United States Code (Last Updated: May 24, 2014) |
Title 26. INTERNAL REVENUE CODE |
SubTitle A. Income Taxes |
Chapter 1. NORMAL TAXES AND SURTAXES |
SubChapter N. Tax Based on Income From Sources Within or Without the United States |
Part III. INCOME FROM SOURCES WITHOUT THE UNITED STATES |
SubPart F. Controlled Foreign Corporations |
§ 957. Controlled foreign corporations; United States persons
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(a) General rule For purposes of this subpart, the term “controlled foreign corporation” means any foreign corporation if more than 50 percent of— (1) the total combined voting power of all classes of stock of such corporation entitled to vote, or (2) the total value of the stock of such corporation, is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such foreign corporation. (b) Special rule for insurance For purposes only of taking into account income described in section 953(a) (relating to insurance income), the term “controlled foreign corporation” includes not only a foreign corporation as defined by subsection (a) but also one of which more than 25 percent of the total combined voting power of all classes of stock (or more than 25 percent of the total value of stock) is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such corporation, if the gross amount of premiums or other consideration in respect of the reinsurance or the issuing of insurance or annuity contracts described in section 953(a)(1) exceeds 75 percent of the gross amount of all premiums or other consideration in respect of all risks.
(c) United States person For purposes of this subpart, the term “United States person” has the meaning assigned to it by section 7701(a)(30) except that— (1) with respect to a corporation organized under the laws of the Commonwealth of Puerto Rico, such term does not include an individual who is a bona fide resident of Puerto Rico, if a dividend received by such individual during the taxable year from such corporation would, for purposes of section 933(1), be treated as income derived from sources within Puerto Rico, and (2) with respect to a corporation organized under the laws of Guam, American Samoa, or the Northern Mariana Islands— (A) 80 percent or more of the gross income of which for the 3-year period ending at the close of the taxable year (or for such part of such period as such corporation or any predecessor has been in existence) was derived from sources within such a possession or was effectively connected with the conduct of a trade or business in such a possession, and (B) 50 percent or more of the gross income of which for such period (or part) was derived from the active conduct of a trade or business within such a possession, such term does not include an individual who is a bona fide resident of Guam, American Samoa, or the Northern Mariana Islands. For purposes of subparagraphs (A) and (B) of paragraph (2), the determination as to whether income was derived from the active conduct of a trade or business within a possession shall be made under regulations prescribed by the Secretary.
References In Text
Section 953(a)(1), referred to in subsec. (b), was subsequently amended, and section 953(a)(1) no longer describes insurance or annuity contracts. However, insurance or annuity contracts are described elsewhere in that section.
Amendments
2004—Subsec. (c). Pub. L. 108–357, § 908(c)(5)(B), struck out “derived from sources within a possession, was effectively connected with the conduct of a trade or business within a possession, or” after “whether income was” in concluding provisions.
Subsec. (c)(2)(B). Pub. L. 108–357, § 908(c)(5)(A), substituted “active conduct of a” for “conduct of an active”.
1986—Subsec. (a). Pub. L. 99–514, § 1222(a)(1), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “For purposes of this subpart, the term ‘controlled foreign corporation’ means any foreign corporation of which more than 50 percent of the total combined voting power of all classes of stock entitled to vote is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such foreign corporation.”
Subsec. (b). Pub. L. 99–514, § 1222(a)(2), inserted “(or more than 25 percent of the total value of stock)”.
Pub. L. 99–514, § 1221(b)(3)(C), substituted “insurance income” for “income derived from insurance of United States risks”.
Subsec. (c). Pub. L. 99–514, § 1273(a), added par. (2) and concluding provisions and struck out former pars. (2) and (3) which read as follows:
“(2) with respect to a corporation organized under the laws of the Virgin Islands, such term does not include an individual who is a bona fide resident of the Virgin Islands and whose income tax obligation under this subtitle for the taxable year is satisfied pursuant to section 28(a) of the Revised Organic Act of the Virgin Islands, approved
“(3) with respect to a corporation organized under the laws of any other possession of the United States, such term does not include an individual who is a bona fide resident of any such other possession and whose income derived from sources within possessions of the United States is not, by reason of section 931(a), includible in gross income under this subtitle for the taxable year.”
Pub. L. 99–514, § 1224(a), redesignated subsec. (d) as (c) and struck out former subsec. (c) which provided circumstances under which for purposes of this subpart, the term “controlled foreign corporation” would not include certain corporations created or organized in Puerto Rico or a possession of the United States or under the laws of Puerto Rico or a possession of the United States.
Subsec. (d). Pub. L. 99–514, § 1224(a), redesignated subsec. (d) as (c).
1976—Subsec. (c) Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
Effective Date Of Amendment
Amendment by Pub. L. 108–357 applicable to taxable years ending after
Amendment by section 1221(b)(3)(C) of Pub. L. 99–514 applicable to taxable years of foreign corporations beginning after
Pub. L. 99–514, title XII, § 1222(c),
Pub. L. 99–514, title XII, § 1224(b),
Amendment by section 1273(a) of Pub. L. 99–514 applicable to taxable years beginning after