Suspension of taxes and credits until related income taken into account

26 U.S.C. § 909

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

Text

(a) In general
If there is a foreign tax credit splitting event with respect to a foreign income tax paid or accrued by the taxpayer, such tax shall not be taken into account for purposes of this title before the taxable year in which the related income is taken into account under this chapter by the taxpayer.
(b) Special rules with respect to specified 10-percent owned foreign corporations
If there is a foreign tax credit splitting event with respect to a foreign income tax paid or accrued by a specified 10-percent owned foreign corporation (as defined in section 245A(b) without regard to paragraph (2) thereof), such tax shall not be taken into account—
(1) for purposes of section 960, or
(2) for purposes of determining earnings and profits under section 964(a),
before the taxable year in which the related income is taken into account under this chapter by such specified 10-percent owned foreign corporation or a domestic corporation which is a United States shareholder with respect to such specified 10-percent owned foreign corporation.
(c) Special rules
For purposes of this section—
In the case of a partnership, subsections (a) and (b) shall be applied at the partner level. Except as otherwise provided by the Secretary, a rule similar to the rule of the preceding sentence shall apply in the case of any S corporation or trust.
In the case of any foreign income tax not taken into account by reason of subsection (a) or (b), except as otherwise provided by the Secretary, such tax shall be so taken into account in the taxable year referred to in such subsection (other than for purposes of section 986(a)) as a foreign income tax paid or accrued in such taxable year.
(d) Definitions
For purposes of this section—
There is a foreign tax credit splitting event with respect to a foreign income tax if the related income is (or will be) taken into account under this chapter by a covered person.
The term "foreign income tax" means any income, war profits, or excess profits tax paid or accrued to any foreign country or to any possession of the United States.
The term "related income" means, with respect to any portion of any foreign income tax, the income (or, as appropriate, earnings and profits) to which such portion of foreign income tax relates.
The term "covered person" means, with respect to any person who pays or accrues a foreign income tax (hereafter in this paragraph referred to as the "payor")—
(A) any entity in which the payor holds, directly or indirectly, at least a 10 percent ownership interest (determined by vote or value),
(B) any person which holds, directly or indirectly, at least a 10 percent ownership interest (determined by vote or value) in the payor,
(C) any person which bears a relationship to the payor described in section 267(b) or 707(b), and
(D) any other person specified by the Secretary for purposes of this paragraph.
(e) Regulations
The Secretary may issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section, including regulations or other guidance which provides—
(1) appropriate exceptions from the provisions of this section, and
(2) for the proper application of this section with respect to hybrid instruments.

History

(Added Pub. L. 111–226, title II, §211(a), Aug. 10, 2010, 124 Stat. 2394; amended Pub. L. 115–97, title I, §14301(c)(29), (30), Dec. 22, 2017, 131 Stat. 2224.)

Editorial Notes

Editorial Notes

Amendments
2017—Subsec. (b). Pub. L. 115–97, §14301(c)(29)(A), (C), (D), substituted "specified 10-percent owned foreign corporations" for "section 902 corporations" in heading, "specified 10-percent owned foreign corporation (as defined in section 245A(b) without regard to paragraph (2) thereof)" for "section 902 corporation" in introductory provisions, and "by such specified 10-percent owned foreign corporation or a domestic corporation which is a United States shareholder with respect to such specified 10-percent owned foreign corporation." for "by such section 902 corporation or a domestic corporation which meets the ownership requirements of subsection (a) or (b) of section 902 with respect to such section 902 corporation." in concluding provisions.
Subsec. (b)(1). Pub. L. 115–97, §14301(c)(29)(B), struck out "902 or" after "for purposes of section".
Subsec. (d)(5). Pub. L. 115–97, §14301(c)(30), struck out par. (5). Text read as follows: "The term 'section 902 corporation' means any foreign corporation with respect to which one or more domestic corporations meets the ownership requirements of subsection (a) or (b) of section 902."

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment
Amendment by 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.

Effective Date
Pub. L. 111–226, title II, §211(c), Aug. 10, 2010, 124 Stat. 2395, provided that: "The amendments made by this section [enacting this section] shall apply to—
"(1) foreign income taxes (as defined in section 909(d) of the Internal Revenue Code of 1986, as added by this section) paid or accrued in taxable years beginning after December 31, 2010; and
"(2) foreign income taxes (as so defined) paid or accrued by a [former] section 902 corporation (as so defined) in taxable years beginning on or before such date (and not deemed paid under section 902(a) or 960 of such Code on or before such date), but only for purposes of applying sections 902 and 960 with respect to periods after such date.
Section 909(b)(2) of the Internal Revenue Code of 1986, as added by this section, shall not apply to foreign income taxes described in paragraph (2)."

Editorial Notes

Amendments
1981—Pub. L. 97–34, title I, §§111(b)(1), 112(b)(1), Aug. 13, 1981, 95 Stat. 194, 195, substituted "Citizens or residents of the United States living abroad" for "Income earned by individuals in certain camps or from charitable services" in item 911 and struck out item 913 "Deduction for certain expenses of living abroad".
1980—Pub. L. 96–595, §4(c)(2), Dec. 24, 1980, 94 Stat. 3467, inserted "or from charitable services" after "camps" in item 911.
1978—Pub. L. 95–615, §§202(g)(2), (3), 203(c), formerly §§202(f)(2), (3), 203(c), Nov. 8, 1978, 92 Stat. 3100, 3106, renumbered Pub. L. 96–222, title I, §108(a)(1)(A), Apr. 1, 1980, 94 Stat. 223, inserted in subpart heading "or Residents" after "Citizens", substituted in item 911 "Income earned by individuals in certain camps" for "Earned income from sources without the United States", and added item 913.