Title 26 — Internal Revenue Code
Part III · Chapter 1 — Normal Taxes and Surtaxes
§ 964. Miscellaneous provisions
Statutory text
Earnings and profits
Except as provided in section 312(k)(4), for purposes of this subpart, the earnings and profits of any foreign corporation, and the deficit in earnings and profits of any foreign corporation, for any taxable year shall be determined according to rules substantially similar to those applicable to domestic corporations, under regulations prescribed by the Secretary. In determining such earnings and profits, or the deficit in such earnings and profits, the amount of any illegal bribe, kickback, or other payment (within the meaning of section 162(c)) shall not be taken into account to decrease such earnings and profits or to increase such deficit. The payments referred to in the preceding sentence are payments which would be unlawful under the Foreign Corrupt Practices Act of 1977 if the payor were a United States person.
Blocked foreign income
Under regulations prescribed by the Secretary, no part of the earnings and profits of a controlled foreign corporation for any taxable year shall be included in earnings and profits for purposes of sections 952 and 956, if it is established to the satisfaction of the Secretary that such part could not have been distributed by the controlled foreign corporation to United States shareholders who own (within the meaning of section 958(a)) stock of such controlled foreign corporation because of currency or other restrictions or limitations imposed under the laws of any foreign country.
Records and accounts of United States shareholders
Records and accounts to be maintained
The Secretary may by regulations require each person who is, or has been, a United States shareholder of a controlled foreign corporation to maintain such records and accounts as may be prescribed by such regulations as necessary to carry out the provisions of this subpart and subpart G.
Two or more persons required to maintain or furnish the same records and accounts with respect to the same foreign corporation
Where, but for this paragraph, two or more United States persons would be required to maintain or furnish the same records and accounts as may by regulations be required under paragraph (1) with respect to the same controlled foreign corporation for the same period, the Secretary may by regulations provide that the maintenance or furnishing of such records and accounts by only one such person shall satisfy the requirements of paragraph (1) for such other persons.
Treatment of certain branches
In general
For purposes of this chapter, section 6038, section 6046, and such other provisions as may be specified in regulations—
a qualified insurance branch of a controlled foreign corporation shall be treated as a separate foreign corporation created under the laws of the foreign country with respect to which such branch qualifies under paragraph (2), and
except as provided in regulations, any amount directly or indirectly transferred or credited from such branch to one or more other accounts of such controlled foreign corporation shall be treated as a dividend paid to such controlled foreign corporation.
Qualified insurance branch
For purposes of paragraph (1), the term “qualified insurance branch” means any branch of a controlled foreign corporation which is licensed and predominantly engaged on a permanent basis in the active conduct of an insurance business in a foreign country if—
separate books and accounts are maintained for such branch,
the principal place of business of such branch is in such foreign country,
such branch would be taxable under subchapter L if it were a separate domestic corporation, and
an election under this paragraph applies to such branch.
An election under this paragraph shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.
Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.
Gain on certain stock sales by controlled foreign corporations treated as dividends
In general
If a controlled foreign corporation sells or exchanges stock in any other foreign corporation, gain recognized on such sale or exchange shall be included in the gross income of such controlled foreign corporation as a dividend to the same extent that it would have been so included under section 1248(a) if such controlled foreign corporation were a United States person. For purposes of determining the amount which would have been so includible, the determination of whether such other foreign corporation was a controlled foreign corporation shall be made without regard to the preceding sentence.
Same country exception not applicable
Clause (i) of section 954(c)(3)(A) shall not apply to any amount treated as a dividend by reason of paragraph (1).
Clarification of deemed sales
For purposes of this subsection, a controlled foreign corporation shall be treated as having sold or exchanged any stock if, under any provision of this subtitle, such controlled foreign corporation is treated as having gain from the sale or exchange of such stock.
Coordination with dividends received deduction
In general
If, for any taxable year of a controlled foreign corporation beginning after , any amount is treated as a dividend under paragraph (1) by reason of a sale or exchange by the controlled foreign corporation of stock in another foreign corporation held for 1 year or more, then, notwithstanding any other provision of this title—
the foreign-source portion of such dividend shall be treated for purposes of section 951(a)(1)(A) as subpart F income of the selling controlled foreign corporation for such taxable year,
a United States shareholder with respect to the selling controlled foreign corporation shall include in gross income for the taxable year of the shareholder with or within which such taxable year of the controlled foreign corporation ends an amount equal to the shareholder’s pro rata share (determined in the same manner as under section 951(a)(2)) of the amount treated as subpart F income under clause (i), and
the deduction under section 245A(a) shall be allowable to the United States shareholder with respect to the subpart F income included in gross income under clause (ii) in the same manner as if such subpart F income were a dividend received by the shareholder from the selling controlled foreign corporation.
Application of basis or similar adjustment
For purposes of this title, in the case of a sale or exchange by a controlled foreign corporation of stock in another foreign corporation in a taxable year of the selling controlled foreign corporation beginning after , rules similar to the rules of section 961(d) shall apply.
Foreign-source portion
For purposes of this paragraph, the foreign-source portion of any amount treated as a dividend under paragraph (1) shall be determined in the same manner as under section 245A(c).
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.
Revenue Act of 1962
Pub. L. 87–834 § 12(a) · 76 Stat. 960
Enacted · 26 U.S.C. § 964
Added Pub. L. 87–834, § 12(a), Oct. 16, 1962, 76 Stat. 1027
Source evidence
Code source credit
Added Pub. L. 87–834, § 12(a), Oct. 16, 1962, 76 Stat. 1027Tax Reform Act of 1969
Pub. L. 91–172 title IV § 442(b)(1) · 83 Stat. 487
Inserted · 26 U.S.C. § 964(a)
Pub. L. 91–172 inserted reference to the exception provided for in section 312(m)(3)
Source evidence
Code amendment note
Subsec. (a). Pub. L. 91–172 inserted reference to the exception provided for in section 312(m)(3).Enacted provision · exact public law section
(1) Section 964(a) (relating to earnings and profits of a foreign corporation) is amended by striking out “For purposes of this subpart,” and inserting in lieu thereof “Except as provided in section 312(m)(3), for purposes of this subpart”.Pub. L. 94–455 title X § 1065(b) · 90 Stat. 1520
Struck · 26 U.S.C. § 964(a)
Pub. L. 94–455, §§ 1065(b), 1901(b)(32)(B)(ii), 1906(b)(13)(A), struck out “or his delegate” after “Secretary”
Inserted · 26 U.S.C. § 964(a)
Pub. L. 94–455, §§ 1065(b), 1901(b)(32)(B)(ii), 1906(b)(13)(A), inserted second sentence
Substituted · 26 U.S.C. § 964(a)
Pub. L. 94–455, §§ 1065(b), 1901(b)(32)(B)(ii), 1906(b)(13)(A), substituted “312(k)(3)” for “312(m)(3)” after “provided in section”
Source evidence
Code amendment note
Subsec. (a). Pub. L. 94–455, §§ 1065(b), 1901(b)(32)(B)(ii), 1906(b)(13)(A), struck out “or his delegate” after “Secretary”, inserted second sentence, and substituted “312(k)(3)” for “312(m)(3)” after “provided in section”.Enacted provision · exact public law section
(b) Bribes Not To Reduce Foreign Earnings and Profits.— Section 964(a) (relating to earnings and profits of foreign corporations) is amended by adding at the end thereof the following sentence,: “In determining such earnings and profits, or the deficit in such earnings and profits, the amount of any illegal bribe, kick-back, or other payment (within the meaning of section 162(c)) shall not be taken into account to decrease such earnings and profits or to increase such deficit.”.Pub. L. 94–455 § 1906(b)(13)(A) · 90 Stat. 1520
Struck · 26 U.S.C. § 964(b); 26 U.S.C. § 964(c)(1); 26 U.S.C. § 964(2)
Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary” whenever appearing
Source evidence
Code amendment note
Subsecs. (b), (c)(1), (2). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary” whenever appearing.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”.Economic Recovery Tax Act of 1981
Pub. L. 97–34 title II § 206(c) · 95 Stat. 175
Substituted · 26 U.S.C. § 964(a)
Pub. L. 97–34 substituted “section 312(k)(4)” for “section 312(k)(3)”
Source evidence
Code amendment note
Subsec. (a). Pub. L. 97–34 substituted “section 312(k)(4)” for “section 312(k)(3)”.Enacted provision · exact public law section
(c) Conforming Amendment.— Subsection (a) of section 964 (relating 26 USC 964. to miscellaneous provisions involving controlled foreign corporations) is amended by striking out “section 312(k)(3)” and inserting in lieu thereof “section 312(k)(4)”.Pub. L. 97–248 title II § 288(b)(2) · 96 Stat. 324
Inserted · 26 U.S.C. § 964(a)
Pub. L. 97–248 inserted provision that payments referred to in sentence beginning “In determining such earnings and profits” are payments which would be unlawful under the Foreign Corrupt Practices Act of 1977 if the payor were a United States person
Source evidence
Code amendment note
Subsec. (a). Pub. L. 97–248 inserted provision that payments referred to in sentence beginning “In determining such earnings and profits” are payments which would be unlawful under the Foreign Corrupt Practices Act of 1977 if the payor were a United States person.Enacted provision · exact public law section
(2) Subsection (a) of section 964 is amended by adding at the 26 USC 964. end thereof the following new sentence: “The payments referred to in the preceding sentence are payments which would be unlawful under the Foreign Corrupt Practices Act of 1977 if the payor were a United States person.”Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 title VI § 6129(a) · 102 Stat. 3342
Added · 26 U.S.C. § 964(d)
Pub. L. 100–647 added subsec. (d)
Source evidence
Code amendment note
Subsec. (d). Pub. L. 100–647 added subsec. (d).Enacted provision · exact public law section
SEC. 6129. TREATMENT OF CERTAIN INSURANCE BRANCHES OF FOREIGN CORPORATIONS. (b) General Rule.— Section 964 of the 1986 Code (relating to miscellaneous provisions) is amended by adding at the end thereof the following new subsection: “(d) Treatment of Certain Branches.— “(1) In general.— For purposes of this chapter, section 6038, section 6046, and such other provisions as may be specified in regulations— “(A) a qualified insurance branch of a controlled foreign corporation shall be treated as a separate foreign corporation created under the laws of the foreign country with respect to which such branch qualifies under paragraph (2), and “(B) except as provided in regulations, any amount directly or indirectly transferred or credited from such branch to one or more other accounts of such controlled foreign corporation shall be treated as a dividend paid to such controlled foreign corporation. “(2) Qualified insurance branch.— For purposes of paragraph (1), the term ‘qualified insurance branch’ means any branch of a controlled foreign corporation which is licensed and predominantly engaged on a permanent basis in the active conduct of an insurance business in a foreign country if— “(A) separate books and accounts are maintained for such branch, “(B) the principal place of business of such branch is in such foreign country, “(C) such branch would be taxable under subchapter L if it were a separate domestic corporation, and “(D) an election under this paragraph applies to such branch. An election under this paragraph shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary. “(3) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.” (b) Effective Date.— The amendment made by subsection (a) shall apply to taxable years of foreign corporations beginning after December 31, 1988.Pub. L. 105–34 title XI § 1111(a) · 111 Stat. 788
Added · 26 U.S.C. § 964(e)
Pub. L. 105–34 added subsec. (e)
Source evidence
Code amendment note
Subsec. (e). Pub. L. 105–34 added subsec. (e).Enacted provision · exact public law section
(a) General Rule.— Section 964 (relating to miscellaneous provisions) is amended by adding at the end thereof the following new subsection: “(e) Gain on Certain Stock Sales by Controlled Foreign Corporations Treated as Dividends.— “(1) In general.— If a controlled foreign corporation sells or exchanges stock in any other foreign corporation, gain recognized on such sale or exchange shall be included in the gross income of such controlled foreign corporation as a dividend to the same extent that it would have been so included under section 1248(a) if such controlled foreign corporation were a United States person. For purposes of determining the amount which would have been so includible, the determination of whether such other foreign corporation was a controlled foreign corporation shall be made without regard to the preceding sentence. “(2) Same country exception not applicable.— Clause (i) of section 954(c)(3)(A) shall not apply to any amount treated as a dividend by reason of paragraph (1). “(3) Clarification of deemed sales.— For purposes of this subsection, a controlled foreign corporation shall be treated as having sold or exchanged any stock if, under any provision of this subtitle, such controlled foreign corporation is treated as having gain from the sale or exchange of such stock.”.Pub. L. 115–97 § 14212(b)(4) · 131 Stat. 2054
Struck · 26 U.S.C. § 964(b)
Pub. L. 115–97, § 14212(b)(4), struck out “, 955,” after “sections 952”
Source evidence
Code amendment note
Subsec. (b). Pub. L. 115–97, § 14212(b)(4), struck out “, 955,” after “sections 952”.Enacted provision · exact public law section
(4) Section 964(b) is amended by striking “, 955,”.Effective date note
Pub. L. 115–97, title I, § 14102(c)(2), Dec. 22, 2017, 131 Stat. 2193, provided that: “The amendments made by this subsection [amending this section] shall apply to sales or exchanges after December 31, 2017.” Amendment by section 14212(b)(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 14212(c) of Pub. L. 115–97, set out as a note under section 851 of this title.Pub. L. 115–97 § 14102(c)(1) · 131 Stat. 2054
Added · 26 U.S.C. § 964(e)(4)
Pub. L. 115–97, § 14102(c)(1), added par. (4)
Source evidence
Code amendment note
Subsec. (e)(4). Pub. L. 115–97, § 14102(c)(1), added par. (4).Enacted provision · exact public law section
(1) In general.— Section 964(e) 26 USC 964. is amended by adding at the end the following new paragraph: “(4) Coordination with dividends received deduction.— “(A) In general.— If, for any taxable year of a controlled foreign corporation beginning after December 31, 2017, any amount is treated as a dividend under paragraph (1) by reason of a sale or exchange by the controlled foreign corporation of stock in another foreign corporation held for 1 year or more, then, notwithstanding any other provision of this title— “(i) the foreign-source portion of such dividend shall be treated for purposes of section 951(a)(1)(A) as subpart F income of the selling controlled foreign corporation for such taxable year, “(ii) a United States shareholder with respect to the selling controlled foreign corporation shall include in gross income for the taxable year of the shareholder with or within which such taxable year of the controlled foreign corporation ends an amount equal to the shareholder’s pro rata share (determined in the same manner as under section 951(a)(2)) of the amount treated as subpart F income under clause (i), and “(iii) the deduction under section 245A(a) shall be allowable to the United States shareholder with respect to the subpart F income included in gross income under clause (ii) in the same manner as if such subpart F income were a dividend received by the shareholder from the selling controlled foreign corporation. “(B) Application of basis or similar adjustment.— For purposes of this title, in the case of a sale or exchange by a controlled foreign corporation of stock in another foreign corporation in a taxable year of the selling controlled foreign corporation beginning after December 31, 2017, rules similar to the rules of section 961(d) shall apply. “(C) Foreign-source portion.— For purposes of this paragraph, the foreign-source portion of any amount treated as a dividend under paragraph (1) shall be determined in the same manner as under section 245A(c).” .Effective date note
Pub. L. 115–97, title I, § 14102(c)(2), Dec. 22, 2017, 131 Stat. 2193, provided that: “The amendments made by this subsection [amending this section] shall apply to sales or exchanges after December 31, 2017.” Amendment by section 14212(b)(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 14212(c) of Pub. L. 115–97, set out as a note under section 851 of this title.
11 of 12 references resolved to an enrolled provision · 1 partial
Editorial Notes
References in Text
The Foreign Corrupt Practices Act of 1977, referred to in subsec. (a), is title I of Pub. L. 95–213, , 91 Stat. 1494, which enacted sections 78dd–1 to 78dd–3 of Title 15, Commerce and Trade, and amended sections 78m and 78ff of Title 15. For complete classification of this Act to the Code, see Short Title of 1977 Amendment note set out under section 78a of Title 15 and Tables.
Amendments1969–2017 · 7 rounds
2017
Subsec. (b). Pub. L. 115–97, § 14212(b)(4), struck out “, 955,” after “sections 952”.
Subsec. (e)(4). Pub. L. 115–97, § 14102(c)(1), added par. (4).
1997
Subsec. (e). Pub. L. 105–34 added subsec. (e).
1988
Subsec. (d). Pub. L. 100–647 added subsec. (d).
1982
Subsec. (a). Pub. L. 97–248 inserted provision that payments referred to in sentence beginning “In determining such earnings and profits” are payments which would be unlawful under the Foreign Corrupt Practices Act of 1977 if the payor were a United States person.
1981
Subsec. (a). Pub. L. 97–34 substituted “section 312(k)(4)” for “section 312(k)(3)”.
1976
Subsec. (a). Pub. L. 94–455, §§ 1065(b), 1901(b)(32)(B)(ii), 1906(b)(13)(A), struck out “or his delegate” after “Secretary”, inserted second sentence, and substituted “312(k)(3)” for “312(m)(3)” after “provided in section”.
Subsecs. (b), (c)(1), (2). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary” whenever appearing.
1969
Subsec. (a). Pub. L. 91–172 inserted reference to the exception provided for in section 312(m)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Pub. L. 115–97, title I, § 14102(c)(2), , 131 Stat. 2193, provided that: “The amendments made by this subsection [amending this section] shall apply to sales or exchanges after .”
Amendment by section 14212(b)(4) of Pub. L. 115–97 applicable to taxable years of foreign corporations beginning after , and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14212(c) of Pub. L. 115–97, set out as a note under section 851 of this title.
Effective Date of 1997 Amendment
Pub. L. 105–34, title XI, § 1111(c)(1), , 111 Stat. 969, provided that: “The amendment made by subsection (a) [amending this section] shall apply to gain recognized on transactions occurring after the date of the enactment of this Act [].”
Effective Date of 1988 Amendment
Pub. L. 100–647, title VI, § 6129(b), , 102 Stat. 3716, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years of foreign corporations beginning after .”
Effective Date of 1982 Amendment
Amendment by Pub. L. 97–248 applicable to payments made after , see section 288(c) of Pub. L. 97–248, set out as a note under section 162 of this title.
Effective Date of 1981 Amendment
Amendment by Pub. L. 97–34 applicable to property placed in service after , in taxable years ending after that date, see section 209(a) of Pub. L. 97–34, set out as an Effective Date note under section 168 of this title.
Effective Date of 1976 Amendment
Amendment by section 1065(b) of Pub. L. 94–455 applicable to payments described in section 162(c) of this title made more than 30 days after , see section 1066(b) of Pub. L. 94–455, set out as a note under section 952 of this title.
Credits
1962–2017 · 8 acts
- 1962Added Pub. L. 87–834, § 12(a), , 76 Stat. 1027
- 1969amended Pub. L. 91–172, title IV, § 442(b)(1), , 83 Stat. 628
- 1976Pub. L. 94–455, title X, § 1065(b), title XIX, §§ 1901(b)(32)(B)(iii), 1906(b)(13)(A), , 90 Stat. 1654, 1800, 1834
- 1981Pub. L. 97–34, title II, § 206(c), , 95 Stat. 225
- 1982Pub. L. 97–248, title II, § 288(b)(2), , 96 Stat. 571
- 1988Pub. L. 100–647, title VI, § 6129(a), , 102 Stat. 3716
- 1997Pub. L. 105–34, title XI, § 1111(a), , 111 Stat. 968
- 2017Pub. L. 115–97, title I, §§ 14102(c)(1), 14212(b)(4), , 131 Stat. 2193, 2217.
Show as published
(Added Pub. L. 87–834, § 12(a), , 76 Stat. 1027; amended Pub. L. 91–172, title IV, § 442(b)(1), , 83 Stat. 628; Pub. L. 94–455, title X, § 1065(b), title XIX, §§ 1901(b)(32)(B)(iii), 1906(b)(13)(A), , 90 Stat. 1654, 1800, 1834; Pub. L. 97–34, title II, § 206(c), , 95 Stat. 225; Pub. L. 97–248, title II, § 288(b)(2), , 96 Stat. 571; Pub. L. 100–647, title VI, § 6129(a), , 102 Stat. 3716; Pub. L. 105–34, title XI, § 1111(a), , 111 Stat. 968; Pub. L. 115–97, title I, §§ 14102(c)(1), 14212(b)(4), , 131 Stat. 2193, 2217.)