)(2)(I)(M)

       Pub. L. 110–172, § 11(g)(15)(A)(i), redesignated subpars. (J) to (M) as (I) to (L), respectively

    2. Struck · 26 U.S.C. § 956(c)(2)(I)(M)

       Pub. L. 110–172, § 11(g)(15)(A)(i), struck out former subpar. (I) which read as follows: “to the extent provided in regulations prescribed by the Secretary, property which is otherwise United States property which is held by a FSC and which is related to the export activities of such FSC;”

    Source evidence

    Code amendment note
    Subsec. (c)(2)(I) to (M). Pub. L. 110–172, § 11(g)(15)(A)(i), redesignated subpars. (J) to (M) as (I) to (L), respectively, and struck out former subpar. (I) which read as follows: “to the extent provided in regulations prescribed by the Secretary, property which is otherwise United States property which is held by a FSC and which is related to the export activities of such FSC;”.

    Enacted provision · exact public law section
    (i) by striking subparagraph (I) and by redesignating subparagraphs (J) through (M) as subparagraphs (I) through (L), respectively, and

19. 2018

    Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 § 401(a)(162) · 132 Stat. 348

    Substituted · 26 U.S.C. § 956(c)(2)(E)

    Pub. L. 115–141, § 401(a)(162), substituted “which are contracts described in section 953(e)(2)” for “which are not contracts described in section 953(a)(1)”

    Source evidence

    Code amendment note
    Subsec. (c)(2)(E). Pub. L. 115–141, § 401(a)(162), substituted “which are contracts described in section 953(e)(2)” for “which are not contracts described in section 953(a)(1)”.

    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.

20. 2018

    Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 § 401(a)(163) · 132 Stat. 348

    Substituted · 26 U.S.C. § 956(e)

    Pub. L. 115–141, § 401(a)(163), substituted “provisions” for “provisons”

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 115–141, § 401(a)(163), substituted “provisions” for “provisons”.

    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.

23 of 24 references resolved to an enrolled provision · 1 partial