Taxable year of certain foreign corporations

26 U.S.C. § 898

• Title: 26 — Internal Revenue Code
• Chapter: Subchapter N—Tax Based on Income From Sources Within or Without the United States
• Part: Subpart D—Miscellaneous Provisions

Text

(a) General rule
For purposes of this title, the taxable year of any specified foreign corporation shall be the required year determined under subsection (c).
(b) Specified foreign corporation
For purposes of this section—
The term "specified foreign corporation" means any foreign corporation—
(A) which is treated as a controlled foreign corporation for any purpose under subpart F of part III of this subchapter, and
(B) with respect to which the ownership requirements of paragraph (2) are met.
The ownership requirements of this paragraph are met with respect to any foreign corporation if a United States shareholder owns, on each testing day, more than 50 percent of—
(i) the total voting power of all classes of stock of such corporation entitled to vote, or
(ii) the total value of all classes of stock of such corporation.
For purposes of subparagraph (A), the rules of subsections (a) and (b) of section 958 shall apply in determining ownership.
The term "United States shareholder" has the meaning given to such term by section 951(b), except that, in the case of a foreign corporation having related person insurance income (as defined in section 953(c)(2)), the Secretary may treat any person as a United States shareholder for purposes of this section if such person is treated as a United States shareholder under section 953(c)(1).
(c) Determination of required year
The required year is—
(A) the majority U.S. shareholder year, or
(B) if there is no majority U.S. shareholder year, the taxable year prescribed under regulations.
For purposes of this subsection, the term "majority U.S. shareholder year" means the taxable year (if any) which, on each testing day, constituted the taxable year of—
(i) each United States shareholder described in subsection (b)(2)(A), and
(ii) each United States shareholder not described in clause (i) whose stock was treated as owned under subsection (b)(2)(B) by any shareholder described in such clause.
The testing days shall be—
(i) the first day of the corporation's taxable year (determined without regard to this section), or
(ii) the days during such representative period as the Secretary may prescribe.

History

(Added Pub. L. 101–239, title VII, §7401(a), Dec. 19, 1989, 103 Stat. 2355; amended Pub. L. 108–357, title IV, §413(c)(13), Oct. 22, 2004, 118 Stat. 1507; Pub. L. 119–21, title VII, §70352(a), July 4, 2025, 139 Stat. 208.)

Editorial Notes

Editorial Notes

Amendments
2025—Subsec. (c)(2), (3). Pub. L. 119–21 redesignated par. (3) as (2) and struck out former par. (2). Prior to amendment, text of par. (2) read as follows: "A specified foreign corporation may elect, in lieu of the taxable year under paragraph (1)(A), a taxable year beginning 1 month earlier than the majority U.S. shareholder year."
2004—Subsec. (b)(1)(A). Pub. L. 108–357, §413(c)(13)(A), amended subpar. (A) generally. Prior to amendment, subpar (A) read as follows:
"(A) which is—
"(i) treated as a controlled foreign corporation for any purpose under subpart F of part III of this subchapter, or
"(ii) a foreign personal holding company (as defined in section 552), and".
Subsec. (b)(2)(B). Pub. L. 108–357, §413(c)(13)(B), struck out "and sections 551(f) and 554, whichever are applicable," after "section 958".
Subsec. (b)(3). Pub. L. 108–357, §413(c)(13)(C), reenacted heading without change, struck out "(A) In general" before "The term", and struck out heading and text of subpar. (B). Text read as follows: "In the case of any foreign personal holding company (as defined in section 552) which is not a specified foreign corporation by reason of paragraph (1)(A)(i), the term 'United States shareholder' means any person who is treated as a United States shareholder under section 551."
Subsec. (c). Pub. L. 108–357, §413(c)(13)(D), reenacted heading without change and amended text of subsec. (c) generally, substituting provisions stating general rule and relating to 1-month deferral and majority U.S. shareholder year, consisting of pars. (1) to (3), for provisions stating general rule and relating to 1-month deferral and majority U.S. shareholder year, consisting of par. (1), and provisions relating to required year in the case of a foreign personal holding company, consisting of par. (2).

Statutory Notes and Related Subsidiaries

Effective Date of 2025 Amendment
Pub. L. 119–21, title VII, §70352(b), (c), July 4, 2025, 139 Stat. 208, provided that:
"(b) Effective Date.—The amendments made by this section [amending this section] shall apply to taxable years of specified foreign corporations beginning after November 30, 2025.
"(c) Transition Rule.—
"(1) In general.—In the case of a corporation that is a specified foreign corporation as of November 30, 2025, such corporation's first taxable year beginning after such date shall end at the same time as the first required year (within the meaning of section 898(c)(1) of the Internal Revenue Code of 1986) ending after such date. If any specified foreign corporation is required by the amendments made by this section to change its taxable year for its first taxable year beginning after November 30, 2025—
"(A) such change shall be treated as initiated by such corporation,
"(B) such change shall be treated as having been made with the consent of the Secretary, and
"(C) the Secretary shall issue regulations or other guidance for allocating foreign taxes that are paid or accrued in such first taxable year and the succeeding taxable year among such taxable years in the manner the Secretary determines appropriate to carry out the purposes of this section.
"(2) Secretary.—For purposes of this subsection, the term 'Secretary' means the Secretary of the Treasury or the Secretary's delegate."

Effective Date of 2004 Amendment
Amendment by Pub. L. 108–357 applicable to taxable years of foreign corporations beginning after Dec. 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end, see section 413(d)(1) of Pub. L. 108–357, set out as an Effective and Termination Dates of 2004 Amendments note under section 1 of this title.

Effective Date
Pub. L. 101–239, title VII, §7401(d), Dec. 19, 1989, 103 Stat. 2357, provided that:
"(1) In general.—The amendments made by this section [enacting this section and amending section 563 of this title] shall apply to taxable years of foreign corporations beginning after July 10, 1989.
"(2) Special rules.—If any foreign corporation is required by the amendments made by this section to change its taxable year for its first taxable year beginning after July 10, 1989—
"(A) such change shall be treated as initiated by the taxpayer,
"(B) such change shall be treated as having been made with the consent of the Secretary of the Treasury or his delegate, and
"(C) if, by reason of such change, any United States person is required to include in gross income for 1 taxable year amounts attributable to 2 taxable years of such foreign corporation, the amount which would otherwise be required to be included in gross income for such 1 taxable year by reason of the short taxable year of the foreign corporation resulting from such change shall be included in gross income ratably over the 4-taxable-year period beginning with such 1 taxable year."

Editorial Notes

Amendments
2004—Pub. L. 108–357, title I, §101(b)(2), Oct. 22, 2004, 118 Stat. 1423, struck out item for subpart E "Qualifying foreign trade income".
2000—Pub. L. 106–519, §4(8), Nov. 15, 2000, 114 Stat. 2433, struck out item for subpart C "Taxation of foreign sales corporations".
Pub. L. 106–519, §4(7), Nov. 15, 2000, 114 Stat. 2433, added item for subpart E and directed that former item for subpart E be struck out, which could not be executed because the item for subpart E had previously been struck out by Pub. L. 94–455, §1053(d)(5). See 1976 Amendment note below.
1986—Pub. L. 99–514, title XII, §1261(d), Oct. 22, 1986, 100 Stat. 2591, added item for subpart J.
1984—Pub. L. 98–369, div. A, title VIII, §802(c)(4), July 18, 1984, 98 Stat. 999, added item for subpart C.
1982—Pub. L. 97–248, title III, §337(b), Sept. 3, 1982, 96 Stat. 630, added item for subpart I.
1978—Pub. L. 95–615, §202(g)(4), formerly §202(f)(4), Nov. 8, 1978, 92 Stat. 3100, renumbered Pub. L. 96–222, title I, §108(a)(1)(A), Apr. 1, 1980, 94 Stat. 223, inserted in item for subpart B "or residents" after "citizens."
1976—Pub. L. 94–455, title X, §1012(b)(3)(B), Oct. 4, 1976, 90 Stat. 1614, struck out item for subpart G "Export Trade Corporation" from analysis without a corresponding repeal of text in such subpart. The amendment probably should have struck out item for subpart H.
Pub. L. 94–455, title X, §§1052(c)(7), 1053(d)(5), Oct. 4, 1976, 90 Stat. 1648, 1649, struck out item for subpart C, relating to Western Hemisphere trade corporations, effective for taxable years beginning after Dec. 31, 1979, and item for subpart E, relating to China Trade Act corporations, effective for taxable years beginning after Dec. 31, 1977.
1966—Pub. L. 89–809, title I, §105(e)(2), Nov. 13, 1966, 80 Stat. 1567, added item for subpart H.
1962—Pub. L. 87–834, §12(b)(3), Oct. 16, 1962, 76 Stat. 1031, added items for subparts F and G.

Editorial Notes

Amendments
2017—Pub. L. 115–97, title I, §14301(c)(38), Dec. 22, 2017, 131 Stat. 2225, struck out item 902 "Deemed paid credit where domestic corporation owns 10 percent or more of voting stock of foreign corporation".
2010—Pub. L. 111–226, title II, §211(b), Aug. 10, 2010, 124 Stat. 2395, added item 909.
1986—Pub. L. 99–514, title XII, §1202(d), Oct. 22, 1986, 100 Stat. 2531, substituted "Deemed paid credit where domestic corporation owns 10 percent or more of voting stock of foreign corporation" for "Credit for corporate stockholder in foreign corporation" in item 902.
1976—Pub. L. 94–455, title X, §1061(b), Oct. 4, 1976, 90 Stat. 1650, added item 908.
1975—Pub. L. 94–12, title VI, §601(c), Mar. 29, 1975, 89 Stat. 57, added item 907.
1966—Pub. L. 89–809, title I, §106(a)(2), Nov. 13, 1966, 80 Stat. 1569, added item 906.